Sunday, October 26, 2008

The Rise of Sino-African Relations

by Sahil Mahtani, FEER, October 7, 2008 

Were there an Olympics medal for the scramble for Africa, China would likely lead the pack. 2008 is already proving to be a good year for Sino-African relations. Earlier this year, Malawi severed longstanding ties with Taiwan to establish links with China, leaving Taipei with only four allies on the continent. Trade, continuing its steady ascent, reached about $70 billion, up from just $11 billion just six years ago. 

The news is especially good for Angola, China’s second largest trade partner in Africa and, since 2006, its largest exporter of oil—surpassing Saudi Arabia. Economic growth rate this year is projected to be around 26.6%, according to the IMF, making it among the highest in the world. This year, President Hu Jintao's visit to Angola was the staggering 11th such visit by a high-level Chinese official to the country since 2000. Recent reports indicate the scale of the Chinese involvement in Angola, which will likely force it to wade deeper into Africa, perhaps even to the point of compromising its “non-interference” policy. 

Consider, for example, the recently published figure that there are now more than one million Chinese workers in Angola alone. If it were true, it would add a singularly complex, even imperial, dimension to China's presence in Africa. Oil-rich Angola is indeed China’s second largest African trade partner, but one million would be a massive number for a republic of only 12 million people. The "more than one million" figure, which excited some interest, was first mentioned by J. Robinson West, chairman of PFC Energy, an energy consulting firm with extensive ties to Africa, who said he said he received the figure from oil companies operating in Angola. 

But it is a controversial number. “Absolute rubbish” in fact, objects Dr. Martyn Davies, head of the Centre for Chinese studies at Stellenbosch University in South Africa. “There is no possible way it could be true,” he says, citing a recent report that put the figure closer to 40,000 to 100,000. Angola researcher Indira Campos at the London-based Chatham House, who travels there several times a year, also says the figure is “quite unlikely” and cited a figure from the Angolan Interior Ministry of 22,000 Chinese residing in Angola with work visas in 2007. 

Why are there so many Chinese in Angola to begin with? Part of the reason is that the country, which only emerged from civil war six years ago, faces an absolute shortage of skilled workers. Perhaps because of this, the Angolan leadership has differed from other African countries by not insisting companies use local labor when awarding contracts, making it easier to import labor. Chinese firms especially have benefited from the situation. According to one study, Chinese workers in Angola are paid $1 a day (as well as food and housing) compared to the $3-$4 that non-Chinese companies are obligated to pay Angolans. Other advantages include the lack of a language barrier, and, by some accounts, a stronger work ethic. Chinese firms also minimize costs by keeping overheads low. Everything tends to be imported from China, down to toilet signs that read “Ladie’s.” When the central air-conditioning system of the just-renovated Ministry of Finance broke down, spare parts to fix it had to be ordered from China. 

Some observers have suggested this is a return to colonial patterns of trade, where colonies export natural resources and import manufactured goods. Perhaps. Others have noted a long-term Chinese demographic strategy of exporting its poor to Africa, in order to avoid domestic instability resulting from about 120 million unemployed Chinese. Luanda’s civil society approaches some of this with wariness. While accepting the shortage of skilled labor, one Angolan human rights activist questions the policy of importing unskilled labor from China. “It doesn’t make any sense,” he says. 

Yet in general, the more Chinese firms employ local labor, the worse China’s reputation tends to be—a point made by John Pomfret of the Washington Post recently. He cited the example of Zambia, where a 2005 mining explosion was blamed on its Chinese owners, sparking anti-Chinese sentiments across the country. In this light, perhaps the Chinese policy of hiring Chinese workers is a sensible one, ensuring fewer misunderstandings. It seems to be working. The average Angolan’s perception of China is “fantastic,” according to one observer. “They all think things are starting to work because of the Chinese.” 

Indeed, it is difficult to argue with the figures. By all accounts, Angola’s post civil war progress has been remarkable. The staggering growth rate is one figure. Just recently, too, Angola’s high levels of infrastructure investment led it to surpass Nigeria as the largest exporter of oil in Africa. As usual, petroleum revenues do not come without a price, in this case inducing a rise in exchange rates to the point that the cost of living and manufacturing skyrockets—the so-called Dutch disease. 

Right on time, Luanda was declared to be the most expensive city in the world in 2007 by ECA International, a multinational firm specializing in human resources; Oslo was second. Wealth is visible in Luanda; Bentleys and luxury SUVs can be seen parked across the city and a hotel room could set you back about $300 a night. “There are just not enough hotels, hostels, or guesthouses to go around,” says Mr. Davies, the Stellenbosch researcher. “Luanda makes Hong Kong seem quite reasonable.” 
The government is undoubtedly benefiting from this, but the excessive Western attention devoted to China’s presence in Africa has led to what Ms. Campos, the Chatham House researcher, calls “China-fatigue.” Credit lines have been extended in the past by Spain, the Portuguese, and the Brazilians, but few inquiries were ever made about how they were spent, or indeed on what. The Angolan officials she spoke with “feel it is an almost racist thing to be asking about the Chinese all the time . . . they try to treat Chinese just like any other investor,” she says. 

But the Chinese are not just like any other. Both the scale and potential of their enterprise in Angola is vast, and they are here to stay. The United States remains the largest continental trading partner, but last year China displaced ex-colonial power France to be the second. Beijing’s claim to distinction is its “non-interference” policy, which is supposed to contrast favorably with the reputation of the Western powers for indiscriminate meddling. But if the scale of China’s involvement persists, it may have to compromise those policies in order to protect Chinese investments. 

This may have already started to happen. In 2007, Angolan officials broke off negotiations with the IMF, saying that they had “other partners” they could turn to for loans. Yet when Beijing leveled charges of Angolan corruption in handling development assistance, Luanda sacked a senior party official. 

Sahil Mahtani, a former Bartley Fellow at the Far Eastern Economic Review, is a reporter-researcher at The New Republic.