China
in Africa: Why
By Akwe Amosu. Edited by John Feffer, March 9, 2007
Deep
inside the tropical forest of Gabon, 500 miles from the coast,
China is going where no other investors dare. A Chinese consortium,
led by the China National Machinery and Equipment Import and
Export Corporation, has won the contract to develop Gabons
massive Belinga iron ore deposit. In return for purchasing
the entire output, Chinese operators will build not only the
extractive infrastructure at Belinga but a hydro-electric
dam to power it, a railway to the coast, and a deepwater port
north of the capital, Libreville, for exporting the ore.
This
venture will cost several billion dollars, and China will
have to wait three years before any ore is actually extracted.
Since the site was identified in 1955, no Western investors
had stepped forward to develop it. But with the support of
its entire state machine, Chinese companies are now taking
the risk.
Chinas
march into Africa has reminded pundits of those two proverbial
elephants fighting. Evoking the battle between East and West,
they opine that it will be the grass that suffers.
But
times have changed. Back in the first colonial scramble, only
the imperialists were at the table to carve up the continent
among themselves. These days, far from being a victim, Africa
is at the table too and cutting deals with enthusiasm. China
negotiates with Gabons sovereign government over the
development of Belingas iron ore, not with the former
colonial power, France. The debate is no longer about whether
East or West is winning the competition.
The
grass may yet suffer, however. Africas peoples need
to be as wary of being trampled underfoot by their own governments
as they are of foreign powers. There are grave doubts about
how well African governments are representing their stakeholders
and whether Africas negotiating capacity is up to scratch.
The jury is out on whether Africa can convert Chinese cash
into development.
The
Scope of Chinese Interest
Few issues have generated as much heat in recent African affairs
as Chinas engagement in the continent. China has been
pushing increased investment and cheap credit into Africa
for at least five years. But the astonishing levels of expenditure
and the breadth of Chinese involvement reached levels in 2006
that focused minds in the West and provoked much media hyperbole.
In
1991, Chinese direct investment in Africa was less than five
million dollars a year. By 1994, it was around $25 million
and by 1999 just short of $100 million. Just seven years later,
He Wenping, director of the African Studies division in the
Chinese Academy of Social Sciences, believes that direct Chinese
investment in Africa reached $1.25 billion in 2006. The Peoples
Daily and other analysts suggest a number over $6 billion.
Chinas trade with Africa has followed a similar pattern,
rising from only $12 million in the 1980s to $10 billion in
2000 and then to as high as $55 billion in 2006. It is surely
no coincidence that Africa, in turn, has seen economic growth.
GDP growth was negative on average from 1975 to 1984, rollercoastered
some more in the 1990s, but is now repeatedly above 5%.
China,
meanwhile, has been growing at just short of 10% a year for
the past four years and reached 10.7% in 2006. Such growth,
in a country and an economy that size, generates a huge appetite
for inputs. Electricity demand is so high that last year China
added new power capacity equal to the entire capacity
of the UK and Thailand combined, or about twice the generating
assets of California. China overtook Japan to become
the worlds second largest oil consumer in 2003 and now
trails only the United States.
In
its engagement with Africa, China certainly aims to build
a political constituency for its much-touted peaceful
development. But its primary interest is petroleum and
raw materials. If Beijings goal of quadrupling the size
of the economy by 2020 is to be met, energy consumption, and
therefore demand, will climb even higher. Africa has resources
in abundance but almost no capacity to process those resources:
a perfect opportunity for a rising economy like China. Africa
can supply its raw inputs and also provide a market for Chinas
manufactured products.
Over
800 Chinese companies, the vast majority of them state-owned,
are operating in 49 African countries. These companies are
the forward edge of Chinas operations, although they
are backed up by frequent visits by top-level officials to
seal deals and smooth their path. China is either drilling
or exploring for oil in Nigeria, Sudan, Angola, Algeria, Chad,
Gabon, Mauritania, Kenya, Congo Brazzaville, Equatorial Guinea,
and Ethiopia - and this list is not exhaustive. China purchases
64% of Sudans production, which accounts for around
6% of its oil imports. Angola contributes half of the oil
China buys from Africa. Beyond oil, China is extracting copper
and cobalt from Zambia and Congo. It is buying timber in Gabon,
Cameroon, Mozambique, Equatorial Guinea, and Liberia. It buys
platinum and chrome from Zimbabwe and iron ore, coal, nickel,
and aluminum from several other locations.
