Monday, October 30, 2006

Chinafrica(6) - Watching for PRC Influence in Africa

2 stories from The Economist

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China in Africa
Never too late to scramble
Oct 26th 2006 BEIJING, LAGOS AND LUSAKA
From The Economist print edition
China is rapidly buying up Africa's oil, metals and farm produce. That fuels China's surging economic growth, but how good is it for Africa?

AFPIN HIS office in Lusaka, Zambia's capital, Xu Jianxue sits between a portrait of Mao Zedong and a Chinese calendar. His civil-engineering and construction business has been doing well and, with the help of his four brothers, he has also invested in a coal mine. He is bullish about doing business in Zambia: “It is a virgin territory,” he says, with few products made locally and little competition. He is now thinking of expanding into Angola and Congo next door. When he came in 1991, only 300 Chinese lived in Zambia. Now he guesses there are 3,000.
Mr Xu reflects just a tiny part of China's new interest in Africa. This year alone many bigger names than his have come visiting. Li Zhaoxing, China's foreign minister, swept through west Africa in January; President Hu Jintao visited Nigeria, Morocco and Kenya in April; and the prime minister, Wen Jiabao, knocked off seven countries in June. In the first week of November Chinese and more than 30 African leaders will gather at the first Sino-African summit in Beijing. And Chinese companies, most of them owned by the state, have been marching in the footsteps of their political leaders. But is this all good for Africa? Is it bringing the trade and investment that Africa so badly needs, or just meddling and exploitation?

The summit in Beijing is being greeted by Chinese officials and the country's state-run media with an effusion reminiscent of the cold-war era, when China cosied up to African countries as a way of demonstrating solidarity against (Western) colonialism and of outdoing its ideological rival, the Soviet Union. It supported African liberation movements in the 1950s and 1960s, and later built railways for the newly independent countries, educated their students and sent them doctors.

China's main aim then was to gain influence. Now China wants commodities more than influence. Its economy has grown by an average of 9% a year over the past ten years, and foreign trade has increased fivefold. It needs stuff of all sorts—minerals, farm products, timber and oil, oil, oil. China alone was responsible for 40% of the global increase in oil demand between 2000 and 2004.

The resulting commodity prices have been good for most of Africa. Higher prices combined with higher production have helped local economies. Sub-Saharan Africa's real GDP increased by an average of 4.4% in 2001-04, compared with 2.6% in the previous three years. Africa's economy grew by 5.5% in 2005 and is expected to do even better this year and next.

Which countries are the main beneficiaries? For copper and cobalt, China looks to the Democratic Republic of Congo and Zambia; for iron ore and platinum, South Africa. Gabon, Cameroon and Congo-Brazzaville supply it with timber. Several countries in west and central Africa send cotton to its textile factories.

Oil, however, is the biggest business. Nigeria, Africa's biggest oil-producer, has been getting lots of attention. CNOOC, a state-owned Chinese company, paid $2.7 billion in January to obtain a minority interest in a Nigerian oilfield, and China recently secured exploration rights in another four. In Angola, which has now overtaken Saudi Arabia as China's biggest single provider of oil, another Chinese company is a partner in several blocks. China has shown similar interest in other producers such as Sudan, Equatorial Guinea, Gabon and Congo-Brazzaville, which already sells a third of its output to Chinese refiners.

Just the beginning
As a result, trade between China and Africa has soared from $3 billion in 1995 to over $32 billion last year. But China's commerce with the world also expanded over the same period, so Africa makes up only 2.3% of the total. This constitutes about 10% of Africa's total trade (see chart).

However, trade between China and Africa is expected to double by 2010. Although Europe remains Africa's main partner, its share has melted from 44% to 32% of the region's foreign trade within the past ten years, whereas America's share has, like China's, risen. For some countries, the redirection of exports has been dramatic. China now takes over 70% of Sudan's exports, compared with 10% or so in 1995. Burkina Faso sends a third of its exports, almost all of which are cotton, to China, compared with virtually nothing in the mid-1990s. China is now Angola's largest export market after the United States.

Africa has found more than a new buyer for its commodities. It has also found a new source of aid and investment. According to China's statistics, it invested $900m in Africa in 2004, out of the $15 billion the continent received. This was a huge increase (see chart), though most of it went to oil-producing countries. But its aid is spread more widely. It has cancelled several billion dollars of African debt, which has helped to build roads, railways, stadiums and houses in many countries.

This largesse is sometimes an entry ticket. In Nigeria China's promises to invest about $4 billion in refineries, power plants and agriculture were a condition for getting oil rights. In Angola a $4 billion line of low-interest credit enables Chinese companies to help rebuild the bridges, roads and so on that were destroyed in decades of war. The debt is repaid in oil.

