Elephant and dragon in Africa: Evidence of China and India FDI in Sub-Sahara Africa

This paper investigates in comparative perspective the behaviour and strategies of Chinese and Indian manufacturing and service firms in Sub-Saharan Africa. We compare the motivations, sectoral distribution, corporate governance and ownership, and linkage with local African firms. Our study has four major findings. First, on motivations for investment, the Chinese and Indian manufacturing and service firms in SSA aim to target local market. Second, on the sectoral distribution of FDI, both Chinese and Indian firms focus on labour-intensive sectors over which they have ownership advantages, while Chinese firms focus more on textile and garments, and Indian firms in chemicals and retail and wholesale. Third, on the governance forms of the firms, both the Chinese firms and Indian firms show a strong preference for wholly owned ownership and greenfield investment, both relying on their own managers in business operations. Forth, on linkages with local firms, both Chinese and India firms extensively use international suppliers to source their production inputs, because local suppliers are less competitive in terms of product quality and price. However, Indian firms have relatively greater involvement with external networks and have more overseas and local suppliers. They also have a stronger tendency to transfer knowledge to local firms compared to Chinese firms.