The African Story of Chinese Investment
China has increased its investment into Africa substantially over recent years, but Africa has not experienced expected growth. From 2000-2005, Chinese trade with Africa more than tripled, reaching nearly $30 billion in 2004, so we would expect to see a consistent and positive growth rate. Many theories state that their lack of growth is merely another example of the ‘African story’; no matter how much money is poured in, Africa simply will not develop. While it seems that China’s Foreign Direct Investment (FDI) is not being used wisely in Africa, this is a surface-level analysis. We must consider the specific ramifications that China’s investment has had on the African State and specific industry sectors to arrive at why Africa has not developed. It is not China’s investment itself, but the way they are investing. This is not another typical African case of wasted FDI; China is keeping this globally destitute area underdeveloped.
The ‘African Story’
First we must explore why China began to invest in Africa, and the nature that their investment has taken, to provide context for Africa’s paradoxical growth pattern. China’s economic rise has largely resulted in an increased demand for minerals to facilitate their economy, thus they have become dependent on access to Africa over the past thirty years. As global resource scarcity increases, China is increasingly adamant about securing access to primary commodities and is now the world’s largest consumer of oil and copper. Many see this as an opportunity for Chinese FDI to turn Africa around. After all, African economies are so small that a few entrants into their markets can have disproportionately large effects. With this in mind, many considered it to be another typical story of African failure when Chinese investment failed to provide growth for Africa. For example, Zambia was the third-largest recipient of Chinese foreign investment in Africa in 2007, but they entered an economic downturn in 2008. Many say that this must be Zambia’s fault, not China’s.
However, Africa’s critics believe that much Chinese aid aims for Africa’s economic success. FDI can be directed specifically towards oil exploration, as China’s investment has become concentrated in the oil sectors of specific nations such as Nigeria and Angola. Although they have largely increased their investment in Africa, much has been in resource and infrastructure. Their investment is misleading and does not contribute to long-term growth. Africa is experiencing deep trade integration where volume, price, and direction of trade is changing instead of the structure. This type of FDI perpetuates an unsustainable economy that is directed to China’s growth, not Africa’s. The infrastructure it builds are pipelines and mines and the benefits are oil and minerals that are sent back to China while the African states are compensated with resource rents.
The resource rents given to African governments are unsustainable sources of economic growth, and they also accentuate the Dutch disease. When China demands more resources, African currencies appreciate and other export markets are crowded out. This makes imports cheaper from China, and Africa only gains comparative advantages in primary commodities. While China took advantage of globalization in the 1980’s and developed economies of scale, Africa has only further developed its natural resource sectors. For instance, Zambia’s currency had appreciated by 35% against the United States dollar in 2005, and as China has become even more involved, the currency gap has increased. It is the marginalizing nature of Chinese FDI that keeps Africa underdeveloped, not Africa itself.
With this context, we can now see that Africa’s inability to develop has materialized in distinct sectors. China’s investment has harmed the African State and three industrial sectors I will now explore mirror China’s level of involvement: natural resource extraction, manufacturing, and production of consumer goods. There are unique reasons behind why investment has failed with each level of progression of industry. No sector’s outcome is epiphenomenal; they all tie back to China’s investment.
The African State
We will first address the effect that China’s investment has had on Africa’s state structure. In many areas of Africa, states suffer from poor government quality, thus the state is often blamed for the failure of China’s FDI as well. However, Africa’s state structure is not mutually exclusive to Chinese investment. Many African governments lack high-quality governance, but China’s resource revenues reinforce the authoritarian and neopatrimonial states already in place. In Africa’s many authoritarian regimes, there is no incentive to develop relations with the public or to create a justifiable political arena. The extraverted and resource based economy that Chinese FDI perpetuates the traditional power of leaders, so control of the state is the primary source of empowerment and wealth.This empowerment brings entitlement to rulers and encourages the authoritarian systems already in place.
