Influence Anxiety: China in Africa – ISN

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By Simon Roughneen in Nairobi for ISN Security Watch (15/05/06)

Chinese investment in Africa, 2005 (risingpowers.foreignpolicyblogs.com)

Chinese investment in Africa, 2005 (risingpowers.foreignpolicyblogs.com)

“Business is business. We try to separate politics from business. Secondly I think the internal situation in the Sudan is an internal affair, and we are not in a position to impose upon them,” Chinese Deputy Foreign Minister Zhou Wenzhong said in an interview with the New York Times on 22 August 2005.

In the Mao era, China dealt with Africa as part of a show of solidarity with countries that shared some of China’s experience of Western oppression. However, these links were fostered in an ideologically charged time, when China sought to display affinity with other socialist countries and to demonstrate an almost nihilistic aversion to the institutions and norms of international relations. Although it joined the UN in 1971, any real alteration of China’s foreign policy did not come until the Deng-initiated reforms post-1979.

Even then reform was piecemeal and cautious, predicated on careful changes to China’s domestic political economy, which allowed for marketization of the economy while retaining a totalitarian state. According to Christopher Alden, senior lecturer in International Relations at the London School of Economics, in an article for YaleGlobal magazine, China’s foreign policy changed in 1993 when it shifted from being an oil exporter to being an oil importer.

In the 1960s and 1970s, China’s engagement with Africa was politically driven: doctors, engineers, teachers, and weapons were sent to support newly independent countries and liberation movements. Today, Chinese officials touring the continent are flanked by businesspeople and bankers. Chinese engagement with Africa is predicated on an unprecedented business boom, driven by China’s increasing hunger for raw materials to power a market-driven economy growing at over 9 per cent per year, which analysts predict will overtake the US as the world’s largest economy by 2030.

Oil: Scraping the bottom of the barrel?

China now gets 30 per cent of its oil from Africa, mainly from Sudan, Angola, and Congo-Brazzaville. Chinese interests in this sector seem set to grow.

Nigeria agreed to give China four oil exploration licenses in exchange for a commitment to invest about US$4 billion in refining and power generation in Nigeria, in one of seven deals signed when Hu met President Olusegun Obasanjo earlier this month.

This followed a deal forged on 9 January. State-run energy firm, China National Offshore Oil Corporation (CNOOC), announced the purchase, for US$2.27 billion, of a 45 per cent stake in a Nigerian oilfield. This was CNOCC’s largest acquisition to date. The company is active in Equatorial Guinea, Chad, Gabon, and Angola.

Rising world oil prices, which hit a record US$75 a barrel earlier this month, have stoked fierce competition between Asia and the West over access to new reserves. Smaller, more marginal producers are acquiring increasing importance in a politicized global oil market, as oil-hungry nations chase additional supplies.

Africa has been an underdeveloped but rich source of supply. The eastern giant has been willing to buy stakes in corners of the continent deemed less profitable or too difficult by the West.

“China has always depended heavily on the Middle East, and that still remains the main source of supply,” said Liu Guijin, Chinese ambassador to South Africa, speaking to IRINnews. “But China is diversifying to secure its supply, and now imports energy from countries in Africa such as Angola, Nigeria, and Sudan. In these countries, China is working hard to make sure that energy cooperation is win-win and mutually beneficial.”

It first established a presence in Sudan’s Muglad oil fields a decade ago. By last year, it was buying between 50 and 60 per cent of Sudan’s oil exports – about 7 per cent of China’s consumption needs. China has invested more than US$8 billion in joint exploration contracts in Sudan, including the construction of a pipeline from the southern oilfields to the Red Sea with a tanker terminal at Port Sudan. An estimated 10,000 Chinese are working in the country.

Chinese involvement in what is already a politically fraught sector in Africa has raised concerns. Oil and other natural resources have been a poisoned chalice for many African countries, despite their abundance and potential for wealth creation. Oil partly caused and financed conflict in Angola and Sudan, diamonds paid for slaughter in Liberia and Sierra Leone, and the 3-4 million deaths in the Democratic Republic of the Congo (DRC) since the mid-1990s can be attributed in large part to the mineral wealth in the country, as militias and foreign armies prolonged conflict to retain access to coltan ore and diamonds.

Lowering the bar? Impact on governance

Western concern over China’s renewed interest in Africa appears to be twofold: Beijing provides an alternative to the supposed consensus built around governance and development policies, giving China an “unfair” advantage in competing for the continent’s resources.

Governance is an important issue here. African states have committed themselves to The New Partnership for Africa’s Development (NEPAD), a new agenda on Africa. The World Bank has developed a Poverty Reduction Strategy Paper system based on reforms and Bank-recipient partnership in determining the lending agenda. The US has brought in its Millenium Challenge Account, offering increased aid to countries that demonstrate commitment to governance reform. Projects like the Extractive Industries Transparency Initiative seek to make African governments and multinational investors in sectors such as oil, gas, diamonds, precious metals, timber, more accountable for how deals are set up.

