|China in Africa: Seven Myths (ARI)|
ARI 23/20011 - 8/2/2011
Theme: Sensationalism and rumours cloud our ability to understand China’s growing engagement in Africa, and to craft appropriate responses. This paper dissects seven common myths on China in Africa.
Summary: Many of the fears about Chinese aid and engagement in Africa are misinformed. This paper unpacks seven myths: (1) ‘China is a newcomer to Africa’; (2) ‘China targets pariah regimes’; (3) ‘China hurts the West’s efforts to build democracy’; (4) ‘Chinese aid is huge’; (5) ‘Chinese aid is mainly used to win access to resources’; (6) ‘China is sending millions of farmers to Africa, leading the land grab’; and (7) ‘Chinese companies bring in all their own workers’. While China’s rise in Africa is cause for some concern, efforts to gain a more realistic picture should help Africans and their other development partners to craft appropriate responses.
Analysis: From Berlin to Tokyo, newspapers and parliaments have depicted China’s economic engagement in Africa in alarmist terms. We read that the Chinese arrived a few years ago, desperate for oil. They began to build palaces for dictators and roads to remote mining regions, brought in all their own workers and lavished piles of cash to muscle aside Africa’s traditional partners in a brutal play for resource security and influence. Enormous aid programmes propped up pariah states, enabling them to continue human rights abuses. Ambassador Johnnie Carson, the US Assistant Secretary of State for Africa, spoke for many when he said (as the Wikileaks cables revealed) that China is ‘a very aggressive and pernicious economic competitor with no morals… China is not in Africa for altruistic reasons’, he emphasised, in a meeting with US oil companies in Nigeria. ‘China is in Africa primarily for China’.
If we in the West are to understand the real nature of the competition provided by China’s rise, and the very real attraction China holds as a model on the continent and as a contributor to its development, we need a more realistic appraisal of China’s engagement in Africa –an appraisal that cuts through the many myths that circulate like viruses through cyberspace–.
(1) China is a Newcomer to Africa
The extensive engagement we see today has very deep roots. In Zambia, for example, Chinese state-owned companies set up construction companies to bid on local projects in the 1980s, began buying modest commercial farms in 1990 and purchased their first copper mine, Chambishi, in 1996. Ethnic Chinese from families that arrived in the 19th and early 20th centuries have risen to become cabinet ministers or parliamentarians in several countries, including Mauritius, Mozambique, Zimbabwe, Gabon and South Africa. Chinese engagement is not seen as a new or temporary phenomenon in most parts of Africa.
(2) China is Targeting Pariah Regimes that the West Will Not Touch
Between 2004 and 2006 as Sudan’s government and its proxies began to brutally crush the rebellion in Darfur, Beijing did little to interfere, supporting Khartoum diplomatically and supplying arms. In 2007, this began to change. Most notably, special envoys sent by China began to cooperate actively with the West. They were able to convince Sudan to allow a hybrid force of UN and African Union peacekeeping troops into Darfur. As the Brussels-based International Crisis Group remarked that year: ‘Beijing is shifting in Sudan from being an obvious part of the problem to a significant part of the solution’. Under President Obama, US policy began to reflect a new understanding that it was indeed essential to ‘deal with’ Bashir in order to push the peace process forward.
Chinese companies do continue to invest in Sudan’s oil sector, as well as its booming construction industry. American and EU companies are barred from investing in Sudan, (although not in Zimbabwe, where dismal economic conditions have probably deterred investment more than any sanctions could have done). But China’s largest stock of foreign investment on the continent is not in Sudan or Zimbabwe, but in relatively well-governed and stable South Africa. In 2009, South Africa was also China’s second-largest trading partner in Africa, behind only oil-rich Angola, which is also a large supplier of the US market. The Chinese are looking for investment opportunities in democratic Ghana, Namibia and Mauritius, and they are also joining American and European investors in many less well-governed countries: Equatorial Guinea, Nigeria and Gabon.
(3) Chinese Hurt the West’s Efforts to Strengthen Democracy and Governance in Africa
Except in the case of Sudan, there are almost no strings attached by the West to its companies’ trade or investment in Africa. Likewise, Western commercial banks provide loans wherever they see the potential for profit. In 2004, for example, Western donorsand the IMF refused to provide aid or finance for post-conflict reconstruction in Angola before it had made improvements in revenue transparency. But Western banks, led by Standard Chartered and France’s Calyon, provided several rounds of loans totalling over US$2 billion to Angola. China’s Eximbank also provided a line of credit worth US$2 billion. None of these banks imposed any governance conditions.
