AFRICA AND CHINA
China has surpassed the United States as Africa’s biggest trading partner, with trade worth $120 billion in 2011. The money has helped build roads, hospitals and schools and brought an array of consumer goods to people who couldn’t afford them before but the presence of the Chinese has also driven a lot of locals out of business, stunted local manufacturing and provided support for entrenched dictators. [Source: Jonathan Clayton, The Times, July 14, 2012]
China says its trade with Africa jumped from little more than $10 billion in 2000 to $166.3 billion in 2011, driven by Chinese hunger for resources and African demand for cheap Chinese products. Africa is an important source for China of natural resources such has oil, iron ore, timber, cotton and minerals. China pumped almost $10 billion dollars in investment into Africa in 2009 and has also seen trade soar as Beijing buys oil and other raw materials to fuel its booming economy. On top of that China has canceled $1.2 billion in debt owed to Africa. The African nations like to do business with China because the Chinese do not lecture them about human rights, corruption and governance as Western nations often do.
Conservative estimates suggest that there are now a million Chinese migrants across the continent. Copper-rich Zambia and the Katanga area of the Democratic Republic of Congo have fast growing Chinatowns. Chinese businessmen are putting down roots in places Malawi and South Africa where niches need filling and opportunities are to be had. The Chinese have even become the target of “Michael Jackson” girls in search of husbands. The Xinhua New Agency has estimated there are 750,000 Chinese working or living in Africa, many of them entrepreneurs. One Fujian native, Yang Jie, arrived in Lilongwe, Malawi in the mid 1990s. By the mid 2000s he owned and operated the largest ice cream company in Malawi. Other have opened up pharmacies in Chad; restaurants in Uganda; and massage parlors in Ethiopia.
Chinese goods are widely available as they are everywhere. Chinese companies made a $6 billion infrastructure and loan deal with the Democratic Republic of Congo using the Congo’s mineral resources as collateral.
History of China in Africa
China's alliance with Africa dates back to the 1950s, when Beijing backed liberation movements fighting to overthrow western colonial rule. In the name of Third World solidarity thousands of Chinese, often drably dressed in felt jackets and hats, arrived in Africa in the 1960s and 70s and built railroads, stadiums and highways, often crushing rocks and doing other labors by hand. Many of the sports stadiums in Africa were built according to Chinese designs with Chinese help and trains in east Africa were largely built by the Chinese in this period. In the 1960s and 70s, 56,000 Chinese engineers and technicians spent ten years building the 1,860-kilometer Tanzania-Zambia Railway.
In the 1990s and 2000s China renewed its interest in Africa. It has sent engineers and medics on a peacekeeping missions to the Congo. It has helped launch satellites for Nigeria; build roads in Kenya and Rwanda; raised government building in Uganda and Djibouti; set up training centers in South Africa; financed hydroelectric projects in Ghana; established a university department in Zimbabwe; and promoted cell phones in Ethiopia In Botswana, Chinese firms have a virtual monopoly on the construction business. In Gabon they buy 60 percent if the timber. In Angola there are plans to build a $4 billion housing estate. As the economic crisis in 2008 and 2009 began taking hold China became more cautious about its investments and backed away from some projects such as plan to build a $1 billion dam in Guinea.
The Chinese arrived in large numbers in the early 2000s on the coattails of giant state-run enterprises that bought into mining industry to feed China’s insatiable appetite for raw materials. Initially, the new arrivals, catered for Chinese compatriots, creating the largest Chinatown in sub-Saharan Africa, but they are now visible in almost every sector. Markets across Africa overflow with cheap Chinese products, from plastic sandals and flowers to shoddy electrical goods.
At first the Chinese were welcomed but, slowly, they have become resented, From Namibia in the south to Tanzania in the east and Nigeria in the west, the same complaints are heard, of poor wages, bad working conditions, shoddy products and low quality workmanship.
As of early 2007, Hu had visited Africa three times. In April 2006 he visited seven countries. During January and February 2007 he visited eight nations, including Cameroon, Sudan and South Africa, in 12 days and promised $300 million in aid to several countries including Sudan. A 2007 meeting of the African Development Bank was held in Shanghai.
In November 2006, Hu presided over a summit attended by the heads of 48 of Africa’s 53 nations in November 2006 (the other five nations recognize Taiwan) and signed 14 deals worth $1.9 billion and announced plans to open free trade zones, eliminate tariffs and build an $8.3 billion railway in Nigeria. The deals covered infrastructure, resources, telecommunications, hospitals and finance.
