TMCD team-members (Jun Hou and Serena Masino) have been exploring the roles and impact of multinationals (MNEs) from China and western countries on Africa’s economy.  Their preliminary research finds a diverse picture of Chinese foreign direct investment (FDI) penetrating different layers of Africa’s economy.

State-owned enterprises mainly invest in strategic sectors such as infrastructure, oil, or ores. In meeting one of Africa’s fundamental needs, the infrastructure improvements, directly serve and stimulate economic development.

Large private-sector enterprises are mainly involved in non-infrastructure projects such as manufactured goods, telecommunications and wholesale trade. Through linking local partners, their presence is expected to induce positive spillovers that enhance the technological and managerial capability of local industries. A notable example is the participation of Chinese telecommunication companies (e.g. Huawei Technology) in the construction of Information and Communication Technology (ICT) facilities, including a fibre-optic transmission backbone, telephone, mobile communication, and the Internet.  Not only have they upgraded the service in terms of coverage, quality and price, but they have also offered a potential technological spillovers that facilitate local actors in upgrading their own strategic capability.

SMEs (small and medium-sized enterprises) have also created enormous technological learning potential for African enterprises. Some of them are dominant in light industry and, compared with the technologies introduced by advanced countries, the superior technologies they’ve mastered are acknowledged to be more appropriate for African engineers to learn.

The researchers found that in the Ghana’s industrial landscape western MNEs lead the competition in several sectors.

The Dutch-owned Textile Ghana group is virtually the only big player in the textile sector. In the construction industry, big foreign players from Europe and China monopolise large-scale infrastructure projects - while local companies compete for smaller-scale contracts.

ICT seems the Ghana’s most dynamic sector. Vodafone has provided the core of Ghana’s mobile infrastructure network, and is one of the main players in the mobile telephony market. The fastest speed it can offer on data traffic, however, is only 3G. Ghanaian companies are emerging to take the lead in niche areas. 

For example a local broadband and mobile Internet company called Surfline has capitalised on the 4G license, which the government has reserved to local firms for five years, and is, at the moment, the sole provider of faster 4G internet connection, with an expanding client base. It will be interesting to see the developments that come with the advantage local companies have secured through exclusive access to 4G licenses.

The research, led by Prof Xiaolan Fu, in collaboration with CSIR-STEPRI, is a part of the MNEmerger project funded by EC FP7 Programme.