Fewer complications
For Angola, which has been keen to get going with the reconstruction of its infrastructure, China's straightforward approach is an attractive alternative to the pernicketiness of the IMF and the Paris Club of creditors, which have been quibbling over terms for years. So it is with many African countries, fed up with the intrusiveness of Europeans and Americans fussing about corruption or torture and clamouring for accountability. Moreover, the World Bank and many Western donors were until recently shunning bricks-and-mortar aid in favour of health and education. China's credit to Angola is not only welcome in itself. It has reduced the pressure from the West.

Thanks to China, therefore, workers from the Middle Kingdom in straw hats are now helping Angolans to lay down new rails on the old line from Luanda to the eastern province of Malange. Another railway, from Benguela to Zambia, once used to carry copper, is also being rebuilt. China is happy: the work helps offset some of its trade deficit with Angola. The Angolan government is also happy: it is rebuilding its shattered economy at last.

For José Cerqueira, an Angolan economist, China is welcome because it eschews what he sees as the IMF's ideological and condescending attitude. “For them,” he says, “we should have ears, but no mouth.” Others are pleased because China is ready to pass on some of its technology. It is, for example, helping Nigeria to launch a second satellite into space. Some African officials, disillusioned with the Western development model, say that China gives them hope that poor countries can find their own path to development.

And now the snagsThe love affair with China, however, may be sour as well as sweet. For countries that do not sit on oil or mineral deposits, higher commodity prices make life harder. Even for producers there are risks. A recent report by the World Bank argues that Africa's new trade with China and India opens the way for it to become a processor of commodities and a competitive supplier of cheap goods and services to Chinese and Indian consumers. But another report, from the OECD, a club of industrialised countries, argues that China's appetite for commodities may stifle producers' efforts to diversify their economies. Oil rigs and mines create few jobs, it points out, and tend to suck in resources from other industries. And if Africa is to escape its vulnerability to the capricious movements of world commodity prices, it must start to export more manufactures. On this the World Bank adds its own warning: China and India must end their escalating tariffs on Africa's main exports.

China is also bringing irresistible—some say unfair—competition to Africa. All over Africa Chinese traders can now be seen selling cheap products from the homeland, not just electronics but plastic goods and clothes. In Kamwala market in Lusaka a host of Chinese shops have appeared over the past couple of years. “Two years ago,” says Muhammad, a local trader of Indian origin, “I did not have time to sit down; now I'm sitting doing nothing.” Though his shelves are full of clocks and radios made in China, he blames his enforced idleness on the competition brought by Chinese traders.

Zambian and other African consumers do not share his despondency. They like Chinese prices. But in some countries consumers are less well organised than textile workers, and in South Africa the trade unions have succeeded in getting the government to negotiate quotas on Chinese clothing imports. Still, the power of China's productivity and economies of scale—never mind government subsidies—certainly hurts local industries. Textile factories in places like South Africa, Mauritius and Nigeria have been badly hit. In tiny Lesotho, where making clothes for Europe or America is the only industry around, this has been catastrophic.

The working conditions, as well as the prices, set by Chinese employers are also a concern to some Africans. The alleged ill-treatment of workers in a Chinese-owned mine in Zambia in July led to a violent protest in which several workers were shot. And many Chinese firms bring in much of their own labour, rather than hiring locals. China brought in thousands of its own workers to build the 1,860km (1,160-mile) Tazara railway between Lusaka and the Tanzanian port of Dar es Salaam in the 1970s. It was finished ahead of schedule, but Tanzania and Zambia still have to rely on Chinese technical help to maintain it. African hopes of technology transfer may be over-optimistic.

Human rights are optional
Some say China's involvement will erode efforts to promote openness and reduce corruption, especially in oil and mining. Nigeria insists that Chinese companies must respect its new anti-graft measures, and the latest bidding round for oil blocks in Angola has been the most open so far. In both countries it is unclear whether China's presence is making corruption better or worse. It is clear, though, that China is not interested in pressing African governments to hold elections or be more democratic in other ways. That helps to explain why China directs so much money towards Sudan, whose odious regime can count on China's support when resisting any UN military intervention in Darfur. China invested almost $150m in Sudan in 2004, three times as much as in any other single country. When American and Canadian oil companies packed their bags there, China quickly stepped in, drilling wells and building pipelines and roads. The Chinese are supposed to be building an armaments factory as well.