Chinese Foreign Aid and Loans in Africa
By some estimates more than half of China’s foreign assistance goes to Africa. In 2007 Chinese President Hu Jintao promised to double aid to Africa by 2009, provide $3 billion in loans, offer $2 billion is export credits and a $5 billion in funds to encourage Chinese investment in Africa, train 15,000 professionals and provide scholarships to 4,000 students, and help Africa’s health care and agriculture sectors.
In November 2009, China pledged to give Africa $10 billion in low-interest loans over three years at a two-day China-Africa summit in Sharm El-Sheik, Egypt. Chinese Premier Wen Jiabao dismissed accusations that China’s intentions were anything but altruistic, “The Chinese people cherish sincere friendship toward African people, and China’s support to Africa’s development is sincere and real,” he said. China also said it would forgive government debts in the poorest countries and institute a zero-tariff policy on 95 percent of goods from the poorest countries.
David Smith wrote in The Guardian, China has offered $20 billion in loans to African countries over the next three years, cementing an alliance that appears increasingly hostile to the west. Hu Jintao, the Chinese president, promised the credit line — double the amount China pledged for the previous three-year period in 2009 — during the opening ceremony of the Forum on China-Africa Co-operation in Beijing. Hu brushed aside such concerns in his speech at the Great Hall of the People, attended by leaders from 50 African states including South Africa's Jacob Zuma and Equatorial Guinea's Teodoro Obiang Nguema, widely condemned by western activists as a brutal and corrupt dictator. [Source: David Smith, The Guardian, July 19, 2012]
"China and Africa should increase co-ordination and co-operation in international affairs," Hu said. "We should oppose the practices of the big bullying the small, the strong domineering over the weak and the rich oppressing the poor." He continued: "China wholeheartedly and sincerely supports African countries to choose their own development path, and will wholeheartedly and sincerely support them to raise their development ability." China will "continue to steadfastly stand together with the African people, and will forever be a good friend, a good partner and a good brother", he added at the summit, which is held every three years since 2000.
Hu said the new loans would support infrastructure, agriculture, manufacturing and development of small and medium-sized businesses in Africa. He also pledged to "continue to expand aid to Africa, so that the benefits of development can be realised by the African people". Africa is increasingly portrayed as a microcosm of the shifting global balance of power: three years ago China overtook the US as the continent's biggest trading partner.
The Guardian reported: “Despite all the income investment in Africa, China only accounts for a few percentage points, whereas the western powers have been here forever and they account for more than 90 percent, especially the minerals and resources investments. So we don't compete; we come here to co-operate. Gao Xiqing, the vice-chairman and president of the China Investment Corporation, Gao told The Guardian China still had a long way to go to rival western investment in Africa. "We don't compete with Americans," he told the New York Forum Africa conference in Gabon last month. "If you count your investment as the percentage of the capital market, the United States accounts for almost half of all the world's capital markets, so how do you compete with that? Americans have been in this continent for a long time. [Source: David Smith, The Guardian, July 19, 2012]
Chinese Projects in Africa
China has its hands in projects all over Africa, including some places that don’t seem to have an immediate economic pay off. The Chinese are particularly keen on getting their hands on Angolan oil and have demined rural eras, built roads and upgraded ports there. In Ethiopia and Kenya they are involved in a number of construction projects. In February 2009, Hu visited four African nations — Mali, Tanzania, Mauritius and Senegal — and the point was made that none of the countries were particularly rich in resources or oil.
China spent $500 million building an ambitious railway from the copper mines in Zambia to the Tanzanian port of Dar es Salaam. It was the largest project undertaken by Communist China under Mao. Little came of it. The locals resented the Chinese train bosses. Zambia did not benefit. The Chinese withdrew from Africa and didn't come back for 30 years.
Many of the projects are places with oil and other resources China wants. China has long term oil contracts with Nigeria and Angola — which supply it with as much oil as Saudi Arabia (2004) — and has a 40 percent stake in oil an project on Sudan and is setting up to look for oil in Niger. China also gets phosphates from Morocco, copper and cobalt from the Congo and Zambia; platinum and iron ore from South Africa; timber from Cameroon and cotton from Egypt.
In some cases very big money is involved. In October 2007, the Commercial bank of China (ICBC) made a move to buy a 20 percent stake of South Africa’s Standard Bank for $5.5 billion, the biggest Chinese financial acquisition offer ever at that time. A month before China made a deal to loan the Democratic Republic of Congo $5 billion to develop infrastructure and mining.
Nigeria in particular has benefitted from Chinese capital. China has invested more than $7 billion in energy, communications and infrastructure in the country, which exports some $4.7 billion in crude oil to China each year, according to China’s minister of industry and information technology. [Source: New York Times]
African leaders have said they welcome Chinese investments as it comes with less conditions and strings attached that American, Europe and Western aid, In addition Europe and the United States seems to be more preoccupied with their own problems these day and less in devoting their attention and resources to Africa.
