THE GLOBALIZATION OF
FOREIGN INVESTMENT
IN AFRICA
The Role of Europe,
China, and India
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THE GLOBALIZATION OF
FOREIGN INVESTMENT
IN AFRICA
The Role of Europe,
China, and India
BY
Adams Bodomo
University of Vienna, Vienna, Austria
United Kingdom North America Japan
India Malaysia China
Emerald Publishing Limited
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First edition 2017
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CONTENTS
Acknowledgements
xi
Foreword
xiii
1. Introduction: Globalizing Foreign Investment
in Africa
1.1.
1.2.
1.3.
Socio-Economic Theories
Socio-Political Theories
Socio-Cultural Theories
2. Conceptual Groundings: The Role of FDI in
National Development
2.1.
2.2.
2.3.
2.4.
2.5.
Introduction
FDI: Definitions and Conceptualizations
Arguments for FDI
Arguments against FDI
Conclusion: We Need FDI
3. Looking Back into History: European
Investment in Africa
3.1.
3.2.
3.3.
Introduction
Historical Overview
Essential Features and Constraints of
European Investment in Africa
3.3.1. European Socio-Economic
Conditionalities
3.3.2. The Export of Global SocioPolitical Values
v
1
3
3
3
7
7
8
11
13
16
19
19
20
23
24
25
Contents
vi
3.3.3.
3.4.
3.5.
European Views of Africa as a
Humanitarian Burden
How Europe Can Re-Invent Itself in Africa
3.4.1. Let Politics Be Politics and
Investment Be Investment
3.4.2. Trade and Investment, Not Aid
3.4.3. The Role of the African Diaspora
Conclusion
4. In Comes the Dragon: Chinese Investment
in Africa
4.1.
4.2.
4.3.
4.4.
4.5.
Introduction
Features of Chinese Investment in Africa:
A Paradigm Shift
4.2.1. Conditions of Engagement But
No Conditionalities
4.2.2. Equality of Partnerships
4.2.3. Aid Versus Investment
Global Growth Companies
China’s Success in Africa: Lessons for
Other Investors
Conclusion
5. The Elephant Stands Up to the Dragon:
India’s 21st Century Investment Initiatives
as a Reaction to China in Africa
5.1.
5.2.
5.3.
5.4.
5.5.
Introduction
History of Indian Investment Presence in
Africa
Indian Awakening in Africa: Evaluating
Investment Initiatives
How Unique Does India Want to Be?
Conclusion
6. Newer Alternative Foreign Investment
Sources in the 21st Century
6.1.
Introduction
26
27
27
29
29
30
31
31
34
36
37
37
39
43
44
49
49
50
52
61
63
65
65
Contents
6.2.
6.3.
6.4.
6.5.
vii
The GEEP or the ‘BRICS’
6.2.1. Brazil
6.2.2. Russia
Rising Asian Stars: Turkey and Indonesia
6.3.1. Turkey
6.3.2. Indonesia
6.3.3. Other Asian Players
Central and South America: Cuba and
Beyond
Conclusion
7. The Lion Must Roar: Towards an
Africa-Driven Investment Policy in an
Era of Globalization
7.1.
7.2.
7.3.
7.4.
7.5.
Introduction: Critiquing Africa China
Relations
The Fallacy of the ‘Win-Win-Win’
Hypothesis for Africa, China and the West
7.2.1. WWW-Hypothesis
7.2.2. Four Formal Arguments against
an Africa China West
Trilateralism Hypothesis
The WWW-Hypothesis versus an
Alternative AWA-Hypothesis
7.3.1. Africa-Driven Win-for-All
(AWA)-Hypothesis
The Role of the African Union (AU)
Conclusion
7.5.1. Africa-Driven Win-for-All
(AWA)-Hypothesis
References
66
68
69
71
71
72
73
74
74
77
78
79
80
82
85
86
87
89
90
93
About the Author
103
Index
105
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An earlier version of this research was published in Spanish
by Casa Africa/Los Libros de la Catarata, Madrid, Spain,
as La Globalizacion de las Inversiones en Africa in 2011:
the current version is longer and more updated.
ix
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ACKNOWLEDGEMENTS
In writing this book, I have benefited from assistance accorded
me by many people and institutions.
First and foremost, I would like to express my appreciation to various editors and anonymous reviewers.
This book targets both a general and a specific readership.
Generally, it targets readers globally
in Africa, Brazil,
China, India, Russia and other parts of the world, including
the Asia-Pacific and North and South America regions
as
this is a book framed in the literature on globalization that
I have researched and taught on from various perspectives
during the past 15 years. But it also specifically targets a
European readership where I believe I have been frank in suggesting how Europe can reposition itself to effectively compete with emerging players on the African investment scene.
I am grateful to the following scholars for reading all or
some parts of this book and offering useful comments and
suggestions: Frances Bodomo, Gao Xiaohui, Marcus Schuetz,
Che Dewei and Moses Kiggundu. Professor Kiggundu has
written a comprehensive forward for this book and is already
one of the first readers to have demonstrated a thorough
appreciation of the message of the book. I am extremely
grateful for his generous comments. I thank students and
other sit-in participants in three of my courses on
Globalization: African Experiences, Foundations in African
Studies and Africa China Relations, all offered at the
University of Hong Kong and at the University of Vienna, for
xi
xii
Acknowledgements
countless hours of discussions, many of which relate to the
subject matter of this book. I have presented draft chapters of
the book at many audiences and I wish to acknowledge the
useful feedback that has led to several revisions and reformulations of the book manuscript.
Finally, I am grateful to my research assistants Lucille Hu,
Phoebe Li and, particularly, Yuky Liu and Caroline Pajancic
who have worked with me over the years to help me to prepare a camera-ready version of the book manuscript.
FOREWORD
Professor Adams Bodomo, a native of Ghana, formerly resident of Hong Kong, and now resident of Austria, personifies
a gratifying and growing number of globally minded African
intellectuals boldly presenting alternative approaches to
African development and its dynamic relationships with other
parts of the world. In seeking to clarify, redefine and reshape
Africa’s changing position in the increasingly globalizing
world, he, like many of his generation, takes a humanistic,
nationalistic and at the same time Pan-Africanist approach,
aimed at improving the lives of ordinary Africans, their communities and countries. He rejects traditional Eurocentric
approaches and seeks alternatives to maximizing Africa’s
benefits and minimizing costs from globalization of foreign
investment. As a globalized African scholar, Professor
Bodomo is uniquely qualified to reframe the discourse about
the globalization of Africa, its changing relationships with
Europe, China and other emerging economies, seeking a
more balanced approach with Africa in the lead.
Like many African Africanists, Professor Bodomo firmly
believes that Africa will get maximum benefits for its
resources and markets only if it succeeds in evolving an
Africa
driven foreign investment policy to regulate all
foreign investors on a bilateral basis as opposed to entering
into multilateral investment relations. This is a powerful
message that he wants all his readers
Europeans, Asians,
xiii
xiv
Foreword
South Americans…or fellow Africans
to internalize.
By raising the important question as to whether or not
Africa and the Africans can manage globalization to advance
their own development, he affirms the strong conviction
many of his generation share that indeed globalization can
and must be managed for the benefit of all. Once again, we
are reminded of the fact that management matters, and that
those who have the capacity and tenacity to manage globalization in all its dimensions will survive and even thrive.
Those without are likely to suffer and be permanently
marginalized.
In this concise book, Professor Bodomo has a message
for us all. For Europeans, the message is clear: European
investments have not always been beneficial to Africa and
the Africans, especially those at the bottom of the pyramid.
The European Union needs to change its economic relations
with Africa and separate politics from commerce … in his
words ‘let politics be politics, and investment be investment’.
This is not a new message, but it takes on new urgency
because, for the first time, Africa has a growing number of
alternative economic partners. Evidently, both Europe and
the US governments are deeply concerned about China’s
deepening economic engagements with Africa. In 2011
alone, then Secretary Clinton accused the Chinese of neocolonialism in eastern and southern Africa, the Germans
accused them of being a contributing factor to the famine in
eastern Africa and David Cameroon accused them of ‘stealing’ trade, investment and business opportunities in Nigeria
from the UK-based companies. Critics have linked these
European anxieties with NATO type military operations in
Africa.
On the whole, Europeans find it difficult to change
because attitudes towards Africa and the European institutions that deal with Africa have not changed that much since
Foreword
xv
colonial times. Europe’s ongoing public finance difficulties
relating to national budgets, deficits and an uncertain Euro
have weakened its capacity and influence to compete for
international investment, especially in high-risk environments. European business in Africa is dominated by old
conservative oligopolistic companies, and bilateral relations
are driven by foreign aid and military, NATO type operations. Most European countries have strong domestic NGO
constituencies addicted to foreign aid with little or no interest
in promoting trade or investment with Africa. European
global growth companies that Professor Bodomo refers to as
the future drivers of global business and commerce are hardly
present in Africa. Until European business and government
leaders can change the way they deal with Africa by replacing
conditionalities with conditions, improving the quality of
partnerships with Africans, and substantially providing more
opportunities for trade and investment rather than focusing
almost exclusively on relief and aid, Africans of Professor
Bodomo’s generation will remain unimpressed, and probably
hostile. The challenge is for both Europe and Africa to
effectively manage this needed transformational aspect of
globalization.
Professor Bodomo has an equally important message for
China and the Chinese. Western reactions to China’s growing economic engagements with Africa have been lukewarm,
controversial and at times hostile, but Professor Bodomo
takes a different view. He sees China as a game changer,
paradigm shifter, providing alternative and potentially better
models for African development, international relations and
helping Africa to overcome its global marginalization.
China’s ‘don’t ask, don’t tell’ approach to Africa’s internal
affairs, its willingness to combine aid with trade and investment, its experience in managing projects in high-risk
environments and its strategic and long-term approach to
xvi
Foreword
relationship building combine to present a positive picture
for Africa. Indeed, as an emerging superpower with a
strong growing economy, China is well positioned not only
to play a leading role in the global economy and global
society but also to significantly change the rules of the game
governing global institutions. This has profound implications; key among them is the urgent need for Africa
and China both to improve their individual and collective
capacities to manage Africa China globalization to mutual
advantage.
Under present global conditions, it would appear that
there is no country with the potential to do more for African
economic development and transformation than China. But
for this to happen, both China and Africa must get it and get
it right. While China has a strategy for Africa (e.g. FOCAC),
Africa is yet to articulate its strategy for China. The challenge, however, is that neither China nor Africa is monolithic.
Accordingly, both sides need differentiated and carefully
targeted strategies to reflect changing realities in China,
Africa and globally. We need to go beyond continental organizations like the African Union, regional organizations like
ECOWAS, and seek more operational strategies among
complementary countries (e.g. Kenya and South Sudan),
sectors (e.g. transport, energy) or development issues (e.g.
urbanization). Likewise, Africa needs to do more to attract
investments from Chinese investors outside Beijing, and focus
on the emerging private sector, provincial governments and
town and village enterprises (TVEs). As China continues its
domestic economic reforms, these will become the prime drivers of the country’s going global policy, foreign investment
and globalization.
There are many things China can do to achieve codevelopment with Africa, within the context of a revised
FOCAC framework, and on regional and bilateral relations.
Foreword
xvii
It is important to diversify trade and investment to include
sectors other than resource extraction and infrastructure
building, and to include African countries not endowed with
minerals or petroleum. China needs to open its vast domestic
markets to African exports, not only by reducing tariffs, but
more importantly, by forming joint ventures with African
producers, especially those in the private sector. A key area
where China, rather than Europe, can be particularly helpful
is the development of an African enterprise private sector,
globally competitive and capable of growing African trade
and investments. Only by helping Africa to build a strong
and globally competitive economy and effective state will
China be a true partner and paradigm shifter, different from
earlier Europeans. This is the essence of Professor Bodomo’s
message to the Chinese.
Growing up in East Africa, I remember seeing many people of Indian origin engaged in business, trade and commerce.
Indeed, for a number of African countries, the Indian community served as the link with the global economy. However,
unlike many of the Chinese people we see in Africa today, the
Indians were settlers rather than expatriates. Accordingly, the
message Professor Bodomo offers for India the Indian government and Indian investors in India
is rather different.
Indeed, the Indian government and investors have been slow
to respond to Africa’s growing economic opportunities, in
spite of well-established Indian roots in Africa. While India,
like China, is an emerging global economic power, India is
not China. It is wrong for India to emulate China in Africa,
and it is wrong for Africa to deal with India as if it were
China. Professor Bodomo’s message here is clear: Africa and
India need to identify areas of socio-economic complementariness in terms of sectors (e.g. services), institutions (e.g. public
administration) and businesses (e.g. business processes) and
develop investments of mutual advantage. India also needs to
xviii
Foreword
work with Africa to help access its growing domestic market
for African goods and services and technology both for
public administration and productive enterprises. India can
also be a game changer and paradigm shifter for African
international investment and development, if the global relationships between the two are strategically calibrated and
managed.
We now turn to the message that Professor Bodomo offers
to African leaders and policy makers. The first message is
that with globalization, economic management and public
administration become much more difficult and challenging.
Not only do leaders and policy makers have to deal with
Europeans, but they must also deal with competing and often
conflicting expectations from the Chinese, Indians and others
from the South. At the same time, the global economy
changes so fast that the reasons for foreign investors to come
and invest often differ from those for staying and investing
more. For example, if the Chinese originally came for oil and
minerals, now they are also interested in African land to
grow food for their own people, banking to finance trade and
investment and deep sea ports to service global supply chains.
Governance, leadership and management become equally
complex, and require competent, proactive, strategic thinking
and operational efficiency both in the public and private
sectors. While friendship, trust and a sense of brotherhood
are important, especially for South-South international investments, nothing replaces strategic thinking and business
acumen. I see Professor Bodomo’s message as a challenge for
African leaders and policy makers to make sure that they
have the individual, institutional and national capacities and
competencies to effectively manage the complexities of globalization to mutual advantage. Failure to do so would mean
that it does not matter whether it is the Europeans, the
Foreword
xix
Chinese or the Indians; Africa would not benefit from foreign
investment, not matter where it comes from.
Finally, as an academic, Professor Bodomo has a message
for the academic community. His first message is that all
his propositions and hypotheses are subject to empirical verification. We must not take his word for gospel truth. Rather,
we must apply rigorous research to test whether or not his
work can be supported by independent evidence. For example, there is a need for longitudinal and comparative studies
of European, Chinese and Indian investments in Africa to
determine if indeed there are significant differences, over a
period of time, among them in terms of net benefits to Africa
and the Africans. As well, Professor Bodomo’s bold assertions
that China’s economic engagements with Africa constitute a
paradigm shift which has also reduced the continent’s global
marginalization need further discussion and research. The
alternative view is that China’s contributions to Africa’ economies are additive and transactional, rather than transformational, and that Africa still remains marginalized in terms of
global economic, political and international relations. African
NGOs seem to have taken a lead from their European cousins
and condemned Chinese engagements with Africa. Professor
Bodomo is challenging them to think again, or at the very
least to suspend judgement until more objective evidence is
available.
Taking a page from recent Chinese economic development, Professor Bodomo seems to draw comparisons between
the role played by ethnic Chinese and the African Diaspora in
the development of their respective economies. Here again,
we need both experience based (case studies) and empirical
research to establish the role of the African Diaspora in
advancing African globalization and international foreign
investment. If management is important for globalization,
then we need management research and development to
xx
Foreword
ensure a level playing field for Africa. Since most African
states are dominated by an overreaching state and a relatively
small or weak business sector, we also need research that
informs of the optimal institutions and institutional arrangements needed to support the effective management of African
globalization and foreign trade and investment. There is also
the question of comparing and testing for the salience and
applicability of Sino-capitalism (market economy with
Chinese characters) with Western type of capitalism for the
varied emerging African economic systems. There is much
Africa can learn from China in terms of proper pacing and
sequencing of economic reforms.
Admittedly, not everyone will agree with everything
Professor Bodomo has said. For example, he may have underestimated the positives of European investments in Africa,
too upbeat about China and unduly optimistic about Africa’s
capacity and tenacity to manage globalization to advantage
for all. His failure to clearly differentiate, in this book,
between official China (bilateral or multilateral) and the
growing highly differentiated Chinese participants from the
private sector (individuals, SMEs), and even provinces
(e.g. TVEs) in Africa or the many Africans who live and
work in China does not take into account the more recent
changes in Africa China relations. Yet, we all agree that the
questions he has raised and the intellectual rigour with which
he has treated the salient issues remain important and laudable. The messages embedded in this work are not only relevant for Africa’s former colonial masters but also for China,
India and present and future members of the evolving GEEP
(group of emerging economic powers). As Professor Bodomo
has promised, this short exposé should be seen as the first of
a series of publications that will critically examine globalization of foreign investment in Africa with different global
Foreword
xxi
players. We look forward to reading this and other works by
Professor Bodomo.
Moses Kiggundu
Professor,
Management and International Business,
Sprott School of Business,
Carleton University,
www://sprott.carleton.ca
Note: Professor Kiggundu is also currently editor of the
African Journal of Management (AJOM). He is also a member of the African Capacity Building Foundation (ACFB).
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CHAPTER 1
INTRODUCTION: GLOBALIZING
FOREIGN INVESTMENT
IN AFRICA
The 21st century era of globalization has suddenly opened up
many investment alternatives for Africa. There is now a rush
by many government and private companies to invest in
Africa to the extent that we can begin to talk of a process of
worldwide investment. At the turn of the Millennium, foreign
investment in Africa was only worth about USD10 billion. By
2014, the number had climbed to USD54 billion according to
the United Nations Commission on Trade and Development
(UNCTAD) 2015 report. Indeed, in order to emphasize this
intensified process, we may talk of the globalization of investment in Africa. The use of the term globalization of investment in this book aims thus to describe this vast proliferation
of investment from all corners of the globe into Africa. To
understand this globalization of investment, we need to put
the term globalization itself in context. There are many
definitions and theoretical view points on globalization
from works such as Meyer (1980), Meyer et al. (1997),
1
2
The Globalization of Foreign Investment in Africa
Robertson (1992), Steger (2009), Wellerstein (1998) and
James (2014). In this book, we advance the following definition of the term globalization:
Globalization is a process which involves an
increasing interaction of people of different
cultures, languages, and identities as more and
more efficient transportation and communications
technologies facilitate the movement of peoples,
goods, and services across vast expanses of
the world.
