The Great China ‘Takeover’ Of Africa Is Greatly Exaggerated

The Great China 'Takeover' Of Africa Is Greatly Exaggerated
China has been buying up African resources at record pace

AFRICANGLOBE – Thatch covers the wooden roof of The Clubhouse in Abuja and the tables are decorated with animal-print cloths. The casual restaurant in Nigeria’s capital looks archetypally African, but it is also distinctly Lebanese, serving dishes such as hummus and shish kebabs.

Early on a Saturday night, a young man in traditional clothes taps on his smart phone while manager Assaad Abi Antoun sips Lebanese coffee at a nearby table. “Lebanese can do hospitality at the top level,” says Antoun, who has been here for four years.

The Lebanese are well known in West Africa for owning posh hotels, restaurants, and grocery stores. But, like other immigrant groups working on the continent, the Lebanese are not nearly as famous worldwide for investment in Africa as the Chinese, who are popularly believed to be “taking over Africa.”

The great China takeover, however, may be something of a myth, according to Bright Simons, an honorary fellow at the Ghana-based IMANI Center for Policy & Education. China is Africa’s biggest trading partner – it took the top spot from the United States in 2009 – and a large source of capital. Trade between Africa and China, which totaled $10.5 billion in 2000, ran $166 billion in 2011.

But Canadians, Americans, Britons, the French, and Australians still represent a heavy footprint in Africa. And a plethora of investors from other emerging economies are becoming more integrated into Africa’s social and political life, Mr. Simons says. While not eclipsing China, these new kids on the Africa block are showing a dynamism previously hidden by China’s shadow.

African trade with South Korea and Brazil has moved from single-digit billions in 2000 to more than $25 billion each in 2011. (Korean giant Samsung peppered the continent with $150 million in shops, technology, and employment between 2010 and 2012, the company says.) India’s footprint is small, but growing at 400 percent a year, according to Páidrag Carmody at Trinity College Dublin in his 2013 study “The Rise of the BRICS in Africa.”

Investment by the emerging economic powerhouses of Brazil, Russia, India, China, and South Africa (BRICS) has doubled since 2007 in Africa, though numbers are notoriously poor. A 2013 United Nations study shows African foreign direct investment grew 5 percent, to $50 billion, while shrinking in nearly every other region.

Africa’s ‘Rise Of The Rest’

Africa auctions off mining and oil exploration to a “broad array of companies from around the world that you did not see before,” says Todd Moss, a former senior State Department official dealing with Africa who is now at the Center for Global Development in Washington, D.C.

The push is being called a “rise of the rest” for Africa, or a new “South-South” partnership. Partly the story is of high rates of growth. New “greenfield investments” – business start-ups – from South Africa and the United Arab Emirates have eclipsed those of China, according to a new Ernst & Young study.

“People have said China is bolstering its ‘soft power’ through the use of charitable projects, Confucius Institutes, donations of medicines, etc.,” Simons says. “But the truth is that most of these projects are lackluster.”

To be sure, China’s role in Africa will never be insignificant. Large-scale symbolic projects such as the highway across Nigeria or the new African Union headquarters in Addis Ababa, built by China at a cost of $200 million and the tallest structure in Ethiopia’s capital, are hard to miss. With trillions in cash reserves and few legal restrictions on public-private partnerships, China’s presence in Africa grows daily.

But the idea that China and the West are the only competitors in a battle for Africa’s resources and markets is outdated, says Ben Payton, an Africa analyst at Maplecroft, a Britain-based global risk analysis company. “In addition to Africa’s traditional partners in the West, there is growing interest in Africa’s resource wealth from companies in countries such as Brazil, India, Singapore, and South Korea,” Mr. Payton says. “By some measures, Malaysia provided more foreign investment in Africa than China last year.”

Nations like Malaysia appeal to African states, says Mr. Moss, the former US-Africa trade official, as an “Asian model” that emphasizes strong political control and wealth. “Americans want both political openness and open markets, but Asians stick to a commercial relationship,” he says.

With only Asia growing faster as a region than Africa, foreign investment can be successful on the continent despite troubles such as constant power outages and muddled trade laws, according to Thomas Hansen, a senior Africa analyst at Control Risks, a security assessment firm. “It’s one of the few places in the world now where you can get a relatively high return on your capital,” he says.

South Africa Understands

In Nigeria, Africa’s most populous country, with more than 160 million people, Indians own many of the supermarkets and computer shops. South Koreans are well known for making affordable electronics available. Brazil and Russia are growing players in Nigeria’s gas and its 2.2 million-barrel-a-day oil export industry, the largest in Africa.

South Africa, the largest economy in Africa, stands out as one of the most successful investors, leading the telecommunications industry on the continent and building shopping malls and supermarkets, according to Simons of IMANI. South African investment tends to be visible in terms of social impact, he adds.

“South Africa has the exceptional capacity to understand Africa,” he says. “South African investments tend to be savvy.”

At a cafe in Abuja on a Sunday afternoon, waitress Becky Utase flips her BlackBerry in her hand. Despite rapid economic growth, the African continent is still the poorest in the world. Ms. Utase says foreign investment only matters to her if it somehow helps Nigerians live better lives. Mobile phone networks, she adds, mean the world to her.

Before cellphones, much of Nigeria and the continent was not connected by land lines. Utase says she remembers when posted letters or physical visits were the only way to keep in touch. “Communication is easier,” she adds, sitting on a couch overlooking her dining customers on the patio. “Even work is easier. Back in the day all business needed to travel.”

South Africa’s MTN leads the telecommunications industry, and other major phone companies in Africa are based in the United Arab Emirates and India. Nigeria’s own Globacom Ltd. provides mobile phone service in three other West African countries.

All these non-Chinese telecom companies, however, sell equipment such as handsets, headphones, and chargers made in China. Among the many innovations in mobile technology especially suited for Third World customers are popular prepaid flash modems, almost exclusively produced by China’s behemoth Huawei Technologies.

Part Two