China Funds new African Union Headquarters
In January 2012, AP reported: “African leaders have inaugurated a new $200 million headquarters that was funded by China as a gift. They say the massive complex is a symbol of China’s rapidly changing role in Africa. The Chinese government fully funded the construction of the 20-floor tower overlooking a calabash-shaped conference center. It took three years to build. AU chair Jean Ping said China had built the complex for free. China’s top political adviser Jiao Qinglan said the gift is a “symbol of deepening relations.” He said China is Africa’s largest trade partner and Chinese investment there totals $13 billion. [Source: Associated Press, January 28, 2012]
The BBC reported: “In front of African leaders a huge golden key was handed over and the 100 meter high building was officially opened. The tower overlooks a vast conference centre where African heads of state are expected to meet for years to come. China's most senior political adviser, Jia Qinglin, attended the opening of the new headquarters. "The towering complex speaks volumes about our friendship to the African people, and testifies to our strong resolve to support African development," he said, according to AFP. The AU chairman, Equatorial Guinea's President Teodoro Obiang Nguema, said the complex was "a reflection of the new Africa," the agency reports. [Source: BBC, January 28, 2012]
The new AU building dominates the skyline of Addis Ababa and is the city's tallest building. Most of the materials used were imported from China and even the furnishings were paid for by Beijing, AFP news agency reports. Construction began in January 2009 and involved 1,200 Chinese and Ethiopian workers. The project co-ordinator, Fantalum Michael, says the new building signifies China's growing friendship with Africa. "It's a testimony that this relationship will continue in the future," he told AFP. Thriving relationship
In Ethiopia, many jobs have been created through Chinese-funded projects. Chinese cars are being made in Ethiopian factories and China is also building a light railway across Addis Ababa.
China's Ambitions in Africa Conflict with its Foreign Policy
Leo Lewis of The Times wrote: China's rapidly growing ambitions in Africa are on collision course with its "non-interference" foreign policy and could ultimately result in Beijing's military reach extending across the continent, defence analysts predict. Since 2006, Chinese banks have provided more loans to African countries than the World Bank. Until now, much of this advance has been based on Beijing's hallowed stance of "non-interference" - no military alliances, no overseas basing of Chinese forces and no intervention in the political affairs of other countries. [Source: Leo Lewis, The Times, October 17, 2011]
The policy has allowed China to distinguish its approach from that of Western powers. But circumstances on the ground are forcing a rethink. "People say that China is changing Africa. It's the other way around - Africa is changing China," Chris Alden, an expert on relations between the two at the London School of Economics, told The Times. In a new research paper, he notes: "By forswearing any role in African domestic affairs, the Chinese were able to concentrate on ... securing access to resources unencumbered by the baggage of colonialism."
But now China is there, it has begun to confront the complex reality of engagement with Africa. His comments come amid warnings that China's military technology, cyberwarfare techniques and the ability of the People's Liberation Army to project its rising might will "consistently surprise" the West. "While the Chinese Navy's focus remains the prevention of Taiwanese independence, it is equipping for wider horizons, such as protecting energy shipments, long-range deterrence, or rescuing far-flung Chinese nationals and interests," wrote Mr Medcalf in a recent paper. He told The Times that the watershed was involvement in the anti-piracy campaign in the Gulf of Aden in 2008, but that Beijing still had a philosophical leap to make. With the anti-piracy campaign, its nationals were threatened; there was international co-operation and a clear mandate.
"Africa's past economic experience with Europe dictates a need to be cautious when entering into partnerships with other economies," the South African president said. "We are particularly pleased that in our relationship with China we are equals and that agreements entered into are for mutual gain. This gathering indicates commitment to mutual respect and benefit. "We certainly are convinced that China's intention is different to that of Europe, which to date continue to attempt to influence African countries for their sole benefit." "Africa's past economic experience with Europe dictates a need to be cautious when entering into partnerships with other economies," the South African president said. "We are particularly pleased that in our relationship with China we are equals and that agreements entered into are for mutual gain. This gathering indicates commitment to mutual respect and benefit. "We certainly are convinced that China's intention is different to that of Europe, which to date continue to attempt to influence African countries for their sole benefit."
Kidnappings and Other Problems for China in Africa
Chinese workers have been kidnaped and killed in Sudan, Ethiopia and Nigeria. But even under these conditions China seems to be committed to the region for the long haul. Seven Chinese oil workers in Ethiopia were killed during an attack on Ethiopian forces guarding a Sinopec facility in April 2007; nine Chinese oil workers were taken hostage in Sudan in 2008, and five died in a rescue attempt. After the incident in Ethiopia in 2007 an official with the Chinese oil company SINOPEC said, “There is no way we will withdraw from Africa due to fear of risk. This is not a game for us. We will try to improve security in the future, but there is no way we will withdraw.”