This definition is closely in line with Thomas Friedman’s
idea of globalization as follows: ‘The simple definition of
globalization is the interweaving of markets, technology,
information systems and telecommunications systems in a
way that is shrinking the world from a size medium to a
size small, and enabling each of us to reach around the
world farther, faster, deeper, and cheaper than ever before,
and enabling the world to reach into each of us farther,
faster, deeper, cheaper than ever before. That’s what globalization is.’ (http://www.bricklin.com/albums/fpawlf2000/
friedman.htm: accessed December 5, 2016). In several
works (Friedman, 2005, 2008, 2016), Thomas Friedman
has described many aspects of globalization that are closely
in sync with many of the theoretical approaches we examine in this book.
There are many theoretical dimensions to this definition
and conceptualization of globalization, including the sociopolitical, socio-economic and socio-cultural and we shall be
looking closely in this book at how this global flow of capital
investments into Africa affects African lives politically, economically and culturally. Some of the major theories of globalization include the following.
Introduction: Globalizing Foreign Investment in Africa
3
1.1. SOCIO-ECONOMIC THEORIES
Works like Wellerstein (1998) theorize globalization in terms
of the spread of the capitalist world system across the entire
globe. The globalization of investment in Africa and elsewhere would then be one of the processes licensed by this
theoretical view of globalization since foreign investment is
an essential part of the capitalist world system.
1.2. SOCIO-POLITICAL THEORIES
Works like Meyer et al. (1997) often theorize globalization in
terms of polities (systems that create value through the collective conferral of authority) and tend to show how nation
states are governed or controlled by some universal cultural
values. ‘Instead of a central actor, the culture of world society
allocates responsible and authoritative actorhood to nationstates’ (Meyer, 1980, p. 112).
1.3. SOCIO-CULTURAL THEORIES
Works like Robertson (1992) theorize globalization (known
as world culture theory) which focuses on the way in which
participants in the process become conscious of and give
meaning to living in the world as a single place. For instance,
Robertson defines globalization as the compression of the
world and the intensification of consciousness of the world as
a whole.
These and other major theories of globalization are well
summarized on a useful website for the study of globalization,
called ‘The Globalization Website’: http://www.sociology.
emory.edu/globalization/ (last accessed December 5, 2016).
4
The Globalization of Foreign Investment in Africa
Foreign investment is an integral component of some of
these goods and services mentioned in the various definitions
of globalization, including the one we have advanced in this
book. We may indeed define the Globalization of Investment
in Africa as a process which involves the transformation of
the socio-economic, socio-political and socio-cultural lives of
Africans as more and more foreign investors and the foreign
investments they bring from across all parts of the world
move into the African continent. The term as defined here is
different from the term investment globalization, which is
defined by some economists (e.g. Chase Dunn, 1989) as the
proportion of all invested capital in the world that is owned
by non-nationals.
Some of the questions we may ask include the following:
can Africa manage this scenario of the globalization of
investment well enough to boost its socio-economic development? How would this affect African lives politically, economically and culturally? This book examines the role of
foreign direct investment (FDI) in Africa’s socio-economic,
socio-political and socio-cultural development with particular
reference to Europe and Asia’s two biggest emerging economic powers, China and India. This book begins with a
focus on conceptualizations of FDI in Chapter 2 and then
develops a debate about its benefits or otherwise to the economic development and political sovereignty of the recipient
country. It then turns to a historical overview of FDI in
Africa since the second half of the 20th century, with particular reference to Europe’s investment in Africa in Chapter 3. It
documents a scenario of Western dominance from mainly
European colonial powers and the United States. Following
from this historical overview, it is argued in Chapter 4 that a
paradigm shift occurred with China’s 21st century intensified
foray into Africa in search of oil and other raw materials to
fuel its rapidly rising economy. In Chapter 5, the argument
Introduction: Globalizing Foreign Investment in Africa
5
about a paradigm shift is further developed with the idea
that even though India was in Africa long before China, it
was basically a sleeping giant that has had to wake up to
challenge the sudden rise in Chinese investment in Africa,
beginning with its ‘Focus
Africa’ investment programme.
Apart from highlighting the prominent roles played by
Europe, China and India, a brief overview of new emerging
players in the African investment stratosphere is provided in
Chapter 6, with particular reference to other ‘BRICS’ countries such as Brazil and Russia. Finally, in Chapter 7, we look
into the future and defend the hypothesis that Africa will
only get maximum benefits for its natural resources if it succeeds in evolving an Africa-driven foreign investment policy
to regulate all foreign investors on a bilateral basis as
opposed to entering into multilateral investment relations.
This book concludes with the idea that maintaining clear
investment alternatives in Africa’s investment stratosphere (a
metaphor we use throughout this book to signal these highlevel investment activities by different actors in Africa) presents the best scenario for an African economic renaissance
in the 21st century.
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CHAPTER 2
CONCEPTUAL GROUNDINGS:
THE ROLE OF FDI IN NATIONAL
DEVELOPMENT
2.1. INTRODUCTION
In their book on the role of foreign investment on national
economic and political development, the authors, Theodore
Moran, Edward Graham and Magnus Blomstrom, ask the
poignant question: does foreign direct investment (FDI) promote development? (Moran, Grahamand, & Blomstrom,
2005). This first chapter of my own book on Foreign
Investment in Africa focuses, first, on conceptualizations of
the specific notion of FDI (which underlies the general notion
of foreign investment) and, then, on the debate about its benefits or otherwise to the economic development and political
sovereignty of any recipient country, with regard to, not just
only African countries, but all countries, in general. This discussion is expected to provide the conceptual groundings of
the topic of FDI. This is necessary for discussing the roles of
various foreign investors in Africa from Europe through
China to India in later chapters.
7
8
The Globalization of Foreign Investment in Africa
2.2. FDI: DEFINITIONS AND CONCEPTUALIZATIONS
The term, FDI, constitutes a rather technical economic notion
that is conceptualized in slightly different ways by various
economic institutions, prominent among which is the
Organization for Economic Co-operation and Development
(OECD). The term has, however, become more popularized
with its increasing use in the media in an era characterized by
massive global investment flows to mean basically the commitment by one country or firm or individual, X, to put substantial resources in another country, Y, for the purpose of
running a business in one sector or other of the recipient
country.
In this book we will follow closely the conceptual definition of FDI adopted by the OECD as follows: ‘Foreign direct
investment reflects the objective of obtaining a lasting interest
by a resident entity in one economy (“direct investor”) in an
entity resident in an economy other than that of the investor
(“direct investment enterprise”)’ (OECD, 1996, p. 7). The
OECD goes further to specify that the lasting interest implies
some kind of long-term relationship between the two parties
and a significant degree of influence on the management of
the enterprise. The direct investment would involve initial
business transactions and subsequent capital transactions
between the parties. This definition is quite broad; it emphasizes long-term investment but does not attempt to tease apart
different types of capital flows including short-term capital
inflows like bonds and stocks. This broad definition that
emphasizes long-term investment flows like equipment and
infrastructure building is sufficient for the scope of this
book.1
Who or what then is a foreign direct investor? The OECD
clearly identifies this as ‘… an individual, an incorporated or
unincorporated public or private enterprise, a government, a
Conceptual Groundings
9
group of related individuals, or a group of related incorporated and/or unincorporated enterprises which has a direct
investment enterprise
that is, a subsidiary, associate or
branch
operating in a country other than the country or
countries of residence of the foreign direct investor or investors’ (OECD, 1996, p. 8).
And what then is a direct investment enterprise? Again the
OECD has a recommendation that a ‘…direct investment
enterprise be defined as an incorporated or unincorporated
enterprise in which a foreign investor owns 10 per cent or
more of the ordinary shares or voting power of an incorporated enterprise or the equivalent of an unincorporated enterprise’ (OECD, 1996, p. 8).
From the above conceptual definitions and specifications
we can see that the issue of ‘foreign’ in the term foreign
investment with regard to individuals is not strictly about
citizenship but about residency. An individual is involved in
foreign investment if the individual is permanently resident in
one polity, A, and puts money into a business in another
polity, B, where he is not a permanent resident. The citizenship here is not an issue.
For our purposes then, in this book we define FDI as
follows:
Foreign Direct Investment is a transaction in which
an individual or an organization located in one
polity commits financial resources to the long-term
development of a business in any economic sector of
another polity to the tune of at least 10% of the
value of the beneficiary business.
As a further clarification of the working definition we have
come up with in this book, ‘foreign’ here does not involve citizenship but residency, as already mentioned above. Second,
10
The Globalization of Foreign Investment in Africa
‘direct’ here implies that entity A must not be dealing with
entity B through a third party, entity C, such that entity A is
invisible; entity A must be directly involved in the financial
transfer and other financial dealings from polity A to polity B.
Third, ‘Investment’ here does not involve spending money in
buying and selling goods and services (in which case we talk
of trade) but must actually be spending resources in growing a
business in polity B. In this book we will use the term foreign
investment as a short form of FDI so there is no real difference
between the two terms, and they will be used interchangeably
throughout the book.
Given these conceptual groundings we will now proceed
to evaluate the role of foreign investment. The role foreign
investment plays in the socio-economic, socio-political and
socio-cultural life of a recipient country is the topic of one of
the most intense intellectual debates of our time, especially
with particular reference to Africa, where more and more foreign enterprises and individuals are beginning to invest to the
extent that we can now say that Africa is attracting investors
from most parts of the globe. As many countries develop
their economies they will need two important elements which
Africa has in abundance: natural resources and a large population. Countries growing their economies would need to fuel
their industries with natural resources such as oil and other
hydrocarbons. They will need minerals such as gold, diamond, bauxite and manganese as raw materials. Africa has
them in abundance, mostly untapped. They will also need a
market to sell their products, and Africa is now a continent
of more than one billion people with a rising middle class
whose purchasing power is getting stronger and stronger
(Mahajan, 2009). What are the arguments for and against
this massive FDI inflow into Africa in terms of the sustainable
development of the continent?
Conceptual Groundings
11
2.3. ARGUMENTS FOR FDI
The first issue to note in terms of justifying the need for FDI
in a country is that there is virtually no country in the world
in this age of globalization that does not encourage foreign
investment in the country, in one way or the other. There
must therefore be a globally implicit understanding that foreign investment is necessary to spur development.
There are many socio-economic arguments for FDI. First,
it is impossible to grow an economy without capital investment, and local investments alone cannot accomplish economic growth. Capital investments by foreign investors is
one of the most effective ways to construct much needed
infrastructure, such as roads, railways, ports and dams, in a
country.
Second, foreign investors and the foreign business investments they set up in a country need labour to operate. So FDI
inflows in most cases provide employment opportunities for
the citizens of the country, opportunities that would not
otherwise be available.
Third, foreign investments can lead to knowledge transfer
and skills development within a country. As investors set up
businesses they will have to share some high level skills in
terms of high technology management of heavy equipment
and precision technologies with local engineers and other
professionals in order to successfully operate in the country.
This can have a trickle-down effect in terms of knowledge
transfer from the foreign experts to local experts and even
down to some unskilled workers within the country.
Socio-politically, there are also justifications for foreign
investments. First, FDI in most cases leads to the payment of
taxes by these foreign companies. This means that the political economy in question will have substantial tax revenue on
12
The Globalization of Foreign Investment in Africa
hand to plan a national budget that can further spur growth
and bring about national development and prosperity.
Second, foreign investors, like all other business people,
are usually attracted to political systems that are stable and
have fairly robust rule of law that can protect the investments
foreign investors pour into the country. This means that the
need to attract foreign investors would be enough impetus
for political reform towards democracy, freedom of speech
and rule of law.
Third, in terms of international political relations, the
more foreign investments a country has the more it is connected to other countries, thus enabling the country in question to become a global player in the league of nations, rather
than one that is isolated and inward-looking.
From the socio-cultural perspectives, one can point to a
number of advantages to be derived from a massive inflow of
FDI. First, the vast majority of foreign investment firms have
very robust corporate social responsibility programmes in
place wherever they invest in. This means that socio-cultural
organizations such as clubs, town and village development
committees, and even non-governmental organizations in
charge of vulnerable groups can apply to these foreign companies for revenue to put in place programmes that can go to
promote the social and cultural welfares of the societies that
host these foreign invested businesses.
Second, foreign invested businesses can serve as catalysts
for the growth of local cottage industries in their localities.
The presence of foreign workers at an industry located in a
rural area, for instance, can spur local tourism and the need
for citizens of the district to provide goods and services to the
workers and company bosses of these companies.
Third, the foreign investments and their workers who
come from a different cultural set-up can create crosscultural spaces that can only go a long way to benefit the
Conceptual Groundings
13
local cultures of the districts in which they are located.
The interaction of people from different cultures, if wellmanaged, can only nourish cultural understandings, which
can go a long way to creating lasting friendships and crosscultural understandings.
The last point is stressed with a caveat, if well-managed.
Most often than not, foreign investment situations are not
well-managed and this can lead to a lot of problems and prevent the realization of the many arguments we have advanced
in favour of foreign investments. In the next section we will
explore arguments against FDI inflows into a country.
2.4. ARGUMENTS AGAINST FDI
Despite the vast inflow of foreign investment in a country, the
country may still not experience any socio-economic, sociopolitical and socio-cultural gains. For instance, the United
Nations Council for Trade and Development (UNCTAD)
Secretary-General (from 1 September 2005 to 31 August
2013), Supachai Panitchpakdi said that, despite a massive
inflow of FDI in Africa from USD14 billion in 2003 to
USD18 billion in 2004, ‘The expectation for foreign direct
investment to create growth, to create diversification, technology spill-over and jobs has not really been fully realised…’,
according to a 2010 BBC report (http://news.bbc.co.uk/2/hi/
business/4242554.stm: retrieved July 2017). This is because
much of that investment was targeted at Africa’s resourcerich oil and mining industries, which often generate low tax
revenues and carry high environmental and social costs.
Socio-economically then, the first argument against foreign
investment is that massive capital investments involving the
building of roads, railways, surface mining and large-scale
hydroelectric dams can often lead to massive environmental
14
The Globalization of Foreign Investment in Africa
degradation with little return for the country. The present
scourge of illegal surface mining by Chinese and many foreign companies in Ghana and other African countries is a
case in point.
Second, whereas it is expected that FDI inflows may
improve the employment rates of an economy, the employment opportunities that are expected may not actually be
realized. The FDI firms may prefer to bring their own
employees from their home countries, and Chinese companies
have been accused on many occasions by Africans for bringing in labour from China rather than hiring local labour.
Even if locals are employed the employees are subject to the
vagaries of the profit cycles of the foreign companies who can
lay off employees without the least hesitation when facing a
negative profit cycle. Moreover, employees, especially lowskilled ones, are often poorly compensated in terms of their
salaries and allied conditions of service.
Third, even though foreign investment creates the opportunities for knowledge transfer and skilled manpower development this does depend on both the companies’ readiness to
transfer skills and the level of education of a country’s work
force. Because of company and trade secrets foreign companies may not be willing to transfer knowledge to local
experts, preferring instead to bring experts from their home
countries. Moreover, if the type and level of education a
country has is not appropriate, transfer of skills especially
with regard to lowly educated workers may not be possible
even if they have worked in a company for a very long time.
Socio-politically, there are, at least, three arguments
against FDI. First, the expected tax revenue accruing from
foreign company tax payments may not be realized in a number of scenarios. In an attempt by a country to woo foreign
investors away from other countries competing for foreign
investments, foreign investors often enjoy large tax concessions
Conceptual Groundings
15
to the extent that only very little revenue is collected from
them. Moreover, corruption on the part of both the foreign
investors and local tax revenue collectors can lead to massive
losses in tax revenue.
Second, whereas foreign investments may serve as catalysts
for positive socio-political developments like democratization
and the rule of law, foreign investors and multinational cooperations could easily interfere with and hijack the political
system of recipient countries. This would ultimately lead to
loss of political sovereignty by the citizens within their own
country, with the influx of foreign investment.
Third, a massive injection of foreign investments can often
lead to influences on the country’s external relations. Foreign
companies with large investments in a country would be
most interested in influencing a country’s foreign policy to
their advantage, with the threat of less investment should the
leaders of the country in question attempt to chart their own
path. A country’s relations to other countries, especially in
international fora such as the UN, can be largely influenced
by foreign investors.
There are socio-cultural arguments against foreign investment in a particular region and locality of a country. First,
corporate social responsibility, while a laudable idea, can be
used as a tool by a foreign company in a particular district of
a country to influence the indigenous people’s culture and traditional ways of living. This is because the clubs and traditional cultural and social organizations receiving this kind of
assistance from these companies can easily become dependent
on their benefactors. A situation of dependency can only be
to the benefit of these foreign companies to further entrench
themselves.
Second, while the foreign invested companies in a particular locality may spur the growth of local industries, they may
as well kill them. Foreign companies can attract visitors from
16
The Globalization of Foreign Investment in Africa
other parts of the country and from abroad. These visitors
and tourists can easily destroy the local ecology if their presence and activities are not well-managed.
Third, while the presence of foreign investors and foreign
workers may create opportunities for cross-cultural exchange,
it could as well present threats for culture clashes, leading to
the destruction of local cultures and values, if not wellmanaged.
