Chinese workers in Africa- What’s the real story?

 In analysis, infographic

In order to mitigate the ongoing impact of COVID-19, it will be essential to reignite growth – in particular trade, finance and people flows to, from and between African countries. Much of these flows rely on increased infrastructure and connectivity, as well as local manufacturing, which is often provided by Chinese partners, either in the form of government loans or foreign direct investment (FDI – i.e. private sector finance). Yet, with both forms of finance can come an increase in Chinese workers, which can negate local benefits, especially in the context of high unemployment in many African countries.

According to the China-Africa Research Initiative, the number of Chinese workers that went to Africa by the end of 2018 was 201,057, a decline by 1,632 from 2017. Critics have argued that Chinese companies prefer to employee Chinese workers, depriving locals of jobs and for those they do hire, training and promotion prospects are limited. Yet, country-specific research conducted by SOAS in 2019 and McKinsey in 2017 (Dance of the Lions and Dragons) has highlighted that Chinese companies do employ just as many local workers as non-Chinese companies, pay them more or less the same and train them to similar standards, though often through less formal channels.

But, what does the comprehensive, Africa-wide data tell us? And what does it tell us about ‘why’ – are changes and differences in volumes of Chinese workers due to Chinese or African policies? Or a combination of both? What is the outlook for the future?

To explore this in a systematic way, The Oxford China International Consultancy (OCIC), together with Development Reimagined, have conducted some innovative analysis and produced a series of infographics (download here) to share the real story behind Chinese localisation trends across Africa.

Our analysis revealed four key insights.

  1. The numbers of Chinese workers in Africa changes depending on amounts of China’s development finance

In recent years, Chinese workers have declined across the continent. From the data we have good reason to believe the volume of China’s loans are a key reason for this.

Our analysis shows that numbers of Chinese workers in Africa peaked in 2015 – the same year that contract revenues and loans from China peaked. The latter are now down to pre-2012 levels. Overall, China-Africa FDI, contract revenues, loans and Chinese labour have moved proportionally over time.

Interestingly, and as an aside, the data also highlights that Chinese contract revenues seem to be more dependent on Chinese loans than ever before, as opposed to loans from other bilateral partners or multilateral development banks. We can infer that this is happening for three possible reasons: Either Chinese Companies are not winning as many of the non-Chinese international contracts as they did previously – perhaps due to changes in value for money; or fewer loans from non-Chinese sources are available; or Chinese contractors are being excluded from the international contracts. However, this is beyond the scope of this research, and requires separate analysis.

Another piece of evidence from our analysis are correlations at country level. We find a strong association between the countries with high levels of FDI, contract revenues, loans and Chinese workers– i.e. countries where there are projects (loans or revenues), DO have more Chinese workers.

2. The numbers of China’s workers in Africa could be changing because of the types of project financed by China

The data also suggests the volume of Chinese workers could be changing due to changes in the type of projects financed by China. Different types of projects have different levels of “labour intensity” and complexity, and therefore need different degrees of Chinese versus local expertise and as a result have an impact the overall volume of Chinese workers. Since, 2011 the dominant industry receiving Chinese loans is ‘transport’ and this has continued to rise. In addition, ‘communication projects’ have been on the rise since 2010, with ‘mining projects’ experiencing less growth over time.

3. The numbers of Chinese workers in Africa changes depending on African policies

Our analysis also suggests that labour policies across Africa do have an impact how many Chinese workers are in the country.

In order to explore this question, we first separated countries into 4 categories depending on their labour policies – ‘Strict’, ‘Targeted’, ‘Moderate’ and ‘Relaxed’.  There were 10 out of the 55 African countries that we could not get sufficient data on – so we created a fifth “limited information” category.  This is the first time we have seen African countries categorized for their labour policies in a clear manner.

We then used these categories to explore whether – as theory might suggest – countries in the strict and targeted categories, had less Chinese workers than those with moderate or relaxed policies. We adjusted this for the volume of development finance to the countries. We also used the analysis to explore whether – as some development theories suggest – stricter labour policies appear to deter interest from Chinese development partners – especially when it comes to FDI.

First, the data suggests that countries with strict and targeted policies bring in less workers per dollar of loans they take or FDI they attract than countries with “moderate” policies, and in some cases than countries with “relaxed” policies. This implies that stricter labour policies may indeed work to increase localization of Chinese projects and investment.

Second, and importantly for the future, the data suggested that Chinese loans and FDI are not deterred by stricter labour policies. Indeed, Chinese loans and FDI appear to be fairly agnostic to labour policies – perhaps because China itself has very strict foreign labour policies, therefore Chinese firms are used to this and respect this. China’s foreign policy also does not attach conditions to loans or investment into other countries. Indeed, if the data has any implication, it is that Chinese development finance is more attracted to countries with strict and targeted policies, as perhaps it implies that these governments are more proactive.