In
each of these countries, the Chinese and the government in
question will sign a broad-spectrum package deal
that gives the African partner a number of rewards, featuring
a mix of cash, investment, cheap credit, technical expertise
and training, and in-kind benefits such as new presidential
palaces and stadiums, or cheap infrastructure such as roads,
dams, and railways. The Chinese agreed to such an aid package
involving major infrastructural investment for Angola, which
is Africas second largest oil producer and the continents
lead supplier to China. A $2 billion line of credit was announced
in 2004, but since then available finance has risen to a reported
$6 billion, over several years, to finance a raft of different
projects such as hospitals, schools, roads, bridges, housing,
office buildings, training programs, and the laying of fiberoptic
cable. Chinas diplomatic support in international fora
has also proved notoriously handy, for example, for President
Bashir of Sudan. Other, less contentious elements include
contributing to Africas peacekeeping missions, sending
medical aid teams to supplement struggling health services,
and training and education opportunities for African students
in China.
China
is effectively making Africa an integral part of its economic
development for decades to come. Africa has not seen inward
flows of this volume in all the post-independence years. This
is not only a matter of cash but also the linkages, backward
and forward, into Chinese and African markets and into government
policy and planning. To continue arguing about the desirability
of the relationship no longer makes any sense. Chinas
deep penetration in, and increasing integration with Africa
is an established fact. Much has been made of Washingtons
decision to announce its new African Command while Chinese
President Hu Jintao was on his latest tour of Africa -- as
if to warn China that the United States will protect its African
interests. But even if Chinas rivals in the West wanted
to roll back this expansion, there seems little chance that
they could do so.
A
New Development Model?
For Prime Minister Meles Zenawi of Ethiopia, the inflow of
investment from China is a concrete demonstration that the
Western model of development has failed. He spoke in February
2007 of the need to build a strong developmental state
complaining that neo-liberal reforms advocated
by the World Bank and others have failed to generate
the kind of growth they sought. The only kind of good
governance that takes root, he suggested, is home grown, not
imposed from outside. The implication is that African leaders
should worry less about meeting demands for transparency,
accountability, rule of law, and other such neo-liberal
objectives and focus instead on economic growth. With China
in the picture, they will find the resources they need.
It
is true that Africa seems to be bucking conventional Western
assumptions on investment. In a recent review of the determinants
of FDI in Africa, Elizabeth Asiedu claims that large
local markets, natural resource endowments, good infrastructure,
low inflation, an efficient legal system and a good investment
framework promote FDI. In contrast, corruption and political
instability have the opposite effect. Yet China does
not seem to have been deterred from investing in African countries
despite large-scale corruption and political instability
on the continent.
Indeed,
some of Chinas investments go hand in hand with supporting
such corruption and instability. Chinese negotiators and businesses
routinely pay bribes to secure deals. Transparency Internationals
International Bribe Payers Index, published in October 2006,
found that China was second most likely, after India, to pay
bribes abroad. Civil society activists have argued that Chinese
assistance has saved countries such as Angola and Kenya from
having to comply with pressure from other international partners
to improve performance on transparency and accountability.
China
has also exploited Africas propensity to engage in civil
conflict. The Congressional Research Service in Washington
estimates that between 2001 and 2004, China was the continents
third largest arms supplier (after Russia and Germany), supplying
nearly 7% of Africas military purchases. The impact
outweighs the volume, particularly because of Chinas
willingness to sell weapons to some of the continents
most repressive rulers, including Bashir of Sudan and Mugabe
of Zimbabwe, and to buyers who then feed them into active
conflicts. Light weapons from China have flooded into the
Great Lakes area, where millions have died as a result of
civil conflict.
In
short, corruption and conflict do not seem to deter China;
it is hungry enough for oil and minerals to overlook these
factors when making investment decisions. Still, Chinas
indifference does not mean that governance and related factors
are not important for Africas economic development.
