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Obama visits Africa, welcomes competition on the continent

Obama visits Africa, welcomes competition on the continent

Obama’s recent visit to Senegal, South Africa and Tanzania has some arguing “too little, too late”.  They argue that while the U.S. was resting on its laurels, China has stolen a march over the United States with its narrow commercial approach, eschewing the Western goals of social and political development.   To back their argument, they cite the fact that China overtook the United States as Africa’s largest trading partner in 2009, according to a February report by the U.S. Government Accountability Office (GAO).

Obama, however, is not worried.  “I don’t feel threatened by it. I feel it’s a good thing,” Obama told a news conference on Saturday during a visit to South Africa.   While Obama generally welcomes competition in Africa, he warned his hosts to be wary of China’s growing need to fuel its economy, “You produce the raw materials, sold cheap and then all the way up the chain somebody else is making the money and creating the jobs and the value,” he said.  Obama further urged African nations to be tougher negotiators, to “Make sure that whoever you’re dealing with … you’re getting a good deal that’s benefiting the people here and that can help to spur on broad-based development.”

The concern is certainly nothing new – the arrest last month by Ghanaian authorities of some 200 Chinese nationals working as illegal gold miners was just one of several events that have many questioning the benefits of China’s involvement on the African continent.  Although the detained Chinese nationals were eventually released and repatriated, the problem is not likely to subside as Chinese nationals flock to the continent in search of fortune.  Many of the illegal gold miners were from the Chinese county of Shanglin, which issued a warning last month against gold mining in Ghana.  Some estimates say as many as 12,000 people from Shanglin County may have engaged in gold mining in Ghana since 2006.

While we often associate Chinese investment in Africa with the efforts of large state-owned companies which tap the continent’s natural resources, we often overlook the plight of thousands of ordinary Chinese who have traveled to Africa in search of better opportunities.  Many of these economic refugees rely on middlemen who bring them over and ignore local laws.  In Ghana, permits are required to operate small-scale mines, and are only issued to Ghanaian nationals.  When Chinese nationals started mining without licenses, using excavators, local miners using mostly pickaxes were furious.  Local farming communities are also angry believing their land and drinking water under threat.

For the time being, though, small incidents like the one occurring in Ghana should not undermine African interest in Chinese investment.  African governments prefer China’s deep pockets and no-strings attached aid policy to the cumbersome conditions of Western nations.  Chinese investment is also welcomed by Africans, who look to China for better job opportunities and the construction of better roads, schools and hospitals.  According to a Gallup World poll of global attitudes conducted in 2011, sub-Saharan African nations have the highest levels of support for the Chinese leadership, filling the top 20 positions in the worldwide survey.

Though foreign investment coming from China has for many years been criticized for representing economic colonialism, exporting pollution, using foreign workers instead of local labor, and displacing small manufacturers, Western governments have been just as guilty in the past.  The differences this time around are the apparent lack of interest in redrawing territorial boundaries and the potential numbers of immigrants.  While many Westerners flocked to the continent in search of economic fortune for centuries, no other nationality (save India) has the potential to populate the continent with large numbers of its nationals.  Xinhua, China’s official news agency, estimates the total population of Chinese working or living “for extended periods” on the continent to be as many as 750,000.  To date, attention has been focused on the large scale investments of Chinese state-owned corporations, but scant attention has been paid to the hordes of illegal economic refugees who make their way to the continent.

Chinese investment has long been welcome as long as it adheres to the regulatory framework, creates jobs, helps build infrastructure and bring money to the local economy.  But the influx of illegal Chinese who flout local laws threatens to undermine the efforts of hard-working Africans, the reputation of the established state-owned corporations who may be playing by the rules, and those Chinese companies and employees seeking a foothold on the continent.  In Africa, China needs to control the influx of immigrants flocking to the continent in order to present its best face – or it stands to quickly lose it.



Gary Sands

Gary Sands is a Senior Analyst at Wikistrat, a crowdsourced consultancy, and a Director at Highway West Capital Advisors, a venture capital, project finance and political risk advisory. He has contributed a number of op-eds for Forbes, U.S. News and World Report, Newsweek, Washington Times, The Diplomat, The National Interest, International Policy Digest, Asia Times, EurasiaNet, Eurasia Review, Indo-Pacific Review, the South China Morning Post, and the Global Times. He was previously employed in lending and advisory roles at Shell Capital, ABB Structured Finance, and the U.S. Overseas Private Investment Corporation. He earned his Masters of Business Administration in International Business from the George Washington University in Washington, D.C. and a Bachelor of Science in Finance at the University of Connecticut in Storrs, Connecticut. He spent six years in Shanghai from 2006-2012, four years in Rio de Janeiro, and is currently based in Ho Chi Minh City, Vietnam. Twitter@ForeignDevil666