**5. Conclusions and policy implications**

#### **5.1 Conclusion**

other hand, has a strong element of political interference which is not very much liked by the national governments. But research shows that a stable environment

Granger causality test is used for forecasting between two series in an analysis. When two series are co-integrated then, there is likelihood of causality in at least one of the directions [25]. For instance, FDI and GDP are co-related, which implies that a change in one can cause the other to change, vice versa. To observe empirically the causality test for all the series in this study, Granger causality technique was employed. The results are presented in **Table 5**. Conclusively, there are situa-

**Table 5** summarizes the results for each series. According to **Table 5**, there is a uni-directional causality link between China's Export by Africa (CEBA), openness (OPEN), Africa's FDI Outflow Around the World (AFDIOTW), China's Import from Africa (CIBA), and China's FDI inflow to Africa (CFDIITA) on economic growth (GDP). This suggests that a change in any of the determinants or indicators will influence regional economic growth (but the reserve is not certain). As a result of this, proper allocation of FDI inflow from various sources including those from China and the US will directly boost regional economic growth. This certainly shows that Chinese investment in Africa is adding more to development. The ARDL

**Variable F-stats Prob.** OPEN does not Granger cause RGDP 24 8.19958 0.0093 RGDP does not Granger cause OPENN 0.01898 0.8917 CIBA does not Granger cause RGDP 24 0.44314 0.5129 RGDP does not Granger cause CIBA 15.4376 0.0008 AFDIOTTW does not Granger cause RGDP 24 2.47903 0.1303 RGDP does not Granger cause AFDIOTTW 8.51158 0.0082 CEBA does not Granger cause RGDP 24 0.12593 0.7262 RGDP does not Granger cause CEBA 7.86194 0.0106 CFDIITA does not Granger cause RGDP 24 0.90823 0.3514 RGDP does not Granger cause CFDIITA 5.13697 0.0341 UNEM does not Granger cause RGDP 24 3.47945 0.0762 RGDP does not Granger cause UNEM 51.5813 0.074 UNFDIITA does not Granger cause H 24 0.24272 0.6274 H does not Granger cause UNFDIITA 5.25532 0.0323 SSE does not Granger cause RGDP 24 2.04574 0.1673 RGDP does not Granger cause SSE 0.44133 0.5137 FDIITA does not Granger cause RGDP 24 1.21995 0.2819 RGDP does not Granger cause FDIITA 5.95881 0.0236

promotes an effective growth [24].

tions of a unidirectional effect for some of the series.

findings in **Table 3** confirm this situation.

*Source: author's computation.*

*Granger causality test results.*

**Table 5.**

**40**

**4.1 Granger causality test**

*Regional Development in Africa*

The FOCAC cooperation has benefited China's economies more than it did for African because of growth hindering factors. In the form of foreign direct and portfolio investment, Chinese activities have grown in the region and are seen everywhere. China knows exactly what it wants from Africa while Africa is yet to wakeup. Africa is still assuming it will gain from China engagement.

Is African economic performance growing as a result of China's economic cooperation or is yet to happen? This Chapter examined this question from the preview of FDI and growth analysis using at least two decades of FDI data. The chapter also examined the effect of US and the World FDI on growth using Autoregressive Distributive Lags (ARDL) and Granger Causality models. According to the ARDL model, there was a positive growth relationship between China's FDI and African economic growth in the long term but not the short term. It was positive for the World FDI inflow to African. However, the effect of US FDI inflows to Africa was insignificant.

Change in human capital positively influences regional economic growth. There was no evidence of Okums Law as economic growth increases with unemployment, suggesting a lack of growth in the job market. Activities prevailing activities in the government and non-government sectors are not enough to bridge the gap in unemployment. The impact of openness i.e. economic inclusiveness was unexpectedly negative with economic growth in all models. This does not suggest, the region is a closed economy.

#### **5.2 Policy recommendation**

The African community will gain significantly from China's investment engagements if the following recommendations are factored in the region growth plans.

In the African economy, resolving growth issues are necessary, if gaining the most from FDI is the ultimate objective. Lingering growth problems will continue to hinder effective investment allocations. Without specifically outlining the core issues (facing development in the region) and actually resolving them is a recipe for underdevelopment. For example, Oil-producing nations need to go beyond crude oil activities which has a lower market price to processing activities which has a higher market price. Continuing with temporarily fixed and front-loaded deals with China will not resolve the region's major problems. China in particular knows that it wants from Africa and as a result deals with African in that regard. In the same vein, African economies need to know what they want to influence investment programs with China. They will be able to attract investments that will resolve their growth issues other than going for anything at all which has a long-run effect of collapsing

the domestic activities and the exporting sectors. Diversification programs will have a greater impact as a result while the non-oil sectors will be well developed.

