Chapter 6 - Internal Constraints on Ensuring a Developmental Impact from Chinese Investment

A consistent theme of this study has been the extent to which the limited developmental impact of Chinese investment is the responsibility of the Southern African states in which China invests.

Claude Kabemba's picture

Director of the Southern Africa Resource Watch (SARW)

October 11th, 2012

A consistent theme of this study has been the extent to which the limited developmental impact of Chinese investment is the responsibility of the Southern African states in which China invests.

Our research does not indicate that China has a ‘take it or leave it’ attitude to investment – that it would withdraw from African countries if it was expected to obey local labour laws, to contribute development funds to the society, and to obey tax and environmental laws. Where these standards are applied, Chinese enterprises continue to operate in the host country and to obey the law. It follows, therefore, that host countries must take a considerable share of the responsibility if Chinese resources are used to treat workers harshly, ignore local development needs, or to harm the environment. Where Chinese enterprises are able to escape tax, this is clearly a host government responsibility. In some cases, countries have the laws and rules which would ensure that Chinese investment did not cause harm but do not implement them. In others, they need tougher and more appropriate rules. In both cases, better local enforcement of standards which protect the country’s citizens and its resources is needed.

Chinese investment would also be more developmental if host governments were willing and able to strike tougher bargains with China. While the study shows that China drives a hard bargain in negotiations, it is unrealistic to assume that, if it is faced by determined negotiators armed with a clear strategy, it will make not concessions. Southern African countries must, therefore, take responsibility if they have failed to negotiate the terms of investment in ways which advance development prospects.

In some cases, factors other than the government’s failure to legislate or negotiate effectively may limit investment’s impact. Environments in which social conflict inhibits economic activity may force companies to adopt a narrow approach in which they seek to extract what they can without putting down deep roots. Foreign investors of any nationality are also not immune to local constraints on economic activity such as poor public services, inadequate education and health systems, and infrastructure which inhibits local people’s ability to be economically productive. Here too Chinese investment may not have the development impact the society requires, not because of China’s practices or attitude but because of local conditions.

It is no surprise, then, that each of our studies stresses that host governments and those who hold power in Southern African countries must initiate changes if Chinese investment is to promote development. This was perhaps the most oft-repeated theme across all the studies. This chapter will flesh out this theme by discussing in detail the domestic constraints which prevent societies reaping the potential benefits of Chinese investment. It will concentrate mainly on the legislative and regulatory dimensions, but will also discuss other constraints which emerged from our country studies.

About the author(s)

Claude Kabemba is the Director of the Southern Africa Resource Watch (SARW). In 2006, the Open Society Initiative for Southern Africa (OSISA) asked him to spearhead the formation of SARW. He holds a PhD in International Relations (Political economy) at the University of the Witwatersrand (Thesis: Democratisation and the Political Economy of a Dysfunctional State: The Case of the Democratic Republic of Congo). Before joining SARW, he worked at the Human Sciences Research Council and the Electoral institute of Southern Africa as a Chief Research Manager and Research Manager respectively. He has also worked at the Development Bank of Southern Africa and the Centre for Policy Studies as Policy Analyst. Dr. Kabemba’s main areas of research interest include: Political economy of Sub Saharan Africa with focus on Southern and Central Africa looking specifically on issues of democratization and governance, natural resources governance, election politics, citizen participation, conflicts, media, political parties, civil society and social policies. He has consulted for international organizations such Oxfam, UNHCR, The Norwegian People’s Aid, Electoral Commissions and the African Union. He has undertaken various evaluations related to the work of Electoral Commissions and civil society groups interventions in the electoral process in many African countries. He is regularly approached by both local and international media for comments on political and social issues on the continent. His publication record spans from books (as editor), book chapters, journal articles, monographs, research reports, and newspaper articles.

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