The penny has finally dropped that China is aggressively homing in on Africa’s abundant energy and mineral resources. Tipped off by a new policy statement on Africa from Beijing late last year – yet another high-level visit by the Chinese foreign minister to the continent early this year – and an overtly ambitious deal in Nigeria, analysts and the international press have seized on the story, in the process piecing together a continent-wide pattern of activity.
China’s top priority is long-term oil supply, which is crucial to sustaining its economic growth momentum. Chinese oil consumption is expected to grow at 10% a year, while its oil and gas imports are expected to rise from about one-third to as much as 60% of its total requirement by 2020. In response, China has invested substantially in Africa’s main oil-producing countries, where it now sources about 25% of its oil imports.
In Sudan, China has poured more than $3bn into refinery and pipeline construction and related infrastructure. Sudan now supplies 5%-7% of China’s total oil imports, constituting more than half of Sudan’s total output. In Angola, Beijing has struck a deal with Luanda to supply 10,000 barrels of crude oil a day in exchange for a $2bn loan.
The state-owned China National Petroleum Corporation has gone into Gabon, with plans to explore the country’s onshore and offshore oil prospects; other state-owned companies have also sought supply from Algeria, Chad and Equatorial Guinea.
If there were any lingering doubts about China’s aggressive posture, state-owned China National Offshore Oil Corporation made its biggest-ever investment in January, paying $2.27bn for a 45% stake in a Nigerian offshore oil and gas field and committing $2.25bn to rehabilitating the Kaduna oil refinery, a loss-making prospect no privately owned company was prepared to touch.
Increasing trade links
Although China’s main interest in Africa is energy, it is also investing in other sectors, particularly metals (Zambia, Democratic Republic of Congo and South Africa), timber (Congo-Brazzaville) and food (Tanzania) – compelled by the same need to feed its economic engine. At the same time, China is vigorously deepening trade ties, seeking to maintain the 50%-plus growth in trade with Africa seen in the past two years (estimated total value in 2005 was $40bn).
All good, one might think. Yet China’s involvement in Africa has attracted criticism for its predatory method – deal-making with odious regimes, diplomatic arm-twisting, penurious deal terms and uneven trade that threatens to kill Africa’s fragile manufacturing sector. Is China narrowly serving its own economic interests, propping up despots who do its bidding in return for access to the continent’s resources? Or is it, as the government in Beijing claims, a benign influence, going where others fear to tread, investing sorely needed capital?
For now, Africans are welcoming Chinese investors. The continent, home to about 15% of the world’s population, attracts less than 3% of global foreign direct investment and the Chinese appetite for risk is in welcome contrast to the wariness of western investors.
Criticism of China centres on its willingness – eagerness, some say – to deal with Africa’s rogue states. Using its United Nations Security Council veto power, China effectively blocked action against Sudan, heading off censure for the Khartoum government’s role in the genocide in the southern parts of the country. Campaigners Human Rights Watch allege that China provided arms – including helicopter gunships – to the Sudanese government that were later used in ethnic cleansing.
In a similar vein, China has extended a hand of friendship to Zimbabwe’s Robert Mugabe, the most recent African leader to plunge his country into despair in a despotic attempt to cling to power. Not only has China sold arms, including fighter jets, to Zimbabwe (apparently in exchange for platinum and other mineral rights), more insidiously it is alleged to have provided electronic jamming equipment, permitting Mr Mugabe’s regime to keep opposition political parties off the radio waves. China has not balked at arms deals with other suspect states.
In war-ravaged Angola, where the international community was using the carrot of an International Monetary Fund loan to insist on improved governance and transparency of oil revenues, China stepped in with a $2bn soft loan. The money is intended for infrastructure but it came with the proviso that 70% of the value of contracts had to be awarded to Chinese companies.
Analysis of China’s role in Africa is typically viewed through a western, and particularly American, lens. Though China is still a relatively small investor in value terms (accounting for about 6% of total FDI to Africa in 2004, the last official figure), analysis of its activities is often alarmist. A report published by the conservative US think-tank the Heritage Foundation observes that China “aids and abets oppressive and destitute African dictatorships by legitimising their misguided policies and praising their development models as suited to individual national conditions… The most pernicious effect of the renewed Chinese interest in Africa is that China is legitimising and encouraging Africa’s most repressive regimes, thereby increasing the likelihood of weak and failed states.”