Unsurprisingly, the top recipients of FDI in Africa are oil-
and mineral-producing nations, with poor governance and stability
records. But also among them is South Africa, which is not
a major producer of petroleum and whose mineral sector is
already intensively operated. South Africa makes it into the
top rank of FDI winners because its economy is well run. The
countrys governance is of a high standard. There is
accountability and rule of law, corruption is relatively low,
and stability is guaranteed, notwithstanding a serious crime
problem. While the bulk of FDI flows into other African nations
are mostly concentrated in the extractive industries, in South
Africa they fuel a diverse array of sectors. Thus if we remove
oil and Chinas appetite from the picture, we find South
Africas competitive advantage is supreme and the reforms
Prime Minister Meles rejects are indeed critical to capturing
foreign investment.
But
Asiedu - with other economists - makes another point equally
significant for Africas development. She notes that
the supply of FDI does not necessarily trigger the growth
that leads to development. Countries with significant oil
and mineral deposits winning high volumes of FDI such
as Equatorial Guinea and Angola frequently fail to
spread the benefits. The purchase of goods and services may
expand inside particular enclaves without stimulating employment
and services in the broader economy. Several factors prevent
sustainable growth, including high unemployment and high rates
of corruption, low educational levels, low rates of domestic
savings, and low citizen confidence in government; all may
persist despite intense investment in specific resources.
Conversely, countries that invest the windfall profits from
petroleum or minerals in the broader economy, while respecting
the rule of law and maintaining healthy legal and financial
systems, do better at promoting equitable development, even
if they attract investment largely into the extractive sector.
Botswana, with its effective use of diamond revenues, is a
case in point.
Some
African leaders, such as the ruling party in Angola and perhaps
Ethiopian Prime Minister Meles as well, have seized on the
idea of a Chinese model of development - involving an autocratic
and unaccountable commandist political economy as an
effective alternative to Western-style reform. Yet the idea
that there is no accountability in Chinas development
model is wrong, even if the lines of accountability do not
look much like the ones advocated by the World Bank. It is
not autocracy in China that has brought development
quite the reverse. Chinas transition, while it still
relies on its legacy of a commandist system, is advancing
because it is incrementally reducing autocracy and opening
space for choice and diverse approaches.
The
truth is that the barriers to Africas development are
to be found at home not abroad. Africas fundamental
challenge remains to find a homegrown model to overcome
centuries of lost human and material assets and build value
at home. Indeed, Chinas investment puts the ball firmly
in Africas court. Time and again African governments
complain that they cannot deliver development due either to
a lack of support or to interference from the West. But the
resources, as Beijing likes to say, now come with no
strings attached. Any failure to share growth and put
Chinese earnings to work will not be Chinas fault but
that of the African recipient government.
Some
countries are aiming high. Last year, for example, Ghanas
establishment of institutions and conditions favorable to
national and international trade aroused Chinas interest
and led to an increase in Chinese trade. The Ghanaian government
encouraged its private sector to lead in conducting economic
activities with Chinese entrepreneurs.
Ultimately
the greatest challenge is not to persuade China to practice
responsible global governance though this is very important
but to prevent African leaders from squandering the
tremendous opportunities offered by Chinese capital. To take
full advantage, African leaders need to address two questions;
how to cut deals with China that leave lasting value in Africa
and how to empower constituencies at home.
Lets
Make a Better Deal
Despite Chinese rhetoric about the win-win nature
of the relationship with Africa, the African side of the table
could drive a harder bargain. It is a common complaint that
when China contracts to deliver infrastructure projects in
return for raw materials, it insists on the use of mostly
Chinese labor, even in situations where African labor is abundant
and desperate for opportunities to acquire new skills. The
practice continues, despite the criticism. In another example,
the Nigerian government did not foresee or seek to limit the
damage done by cheap Chinese imports drowning its fledgling
plastics and textile industries. And the Zambian governments
failure to require of Chinese employers reasonable employment
standards has resulted in violent confrontation and political
disaffection in the Copperbelt.
