Question

3. “Chinese investments and business interests are now to be found all across Africa” (Commission for Africa, 2005). Why have Chinese companies found the emerging markets of Africa less risky and a more attractive proposition than western multinationals?

Answer 1

Mining and oil tend to be the main priority of Chinese production. Investments by the government, however, extend into nearly every business area, covering everything from transportation to food processing. Specially high are China's investments in African nations' relatively undeveloped infrastructure, encompassing core areas such as electricity, telecommunications, port development and transport.

China's investments have the country well placed to take advantage of Africa's growing economic growth. Many Chinese companies which invest in Africa are owned by the state. This gives them a significant competitive edge when, for example, procurement contracts are bidden in African countries, as the companies can obtain substantial subsidies from the Chinese governors

The stakes in Africa are high because of the abundant supply of raw materials on the continent. It is estimated that Africa contains 90 per cent of the world's platinum and cobalt supply, half the world's gold supply, two-thirds of world manganese, and 35 per cent of world uranium supply. It also makes up about 75% of the world's coltan, an important mineral used in mobile devices and cell phones.

The emphasis on Africa which is rich in wealth is a rational one for China. Mining activities in African nations account for about a third of China's overall foreign direct investment, or FDI. China is improving its economy for decades to come by working to build a stable foundation of essential raw materials. China finds Africa as an important ally in its One Belt One Road (OBOR) project, partially because of the need for a continuous supply of raw materials.