China's lack of interest in human rights is something that President Robert Mugabe of Zimbabwe can also be thankful for. Shunned by the West, and with his country's economy in a shambles, he has turned to China for political and economic support—and got it. After he launched Operation Murambatsvina last year, in which 700,000 people had their homes or businesses destroyed, China neutered all attempts at discussion, let alone condemnation, in the UN Security Council. However, despite this, China may not want to squander any more money in a country that has no oil and few mineral rights left to dispose of.

But China's friendship and support at the UN comes with one important political string attached: the endorsement of the one-China policy. To date 48 African countries have paid due obeisance to Beijing: Chad, Senegal and Liberia are the latest to have abandoned their recognition of Taiwan. The suggestion by Michael Sata, the main opposition candidate in Zambia's presidential election on September 28th, that he would have recognised Taiwan if he had won was enough to bring the first public intervention by China in the internal affairs of an African country; the ambassador said that China would consider cutting diplomatic relations if Mr Sata won (which he did not).
That is a warning to Africans that this new interloper in their continent is no more altruistic than its predecessors. Still, that does not mean China's involvement is bad and it is certainly not to be stopped. It is up to Africans to ensure that they get a fair deal from it. If so, both China and its African partners can be winners.

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Africa and China
Wrong model, right continent
Oct 26th 2006
From The Economist print edition

China knows what it wants from Africa and will probably get it. The converse isn't true
AFP THE characters for "Africa" in the Mandarin language mean "wrong continent". But the Chinese have often ignored this etymological hint. In the 15th century the emperor's emissaries sailed as far as Mozambique, carrying silk and returning with a giraffe. In the cold war Maoists dotted Africa with hospitals, football stadiums and disastrous ideas.

Next week China will host more than 30 African leaders from the wrong continent in Beijing, offering them a pinch of debt relief, a splash of aid, plus further generous helpings of trade and investment. China already buys a tenth of sub-Saharan Africa's exports and owns almost $1.2 billion of direct investments in the region (see article). A Chinese diaspora in Africa now numbers perhaps 80,000, including labourers and businessmen, who bring entrepreneurial wit and wisdom to places usually visited only by Land Cruisers from international aid agencies.

What is in it for China? It no longer wants Africa's hearts, minds or giraffes. Mostly, it just wants its oil, ores and timber plus its backing at the United Nations. Thus, even as the Chinese win mining rights, repair railways and lay pipelines on the continent, Africa's governments are shuttering their embassies in Taiwan in deference to Beijing's one-China policy.

This suits Africa's governments. The scramble for resources invariably passes the ministerial doorstep, where concessions are sold and royalties collected. China helps African governments ignore Western nagging about human rights: its support has allowed Sudan to avoid UN sanctions over Darfur. And some Africans look on China as a development model, replacing the tough Washington Consensus with a "Beijing Consensus": China's economic progress is cited by statists, protectionists and thugs alike to "prove" that keeping the state's grip on companies, trade and political freedoms need not stop a country growing by 8%-plus a year.

Think again, AfricaThe Chinese part of this puzzle is easier to deal with: even if it is not the first resource-hungry power to behave poorly in Africa, China should be condemned wherever it bribes, cajoles or (in the case of Sudan) permits genocide. But what about the African hope that China provides an economic model?

Sadly, China's success is an obstacle, as well as an inspiration. Its rise has bid up the price of Africa's traditional raw commodities, and depressed the price of manufactured goods. Thus Africa's factories and assembly lines, such as they are, are losing out to its mines, quarries and oilfields in the competition for investment. Even if Africa's labour is cheap enough to compete with China's, its roads, ports and customs are far from good enough. If they are to provide jobs for their workers, not just rents for their governments, Africa's economies must find less-exposed niches in the world economy, such as tourism or cut flowers. And they should look not to China, but to Chile or Botswana for examples of how to turn natural bounty into shared prosperity.

China is doing its bit to improve infrastructure, building roads and railways. But it could do more to open up its own markets. China is quite open to yarn, but not jerseys; diamonds, but not jewellery. If it has as much "solidarity" with Africa as it claims, it could offer to lower tariffs on processed goods. Chinese firms have also ignored international initiatives to make project finance greener (the "Equator Principles") and to make mining industries cleaner (the "Extractive Industries Transparency Initiative"). Even with China's backing, these outside efforts might not succeed: honesty and greenery come from within. Without it, they will certainly fail.

For their part, Africa's leaders could also play their hands rather better. They should talk to each other as well as their hosts in Beijing. If they negotiated as a block, they could drive a harder bargain. Just as China insists that foreigners enter into joint ventures with its companies, so Africans should make sure they get China's know-how, not just its money.


EarlyBird

'Do not look where you fell, but where you slipped' A proverb of the Vai people of Liberia advises ...

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