China, "Global Investment Overview" Series: Africa In Focus

An examination of the investment trends of Chinese investors on the continent highlights not only the dominance of certain economic engines - namely transportation, energy, and metals - but also the foreign policy and natural resource angle that still dominates much of the investment. It also provides some evidence that in contrast to public statements from Chinese officials asserting that certain African countries must improve trade and contract terms to compete for investment on the continent investors must carefully consider country-by-country opportunities where government regulations, infrastructure, natural resources, and security conditions, among other factors, can satisfy their investment strategies.

• West Africa. Unlike any other region in Africa, a single West-African country, Nigeria, perpetually receives the vast majority of Chinese investment. Last year, the total investment in Ghana and Guinea combined failed to reach even one third the level of total investment in Nigeria. Nigeria alone absorbed 75 percent of investment in the region, up from the historic average of 50 percent in the period.
• South Africa. The region offers some surprises to those unfamiliar with the historic relationships of China with these countries and the drivers for investment. Angola, for example, is a key source for Chinese oil imports; steady investment in the energy sector has, however, now retreated as projects have come online, contributing to a decline in investment from about $3.6 billion in 2008 to slightly less than $1 billion last year. South Africa, an economic leader in the region, has barely garnered any investment - $230 million in 2014 - whereas giant power and metal projects have brought in multiple billions of dollars to Zimbabwe and Namibia, respectively.
• East Africa. This region has enjoyed a total average investment, per country, from Chinese investors of $6-9 billion during the period. Ethiopia has been an outlier, winning large construction contracts, particularly in transportation, but also including agriculture, energy, and technology. Kenya's success in attracting investment has been lackluster by comparison both in industry diversity and total investment despite its attempt to take a strong leadership role in the region and internationally.

The relatively small economies of Africa inherently implies that investments that would be small in major developed economies amount to substantial distortions to the economic composition African economies. But for some African countries, particularly many in Central and North Africa, the lucrative Chinese contracts and investments remain out of reach without substantial on-the-ground improvements to the investment environment.

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