Read an Excerpt
African Perspectives on China in Africa
By Firoze Manji, Stephen Marks
FahamuCopyright © 2007 Fahamu
All rights reserved.
A NEW FRONTIER IN THE EXPLOITATION OF AFRICA'S NATURAL RESOURCES: THE EMERGENCE OF CHINA
John Rocha sets out to answer two questions related to China's role in Africa: To what extent will China's growing influence in Africa either advance or undermine the African agenda? And what are the challenges and implications that these hold for African governments, the private sector and the international community?
Providing an expansive overview of China's interests in Africa, Rocha examines both the positive and negative implications for Africa and the meaning of China's involvement for NEPAD's African Peer Review Mechanism.
China's burgeoning influence around the globe has captured the attention of governments, the private sector and civil society. With a large population and recent high economic growth rates, estimated at 9.5 per cent, China now comes only second to the United States of America (USA) in its consumption of oil. Based on current projections, Chinese demand for and consumption of mineral resources is expected to grow exponentially in the foreseeable future, so in an attempt to diversify its source of supply, China has set its sights on Africa as a natural partner.
While this development is certainly welcomed by many African states, in international circles it has prompted some analysts to postulate that China's Africa strategy is largely underpinned by its voracious appetite for natural resources, especially gas, oil and minerals rather than a genuine desire to foster strong and long-lasting partnerships with Africa. Linked to this is a growing concern that China's rising influence in Africa could derail international attempts to foster good governance in Africa. The argument is that because China does not insist on commitment to democracy, good governance and respect for human rights as a precondition for development assistance, Western pressure to that effect is diluted.
Others argue that stronger cooperation with Africa could also increase China's sphere of influence and bolster its attempts to redefine its relation to the rest of the world. This would be a dramatic change in the traditional patterns of Western dominance over African affairs and would diminish Western political and economic leverage over the continent, thereby constituting a major challenge to Western hegemony over the political, economic and development discourse in Africa and internationally.
With this in mind, the main purpose of this paper is to provide an African perspective on the ongoing debate about China's role in Africa by contextualizing this evolution within the African development agenda as represented by the African Union and the New Partnership for Africa's Development (NEPAD). In particular, special attention is given to the following questions: To what extent would China's growing influence in Africa either advance or undermine the African development agenda? What challenges and implications do these hold for African governments, the private sector and the international community? The paper also sheds some light on how African governments and the international community, including the private sector, should respond to some of these challenges.
Background and context
Within Africa towards the beginning of the 21st century, African leaders adopted NEPAD and transformed the erstwhile Organisation of African Unity (OAU) into a more vibrant African Union (AU). The need to end the continued marginalisation of Africa and reverse the development chasm between Africa and the rest of the world was a core objective. From China's viewpoint, it was adopting the prevailing global strategy aimed at opening opportunities for foreign investment in China as well as creating new markets for Chinese investments abroad. A key feature of both initiatives is an ardent desire to improve South – South relations in order to strengthen the role of developing countries in international affairs.
Notwithstanding the international communities' commitment to double total overseas development assistance to Africa by an additional US$25 billion by 2010, the composition, scale and slow pace of delivery is generating a certain level of disillusionment with Africa's traditional development partners. There is also a growing realisation that traditional relations and partnerships with the West have not helped Africa overcome the structural obstacles to eradicating poverty and reversing its economic marginalisation. Rather than develop, Africa is haemorrhaging while the rest of the world accumulates wealth at its expense through the unbalanced exploitation of its natural resources and the enforcement of a distorted international economic system. Logically, strengthened cooperation with China is seen as a way of addressing some of these structural imbalances.
Current status and trends in China – Africa cooperation
According to the Chinese Ministry of Land and Natural Resources, there were 158 minerals with identified resources and reserves in China in 2004. However, these resources are insufficient to meet an ever-increasing domestic demand and to sustain China's dramatic economic growth. For instance, based on projections by the Ministry of Land and Natural Resources, by 2010 domestic crude oil production will be able to meet 51–55 per cent of demand and only 34–40 per cent by 2020; while domestic iron production will be able to meet 38 per cent of demand by 2010 and only 29 per cent by 2020. It is estimated that by 2010 and 2020 the shortage of coal will reach 250 million and 700 million tons respectively. So China is looking to Africa to address some of its short- to long-term needs.