An
African Union meeting of experts and diplomats in September
2006 warned that the China-Africa relationship should not
follow the pattern of relations with the West. Participants
certainly appreciated that Chinese investment gave Africa
new leverage. But there was also criticism that China was
making no serious effort to transfer skills
and knowledge to Africa and relied excessively on labor
from home. In a list of challenges for both sides, presenters
at the meeting stressed the importance of industrialization
and ending Africas seeming perpetual reliance on export
of raw, unprocessed materials; on improving structure of trade
deals, and preventing an increase in Africas debt, finding
mechanisms to ensure China pays more attention to environmental
damage. China, it was said, should be encouraged to relocate
some of its industries to Africa as a reflection of
a true spirit of partnership.
The
report from this meeting concluded that the African
Union should be the fulcrum of the emerging Strategic Partnership
and should be able to define the continents interest
more coherently and clearly. Africa needs a strategy
for China just as China has a strategy for Africa.
To
succeed, that strategy might rely on collective bargaining.
All Chinas deals on the continent have been negotiated
with governments bilaterally, and the details are not made
public. But at a pan-African level, China is perceived to
have acquired too much power and leverage in its bilateral
deals to the extent that disadvantageous agreements are being
concluded. It is hard to imagine China accepting the target
proposed in the report of 70% of all Africas raw materials
to be processed on African soil, or even that joint ventures
should use 80% African labor. But even progress toward such
targets is hard to achieve without increasing leverage. Several
commentators, notably economist Chris Alden, have outlined
new, potentially fruitful approaches for African negotiators;
such inputs are likely to be pushed to the fore as the pan-African
leadership advocates its strategies.
So
far, China has proved ready to adjust as Africa begins to
flex its muscle. South Africas president Mbeki warned
late in 2006 of the risk that Africa could fall into a colonial
relationship with China. In February 2007, during his eight-nation
African tour, President Hu Jintao went out of his way to promise
that China would work to make the trade relationship more
balanced. He also said Chinese companies would be encouraged
to increase investment, provide technical and management
training and help Africa develop processing and manufacturing
industries so as to ease employment pressure and enhance competitiveness
of its exports. The key vehicle for that encouragement,
the China-Africa Development Fund will direct $5 billion toward
encouraging Chinese companies to invest in Africa.
China
may lose some negotiating advantage if African countries can
start to collaborate and cut better deals, but there could
be benefits as well; Beijing might find it easier to deal
with Africa in bulk. Chinese policy analysts in
Beijing in November 2006 told a visiting delegation from Washington,
D.C. that managing relations and obligations with dozens of
countries bilaterally was proving cumbersome. They were looking
to the Africans to establish a joint body that might coordinate
and bundle African needs and concerns.
Holding
China and Africa Accountable
To maximize the benefits of the Chinese windfall, as argued
above, Africa needs to deepen its commitment to better governance
and cut a more advantageous deal with Beijing. But there is
a third major shift in attitude that is critical for Africas
future. Non-governmental stakeholders need to be empowered
and encouraged to hold both the Chinese and their own governments
to account. Ultimately this will improve both the quality
of governance and of the relationship with China.
This
is critical for African governments but it could help China
too. China is most comfortable dealing state-to-state with
Africa. Its engagement in Africa has been remarkable for its
focus on government officials and avoidance of less formal
contacts. As a result, Chinese diplomats and officials in
Africa have missed out on learning from two key constituencies:
business and civil society. They too need to pay more attention
to non-governmental voices.
Many
African businesspeople have good reason to rue Chinas
impact on their lives While the benefits of Chinese investment
have spread only partially to the rest of the economy, trade
has brought Chinese manufactures into the markets at prices
too low for African manufacturers to beat. Nascent African
industry making plasticware and textiles, for example, face
competition from a player with deeper pockets than they and
no aversion to producing counterfeit goods. Similarly, Chinese
firms are able to bid for building contracts and other service
provision at lower prices than African competitors can manage.
African trade unions and others have collected extensive evidence
that hundreds of thousands of African jobs have been lost
as a result. And in South Africa, it was protests by these
same trade unions that galvanized President Mbeki to warn
China, late in 2006, that dumping of goods had to stop. In
a similar vein, protests from Zambias civil society,
given powerful voice by opposition party leader Michael Sata,
have exposed Chinese labor practices in its extractive sector
businesses.