Even when focusing strictly on aid, the differences between the West and China are less than commonly believed. Take the US, for example. The largest recipient of US aid in Africa is Egypt, where President Mubarak has refused to allow free and fair elections. Ethiopia, which earned a dismal five out of seven (with seven being worst) on the Freedom House assessment of civil and political liberties, received US$1.2 billion from the US in 2009.
(4) Chinese Aid is Huge
In 2009, the US Congressional Research Service (CRS) published a report on China’s foreign aid activities in Africa, Latin America and South-East Asia that gave a gloss of official sanction to many of the rumours. Applying a ‘flexible’ definition of foreign aid which included all state-sponsored economic activities (foreign direct investment, commercial loans, export credits as well as official aid), the researchers simply counted up any and all reports of China-related finance going into these regions, as mentioned in the global media, without investigating whether these were firm commitments as opposed to rumours, recipients’ hopeful requests or even mistakes.
The CRS approach had two obvious problems. Given that many of the Chinese companies investing abroad –including its oil companies– are state-owned, and that its main banks are also state-owned, lumping all of their activities together as ‘aid’ just because they occur in the developing world defies both logic and convention. The West has never considered export credits or investment by its own state-owned companies as official development assistance.
Secondly, counting up figures based on media stories requires very careful investigation into their veracity. As Remi Bello, CEO of a political-risk consulting firm focused on Africa noted: ‘Keep in mind that only 2% to 4% of MOUs [memos of understanding] lead to projects in Africa’. The CRS researchers’ methodology produced a Chinese ‘aid’ figure of US$17.96 billion for Africa (2007). However, if the same definition of ‘aid’ is used for China and for the West, in 2007 China disbursed only about US$850 million in official development assistance to Africa, about 40% of its total aid. China’s aid is growing rapidly, but disbursements still reached only about US$1.4 billion in 2009.
(5) Chinese Aid is Mainly Used to Win Access to Resources
A major reason for confusion about Chinese aid figures, and their purpose, is the Chinese government’s expanded use of very large lines of export buyers’ credit that can be secured with commodities. In resource-rich Angola, Equatorial Guinea and the Democratic Republic of the Congo, and outside of Africa, in Brazil and Russia, Chinese banks have offered long-term lines of export credit, secured by commodities, to finance Chinese companies to do infrastructure projects or for the import of Chinese goods. These large credits are almost always secured with commodity exports (not, as often believed, by a resource concession). It acts as a kind of complicated long-term trade arrangement, with financing up front. Though countries can use their credits to finance infrastructure projects, the instrument itself is based on commercial market rates, and is not ‘aid?”.
China’s use of commodity-secured lines of credit parallels similar commercial instruments long in use by Japan and also by Western banks. None of these are regarded as official development assistance but as ways to promote business. As the African Development Bank’s President Donald Kaberuka, pointed out, this was not aid but investment: ‘When an investor comes and says, “I want to do business here and I will also build infrastructure”, what is bad about it? Nothing’.
(6) Beijing is Sending Millions of Chinese Farmers to Settle in Africa, Leading the ‘Land Grab’
One of the stories often used as an example of Chinese ‘land grabs’ comes from Zimbabwe. In 2003, ‘China’, it is said, ‘purchased 100,000 hectares in Zimbabwe’. What really happened in Zimbabwe was this: China International Water and Electric Corporation, a large state-owned engineering company which has built irrigation projects in Pakistan, the Philippines and a number of other developing countries, won a contract issued by the Zimbabwe government to develop 100,000 hectares of land for irrigated maize production, a quixotic scheme dreamt up by the Zimbabwe government to fill the production gap left by their illegal seizure of white-owned farms. CIWEC began construction, but when the Mugabe government was unable to make any payments, CIWEC withdrew its construction team and abandoned the project.
The only African country with hard evidence of a large-scale land concession obtained by a Chinese company comes from the DRC, where ZTE Agribusiness was given a concession reported variously to be from 100,000 to 3 million hectares, to grow oil palm. However, the project had not moved forward by late 2010. Apparently, ZTE’s economic feasibility analysis suggested that transport and infrastructure problems in the Congo would make the production and export of palm oil too expensive.
