Recently I attended a conference hosted by Urban LandMark (an organisation dedicated to making urban land markets work for (and with) the poor, founded in 2006). The conference was held in Johannesburg over two days (from the 13th to the 14th March 2013). And it had a stimulating line-up of speakers each of whom were well versed in their respective sectors.
There was an array of topics being presented and discussed. Of particular interest to me was the second session titled: Investor impacts in African countries, with a particular focus on Chinese investments in Africa. Discussing this topic was: Allan Cain from Development Workshop Angola, Liu Haifang from Peking University, Caroline Wanjiku Kihato from Urban LandMark and Kecia Rust from the Centre for Affordable Housing Finance in Africa.
China’s relationship with Africa stretches back many years, however the last two decades has seen accelerated shifts in investments into Africa by Chinese companies in areas such as construction, mining, and oil extraction. This partnership has assisted many African countries in developing their infrastructural programmes or even through coping with their huge deficits. China came to the table and for the first time offered incentives that seemed lucrative to many of these nation states that were in a distressed position.
Since 2010 China has invest an approximate amount of US$ 101 billion into Africa, with a further US$ 20 billion scheduled from 2012. The way in which this partnership works is that China brings in the capital in exchange for natural resources, or China undertakes the construction of a certain infrastructural project in exchange still for raw materials. In this way Africa can make use of the investments to fund the construction of roads, social amenities and other critical projects.
Unfortunately this partnership has not gone without criticism from the rest of the world often stating that the relationship has been exploitative. Since China uses its own labour in the construction of some of these infrastructural projects, these projects have been clouded by comments of the structure being inferior and of being sub-standard. However, many African leaders have also not come forth to the table to negotiate in the ultimate best interests of their nation states.
An example of this is the Chinese investment in Angola’s new city of Kilamba were the Chinese constructed 20 000 apartments to be sold for between US$120 000 and US$250 000 per apartment. In a country where the vast number of the population earns less than US$2 per day, a development like this is clearly unaffordable to them. Furthermore, even if they could afford it Kilamba lies 30km outside of Luanda which means that they will have added transport costs. Housing finance in Angola is not readily accessible to the low income group to purchase such apartments due to the high interest rates and the short loan terms. Many reports have blamed this project on China, citing that the Chinese’s investments are reminiscent of the West in the 18th and 19th centuries. While the project might not have been successful and has failed to address the huge housing backlogs, the decision to undertake such an initiative could not have been solely negotiated among the Chinese but rather with full knowledge by the Angolan government.
The Kilamba Project reminds me of a theory I learned in sociology: Who has power? In this case, was power held by the politician, the investor or the planner? To build Kilamba all these parties have to have been involved and the results leads one into concluding that the housing project was done without proper consultation, most probably within a few clusters involving a selective conclave. And that the context was not analysed realistically which is why Angola now has a ‘ghost town’ even though there is a massive housing deficit as about 68% of the population earn less than US$2 per day. To afford an apartment that costs US$ 120 000 in Kilamba, one would need to pay US$1 944.82 monthly over 20 years, at a lending rate of 19%. Sixty-eight percent of Angolans have an average monthly income of less than US$60. The cheapest apartment in Kilamba therefore requires a payment that is over 32 times the average monthly income of the vast majority of Angolans!
In this example, and possibly others, the impact of Chinese investment in Africa is not trickling down to the majority low income earners. One of the presenters posed a question: How do we then begin to think intellectually on channelling investments into making real impacts? And I will expand on that and ask whose responsibility is it to ensure that investments make real impact?
To answer the first question, Kecia Rust presented that, firstly- it is imperative for all investors wanting to invest in Africa to first explore the African context and make sure their plans are realistic given conditions on the ground. It is therefore incumbent upon the government of that country and the investor to thoroughly inspect the context and be equally responsible. Secondly- it is equally vital to have access to reliable information and to have a platform where stakeholders are given the opportunity to come together and exchange ideas. And so, it rests upon all partners to ensure that any project undertaken all the risks are equally understood and shared.