China, one of the world's largest 'emerging' investors, is ramping up investment in Sub Saharan Africa as it searches for natural resources, but whether the benefits are mutually beneficial is questionable.
China's economic growth has been a key narrative in the story of economic miracle over the past two decades. (Its foreign direct investment) FDI in particular has played a prominent role in economic interactions with many developing countries. Once a major recipient of FDI, it's now one of the largest 'emerging' investors, especially in Sub Saharan Africa countries, it has investments being in Nigeria, Sudan, South Africa and Angola among others.
The Asian economic super power is in pursuit of oil, gas, precious metals and mining to diversify its energy resource import's pool; it requires other resources to sustain its manufacturing capabilities. Africa can offer all of these things to the world's second largest economy: about 40 percent of global reserves of natural resources, 60 percent of uncultivated agricultural land, a billion people with rising purchasing power and a potential army of low-wage workers.
A fast-growing market
Like many emerging markets, African countries are one of the fastest growing markets and profitable outlets for exported manufactured goods. In the past, the U.K. and France were the prime trade partners for Africa, however, today, China is Africa top bi-lateral trading partner with trade volume exceeding $166 billion. Between years 2003 and 2011, its FDI in the continent has increased thirty fold from $491 million to $14.7 billion.
This is more than just a trend.
Not a long time ago, China eyed areas in Africa where resources were abundant and easy to extract. It focused on resource-rich countries such as Algeria, Nigeria, South Africa, Sudan and Zambia. Today, Sino-African investment focus has become broader. China is branching out into non-resource-rich investments, focusing on countries such as Ethiopia and Congo. Higher margins have attracted many state-owned enterprises and private companies to compete on gaining dominion in the vast continent. Oil, gas, metals and minerals constitute three-quarters of African-exports to China. Chinese Imports to Africa are more diverse, mostly comprised of manufactured goods.