In November 2012, AP reported from Maiduguri, Nigeria: “Gunmen have shot dead two Chinese construction workers in northeast Nigeria, a region under assault by a radical Islamist sect. Authorities initially blamed the killings on the sect known as Boko Haram. However, the group did not claim responsibility for the attack, which saw gunmen intercept the Chinese workers' truck and open fire on them at the town of Benisheik. Other Chinese workers have been killed in recent weeks in northeast Nigeria, prompting the Chinese government to contact Nigerian officials and ask them to provide better protection for their citizens. An Associated Press count shows Boko Haram is blamed for killing more than 730 people this year alone. [Source: Associated Press, November Nov 8, 2012]
China, African Dictators and Exploitative Economic Practices
David Smith wrote in The Guardian, Western critics say China supports governments with dubious human rights records. The Asian country's biggest African trading partners in 2010 were Angola, ruled by one man for 33 years, South Africa and Sudan, whose president is wanted by the international criminal court. China is also accused of importing labour to build roads and hospitals and extracting raw materials for processing at home, leaving little for local economies. During a visit to Zambia last year, the US secretary of state, Hillary Clinton, warned against a "new colonialism".[Source: David Smith, The Guardian, July 19, 2012]
China has made deals and supported pariah nations like Sudan and Zimbabwe in its pursuit for resources. David Smith wrote in The Guardian, China has also “struck up friendly relatitions with South Africa's Jacob Zuma and Equatorial Guinea's Teodoro Obiang Nguema, widely condemned by western activists as a brutal and corrupt dictator.” [Source: David Smith, The Guardian, July 19, 2012]
"Africa's past economic experience with Europe dictates a need to be cautious when entering into partnerships with other economies," the South African president Zuma said. "We are particularly pleased that in our relationship with China we are equals and that agreements entered into are for mutual gain. This gathering indicates commitment to mutual respect and benefit. "We certainly are convinced that China's intention is different to that of Europe, which to date continue to attempt to influence African countries for their sole benefit."
Africa nations are concerned that a flood of Chinese imports will slow the development of manufacturing and industry in China. In Guinea, China began negotiating a $7 billion oil and mineral rights deals with a military regime only weeks after it was seized power and massacred 150 unarmed opposition protesters. Guinea is the world largest exporter of bauxite and has large deposits of diamonds, uranium, iron ore as well offshore oil.
In Zimbabwe, Chinese miners have been accused of ignoring the country’s mining environmental protection laws and threatening endangered animals in their quest for chrome, coal, diamonds and other minerals. Francis Nhema, Zimbabwe’s Environmental Minister, has accused the China of using bulldozers and diggers to strip mine in nation parks. There are also reports the Chinese are supplying weapons and money used to poach endangered species such as the black rhinoceros.
Supporters of China in Africa
According to the BBC: African leaders have welcomed the Chinese approach and have embraced investment from Beijing. China is interested in Africa's natural resources and in return is investing huge sums in African infrastructure. Roads are being built by Chinese firms at a staggering rate, says the BBC's Will Ross in Addis Ababa. While other rich nations impose conditions before aid is given, China's relationship with African countries is strictly a business one, he says.
China has been praised for investing money in Africa rather than providing aid for programs that often don’t work. In October 2009, the leader of Rwanda said, “the Chinese bring what Africa needs: investment and money for government and companies. I would prefer the Western world would invest in Africa rather than hand out development aid.”
President of Gabon Ali Bongo Ondimba told the Times of London: “When the Chinese come to us, they do not lecture. You American come to see us and you come with a nice menu, two or three pages long. I look at the menu and say: “I’m going to have a fine meal today.” [Then I am told] that in order for you to order a meal exactly as you want there are conditions. I see the menu and I am told I cannot have access to it...The Chinese have a one course set, but they say you can have plenty of it. You have to realize you are talking to someone who is very very hungry and not willing to wait.”
David Smith wrote in The Guardian, China's non-judgmental approach to business continues to gain traction with African governments, who say they will no longer tolerate being lectured by a hypocritical west that includes their former colonial masters. Criticism that Africa is allowing its natural resources to be exploited, and that China is content to bolster dictators and ignore human rights abuses, merely feeds the partners' anti-western sentiment.[Source: David Smith, The Guardian, July 19, 2012]
Zimbabwe’s unpopular dictator Robert Mugabe had the called the Chinese “unselfish allies” in his battle against Western imperialism and neo-colonialism. In a recent speech at South Africa's Institute of International Affairs in Johannesburg, the Chinese ambassador, Xian Xuejun, said: "Chinese and African people harbour simple but friendly sentiments towards each other. But there is a lack of in-depth understanding. Some western politicians and media also tend to make irresponsible remarks on China-Africa relations, attempting to mess up our co-operation." Xian insisted that China has a "non-interference policy" with "no political conditions attached" because Africans know their own situation best. "We have never pointed fingers to African countries concerning their independent and own choice of political system because we have never drawn lines according to ideological differences."