2.5. CONCLUSION: WE NEED FDI
The last section (on arguments against FDI) ended with a
caveat, if not well-managed. It is not that foreign investment
has inherent disadvantages; it is just that the many advantages contained in the arguments for FDI would not be realized if foreign investment and foreign investors are badly
managed. As we have seen, in an era in which there is a globalization of foreign investment, not just only in Africa but in
other emerging markets, there is the need to put in place
strategies that would ensure that the benefits of foreign
investments are realized and sustained.
To benefit from FDI inflows, recipient countries must
ensure that they have appropriate educational systems that
can train their citizens to take advantage of potential employment opportunities. No polity can develop without investment in its human resources. A polity with a poorly educated
populace can only look on while foreign investors exploit or
even plunder the natural resources of the polity.
Investment diversification and the need to protect certain
local industries constitute another strategy that must be put
in place if any country is to enjoy the benefits of FDI inflows.
Foreign investors are often attracted to the traditional extractive industries of a country, such as oil and gold mining.
Conceptual Groundings
17
These can have disastrous consequences on the environment.
There is the need to move away from extractive industries to
the development of essential manufacturing industries.
Moreover, a country cannot afford to leave its most vulnerable and sensitive industries such as water purification and
defence, respectively, in the hands of foreign investors.
Certain industries must enjoy local protection in order to
strive. Chomsky (1998) points out that all industrialized
countries have at one stage or the other instituted protectionist investment policies in the course of their development into
industrialized countries.
Finally, industrialization and FDI inflows in small pockets
of nations may not have the desired effect of creating a consumer base for the industrial goods thus produced. The best
way for small, developing nations to take advantage of FDI
inflows is to create large markets by forming large regional
markets with other smaller developing nations. For instance,
Africa is a continent of one billion people but this potentially
huge consumer base and market is fragmented into 50-odd
nations. The best way Africa (or for that matter any developing countries) can benefit from the advantages of FDI inflows
is to pool together all their consumers into a huge PanAfrican market.
To conclude this chapter then, we may revisit the question we started out with: does FDI promote development?
The answer from the arguments we have advanced for and
against the concept is: Yes, but only if we manage it well.
In addition to answering this crucial question for the subject matter of this book, we have also defined and delineated the conceptual notions necessary for subsequent
discussions of the roles of Europe, China and India in
Africa’s investment stratosphere. We begin in Chapter 3
with the role of Europe.
18
The Globalization of Foreign Investment in Africa
NOTE
1. But we do also take a more philosophical look at the
term investment. Investment does not have to necessarily
deal with only economic investment but could involve a
certain kind of commitment to improving the lives and
overall welfare of those people with whom one does
business.
CHAPTER 3
LOOKING BACK INTO HISTORY:
EUROPEAN INVESTMENT
IN AFRICA
3.1. INTRODUCTION
Some of the most fundamental questions that must be raised
in this chapter are why after so many decades of foreign
direct investment (FDI) in Africa by the West (mainly Europe
and the United States), Africa still remains one of the poorest
and least industrialized parts of the globe? Did the West and
Europe, in particular, contribute in the development of Africa
or did it indeed under-develop Africa (Rodney, 1972)? How
can Europe (and the West as a whole) reposition itself in the
wake of new and renewed investment players in the African
investment stratosphere?
Given these questions, this chapter necessarily constitutes
a historical overview of FDI in Africa since the second half of
the 20th century, with particular reference to Europe’s investment in Africa. It documents a scenario of Western dominance from mainly European colonial powers, and this aspect
of the book, taken up in Section 3.2 of the chapter, comprises
19
20
The Globalization of Foreign Investment in Africa
the mandatory historical situational contextualization that is
needed for a book on FDI in Africa. In Section 3.3, an outline
is provided of the main features and constraints of European
investment in Africa; it is then claimed that these constraints
are rather inhibiting factors for a beneficial Africa (AU)
Europe (EU) investment partnership, and argued that if
the EU stands any chance of serving as a relevant and competitive investment alternative in Africa, it must re-evaluate
these constraints to reposition itself in Africa’s investment
stratosphere.
3.2. HISTORICAL OVERVIEW
Following the Berlin conference of 1884 1885 marking the
beginning of what is often known as the Scramble for Africa
(i.e. the beginning of European colonialism in Africa), much
of Africa was formally carved out and colonized by three
main European powers, including the United Kingdom,
France and Portugal, with others including Germany and
Belgium. So any historical overview would dwell mainly on
these major former colonial powers, though other Western
European countries like Belgium, Germany, Spain, Denmark,
Sweden, Finland, Norway, the Netherlands, Switzerland,
Austria and Italy also have made important contributions to
investment in Africa. During this colonial period one could
hardly talk of FDI as these African entities were considered
integral parts of the European economies. A country like
France even considered its colonies to be ‘Overseas
Departments’ (Departments d’Outre Mer) within the French
civil service administrative hierarchy, so it would be highly
problematic or even inconceivable to spell out the notion of
foreign direct investment in such a situation.
Looking Back into History: European Investment in Africa
21
Since the second half of the 20th century when most
African countries began to get their independence from
Europe and started charting their own political economies,
FDI has steadily flowed in from Europe into Africa (and other
developing countries). It is estimated that FDI in the 1970s
flowed from the developed world (mostly the West, including
Europe) to the developing countries (including Africa) at an
average yearly rate of USD10 billion in the 1970s, USD20
billion in the 1980s, USD27 billion in the 1990s and up to
USD210 billion at the turn of the Millennium (Graham &
Spaulding, 2011).
In 2010, France had the largest FDI contributions compared to its European peers, given that France has a very
large number of former colonies in Africa. The 2010
UNCTAD Trade Investment report says: ‘Most of the FDI
flows to Africa come from only a small number of (…)
countries…, led by the United States, France and the United
Kingdom. During the period 1996 2000, the US alone
accounted for more than 37% of total flows from developed
countries, France for 18% and the UK for 13%; Germany
and Portugal followed at some distance’ (UNCTAD World
Investment Report, 2010). By 2015, the United Kingdom had
over-taken France as the largest European investor with 58
billion dollars to France’s 54 billion dollars (UNTAD World
Investment Report, 2017).
However substantial this French FDI is, the most important fact is that it has been falling rapidly. For instance, while
French FDI accounted for 18% as Smith says, ‘France’s foreign direct investment in Africa has also plummeted since the
Berlin Wall crumbled. While the African share stood at just
over 30% in 1989, it has been consistently below 5% since
the turn of the century’ (2010). How France Maintains Its
Grip on Africa, BBC Focus on Africa Magazine: http://news.
bbc.co.uk/2/hi/africa/8639874.stm (retrieved: June 23, 2011).
22
The Globalization of Foreign Investment in Africa
The United Kingdom, the next country with the largest
number of former colonies on the African continent, also has
substantial FDI outflows to Africa, indeed currently the highest, though its African FDI outflow is only a tiny fraction of
its total FDI outflows. Figures show that of nearly BPD320
billion of FDI invested by UK companies between 2000 and
2004 only about 15 billion (or approximately 4.5%) of that
went to Africa, mostly to South Africa (UK Government
National Statistics, Dec 13, 2005). It not clear how this scenario of dwindling rate of UK investment in Africa, now that
Britain has begun negotiations to leave the European Union
following a referendum on 23 June 2016, dubbed the Brexit
referendum.
To illustrate a 20-year historical overview of FDI from
Europe, Table 3.1 provides a table of statistics and it shows
FDI figures from major European countries (most of which
are European Union member countries) to Africa between
1981 and 2000.
From this table, we may say that historically the top 10
European investors in Africa over a long period of time have
been France, the United Kingdom, Germany, Portugal, the
Netherlands, Italy, Spain, Denmark, Belgium and Austria,
each of which has 200 million dollars or more of investments by either governments or private companies from
these countries. This order may have changed over the
years; for instance, the United Kingdom has slightly overtaken France in the 2017 UNCTAD figures mentioned
earlier.
So why has Africa not developed much despite this substantial FDI inflows from Europe? We may look at the essential features of European investment, in part, for answers to
why after so much FDI outflow to Africa, the continent still
remains what it is today, largely underdeveloped.
Looking Back into History: European Investment in Africa
23
Table 3.1. Africa: Accumulated FDI Outflows from Western
European Countries 1981 1985, 1986 1990, 1991 1995
and 1996 2000 (Millions of Dollars).
Country
1981 1985 1986 1990 1991 1995 1996 2000
Austria
72
33
7
221
Belgium
99
40
47
242
Denmark
19
24
1
340
38
3
8
1239
1001
2066
4362
Germany
504
332
402
2475
Italy
Finland
France
455
217
213
678
The Netherlands
94
153
297
816
Norway
99
12
145
148
96
1560
Portugal
Spain
50
576
177
48
4
197
Switzerland
6
73
452
69
The United
882
2193
2376
3269
Sweden
Kingdom
Source: UNCTAD, World Investment Report 2002.
3.3. ESSENTIAL FEATURES AND CONSTRAINTS OF
EUROPEAN INVESTMENT IN AFRICA
One would have expected that given all the arguments
advanced in Chapter 2 for the role of FDI in national development, Africa would have made some substantial headway
in economic development, given this injection of FDI since
the 1960s until now from Europe. Yet, one can claim, arguably, that many countries in Africa are even worse off than
24
The Globalization of Foreign Investment in Africa
they were at independence in terms of the economic wellbeing of their people. I want to argue in this chapter that,
putting internal political factors aside, FDI did not do any
substantial good in Africa because of three essential features
of European investment.
3.3.1. European Socio-Economic Conditionalities
European FDI and economic development assistance as a
whole have always come to Africa on the back of many
strings of socio-economic conditionalities. This is particularly the case with former colonial governments and financial institutions controlled by these governments. Many of
these former European colonial powers, particularly France,
the United Kingdom and Portugal, have always had the
tendency to see FDI and the granting of loans to Africa as
an economic tool to continue to have massive influence in
running the economies they left behind. The most prominent of all socio-economic conditionalities are the demands
by these European donors that African economies must privatize their government-controlled corporations and follow
such other structural adjustment programmes (SAPs) like
trade liberalization and currency devaluation. Any people
growing up in Africa, like the author, in the 1970s and
1980s would remember the socio-economic turmoil that
SAPs imposed by Western-controlled economic institutions
like the International Monetary Fund (IMF) and the World
Bank visited on African countries like Ghana, Nigeria,
Senegal, Kenya and Zambia. SAPs on the whole demand
countries to remove price controls on goods, remove
government subsidies, lay off workers in over-bloated
civil service structures and in corporations, devalue local
currencies against the US dollar to make exports from such
Looking Back into History: European Investment in Africa
25
countries cheap for European importers, and so on. All
these have the effects of cutting expenditure on education
and social services to the extent that students and workers
agitate through strikes and other aspects of civil disobedience. While some scholars may argue that SAPs are related
more to aid than to FDI, the point here is to show that
SAPs are imperfect attempts to mitigate the negative effects
of investments. SAPs and other socio-economic conditionalities ultimately lead to generally unstable political systems
and dismal economic welfare for the people, and thus to a
large exodus of citizens away from these countries in search
of better conditions of life in Europe and other Western
countries. I believe that a large number of the professionals
of African descent living in Europe (and the West as a
whole) are economic refugees who had to flee the economic
hardships meted out on African countries by European(and American-) controlled SAPs. Immigration often
involves push and pull factors (the push factors explain the
reasons why people migrate away while the pull factors
explain why they choose a particular destination to migrate
to, if the migration is voluntary). Unstable economies that
result from such socio-economic and socio-political conditionalities in the form of SAPs are an important push factor
for migration away from Africa.
3.3.2. The Export of Global Socio-Political Values
In addition to the socio-economic conditionalities imposed by
European investors in Africa, there are also socio-political conditionalities. In the context of this chapter, socio-political conditionalities are constraints and rules imposed on African
countries by European countries before any investment and
other economic transactions occur between donor and recipient
26
The Globalization of Foreign Investment in Africa
entities. These are different from the purely socio-economic
conditionalities characterized by SAPs. These are attempts to
directly influence the internal political structure of the country
involved. They include the demand that countries must redesign their political system to be one of multi-party democracy,
and that there must be a rule of law, free press, freedom of
speech, etc. All these are seen as global socio-political views
that the West, especially Europe and the United States, tries to
impose on Africa and other developing polities. While not
denying the inherent good in them for promoting human rights
and societal well-being, mainstream anti-imperialist activists
often consider them as modern-day post-colonial attempts to
re-engineer colonial era ‘civilizing’ missions the need to bring
civilization to ‘primitive’ and less advanced societies.
3.3.3. European Views of Africa as a
Humanitarian Burden
A third group of features and constraints of European investment are socio-cultural in nature. They often take on a more
humanitarian dimension and the perceived need to do good
to humanity, which on the surface is a very good cultural
value on the part of Europeans, but deeper down could be
conceived as paternalistic in nature. One of the most distinctive aspects of European investment and general engagement
with Africa from any other entity is the conceptualization of
Africa as an economic burden, given its dismal colonial past
in Africa that has left most countries with hardly any functional political economies. The consequences of seeing Africa
in this way is that Europe has focused more on giving Africa
‘development aid’ and less on purely engaging in trade and
investment, something that makes it very different from other
new investors to be discussed in subsequent chapters.
Looking Back into History: European Investment in Africa
27
Given these three types of investment features and constraints that have left Africa still worse off than it was before
European intervention, some scholarly works (Rodney, 1972)
have tended to claim that Europe, indeed, through development ‘aid’ and investment has actually exploited the resources
of Africa to develop itself, rather than Africa. Europe, therefore, seems to have benefited more than Africa in Africa
Europe investment relations over the centuries. If this is the
case, can Europe turn a new leaf in its investment relations
with Africa in the 21st century?
3.4. HOW EUROPE CAN RE-INVENT ITSELF
IN AFRICA
The turn of the Millennium presents a good opportunity for
Europe, now represented by the canopy European Union
(EU), and Africa, most often represented by the canopy
African Union (AU), to re-evaluate their investment relationship (Brown, 2002). I argue and demonstrate here that if the
EU or Europe as a whole (since not all European countries
are EU members and since some EU members like Britain are
threatening to exit or already on their way out with referenda
such as what the United Kingdom did in June 2016 to trigger
a Brexit) doesn’t want to put itself in danger of being overtaken by others, especially the emerging economies from
Asia, it needs to re-invent itself along three parameters.
3.4.1. Let Politics Be Politics and Investment
Be Investment
As outlined above, Europe has tended to impose socioeconomic and socio-political conditionalities on African
28
The Globalization of Foreign Investment in Africa
recipients of its foreign investment. These conditionalities
have often led to unstable political systems, inefficient economies and social vices such as corruption. Indeed, it can be
argued that the turmoil we see in many African countries is
not because Africans are incapable of ruling themselves but
that it is precisely because of these externally imposed SAPs
that have made it impossible to govern certain countries on
the African continent whether or not one were an African. In
fact, it has sometimes led to defiance against Europe in the
form of military coups and uprisings against imperialism,
leading to dictatorship regimes, which then have to find ways
of staying in power by either looking to alternative sources of
investment and economic development or simply just suppressing their citizens over many decades. This situation then
creates the need for further European intervention, this time,
in the form of ‘development aid’ and humanitarian assistance
by both European government and non-governmental organizations (NGOs). This vicious cycle cannot continue forever.
The way forward is for Europe to mitigate or even completely
abandon its unrealistic conditionalities of engagement and
rather engage purely in investment with Africa. Politics
should be kept separate from business as much as possible.
Let politics be politics and investment be investment! Notice
that, linguistically, the term ‘conditionalities’ is different from
the term ‘conditions’ (of engagement). Conditionalities are
one-sided, asymmetrical constraints imposed by one party
in a dialogue between two or more parties while conditions
are negotiated, more or less, symmetrical rules of engagement
between two or more parties. So the EU can still have
negotiated rules of engagement rather than imposing widespread neo-colonial and super-power socio-economic and
socio-political conditionalities on their African investment
partners.
Looking Back into History: European Investment in Africa
29
3.4.2. Trade and Investment, Not Aid
We have seen that Europe tends to focus more on development aid than on investment when it comes to its economic
engagement with Africa. This, as mentioned earlier, is a
major European distinction. But this distinctive engagement
is unsustainable. It creates many economic disconnects, leading to the dependence by many African economies on
European governmental and NGO aid. In the 21st century to
remain a serious economic partner in Africa and take advantage of Africa’s rich natural resources, the EU must reverse
this equation, focusing more on purely trade and investment,
which would hopefully lessen the need for development aid
by the EU and individual European governments and
their NGOs.
3.4.3. The Role of the African Diaspora
A third way in which the EU can re-invent itself and remain
as a dominant investment partner in Africa is to retool its
economic actors in its relations with Africa. There now exists
a large number of Europeans of African descent. Indeed, putting aside the history of trans-Atlantic slavery, there are more
professionals and other peoples of African descent in Europe
than anywhere in the world. The African Diaspora appears
to be more vibrant and more salient in many European countries than anywhere in the world as most professionals have
had to move to Europe as economic refugees, as mentioned
above. This can serve as a comparative advantage that the
EU has over many parts of the world, if well managed. These
Europeans of African descent can take the lead and serve
as efficient actors to re-engineer FDI in Africa to enable the
30
The Globalization of Foreign Investment in Africa
EU reinvent itself in Africa in the face of massive competition
from more and more efficient emerging economies.
3.5. CONCLUSION
To conclude this chapter, let us revisit and address the main
questions and issues we started out with. We have asked why
after so many years of FDI outflows from Europe to Africa
between the 1960s and now the continent remains one of the
poorest places in the world. Our answer to the question is
that Africa is not just poor per se, but has been impoverished
because of the way investment has been managed in Africa.
Europe has imposed too stringent socio-economic and sociopolitical conditionalities on the continent to the extent that
Europe has gained more than Africa from its FDI outflows
into Africa.
To redress this situation, the EU and individual European
countries must re-engage Africa in search of more mutually
beneficial investment relations, especially at discussions
within the auspices of the periodic Africa
EU Summits.
