African economists are currently advocating that green economy and green growth should be included in the African nation agenda; thereby stressing the importance of including sustainability in all issues pertaining to economic growth. In 2009, the biggest foreign direct investments (FDI) inflows in the African continent were from China, which is considered an example to follow when it comes to investment in renewable energy and low carbon projects.

Recently, when outlining its 12th Five Year Plan, China renewed its engagement in reducing its carbon emission per Gross Domestic Product (GDP), while also improving energy efficiency consumption. If China can be praised for the dedication its Government shows towards sustainability in the mainland, it should be interesting to investigate if such Governmental directives can be reflected through its investment in Africa. More important, should African countries be interested in encouraging their most important Asian investor to include the continent in their long-term sustainability plan?

Given the amount of natural resources that are always on the table during African-Chinese negotiations, having a common path towards green economy can be beneficial; a sustainability plan will require Africa to ensure that today’s natural resources consumption does not interfere with the future need of natural resources, while, on the Chinese part, today’s energy efficiency should meet that of tomorrow. China also needs to ensure that their investment in Africa is maintained and their green reputation reaffirmed.

China’s FDI impact on Africa’s green growth

The Organisation for Economic Co-operation and Development states that green growth means “promoting economic growth while reducing pollution and greenhouse gas emissions (GHG), minimising waste and inefficient use of natural resources, and maintaining biodiversity.”⁽²⁾ This has been the issue for some years now, namely how to achieve economic growth with minimum impact on our environment. When it comes to the African continent, the fact is that environmentally sensitve industries such as resource extractions have always been quite lucrative, and their environmental impact has been quite high. From coltan extraction, timber exploitation, to oil exploitation, African countries have derived (some) economic growth from FDI inflows for decades at a considerable environmental cost. Such environmental costs range from biodiversity destruction to GHG emisssions; unfortunately, pollution and GHG from industrial exploitation have not been taken into account (from Africa’ side) during negotiations with China, and this has not yet changed either.

In fact, while worldwide environmental concerns are raised when it comes to GHG emissions during industrial exploitation, African countries are more concerned about cash inflows from investors than their sustainability report. This is advantageous for foreign businesses since the costs to comply with environmental standards amount to null when the country where you invest does not have those standards in the first place; if previous investors were taking advantage of that fact, China does intend to follow in those steps. Chinese FDI in Africa, accounting to US$ 40 billion in 2009, take place mostly in the environmentally sensitive sector, which has either a huge environmental impact or generates huge pollution through their consumption such as oil and gas exploration, mining, hydropower, and timber extraction. Furthermore, investment in road projects and other infrastructure projects facilitate access to resources with high environmental risks.⁽⁴⁾

In case of a change in environmental regulation in China, weak African regulation on environmental policies can attract Chinese companies with bad environmental track records. Being one of the biggest polluters in the world for some time,⁽⁵⁾ as well as being criticised in the past for its lack of domestic enforcement of environmental regulation, has made China the least adequate to enforce proper environmental conduct in its various businesses in Africa. Already, Chinese investments have created environmental risks in Gabon, Ghana, Sudan, and Zambia where national parks and protected biodiversity have been put in danger and destroyed due to oil exploitation, iron mining, and dam construction.⁽⁶⁾

Analysing Africa’s possibility of achieving green growth and blaming Chinese FDI (or any other foreign investments) on the environmental shortcomings for most of its investment in the continent can be considered as a bias standpoint. From an investor’s point of view, weak environmental regulation is viewed as opportunties, especially in environmetally sensitive industries, and China is just doing what countless Western investors have done in the past. This fact brings to light the most important information when it comes to foreign investment’s negative impact on African green growth: if FDI investor’s names have changed, African Governments have not. African states should have, by now, acquired the skills and ability to negotiate contracts in such a way that benefits are not only financial, but environmental as well.

Lack of environmental evaluations and project appraisals in the past from Africa’s side have contributed in not developing the need of doing them; in fact, world knowledge and concern about African biodiversity and its protection have done nothing but make business difficult from the African Government’s point of view. Environmental disasters in the national parks of Ethiopia, Gabon, Ghana, Sudan, and Zambia were made possible because of the inability of African countries to secure funding from traditional donors such as the World Bank and the European Investment Bank,⁽⁷⁾ which were concerned about the environmental damages of the projects presented to them. While past and current investment practices show how little achieving green growth is important for African Governments, China has taken the first step in ensuring that green growth is part of its domestic goals in its 12th Five Year Plan.⁽⁸⁾

Can Africa follow China’s green economy example?