Critics of China in Africa
Critics have accused China of taking up an interest to Africa solely to gain access to its resources, while turning its back to human rights, corruption and dictators in countries like Sudan and Zimbabwe. China has been particularly generous with aid to Angola, which surpassed Saudi Arabia as China’s No 1. supplier of oil. China strategy in sub-Saharan Africa is part of a broader strategy to increase its energy supplies and reduce its dependence on Middle Eastern oil. In diplomatic cables revealed by Wikileaks, U.S. Asst. Secretary of State for Africa Johnnie Carson said, “China is very a aggressive and pernicious economic competitor with no morals. China is not in Africa for altruistic reasons. China is in Africa primarily for China.”
Human rights groups have criticised China for undermining efforts by western countries to link aid to improvements in governance. In June 2011 U.S. Secretary of State Hillary Clinton on Friday warned Africa that China does not always have its interests at heart as economic ties expand, and offered the United States as an alternative. “The United States does not see these Chinese interests as inherently incompatible with our own," Clinton told reporters in Lusaka, Zambia adding that Washington believed everyone benefited as Beijing assumes "a greater and more responsible role" in world affairs. "We are however concerned that China's foreign assistance and investment practices in Africa have not always been consistent with generally accepted international norms of transparency and good governance, and that it has not always utilized the talents of the African people in pursuing its business interests," she said.
There is a very alarmist tone to Western reports about Chinese activities in Africa. Matthew Parris wrote in the Times of London,” Nowhere was that undertone of alarm more noticeable than in the first episode of the BBC’s “The Chinese are Coming“. It was about Africa, and took us across Angola and Zambia. We saw how China is investing heavily in mining, construction and railway building in sub-Saharan Africa, including Zimbabwe and Congo — and exporting large numbers of Chinese workers (even self-employed chicken farmers) too. The documentary suggested that Chinese muscle may still be popular among Angolan Africans...It mentioned a new glint in Beijing’s eye: cobalt--and said there was resentment in Zambia at alleged exploitation of black workers at Chinese-owned copper mines and ruthless competition from Chinese settlers. “
David Smith wrote in The Guardian, China bridles at such attacks and argues that China-Africa economic co-operation and trade now drives around a fifth of the continent's economic growth, while China has aided 600 infrastructure projects across the continent. Chinese officials claim it is all about business. Gao Xiqing, the vice-chairman and president of the China Investment Corporation, the country's sovereign wealth fund that invests in more than 100 countries, said: "We grew up studying Karl Marx, Lenin, Chairman Mao. Karl Marx said the workers have no motherland and in fact today capital knows no boundaries of state. Wherever there's profit to be made, capital will go there. There's not that much difference for Chinese capital, as compared to any capital in the world."[Source: David Smith, The Guardian, July 19, 2012]
Brazil Versus China in Africa
China and Brazil are competing with one another in Africa, with some people call Brazil “the anti China.”David Lewis of Reuters wrote: Former president Luiz Inacio Lula da Silva, who stepped down in 2012, spent a good part of his eight years in power selling Brazil as Africa's partner and highlighting the ways in which Brazil is built on the "work, sweat and blood of Africans" shipped across the Atlantic during the slave trade. Lula visited 25 African nations, doubled the number of Brazilian embassies in Africa and boosted trade to $26 billion in 2008 from $3.1 billion in 2000. [Source: David Lewis, Reuters, February 23, 2011]
Adriana de Queiroz, Executive Coordinator at the Brazilian Center for International Relations, a think tank, says that attitude helps. "We are going there to form partnerships and to build up our companies," de Queiroz says. "Petrobras, for example, is not going to Africa to bring back oil to Brazil. It is to grow the company in other markets. China is not there for this reason. They are there to extract resources."
While China is increasingly keen to emphasize non-resource related projects, like helping countries set up special economic zones to boost local industries, the differences have not gone unnoticed in Africa. Mthuli Ncube, chief economist and vice president of the African Development Bank (AfDB) Group says conditions that some African nations agreed with China have, in effect, created "a barrier to employment creation" as China imports its own labor. Brazil, on the other hand, has gone beyond commercial ties to include social programs and alliances with African countries. "Brazil's value of accountability when engaging with African nations is bearing importance, especially when compared to China and its 'no strings attached policy' that some African governments are increasingly finding offensive."
