An Analysis of Chinese Foreign Direct Investment (FDI) in Sub-Saharan Africa: A Particular Focus on Ethiopia

Abstract

This study offers an assessment of' Chinese FDI in Sub-Saharan Africa with a particular focus on Ethiopia. The research method employed in this study has both qualitative and quantitative features. The findings of the study are presumed to be of paramount importance by inducting policy direction for policy makers in sub-Saharan Africa regarding Chinese investment in the region. The findings demonstrated some 90% of China (Sino) - sub-Saharan African trade is based around natural resources: oil, ores and minerals (Mary- Françoise Renard, 2011). Of course, China has certainly been contributing to sub-Saharan Africa’s economic growth, both in terms of trade and building of infrastructure. However, the Chinese exports of natural resources by themselves do not help sub-Saharan Africa because oil and mining are not labor intensive industries which even if natural resources may create economic growth in figures, does not necessarily translate into widespread job creations. In addition, large oil and mineral reserves can also distort the local currency, pushing up prices of other exports, such as agricultural and manufacturing products making them much harder to sell overseas. What makes the Chinese FDI unique in Ethiopia is almost 60% of these investments are concentrated in the manufacturing sector and infrastructural development, which is different from what happened in other African countries where the Chinese FDI is pretty much resource seeking (Alemayehu Geda and Atnafu G. Meskel, 2009). There are concerns related to China FDI in Ethiopia such as the dumping of low quality Chinese goods in Ethiopian markets, Chinese manufacture poor employees’ safety practices, the Chinese imports negative impact on domestic industries and Chinese investors’ involvements in corruption and other trade frauds. In conclusion, to realize the major benefits by reducing risks associated with this Chinese FDI in sub-Saharan Africa, countries must have appropriate policies and strategies including strong institutions arrangement.

Keywords: FDI, Sub-Saharan Africa, Chinese FDI in Sub-Saharan Africa, China, Ethiopia