The Chinese preach an altogether different line. Late last year, the Chinese government unveiled a new policy declaration on Africa, outlining its objectives on the continent. At its core is this: “China will unswervingly carry forward the tradition of China-Africa friendship, and, proceeding from the fundamental interests of both the Chinese and African peoples, establish and develop a new type of strategic partnership with Africa, featuring political equality and mutual trust, economic win-win co-operation and cultural exchange.”
China clearly wishes to project a benign, even supportive, image. In the policy paper, for instance, the Chinese government promises to grant duty-free treatment to some goods from the least developed African countries, with a view to expanding and balancing bilateral trade (Chinese textile and apparel imports are decimating local industry). It further promises to settle trade disputes and frictions properly through “bilateral and multilateral friendly consultation, mutual understanding and mutual accommodation”. When conditions are ripe, says the Chinese government, it is even willing to negotiate free-trade agreements with African countries.
China is also scaling up assistance in terms of debt reduction, infrastructure, agriculture, education, science and technology co-operation, and medical and health co-operation, particularly with respect to HIV/Aids and malaria. Indeed, among other projects, roads have been laid in Tanzania and a water treatment plant built in South Africa costing far less than other international (and local) bidders could promise – diplomatic sweeteners that Africa desperately needs.
Still, China makes little apology for the fact that it has a strict policy of non-interference in the domestic affairs of other countries, in the same way it expects no criticism of its own style of government. Senior officials, such as China’s ambassador to South Africa Liu Guijin, have repeatedly expressed China’s solidarity with Africa, born out of their shared development needs and history of being bullied by the west.
That is no succour to governance campaigners, who argue that China has effectively thrown a lifeline to Africa’s most malevolent regimes just when internal and international pressure was beginning to force change. Led by politicos such as UK Prime Minister Tony Blair and pop stars Bob Geldof and Bono, 2005 saw an unprecedented push to assist Africa, giving fresh momentum to efforts to strengthen governance.
It does not help that China courts suspicion elsewhere. Its apparent reticence to intervene in the Iranian nuclear drama for fear of compromising oil deals from the country only deepens doubts that China is sensitive to concerns other than its own. But the Iranian saga also underlines that different countries have different concerns. And the western powers have a long history of protecting their interests at the expense of others.
As a matter of foreign policy, the US protects its economic interests using a variety of levers to achieve its ends. It also benefits from already established geo-strategic influence, diplomatic reach and the globalisation of its corporate interests. In contrast, China’s emergence as an economic power has taken place over the past two decades and its need to ensure energy security has only become urgent in the past few years; its haste and expedience to safeguard energy supplies is entirely rational and even sensible, particularly given the political risks of an economic slowdown to the government in Beijing. As one analyst puts it, China does not have a particular advantage in the open market and must consider every option to achieve its objectives.
Ultimately, China’s growing interests in Africa need not be at the cost of better governance and soundly structured economies. Demand for Africa’s natural resources will only rise, propelled by growth not just in China but the rest of the world too. The occasion of deep-pocketed suitors turning up in Africa to bid for resource rights will become less the rarity it has historically been and more a matter of course; African governments will no longer have to react precipitously for fear of losing the deal.
What is needed, however, is the technical assistance to safely and shrewdly negotiate these deals. To date, Africa’s development agenda has emphasised what to do to get capital flowing into the continent – it has mostly had to address the problem of too little capital rather than too much. Now the focus should be on building the capacity to ensure efficient allocation of capital in the face of rising investment, in effect to get better deal terms for individual countries.
This is relatively easy to do, and the regional bodies and forums exist to facilitate it. It starts with sharing experience – another African country should not learn to its surprise that Chinese constructors typically do not employ local labour or pass on technological know-how, for instance. Africa then needs to realise its strong negotiating position – it has the natural resources that China and the rest of the world need. Only once Africa exerts this position can there be a win-win outcome. In the end, it is up to the Africans and not the Chinese to ensure this new relationship is mutually beneficial.