There are no hard facts on the number of Chinese who have moved to Africa. The number is certainly high, and may indeed be in the range of one million, compared with the 6.5 million or so white Europeans who are resident on the continent. But it is clear that at present, most Chinese immigrants are coming to Africa not to be farmers, but rather traders, more intent on opening a shop or a small business than growing rice.
(7) Chinese Companies Bring Over All Their Own Workers
The companies most likely to bring in a hefty share of Chinese workers are Chinese construction companies. Over the past few years, Chinese engineering firms in Africa have secured literally thousands of contracts, building projects such as health clinics, industrial estates and many kilometres of roads. In recent years, Chinese companies have been winning the largest share of all African Development Bank and World Bank civil works projects in Africa. In 2007, according to official figures, over 114,000 Chinese were working on a temporary basis in Africa, in 2,142 different projects. This comes to an average of about 53 Chinese staff per project.
These numbers are indeed higher than one would find with Western companies or aid donors, whose costs of bringing in expatriates are so much higher. Yet in many countries, Chinese win contracts not based on cheap Chinese labour but on their relatively inexpensive top level staff. A Chinese engineer costs around US$10,000 annually, a small fraction of the costs associated with European engineers. Furthermore, in most countries, the numbers of Africans working on these projects will be far higher than Chinese. While there are exceptions, Chinese tend to be in skilled technical or managerial positions where Chinese language skills are key, while less skilled positions are filled by African workers. Proportionately more Chinese workers can be found in places like Angola, where population densities are low and skilled labour is expensive. Even here, Chinese companies resident for several years have doubled the proportion of locals they hire compared with newly arrived Chinese firms. In Tanzania, a Chinese official predicted that localisation would continue to grow: ‘Tanzania doesn’t want to give work permits. And it’s more expensive now to bring people from China. Some don’t want to come. It costs a thousand dollars a month for a Chinese worker now. This is ten to twenty times what it costs for local salaries’.
Much of the cyber-space portrait painted of China in Africa rests on rumours, myths or outdated understandings. Trade between the two regions is huge, but official development assistance from China is far smaller than that from the West. China is not leading the land grab in Africa, and Chinese companies do not bring in all their own workers. So on and so forth.
China is now a powerful force in Africa, and the Chinese are not going away. Their embrace of the continent is strategic, planned, long-term and still unfolding. China’s rise in Africa is cause for some concern among all who care about development on the continent. But this concern has more to do with the standards of companies and banks from a country where capitalism is still relatively raw and where corporate social responsibility is rudimentary at best.
For many decades, Africans have been used to foreign investors coming from countries with higher standards than their own. But many Chinese companies are bringing over China’s own, notoriously low environmental and safety standards and labour relations. A growing number of Chinese entrepreneurs compete very effectively as traders and service-providers. Operating at the same modest level as their African counterparts, these entrepreneurs provide ample ground for discontent among those scratching out a living in African cities and towns. These are concerns where the Western role should be largely limited to advocacy, setting better examples, and, if asked, helping African governments bolster their own enforcement capacities and African NGOs their important local advocacy and watchdog role.
Ultimately, it is up to African governments to shape this encounter in ways that will benefit their people. Many will not grasp this opportunity, but some will. The West can help by gaining a more realistic picture of China’s engagement, avoiding sensationalism and paranoia, admitting our own shortcomings and perhaps exploring the notion that China’s model of consistent non-intervention may be preferable, for many reasons, to a China that regularly intervenes in other countries domestic affairs or uses military force to foster political change.
 ‘US Monitors Aggressive China in Africa’, BBC News, 10/XII/2010, http://www.bbc.co.uk/news/world-africa-11955516.
 Deborah Brautigam (1998), Chinese Aid and African Development, Macmillan Publishers, New York, p. 4.
 For an exception, see the excellent reporting by Philip Snow (1988), The Star Raft: China’s Encounter with Africa, Weidenfeld & Nicolson, New York.
 Gareth Evans & Donald Steinberg (2007), ‘Signs of Transition’, The Guardian, 11/VI/2007, http://commentisfree.guardian.co.uk/gareth_evans_and_donald_steinberg/2007/06/signs_of_transition.html.
 Ministry of Commerce (2010), ‘2009 Statistical Bulletin of China’s Outward Foreign Direct Investment’, Ministry of Commerce, Government of the People’s Republic of China, Beijing.