The
views of African populations find expression not only through
government but through their non-governmental representatives.
Governments like that of Ethiopias Meles, which brushed
away criticism over its shooting of 82 defenseless civilians
in 2005 for protesting in the streets, are apparently puzzled
by the suggestion that they need to be more accountable. But
others less preoccupied with keeping themselves in power at
all costs will find, if they allow non-governmental voices
to be heard, that they can be allies in the relationship with
China.
Neither
business nor civil society takes a rigidly anti-China view.
The former, rather than rejecting Chinese investment, has
mostly complained about not having sufficient opportunity
to take advantage of the capital inflow. African civil society
voices who advocate better government and civil and political
rights at home have applauded the Chinese for investing in
infrastructure, a no-go area for Western donors for decades,
and recognized the qualitative contrast between the hands-on
pragmatism of Chinese expatriates and Western development
efforts from inside the air-conditioned Land cruiser.
But
such groups have also criticized their governments for the
lack of transparency in deals made with China and asked hard
questions about the payment of bribes, colonial-style attitudes
and the lack of jobs for Africans. As Zainab Bangura of Sierra
Leones National Accountability Group commented recently:
Weve spent 15 years working on conventions against
corruption and now the Chinese come in and they havent
signed any of it. Theyre secretive and will only deal
with governments, they dont consult civil society or
anyone. On a broader agenda, civil society coalitions
like the Darfur Consortium that represent over 50 organizations
have shown leadership in protesting the carnage and human
rights abuse in Darfur, Sudan, and added their voices to international
calls on China to use its leverage with Khartoum.
By
listening to and acknowledging such critiques, African governments
and their sub-regional and regional organizations can gain
leverage in their negotiations with China. Beijing likes to
be seen in Africa as a brother nation, in solidarity
with Africans. It will take African critiques more seriously
than Western complaints. Some African governments, particularly
those worst affected by the resource curse, clearly have no
intention or desire to become more accountable or push back
in their relations with China. These arguments will cut no
ice with them. But China may choose to seek out and get to
know African civil society anyway. Chinas new integration
into African economies is proving to carry some alarming risks.
Investment and operation in the Niger Delta have put Chinese
oil workers in harms way, making them suddenly vulnerable
to militants and hostage-takers. In Darfur, Chinese oil installations
have been attacked. China cannot afford to put all its eggs
in government baskets.
Inevitably,
regardless of official attitudes, informal non-governmental
encounters between China and Africa will increase. Hundreds
of thousands of Chinese citizens have moved, legally or illegally,
to African countries. Some 24 African countries are now approved
as destinations for Chinese holidaymakers, not only a good
source of revenue for African tourism industries but a guarantee
of an unprecedented level of person-to-person contact. In
addition, with three Confucius Institutes in South Africa,
Kenya, and Rwanda, many more Africans will learn about Chinese
culture and study Chinese language. Chinas ministry
of education believes 8,000 Africans are currently learning
Chinese. With five more Confucius Institutes projected, that
number will rise sharply, with a potentially lubricant impact
on cooperation.
At
some point in the future Chinese citizens too might grow more
concerned about Chinas role in Africa. At the recent
World Social Forum in Nairobi, Chinese groups focused on domestic
Chinese issues found themselves assailed by Western NGOs and,
to a lesser extent, African groups, over Chinese government
and corporate practices in Africa. In a shrinking world, we
are only just beginning to see the consequences of Chinas
opening up to other cultures and communities.
For
non-governmental Africa in these new times, the choice is
not between China and the West. The important choice must
be made closer to home. On one side are the rulers who are
too lazy, incompetent, or venal to take the necessary steps
to share the benefits of investment and give Africas
populations the chance to build a viable economic future.
On the other side is the real leadership of presidents, business
leaders, and legislatures who have the self-discipline, honesty,
and commitment to set a new course and use the unprecedented
benefits of Chinese investment to achieve some real development.
Dont
focus so much on the elephants. The future of Africa lies
with the grass.
Source:
Foreign Policy in Focus
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