4. The reality is a combination of both African and Chinese drivers determine the numbers of Chinese workers in Africa and their impact

While this is the first time anyone has attempted this kind of cross-country analysis, it is revealing and important for countries trying to simultaneously create jobs, invest in infrastructure through loans, as well as attract FDI.  The findings imply that countries do not have to trade these objectives off, at least when it comes to China, and they can use labour policies as a means to manage their multiple development objectives.

Furthermore, the impact of Chinese FDI and Chinese workers on African economies and labour markets is not uniform.  In particular, those countries ‘most affected’ by Chinese investment and workers relative to their economies are not necessarily those with the highest total levels in absolute terms. For instance, over the last 15 years, South Africa, Zambia and Nigeria have received the most Chinese FDI in value terms on the continent, but as a contribution to their economies, only Zambia features in the top three.  Chinese FDI into the Seychelles, Zambia and the Republic of Congo has accounted for the equivalent of over 10% of their economic size.

On the other hand, there is no African country for whom Chinese workers have made up more than 0.5% of their population, so the question of localisation must be put into context.

This means that African countries need to tailor their labour policies and FDI attraction policies vis-à-vis- China to their own economic priorities. Our analysis suggests there is no one-size-fits-all.

So, what does this mean for the future, especially as Africa’s overall development finance needs continue to rise to meet poverty reduction and climate change goals?

Despite international narratives of debt distress, African infrastructure needs in transport, power and communications continue to be massively underfinanced – and COVID-19 only increases this urgent need for financing.

Therefore, there are two important takeaways for African and Chinese stakeholders in particular to consider from our analysis:

  • In regards to loans and contract revenues, the current trends are downwards. However, if China can make it work internally to provide new debt to other countries at very low cost, it is possible that we will see an increase in Chinese loans going forwards. That said, in some provinces, local governments provide extra subsidies to local firms to use Chinese workers on projects abroad, so based on our analysis we recommend more African countries use strict or targeted policies in order to get the most local employment out of the loans they take.
  • China’s FDI into Africa overall is increasing in absolute terms, and it is also increasing in importance in Africa compared to FDI from other countries – now accounting for 5.1% of the total. However, the growth rate of China’s FDI to Africa has been declining, which implies it is meeting challenges of scaling up. On the other hand, our work with African governments and Chinese companies suggests increasing interest in Public Private Partnerships (PPPs), which combine private investment with domestic or international loans, in order to avoid debt distress. While PPPs bring their own specific challenges, our analysis suggests that FDI brings along with it more workers for each dollar, compared to loans (FDI ratio is at least 6 workers to 1 dollar for strict countries, and 20 to 1 for moderate countries). While FDI can in principle be funneled into existing firms who will primarily employ local staff, or into manufacturing, which should require just a few “senior managers” and more local workers, countries will need to look closely at the terms of FDI and PPP agreements to ensure they get the most out of the investments. In doing so, it is also crucial to learn from successes and failures with other development partners, especially those PPPs that were advocated as part of structural adjustment and privatisation in the 1980s and 1990s.

DOWNLOAD ALL THE INFOGRAPHICS HERE

* Development Reimagined would like to thank the team at Oxford China International Consultancy, especially Charlotte Baker, for research and analysis.

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EDMOND BOSILONG

Research Analyst

Edmond is a research analyst who is passionate about sustainable development, innovation, and the environment. Passionate about climate financing, he firmly believe there is a more reliable system to promote equality, growth, and welfare in societies without affecting the ecosystem. Through his skills, knowledge and experienced gained over 7 years, he wants to make an impact in the world of development. Edmond holds a Master’s Degree in Public Policy from Korea Development Institute and a BA Degree (Honors) in Business from University of Derby.

   HANNAH RYDER

    Founder and CEO

Hannah Ryder is the Founder & CEO of Development Reimagined. A former diplomat and economist with 20 years of experience, named one of 100 most influential Africans in 2021, she is also Senior Associate for the Africa Program of the Center for Strategic International Studies (CSIS), sits on the Board of the Environmental Defence Fund, and is a member of UAE's International Advisory Council on the New Economy. Prior to her role at DR, Ms Ryder led the United Nations Development Programme (UNDP)’s work with China to help it scale up and improve its cooperation with other developing countries, including in Africa. She has also played various advisory roles for the UN and OECD and co-authored the seminal Stern Review of the Economics of Climate Change in 2006.