Brazil Versus China in Africa on the Issue of Hiring Local Labor
Reporting from the Nimba-Buchanan Railway in Liberia, David Lewis of Reuters wrote: “In the muggy forest of central Liberia, a gang of workers is inching its way along a railway track, cut long and straight through an otherwise impenetrable mesh of trees and vines. The drone of insects is interrupted by a high-pitched drill and the clang of hammers as workers put the finishing touches to the perfectly aligned steel tracks. The gang of Liberian railway workers is a small sign things may finally be improving. Some of the men have only recently swapped their weapons for blue overalls and yellow hard hats. "We have a few young boys coming out of high school," Dogar says. "I am happy that I am around to train people." [Source: David Lewis, Reuters, February 23, 2011]
Hiring locals might seem unremarkable on a continent with an oversupply of cheap labor. But the issue of who works on Africa's big infrastructure projects has come into sharp focus in recent years. At building sites from Angola to Zambia, teams of Chinese workers often do the work instead of Africans. Where locals are employed, their rough treatment by Chinese managers has stirred bitterness. In Zambia last October, the Chinese managers of Collum Mine shot and wounded 11 local coal miners protesting over pay and working conditions.
That growing resentment is one reason why Brazilian engineering group Odebrecht, contracted to get Liberia's railway rolling again, made a conscious decision to employ locals for the job — and treated them well. "It worked perfectly," says project manager Pedro Paulo Tosca, who decided to divide the 240 km (149 miles) of track into sections and assign dozens of separate villages along the way to clear them. "The majority of the heavy work was activities that we could perform with local manpower instead of bringing sophisticated equipment to the site."
Odebrecht's initiative is not solely altruistic, of course. The unlisted company sees big profits in Africa. But as it pushes into the continent, Odebrecht and other Brazilian firms are using every chance they have to keep up with their Chinese rivals, who often enjoy a massive financing advantage thanks to the deep pockets of Beijing, and who rarely pay much attention to factors like human rights.
As investment in Africa grows — foreign direct investment surged to just under $59 billion in 2009 from around $10 billion at the turn of the century, according to UNCTAD, the U.N.'s agency that monitors global trade — so too do the expectations of host nations, who want not just trade, roads and bridges, but also jobs and training. Ngozi Okonjo-Iweala, World Bank managing director and a former finance minister in Nigeria, told one of China's biggest mining conferences in November that investors in Africa need to work with local communities to avoid conflicts and start building the real economy rather than just stripping resources. If it can build a reputation for doing just that, Brazil thinks, it might help it stay in the game.
"If (Brazil) wants to distinguish itself from the other emerging powers, it needs to demonstrate what is different about its engagement with Africa based on the principles it espouses as a democratic country," says Sanusha Naidu, research director of the China/Emerging Powers in Africa Program at Fahamu, a Cape Town-based organization that promotes human rights and social justice. "It will also have to reconcile its economic ambitions in Africa with its posture of being a democracy, especially in cases where it does business with essentially corrupt and malevolent regimes in Africa."
Odebrecht's decision to employ people who live along the track is clearly popular. After seven years of peace, Liberia's economy is only slowly getting back on its feet. In Buchanan, the port, small businesses are feeding off the rebirth of the railway, winning contracts to clean offices, transport material or put food on the plates of workers. Though accurate figures are hard to come by, Liberia's unemployment rate is believed to top 80 percent. Such is the hunger for jobs that a number of the new railway workers have come from the capital, Monrovia, hundreds of miles away.
"We are happy with what we are earning. Something is better than nothing," says Abraham Browne, a village contractor, between scooping mountains of rice into his mouth during a lunch break. Browne has swapped subsistence farming for a daily wage of about $4.50 for hammering nails into the tracks: "It helps us send our brothers and sisters to school because some of our parents are dead, killed in the war. It helps us a lot."
Odebrecht asked each community along the track to select a leader, with whom the Brazilian firm then signed a contract. The company has completed more than 75 percent of the work with Liberian labor, says manager Tosca. It has also trained up teams of engineers, technicians and accountants to help run its offices. The first iron ore, from a mine run by Luxembourg-based ArcelorMittal, is due in mid-2011.
In terms of cost, the decision to hire locally "is cheaper because labor here is not expensive," says Tosca. "Of course, you have a learning curve. The risk of accidents is higher — therefore you have to invest more time in training. (But with machines), if you have a breakdown, to have a part here, to replace it, takes several weeks, if not months." Tosca says the company believes it has an obligation to help the local economy, which in turn helps the company. "You create loyalty. They wear the shirt of the company It is (a) kind of chemistry," he says. Former human rights activist Kofi Woods, now Liberia's minister for public works, says Brazil is an "important partner" in developing the country.