Europe can do this by relaxing its unrealistic conditionalities,
by focusing more on trade and investment rather than on
development aid, and by taking advantage of its large African
Diaspora. Both Africa and Europe need each other, and,
indeed, Europe cannot afford to lose out to other competitors. In the era of the globalization of investment, more and
more efficient investors are beginning to take hold in the
African investment stratosphere, so Europe needs to develop
a novel approach to investment in Africa.
In the next chapter we will focus on China, one of such
new investment players on the African continent in the 21st
century characterized by the globalization of investment.
CHAPTER 4
IN COMES THE DRAGON:
CHINESE INVESTMENT
IN AFRICA
4.1. INTRODUCTION
Two of the most fundamental questions to pose and address
in this chapter are why is China investing so much in Africa,
and how has China’s investment in Africa shaped up the
investment stratosphere of the second largest continent in
the world? It is not that China was not present in Africa
before the turn of the Millennium. Indeed, the history of
Africa China relations goes back to the 15th century or
earlier when a Chinese sailor, Admiral Zheng He, sailed to
the East African Coast on a trading mission. The second
significant event involving Africa and China (this time in the
context of larger Africa
Asia relations) is the Bandung
Conference a conference that brought together for the first
time mostly independent African and Asian countries in the
Indonesian city of Bandung in 1955. The aim was to form an
alliance against colonialism, neo-colonialism and imperialism;
and to work together for economic development. Since then
31
32
The Globalization of Foreign Investment in Africa
many African countries and China have established diplomatic relations. China, as a player in the Cold War era, characterized by superpower skirmishes between East and West
for ideological and economic influence in different parts of
developing world, was always present in Africa throughout
the 1960s, 1970s and 1980s. Indeed, it did carry out one of
the largest development projects in the World
the Tazara
railway (linking the port of Dar es Salam in Tanzania to
inland Zambia) was completed within five years in 1974
(Monson, 2009). The Tazara Railway project constitutes an
epitome of Africa China relations, especially in the area of
development aid. Because of this and many other projects,
China has achieved a lot of political capital and a large
amount of trust from many African leaders, which has
resulted in crucial support to China on many occasions from
African countries especially in matters of voting and endorsements within the aegis of the United Nations (UN).
But China’s Cold War era presence in Africa is nothing
compared to the intensified way it refocused its attention on
the African continent in the 1990s, especially at the turn of
the Millennium until now. The year 2000 saw the creation
of the Forum for Africa China Cooperation (FOCAC),
which I consider as the third most significant event in the
development of Africa China relations. FOCAC is a triennial
gathering of African and Chinese leaders alternating between
African capitals and Beijing at which various development
cooperation agendas are outlined and assessed. So far we
have had FOCAC2000 in Beijing, FOCAC2003 in Addis
Ababa, Ethiopia, FOCAC2006 again in Beijing, FOCAC2009
in Sharm El Sheik, Egypt, FOCAC2012 back in Beijing, and
FOCAC2015 in Johannesburg, South Africa, where China
pledged to increase investment in Africa to the tune of 100
Billion US dollars by 2020 (http://www.focac.org/eng/ltda/
dwjbzjjhys_1/t1327961.htm accessed July 25, 2017).
In Comes the Dragon: Chinese Investment in Africa
33
The next edition of this trennial meeting is scheduled for
Beijing in 2018.1 This model of cooperation has indeed been
emulated by other investment competitors as we shall see in
the next chapter.
The FOCAC policy framework has been the dominant
framework for Africa China relations. However in recent
years another policy framework has come in view, especially
with the advent of President Xi Jinping as the paramount
leader in China. Since 2013, President Xi has championed a
new policy framework called the Silk Road Economic Belt
and the 21st century Maritime Silk road (One Belt One Road
policy framework (Page, 2014)). This framework mainly concerns China’s relations with West Asia and into Europe.
However, with the expansion of the ancient silk road to
include a maritime component, as indicated in the name of
the policy framework which can even be seen as a strategic
development programme
we are dealing with the South
China Sea and also parts of the Indian Ocean which eventually involves countries in East Africa and upwards to the
Horn of Africa and even the Maghreb. In the coming years,
we are likely to see substantial development finance and foreign investment projects involving Africa within the aegis of
this framework, just as we are seeing with FOCAC.
In this chapter, we argue that a paradigm shift occurred
with China’s 21st century intensified foray into Africa in
search of oil and other raw materials to fuel its rapidly growing economy. This paradigm shift can be calibrated in, at
least, three ways: in terms of the volume of engagement with
regard to trade and investment figures and the sheer number
of infrastructure projects; in terms of the speed and efficiency
with which investment projects are completed; and in terms
of the very discourse of trade, investment and even aid.
We develop this argument in Section 4.2, where we also
outline some of the main features of Chinese investment in
34
The Globalization of Foreign Investment in Africa
Africa that distinguish it from Europe as discussed in
Chapter 3. In Section 4.3, to give a concise description of the
quiet investment revolution that China appears to be engineering in Africa and across the globe, we focus on the new
phenomenon of global growth companies (Kiggundu & Ji,
2008), a group of high-growth, small and medium enterprises
(SMEs), many of them from China, that are emerging as the
movers and shakers of globalization of investment that we
have described throughout the book thus far. Section 4.4 is a
brief expose of how China is in tandem with other investment
competitors in Africa and what lessons these competitors can
learn from China’s success. Section 4.5 summarizes and concludes the chapter.
4.2. FEATURES OF CHINESE INVESTMENT IN
AFRICA: A PARADIGM SHIFT
So why is China in Africa? Or in other words, what accounts
for China’s increasing economic activities in the 21st century?
There are claims that China is in Africa mainly because it is
badly in need of African resources to fuel its rapidly growing
economy (Bodomo, 2016a, 2016b; Chin, 2014; Deepak,
2014; Mhandara, 2013; Okolo & Akwu, 2016; Rich &
Recker, 2013). Actually China has long been in Africa even
when its economy was not that robust (the building of the
Tazara railway in the 1960s being a typical example). China
not only engages Africa for economic reasons but also to gain
political capital and enhance its soft power status; so it would
not be fair to say that it is just there for resources. However, it
would be fair to say that China has dramatically increased its
investment presence in Africa because of one important item:
oil! Here is why. Figures from many sources in 2010 showed
that the Chinese economy consumed 10 million barrels of oil a
In Comes the Dragon: Chinese Investment in Africa
35
day in that year
making it thus approximately 3.65 billion
barrels that year (which is seen in the oil industry as a substantially large figure). The number could be much higher now,
about 4 billion barrels and increasingly so according to CNBC
Reuters website, 26 January 2016. For instance, the Stateowned China National Petroleum Corporation (CNPC) sees
the country’s oil demand rising to 566 million tonnes, or
11.32 million barrels per day in 2016, some 460,000 bpd
higher than in 2015 (retrieved July 8, 2017 from http://
www.cnbc.com/2016/01/26/china-oil-demand-to-grow-43-percent-in-2016-cnpc-research.html). This would make China the
largest consumer of oil in the world. So where does China
secure its oil from, and where will it source oil from in the
future? West Asia (or the so-called Middle East) is still China’s
main source of oil (for instance, it received 45 million tonnes
of oil from Saudi Arabia, its largest supplier of oil in 2010 and
in 2014 it received 16% of crude oil imports from Saudi
Arabia (retrieved July 8, 2017 from http://oilprice.com/Energy/
Crude-Oil/The-Battle-For-Chinas-Oil-Market.html)) but West
Asia is not that stable politically and security-wise (especially
with the expanding presence of Islamist groups in Iraq, Syria
and adjoining areas in the region); moreover there is much
more competition with the United States for oil in West Asia.
Africa has the largest known reserves of oil and its oil is
among the best in the world in terms of quality, so China
has very few alternatives left but to engage Africa more intensively in terms of investment in its extractive and other
resource exploitation industries. Moreover, as mentioned
above the most realistic alternative to Africa, West Asia is less
stable than Africa, security-wise.
To begin to answer the questions stated at the beginning
of this chapter we claim here that China’s re-engagement
with Africa in the 21st century constitutes a paradigm
shift that has completely altered the investment stratosphere
36
The Globalization of Foreign Investment in Africa
(stratosphere here being defined as the entire gamut of the
economic sector that need capital injection). This paradigm
shift is characterized by three distinctive aspects of Chinese
investments: (i) conditions, yes, but conditionalities, no
leading to speedy and efficient completion of massive infrastructure investment projects, (ii) equality of partnerships and
(iii) more investment than aid. These three types are basically
direct contrasts of what we see with European investment in
Africa (Bodomo, 2011a, 2011b), so there inherently has to be
a comparison. Let us address each in turn (Downes, 2007a,
2007b; Meidan, 2006; Taylor, 2006).
4.2.1. Conditions of Engagement But No
Conditionalities
One myth about Chinese forays into Africa seems to be that
China’s engagement with African governments is unconditional and without asking questions. The reality, however, is
that China negotiates conditions of engagement, the most
important of which is the ‘One
China’ policy. The ‘One
China’ Policy is a policy that opposes Taiwan declaring independence and calling itself the Republic of China, as seen from
Taipei, as opposed to the Peoples’ Republic of China, which is
the official name of China, as seen from Beijing. Indeed almost
all African countries adhere to this principle and for the few
countries which from time to time deviate from it and recognize Taiwan, China does all it can to woo them back by negotiating to start investments if they agree to switch. This is a
typical example showing that China does actually negotiate
conditions of engagement, rather than impose conditionalities,
as the West does. Because of this Beijing has succeeded in setting up investment programmes more speedily and efficiently
than many of its European competitors.
In Comes the Dragon: Chinese Investment in Africa
37
4.2.2. Equality of Partnerships
This last point about negotiating conditions brings us to the
issue of equal partnerships. A particularly attractive and
rather refreshing approach that China brings to Africa with
regard to investment is what I will call here a new language
of engagement. China comes to Africa with words and
phrases in its lexicon bag like ‘brother’, ‘comrades in arms
against neo-colonialism’, ‘people of the developing world
comparing notes’, ‘win-win’ partnerships, and so many other
issues all of which centre around the theme of ‘South South’
Cooperation. Given decades of neo-colonial discourse involving former European colonial masters handing down conditionalities on its former African subjects, this approach from
China is rather refreshing to anti-imperialist movements in
Africa and is indeed music in the ears of many African leaders
tired of being dictated to by the West. China refrains from
being judgemental about the internal political machinations
of African countries, as opposed to the West’s socio-political
conditionalities like the need for so-called dictatorships to
democratize before investment can begin. This ability to separate politics from investment is a major ingredient helping
China’s engagement in Africa.
4.2.3. Aid Versus Investment
Another feature about Chinese engagement in Africa in the
21st century is that it now focuses more on investment (and
trade) than on aid. While both the West and China have
undertaken vast development aid and humanitarian aid programmes in Africa, China has at the turn of the Millennium
focused more on trade and investment than on aid, while the
West is still stuck to that old paradigm of seeing Africa as a
38
The Globalization of Foreign Investment in Africa
humanitarian burden that must be addressed with ‘aid’
packages, even after many African analyses (Bodomo, 2013;
Moyo, 2009, 2010) are beginning to show that Africa needs
more trade and investment than foreign aid. This investment
is financed and channelled through banking institutions
like the Exim Import and Export Bank and the Asian
Infrastructure Investment Bank (AIIB).
Given these three features of Chinese investment and
many more, China has shaped up Africa’s investment stratosphere in a rather profound way, to the extent that we can
talk of a paradigm shift away from the Western approach to
investment in Africa. China is certainly not just following in
the footsteps of the West and simply adding to how the former colonial masters did in terms of investment in Africa;
China’s engagement is not an additive engagement, the
country of the Dragon, as China is commonly known, is creating a paradigm shift by charting a different path to investment in Africa. This has resulted in a massive injection of
investment capital into Africa from China. According to
Berger (2007), figures from the African Development Bank
(AfDB) show that ‘...in 2006 Chinese investment in Africa
amounted to US$11.7 billion. In the same year bilateral
trade reached $55.5 billion, an increase of 40% from 2005.
In October 2007, trade volume soared 30%. One third of
China’s crude oil exports are now coming from Africa, with
Angola as the largest single exporting country since early
2006’. The numbers have been dramatically increasing in
subsequent years. For instance, in 2014, bilateral trade
between China and Africa trade surpassed $220 billion, a
22-fold growth since 2000 and China’s investment stock
in Africa exceeded $30 billion, a 60-fold growth (retrieved
July 8, 2017 from http://www.bjreview.com/Current_Issue/
Editor_Choice/201512/t20151214_800044690.html). The
2017 UNCTAD investment figures show that China’s FDI
In Comes the Dragon: Chinese Investment in Africa
39
investment in Africa increased from 13 billion dollars in
2010 to 35 billion dollars in 2015. These figures, which
could indeed be far higher but for the fact that it is hard to
calculate and calibrate Chinese FDI because of transparency
issues, represent a strong paradigm shift from what was
happening on the African investment scene before the era of
globalization of investment. In the next section we shall
look at another phenomenon that is likely to shape the
future of Chinese investment in Africa
the concept of
Global Growth Companies as emerging leaders on the
African investment scene.
4.3. GLOBAL GROWTH COMPANIES
According to Kiggundu and Ji (2008), a typical global
growth company may be generally conceptualized as ‘… a
new, high-growth and SME (gross revenue range from 100
million to 5 billion USD) which has demonstrated a clear
potential to become a leader in the global economy based
on factors such as its business model, growth record, internationalization, leadership, innovation, and the market or
markets it serves’.
Apart from established Chinese companies, including China
National Offshore Company (CNOOC), Aluminium Corp. of
China Ltd. and China National Petroleum Corp which are
already doing investment and trade business in Africa or currently looking for acquisitions in Africa, including buying iron
ore, oil and copper assets to feed China’s growing economy,
there are many other emerging companies from China (and
other emerging economies), as seen in Table 4.1. China alone
has 22 companies on this table, most of them from Tianjin
and Dalian, out of about 70 companies. Many of these
40
Table 4.1. A Partial List of Global Growth Companies in the E7 Countries.
China; Dalian List
1. CBC Capital
India, Russia, Mexico BCG
India:
Brazil; HBR List
1. B2W (retailer)
1. Bajaj Auto
2. Casas Bahia (consumer electronics)
3. Dalian Dayang Trands Co. Ltd
2. Bharat Forge
3. Cosan (ethanol, sugar)
4. Dalian Hi-Think Computer Technology
3. Cipla
4. Gol Linhas Aereas Inteligentes
Company
5. Dalian Wanda Group Co. Ltd.
6. Dashang Group Co. Ltd.
7. Far East Holding Group
8. Fujia Group Company Co. Ltd
9. Inner Mongolia Mengniu Dairy Industry
(Group) Co. Ltd.
10. Inner Mongolia Yili Industrial Group
11. Neusoft Group Ltd.
12. Suntone Business (Group) Co. Ltd
4. Crompton Greaves
5. Dr. Reddy’s Laboratories
6. Hindalco Industries
7. Infosys Technologies
8. Larsen & Toubro
9. Mahindra & Mahindra
10. Ranbaxy Pharmaceuticals
11. Reliance Group
12. Satyam Computer Services
(airline)
5. Grupo Positivo (PCs, Notebooks)
6. O Bosticario (cosmetics)
7. Totvs (ERP solution provider to
SMEs
8. TV Globo (TV network)
9. Votorantim Financas (auto finance
company)
The Globalization of Foreign Investment in Africa
2. China Baha’i Bank
13. Suzlon Energy
14. Tianjin Jinbin Development Co. Ltd.
14. Tata Consultancy Services
15. Tianjin Pipe (Group) Corporation
15. Tata Motors
16. Tianjin Port (Group) Company Ltd.
16. Tata Steel
17. Tianjin Tasly Pharmaceutical Co. Ltd
17. Tata Tea
18. Tianjin Teda Group Co. Ltd
18. Videocon Industries
19. Tianjin Zhonghuan Electronics and
19. Videsh Sanchar Nigam
Information Group Co. ltd
20. Tianjin Zhonghuan Pharmaceutical Group
Corporation Ltd.
21. Xi’an Dagang Highway Machinery &
Electrical Co. ltd
22. Yida Group Co. Ltd.
20. Wipro
Russia:
Turkey: BCG List
1. Gazprom (fossil fuels)
1. Koc Holdings (home appliances)
2. Inter RAO EUS (energy)
2. Sabanci Holdings (chemicals)
3. Lukoil (fossil fuels)
3. Vestel Group (consumer electronics)
In Comes the Dragon: Chinese Investment in Africa
13. Tianjin Bohai Chemical Industry Group
4. MMC Norilsk Nickel Group
(nonferrous metals)
5. Rusal (nonferrous metal)
6. Severstal (steel)
41
42
Table 4.1. (Continued )
China; Dalian List
India, Russia, Mexico BCG
Mexico
Brazil; HBR List
Indonesia (BCG & HBR)
2. Cemex (building materials)
3. Femsa (food and beverages)
2. Astra International (car maker with
foreign partners)
4. Gruma (food & beverages)
5. Grupo Bimbo (food & beverages)
6. Grupo Modelo (food & beverages)
7. Nemak (auto equipment)
Sources: Kiggundu and Ji (2008), China List from the WEF, Founding Members of the Community of Global Growth Companies, http://www.
weforum.org/pdf/SummitReports/dalian2007/print_gccmembers.htm, accessed March 04, 2008; India, Russia, Mexico and Turkey lists from The
2008 BCG 100 New Global Challengers, Exhibit 2, p. 8, December 2008, <underline>www.bcg.com</underline>; Brazil list from Bhattacharya and
Michael (2008) (<underline>www.hbr.org</underline>), and Indonesia from both BCG and HBR. We refer to these seven emerging economies as
the E7, representing the top seven Emerging Economies.
The Globalization of Foreign Investment in Africa
1. America Movil (telecom networks) 1. Indofood Sukses Makmur (BCG)
In Comes the Dragon: Chinese Investment in Africa
43
companies are either already in Africa or beginning to prospect
for business investment on the continent.