LEAH LYNCH

Deputy Director

Leah Lynch is Deputy Director of Development Reimagined (DR), and head of the China office. Leah has over 10 years of experience in development and has lived in China for over 8 years. Leah has also travelled extensively around Asia and Africa for research. Leah supports the strategic direction of the team across China, with a mission to deliver high quality research on sustainable development and poverty reduction. Leah is also Chair of the Sustainability Forum at the British Chamber of Commerce in China, providing direction on sustainability initiatives for British and Chinese business. Leah has also consulted on various evaluations on UK aid (ICAI) and is a specialist on development cooperation from the UK and China. Leah has also consulted on various UN projects, including providing support to the UN China team during the COVID-19 Pandemic. Prior to DR, Leah was at the United Nations Development Programme (UNDP) China, supporting the UN’s portfolio on communication strategies, China’s South- South Cooperation and the Belt and Road Initiative (BRI). Before UNDP, Leah lived and worked in Kenya developing sustainable water policies for the Kenyan government.

YIKE FU

China-Africa Policy Analyst

Yike Fu is a Policy Analyst and has been responsible for leading numerous areas of work, including on debt analysis in Africa and beyond, and China-Africa trade and investment logistics and analysis. She is the co-author of “African Debt Guide”, in which she challenged the narrative that Africa is in the midst of a new debt crisis by analysing data back to the 1970s and adopting new metrics to present the real story behind the data. She also developed a benchmark to compare the financial distribution of development partners such as the UK, US, Japan, France and China in Africa. Prior to her role at DR she worked at the International Finance Corporation and African Union Representational Mission to the US. She holds a Masters in International Affairs from George Washington University.

JUDITH MWAI

Research Analyst

Judith is a Research and Policy Analyst, where she specialises in Africa-China relations, international development, and diplomacy. During her time at Development Reimagined, Judith has co-authored several articles published in The Diplomat on debt and China-Barbados relations and was quoted by China Daily in a piece on Women Rights in China. Previously, Judith worked as a research analyst for an Advocate and Commissioner and Oats office in Kenya.

OVIGWE EGUEGU

Policy Analyst

Ovigwe specialises in geopolitics with particular reference to Africa in a changing Global Order. He is adept at critically analysing the politics of contemporary development processes and providing insight into the geopolitical interests that influence them. His work includes research, publications, tailored briefings and advising on global and regional trends, and issues at the nexus of geopolitics and development. Ovigwe appears frequently in media around the world such as Al Jazeera, TRT World, SABC, CGTN, BBC Radio, and other platforms.

JING CAI

Policy Analyst

Jing leads China-African health and agriculture cooperation research at Development Reimagined, having managed our FOCAC Policy Analysis and Advocacy project. She is also the co-author of “China-Africa Health Cooperation under FOCAC Umbrella”, in which she analysed China’s commitments around health cooperation since the first FOCAC summit and deepdived into four African countries’ health overview, challenges and cooperation with China as cases studies. Before DR, Jing worked at GIZ Cambodia on M&E of a disability advocacy project. She also worked as a translator with Chinese medical team in Benin.

PATRICK ANAM

Trade Policy Analyst

Patrick is an International Trade Policy and Trade Law Expert with over 5 years of experience. His expertise includes trade law, trade policy analysis and regional integration. He is currently engaged with Development Reimagined as a Senior Trade Analyst and was the lead author of Development Reimagined's recent Report on Africa-China Relations titled "From China-Africa to Africa- China: A Blue Print for a Green and Inclusive Continent-Wide Strategy Towards China." and “Reimaging FOCAC Going Forward.” Patrick has previously consulted for the East African Community, UNECA and for the Kenya Ministry of Trade.

ROSIE FLOWERS

Senior Policy Analyst 

Rosemary is our Senior Policy Analyst. She is a skilled policy analyst and has previously worked as a UK civil servant. She is studying Human Rights at Birkbeck, University of London with a research focus on international law in the context of health crises such as the COVID-19 pandemic.

JADE SCARFE

Project Manager and Africa-China Communication Assistant

Jade is a Project Manager for Development Reimagined’s flagship project Africa Unconstrained, which focuses on financing needs and debt vulnerabilities of African countries. Her research focuses on China-Africa development finance alongside debt vulnerabilities, infrastructure needs and South-South cooperation. She has worked with a breadth of stakeholders from China, Africa and the wider international community, including governments, private sector, NGOs and civil society. Her writing has appeared in a number of publications, including The Africa Report, The China-Africa Project, The Diplomat and more. Jade holds a Master’s in China and Globalisation studies from King’s College London.