This encouragement of authoritarian systems has prevented Africa from developing modern democratic systems. Without natural resource surpluses, democracies often outgrow autocracies, as the government cannot rely on resource rents to function. With resource rents, governments do not depend upon the public for their personal well being. They have the ability to turn resource revenue, aid, and a minimalist state into their personal success, so the leaders in some of the poorest countries are paradoxically wealthy. Specifically, aid received by China has been used to fund Angola’s reelection campaign and the Democratic Republic of the Congo’s 2007 state budget was mostly used to pay elitist’s salaries. There is no incentive here for elitists to stop acting dictatorially and start acting democratically.
Those attracted to power are then inevitably interested in personal gain and gaining authority over resource revenues. Those in authoritarian regimes also have no checks on their power, so they are not held accountable when China invests in primary commodities. Those in power are making easy money, which leads to easy spending that correlates with the boom and bust cycle. Governments often do not save during booms, but increase spending rapidly when oil and copper prices soar. These surges in spending then cause debt in subsequent crashes. Developing countries are readily given loans while repayment is decided later, and interest rates are incredibly high by the time repayment is negotiated. Zambian small and medium sized businesses pay an average of 37% interest on loans while large firms pay about 20% and Chinese companies can often access state-subsidized credit so China keeps on lending. With surplus during booms and loans during busts, there is no faith in the market economy. This comes full circle, as debt cannot be stabilized by a functioning state or rainy day fund when the government has spent all of its revenue on salaries and campaigns. The original lack of an economic sector in authoritarian regimes increases when the state is receiving constant funding.
The argument for Africa’s state structure as the cause of its underdevelopment is thus incomplete. The state reinforces an underdeveloped economy, which in turn reinforces an authoritarian state. However, the scale of this cycle would be much smaller without the specific nature of China’s investment. Africa began with a lack of state quality, a fact that is perpetuated and accentuated by China’s investments in primary commodities and have negative repercussions in the economy. The primary commodity sectors are then the only ones that survive this volatile cycle, and Africa’s underdevelopment continues.
China’s Extraction Based Investment
China’s economic rise has led it to invest in primary commodity sectors in Africa. We must now address the specifically imperialistic qualities of China’s investment. Decolonization did little to develop capitalism (Mohan and Tan-Mullins 589), so while African states are free, they easily succumb to the neoimperialistic structure of Chinese investment. China has combined aid, trade, and FDI in a way that has reverted Africa to its colonial links rather than promoting Africa’s economic freedom (Kaplinsky and Morris 561). This combination forces Africa to rely on China for all three variables. While aid, trade, and FDI all have potential for bettering economies, the combination of these three locks Africa into dependence. Investment has the stigma of being economically transformative, but China’s investment readily became a reinstatement of a colonial-style economy (Carmody and Hampwaye 85). This colonial-style economy then has one revenue base: natural resources.
Resource-rich states are growing the most quickly from a strictly financial standpoint because they have an economy in a neocolonial region. Resource-rich countries have the highest returns on investment in times of boom, so many Chinese investors look at these statistics alone and place all of their funds in African resources. They invest in volatility rather than growth. China’s “tight bundling of investment with tied-aid” is then used to facilitate the export of natural resources directly to China (Kaplinsky and Morris 562), thus enhancing the imperialistic qualities. Africa’s dependence substantially increases when the very things being invested in are shipped out of the original area. All African countries gain are resource rents.
This process of bundling aid, trade, and FDI further encourages China’s investment, as it is easily done and highly lucrative. The specific resource sectors of mining and oil have attracted much investment, as they enable China to climb the global ladder without providing capital for actual industries (Lowe and Kenney 1435). Zambia currently has over 200 Chinese companies, mostly in mining, and China uses its established status in Africa to buy up other foreign investments in the mining sector (Carmody and Hampwaye 87). In oil, many Chinese companies “are state owned and subsidized” (Carmody 37), so China has an easy pathway into the resource sectors. Over 800 Chinese multinational companies are in Africa working on fixed-term extraction projects (Mohan and Tan-Mullins 595), so they are heavily invested, but primarily in fixed-term extraction. This drastic investment in extraction then crowds out other potential areas for growth and investment, and when these contracts end, there are no other areas for Africa to rely on.
