South Africa: China-Africa Cooperation: Past, Present And Future

Last Updated: 17 July 2014
Article by Kenny Chiu

Most Read Contributor in South Africa, September 2016

In 2014, China's Premier Li Keqiang chose Africa as the destination for his very first foreign trip, marking a milestone in China-Africa cooperation. His travels commenced on 4 May and included countries such as Ethiopia, Nigeria, Angola, and Kenya. Premier Li's visit undoubtedly reflects the emphasis China is placing on Africa. The countries that he chose to visit are strategically important for the following reason:

  • Addis Ababa in Ethiopia is where the African Union (AU) headquarters are based;
  • Angola is one of China's largest trading partners in Africa;
  • Kenya is located adjacent to several landlocked countries that are rich in natural resources (strategic position in East Africa); and
  • Nigeria has recently surpassed South Africa as the largest economy in Africa.

It can thus be said that the choice of the above-mentioned countries was well considered. The visit to the AU headquarters sends out the message that China's future investment in/cooperation with Africa will be comprehensive, and will not be limited to a few minor countries.

A well-established foundation has been laid for cooperation between China and Africa dating back to the 1950s and 60s. An example of this was when, in 1971, the UN General Assembly recognizing the People's Republic of China as the only lawful representative of China to the UN (despite many objections from the USA and other western countries). This was achieved with the support of many African countries and assisted in the rise of China's political power from the 1970's onwards.

According to Prof James Petras of the Global Research Council, China has continued to thrive, and has led the world as the biggest manufacturer and exporter, dominating markets such as that of the US, whilst playing an important financial role as it holds over $1.3 trillion in US Treasury notes. Furthermore, it has significantly contributed to Africa's infrastructure development, and continues to be one of the continents biggest financiers. African leadership is such that it has welcomed China's approach to development assistance with the aim of mutually benefiting from co-operation. China is one of the largest developing countries in the world with Africa being the continent with the largest number of developing countries. Economic development has thus become the common denominator of the two parties.

Thirty years of development since China's reform, the country has had some remarkable achievements. China is now the second largest economy in the world and is leading progressively in the fields of technology, production and management. Africa, on the other hand, is a large and populous continent playing an essential global role that should not be overlooked. In recent years, Africa has gained strategic advantage through its multiple natural resources. Africa has not only inherited a large variety of mineral resources but it has also secured large reserves including oil, copper, gold, diamonds, bauxite, phosphate, niobium and cobalt.

According to the 2013 PWC report, Separating Fact From Fiction in the China-Africa Relationship, although oil and mining remain a dominant focus of China's investment in Africa, Chinese foreign direct investment (FDI) has infiltrated into everything from shoe manufacturing to food processing. PWC reports that Chinese companies have also made sizable investments in African infrastructure, targeting key sectors such as telecommunications, transport, construction, power plants, waste disposal and port refurbishment. Given how behind Africa is when it comes to infrastructure, these investments represent a much needed contribution to the continent's development.

China-Africa cooperation ventures are welcomed given this context and China will continue to contribute to the development of Africa. Co-operation does not come without backlash, however, and there will be many challenges ahead needing proactive solutions.

The cooperation between China and Africa has to be open to social pressure. Currently, it is known that China's economy is developing at an exponential rate, but shortcomings at the social-development level continue to plague the country. There is a great gap between the economic and social development of the country which has led to development imbalances within the country, as well as deep inequalities between different classes of society. This continues to be a long standing challenge for the government of China. Coupled with the recent and marked incidences of terrorism in the country, China is finding it increasingly difficult to revive its social cohesion.

Challenges to China-Africa cooperation also arise from problems associated with the uncertainty of China's internal policies. China's policy on foreign investment is ambiguous and unpredictable. This is closely linked to the foreign investment strategy set out by Chinese leaders. This type of personalised foreign investment strategy creates a lack of confidence for investors in Africa. In addition, China has invested largely in the infrastructure and energy sectors in Africa which require long investment cycles, and large investment volumes.

There are also uncertainties within Africa itself. It is well known that Africa is plagued by war and security issues. In comparison to some other continents, Africa's development discrepancies are far wider. In recent years, many African countries have become internally divided by political strife. Furthermore, the social-development standards of African countries are inconsistent, and the tax systems are not uniform. Anti-government rebel forces are also problematic which negatively impact on the local investment environment.

That being said however, many countries in Africa and becoming increasingly attractive investment options, and China looks set to continue its path of investment and infrastructure cooperation on the continent. There are many examples already of China's interest in and support of African infrastructure. According to the PWC report:

  • Chinese investors won the deal to build a $600 million hydroelectric plant in Zambia;
  • Chinese investors have been building hotels and tourist infrastructure in South Africa and Botswana; and
  • Chinese telecom heavyweight, Huawei, won contracts worth $400 million to provide cell phone service in Kenya, Zimbabwe and Nigeria

Celia Becker, African Tax and Country Risk Executive at ENSafrica, says that many African countries risk profiles are improving, making them more attractive to Chinese investors. Referring to the main findings in the World Bank's Doing Business 2014 report, Becker states that Sub-Saharan Africa is home to 9 of the 20 economies narrowing the gap with the regulatory frontier the most since 2009. Also, according to the report, Rwanda and Burundi (both locations of ENSafrica offices) are among the economies improving the most in 2012/13. Becker says that certain countries in Africa have undertaken land and judicial reforms, introduced new corporate and civil procedure and streamlined processes for starting a business, registering a property, and trading across borders.

Weak infrastructure still curbs much of the region's potential, however, that is where Africa needs China's cooperation. As more African countries open themselves up to investment opportunities, so too will China widen its involvement in infrastructure projects on the continent.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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