ROSIE WIGMORE

Programme Manager

Rosie is the Project Manager of Africa Reimagined (AR) at Development Reimagined (DR) where she supports high-end African brands with entering the Chinese market by operating services such as trademark protection, Chinese market research, Chinese partnership building, and Africa to China logistical support and import/export services. Rosie has worked with DR for over two years now with proven success in helping high-end African brands navigate the Chinese market. She is extremely passionate about her work because more African brands selling in the Chinese marketplace means African countries can export MORE value-added goods, create MORE jobs and foster MORE innovation in African countries.

Rosie is also alumni of the School of International Studies at Peking University in Beijing where she is also an editor at the Peking Africa Think Tank. PATT is led by a diverse group of scholars who specialise in African Studies within the context of Sino-Africa relations.

LAUREN ASHMORE

Consultant

Lauren has lived in six countries from the Americas to Europe and Asia and speaks both French and Spanish proficiently. At Development Reimagined, Lauren’s research focuses on climate action both in the Asia-Pacific and in Africa, and how countries are using tools such as SDGs and Covid-19 action to build a more climate-resilient future. She holds a Masters in International Relations from Leiden University.

ETSEHIWOT KEBRET

Consultant

Etsehiwot holds a Masters’s degree in Development Studies from the London School of Economics. She has diverse experience in humanitarian and development issues by working in both multilateral organizations and international non-governmental organizations. Etsehiwot is currently a consultant focusing on the SDGs and development finance.

DIBEKULU MULU

Economist Consultant

Dibekulu is an economist by training. He holds an MSc in International Development Studies from Palacky University Olomouc, an MSc in Development Economics from the University of Clermont Auvergne, and an MSc in Economics, Finance, and International Integration from the University of Pavia. At Development Reimagined, he works as an Economist consultant. He has strong data analysis skills, with research interests centring around development finance, impact assessment, food security, and agricultural insurance.

OSARU OMOSIGHO

Project Manager

Osaru is a health professional with an MSc in Health Systems Policy and an interest in women’s health and population management. At Development Reimagined, she applies her health sector experience to global health research and collating locally applicable development insights from China.

PIER FERDINANDO CINOTTO

Research Analyst

Ferdinando’s research at Development Reimagined is centred on South-South Cooperation dynamics, specifically on the analysis of Chinese investment and debt flows in Africa and their linkages to African industrialisation. He is currently a Yenching Scholar at Peking University, after having graduated from the University of Cambridge with an MPhil in Development Studies.

DAVID TINASHE NYAGWETA

Research Analyst

David is a Research and data analyst at Development Reimagined. His scholarly focus is mostly on interdisciplinary research in demographic economics and development with interests in migration, economic development and policy, education, health and subjective well-being. He is currently a PhD scholar at Nelson Mandela University from which he also holds B.com Economics and Statistics and M.com respectively.

IVORY KAIRO

Research Analyst Kenya

Ivory is a Kenyan lawyer with experience in policy research and analysis. She also supports the communications team at DR. Ivory speaks English, Swahili and French.

JOY ENE

Research And Data Analyst China 

Joy Ene is a Research and Data Analyst at DR. Joy is passionate about African/global development, poverty eradication and trade policies between underdeveloped and developing countries. She is also a fourth-year student of International Economics and Trade at the  Liaoning University, Shenyang, China. She serves as the President of the Student Union, Liaoning University, International Students chapter.

CHENSI LI

Research Analyst 

Chensi Li is a research analyst. She has previously worked for local NGOs in Nigeria and Cameroon and think-tanks in China.  Her research areas include Sino-African relations, African foreign affairs, public diplomacy, state-building and national governance.

Yixin Yu

Research Analyst 

Yixin is a Junior Research Analyst and her focus areas is on public-private partnership and entrepreneurship. She has over three years of working experience in both private and public sectors in Ethiopia. She was the China Liaison Officer for project ‘Partnership for Investment and Growth in Africa’ at International Trade Centre, where she accumulated rich experience in investment and trade promotion

HANNAH RYDER

Founder and CEO

Hannah Ryder is the Founder & CEO of Development Reimagined. A former diplomat and economist with 20 years of experience, named one of 100 most influential Africans in 2021, she is also Senior Associate for the Africa Program of the Center for Strategic International Studies (CSIS), sits on the Board of the Environmental Defence Fund, and is a member of UAE's International Advisory Council on the New Economy. Prior to her role at DR, Ms Ryder led the United Nations Development Programme (UNDP)’s work with China to help it scale up and improve its cooperation with other developing countries, including in Africa. She has also played various advisory roles for the UN and OECD and co-authored the seminal Stern Review of the Economics of Climate Change in 2006.