The African community can leverage China's economic interest to attract investment resources to bridge the infrastructural gaps facing development in the region. As the majority of countries experiencing heavy financial depts from doner organizations (the IMF and World Bank and) thereby losing their creditworthiness. The most viable approach to continue expanding infrastructural development in the region is to adopt and implement the Mutual or Pooled Growth Model (MGM/ PGM) investment plan with China. This strategy as the name implies requires China and African economies to initiate a "susu" plan together. Depending on the agreement, both countries (i.e. China and any other country in African or all ) can pull a fixed amount of funds together to be invested in a viable structural program or project in a partner country (say an African country) for at least two years and later pull another for the remaining country (say China) for a similar or different project/ s. Both countries after the two years will account for the funds to avoid missappropriateness. This type of financing or investment is unique because unlike the IMF funding system, it has no interest commitment hence reducing the debt to GDP ratio for partner economies.

Africa's manufacturing sector remains underdeveloped, yet China is an industrial hub. Africa is an endowed region with diverse resource potential, hence a suitable place to site processing and manufacturing industries. The lack of effective technical competencies is delaying industrial programs in the region. China-Africa cooperation is a forum that can help Africa close the technical gap and boost industrial development. The cooperation can be used to transfer technical resources to support the sector. Through government policies, young entrepreneurial visions can be supported by given special incentives such as tax holidays for at least one year, technical and skills training, and others to sustain activities. The government through its machinery can also protect young vision from competitions. This will allow them to grow into huge exporting industries and create more jobs to reduce unemployment.

Lastly, Africa needs to reform its investment policies with China. Observing China's past partnership engagements with the ASEAN community and other rising economies will help gain wisdom and help shape future engagement with China. In the future, Africa community will be able to develop proper economic deals with China via trade and investment. Again, the US has had long-standing trade and investment history with China. Most of such engagements have had a couple of successes and as well as failures to learn from.

**Author details**

**43**

Gadong, Brunei Darussalam

2 W2POINTS Limited, China

provided the original work is properly cited.

Isaac Abekah-Koomson1,2\* and Nwaba Eugene Chinweokwu2

*China-Africa Investments and Economic Growth in Africa*

*DOI: http://dx.doi.org/10.5772/intechopen.89444*

\*Address all correspondence to: isabkoworld@gmail.com

1 School of Business Economics (SBE), University of Brunei Darussalam (UBD),

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

*China-Africa Investments and Economic Growth in Africa DOI: http://dx.doi.org/10.5772/intechopen.89444*

the domestic activities and the exporting sectors. Diversification programs will have

Africa's manufacturing sector remains underdeveloped, yet China is an industrial hub. Africa is an endowed region with diverse resource potential, hence a suitable place to site processing and manufacturing industries. The lack of effective technical competencies is delaying industrial programs in the region. China-Africa cooperation is a forum that can help Africa close the technical gap and boost industrial development. The cooperation can be used to transfer technical resources to support the sector. Through government policies, young entrepreneurial visions can be supported by given special incentives such as tax holidays for at least one year, technical and skills training, and others to sustain activities. The government through its machinery can also protect young vision from competitions. This will allow them to grow into huge exporting industries and create more jobs to reduce

Lastly, Africa needs to reform its investment policies with China. Observing China's past partnership engagements with the ASEAN community and other rising economies will help gain wisdom and help shape future engagement with China. In the future, Africa community will be able to develop proper economic deals with China via trade and investment. Again, the US has had long-standing trade and investment history with China. Most of such engagements have had a couple of

a greater impact as a result while the non-oil sectors will be well developed. The African community can leverage China's economic interest to attract investment resources to bridge the infrastructural gaps facing development in the region. As the majority of countries experiencing heavy financial depts from doner organizations (the IMF and World Bank and) thereby losing their creditworthiness. The most viable approach to continue expanding infrastructural development in the region is to adopt and implement the Mutual or Pooled Growth Model (MGM/ PGM) investment plan with China. This strategy as the name implies requires China and African economies to initiate a "susu" plan together. Depending on the agreement, both countries (i.e. China and any other country in African or all ) can pull a fixed amount of funds together to be invested in a viable structural program or project in a partner country (say an African country) for at least two years and later pull another for the remaining country (say China) for a similar or different project/ s. Both countries after the two years will account for the funds to avoid missappropriateness. This type of financing or investment is unique because unlike the IMF funding system, it has no interest commitment hence reducing the debt to GDP

ratio for partner economies.

*Regional Development in Africa*

unemployment.

**42**

successes and as well as failures to learn from.