These other areas are effectively the economies of African states, which are small to begin with and do not attract much investor interest aside from resource attraction. Many investors are not aware of their opportunities, so those that do invest in African states realize the vast monetary rewards they will gain and the lack of competition they will face (Carmody and Hampwaye 92). Once they are able to quantify their potential revenues, investors often have little interest in a domestic consumer base (Lowe and Kenney 1435). Domestic economies are much smaller than resource industries, so there is no incentive to develop the economy beyond resource extraction.
Companies are also not investing in infrastructure for fear of losing funds to an undeveloped economy. “Private investment…[has] been to finance the extraction of natural resources” (Collier 88) while private investment in middle income countries is often in manufacturing and goods production. Prices are thus higher for commodities than manufactured products in Africa, so China capitalizes further on resource extraction (Carmody 106). This has led to “Chinese stockpiling of copper” that has almost doubled copper prices since 2009 (Carmody and Hampwaye 87). Developing states are also prisoner to demand shocks and global prices for resources. The price of oil fell from $150 a barrel to $40 a barrel in only a year (Carmody 6), so revenue for petro-states varies highly. These volatile prices apply to other commodity sectors as well, as Zambia must rely on global copper prices, which are unsurprisingly driven by China (Carmody and Hampwaye 96). China driving prices further emphasizes Africa’s dependence that is created by China’s original bundling of services.
Increased dependence on China has led to massive exploitation, which is again indicative of recolonialization. “The development of the continent’s oil resources” should create stability in global oil markets (Carmody 76), but merely developing physical infrastructure does not create stability. Physical structures are indeed necessary for economic development, but they are the first step on a trajectory. China only develops physical infrastructure without the necessary industry to surround it. Everything but the nation’s primary resource is imported, thus domestic economies do not develop. Africa then only has primary commodities to trade, and trade based in commodities produces financial growth without economic growth in neopatrimonial states. These two components reinforce each other: commodity investment encourages commodity trade, which enforces the original commodity sectors.
These natural resources are not only the main revenue for African states; they are increasingly commanded by China. China has major infrastructure projects in 35 African countries, but they are mostly funded by natural resource deals (Mohan and Tan-Mullins 595). This produces a risk born primarily by African countries, and this risk will only continue to grow as China takes more control over the resources themselves; this risk is synonymous with exploitation. Additionally, “the exploitation of developing countries by the mining and oil companies is perfectly legal” (Stiglitz 140), so there is no incentive to stop when foreign companies risk little. African countries risk their security and economy when they are exploited, but foreign countries do not. African countries are then marginalized when foreign companies invest heavily in specific industries while the African economies bear the risk of volatile commodity industries.
As natural resource extraction continues to build, China and other rising economies have realized the potential value they can add to resources. China demands that exports are “unprocessed, meaning value is added primarily in other economies” (Carmody 54). Primary commodities are now 80% of sub-Saharan Africa’s commodity exports (Carmody 39); here is the epitome of deep trade integration. A focus on natural resources not only stagnates African economies. It also develops China’s economy and enables them to exploit Africa even further.
China’s Manufacturing Based Investment
This further exploitation has indeed created a manufacturing industry in Africa. By processing and manufacturing in Africa, we would think that Africa would grow. We must now explore why even this has not caused African growth.
From a bird’s eye view it seems that China has begun to invest more shallowly than anticipated, creating structural differences in investment. However, most manufacturing and infrastructure investment is highly connected to natural resource exploration. China “constructed a railway line” from Tanzania to Zambia but this only occurred because it “was necessary to facilitate Zambian copper exports” (Carmody and Hampwaye 88). In addition to construction for resource exportation, most investment in manufacturing involves only “the processing and refining of minerals” (Carmody and Hampwaye 94)-it is not sustainable industry. Large state-owned enterprises are still predominantly investing in resource extraction and infrastructure (Kaplinsky and Morris 552). China’s chief motivator for African investment remains economic gain regardless of the structural change in investment. Africa is only developing enough to better facilitate extractive industry.
