ADDIS ABEBA, Sep 27 (IPS) - Behind the media headlines about China’s scramble into Africa, new trends are emerging of far-reaching involvement in finance, infrastructure and manufacturing. A two-way engagement even sees African lessons shaping Chinese foreign policy.
This is the argument presented by researchers from the South African Institute of International Affairs (SAIIA), a foreign policy think tank. They were hosted by the African Union’s Department of Economic Affairs in Addis Abeba, Ethiopia, on Sep. 8, to present their ongoing China in Africa project.
”We’re at the end of the beginning of the Chinese surge into Africa,” said team leader Chris Alden of the London School of Economics and Political Science. ”China is diversifying its investments and changing its policies. It is developing a sustainable engagement.”
Alden said media headlines describe China as ”leading the charge” in a recent investment surge into Africa, under a ”no conditions” aid and investment policy and welcomed by Africans rebelling against Western donors who link aid to democracy and governance conditions.
China’s arrival is backed by deep financial pockets and a history of strong support for African independence. It has rapidly become a significant player in resources, especially in oil-rich Angola, Sudan and Nigeria, is Africa’s leading infrastructure lender and is in the forefront of two-way trade.
Chinese construction firms are turning to Africa as China’s domestic construction slows. Projects are often linked to access to Africa’s rich resources but, once established, Chinese firms also compete in the local market. Researcher Isaac Idun-Arkhurst, of the UK’s Cambridge University, said China’s growing aid programme to Ghana includes the 600 million dollar Bui Dam on the Black Volta River.
China’s Sino Hydro is building it and China’s ExIm bank is financing it, backed by cocoa revenues. Sino Hydro has since won contracts on four more hydro-electric projects, some backed by international finance consortia.
Chinese manufacturing in Africa is a change in a market used to deadly competition from cheap Chinese imports. In October 2007, Beijing’s Tianpu Xianxing Enterprises and Kenya’s Electrogen Technologies started building the first solar panel factory in Eastern Africa, in a 125 million dollar joint venture. The plant highlights China’s new role in creating local employment, technology transfer and a lasting partnership.
SAIIA’s Tsidiso Disenyana said solar energy is growing fast in Kenya, particularly in rural areas affected by poor transmission and distribution infrastructure. Some 200,000-350,000 photovoltaic systems are in use, demonstrating that solar power is viable even for poor households in an unsubsidized market. The new plant could bring the cost of panels down by 40 percent, ensure faster take-up of solar energy and be replicated elsewhere in Africa.
Chinese banks are entering emerging banking and capital markets just as the West is reeling and likely to focus on rebuilding at home, said SAIIA financial consultant Riaan Meyer. Chinese banks have little exposure to the ”toxic products” that are crippling Western banks.
”China has a unique problem — it has too much cash,” he said. Acquisition is one route into new markets, such as the Industrial and Commercial Bank of China’s 5.5 billion dollar investment for 20 percent of South Africa’s Standard Bank in October 2007; that purchase brings ICBC good banking systems and a presence in 18 African countries and London. More mergers and acquisitions could follow.
Chinese banks are increasing trade finance and following Chinese businesses into Africa by setting up corporate and retail banking services and expanding branch networks. The China-Africa Development Fund, set to grow to 5 billion dollars, is funded by the China Development Bank and China ExIm Bank. It signed its first four deals with Chinese companies in January 2008 for infrastructure and housing projects.
In project finance, Sonangol-Sinopec International, a joint venture between Angola’s state oil company and a Chinese refiner, successfully bid a record 1.1 billion dollars for oil bloc 18 off Angola’s coastline. The deal was opened to Western banks to help finance what one magazine termed African oil and gas ”deal of the year”.
Elaborating on China’s policy after the presentation, Zhang Yeubang, Counselor at the Chinese Embassy in Addis Abeba, said China’s cooperation with Africa follows principles of mutual respect, believing that countries should respect each other’s ”dignity” and work on the basis of equality and mutual benefit. He said China had also experienced bullying.
On competition, he explained: ”We have developed our technology and skills in the past decades — we have the most railways, the longest bridges and the biggest dams. We have a workforce that can stand up to hardships”.
Summing up, Alden said China is proving ”the catalyst for African development”, but must calm disquiet. On the positive side is the substantial hard infrastructure, including roads, railroads and hydro-electric dams, where the skills and overcapacity of China’s construction sector means mutual benefit from the interaction. Local manufacturing, banking and a willingness to open projects for Western and other financing and support show China’s evolving role.
On the negative side is ”de-industrialisation” as Chinese imports destroy local manufacturers. Other concerns include that Chinese aid is tied to using Chinese firms and doubts about whether local contractors have capacity to take up their smaller share of projects.
In some countries, infrastructure projects are run by the Chinese embassies and handed over when complete. There is concern whether project supervision is adequate to ensure Chinese companies deliver to their potential. While state-owned companies are getting better at governance, private Chinese firms have a reputation for exporting ”worst practice”.
On the political front, China is learning fast from its involvement in Africa. Popular activism about Darfur dented China’s image-building around the Olympic Games. Resource firms worry their massive investments will be subject to the fortunes of unstable regimes. China may soon find its interests aligning with those of other superpowers.
Problems such as sole sourcing, corruption and environment are not limited to the Chinese and many of Africa’s previous partners are also guilty. Controlling them requires effective regulatory regimes and civil society, says Alden, and getting the best of the new partnership could ”come down to African governance”.