Chinese Investment in Africa: How Much?

How much has China invested in Africa? I just received a slightly breathless invitation to an event to be held at the Ritz-Carlton in Beijing, which led off with this statement:  "China's investment in Africa has increased a staggering 30-fold since 2005, with 2,000 Chinese firms now present in 50 African countries." 

Really?

Let's look first at the math. Here are the annual official figures for Chinese investment in Africa from MOFCOM:

Chinese FDI Flows to Africa (US$ million)

2005   2006   2007   2008   2009   2010   2011   2012
  392     520   1574   5491   1439   2112   3173   2520

Source: MOFCOM. This data has problems, as I've noted here before, although many of these problems are also shared by other countries' official FDI data,  And the leap from $392 million to $2520 million is not "a staggering 30 fold" increase, but a factor of 6.

Let's look at accumulated FDI figures:

Chinese FDI Stock in Africa (US$ billion)

2005   2006   2007   2008   2009   2010   2011   2012
1.60    2.56    4.46    7.80    9.33   13.04  16.24  21.23

Source: MOFCOM. The figure for 2012 is higher by a factor of 13, compared with 2005.

The most recent white paper on China-Africa Trade and Economic Cooperation noted that between 2009 to 2012, China's direct investment in Africa grew at an annual rate of 20.5%. This is a brisk clip, but I'm not sure I'd call it a "staggering" rate.  

How many Chinese companies are active in Africa? The figure on 2000 firms in 50 African countries comes from China's Ministry of Commerce. More precise numbers that I have from MOFCOM state that 2372 investments have gone through the required approvals for Africa, as of March 2013. Some firms will have multiple projects. On the other hand, it probably doesn't include a number of small enterprises that fly under the radar -- including all the Chinese shops -- so the true number of "firms" is undoubtedly higher.

China and the DR Congo

Jacob Kushner, a young journalist with a grant from the Pulitzer Center, has produced a new e-book on China and the Congo, which can be downloaded on Kindle for just $1.99. Viewing his creative effort is well worth the small expense. Kushner traveled to the DRC, interviewing Chinese managers, Congolese officials, visiting the Sicomines project, and immersing himself in a challenging environment. While as journalism, this isn't the detailed look at China and the DRC that scholars like Johanna Jansson have produced, it is a fascinating "new age of journalism" multi-media production. (Look past the catchy title: Kushner might have more usefully put "Congo Plan" in quotation marks, as he ends up doubting that there is a plan.) The talented Mr. Kushner combines short videos, excellent photographs, and traditional narrative to produce a book that is far more of an experience than simply a read. If this is the future of journalism as reflected in books, I'm looking forward to it.

China Africa Ec. and Trade Coop. White Paper 2013

Source: State Council, "China Africa Ec. and Trade Coop. 2013"

The Chinese State Council has published the new China-Africa Economic and Trade Cooperation White Paper (2013): click here. (hat/tip to Prof. Zhang Haisen).

While in China at the World Economic Forum/Dalian a couple of weeks ago, I heard that a new white paper on China's foreign aid will be published soon, probably in October.

While only one foreign aid white paper has been published so far, these overview reports on China-Africa trade and economic cooperation have been published annually since 2010, and are one of the signs of a new transparency in Beijing.  

Some of the highlights of this report:

• "In 2012, the total volume of China-Africa trade reached US$198.49 billion, a year-on-year growth of 19.3%. Of this, US$85.319 billion consisted of China's exports to Africa, up 16.7%, and US$113.171 billion was contributed by China's imports from Africa, up 21.4%."
• "From 2000 to 2012, the proportion of China-Africa trade volume as a part of China's total foreign trade volume increased from 2.23% to 5.13%." This shows that although China looms large for Africa, Africa is still a tiny part of China's overall trade.
• "In 2012, the proportion of mechanical and electrical products as a part of China's total commodity exports to Africa reached 45.9%." A lot of these are vehicles, generators, telecoms and factory machinery.
• Cumulative Chinese FDI to Africa now amounts to US$21 billion (by official figures). Of this, manufacturing investment is at US$3.43 billion.
• China Africa Development Fund has "invested US$1.806 billion for 53 projects". So far, only one is in agriculture.
• China's agricultural exports to Africa are now at US$2.49 billion, having increased 57.6% since 2009. Yes, China exports food to Africa, Africa exports mainly industrial inputs like rubber, cotton, sisal, along with oil palm, sesame, cocoa, and peanuts to China. 
• "In 2012, Chinese enterprises completed construction contracts worth US$40.83 billion in Africa." As I have been arguing, this is a huge and under-appreciated sector of commercial interest for the Chinese.
• "From 2010 to May 2012, China approved concessional loans worth a total of US$11.3 billion for 92 African projects." This includes preferential export buyer's credits, and foreign aid concessional loans. It is in fulfillment of the 2009 pledge of $10 billion over 3 years. All of these loan commitments would have come through China's Export Import Bank. This comes to about US$4.7 billion per year.

Chinese energy companies go global ... in the US

Chinese companies are big investors today -- not only in Africa, but in developed economies like the US and Canada, where they compete for engineering projects, real estate deals, and acquisitions of companies that have the competitive technology and marketing know-how that they lack. A new article in the Beijing Axis's China Analysis by Daniel Galvez, analyzes this outward investment. For those interested in comparisons with Chinese engagement in Africa, skip down past the luxury real estate deals to the "energy infrastructure" section, which describes the ways in which Chinese companies are engaging in the US energy sector. 

Chinese banks are playing a big role here, just as in Africa:

• In April, it was reported that Industrial & Commercial Bank of China (ICBC), China’s largest bank by market value, agreed to help finance plans for the USD 25 billion LNG export terminal in British Columbia, set to be among the 10 largest refineries in the world.  
• In September 2012, Seattle-based Summit Power Group LLC announced that Sinopec Engineering will manage the construction of a critical portion of the Texas Clean Energy Project, a planned power-generating facility near Odessa, Texas. The facility will be funded by China Exim Bank, and is in line to receive USD 450 million in US federal funding.

See more at: http://www.thebeijingaxis.com/tca/editions/the-china-analyst-sept-2013/201-chinas-increased-presence-in-the-developed-world#sthash.lLByn5O8.dpuf

Jo'burg: Chinese shops move out to the suburbs

All photos: Yoon Jung Park

China in Africa: The Real Story is pleased to welcome this guest post from Dr. Yoon Jung Park, sociologist and author of the acclaimed A Matter of Honour: Being Chinese in South Africa and a number of other studies on Chinese immigrants in Africa. She writes:

I was recently in Johannesburg and managed to spend part of my last day there at the China Discount Shopping Mall. While there are dozens of wholesale/distribution centers around Johannesburg, most are south of the city center, off the main highway towards Soweto … in an area that was reclaimed from the mine dumps that had been there for at least two or three decades. This one, however, is different in at least two ways: (1) it is located in the northern suburbs – typically whiter and wealthier, and (2) it is a retail shopping center… or at least a “wholesale prices to the public” kind of place.

It is also, in my view, an indication of some shifts … a sign of greater economic integration of the Chinese migrant community, certainly a sign of Chinese migrant “filling in the gaps” opportunism and risk-taking business behaviour, as well as a sign that the Chinese are looking to broaden their customer base and bringing the products closer to the people in the ‘burbs.

The consumer's choices...

The China Discount Shopping Mall has basically replaced the owners and installed new management and new shops in an existing mall, which likely suffered from the recent economic challenges. While I didn’t have enough time to do any real research, I did manage to chat with several of the new shop managers – amongst them mainland Chinese (recently arrived) and Taiwanese (20 years resident in South Africa), Pakistanis, and an Ethiopian. There were many clothing shops selling popular fashions, but also shops selling party supplies, beads, housewares, and curtaining. They even had a dragon-shaped kiddies’ jumping castle! They also have a website (http://www.sa123.co.za/), but it seems to be a work in progress. 

