Winning the Investment War

　　Africa ’s level of foreign investment has grownover the past five years, but it is the emerging markets,which include China, that are winning hearts and wallets inSub-Saharan Africa, pushing aside traditional investorsfrom the West.

　　In the results of the third Africa Attractiveness Survey,published early in May, global financial advisory firm Ernst& Young revealed that investment from emerging marketshad maintained a rate of 21 percent since 2007.

　　By contrast, investments from Africa’s previous biginvestors, France, the United States and the UK “wereconsiderably down,” according to the report. Since 2007,foreign direct investment (FDI) from the West has fallen by20 percent, with the UK being the only Western nationto grow its investments on the continent, which onlyincreased slightly.

　　Economists at Ernst & Young interviewed over 500 globalbusiness leaders, both those with investments in Africaand those who are considering investing in the future, ontheir views about the continent’s business environment.The findings showed that while Africa’s share of FDI hasgrown from 3.2 percent in 2007 to 5.6 percent in 2012,investments have mostly come from emerging marketssuch as China, India, South Korea and Saudi Arabia.

　　China alone has 152 projects underway onthe continentat the moment, but companies from the countryhave also already completed several projects and havebeen awarded new contracts for projects that have yet tostart. In total, China has been involved in over 350 projectsin the past five years, and the nation has led almost a thirdof the African projects funded entirely by foreigninvestors.

　　Africa’s GDP is expected to grow by4percent this year and 4.6 percent in 2014,according to economists at the firm.

　　China’s rise as Africa’s most favoredinvestment partner is not news, especiallyconsidering that China has pumped over $60billion in loans into Africa through the Export-Import Bank of China since 2001, making it thecontinent’s biggest financier.

　　So why is China overtaking the West atthis pace, even as a number of Western criticsderide China’s charm offensive as the new“colonialism?” Economists say that China hasidentified the right issues to address in Africa.James Shikwati, Director of the Inter-Region EconomicNetwork, a Nairobi-based think-tank on African economicissues, believes China is winning because it has treatedAfrican countries as equal. For instance, he argues thatthrough the Forum on China-Africa Cooperation (FOCAC),African countries engage with China while enjoying equalstanding.

　　There are other reasons for China’s investment dominance.

　　China’s zeal in infrastructure investment fits perfectlywith Africa’s developmental needs. “Africa sorely needsroads, railways, and ports to improve trade. China has seenthis as an opportunity, but the benefits are mutual,” saidDavid Muge, a professor of economics and entrepreneurshipat Mt. Kenya University.

　　“Over recent years, the Chinese have been makingoffers to all sorts of governments, some of which the Westhas shunned,” he told ChinAfrica.

　　“But you’ve got to look at it from a two-dimensionalperspective: China gets the money, Africa gets the roads.That model works for both sides.”

　　Last year alone, there were over 800 active infrastructureprojects across different sectors in Africa, togetherworth $700 billion. China was involved in about a third ofthese, mainly in energy and transport sectors.

　　Although 80 percent of the business leaders interviewedby Ernst & Young spoke positively about the benefitsof investing in Africa, the main drawbacks mentionedwere the lack of necessary infrastructure to ease businessoperations.

　　The findings also stated, “The two fundamental challengesthat are facing those already present andthose looking to invest in Africa are transportand infrastructure logistics, anti-bribery andcorruption.”

　　Some analysts think that China’s growing bondwith Africa originates from the fact that many ofthe continent’s leaders have watched China’srise and admire the country’s determination.

　　“It is a thing that Africa can relateto. It wasnot long ago that China made the turn toprosperity and its growth [has been closely]observed by Africa. It is something that Africaemulates,” said Apuuli Kasaija, a political scientistat Uganda’s Makerere University. CA

　　Emerging markets, with China at the fore, continue to make FDI gains in Africa By Aggrey Mutambo