Resource-based manufacturing is unstable not only because of its emphasis on bettering the primary commodity industries. “Manufacturers [prefer] to import materials and components from China” (Mohan and Tan-Mullins 597), so the informal economy is still destitute. Even a railway being built for copper exportation does not use railroad tracks manufactured in Africa, China brings them in. The Chinese influence in manufacturing has risen significantly in Nigeria, but manufacturing is primarily a source “of imported technology and inputs rather than investment or skills” (Kaplinsky and Morris 558). The investment in nonrenewable resources combined with importing inputs creates an unsustainable economy.
Most jobs in manufacturing are even imported. In 2005, “82,000 workers were dispatched to Africa” from China, two-thirds of whom were in the construction sector (Mohan and Tan-Mullins 593). Africans could do these jobs. Chinese firms have undertaken resource projects in Angola similar to those in Zambia that cover mining, oil, and railways, but they make extensive use of Chinese workers (Kaplinsky and Morris 561) that often leave after the project is finished. The projects that demand an increased Chinese presence often come with fixed-term contracts and Chinese workers return home once they secure resources (Mohan and Tan-Mullins 597). These agreements are made for efficiency and profit, thus they disregard the employment of Africans.
If training was implemented, Africans would develop the skills to carry out the projects without Chinese immigration and could then oversee the project’s fruition, but this possibility is forgone because of upfront costs of training. China does not explore the potential long-term return on investment that training would create. The Chinese only recognize that importing labor is cheaper, as Africans often lack necessary skill sets to begin construction right away. This importation is enhanced by the internalization factor: foreign firms prefer to own their operations in other countries (Kaplinsky and Morris 562). Profits return to China almost at the same rate of the resources they are extracting when China owns the entire operation. An increase in manufacturing still sends profits back to China; it does not create economic development in Africa.
With this Chinese influence comes low environmental and labor standards and wages. Some Chinese mining companies have been paying their staff as little as $30 a month, so hiring by Chinese firms does not give equitable compensation (Carmody and Hampwaye 93); Africans are still taken advantage of. Most African governments are then forced to shut down operations when China imposes low labor standards. The Zambian government closed down a Chinese coal-mining company due to working conditions (Carmody and Hampwaye 94). Companies enter these areas specifically because there are low environmental and labor standards. This all goes back to China’s main motivation being economics; China will not “give up their search for strategic minerals” for the lives of Africans (Carmody 92). Economics has trumped humanitarianism.
However, producing successful manufacturing industries outside of extraction is not alone indicative of growth. China created a textile factory in Zambia, an industry that also had Chinese producers (Carmody and Hampwaye 87). “Thousands of jobs were lost directly, as were thousands of local cotton-growing jobs” (Carmody and Hampwaye 87) when imports from China became cheaper. Africa cannot compete with China in manufacturing. With China’s economies of scale and manufacturing industry, African manufacturers cannot produce and sell cheaply enough to surpass imports. China’s superior technology and economy enables them to undercut African producers and competitively displace them (Carmody 59). Here we see another facet of the Dutch disease. While resource extraction made many African industries uncompetitive, the revenue it created for China enabled them to further manufacturing endeavors, so Africa receives a double disadvantage. Africa’s “poor skills, organizational systems, and infrastructure, and Africa’s overdependence on unprocessed primary commodities” are a substantial barrier to its growth, and they combine with China’s advantages to severely limit exportation capacities (Carmody 135). Until these root problems are addressed, Africa will remain uncompetitive.
China’s Consumer Goods Investment
To become competitive and enter a modern market, Africa needs to produce consumer goods, another step up from manufacturing. However, creating industry is not good in itself; “certain industries inherently offer greater potential for stimulating national growth and provide more opportunities for the acquisition of new skills and technologies” than others (Lowe and Kenney 1429). The motivation of profitability does not fade in the consumer goods sector, so foreign firms do not consider the potential for growth; they only consider profit. Africa is experiencing thintegration, thin integration into the global economy that does not “fundamentally alter the continent’s dependent position” (Carmody 109). They are being marginalized.