The future of investment will be greatly shaped by these
companies in the sense that they, more than established companies, reach out to up and coming local companies to either
acquire them or do joint business with them. They thus stand
a chance of affecting middle class incomes in profound ways,
mostly in a more positive way in terms of raising income
levels for middle class business investors. The intention of
this brief section is to draw attention to these global growth
companies as the companies to watch for in the future in
terms of fundamental changes in Chinese private company
investments in Africa. In the next section we will briefly outline what lessons the West and other competitors on the
African investment scene can learn from China.
4.4. CHINA’S SUCCESS IN AFRICA: LESSONS FOR
OTHER INVESTORS
The most important lesson any contemporary investor can
learn from China is risk taking with regard to investment in
Africa. In fact, prior to the era of globalization of investment
the proliferation of investment by many foreign investors
from all corners of the globe
Africa was faced with what
many referred to as the marginalization of Africa (Bouët,
Devesh, & Mishra, 2007; Hagen, 2002). As explained in
many places, the end of the Cold War in the 1990s was read,
mistakenly, by some people to mean that Africa would no longer be an important geopolitical region, and much less economically so. However, China read otherwise and while
others were relaxing China entered Africa in full force at the
turn of the Millennium. Not only did China just enter Africa
as a whole, but it also ventured into war-torn and rather
44
The Globalization of Foreign Investment in Africa
unstable political economies. The result was that it paid off
handsomely. A case in point is Angola. Angola was embroiled
in civil war for 25 years and just as the end of the war was in
sight in 2002, China entered and invested heavily in Angola’s
oil sector (which no country was doing at the time) and its
infrastructure building programmes like the construction of
the Benguela railway. As of 2014, Angola was China’s second
largest supplier of oil, following Saudi Arabia, accounting for
13% of China’s crude oil imports. While Angola may be selling crude to Western countries like the United States, it is certainly trading more with China. China has also taken risks in
many other countries like Sudan, South Sudan and Zimbabwe
which are either politically unstable or are seen to be countries
where many of their leaders are dictatorial and are involved
with human rights violations (Sautman & Yan, 2009). Again
these issues should not prevent investors from investing in
such countries. Investment must supersede politics; moreover,
it is actually morally wrong to deny the populations of such
countries much needed investment and its attendant benefits
like employment leading, hopefully, to better standards of living just because one perceives that the leaders there are not
democratic.
4.5. CONCLUSION
In this chapter we have addressed two important questions in
the book: why is China so much in Africa and how has it
shaped up the investment scene in Africa? As seen in this
chapter, China’s fast growing economy means that it needs
more than 10 million barrels of oil a day. It thus had to look
beyond West Asia and other places to Africa for oil. It now
gets almost one-third of its oil needs from Africa. In so doing
it has completely shaped up the investment sphere and has
In Comes the Dragon: Chinese Investment in Africa
45
completely rewritten the rules about how to invest profitably
in Africa
thus creating a paradigm shift that is making its
competitors from around the globe sit up. Three main
features have brought about this paradigm shift of success
in Africa: the negotiation of symmetrical conditions rather
than imposing asymmetrical conditionalities; a new language
revolving around ‘brotherhood’ and equality of partnerships; and more investment than aid. How would the future
of this investment be shaped up? In future we should expect
more global growth companies, many of them private, and
also small-scale Chinese entrepreneurs acting solely on their
own, to be the drivers of Chinese investment in Africa.
Does the fact that China has rewritten the rules about successful investment in Africa mean that there is no room for
improvement on the Chinese side? No, a lot stills needs to be
done. Faced with competitors and criticism mainly from
Europe and the West, China doesn’t seem to have done a
good enough job of explaining itself and justifying what it
does in Africa and how it does it (Bodomo, 2015, 2016). It
needs to really address the myths and realities of the effects of
its investment in Africa. For instance, it needs to rein in its
own private companies and private individual Chinese investors and traders in Africa. This is because each Chinese in
Africa is seen by many Africans and other observers to be the
face of the Chinese government and state, and any wrong
and reprehensible behaviour on the part of an individual
Chinese or Chinese company would be interpreted by the
average man on the African street as a Chinese government
atrocity in Africa. A typical example is how the Chinese
government responds to illegal mining and other illegal
investment activities in Africa that lead to environmental degradation. For instance, in 2017, there was a massive public
outcry against illegal surface mining in Ghana, called galamsey in local parlance, which is vast polluting the river waters
46
The Globalization of Foreign Investment in Africa
of Ghana, in most cases the only sources of drinking water
for rural dwellers. The Chinese ambassador in Accra, Sun
Baohong, came out to complain and criticize the media for
projecting a bad image about China (http://citifmonline.com/
2017/04/08/chinese-mission-angry-over-galamsey-reportagecalls-for-fairness/ accessed July 7, 2017). One would have
expected the ambassador to advise her compatriots in
Ghana to respect the laws of their host country, as African
ambassadors in China often do when they address Africans
in Chinese cities such as Beijing, Guangzhou and Hong
Kong. Instead, she chose to go on the defensive in the way
described in the report, leading to anger against China on
the part of the Ghanaian civil society. Such public relations
disasters can only militate against the good image of China
as a win-win investment partner in Africa.
Finally, and rather surprisingly, the impression about the
discourse surrounding Chinese investment in Africa is as if the
country of the Dragon has completely forgotten about other
parts of the world and turned its attention massively to Africa.
Nothing can be further from the truth if we look at the statistics: even though China gets almost one-third of all its oil
imports from Africa, only about 4% of its total FDI outflows
goes to Africa! This means that there is a lot of room for
improvement as far as commitment to investing in Africa is
concerned. For instance, rather than just concentrating heavily
on oil (which only less than half of African countries have at
present) it must go beyond ‘palaces and petroleum’ (Kiggundu,
2011), that is it must do more than just speedily building infrastructure to facilitate its oil and natural resource extraction; it
must diversify into other areas such as agro-business. And this
is especially more poignant if we understand that Europe,
India and many other competing investment players are repositioning themselves to compete with China in Africa. In the
next chapter we will focus on one such player, India.
In Comes the Dragon: Chinese Investment in Africa
47
NOTE
1. In some of my conversations with my colleagues,
Chinese academics, many of whom are in think tank and
advisory relationship with the Chinese government, I have
suggested that in 2018 or at some point in the future it
would be reasonable for China to mount a FOCAC forum
in Guangzhou, which is the city that hosts the largest
African trading population.
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CHAPTER 5
THE ELEPHANT STANDS UP TO
THE DRAGON: INDIA’S
21ST CENTURY INVESTMENT
INITIATIVES AS A REACTION
TO CHINA IN AFRICA
5.1. INTRODUCTION
In 2006, immediately after giving a talk on Africa China
relations, I had a lunch invitation from an Indian Consul in
Hong Kong and discussions at lunch naturally centred on
Africa India relations. I mentioned that I was surprised that
India, which is so geographically close to Africa, was just
sitting back while China flew over India into Africa to the
extent that Africa China relations are now more prominent
worldwide than Africa India relations. In further discussions
with Indians at various fora including an invitation to attend
India’s 59th Independence anniversary celebrations by the
Indian Consulate General in Hong Kong, I came to the
49
50
The Globalization of Foreign Investment in Africa
understanding that India was quite concerned that it is losing
the momentum to China with regard to investment in Africa.
In this chapter, I argue that even though India was in
Africa long before China, it was basically a sleeping giant,
but has had to wake up to challenge the sudden rise in
Chinese investment in Africa with its ‘Focus Africa’ investment programme which began in 2002, and was later supplanted by a triennial Africa India Forum that took off in
2008. In Section 5.2, we sketch a history of Indian investment
in Africa up to 2002 when the ‘Focus Africa’ programme was
initiated. Section 5.3 examines and evaluates the current
engagement, especially in comparison to China’s own initiated programme, the Forum for Africa China Cooperation
(FOCAC). In Section 5.4, we speculate on how India would
like to distinguish itself from other competitors. Section 5.5
concludes the chapter.
5.2. HISTORY OF INDIAN INVESTMENT PRESENCE
IN AFRICA
Like China, India’s trade and investment history begins in
Africa with ship voyages, but while China’s journeys were
limited to East Africa, India’s voyages were limited to the
Horn of Africa when Indian ships entered Ethiopian ports in
the 6th century AD in search of trade in silk and spices. This
early date of 6th century would mean that India did indeed
engage Africa before China did (China’s Admiral Zheng He’s
journeys were in early 1400 AD).
The next most prominent event in India’s relations with
Africa (not necessarily in the field of trade and investment but
more generally) involves the exploits of Indian Statesman
Mahatma Gandhi in South Africa. Gandhi and Indian
Diaspora community members, who were mostly merchants
The Elephant Stands Up to the Dragon
51
in South Africa, were among the first to resist the Apartheid
policy (a racist policy practiced by a White Minority government in South Africa against its majority Black populations
over many decades until it was formally abolished in 1994)
through non-violent ways in the early 1900s. Gandhi thus
began his political activism in Africa which he took back
home to lead India into nationhood. Indians often look back
with pride to this event in their relations with Africa.1
A third event through which Indians often frame their historical links with Africa is the fact that India and many parts
of Africa all experienced the advent of European colonialism,
and indeed, currently India and many African countries
(former British colonies) are all members of the British
Commonwealth. This group of 54 nations in all parts of the
globe often has close financial investment links as well as cultural links (e.g. India organized the 2010 Commonwealth
Games in New Delhi). Because of these colonial links (being
under the same empire at some points in time), there have
been sizeable proportions of Indian communities in many
African countries, such as in Southern Africa (South Africa,
Zambia, Malawi etc.), East Africa (Kenya, Tanzania, Uganda
etc.) and West Africa (Ghana, Nigeria etc.) long before other
Asian communities, such as the Chinese, appeared in Africa.
Despite all these historical links and the framing of close
contemporary relationships between Africa and India, it is a
fact that Africa India relations are nowhere as prominent as
Africa China relations, even if India has been in Africa
longer than China. Metaphorically speaking, it is the case of
a large animal (let us call it the Elephant) going slow and
sometimes sleeping quietly over long periods of time in an
open grassland area for which it has no challengers until a
competitor appears in the horizon.
India thus has had considerable economic and cultural
influence in Africa, especially given its long established
52
The Globalization of Foreign Investment in Africa
African Indian Diaspora, in a rather low key way up to the
turn of the Millennium.
5.3. INDIAN AWAKENING IN AFRICA: EVALUATING
INVESTMENT INITIATIVES
At the turn of the Millennium, India began to up the ante in
its African foray with two investment-related initiatives:
Focus Africa and the Africa India Forum. India has often
denied that it is awakening or re-engaging with Africa more
intensively because of Chinese competition in Africa as seen
by many analyses (e.g. Broadman, 2008; Chand, 2011;
Mathews, 2011; Mawdsley & Gerard McCann, 2011). The
South Asia Monitor reports the following from the second
Africa India Forum Summit (which took place in Addis
Ababa): ‘Rejecting any race with China, India Tuesday
announced a massive $5 billion credit line for Africa for the
next three years and unveiled a host of new institutions for
training and capacity building, setting the stage for forging a
“contemporary and modern” partnership with the resource-rich
continent’ (South Asia Monitor. Retrieved July 3, 2011 from:
http://www.southasiamonitor.org). The Third Africa India
Forum Summit which took place in New Delhi from 26 to 30
October 2015 promised even more investment from Prime
Minister Narendra Modi’s government than was done in the
second summit. This third summit saw India promising USD10
billion in investment fund, along with 50,000 scholarships for
African students to study in India.
However, a broad overview and evaluation of the two
main frameworks under which India is operating in Africa
indicates that there exists indeed this race to catch up with
China, to a large extent, even if rather inexplicit. We will
look at some features of these frameworks.
The Elephant Stands Up to the Dragon
53
But, first, let us put the India foray into Africa in terms of
a pan-Asian FDI outflows before focusing on a comparative
analysis of China and India in Africa. UNTAD (2007), a
book about FDI contributions from Asian countries, shows
that India has the highest FDI contributions as can be seen in
Table 5.1 after Singapore. However, the case of Singapore is
exceptional. Singapore shows the highest figures on this
table but it is not the case that there is more investment from
Singapore companies than most other Asian nations. This is
almost certainly due to the fact that Singapore, being a wellknown international offshore investment centre, has many
companies from Western countries registered there and doing
FDI transactions with Africa from Singapore. Malaysia also
comes in rather strongly, given the 2004 and 2005 figures, as
shown in the table.
Currently, however, China’s investment in Africa is higher
than India’s, standing at USD11.7 billion in 2006 and 35 billion in 2015, as stated in Chapter 4.
With these figures in an Asian perspective presented, let us
now look at the two frameworks, India’s Focus Africa programme and the triennial Africa India Forum.
India began its 21st century foray into Africa with a policy
framework called ‘Focus Africa’ in 2002 under the auspices
of the Indian Ministry of Commerce and Industry. The programme began with seven African countries
South Africa,
Nigeria, Mauritius, Tanzania, Kenya, Ghana and Ethiopia in
2002 but has since then been extended to all other countries
in 2003. The main aim was to widen and deepen trade with
Africa. On the programme website the following details are
put in place:
‘Focus Africa’ Programme was initially launched on
31.3.2002 with focus on seven countries of Sub-Saharan
African (SSA) Region, viz., South Africa, Nigeria, Mauritius,
Indiab
Malaysia
Pakistan
Republic of
Singapore
Taiwan Province of
2005
2004
2004
2004
Korea 2002
2003
Chinaa 2002
1595.3
1968.6
1880.1
93.0
480.5
3508.9
224.0
North Africa
618.4
974.5
416.9
58.5
349.0
..
..
Africa
Algeria
171.2
Egypt
39.8
Libyan Arab
Jamahiriya
33.1
30.0
Morocco
20.6
32.5
2.3
351.5
912.0
320.8
Sudan
Tunisia
Other Africa
Angola
93.8
994.1
..
..
..
..
..
..
39.3
..
..
104.5
..
..
0.1
..
..
3508.9
224.0
58.5
2.2
976.9
102.8
102.3
1463.2
34.5
131.5
8.8
..
..
..
..
..
..
Botswana
18.1
..
..
..
..
..
..
Cameroon
7.9
..
..
0.7
..
..
0.3
The Globalization of Foreign Investment in Africa
Chinaa
Region/country
54
Table 5.1. FDI Stocks in Africa from Selected Developing Asian Economies (Millions of US dollars).
0.6
..
..
..
..
..
..
Central African
2.0
..
..
..
0.6
..
..
Chad
2.7
..
187.6
..
..
..
..
Congo
13.3
..
..
..
..
..
..
Congo, Democratic
25.1
..
..
..
..
..
..
Côte d´Ivoire
29.1
..
..
..
36.3
..
..
Equatorial Guinea
16.6
..
..
..
..
..
..
Ethiopia
29.8
..
..
..
0.6
..
..
Gabon
35.4
..
19.7
..
..
..
..
Gambia
1.2
..
..
..
..
..
..
Ghana
7.3
..
55.3
..
1.9
..
..
Guinea
44.2
..
13.2
..
..
..
..
Republic
Republic of
58.3
..
0.3
..
2.0
..
..
Liberia
15.9
..
4.5
..
..
..
131.8
Madagascar
49.9
..
0.3
..
..
..
..
55
Kenya
The Elephant Stands Up to the Dragon
Cape Verde
56
Table 5.1. (Continued )
Region/country
Malawi
Chinaa
Indiab
Malaysia
Pakistan
Republic of
Singapore
Taiwan Province of
2005
2004
2004
2004
Korea 2002
2003
Chinaa 2002
..
..
..
..
..
13.3
..
..
..
..
..
..
2.4
..
..
..
..
..
..
Mauritius
26.8
948.9
618.7
..
..
3,508.9
..
Mozambique
14.7
..
9.1
..
..
..
..
2.4
..
90.5
..
..
..
..
Niger
20.4
..
..
..
..
..
..
Nigeria
94.1
..
..
1.5
12.0
..
..
Rwanda
4.7
..
..
..
..
..
..
Senegal
2.4
22.2
..
..
0.5
..
..
Mali
Mauritania
Namibia
Seychelles
4.2
..
Sierra Leone
18.4
..
South Africa
112.3
23.0
3.3
..
..
..
..
..
0.3
..
..
..
..
456.2
..
73.5
..
29.6
The Globalization of Foreign Investment in Africa
0.7
4.8
..
..
..
..
..
..
Uganda
5.0
..
..
..
..
..
..
62.0
..
..
2.1
..
..
160.3
..
..
..
..
..
41.6
..
..
..
..
United Republic of
3.9
Tanzania
Zambia
Zimbabwe
..
0.3
Unspecified Other
33.0
..
62.6
Africa
Unspecified Africa
Total world
57,200
11,039
41,508
794
31,102
90,242
34,718
The Elephant Stands Up to the Dragon
Togo
Source: UNCTAD, Asian Foreign Direct Investment in Africa: Towards a New Era of Cooperation among Developing Countries, Table I.5, p. 19.
a
Based on approval data.
b
Based on data for approval flows, accumulated since 1996.
57
58
The Globalization of Foreign Investment in Africa
Tanzania, Kenya, Ghana and Ethiopia. With a view to
further widen and deepen India’s trade with Africa, the
scope of this Programme was further extended with effect
from 1.4.2003 to include Angola, Botswana, Ivory-Coast,
Madagascar, Mozambique, Senegal, Seychelles, Uganda,
Zambia, Namibia and Zimbabwe, along-with the six countries of North Africa, viz., Egypt, Libya, Tunisia, Sudan,
Morocco and Algeria. Thus, the following 24 countries are
covered under the programme:
Algeria
Libya
Seychelles
Angola
Madagascar
South Africa
Botswana
Mauritius
Sudan
Egypt
Morocco
Tanzania
Ethiopia
Mozambique
Tunisia
Ghana
Namibia
Uganda
Ivory Coast
Nigeria
Zambia
Kenya
Senegal
Zimbabwe
Under this Programme, Government extends assistance to
exporters and Export Promotion Councils etc. to undertake
visits to countries in Africa to organize/participate in trade
fairs and exhibitions, hold B-2-B meetings etc. African trade
delegations are also sponsored to visit India. These export
promotion activities are conducted by various Export
Promotion Councils and Apex Chambers with grant under
Market Development Assistance (MDA) and Market Access
Initiative (MAI) Scheme.
