Against the backdrop of a bleak global economy, the amount of foreign direct investment (FDI) introduced by African countries continued to decline in recent years, while Chinese FDI to Africa saw a major increase. According to Wang Yong, Vice President of China-Africa Development Fund, Chinese FDI to Africa had reached $20 billion by the end of 2012, a significant increase compared to the figure of less than $500 million a decade ago. China invested over $3 billion in Africa in 2012 alone.

"Chinese enterprises are devoted to helping African countries realize industrialization, improve the added value of their products, create more job opportunities for locals and increase revenues of local governments," said Wang at the forum.

The China-Africa Investment Fund in recent years helped batches of Chinese enterprises in good standing to conduct business in Africa, bring practical changes to the lives of local residents (see box).

The element of risk

Although security on the continent has improved in general terms, some regions were still plagued by ongoing conflicts, leading to economic stagnation. The Tunisia protests in December 2010 set off a domino effect of uprisings across North African countries, including Egypt and Libya. Mali witnessed a coup d'état in March 2012, which, according to its national revenue authority, saw the country's revenue levels drop by $625 million.

"Political instability and constant turnover in leadership bring huge risks for enterprises' operation," said Cheng. Besides, Chinese companies had to deal with challenges in regard to the business environment, including inadequate electricity supplies, high inflation and currency instability.

However, He Wenping, a researcher with the Institute of West Asian and African Studies at the Chinese Academy of Social Sciences, noted that risks should be looked at rationally. "As long as there are opportunities, there are risks. Among risks, there are also secure harbors," she said, citing the example of Democratic Republic of the Congo, where conflicts mainly happened in the eastern region and the business environment was relatively stable in the west.

Representatives at the China-Africa Investment Forum suggested Chinese companies learn more about local customs, culture, religions, laws and regulations, and perfect their management and communication abilities with locals in Africa to conduct business operations in a sustainable way. "Some of our companies are not well prepared to expand their global presence, especially in terms of skilled staff. We urgently need talented individuals who not only master the language and management skills, but also are familiar with local laws and regulations and local investment environment," said Wang. He also noted that Chinese companies lacked experience in localizing their operations and maintaining public relations with locals. The people-to-people aspect of foreign investment is clearly one that must not be neglected, he said.

China-Africa Investment Fund Projects

- Chinese digital channel provider StarTimes gives 10 African countries access to digital TV services.

- Cotton planting and processing projects invested in Malawi, Mozambique and Zambia increase incomes of 100,000 local households.

- Investment in a leather factory in Ethiopia creates annual revenue of over $20 million for the local government.

- A power plant in Ghana provides 15 percent of the nation's total electricity.

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