For African countries to truly benefit from globalization, they must incorporate into the global economy through integration, not thintegration. Countries must be inserted into global production networks for exports if they are to experience long-term benefits (Carmody and Hampwaye 98); they must economically diversify. Success does not depend on diversifying alone. “The level of connectivity of a country determines” the possibility of it benefiting from globalization (Carmody 127). This relates to connectivity within the domestic economy and to foreign economies, neither of which many African countries currently possess. Innovation needs to happen for this diversification to occur. Relying primarily on “unprocessed primary commodities” that have volatile values is not only harmful to the current economy, but it prevents innovation in the long run (Carmody 135). Africa will continue to rely on China’s exploitation until it develops the skills and valuable economy that will enable it to enter the global market.
Many firms prohibit this development of skills, seeking to invest in industry in Africa that can immediately be marketed on an international level. They disregard the potential for Africa’s domestic markets. When there is already a stagnant economy, there is “insufficient opportunity for a local infrastructure to develop” (Lowe and Kenney 1435), so foreign firms only further prohibit the domestic economy. African economies lack a domestic foundation and still depend on the markets created by foreign firms when production is immediately catered to the international market.
If Africa did try to compete by producing consumer goods, their absence of a middle class would also prohibit them from selling on a local market. The attempt to produce consumer goods for a developed population serves to “legitimate unequal globalization” (Carmody 120), and does not provide a more beneficial outcome for Africa than resource extraction. “Foreign investors [have] little interest in the growing consumer base” (Lowe and Kenney 1437), so they continue to cater to an international market. In the Congo, previously agricultural lands were taken over for coltan mining, and mining combined with the environmental externality of destabilizing hillsides has drastically lowered the amount of arable land in the region (Carmody 114). This creation of environmental issues and ‘crowding out’ of industry further prohibits domestic economies from forming, and creates more dependence on foreign suppliers. When subject to foreign suppliers for manufacturing and foreign demand for selling products, nothing is left in the hands of the domestic economy and there is no capital accumulation.
China feeds thintegration by their high demand. China has subjected producers to what they demand and this encourages hierarchies in production. Thintegration “enables the connection of the disconnected in the developing world” but gives all actors involved different levels of power (Carmody 111). Domestic producers can only use their labor for production of parts but never assembly of the whole product when they enter into the global market. Participating in international trade agreements has resulted in a decline of Africa’s share of global trade from 5% in the 1980s to only 2% by 2002 (Maruping 135). The hierarchical structures that global trade creates for Africa are thus severely detrimental to growth.
A Solution: Marketable Consumer Goods
This vicious cycle calls for a solution. We need “to promote local-foreign relations” (Lowe and Kenney 1436) to turn thintegration into integration. Africa had to liberalize their markets earlier in the development phase than China or the United States because they had become “increasingly dependent on the resources and markets of other countries for their growth” (Carmody 135), but this only caused exploitation of their economy because of the development gap. Africa’s economies are free, so China’s integral exploitation has become the norm, and there is no governance to stop it.
We must ask what could be done to turn Africa’s volatility into a growth path. The answer lies in a variation of the production of consumer goods we just discussed: they must be made marketable and producible for and by the local population. Industry must first enable Africa to develop a valuable economy and requisite skills. Creating a sustainable domestic economy is a step on the trajectory to economic success that cannot be sidestepped. This is not possible from a purely domestic standpoint while FDI is being given in ways that prevent sustainable domestic capital accumulation. However, once Chinese FDI operates to its full potential, investing in sustainable industries, Africa will have the capability to develop marketable consumer goods.
In developing a domestic industry, it should not crowd out other industries as Chinese firms have repeatedly done. This process of developing a domestic market will combine production with consumption (Flynn 11) to meet local needs; something else China has not done. If an indigenous industry is created, it should be labor-intensive, as China will be moving out of “labor-intensive assembly operation in the next ten to twenty years” (Carmody 139). As Chinese competition fades in these areas, Africa must capitalize on this so that it cannot be undercut. It is now becoming more costly for developed countries to provide labor-intensive services, and they must now “facilitate the transfer of remittances to developing countries” for both developed and developing countries to profit. Once African countries are given the resources to develop industry, they will have the capability to use a bottom-up approach and begin creating indigenous industry that meets the demands of the domestic market.
