China's model for sustainable investment in Africa

Moses Ikiara says Chinese investments in Africa's future are taking place in a spirit of true partnership

PUBLISHED : Monday, 01 June, 2015, 5:27pm
UPDATED : Monday, 01 June, 2015, 5:27pm

China has rapidly become one of the world's biggest overseas investors, buying assets in developed markets and investing in infrastructure development in some of the world's fastest growing economies. This is particularly the case in sub-Saharan Africa, which boasts six of the 10 fastest-growing economies in the world.

As a relative newcomer to the African scene, China has an opportunity to go beyond capital investment and make a positive, meaningful impact on the lives of ordinary Africans.

China appears to understand this responsibility - it has been building strong diplomatic ties with sub-Saharan African countries for more than a decade. The Forum on China-Africa Cooperation facilitates trade, political and cultural ties between China and 48 African countries. So far, forum meetings have enabled commitments in human development, technical assistance, infrastructure building and information sharing, and increased trade and credit lines.

Recent Chinese aid to Africa has included four rounds of humanitarian aid, with a combined value of more than US$120 million, in the fight against the Ebola epidemic. China is also actively involved in promoting enterprise in Africa, recently opening the third Africa-China Young Leaders Forum in Tanzania, attracting 400 delegates from 40 African nations to promote youth exchange between China and African countries.

Supporting young business leaders is perhaps one of the most important socio-economic goals across the continent, considering that human development is central to economic diversification, poverty alleviation and sustainable growth. It is here that China can leave a lasting legacy - and is already doing so. China's work in Kenya is a good example.

Last month, Chinese and Kenyan investors launched a technology transfer and training centre to promote assembly of solar lighting systems in order to meet the growing demand for solar energy in the country. This is much more than an investment for China.

The centre provides an environment for Kenyan technicians to be enlightened on the latest solar solutions. They can learn how to assemble affordable solar energy systems that can be easily set up in rural areas. This kind of social enterprise has many multiplier effects - the transfer of skills and knowledge, raising living standards for some of the poorest in society and helping to stimulate a viable business.

China does have a particular responsibility in Kenya because it has significant and growing investments in the country. With the launch of Kenya's "Vision 2030" programme to drive economic development, there are many compelling reasons that make the country a competitive choice for private investments. Chinese companies such as the Bank of China, Huawei Technologies and the China Road and Bridge Corporation are among those already investing in Kenya.

We continue to receive delegations of new Chinese investors looking for investment opportunities in the country.

Going by the names of many of the Chinese firms in Kenya and the wider region, we can see that the major areas of investment include infrastructure and the natural resources sectors. Technology is also part of the picture, particularly in the important area of skills and training.

It was announced in April that China is providing Kenya with over US$120 million in loans to help the country's youth attain job skills, by providing technological assistance to Kenya's National Youth Service, the country's largest vocational training institute. Part of this deal has seen China provide equipment for training mechanics.

Besides the social impact, China's investments have a positive economic benefit for African countries. It must not be forgotten that they must also deliver long-term commercial gains for China. Yet it is important for African regulators to ensure that foreign investments respect the cultural, economic and environmental future for the continent.

In an interview last year, US President Barack Obama said: "I think America can be central in moving Africa into the next stage of growth and integrating it into the world economy in a way in which it's benefitting the people of Africa and it's not just a source of natural resources."

This is an important message that is almost certainly understood by policymakers right across the continent. Businesses and governments that invest in Africa have a responsibility not only to their own people and shareholders but to Africa and its indigenous population. The relationships that are being forged between countries such as China and Kenya must be sustainable - that means following good practices that prevent unwarranted harm to the environment and communities.

This will not happen automatically; African governments have to be in the driving seat.

China's influence in many parts of the world is growing and there are enormous opportunities for Chinese companies looking to expand their presence in sub- Saharan Africa's fastest-growing economies. Countries such as Angola, Nigeria, Mozambique and Kenya naturally welcome foreign direct investments from companies that can help them grow - and many of them offer financial incentives to companies that are able to invest.

Recent history tells us that foreign investments do well when they operate ethically - and it is good news that China is working in genuine partnership with countries across the continent so that it can leave the best possible legacy for African people.

Dr Moses Ikiara is managing director of KenInvest