The concern is that the Chinese presence has the potential to throw a spanner in the works of the move towards greater accountability of African governments and the governance agenda, given the fact that China practices one-party rule and media censorship, among other things.

Ambassador Guijin stated: “We follow five basic guidelines of peaceful coexistence in our relations: mutual respect for sovereignty and territorial integrity; mutual non-aggression; non-interference in each other’s internal affairs; equality and mutual benefit; and peaceful coexistence – and these also apply to Africa”.

Perhaps most telling are the cases of Sudan and Zimbabwe, two countries that have been engaged in long-standing human rights abuses of their own citizens. China is actively and unconditionally engaging with both.

CNOCC won an oil exploitation bid in Sudan in 1995, and when Washington cut ties two years later, the Chinese filled the void left by retreating Western oil companies. They developed oil fields, built refineries, and laid two oil pipelines. Sudan, which was an oil importer before the Chinese arrived, now earns some US$2 billion in oil exports each year, half of which goes to China, accounting for 5 per cent of the country’s total imports. China owns a 40 per cent stake in the Greater Nile Petroleum Operating Company, the major consortium drilling in Sudan.

Perhaps more important for Sudan is Beijing’s political support, given the international spotlight on Darfur, and on the implementation of the north-south Comprehensive Peace Agreement. When the UN Security Council tabled a resolution in September to punish Sudan for failing to stop atrocities in the troubled western region of Darfur, it was forced to water down the proposal to avoid a Chinese veto. China, Russia, Pakistan, and Algeria all abstained in the vote for the weaker resolution that passed by 11-0.

Zimbabwe is another case in point. After Americans and Europeans withdrew from the country due to the government’s destructive land reform program and poor human rights record, China stepped in, ready to work with the resource-rich African nation.

China, itself subject to an arms embargo, ignores US and EU embargoes on Zimbabwe, selling the Mugabe government US$200million worth of fighter jets and military vehicles.

During his recent trip to Africa, Wu Bangguo, chairman of China’s legislature, spent four days in Zimbabwe, leading a delegation of 100 Chinese businessmen who inked joint venture deals in mining, transportation, communications, and power generation. Emmerson Mnangagwa, speaker of parliament, stated in a state-run Zimbabwean newspaper: “With all-weather friends like the People’s Republic of China […] Zimbabwe will never walk alone.”

Mining resources, undermining development?

In Angola, China stepped in with a US$2 billion credit line secured by future oil deliveries to upgrade war-damaged Angolan infrastructure after talks between Luanda and western lenders stalled over issues of transparency.

Angola needs Chinese money for its reconstruction efforts. Donors and the IMF have been wary about providing loans to a country notorious for siphoning off oil wealth, and with a record for poor fiscal management.

China has since displaced the US as Angola’s biggest oil customer – buying an estimated 323,000 barrels per day in 2004 against 306,000 barrels per day in US sales – and close political ties promise an increasing flow.

However, this may signal to African governments that tackling corruption, avoiding the use of violent conflict as a domestic security policy, improving governance, and tackling human rights abuses are not necessary to get soft loans and foreign investment. If the west shies away, China may prove a more willing investor.

Moreover, China’s economic development model may be cited as an example to be followed by African leaders, irrespective of how applicable it is to African states lacking the huge economies of scale that China has. Such a model runs contrary to donor states and international financial institution policies on aid and development.

On the ground, at a micro-level, Chinese investment has been criticized locally. Chinese exports, with their cheaper, larger-scale production, are driving African manufacturers out of business.

In Southern Africa, the textile and clothing industry has been particularly hard hit. Incentives provided by the US African Growth and Opportunity Act meant the sub-continent was able to export to the lucrative US market. In 2005, the World Trade Organization (WTO) stripped away the quotas on Chinese exports, allowing them to monopolize the US and European markets. The Congress of South African Trade Unions (COSATU) has protested that booming Chinese textile imports cost the country thousands of jobs, and last year turned up the pressure on major local clothing retailers to sign an agreement committing them to buy at least 75 per cent of their stock from local manufacturers.

It is arguable that not all Chinese intervention in Africa is negative. The country has also become increasingly active in the Democratic Republic of Congo (DRC), investing in copper and cobalt mines, as well as sending peace keepers in 2003. China has provided some road infrastructure to facilitate exports – a vital need in a vast country that can only be traversed by river or by air.

China is helping Ethiopia build the continent’s biggest dam; it will launch a communication satellite for Nigeria in 2007; and is introducing a new anti-malaria drug in Uganda. China’s state radio station has opened a station in Kenya, delivering 19 hours of broadcasting every day. In 2003, 550 Chinese troops joined a UN peacekeeping operation in Liberia.

However, with an apparent genocide continuing in Darfur, and funded by Chinese oil purchases, it will be difficult to escape the notion that an amoral business-oriented Chinese involvement in Africa has direct and negative political consequences.

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