We must first identify domestic demand and what is being imported for Africans. The Millennium Cities Initiative at Columbia University found “a lack of suitable transportation” and that there were “no local bicycle manufacturers anywhere on the continent” (Mutter n.p.). Thus, there is a high domestic demand and a high importation rate for bicycles. While Chinese imports currently undermine Africa, there is economic opportunity for indigenous industry that is marketable within the region.
Once indigenous industry is created and domestic economies are realized, beneficial regional blocs will be possible. This will ensure that “regional infrastructural networks to provide access for non-commodity exporters” will provide adequate trade (Kaplinsky and Morris 566). In addition, because African countries have a high demand for bicycles, creating this industry would be sure to serve a wide region, not only a country. Once domestic industry begins, regional infrastructure integration will have the potential to provide the base for goods and capital on a larger scale (Flynn 20). It is obvious that this is not currently the case, as “sending products to Angola [from South Africa] is as expensive as shipping them to China” (Carmody 60). Regional blocs will then enhance the market for consumer goods and decrease transportation cost simultaneously. In the East African Community (EAC), Kenya has achieved a 90% tariff reduction, while Tanzania and Uganda apply 80% and have achieved free trade status (Maruping 136-137). This should serve as an example that if indigenous industry were created, regional blocs would become highly beneficial, as they already have the foundation for low-cost transport. Countries will then have a sustainable economy, which could be directed towards the benefit of the region through already established tariff reductions. Bicycles are a trans-regional product that lack a domestic market and could be traded regionally. Bicycle production is opportunity.
Establishing domestic production will increase the well being of citizens, a concept that has not been implemented by Chinese firms. This does not require protectionism, as the developing economies will be insulated from financial crisis by their export diversification (Carmody 134). This can be seen in India, where the bicycle industry grew considerably the decade after deprotection (Singh 99). This growth can occur in Africa, but it will require regional integration, and revised trade policy for successful export diversification (Collier 183). Columbia University’s project intends to “transfer the technology to Africa and train workers” thereby creating employment and stimulating local enterprise and economic development (Mutter n.p.). This will enable Africa to develop the economies of scale that are currently in China and Africa will develop a comparative advantage in a domestic industry (Mutter n.p.). In Ghana, bikes can be produced for less than $50 and sold for much less than imported bikes from China. Ghana thus has a comparative advantage in this industry, but they must be given the capability to produce through better-directed FDI. As a current example, the bicycle company Hero Cycles in India produces 65% of the total value added in the plant, with the rest coming from other domestic companies. All value stays in the domestic economy. On an even simpler level, domestic production integrates manufacturing into one place. The Columbia project uses readily available inputs such as bamboo rather than importing materials that must be manufactured in Asia. This industry capitalizes on comparative advantage, manufacturing, marketable consumer goods, and regional industry all in one product.
Once a regional network is established and bicycles have met domestic and regional consumer needs, African industry will be tied to international markets without dependence. India earned “a considerable amount of foreign exchange through exports of cycles” once the industry met entire domestic demand (Singh 98), thus Africa can become integrated into global markets. This will allow for a semiautonomous domestic and international industry, which will reiterate the incentives for Chinese companies to place their FDI in sustainable areas.
Africa will develop once they are able to transcend thintegration through development of domestic industry and higher quality FDI. This is not possible with current Chinese investment, as Chinese involvement had strengthened current regimes and economic statuses. After walking through exploitation of natural resources, manufacturing, and the production of consumer goods, we have found that the failures of the African state and each industrial sector are integrally related back to China’s investment. This is not a typical African failure. To circumvent this integral issue, FDI must be placed in African industry. This will give domestic industry the capability to develop and end Africa’s reliance on extraction-based industry. Foreign investment has the potential to reinforce domestic production, sustainable economic growth, and a more just political sphere. Once this is realized, we will then see that Africa has failed to grow not because it is inherently destitute, but that it is the nature of Chinese investment that has kept Africa underdeveloped. Developing domestic and marketable industry through better quality FDI from China will give Africa the necessary domestic capital to escape dependence. Africa can develop.