Ongoing activities under this programme include:
• Focussing on commercial issues as a priority by the Indian
Missions in the African countries.
The Elephant Stands Up to the Dragon
59
• Review of the Trade and related issues with the 24 African
countries through institutional mechanisms like the ‘Joint
Trade Committee’ etc.
• Increased interaction among businessmen through Joint
Business Councils/Joint Business Groups/CEOs Forum.
• Additional ‘Lines of Credit’ to the African Countries.
• Finalizing MOUs between appropriate authorities, on technical assistance and cooperation in several sectors (http://
focusafrica.gov.in/Focus_Africa_Programme.html
retrieved: July 10, 2017).
Under this programme, India had trade relations with Africa
to the tune of USD40 billion in 2010, representing about 10
per cent of India’s total trade figures.
These kinds of trade investment relations are parallel to
the kind of activities that were taking place between China
and African countries prior to the massive enactment of
FOCAC in 2000.
India has now also enacted its Africa India Forum in
2008, in many ways replacing this single trade-focused programme with a more comprehensive continental relationship.
Incidentally, the Africa India Forum resembles FOCAC in a
number of respects. First, like FOCAC, it is a triennial event,
beginning in 2008. The second Africa India Forum summit
took place in 2011 and the third in 2015.2 Second, like
FOCAC which alternates between Beijing and African capitals, the Africa India Forum also alternates between New
Delhi and African capitals, with the first in New Delhi, the
second in Addis Ababa, the third scheduled for New Delhi.
Third, just like FOCAC and its trademark declarations with
promissory notes by China to undertake various things in the
next 3 years after each summit, the Africa India Forum
also has its declaration document titled: The Africa India
60
The Globalization of Foreign Investment in Africa
Framework for Enhanced Cooperation. In this document a
number of areas of cooperation are outlined: ‘…human
resource development, research and development, institutional capacity building, education, science and technology,
agricultural productivity, industrial growth, mineral extraction, development of the health sector, development of infrastructure, Information Communication Technology as well as
establishment of judicial systems with police and defense
establishments under civilian control’ (Mathews, 2011).
Indeed, the Indian Prime Minister, Manmohan Singh, who
was in attendance at the second summit, summarized the
initiatives by outlining four broad areas of Indian support
including ‘… infrastructure development, regional integration, capacity building and human resource development’
(Mathews, 2011). One important infrastructure project proposed is the Ethiopia Djibouti railway at an estimated cost
of USD300 million. All this seems to be very parallel to what
China has done and is doing in terms of railway infrastructure building (The Tazara railway in Tanzania and Zambia,
the Benguela Railway in Angola etc.).
Given all these similarities, we cannot simply say it is by
coincidence that both China and India have similar and
rather parallel frameworks. Clearly, India seems to be looking closely at how it can go in tandem with China, and is
thus carefully examining what is happening between Africa
and China and taking some cues from it. This constitutes
some amount of evidence for our argument that India’s 21st
century re-engagement with Africa is a reaction to China’s
presence on the continent. This Indian awakening is not necessarily a negative thing for any of Africa, China and Europe.
Indeed, as I argue in the last chapter of the book, competition
for investment in Africa is the best way forward for Africa,
on the one hand, and even for the competing investors, on
the other hand.
The Elephant Stands Up to the Dragon
61
It is not the case, however, that India is just doing exactly
what China is doing in Africa. In the next section, we outline
some features that go to show how India will like to distinguish itself from other investors on the African continent.
5.4. HOW UNIQUE DOES INDIA WANT TO BE?
There are four ways in which India would like to distinguish
itself from the Europeans on the one hand and from the
Chinese on the other as the three go in tandem in the African
investment scene. First, India, somewhat like China, often
wants to portray itself as a ‘fellow victim’ of colonialism and
exploitation (e.g. Africans who were sent to America as
slaves, Indians were also shipped to East and South Africa as
slaves or more euphemistically put, as ‘indentured labourers’
to build railways), thus suggesting that there is no way in
which India would come to the discussion table with the
same set of conditionalities that the former European colonial
masters often lay on the table. The Indian Prime Minister
made sure to allude to this point at the second Africa India
Forum in Addis Ababa: ‘The India
Africa partnership is
unique and owes its origins to history and our common
struggle against colonialism, apartheid, poverty, disease, illiteracy, and hunger’ (Kimani, 2011). From this perspective
then, India would like its relations with Africa to be seen as
one of equal partnership to distinguish itself from it
European competitors.
Second, India distinguishes itself from its Chinese competitors by focusing more on private sector investment than relying heavily on government-owned or government-controlled
company investment as the Chinese do. Currently, some of
the largest Indian investments in Africa are championed by
major Indian companies such as Tata Group and Bharti
62
The Globalization of Foreign Investment in Africa
Airtel Group while Chinese investments are led mainly by
government-owned or government-controlled companies such
as CNOOC.
Third, India would also like to distinguish itself, faced
with Chinese competition, by pointing to the fact that it is
indeed the largest democracy in the world, and would thus
not export undemocratic practices to Africa or be complicit
to certain human rights violations in Africa by dealing with
entrenched African dictators.
Fourth and finally, the most unique way in which India
would like to distinguish itself from either the Europeans or
the Chinese is to highlight its signature approach to capacity
building, which rather than being seen as just aid, should be
seen as ultimately facilitating Indian trade and investment.
Four flagship institutes underlie this Indian signature
approach: ‘The India
Africa Institute of Foreign Trade
(IAIFT) in Uganda, the India Africa Institute of Information
Technology (IAIIT) in Ghana, the India
Africa Diamond
Institute in Botswana, and the India -Africa Institute of
Education, Planning and Administration (IAIEPA) in
Burundi’. It even plans to give more than 50,000 scholarships to students, many of whom will study in these institutes, a better way to capacity building within the continent,
it seems, than sending them mostly abroad to study. Other
educational and student assistance programmes include
training positions as outlined by the Indian Prime Minister:
‘We will thus offer 2500 ITEC training positions every year
for the next three years. Our total commitment for the next
three years by way of scholarships to African students will
stand at more than 22,000’, Manmohan Singh said to applause
from African leaders at the African Union headquarters (South
Asia Monitor: May 24, 2011 www.southasiamonitor.org,
retrieved: July 3, 2011).
The Elephant Stands Up to the Dragon
63
5.5. CONCLUSION
From the preceding analysis in this book, it is now clear that
the three front runners among all the investors setting up
shop in Africa are Europe, China and India. India, the
Elephant, appears to have awoken from its slumber to
reclaim a strong position in the intense competition for
Africa’s resources (and for Africa’s voting power in world
politics
India itself is vying for a permanent UN seat and
would like to place itself in such a way that it can garner
African votes). Can India maintain this premium position on
the African investment stratosphere? This is possible if India
emphasizes its comparative advantages over Europe and
China in three aspects. The first aspect concerns its ability to
provide appropriate technology for African countries (TATA
buses are, for instance very adaptable to African road conditions). The second is with regard to its ability to maintain an
edge over others in terms of its signature capacity building
training programmes (many Africans complain a lot about
Chinese bringing in their own workers rather than employing
and training local workers, so if Indians are seen at prioritizing capacity building in training Africans in Africa this would
come very good for them). To further strengthen this capacity
building, it must add its well-known expertise in setting up
business services (call centres) to the picture, and it must
strive to invest in agro-business. Finally, India must strive to
meet up the challenge of continental coverage. Currently, the
Europeans and the Chinese are investing more comprehensively continent-wide than the Indians who only concentrate
on a small but increasing number of countries. India can only
remain one of the three top investors in Africa if it can widen
and deepen its FDI inflows to many more African countries
than it is doing now.
64
The Globalization of Foreign Investment in Africa
NOTES
1. A 2016 Gandhi statue ‘must fall’ campaign on the campus of the University of Ghana, Legon, Accra (which were
based on claims that Gandhi made some anti-Africa racist
remarks in his life time) has had some damaging effects on
Ghana/Africa India relations, though I believe that the
two entities can quickly mend these relations by more indepth discussions of the role of Gandhi in contributing to
African self-actualization struggles as briefly mentioned
here.
2. Syed Akbaruddin, the official spokesperson of Indian
Foreign Ministry, told the media that the scheduled summit was postponed to 2015, although the summit was earlier scheduled to be held in December 2014, with a 3-year
gap after the 2011 Addis Ababa summit. Media reports
claimed that Ebola outbreak in Western African nations
played key role behind the postponement of the summit.
CHAPTER 6
NEWER ALTERNATIVE FOREIGN
INVESTMENT SOURCES IN
THE 21ST CENTURY
6.1. INTRODUCTION
In this chapter, a brief overview of new emerging players in
the African Investment stratosphere is provided, with particular reference to ‘BRICS’ countries such as Brazil and Russia,
but also to newer and renewed players such as Turkey, South
Korea and Indonesia. The aim is to show that the picture of
globalization of investment we have painted in this book cannot be complete by just concentrating on the three pillars of
globalization of investment in Africa: Europe, China and
India. These new, renewed, or up-and-coming investors are
likely to shape the future of investment in Africa in so many
profound ways that we can only be speculative about this at
the moment, though we will bring up some important statistics to foreground this future. We begin in Section 6.2 with
the so-called BRICS or what I prefer to call here the GEEP or
the E-Group. I give a background to this nomenclature before
showing how the major players, mainly Brazil and Russia,
65
66
The Globalization of Foreign Investment in Africa
are positioning themselves for this phenomenon of global
African investment. Section 6.3 focuses on the interesting rise
of other Asian stars such as South Korea, Turkey and
Indonesia, while in Section 6.4 we move down to South
America to see if other players like Cuba, Mexico and
Venezuela could be looming in the African investment horizons. Section 6.5 concludes the chapter.
6.2. THE GEEP OR THE ‘BRICS’
A feature of the globalization of investment, not just in
Africa, but in all corners of the globe is that new economic
and investment groups are being formed by the day. One
such group is the ‘BRICS’, comprising Brazil, Russia, India,
China and South Africa. Goldman Sachs, a global investment
company, coined the term ‘BRIC’ in 2003 as the designation
for this group, making use of the first or significant letters of
the component country names: Brazil, Russia, India and
China. With South Africa (SA) joining later in 2011, one
would have thought that the name would change to incorporate SA; instead ‘BRICS’ was designated as the name.
However, this choice of BRICS is not correct, as it stands,
and the right name should be BRICSA — Brazil, Russia,
India, China and South Africa, if we stay with this paradigm
of choosing first or significant letters of country names to designate economic groups. ‘SA’ would be more representative
of ‘South Africa’ in this acronym, as the country is not simply
‘Southafrica’ but South AFRICA! Beyond making better linguistic sense, BRICSA would emphasize the emergence of an
AFRICAN economy into international prominence and this
ought to be recognized with the presence of ‘Africa’ in all
aspects of the name.
Newer Foreign Investment Sources in the 21st Century
67
I believe, however, that we need a different paradigm of
designating these blocs beyond the original Goldman Sachs
choice of first letters of country names. Unfortunately, the
Goldman Sachs strategy is characterized by lack of foresight
to take account of future expansions to include new members.
As it stands now, we are already getting things wrong, with
just the inclusion of only one new member, SA. What happens
if other members join? At one time or the other, Mexico,
Indonesia and Turkey have also expressed interest in joining
BRICSA. What would happen if they joined? Shall we call it
BRICSMIT or even BRICSAMIT? Even if we succeeded in
choosing one of these names what happens if more countries
like Nigeria, Africa’s largest economy, and South Korea succeed in joining the group in the future? Indeed, worse attempts
to propose other acronyms for various economic groupings,
such as CIVETS (Colombia, Indonesia, Vietnam, Egypt,
Turkey and South Africa) are on the way.1 Because of this
problem, I propose in this book to call this group, the Group
of Emerging Economic Powers, or the GEEP. Since they are
now five members, I propose to call the current BRICS, the
GEEP5 instead, with possibilities of calling it GEEP6, GEEP7,
GEEP8 etc., depending on how many countries are in the
group. The proposed acronym, GEEP, is presumably superior
to the existing acronym, BRICS, because it is not only more
amenable to future expansions, but because it indeed describes
more aptly what these countries really are in comparison to
other existing groups such as the Group of industrialized
nations with acronyms such as G7, G8 and G20.
Another alternative, which is already in use in some quarters is to simply reduce my coinage of GEEP to E (Group of
Emerging Powers) such that where I talk of GEEP5, GEEP6,
GEEP7 etc., they talk of E5, E6, E7 etc. While there may
be arguments that some of these countries are not just emerging but already emerged powers, both of these alternatives
68
The Globalization of Foreign Investment in Africa
(GEEP and E) are better than the BRICS alternative, at least
in the way that it is amenable to amendments, and I hope
that either of them gets adopted over and above BRICS as the
wave of globalization of investment continues unabated.
Let us look at Brazil and Russia as potential players in the
African investment scene.
6.2.1. Brazil
Brazil, a more or less economically successful country in South
America and a member of GEEP5, is beginning to turn its
attention to Africa. Africa’s stake in Brazil’s foreign trade overall increased steadily from 3.9 to 5.7 per cent between 2000
and 2012. The 2008 figures show that Brazil’s FDI outflows to
Africa stood at just USD1.2 billion, according to the Brazilian
Central Bank, but the number could be far higher now.2 Still
this number is far lower than that of Europe, China and India.
For example, it is less than 10 per cent of Chinese FDI in
Africa. So how can Brazil succeed in Africa, what are its relative comparative advantages in terms of investment? To succeed, Brazil has to carefully calibrate a fine line between it and
Europe, China and India, the three main pillars of foreign
investment in Africa. One of its comparative advantages that
none of its competitors shares with it is: its blood links with
Africa. Many people were shipped to Brazil from Africa as
slaves during the infamous Trans-Atlantic Slave Trade, so
Brazil can more than China and even India (which also suffered trade in ‘indentured labour’) appeal to the fact that it
and Africa are both victims of Western exploitation and ought
thus to stick together in matters of trade and investment.
Lewis (2011) states: ‘Former president Luiz Inacio Lula da
Silva, who stepped down in January [of 2011], spent a good
part of his eight years in power selling Brazil as Africa’s
Newer Foreign Investment Sources in the 21st Century
69
partner and highlighting the ways in which Brazil is built on
the “work, sweat and blood of Africans” shipped across the
Atlantic during the slave trade. Lula visited 25 African nations,
doubled the number of Brazilian embassies in Africa and
boosted trade to $26 billion in 2008 from $3.1 billion in
2000’. Indeed, about a 100 million Brazilians are said to have
African blood and share many cultural traits with Africans in
terms of food based on ‘…palm oil, beans, okra, and cashew
nuts…’ (Lewis, 2011). Many African religions or their remnants still live on today in Brazil.
However, blood links are not enough. Brazil, once it supplants its current financial problems and political turmoil
because of the impeachment and subsequent overthrow of
President Dilma Roussef in 2016 has to emphasize its real
comparative economic advantages. It is not clear if the current President, Michel Terner, since August 2016 will continue engaging Africa with the same enthusiasm as Lula and
Roussef. The country is well-known for its expertise in biofuel production, such as the creation of ethanol. Brazil can
try to invest in Africa based on this technology and strive to
share this expertise in the form of technology transfer. If it
can do this successfully, it would be able to create a niche
market that it can build on to mount a good challenge to
investment competitors like Europe, China and India.
6.2.2. Russia
The way we can foreground Russia’s role in African investment is to show what it lost out as one of the countries that
seemed to have lost interest in Africa and in the process
allowed China to make inroads and take a pole position. As
has been mentioned in earlier parts of the book, one of the
biggest, though little noticed, contributions of China’s 21st
70
The Globalization of Foreign Investment in Africa
century intensified forays into Africa for trade and investment
purposes is the elimination (or at least the minimization) of a
major problem Africa faced at the end of the Cold War in the
early 1990s: the marginalization of Africa. There was the fear
that with the end of the Cold War, Africa would cease to be
an ideological battleground between major world powers and
thus be of little geopolitical and economic importance.
However, China’s entry into Africa was a game-changer and
this led to the sudden disuse of this term 20 years on (even
though one can still argue that Africa is still marginalized in
many world fora since it doesn’t have a forceful voice yet),
and has now resulted in a global rush by major economic
powers to compete with China in Africa, leading to what
I call the ‘globalization of investment’ in Africa. We now see
major trade and investment players on the African continent
including the traditional Western players like Europe and the
United States but also new and renewed ones like India,
Brazil and Russia.
In many ways then countries like Russia, which was very
much present in Africa under the Soviet banner, seem to be
playing ‘catch-up’ with China and it is in this context that
any closer contacts between Russia and African countries
would bring both short- and long-term benefits to both entities. In the short-term it would show that Russia is, so to
speak, keeping its hands warm in the fire, as it would be seen
to be one of the contemporary players in the African investment stratosphere. In the long term it would translate into
lucrative trade deals. Even though Russia is a net exporter of
petroleum products, it would still benefit from up-and-coming exporters of petroleum products in Africa in that it would
be able to find market for its oil extraction technologies
and for its consultancy expertise. Russia doesn’t seem to
have a clear Africa strategy, and it ought to set about developing one. To stay in the game and to match-up with the
Newer Foreign Investment Sources in the 21st Century
71
spectacular success of its fellow GEEP5 members, China and
India in Africa, Russia must intensify such close contacts,
between not just oil producing countries like Nigeria, Angola
and Ghana, but most of the other 50-odd countries on the
African continent as well.