Brazil Versus China in Africa In Terms of Money
David Lewis of Reuters wrote: When it comes to sheer numbers, though, Brazil still lags a long way behind. China's agile, state-backed policies have pushed Beijing's trade with Africa to $107 billion a year. India too, has boosted links: India-Africa trade is about $32 billion a year. That puts Brazil, with $20 billion in trade in 2010 (it slipped after the credit crunch), in third place. Rounding out the BRIC economies, Russia trails a distant fourth, with just $3.5 billion in 2009, according to IMF data. [Source: David Lewis, Reuters, February 23, 2011]
Brazil's weak points are many. Start with financing. China has long enjoyed links with Africa, but the bonds have deepened since 2000, when Beijing embarked on a series of resource-backed deals in which Africa handed over oil, bauxite, iron ore and copper and cobalt in return for dams, power plants and other infrastructure projects worth billions of dollars. Chinese firms enjoy a plethora of financing opportunities from institutions like the China Exim Bank, the Bank of China and the China Development Bank. Sweeping in behind these deals, Chinese businesses — from small street traders to mid-sized companies dealing in everything from construction materials to hotels — have set up shop across the continent.
Brazilian firms looking to invest in Africa can tap BNDES, Brazil's national development bank, for financing, while Banco do Brasil, Latin America's largest bank by assets and Brazil's biggest state-run bank, announced expansion plans last August to exploit growing demand for loans and other products in Africa. But that still leaves Brazil Inc. well behind its Chinese counterparts. "BNDES plays an important role but it is limited by the conditions that prohibit it from financing in more unstable markets," says Sergio Foldes, international director at the bank, which has about $2 billion in projects in Africa.
That's one reason for the huge gap between China and Brazil's performance in Africa. Frontier Advisory, a South African-based consultancy, estimates the number of Chinese firms operating in Africa rose to 2,000 in 2008 from 800 in 2006. Those companies range from resource and construction firms to textile manufacturers and telecommunications companies. Brazilian companies, on the other hand, tend to be traditional resource firms like Vale and Petrobras and are concentrated in a handful of countries: Angola, where Odebrecht has been active for more than 25 years, Egypt, Mozambique, Nigeria and South Africa.
Investment levels also tell the tale. By 2007, cumulative Chinese foreign direct investment in Africa had reached $13.5 billion, or 14 percent of all Chinese FDI, Frontier Advisory said. Brazilian FDI in Africa between 2001 and 2008 added up to just $1.12 billion, according to the Brazilian Central Bank. "Brazilian resource and construction firms ... do not offer such comprehensive packages," says Hannah Edinger, senior manager and head of research at Frontier Advisory.
The Brazilian Center for International Relations' Adriana de Queiroz concedes that the gap in support for Brazilian business remains large. "Brazil isn't in a position to compete with the (Chinese) model because we can't even get close to the volume of financing," she says. "We don't have the resources for that." Indeed, Chinese foreign exchange reserves at $2.85 trillion dwarf Brazil's $298 billion. "Our government is not going to fund projects in countries where there is a high level of risk," says de Queiroz. "Chinese capital, in contrast, has a greater appetite for risk." Brazil knows it has to be more aggressive in financing, says Brazil's former foreign trade secretary Welmer Barral. "The Chinese are very aggressive in finance so we are trying to empower our capacity to finance different projects in Africa, especially in construction services."
China Versus Brazil Over Mining in Gabon
David Lewis of Reuters wrote: But as one experience in the tiny central African nation of Gabon seems to show, it's not just finance where China is more aggressive. The rich but technically challenging iron ore concession of Belinga had been ignored by the international mining community for years when it came under scrutiny about six years ago thanks to rocketing iron ore prices. Gabon's then-president Omar Bongo had long used the country's oil wealth to buy social peace, largely by allowing rampant corruption among his allies and co-opting and coercing the opposition. But Gabon's oil reserves were dwindling and Bongo saw a chance to cash in on another hot commodity. [Source: David Lewis, Reuters, February 23, 2011]
In March 2005, Brazilian miner Vale secured an exploration contract and began work on feasibility studies for an iron ore mine — a complex undertaking due to environmental concerns. Before Vale was done with its study, a Chinese joint venture called CMEC came in promising to complete the job more quickly and throw in a hydro-electric plant, a railway and deep water port. When the Brazilians said they were unable to complete the project as quickly, it was handed to the Chinese.