Historically, the availability of cheap raw materials and the prospects for huge returns on investments, particularly from the exploitation of natural resources, has always provided an incentive for the expansion and deepening of political and economic ties with Africa. Africa is blessed with an impressive endowment of mineral wealth, including near-global monopolies of platinum, chromium and diamonds; a high proportion of the world's gold, cobalt and manganese reserves; and extensive reserves of bauxite, coal, uranium, copper and nickel (see Table 1). Of the proved oil reserves currently estimated, Africa accounts for 7 per cent of the global total. New oil discoveries have been made in Madagascar, Zambia and Uganda while extensive exploration is ongoing in Ethiopia, Kenya and Tanzania. It is estimated that by 2010, the Gulf of Guinea will contribute at least one out of every five new barrels onto the global market. The bulk of this will come from Angola and Nigeria followed by others (see Table 2). Africa also has substantial quantities of the world's remaining natural gas reserves (see Table 3). It is this capacity that endears Africa to China and the rest of the world. Both the Addis Ababa Action Plan 2004–2006 and the China Africa Policy emphasise the need to intensify cooperation on natural resources exploration under the principle of mutual, beneficial, reciprocal and sustainable development.
Currently, China derives a quarter of its oil imports from Africa through its oil interests in Algeria, Angola, Chad, Sudan and increasing stakes in Equatorial Guinea, Gabon and Nigeria. Oil exploration rights were established in Sudan in 1995 by the China National Petroleum Corporation (CNPC) through ownership of a 40 per cent stake in the Greater Nile Petroleum Operating Company where it is pumping over 300,000 barrels per day. Another Chinese firm, Sinopec, is constructing a 1,500-kilometre (932 miles) pipeline to Port Sudan on the Red Sea, where China's Petroleum Engineering Construction Group is building a tanker terminal. China has invested more than US$8 billion worth of oil exploration contracts in the Sudan. In Nigeria, the China National Offshore Oil Corporation (CNOOC) acquired a 45 per cent working interest in an offshore oil mining licence, OML 130, for US$2.268 billion cash; CNPC invested in the Port Harcourt refinery while Petro-China is interested in the Kaduna refinery. ONGC Mittal Energy Ltd (OMEL), the joint venture between the Oil and Natural Gas Corporation and the L. N. Mittal Group, will invest US$6 billion in railways, oil refining and power in exchange for oil drilling rights.
Similar investments have been made in Gabon by Sinopec and Unipec through a joint venture with Total while Pan-Ocean exploits the Tsiengui on-shore basin and is associated with Shell to explore Awokou-1. Gabon is now selling one-fifth of its annual oil output to China.
Another deal that has attracted the attention of the international community is the US$2 billion Chinese – Angolan cooperation agreements. It is reported that the value of this has since risen to almost U$9 billion. The general agreements focus particularly on enhancing Chinese – Angolan cooperation in the oil and gas as well as mineral resources sectors. Three definite oil agreements were signed whereby Sonangol, Angola's state oil company agreed to supply oil to China's Sinopec oil company. This was supplemented by agreements for Sonangol and Sinopec to jointly evaluate Angola's offshore Block 3 as well to study plans for the development of a new oil refinery in Angola. In addition, the agreements also foresee cooperation between the Angolan Ministries of Petroleum and Geology and Mining and China's National Commission for Development and Reform, focusing on technical aid.
While Chinese oil deals have captured the attention of the world, much less is being said about China's demand for the main base metals such as aluminium, copper, iron ore, nickel, zinc and other minerals. In the DRC, Feza Mining, a joint venture between the Chinese company Wambao Resources Corporation and some Congolese businessmen, is finishing a pyrometallurgic plant which, according to the DRC's Ministry of Mines, should produce 1,000 tonnes of pure cobalt per year. In Zambia, China has invested nearly $170 million in the mining sector, focusing primarily but not only on copper. China is to build a US$200 million copper smelter at Zambia's Chambeshi Mine with a capacity to produce 150,000 tons a year. In Gabon, a Chinese consortium headed by the China National Machinery and Equipment Import and Export Corporation (CEMEC) has been granted sole rights to exploit huge untapped iron ore reserves and build the costly rail links needed to reach them in the tropical forest. This has been at the expense of the world's leading iron miner, Vale do Rio Doce (CVRD).
Over the past decade, China's imports in all major primary commodity categories, except ores and metals, grew significantly more rapidly from Africa than from the world as a whole. China also sources over 20 per cent of its log imports from Africa while China is the destination of about 13 per cent of Africa's log exports. Overall, Africa's share of the most dynamic primary commodities in China's imports has also risen substantially during this period (see Table 4 and Figure 1).