6.3. RISING ASIAN STARS: TURKEY AND INDONESIA
It is not just only China and India that are Asian players on the
African continent. As we saw from the table of FDI statistics in
Table 4.1, other Asian countries are also strong, including
Turkey, Indonesia, South Korea, Malaysia, Thailand and the
Philippines.
6.3.1. Turkey
Turkey seems to be a surprise player on the African continent. It is said to be suddenly opening many embassies in
Africa and expanding its relations in many ways including
that of trade and investment (Amra, 2011, Vicky, 2011),
despite the 2016 political turmoil involving an attempted
coup d’etat that led to far more excessive powers for
President Erdogan. Turkish companies in Africa have
increased from 52 to 90 between 2005 and 2009 (Amra,
2011), with most of its investment concentrated in North
Africa though. Turkish FDI in this region of Africa was
USD317 million in 2009 (Amra, 2011). In 2010 foreign
investment by more than 400 Turkish SMEs amounted to
USD500 million in all of Africa (Vicky, 2011). Turkey’s bilateral trade volume with Africa has reached USD17.5 billion in
2015, a threefold increase in volume compared to the records
of 2003 (Republic of Turkey, Ministry of Foreign Affairs,
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retrieved December 4, 2016 from http://www.mfa.gov.tr/turkey-africa-relations.en.mfa).
In many ways Turkey’s investment journey is rather parallel to that of China and India. China re-entered Africa more
energetically at the turn of the Millennium with the formation
of FOCAC. India responded by re-focusing on Africa with its
‘Focus — Africa’ programme in 2002. And Turkey took a
cue and responded in 2005 with its designation of that year
as the ‘Year of Africa’, leading to the first Africa Turkey
Cooperation Summit in Istanbul in 2008. Turkey trades and
invests in Africa with Turkish made products such as building
materials. Turkey now has 39 embassies in Africa, and this
refocus on Africa immediately paid off in diplomatic terms
with Turkey winning a non-permanent seat on the UN
Security Council, with a strong backing of 51 votes from
Africa alone (Vicky, 2011).
It seems then that it is an absolute miscalculation for anyone to have had the conceptualization that the end of the
Cold War would mean that Africa would be geopolitically
less important. Besides its rich natural resource reserves,
Africa is also geopolitically a vital part of the world in terms
of it mounting a collective stance at many UN fora, compared
to how other parts of the world fare. So neither traditional
power blocs in the West nor emerging powers can afford to
ignore Africa economically and geopolitically. Turkey seems
to have realized this and has risen to the occasion with a late
entry compared to other emerging powers like China, India
and Brazil. As the saying goes, better late than never!
6.3.2. Indonesia
Indonesia, South East Asia’s largest economy, is beginning
to show signs of investment in Africa, especially in
Newer Foreign Investment Sources in the 21st Century
73
predominantly Moslem countries like Nigeria where it is
exploring investment in housing construction, hydroelectric
power generation and in the petrochemical industry.
Indonesia was the host of the first ever major Africa Asia
conference (held in Bandung in 1955), so the political goodwill is already there as far as Africa Indonesia relations are
concerned. A little bit more push at the socio-economic and
socio-cultural levels can come good for both sides of the
relationship.
6.3.3. Other Asian Players
South Korean companies are present in Africa as traders and
investors. The most famous are car companies and fishing
companies. Korean cars like Hyundai and KIA are popular
among African middle class buyers.
Malaysia, like South Korea, is often seen as a success story
by many African countries, since at independence many
African countries were richer than these two Asian countries
but have now been overtaken by them. Malaysia, which has
a large population of ethnic Chinese (about 25 per cent of its
total population of about 30 million), often makes use of the
ethnic Chinese Diaspora in Africa as a stepping stone to
investments in many countries such as Mauritius and South
Africa, and in many industries such as tourism, resource
extraction, garment manufacture and all kinds of trade.
It would not be too surprising to see the rise of other
Association of South East Asian Nation (ASEAN) players like
Thailand, the Philippines, Singapore, Myanmar, Cambodia,
Laos and Vietnam as investment partners with Africa in the
very near future. There is already a nascent Africa ASEAN
Business Forum whose first edition is to be held in
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The Globalization of Foreign Investment in Africa
Johannesburg in November 2017 (http://www.aabexpo.com/:
accessed on July 25, 2017).
6.4. CENTRAL AND SOUTH AMERICA:
CUBA AND BEYOND
The Central and South American regions on the whole have
countries which are rising stars with countries such as Cuba,
Venezuela, Mexico, Argentina and Colombia poised to look
to Africa for trade and resource extraction. Currently, there
are no obvious attempts by these countries to engage Africa
investment-wise. However, Cuba is very prominent in Africa
in terms of development aid, especially in the medical field
(Cuba was very instrumental in combatting the Ebola outbreak in 2014/2015) and could build on this in terms of trade
and investment. Venezuela has just begun to talk to Nigeria
about investment in Nigeria’s oil refineries. These initial contacts by these Central and South American countries are
bound to translate into some concrete investment deals in the
not too distant future.
6.5. CONCLUSION
As this chapter has shown, while Europe, China and India
are the three pillars of the globalization of investment in
Africa, other players beginning to emerge are Brazil, Russia,
Turkey, Indonesia, South Korea, Malaysia and possibly some
other Central and South American countries like Cuba,
Venezuela, Mexico, Argentina and Colombia.
We have not explicitly examined the role of obvious
players like the United States, Canada, Japan and Australia
for, at least, two reasons. First, we believe that these are part
Newer Foreign Investment Sources in the 21st Century
75
of the Western players that we have discussed in Chapter 2,
and the socio-economic patterns these countries, especially
the United States, use is somewhat rather similar to what the
Europeans do in that these Western-based economies all
make use of Western-controlled worldwide financial institutions like the IMF and the World Bank as instruments to
impose socio-economic conditionalities on African countries.
Second, for reasons of space, we need further sequels to this
book where we can do book-length discussions with titles
like: The Globalization of Investment in Africa: The United
States, Brazil and South Korea in Tandem; the Globalization
of Investment in Africa: Japan, Cuba and Indonesia in
Tandem; the Globalization of Investment in Africa: Russia,
Turkey and Malaysia in Tandem etc.
The discussion, thus, far seems to be that it is only the foreign investors who are taking investment initiatives in the
African investment stratosphere, while Africa is just a passive
recipient of these foreign investors and the investments they
bring. In the next chapter, we will look to arguing for giving
Africa a certain amount of agency in managing its own
investment stratosphere.
NOTES
1. ‘…But…, economist Jim O’Neill of Goldman Sachs,
the man who originally coined the initial term BRICs, has
designated what he thinks are the next great emerging
market opportunities Columbia, Indonesia, Vietnam,
Egypt Turkey and South Africa. The CIVETS for short’.
(http://www.skyscrapercity.com/showthread.php?t=
1209661 retrieved: December 28, 2010). Indeed Jim
O’Neill has further cooked up another term: The N-11,
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The Globalization of Foreign Investment in Africa
standing for the New or the Next 11 emerging countries,
and comprising South Korea, Mexico, Turkey, Egypt,
Iran, Pakistan, Indonesia, Nigeria, Philippines, Bangladesh
and Vietnam.
2. It increased from USD69 billion in 2001 to USD214
billion in 2009 (http://siteresources.worldbank.org/
AFRICAEXT/Resources/chapter5.pdf: Accessed on
December 10, 2016).
CHAPTER 7
THE LION MUST ROAR:
TOWARDS AN AFRICA-DRIVEN
INVESTMENT POLICY IN AN ERA
OF GLOBALIZATION
This final chapter of the book looks into the future and
defends the hypothesis that Africa will only get maximum
benefits for its natural resources if it succeeds in evolving an
Africa-driven foreign investment policy to regulate all foreign
investors on a bilateral basis as opposed to entering into trilateral investment relations.
The book concludes with the idea that maintaining clear
investment alternatives in Africa’s investment stratosphere
presents the best scenario for an African economic renaissance in the 21st century. Power and agency are translated
into having options and choices. Lions always keep their
options open as they roam the African savannah!
77
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7.1. INTRODUCTION: CRITIQUING
AFRICA CHINA RELATIONS
As mentioned in Chapter 4, one of the biggest, though little
noticed, contributions of China’s 21st century intensified forays into Africa for trade and investment purposes is the elimination of a major problem Africa faced at the end of the
Cold War in the early 1990s: The Marginalization of Africa.
There was the fear that with the end of the Cold War, Africa
would cease to be an ideological battleground between major
world powers and thus be of little geopolitical and economic
importance. However, China’s entry into Africa was a gamechanger and this led to the sudden disuse of this term 30 years
on, and has now resulted in a global rush by major economic
powers to compete with China in Africa, leading to what
I call the ‘globalization of investment’ in Africa (Bodomo,
2011). We now see major trade and investment players on
the African continent including the traditional Western
players like Europe and the United States of America but also
new and renewed ones like India, Brazil and Russia.
However China’s engagement in Africa has not been without critical comments. Indeed, Africa China relations, especially in the era of globalization of investment, are marked and
defined to the international world, not so much by the two
parties but by more than one decade of sustained Western critiquing and even downright criticism of China’s activities in
Africa (Berger & Wissenbach, 2007; Bodomo, 2009, 2010b,
2015; Hartig, 2015; Mohan & Lampert, 2012; van Staden,
2015; Waseermann, 2015; Wissenbach, 2008, 2009). In this
respect then Africa China relations may be said to be defined
and determined not just by them but also by Western reactions
to the contacts between Africa and China. China is often seen
as a new economic imperialist in Africa (e.g. Games, 2005), as
a pure capitalist investor in Africa (e.g. Hilsum, 2006) or even
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79
as a neo-colonialist power on the continent (e.g. Jack Straw,
former British foreign Secretary’s address in Nigeria, February
2006).
In Section 7.2, I question the European Union’s stance on
moving suddenly from this criticism of China to one of
engagement with China in Africa, and raise four arguments
against the EU proposal for ‘trilateralism’ in Section 7.3.
I then propose an alternative approach in Section 7.4 that
I believe is more inclusive in giving conceptual spaces to
other investment players, not just only Western and Chinese
players. Section 7.5 concludes the chapter and the book by
stressing the need for Africa to chart an investment policy
that is based on the philosophy that only Africa knows what
is best for Africa.
7.2. THE FALLACY OF THE ‘WIN-WIN-WIN’
HYPOTHESIS FOR AFRICA, CHINA AND THE WEST
As mentioned earlier, the EU and other Western bodies have
heavily criticized Chinese engagement with Africa on many
fronts since the turn of the century. Suddenly, after one decade
of criticism, as if to mimic the phrase, ‘if you cannot beat
them, join them’, the West has turned volt face, and proposed
to ‘collaborate’ with China in its African foray (Berger &
Wissenbach, 2007; Commission of European Communities,
2008; Wissenbach, 2008, etc.). Even the European commission
now has a blue print for a so-called EU-China-Africa trilateral
dialogue and cooperation (Commission of the European
Communities, 2008). Further still, the American government is
encouraging American companies to have trilateral meetings
on ‘corporate social responsibility’ (Bodomo, 2010a). So it is
quite clear that, to a large extent, there is a common Western
position on trilateralism. This trilateralism is the basis for the
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The Globalization of Foreign Investment in Africa
Win-Win-Win hypothesis. This hypothesis has never been
clearly articulated by its proponents; it is often simply assumed
and stated in different ways so many times that it has become
a hackneyed expression. However, surmising from the various
ways it is often mentioned, we construct the following formulation for the hypothesis:
7.2.1. WWW-Hypothesis
Africa, China and the West will achieve mutual benefit if
China and the West cooperate in their investments, trade and
humanitarian activities in Africa.
The spirit of this statement is at the core of the
Commission of the European Communities 2008 blueprint.
But one wonders whether this is true; is it genuine to claim
that all three parties stand to win within the scenario
China West collaboration in Africa? In any case, why now
has this position been arrived at after two decades of intensive criticism about China’s presence in Africa? Is it only the
West that has arrived at this stance?
Even some Chinese academics and Chinese institutions
have talked about this so-called beneficial trilateralism
(Guan, 2007; Luo, 2006), for instance at a February 2010
Monrovia meeting between Africa, China and the United
States (Bodomo, 2010a). Indeed, after resisting EU requests
to table Africa as an agenda in EU-China fora, China has on
at least one occasion allowed this to happen. (China — EU
Summit in Beijing 2008).
While it is clear that there is a Western position on this
and there is some semblance of some Chinese academics and
institutions going along with it, probably bending to the
weight of Western criticism, it is not clear what the foundations of this position are.
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On the surface, it would be a good, sound hypothesis in
the minds of its proponents. The most developed part of the
world, the West, and the fastest developing country globally,
and indeed the second largest economy — China — could
team up to give life-support to a helpless Africa. But this
would appear to be a highly flawed thinking that is not commensurate with contemporary ways of viewing Africa in the
21st century. First, this position would be treating Africa, not
in reality as a trade and investment opportunity, but as a
paternalistic, basket case of aid to give, in reality as a humanitarian burden to grapple with. This, as mentioned in
Chapters 3 and 4, is a patently Western paradigm to African
development and it is precisely this paradigm that China has
successfully challenged at the end of the 20th century.
Even if we were to stay with this old paradigm of engaging
Africa as a ‘burden’, as a basket case of aid and not of trade
and investment, the hypothesis of a trilateralism would still
be ill-stated and thus flawed. For instance, the rationale for
the Monrovia meeting was for the parties to ‘discuss how
companies can contribute to economic and social development in Africa’. This is hardly convincing, in the least. For
this rationale to have a real tangible, honest truth-value we
need a multinational, UN-style meeting, not a tripartite meeting. After all, social development (especially for a whole continent) is a comprehensive concept that is best discussed in
the environment of more international and necessarily multilateral expertise, rather than within the confined circles of
top-notch economic and investment technocrats whose primordial aim is to make as much profit as possible, rather
than any truly altruistic preoccupations.
Far from being well founded, this hypothesis of
China West cooperation thus seems indeed to have been initiated by the West for China and the West to gain a foothold
in Africa (as part of the West’s reaction to the Chinese
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success in Africa, which seems to have taken Western analysts
by surprise). This could end up creating a Win-Win-Lose
scenario against Africa rather than a so-called cooperation
with Africa.
7.2.2. Four Formal Arguments against an
Africa China West Trilateralism Hypothesis
We have shown in the above that the proposal for trilateralism as a Win-Win-Win scenario does not appear to be well
stated, nor well demonstrated, and is indeed, rather hollow
and flawed. In fact, this ill-stated hypothesis of Win-Win-Win
is so hackneyed in international studies but is a largely unsubstantiated ‘Win-Win-Win’ hypothesis. If one were to allow it
to be repeated over and over again unchallenged it might risk
developing into an (un)intended collusion between China and
West that can scupper a rare chance for African development
in the 21st century. I here advance and discuss four arguments against the Win-Win-Win hypothesis.
7.2.2.1. Why Africa as a Locus for China West Cooperation?
One may wonder why at all any analyst would single out
Africa as a locus of cooperation between any two Power
Blocs. It seems that this is often assumed without any attempt
to justify the assumption. This kind of fallacy creates a baseless or, at least, a shaky foundation for any logical argumentations to follow from such presumptions. Proponents of the
trilateralism hypothesis are often silent on this needed explanation about why Africa would be a beneficiary to such
cooperation. Indeed such analyses do not point to clear precedents in the world where such power Bloc cooperation has
solved anything. The Marshall Plan at the end of the Second
World War may be mentioned as such a precedent, but it
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83
was just one Power Bloc, the United States, helping out an
old ally, Europe, in need after the War. This is a major flaw
for proponents of the hypothesis about Power Bloc-based
‘multilateral cooperation’ in one part of the world or the
other. Of course, this inability to justify Africa as a necessary
locus of China West cooperation is inherent from the old
paradigm of Africa as a basket case for aid, and not as a typical, lucrative spot for business investment.
7.2.2.2. Benefits for Who?
There is a glaring counter-argument against the hypothesis of
China West cooperation in Africa: Africa is better off championing its own agenda and dealing bilaterally with one outside Power Bloc at a time, rather than risking with two Blocs
concurrently which are likely to collude to promote their joint
interests at Africa’s peril. In sum, Africa stands a better chance
of developing higher bargaining powers if it dealt with China
and the West separately. This formal counter-argument alone
would render untenable the so-called Win-Win-Win hypothesis
that is often touted by its proponents. A rebuttal to this
counter-argument may be that the average African state
appears too weak, tiny and insignificant and thus lacks the
power and leverage to negotiate with each of these superpower
investors like many European countries, China and India to its
advantage. However, the counter-argument can be quickly reenforced if one draws attention to the fact that the strength of
this counter-argument lies in the weakness of the original argument it is countering: Africa should deal with two or more
investors concurrently as against dealing with one investor at a
time. For if an African country is weak even in dealing with
one big powerful investor at a time, it would even be worst off
dealing with two or more investors concurrently. Even if
African countries do not get maximum benefits from investment negotiation either way, they would benefit more from
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investment negotiations with one investor at a time than with
two or more investors at a time.
7.2.2.3. The Albatross of Differences in Diplomatic Philosophies
Further still, a major flaw about the WWW-hypothesis is that
it is often abstract and is thus devoid of concrete illustrations.