Local media swiftly reported that corruption had helped in the decision, though both Chinese and Gabonese officials denied the allegation. "There was never irrefutable proof that this happened but I heard that money had changed hands," says a western diplomat who was serving in Gabon at the time. The diplomat says a number of cabinet ministers had been seeking to take advantage of the aging president to cut deals behind his back on the project: "The problem was that Bongo had not been included in the deal."
In 2007, according to Brazil's Folha de S. Paulo newspaper, quoting leaked U.S. diplomatic cables, senior Vale officials pointed to the Gabon incident in warnings to the U.S. ambassador in Brazil that China's growing influence in Africa threatened international markets.
In the end, amid warnings from Chinese engineers that the project was indeed more complicated and expensive than they had previously claimed, a row broke out over plans to build a dam on a protected waterfall. The collapse of commodity prices during the global crisis, and Bongo's death in 2009 sealed the mining project's demise. Ali Bongo, the late president's son and successor, has called for a review and there is talk of bringing the Brazilians back onboard.
For listed companies like Vale "there are constraints on corporate misconduct. However, in the longer term, Brazilian companies may see this as a competitive advantage in terms of differentiating themselves from other emerging market players. Why compete with the Chinese on that level (of corruption)? It is better to keep their powder dry and wait for the Chinese to fall at the technical level," says Chris Melville, senior associate at political risk consultancy Menas Associates. "Unlike their Chinese competitors, Brazilian firms spend a lot of time and effort seeking to align their interests with those of their hosts — not just governments, but broader economic and social interests. They're still motivated by making profits, of course, but they recognize that aligned interests are the key to long-term and sustainable profit-making."
Chinese Infestors in Zambia
In Zambia, where its is rumored that Beijing is bankrolling President Banda’s re-election campaign, the Chinese traders are dubbed “infestors” rather than “investors,” according to The Times. On how the Chinese have taken over the chicken-selling business in Zambia, Jonathan Clayton wrote in The Times, “In the crowded central market of the capital, Lusaka, there are trucks packed with rows of plump, white chickens. Chinese traders, hands full of notes, do a brisk trade. Zambian vendors are harder to find. Those still around complain bitterly. “They are driving us out of business. They have more birds that are fatter than ours and sell at cheaper prices. I can’t compete,” one said. [Source: Jonathan Clayton, The Times, July 14, 2012]
Some have accused China of practicing neocolonialism in Africa. Their have been anti-Chinese demonstrations in Zambia, where Chinese are anxious to get their hands on Zambian copper. People took the streets afer 50 workers were killed in an explosion at a Chinese-owned mining-explosives factory and the company rebuffed the families of workers who died. After company guards opened fire on protesters demonstrations began taking out their frustrations on Chinese-owned companies.
Evan Osnos wrote in The New Yorker: “Two Chinese mining managers in Zambia are scheduled to go on trial for attempted murder next month, accused of shooting and wounding thirteen miners during a 2008 riot over wages at a Chinese-owned coal mine. That riot, in October, 2010, was followed last month by another burst of unrest in Zambia when hundreds of miners at NFCA Mining, in a long-running dispute with Chinese management, burned and vandalized company vehicles and shattered windows. It is all part of a low boil of unrest that has persisted over the past few years, as Chinese-owned enterprises have injected money into Zambia’s mining sector.
In Zambia, where Chinese investment has been cheered by the government, but also stoked repeated flare-ups from critics and workers, it’s easy to envision a scenario in which shots fired into a crowd trigger not simply a courtroom drama, but a larger backlash against the Chinese presence.
The two Chinese coal mine managers were set free on bail and apparently skip town and returned to China without ever showing up for their court date,
Chinese in Angola, Namibia and Uganda
The sprawling Angolan border town of Oshoikango, the hub of the Chinese trade between Namibia and Angola, was once a sleepy town in northernmost Namibia.” Here “Chinese businessmen have grabbed communal land and pastures from peasant farmers, often with the help of corrupt government officials, leaving a trail of homeless families and lawsuits. Giant warehouses and holding pens for vehicles and industrial exports to Angola stand where communal homes and cornfields used t be. Bulldozers pound the ground every day to make way for the new landowners. [Source: Jonathan Clayton, The Times, July 14, 2012]
In Kampala, the Ugandan capital, shopkeepers lowered their shudders for two days in June 2012 to protest the influx of Chinese, forcing the government to promise a headcount of immigrants. Traders accuse the Chinese of hoarding dollars, contributing to a sharp, recent weakening of the local shilling, which further incenses costs. The head of the Kampala traders association, Issa Ssekito, told The Times, “the problem is that, on top pf dealing in predominately shoddy items, these people have continued to cause problems on the way the country develops. They come here with little stock and after a short period you find they have amassed a lot of money.
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Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.
Last updated December 2012