All those green projects are subject to US$ 313 billion worth of investment. Green economy is defined by the United Nations Economic Commission for Africa (UNECA) as “enabling economic growth and human development without exposing future generations to significant environmental risks and ecological scarcities, while creating new opportunities for green growth and employment creation.”⁽⁹⁾ After announcing its 12th Five Year Plan (2011-2015), China stated that low-carbon development and green economy will be boosted under each of the 10 underlying perspectives of the Plan.⁽¹⁰⁾

In an attempt to achieve a greener economy, it is clear that China has taken the business benefits that it entails seriously, and Africa thus represents a huge investment potential. The continent’s lack of infrastructure, as well as rampant poverty, has given rise to small-scale renewable energy projects, which generate electricity and other energy commodities to local communities. While Chinese investment in African infrastructure is quite huge as represented by its total FDI in 2009,⁽¹¹⁾ it cannot meet the full energy demand of African countries, and this is why small-scale energy projects are becoming more and more popular.

China is the leading supplier of photovoltaic panels and solar panels in Africa, and added to that, solar plant projects are being implemented in South Africa, while ethanol production in Benin, Mozambique, and Sierra Leone among others are being undertaken.⁽¹²⁾ By investing in such green projects in Africa, China is more interested in the business side than contributing in the green economy growth of the continent, which only African Governments can deliver if they are interested in it.

Applying UNECA’s definition of green economy in industries attractive to Chinese investment will require African Governments to be less “flexible” than what they are today. It will compel them to ask China to formally add the sustainable investment concept within their African strategy framework. More specifically, it will oblige Africa to look at the real sustainable benefits that Chinese investment provides in their respective countries. UNECA’s definition emphasised concepts such as “employment creation,” which are of concern when it comes to Chinese investment. With regard to the implementation of infrastructure or extraction project, Chinese businesses are widely known to use mainly Chinese labour. In a continent where capacity building, unemployment, and skilled labour are known to be an issue, Chinese human policies seem surprising, especially when they have claimed that they are an advocate of African development. It reflects some of the hidden agreements that come with Chinese contracts: investments from China come with Chinese workers attached to them. No negotiation possible on that.

It can be argued that African countries’ green path is of no concern to the Chinese agenda, but sustainable business practices ensure business’ long term survival in an international environment. If African countries decide collectively or not to adopt a green agenda, China will surely have something to gain from it.

Concluding remarks

When it comes to environmental issues raised by Chinese investment in Africa, blaming China is an easy road that should not be followed. African Governments, by accepting Chinese investments in their respective countries, choose an investor that traditionally is not interested in sustainability concerns. Those Governments provide Chinese investors a business environment where there is a lack of environmental regulation and this environmental strategy provides them with business opportunities that they are more than willing (and ready) to take. Now African economists are advocating that green growth and green economy should be part of the national agenda, but from a Chinese FDI perspective, this will be difficult to achieve given the fact that agreements signed between African and Chinese Governments do not encourage that.

NOTES:

(1) Contact Astrid Akoyoko through Consultancy Africa Intelligence’s Asia Dimension (asia.dimension@consultancyafrica.com)
(2) ‘Investment for green growth’, OECD, http://www.oecd.org.
(3) Jopson, B., ‘Brics in Africa: Adding it up’, Financial Times Blog, 5 August 2010, http://blogs.ft.com.
(4) Bosshard, P., ‘China’s environmental footprint in Africa’, South Africa Institute for International Affairs, 2008, http://www.internationalrivers.org.
(5) ‘China population to become world’s biggest polluters’, Telegraph, 4 November 2011, http://www.telegraph.co.uk.
(6) Bosshard, P., ‘China’s environmental footprint in Africa’, South Africa Institute for International Affairs, 2008, http://www.internationalrivers.org.
(7) Ibid.
(8) Xiang, L. and Xiouzheng, R., ‘China to boost green investment’, China Daily, 25 September 2011, http://www.chinadaily.com.cn.
(9) ‘Selected current and emerging development issues in Africa 2010’, UNECA, 2011, http://www.uneca.org.
(10) Xiang, L. and Xiouzheng, R., ‘China to boost green investment’, China Daily, 25 September 2011, http://www.chinadaily.com.cn.
(11) Jopson, B., ‘Brics in Africa: Adding it up’, Financial Times Blog, 5 August 2010, http://blogs.ft.com/beyond-brics.
(12) ‘Africa’s new friend finances 9.3 billion of hydropower’, Bloomberg, 9 September 2011, http://www.bloomberg.com.

Written by Astrid B. Akoyoko ⁽¹⁾