As I was doing some research for my book project, I also learned that this sort of management takeover and auction purchasing of major shopping malls has occurred elsewhere in South Africa. “Rivonia Square” including the formerly exclusive “The Cloisters”, in a different part of the northern suburbs of Johannesburg, has recently been purchased by a Chinese migrant and is now called “Rivonia-Oriental City” ; they’re in the midst of trying to convince some of the food outlets and chain stores to stay in place as they attempt to attract higher-end Chinese retailers. Perhaps of greater significance, both the former “Highgate Shopping Mall” just outside Soweto and the former “Wheel Shopping Mall” in Durban are now part of the China Mall group owned and operated by Sino-African Property (Pty). Both are located in more economically marginal areas of the two cities and had recently suffered a serious downturn in foot traffic. 

The acquisition of these two shopping centres add hundreds of shops to the existing China Mall-JHB, which already had over 450 shops, a 1000 square meter food court and over 1000 parking bays! According to their website (http://www.chinamall.co.za/) this makes them the “biggest Chinese products market” in South Africa and perhaps on the continent.

Several restaurants from Cyrildene’s Chinatown (also in Johannesburg) have also expanded over the past couple years, opening up second “branches” in Rivonia. My friend and former research collaborator, Anna Chen, surmised that the rationale was two-fold: (1) restaurant owners wanted to capture the wealthier white South African suburban diner population and (2) they wanted more space to be able to open up private dining rooms for larger parties of their Chinese regulars. 

Because of growing crime in Cyrildene (increasing numbers of luxury cars were followed home from Cyrildene and people were carjacked and/or robbed as they pulled into their driveways and homes), these moves have proved to be a boon for restaurant owners, as increasing numbers of Chinese patrons now dine only at the Rivonia restaurants. On the evening that I was at the Rivonia branch of Northern Foods (a favorite), the restaurant was fairly quiet, but it was also quite early… by the time we were leaving, the place was packed.

I can’t say the same about the Chinese shopping experience … there were no huge crowds at the China Discount Shopping Mall on the Sunday that I was there… and the survival of this mall (and the others) will depend in large part on the health of the South African economy, which continues to be in the doldrums.

So… Chinese traders, having started out peddling wares in the streets of downtown Johannesburg and fighting with the black South African street hawkers, moved into wholesale supplying thousands of retailers from across the country and the southern Africa region, appear to be moving into retail again, albeit at a very different level. This is a phenomenon worth watching.

Guest Post: Visiting the Chinese-financed Zongo II Dam

Zongo Waterfall, Inkisi River. photo: Oldrich Neumayer

This guest post comes to us from Antoine Lokongo, a Ph.D. student studying international politics at Peking University. In August 2012, Antoine visited Sinohydro's Zongo II dam project in the Democratic Republic of the Congo. His report provides a useful lens into Sino-African relations.

As part of my field research, it was of great importance to me to visit some Chinese projects undertaken in my country, the Democratic Republic of Congo (DRC). I visited all such projects in and around the capital Kinshasa, including the expansion of the bridge over the Basoko River project, the reconstruction of Boulevard Lumumba, from Limete up to the International Ndjili Airport, the widening of Ndjili Airport’s runaway project and so on. But above all, spending five days in Zongo, the site of the construction of Zongo II Hydropower project over the Inkisi River waterfalls, living and working together with the Chinese there, was the most interesting activity of my field research. 

Zongo is a beautiful place on the bank of the Congo River in the Western Lower Congo Province of the DRC. Its topography very much resembles that of China’s Yunnan Province (which makes Chinese immediately feel at home). Here, the Congo River, which constitutes an artificial border between the DRC and the Republic of Congo-Brazzaville, is squeezed by rocky mountains, making the deepest river in the world coil like a big snake among those mountains.

Now, the inhabitants of Zongo’s hitherto quiet mountains and valleys are woken up by the sound of the Chinese hammer. From dawn to dusk, hammer beats echo here in these mountains and valleys. The hardworking and industrious Chinese people who have been building dams for thousands of years, have come to the Inkisi River to build a hydroelectric dam called Zongo II (during colonial times, the Belgians already built a first dam, Zongo I, over the Inkisi River to provide Kinshasa with electricity but had always postponed the construction of another dam over the Inkisi River).

