Chinese President Xi Jinping announced $80 billion in financial support to Africa as recently as 2018 as part of their grander plan in the region.[1] What that plan is exactly is less clear than it seems. Has China’s generous investments into Africa been purely economical or is there more incentive for them to help one of the fastest developing regions in the world?
Africa’s population has been booming for years now, with more and more citizens moving toward cities. This increase in urbanization is one reason why Africa is currently experiencing an industrialization the likes of the first industrial revolution. It is estimated that Africa’s economy will soon amount to over $5 trillion dollars.[2] Their emerging market is able to offer cheap labor, natural resources, and untapped potential for many sectors. No wonder the allure of Africa has called to China for over two decades as the rising superpower tries to diversify its economy. China can now boast of being Africa’s biggest trade partner and economic friend with over 10,000 Chinese businesses located within Africa.[3][4]
Now, although this partnership has been proven to be beneficial for both sides in some regards, Africa needs to tread lightly as China has aims that do not fit its own agenda. Aside from the fact that most African countries have a large trade deficit with China, as they export minerals and import Chinese manufactured goods.[5] These massive loans could prove to be unsustainable for the developing countries of Africa. Even though some of the money comes in the form of grants, large sums of it are expected to be paid back to China at some point. These loans, largely intended to help build Africa’s infrastructure, could be the foundation of debt traps whereas African countries would find themselves in holes almost impossible to get out of. Beijing already owns 15% of sub-Saharan Africa’s external debt with that number likely to increase.[6]
If the debt problems weren’t enough, Africa must also guard closely its natural resources as China targets their available reserves. Africa is home to at least 46% of the world’s supply of manganese (used to manufacture steel), 50% of the world’s cobalt, and have a large amount of coltan resources (used in electronics).[7] By financing Africa’s infrastructure and gaining inroads in these sectors China is constantly winning the rights to these precious resources. Cleary, African countries are willing to give the rights away to some of its natural resources in exchange for millions if not billions of dollars. But the question remains, where do you draw that line as you hope to develop those resources yourself someday. Again, it bears repeating that Africa’s dealings with China can be very beneficial for both parties. Africa is an emerging market and if it spends the massive influxes of cash wisely, it will set up its economy for future success. This must be accomplished all while avoiding economic pit falls such as corruption, over borrowing, and poor investments. How much and how well the money is invested in Africa’s infrastructure and education will play a major role in the potential of their future economy. China knows it and is willing to foot the bill in the short term for long term strategic gains.
[1] AfricaNews. “China Promises $60 BN Aid to Africa as 2018 FOCAC Summit Opens.” Africanews. Africanews, September 3, 2018. https://www.africanews.com/2018/09/03/china-promises-60-bn-aid-to-africa-as-2018-focac-summit-opens/.
[2] Dezan Shira & Associates. “US$ 1 Billion Belt & Road Africa Fund Launched.” Silk Road Briefing, July 4, 2019. https://www.silkroadbriefing.com/news/2019/07/04/us-1-billion-belt-road-africa-fund-launched/.
[3] Jayaram, Kartik, Omid Kassiri, and Irene Yuan Sun. “The Closest Look Yet at Chinese Economic Engagement in Africa.” McKinsey & Company. McKinsey & Company, April 1, 2020. https://www.mckinsey.com/featured-insights/middle-east-and-africa/the-closest-look-yet-at-chinese-economic-engagement-in-africa.
[4] Brown, Heather. “Chinese Investment in Africa: New Model for Economic Development or Business as Usual?” DOC Research Institute, September 13, 2018. https://doc-research.org/2018/09/chinas-approach-to-africa/.
[5] Ibid.
[6] Ibid.
[7] Ibid.