 Stefan Halper (2010), ‘Beijing’s Coalition of the Willing’, Foreign Policy, July/August, http://www.foreignpolicy.com/articles/2010/06/21/beijings_coalition_of_the_willing?page=full.
 The rumour seems to have started in a Malawi newspaper. See Dickson Kashoti (2007), ‘Malawi Set to Switch from Taiwan to China’, Daily Times [Malawi], 25/XII/2007, and Taonga Sabola (2008), ‘Govt Dismisses US$6bn China Waterway Pledge Reports’, Nation [Malawi], 4/II/2008, which ‘dismissed’ reports of US$6 billion in aid and explained that Malawi planned to offer commercially viable components of the US$6 billion project as investment concessions, and that Chinese investors had expressed an interest in participating. Henry Mussa, Minister of Transport, Public Works and Housing said: ‘As government, we have segmented the waterway project into a number of areas like ports, dredging and others and we will be concessioning the areas to various stakeholders. So the Chinese are interested to concession one of the areas’.
 Thomas Lum, Hannah Fischer, Julissa Gomez-Granger & Anne Leland (2009), ‘China’s Foreign Aid Activities in Africa, Latin America, and Southeast Asia’, Congressional Research Service, 7-5700, R40361, Washington DC, 25/II/2009, http://www.fas.org/sgp/crs/row/R40361.pdf (accessed 22/I/2011).
 Deborah Brautigam (2011), The Dragon’s Gift: The Real Story of China in Africa, Oxford University Press, Oxford.
 Lum et al. (2009), p. 5.
 These large lines of credit use market interest rates and are not subsidised by the Chinese government. Interest rates are based on commercial terms –albeit very competitive–: usually London Inter-Bank Offered Rate (LIBOR) plus a margin, usually between 1% and 2%.
 In Angola Western banks have provided oil-backed loans at very low rates: LIBOR plus 2.5%, for example. Although the World Bank does not ask for commodity guarantees for its finance, it also offers similar, non-concessional loans through its IBRD window: loans that are also not considered official development assistance. These are based on LIBOR plus a margin that varies from .28 to 1.25 depending on the repayment period. World Bank (2010), ‘IBRD Pricing Basics’, August, http://treasury.worldbank.org/web/IBRD_Pricing_Basics_Aug_2010.pdf.
 ‘What is Bad About it?’, Der Spiegel, 29/I/2010.
 David Smith (2009), ‘The Food Rush: Rising Demand in China and West Sparks African Land Grab’, The Guardian, 3/VII/2009. The Guardian failed to tell its readers the source of this ‘estimate’.
 Lorenzo Cotula, Sonja Vermeulen, Rebeca Leonard & James Keeley (2009), ‘Land Grab or Development Opportunity? Agricultural Investment and International Land Deals in Africa’, IIED/FAO/IFAD, London & Rome, ftp://ftp.fao.org/docrep/fao/011/ak241e/ak241e.pdf.
 Blake Hurst (2010), ‘The 21st Century Land Rush’, The American, American Enterprise Institute, September, http://www.american.com/archive/2010/september/the-21st-century-land-rush/article_print (accessed 17/I/2011).
 http://www.guardian.co.uk/world/2003/feb/13/zimbabwe.andrewmeldrum. While this article accurately reports the contract, it suggests that CIWEC would not simply develop the irrigation system for the land but wished itself to farm there. This was not the case.
 The DRC government approved 100,000 hectares; the Chinese Embassy website listed 300,000 hectares; the Chinese news agency Xinhua said 1 million hectares; newspaper reports claimed it to be 3 million hectares.
 Vivien Foster, William Butterfield, Chuan Chen & Nataliya Pushak (2008), Building Bridges: China’s Growing Role as Infrastructure Financier for Africa, Infrastructure nr 5, World Bank, Washington DC, p. 26.
 Ministry of Commerce (2009), China Commerce Yearbook 2008, Ministry of Commerce, Beijing, pp. 217-218 & 488.
 Tang Xiaoyang (2010), ‘Bulldozer or Locomotive? The Impact of Chinese Enterprises on the Local Employment in Angola and the DRC’, Journal of Asian and African Studies, vol. 45, nr 3,18/VI/2010.
 Brautigam (2011), p. 157.
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