April 25, 2011

The Economist: Mixed Perception of Chinese Investors in Africa

In an article in the Economist over the weekend (read here), the magazine profiles the less-than-favorable perception among many Africans of China's investments in their economies. The magazine notes that “once feted as saviours in much of Africa, Chinese have come to be viewed with mixed feelings—especially in smaller countries where China’s weight is felt all the more. To blame, in part, are poor business practices imported alongside goods and services.” The article points out that construction projects which are completed by Chinese firms – often a ‘tied’ requirement for low cost Chinese loans – are frequently of low quality. Also, labor practices among Chinese firms are frequently perceived as corrupt or draconian. The article notes that the political backlash in many African nations has been significant, with many African leaders pushing for greater scrutiny and improvement of practices. However, it also quotes a former senior official at the African Development Bank who claims that “more Chinese have come to Africa in the past ten years than Europeans in the past 400.” We had noted previously that China was undoubtedly going to remain a major player in Africa, although we see other Emerging nations in particular as working to expand their role. However, as we mentioned in a recent article Africa’s governments are becoming more sophisticated in their ability to negotiate with foreign investors, with many recent contracts requiring infrastructure investments and local employment as a condition of new deals. Ironically, these infrastructure projects have been one reason for the recent influx of Chinese workers in the Continent, and have in some cases led to greater scrutiny of their business practices.
For more information about investing in Africa, please contact Nile Capital Management at (646)367-2820 or info@nilecapital.com. We know Africa - from Cairo to Capetown.

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