Wanting to know whether or not Congolese workers were absorbing Chinese people’s hard-working and organizational culture, I joined different teams on different days and worked with them on site (manual labour like mixing cement with sand, digging trenches to canalize rain water and so on). Although Congolese workers were skilled and knew what they were doing (especially electricians), they were constantly complaining. The culture of complaining in Africa stems from the harsh colonial experience, I guess, but Chinese should not become the new target in this very region of Lower Congo where so many Chinese and Congolese died of slave labour, forced to break the rocks with hammers, to build King Leopold of Belgium’s first railway in Congo, from Kinshasa to the port of Matadi.

"Why don’t we have shoes and uniforms, the same like Chinese workers?"

"Why have they not yet paid us our wages on time?"

"Why don’t they pay us $5 an hour but less?"

These are some of the questions Congolese workers fired at me, “one of them, who could speak Chinese”, as they put it.

I put those questions to a certain Mr. Li Gang, in charge of human resources, who was tirelessly addressing all the questions raised by the Congolese workers to ensure good relations between Chinese and Congolese workers. He told me that he had already many times and repeatedly explained to the Congolese workers that a cargo of new boots and uniforms had arrived at the port of Matadi, but the goods had not yet been delivered to the Zongo due to the slow customs clearance of goods at the port facilities. About pay delay, he explained: “Congolese workers usually get their wages on the 4th of each month. Today is the 6th of August and unfortunately they have not yet been paid. They will definitely get paid tomorrow. This postponement was due to the fact that our financial manager fell ill and went to Kinshasa for treatment."

Mr. Li Gang confirmed that unskilled Congolese workers (jobbers) are paid $2 to $3 a day, but highly skilled Congolese workers are paid $8 per day. “This is very fair,” he said.

The Zongo II Hydropower project, is being jointly built by Sinohydro (China) and Societe Nationale d'Electricite or SNEL (Democratic Republic of Congo). Neither partner is the "boss". SNEL has provided manpower; so has Sinohydro. But of course Sinohydro is injecting more money, expertise and equipment in the project. When the dam is completed, Sinohydro will get more out of the sale of electricty (entitlement is to each according to his contribution). After Sinohydro recovers its money, it will hand over the dam and the management of it to the Congolese government and will have nothing to do with it anymore unless Kinshasa solicits Sinohydro's assistance.

As a reminder, after recovering its investment over five years, Sinohydro handed back to Congo the Kinshasa-Matadi Highway it built, as commissioned by the Congolese government (Matadi is the Congolese port on the bank of Atlantic Ocean in the West). That is what the Chinese are doing all over Africa, and I think it is a good thing that does not leave African countries in debt. Of course due to cultural differences, there were a lot of misunderstandings. I particularly witnessed two negative incidents. The first one involved a Chinese worker. One afternoon, I saw a number of Congolese workers just standing there, chatting, chatting instead of working. This made the Chinese supervisor very angry and he slapped one of the Congolese in the face. 

I mediated between the two. I said to the Chinese supervisor that it would be better to report the matter to the office and the office will decide to sack inefficient Congolese workers. But he should not hit people! A second incident involved a Congolese worker who forged the signature of a Chinese manager, ticked more hours he did not work for in order to get more money. That is a crime! I told the Congolese workers to learn from the Chinese culture of working hard and abandon the habit of corruption.

But at end, the two sides got used to each other. Although they still ate separately, used separate showers and latrines, I could see Chinese and Congolese workers getting on well after all, playing football together on the sandy bank of the Congolese river after work. Local women were employed as cleaners and cooks.

The DRC is still very underdeveloped, but I think for both the Chinese people and Congolese people, this represents a great opportunity. Of course, some labour problems are bound to occur, but this a universal problem, that also occurs in American and European projects sites in Africa. As China begins to transfer its new technologies and expertise to Africa, practical solutions to some of these problems and issues will be found.