Features of Chinese investments in Africa
China's approach to Africa has several distinct characteristics. For example, a key feature of Chinese cooperation with Africa is the strong links between the Chinese government's foreign policy objectives and the role played by Chinese enterprises. By the end of June 2003, the Chinese Ministry of Commerce had given approval to 602 Chinese enterprises to invest a total of US$1.173 billion in Africa. This had risen to 715 by the end of 2004. The range of activities that these companies are engaged in varies from trade, processing, manufacture, communication, transportation, roads and agriculture, to resources development.
For example in Angola, the US$2bn deal has lead to the rebuilding of national roads, the building of a new airport in the outskirts of Luanda and other major infrastructure development projects. In addition, a US$69 million agreement was signed between Angola's MundoStartel and China's ZTE Corporation and the Angolan Council of Ministers approved broader ZTE operations. These which will see ZTE invest US$400 million, of which US$300 million will be used to modernise and expand Angola Telekom to develop telephone networks in Angola. According to the Angolan government, the remaining US$100 million is to be invested in military communications, the development of a mobile telephone factory and the creation of a telecommunications training institute for Angolan employees. It is the multifaceted character of Chinese involvement in Africa that seems to be a major draw for African countries.
On a positive note, there is no doubt that Chinese investments in Africa are having and could continue to have some positive impacts. China is helping African countries to rebuild their infrastructure and providing other types of assistance to agriculture, water, health, education and other sectors. This could have very positive spin-offs in lowering transaction costs and assisting African governments to address social calamities such as poor health services, energy crisis, skills development, etc. Increased Chinese demand for raw materials has seen an upsurge in commodity prices, putting extra cash in the coffers of many resource-dependent economies. However, African countries should use this windfall to make provision for the future by investing heavily in education and training, diversifying the economy and strengthening the administrative and governance systems – political, economic and corporate – in order to be better able to maintain and sustain the current economic boom throughout the continent.
On a pessimistic note, the NEPAD framework extols the virtues of African self-reliance, ownership and leadership as well as good economic, political and corporate governance as the bedrock of its development agenda. The emergence of China as a key player in Africa could undermine the NEPAD vision since it could make African countries increasingly reliant on China rather than on their own domestic resources and the resourcefulness of their people. At present, China and not NEPAD or the domestic market is being seen as a more reliable source for resource mobilisation. There are also concerns about Chinese funded projects where in some cases, the ratio of Chinese expatriates (labour and enterprises) to locals contracted is as high as 70 per cent Chinese and 30 per cent local. This practice does not help Africa in addressing the problems of high unemployment and the scourge of poverty. Nor does it assist Africa's private sector to grow both technically and financially. Instead it could entrench African dependence on external assistance.
The governance conundrum
At the beginning of the 21st century, Africa's leaders adopted NEPAD and transformed the OAU into the AU. Underpinning these initiatives are concrete commitments to transforming the nature of governance throughout the continent to ensure that good political, economic and corporate governance prevails. The African Peer Review Mechanism (APRM) was adopted to deliver this commitment and to date 25 countries have acceded to it. In July 2002, the AU summit adopted the Declaration on Democracy, Political, Economic and Corporate Governance, which recognises 'good economic and corporate governance including transparency in financial management as essential pre-requisites for promoting economic growth and reducing poverty'. Yet, again despite calls by NEPAD for untied aid, accession to the APRM is being used by some sectors of the international community as a condition for receiving aid. This practice is undermining the credibility of the entire NEPAD process, including the APRM as many countries now regard the APRM as being an external instrument.
The international community has notably invested a lot of effort and resources in advocacy and other initiatives to foster good governance in Africa's natural resources sector. The Kimberley Process, the Extractive Industries Transparency Initiative (EITI), Publish What You Pay and various other codes and standards have been discussed and adopted at various forums. So far, only Cameroon, the Republic of Congo, the Democratic Republic of Congo, Gabon, Ghana, Guinea, Mauritania, Nigeria, Sao Tomé and Príncipe and Sierra Leone have implemented the EITI principles.
The remaining 41 countries, including some of the most stable democracies in the continent such as Botswana, Namibia and South Africa, have kept their distance. However, even in the countries where progress has already been made the pace is sluggish, requiring, in some instances, a certain degree of coercion. The underlying motive for this lethargic approach is that the EITI lacks the necessary political legitimacy within the continent since it was developed outside and is largely externally driven. The same applies to the other initiatives, which are largely ad-hoc and sector specific.
Excerpted from African Perspectives on China in Africa by Firoze Manji, Stephen Marks. Copyright © 2007 Fahamu. Excerpted by permission of Fahamu.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.