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[i] French n.p.
[ii] While some claim that Africa has developed, its growth is highly volatile, often unsustainable, and highly relative to country. These characteristics prohibit it from experiencing long-term growth on a continent as a whole.
[iii] Carmody 13 & 37
[iv] Mohan and Tan-Mullins 589
[v] Carmody and Hampwaye 87 & CIA
[vi] Kaplinsky and Morris 555
[vii] Kaplinsky and Morris 560
[viii] Carmody 59
[ix] The Dutch disease indicates a reliance on a natural resource that results in crowding out other sectors, and producing a failed economy.
[x] A constantly appreciating currency and reliance on imports also forces countries to then hold their wealth abroad so that their wealth does not continually become devalued. In 2007, 40% of Africa’s private wealth was held overseas (Carmody 71). “Official wealth is being externalized” from Zambia, as the ratio of private sector credit to GDP is only 8% (Carmody 102). Native Africans do not invest in their economy, as it simply is not economical. Countries hold their wealth abroad for other reasons that we do not have sufficient time to explore.
[xi] Carmody 5
[xii]Atul Kohli defines neopatrimonial states as having the façade of modern states, but letting public officials treat public resources as their personal patrimony (Kohli 9).
[xiii] Mohan and Tan-Mullins 599
[xiv] We must not claim that Chinese investment for resources alone prevents sustainable economic growth, as Botswana and other African countries with high-quality governance have grown substantially over recent years. This argument does not apply to all African countries, but to those with authoritarian and/or neopatrimonial systems.
[xv] Collier 43
[xvi] Carmody 27 & Kaplinsky and Morris 565
[xvii] Stiglitz 145
[xviii] Carmody 100 & Carmody and Hampwaye 94
[xix] These statistics directly contradict early statements that these countries experience the least growth. Comprehensively, they grow the least, but in times of commodity booms, petro-states grow most quickly.
[xx] This stockpiling goes back to the previous argument that driving up prices stops reform in other sectors, trapping Africa in an economy reliant on natural resources.
[xxi] One suggestion is that price risk currently borne by African governments should be borne by the companies that control resources (Collier 140). However, we do not have time to explore this full argument.
[xxii] The previous section highlights why natural resource exploration is detrimental for African economies.
[xxiii] We do see some potential for sustainability in the Chinese creation of export processing zones such as the Chambishi Multi-Facility Economic Zone in Zambia (Carmody and Hampwaye 88). These offer tax incentives for investment, so Chinese firms are more likely to invest here. They offer “potential for job creation and technology and knowledge transfer” (Carmody and Hampwaye 90) to African employees, and they typically do not import all labor and inputs. However, the surrounding areas and countries do not often benefit even if local ones do.
[xxiv] While this number is quite small in relation to GDP, it represents the larger trend of China using its own resources to invest in Africa.
[xxiv] We see success in Taiwan, where training implementation and success was conducted by Japanese and US corporations (Lowe and Kenney 1430).
[xxvi] This raises environmental and economic concerns related to sustainability that correspond to previous arguments but we do not have time to revisit them now.
[xxvii] However, we must not be too cautious in developing indigenous industry because if protectionist measures are taken, they will “impose enormous costs on the rest of the economy” and still crowd out other industry (Stiglitz 71).
[xxviii] Ghana has been identified as a specific country for industry to begin (Mutter n.p.). Ghana is politically stable relative to other areas in Africa and will provide the needed trajectory for expanding production elsewhere in the region.
[xxix] Latin America has created a successful trade zone, which helped to not only increase demand, but also increase bargaining power of developing countries at international negotiations (Flynn 21).
[xxx] A team of civil society organizations and individuals from over fifteen African countries has created the African Agenda for Bicycles, which aims to reduce the price of bicycles in Africa (Jennings, 3). This task force has the potential to become a holistic regional bloc, but we do not have time to explore the specific implications of such a creation.