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China Faces Criticism, But Remains Africa’s Biggest Investor

by Caroline Theuri

That China has played a huge role in the economy of Africa is not in doubt. Unlike the European Union (EU), whose largest investment in Africa is agriculture, infrastructure is the hugest component of expenditure in the continent from China, states the Chinese Embassy in Kenya.


This is mainly through the Belt and Road Initiative (BRI), a one trillion dollar project that comprises of roads, rail and sea routes. Its role is to facilitate international trade between China, Europe, the Middle East as well as Africa.


The BRI is almost a similar model to the centuries-back Silk Road. This was a trade route that was named after silk, the product that was transported from China to other continents.


According to the World Bank’s Building Bridges report, China, through its Export-Import bank has invested in the Standard Gauge Railways (SGRs) in African countries. These include countries like Nigeria and Kenya.


In Kenya, China had financed the SGR with a $ 3.2 billion loan to facilitate the rail transport of people and goods in two cities, Mombasa and Nairobi. The SGR was completed two years ago.


According to data from consulting company Deloitte, the Chinese have been financing infrastructural projects in Africa for the last seven years, though this has been on a decline as of late, standing at $ 26.3 billion in 2016, $ 2.3 billion less than was the case the previous year. 


But China has also made an economic impact in other areas, such as manufacturing.


Experts have pointed an accusatory finger at the Chinese for at times building sub-standard infrastructural projects. An example is the collapse of the $ 10 million Sigiri bridge in Busia County, Kenya. It collapsed barely a month after it had been launched two years ago.


Another challenge is the on-going dispute between the Chinese government and the United States of America (USA), which analysts fear have a spill-over effect in Africa. 


The USA has of late been accusing the Chinese government of having one of its telecommunication company, Huawei, of allegedly spying on it.


The company has been banned from trading with American technology companies, but this ban was month temporarily lifted for the next three months. 


But China, stating that its dispute with the USA could spill over to Africa, with a likelihood to adversely raw materials imported from the continent, further states the Institute of Chartered Accountants in England and Wales  (ICAEW).  


Experts have further been able to observe that China’s trade with Africa has often been unequal. Having a population of 1.4 billion people, China is the second largest economy on an upward trajectory since the late 1970s. This economy has had a development effect, by lifting over 800 people from poverty, states the country’s 2018 Economic Update. 


Furthermore, China is at position 46 out of 190, and is one of the top ten countries in the Asian continent, states the World Bank’s 2019 Ease of Doing Business report. This is based on how it has been able to improve its business processes in the country.


Despite the accusations levelled at China, Africa and the world tend to emulate how it has been able to use the internet to build e-commerce businesses, such as the Alibaba Group.


Its founder, Mr Jack Ma, was in the country two years ago to pass on the lessons of what makes it work. The internet has become a neo-silk road for countries that want to conduct international trade with China.


In an interview with The East African Business Times at the Digital Silk event held at iHub on August 22nd 2019, Ms April Long, a former international banker, said that that Africa has its own set of opportunities that could be of benefit to investors globally.


“ The challenge for Africa is very unique and specific in terms of business. A lot of things are fragmented and peaceful because we, both Africa, the United States and China, are at play  and catching up. We do not have the benefit of the whole system. The issue is how do we bring a resource and create a complete solution,” she says.


Ms Long added: “I do think that e-commerce is a good solution for the Kenyan market. I think that the Western countries took a long time to build themselves individually. Africa can leverage  from the latest technology to leapfrog to where the West is. If technology is used in a good way, it is such a powerful tool in terms of innovations that can both boost the well-being of the economy and of society.”


Mr Edwin Iragu, a Kenyan entrepreneur from iTrace Africa, says that the continent can learn lessons about what China has been able to accomplish. From that advice, Africa can be able to  put that into action based on its own needs.


“ We have listened to Africans talk about change from the outside. We can learn from other people, but the implementation has to come from us. It also has to be adaptable to our local situation and education. We should have business classes to learn how to develop a business plan and how to get funding. We have to study the Chinese model and find out what has worked there and implement it here,” he says.


“China has for instance, been able to uplift its people from poverty using the digital economy which involves business and entrepreneurship, which has to be embraced. Internet connectivity should be available to the entire population so that digital commerce, that is the ability to sell goods online is available to every Kenyan,” says Mr Kiragu.


Mr Daniel Kilman, A Senior Fellow and Director of Asia-Pacific Security at the Center for a New American Security, said that the USA is also working with Kenya to “strengthen its venture capital system to support women-owned businesses.”


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