Chinese State-Owned Enterprises in Africa: Myths and Realities by Namukale Chintu and Peter J. Williamson Chinese state-owned enterprises (SOEs) are often depicted as the new colonials in Africa, rapacious exploiters who lack transparency and good corporate citizenship. But the reality is rather different Read more: forbesindia/article/ivey-business-school/chinese-stateowned-enter-prises-in-africa-myths-and-realities/35745/1#ixzz2aolbTzOL In today’s environment the label “State-Owned Enterprise (SOE)” hardly conjures up a positive image for most of us. Since the 1980s and in many countries, SOEs have been seen as inefficient, unprofitable dinosaurs that stifle competition, misallocate resources, and act as a drag on economic growth. Numerous governments have eliminated them through mass privatisation. China has also privatised many of its SOEs over the past two decades, although many still remain, particularly in the natural resources, energy and construction sectors. Viewed from abroad, China’s SOEs are often regarded as either “menacing agents of a foreign government or muscle-bound goons—heavy on brawn, light on brain.” Even in China itself, some worry that they might have become over-powerful monopolists pursuing their own agendas rather than acting in the best interests of the country. However, the reality is that many Chinese SOEs can marshal the huge amounts of capital, people and expertise that are required to undertake large projects. Moreover, they have shown themselves to be competent, cost-effective and fast in delivering those projects. The success of these SOEs today shows that state ownership is not always a bad thing. Moreover, as the Chinese economy has evolved, SOEs have not acted so very differently from private behemoths. It is true that the state provided Chinese SOEs with initial advantages in the form of cheap access to hard assets, capital, and intellectual property. However, beyond these initial endowments, and once they have been restructured or partly privatised, SOEs are run less as pure arms of the state and more as complex, hybrid organizations. This is the first gap between common perception and reality that we need to correct before assessing the balance of benefits and shortcomings in governance, environmental and social accountability that might characterise Chinese SOEs in Africa. This article will discuss this and other gaps in assessing their performance and behaviour. China’s thirst for resources leads SOEs to Africa Chinese firms are now fanning out all over Africa, becoming involved in everything from consumer products to machinery. They include the full range of firms from large, global companies such as the privately owned telecommunications equipment maker Huawei and SOEs such as Industrial and Commercial Bank of China (ICBC), to small, family-owned traders. Yet, in fact, the total stock of Chinese foreign investment in Africa is still relatively small. As of the end of 2011, according to the last figures published by the United Nations Conference on Trade and Development (UNCTAD), China accounted for just 2.6 percent of the total US$570 billion stock of foreign direct investment (FDI) in Africa.[iii] One reason Chinese investment has attracted attention is the phenomenal rate at which it is growing: it multiplied 10 times between 2005 and 2011. A second reason is that in some sectors Chinese investment is much more significant, most notably in mining and energy extraction (and related infrastructure). This is also one of the sectors whichSOEs dominate. Hence, the debate about the behaviour of Chinese SOEs and their impact on African economies and societies is most heated. Therefore, in trying to separate myths from realties about Chinese SOEs in Africa, the mining industry is a good place to look. Contrary to theories that depict Chinese interest in Africa as part of a grand political game or an emerging world power struggle, China’s drive into Africa is both more obvious and more mundane: China has an almost insatiable thirst for natural resources and energy, and Africa probably has the largest untapped reserves on earth. Moreover, given the simple fact that SOEs predominate in the resource and energy industries (not only in China but also in many other countries), it is hardly surprising that they are leading the charge. These Chinese SOEs are also giants, so that if they were the most light-footed of elephants, they would surely have an impact wherever they tread. Consider the facts: China is consuming more than 25 percent of the world’s total annual production of minerals. Chinese SOEs are now major players in the world mining industry. Data from the World Bank and Intierra Raw Materials Group for extraction of metals, for example, show that Chinese SOEs control almost 15 percent of global metal production. China’s Shenhua ranks fourth in the top 40 mining companies by market capitalisation, along with giants BHP Billiton, Rio Tinto and Vale[v]. Africa, meanwhile accounts for around 30 percent of the total mineral reserves on the planet.
Posted on: Fri, 02 Aug 2013 13:24:20 +0000
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