The hypothesis ought to be able to show what contemporary
African problems such a cooperation has or will be able to
solve. We may take the Darfur problem, for instance. How
would China West cooperation solve this problem? On the
contrary the counter-argument would be that the differences
in policies, diplomatic ideas and philosophies between China
and the West would rather worsen the situation, and this is
what has happened in the two Sudans so far, where differences between China and the West about how to handle
the Al-Bashir divisive rule still leave the Darfur problem
unresolved till now. Even though some semblance of peace
seems to be in the horizons with a 2011 successful referendum that has led to independence for South Sudan in July
2011, any Sudan analyst would still be aware that peace cannot really come to the two Sudans until the Darfur case too is
addressed. Further still, the irony of the situation is that the
West, especially the United States, is often at loggerheads
with China on many issues in the world. China US relations
often degenerate into their lowest ebbs on major international
issues, as the reality of contemporary geopolitics is that the
two often act as competing superpowers. It is thus suspiciously harmonious for two competing superpowers, with
their relations usually at their lowest ebbs, to try to find common ground around how best to do business in Africa.
Indeed it will finally take a concerted effort within the aegis
of the United Nations to address the Darfur problem. Such
illustrations are lacking among proponent analysis for a
China West cooperation hypothesis.
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85
7.2.2.4. Lessons from Contemporary Scenarios
Furthermore, the WWW-hypothesis is flawed by evidence
that most of Africa’s problems are best addressed and eventually resolved within the aegis of the United Nations and not
by some Power Bloc ‘multilateral cooperation’ in Africa, even
if we must acknowledge that the UN is not without its weaknesses. Even the ending of the apartheid system in South
Africa in 1994 took more than trilateralism. All major countries around the Globe contributed to a resolution of the
problem. Many Civil wars in Africa, including the Angolan
Civil war, the Rwandan genocide and the diamond wars in
Liberia and Sierra Leone, to name just a few, took concerted
United Nations-style efforts to resolve. The counter-argument
here shows that probably the WWW-hypothesis so many
authors allude to may indeed be a win for all major Power
Blocs coming into Africa and not a win for Africa, a sort of
Win-Win-Lose hypothesis (WWL-hypothesis).
7.3. THE WWW-HYPOTHESIS VERSUS AN
ALTERNATIVE AWA-HYPOTHESIS
The Win-Win-Win hypothesis of an Africa China West
cooperation is not only ill-stated, ill-founded, and thus
flawed, it is also unfairly exclusionary as it leaves no room
for other major players on the African continent. What if
Africa suddenly finds that it has more alternatives among its
stack of clientele who may even be better to deal with?
A China West cooperation, for not to say collusion, would
already have taken a foothold, and may even serve as a stranglehold for new players.
To avoid this unfavourable scenario for Africa, what is
needed is an Africa-driven Win-For-All hypothesis. This
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The Globalization of Foreign Investment in Africa
hypothesis may be stated in a number of ways, but in this
book we propose to state it as follows:
7.3.1. Africa-Driven Win-for-All (AWA)-Hypothesis
1. In a 21st century era marked by free trade and globalization of investment, Africa will gain maximum benefit for
its resources by refereeing a healthy competition for all
friendly foreign investors.
Consequently:
2. Africa must thus put in place equitable trade and investment policies and rules for all friendly countries within the
aegis of the United Nations (particularly UN agencies such
as UNCTAD) and other international bodies such as the
World Trade Organization (WTO) and the African
Development Bank that would like to trade and invest in
Africa.
The first part of the hypothesis may be regarded as the cause,
and the second part may be seen as the effect or the consequence.
The AWA-hypothesis has, at least, the following three features. First, it seeks to create a level-playing ground for all
investors, and is thus fair and equitable. Second, it focuses on
the role of Africa, and thus puts Africa at the centre and in
control of how it opens up its investment stratosphere to
foreign investors. Third, it is particularly a welcome development for other emerging investors, such as the GEEP nations,
including Brazil, Russia, India and, of course, China. Rather
than aligning China to the West, which is what the
WWW-hypothesis does, the AWA-hypothesis would actually
align China to its natural GEEP group. Under the AWAhypothesis, any potential investors, whether they be from the
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87
West, the East, the North or the South, would stand a fairer
chance of competing for investment opportunities in Africa.
A possible counter-argument against the AWA-hypothesis
is that Africa is too weak and disorganized to effectively
determine and conduct a gate-keeper role in regulating investment in its own territory. However, this would, at best, be an
afro-pessimistic way of looking at the issues. Africa is fast
democratizing and the individual countries on the continent,
which are getting more and more democratic, can be
expected to manage their own investment resources and
make decisions in the most rational ways possible.
7.4. THE ROLE OF THE AFRICAN UNION (AU)
More often than not, European Union (EU) relations with the
African continent are treated as EU-Africa relations. But this
again is a flaw in nomenclature and overall presentation of
the analytical framework. Why does it always have to be
framed in terms of Africa-EU, why not talk of AU-EU and
more? This clearly shows that the role of AU is often not seriously considered or, at worse, completely sidelined altogether. In the same way that the European Union acts as a
canopy institution for Europe, so does the African Union act
as a canopy institution for Africa. The counter-argument
might be raised that the AU is weaker than the EU, but this is
not true in many scenarios. For instance, in many UN-style
political decision-making, the AU is sometimes even more
united than other canopy organizations such as the EU, and
indeed China has on many occasions benefited from Africa’s
united stance (Bodomo, 2009). Moreover, events like the
2016 referendum by Britain to exit the EU (Brexit) indicate
that the EU itself is not that more united than the AU.
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The Globalization of Foreign Investment in Africa
In reality, it seems the AU is already beginning to think
seriously of evolving an investment policy and of coordinating continent-wide investment as suggested by a recent position advertisement1 for a Policy Officer on Investment and
Resource Mobilization. This is a step in the right direction.
The AU must chart an Africa-driven investment policy based
on the philosophy that only Africa can decide what is best for
Africa, not any other national or international body.
Therefore ‘partnership’ programmes such as the NEPADOECD as described in this excerpt:
The NEPAD-OECD Africa Investment Initiative is
the major regional forum on mobilising investment
for Africa’s development. Launched in 2006 as a
partnership between the OECD Investment
Committee and NEPAD, as well as other regional
and global organisations, the Initiative aims to:
strengthen the capacity of African countries to
design and implement reforms that improve their
business climate; raise the profile of Africa as an
investment destination while facilitating regional
cooperation and highlighting the African perspective
in international dialogue on investment policies.
(Retrieved from http://www.oecd.org/document/41/
0,3746,en_2649_34893_45337193_1_1_1_1,00.
html. Accessed on April 28, 2011)
would seem rather naïve, as we cannot expect the very same
people who stand to gain by Africa remaining a fragmented
body in terms of investment to help Africa achieve the kind
of goals that are spelt out in this ‘cooperative’ programme.
There is a promising policy framework by the AU in the
name of Agenda 2063 that promises to be a large-scale
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89
investment and development policy that all foreign investors,
including China, Europe and India, must familiarize themselves with.2
7.5. CONCLUSION
In conclusion, we have shown in this chapter and other parts
of the book that after a decade of sustained criticism of China
by the West about China’s engagement in Africa, the West
suddenly appears to have changed strategy and many Western
bodies such as the EU have now proposed frameworks for a
China West ‘cooperation’ in Africa (Bodomo, 2016a). The
hypothesis of a so-called China West cooperation, which
may be termed the Win-Win-Win (WWW)-hypothesis, seems
to say:
Africa, China and the West will achieve mutual benefit if
China and the West cooperate in their investments, trade and
humanitarian activities in Africa.
I have presented four arguments to critically assess this
WWW-hypothesis. First, it is not convincingly justified why
Africa is the locus of a supposed China West cooperation.
Second, it is not clearly and convincingly indicated who the
real beneficiaries of such a stated cooperation would be; it is
believed instead that this scenario of a China West cooperation actually points perilously to a Win-Win-Lose scenario
against Africa. Third, the differences in diplomatic philosophies between the West and China alone would render this
WWW-hypothesis untenable. Lastly, lessons from contemporary scenarios dealing with the search for solutions to
Africa’s problems do not suggest any good things
China West cooperation in Africa can do or has actually
done for Africa.
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The Globalization of Foreign Investment in Africa
I have instead proposed an alternative hypothesis, stated
as follows:
7.5.1. Africa-Driven Win-for-All (AWA)-Hypothesis
In a 21st century era marked by free trade and investment,
Africa will gain maximum benefit for its resources by refereeing a healthy competition for all friendly foreign investors.
This AWA-hypothesis not only sees Africa at the centre of
the action, it actually sees Africa presenting a level-playing
ground and an equal opportunity to all other investors, such
as those of the GEEP countries. Africa is a vast continent and
it is possible for all investors to find investment room in
Africa’s investment stratosphere.
The most fundamental argument against the WWWhypothesis, and for managing meaningful and sustainable
investment in Africa, is that Africa (or for that matter any
developing part of the world) is better off dealing with each
of these major economic Blocs, China, India or the West, separately at a time and dealing with all of them concurrently
only within the aegis of the United Nations and other international financial, investment and trade institutions such as
World Bank, the International Monetary Fund and the
World Trade Organization.
We began this book with two fundamental questions: can
Africa manage this scenario of the globalization of investment
well enough to boost its socio-economic development? How
would this affect African lives politically, economically and
culturally? The answer to the first question as we have seen
throughout the book especially this chapter is: yes, only if
Africa maintains clear choices and puts in place fair and
equitable rules of engagement on its own terms to all foreign
investors. The answer to the second question, again, as has
The Lion Must Roar
91
been seen throughout the book, is that the presence of so
many groups of investors is already giving Africa some political leverage and leeway in the way it relates to traditional
donors from the West. In the face of alternatives, Africans
will more and more be in a position to effectively engage its
political partners from around the world. Economically, we
are seeing the establishment of huge infrastructure projects
and large FDI inflows that will in the next 10 20 years
completely transform African society. Culturally, the influx
of so much investment and so many investors from different
cultural set-ups is creating a more and more cross-cultural
setting; Africa will be thrust in the whirlwind of global culture forever.
In this first half of the 21st century, as Africa enjoys an era
characterized by the globalization of investment it must
take steps to maintain clear investment alternatives if it is to
benefit in a sustainable way from this phenomenon of
globalization.
NOTES
1. In an advert for a Policy Officer — Investment and
Resource Mobilization, the AU spells out the purpose and
duties for the job some of which include the following:
JOB PURPOSE
To formulate appropriate policies and plans of action and
develop programmes and project proposals related to
investment promotion, private sector development, mobilization of both domestic and foreign resource for development; and to monitor progress on implementation in
conjunction with relevant stakeholders.
92
The Globalization of Foreign Investment in Africa
MAJOR DUTIES AND RESPONSIBILITIES:
• Recommend appropriate policies for empowering
the private sector in particular small, medium and
micro-enterprises so that it can contribute to the
attainment of the Millennium Development
Goals;
• Develop and recommend investment policies that
would lead to Africa becoming a single investment
destination and improving the investment climate
on the continent;
• Network all investment promotion agencies in
Africa with the aim of harmonizing investment
policies;
• Suggest new measures for raising resources for
financing the Africa Union’s programmes;
• Coordinate the African Union Commission relations with cooperating partners such as the
European Union;
• Perform any other duties as may be directed by
the Head of Division;
• To organize and service workshops, seminars and
meetings;
• To coordinate and conduct studies and research
in related fields of the work of the Division;
http://www.au.int/en/sites/default/files/Policy%20Officer%
20(Investment%20and%20Resource%20Mobilization)%
20-%20English.doc (accessed on April 28, 2011).
2. Agenda 2063 documents can be downloaded from
here: https://www.au.int/en/agenda2063 (Last accessed on
December 10, 2016).
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ABOUT THE AUTHOR
Adams Bodomo is a Professor of African Studies holding the
chair of Languages and Literatures at the University of
Vienna. For 15 years, he was a Professor of Linguistics and
African Studies at the University of Hong Kong where
he served as Director of the university’s African Studies
Programme. Professor Bodomo has done pioneering work on
21st century Africa China studies, with a particular focus on
the African Diaspora in China. His research in the area of
Africa China Studies, Diaspora and Global Studies has
been featured in major academic journals such as China
Quarterly, China Review, West Asia and Africa, African
Diaspora and African Studies. His first book on the topic
of Africa China relations is titled: Africans in China:
A Sociocultural Study and Its Implications on Africa China
Relations. This was shortlisted for the Africa Asia book
prize in 2015. His latest (edited) book on the topic is titled
Africans in China: Guangdong and Beyond (Diasporic Africa
Press), which won the ICAS Colleague’s Choice Award book
prize in 2017.
103
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INDEX
Africa as humanitarian
burden, European
views of, 26 27
Africa as locus for
China West
cooperation, 82 83
Africa China relations,
critiquing, 78 79
Africa China West
Trilateralism
hypothesis
Africa as locus for
China West
cooperation, 82 83
albatross of differences in
diplomatic
philosophies, 84
benefits from investment,
83 84
lessons from
contemporary
scenarios, 85
Africa-driven Win-For-All
(AWA) hypothesis,
86 87, 90 91
Africa India Forum, 52
Africa India Framework
for Enhanced
Cooperation, 59 60
African Development Bank
(AfDB), 38, 86
African Diaspora, role of,
29 30
African Union (AU), 27
role of, 87 89
Aid versus investment,
37 39
Akbaruddin, Syed, 64n2
Alliance against
colonialism, 31
Aluminium Corp. of China
Ltd., 39
Apartheid policy, 51
Apex Chambers, 58
Argentina, 74
Asian Infrastructure
Investment Bank
(AIIB), 38
Association of South East
Asian Nation
(ASEAN), 73
Bandung Conference, 31
Baohong, Sun, 46
Berlin conference of,
1884 1885, 20
Bharti Airtel Group,
61 62
105
106
Brazil’s investment in
Africa, 68 69
BRICS, 65
BRICSA, 66, 67
BRICSAMIT, 67
BRICSMIT, 67
Central America, 74
China National Offshore
Company (CNOOC),
39
China National Petroleum
Corp., 39
China National Petroleum
Corporation (CNPC),
35
China US relations, 84
Chinese investment, in
Africa, 31 47
aid versus investment,
37 39
conditions of
engagement, 36
equality of partnerships,
37
features of, 34 39
Global Growth
Companies, 39 43
success of, 43 44
CIVETS, 67
CNOOC, 62
Colombia, 74
Commonwealth Games
2010, 51
Conditions of engagement,
36
Cuba, 74
Currency devaluation, 23
Index
Darfur problem, 84
Development aid, 26 28
Direct investment
enterprise, 8, 9
Direct investor, 8
Equality of partnerships,
37
Erdogan, Recep Tayyip, 71
Ethiopia Djibouti railway
project, 60
European investment, in
Africa, 19 30
essential features and
constraints of,
23 27
historical overview of,
20 23
reevaluation of
investment
relationship, 27 30
European socio-economic
conditionalities,
23 24
European Union (EU), 27,
29, 30, 79, 87
EU Summits, 30
Exim Import and Export
Bank, 38
Export Promotion
Councils, 58
Focus Africa programme,
53, 58, 72
Foreign direct investment
(FDI), 4
alternative sources 21st
century, 65 76
Index
arguments against,
13 16
arguments for, 11 13
defined, 8 10
need for, 16 17
role in national
development, 7 18
stocks in Africa, 54 57
Forum for Africa China
Cooperation
(FOCAC), 32, 47n1,
50, 59, 72
policy framework, 33
Gandhi, Mahatma, 50 51,
64n1
political activism in
Africa, 51
Global Growth
Companies, 39 43
Globalization
defined, 2
theoretical dimensions
of, 3
Globalization of
investment, defined, 4
Globalization Website,
The, 3
Global socio-political values,
export of, 24 25
Group of Emerging
Economic Powers
(GEEP), 65, 67 68, 86
He, Zheng, 31, 50
Humanitarian assistance,
28
Hyundai, 73
107
Imperialism, 31
India Africa Institute of
Education, Planning
and Administration
(IAIEPA), 62
India Africa Institute of
Foreign Trade (IAIFT),
62
India Africa Institute of
Information
Technology (IAIIT),
62
India’s investment, in
Africa, 49 64
history of, 50 52
initiatives evaluation,
52 61
uniqueness of, 61 62
Indonesia’s investment in
Africa, 72 73
International Monetary
Fund (IMF), 23, 75
Investment, defined, 18n1
Investment globalization, 4
KIA, 73
Lula da Silva, Luiz Inacio,
68 69
Malaysia’s investment in
Africa, 73
Manmohan Singh, 62
Marginalization of Africa,
The, 78
Maritime Silk road (One
Belt One Road) policy
framework, 33
108
Market Access Initiative
(MAI) Scheme, 58
Market Development
Assistance (MDA), 58
Mexico, 74
Neo-colonialism, 31
NEPAD-OECD Africa
Investment Initiative, 88
Nigeria, 74
Non-governmental
organizations (NGOs),
28, 29
‘One China’ Policy, 36
O’Neill, Jim, 75n1
Organization for Economic
Co-operation and
Development
(OECD), 8
Politics, and investment,
27 28
Roussef, Dilma, 69
Russia’s investment in
Africa, 69 71
Silk Road Economic Belt,
33
Small and medium
enterprises (SMEs), 34,
39
Socio-cultural theories, 3
arguments against,
15 16
arguments for FDI,
12 13
Index
Socio-economic theories, 3
arguments against,
13 14
arguments for FDI,
11
Socio-political theories, 3
arguments against,
14 15
arguments for FDI,
11 12
South America, 74
South Korea’s investment
in Africa, 73
South South Cooperation,
37
Structural adjustment
programmes (SAPs),
23 24, 26, 28
Tata Group, 61
Tazara Railway project,
32, 34
Terner, Michel, 69
Trade, and investment,
29
Trade liberalization, 23
Trans-Atlantic Slave Trade,
68
Turkey’s investment in
Africa, 71 72
United Nations (UN),
32
United Nations
Commission on Trade
and Development
(UNCTAD), 1, 13, 22,
38, 53, 86
Index
World Investment Report
2010, 21
Venezuela, 74
Win-Win-Win hypothesis,
80 82, 83, 85 87
109
World Bank, 23, 75
World culture
theory, 3
World Trade Organization
(WTO), 86
Xi Jinping, 33