China provides fillip to African economies

Critics of Chinese involvement in continent often misunderstand its benefits of spurring productivity

As the world focuses on the hype surrounding foreign capital influxes into Africa, far too few understand the dynamics of these investments, and just how much they contribute to African communities and firms. All the talk aside, though, one thing is for sure: China's investments and migration patterns into Africa are helping develop local economies and benchmark for other investors seeking to engage.

Few would argue that China and its entrepreneurial workforce have not developed a unique ability to service international consumers. Indeed, in just 20 years, China has turned into a production hub for foreign businesses by providing a level of cost-efficiency that is hard to replicate in the Western world.

Ironically, though, outside China's borders, the Chinese are increasingly becoming the 21st century face of foreign investment, and showing a knack for doing business while they are at it. Leading today's investment charge into Africa, over 1 million Chinese have already migrated to the continent by some estimates. After adapting to local realities and opening businesses targeting African consumers, these entrepreneurs look to gain a stake of a region that by some accounts will serve as home to half the world's youths by 2050.

Although pundits continue to debate amid much finger-wagging the impact of these migration trends on African markets, neither local governments nor anyone else have discovered many effective avenues to empower African entrepreneurs. Given this backdrop, specifically in areas where labor productivity is low, Chinese migration is providing adrenaline to dysfunctional local firms, forcing African entrepreneurs to improve their performance and assimilate Chinese best practices to compete.

One need look no further than African retail markets to confirm the validity of this statement. From Ghana to Cameroon, once-small Chinese shops are now swelling at the seams, expanding across large cities and serving as a sound base for Chinese entrepreneurs to diversify their assets and develop their businesses.

Unquestionably, much of China's economic engagement in Africa has been subjected to debate and even criticism. China's massive infrastructure projects on the continent have at times raised eyebrows, being given the moniker of "new-age colonialism" in some circles. This criticism is often rooted in China's failure to use local labor, which has left advocates of inclusive economic growth skeptical of its approach.

As with any country, China's pragmatism comes with its own peculiarities. Undoubtedly, local labor deserves the first look when foreign investors do business in Africa. From an institutional perspective, though, stakeholders in Africa's public sector have frequently talked of difficulties in integrating locals into project lifecycles due to their poorly trained workforces. Thus, instead of issuing ultimatums or demands, African countries often thankfully allow China to do business on its terms, realizing that the infrastructure it brings will boost human capital and lead to projects on more agreeable conditions.

A similar argument could be made for Chinese migration. Although there are certain negative aspects, such as the indifference shown by some Chinese migrants toward assimilating local cultures and the possibility that migration could snowball into a trend given China's population of 1.3 billion, it remains a rare, tried-and-true vehicle for advancing African economies with minimal collateral damage.

The Chinese experience in Africa has reminded global investors that private and public stakeholders engaging on the continent must focus on developing mechanisms to raise the productivity of African business and human capital, should Africa achieve inclusive growth. Direct or indirect, local governments are in desperate need of support from their international counterparts to develop robust systems for supporting stronger local businesses, such as through vocational training.

A vast continent such as Africa that boasts immense industrial potential and abundant youth, yet suffers from low productivity, will only benefit from the competition that China brings. Rest assured, China and its entrepreneurial force will continue to set a standard against which African companies will be measured.

Although all eyes are following large-scale infrastructure projects in Africa today to gauge who wields how much influence over its economy, the real scramble for Africa is being waged among small and medium-sized enterprises on the ground. For now, China remains well ahead of the pack. Let fair competition prevail.

The author is the founder and president of the Cameroonian American Chamber of Commerce and a managing partner of the Africa Investment Agency. The views do not necessarily reflect those of China Daily.

(China Daily Africa Weekly 09/19/2014 page10)