By Holly Reeves
Rumours and half-truths swirl around the work of Chinese companies in Africa. Billions of dollars are moving from Asian institutions into African projects as China seeks to find its feet as a powerful yet responsible global player. But under what terms are these two blocs playing the game?
“Neither Chinese policy banks nor African recipients regularly publish figures on financing agreements. Ironically, another obstacle is inaccurate information – rumoured projects find their way into media stories, which snowball into exaggerations and half-truths,” explains Janet Eom, Research Manager at the China-Africa Research Initiative (CARI).
Around half of the projects announced seem to come to completion, with infrastructure projects making up the bulk of investment over the last two decades. Energy, transportation, and communications efforts make up half of this spending. Sectors which are often priorities for Western donors, such as environment and reproductive health, fall to the bottom of the funded areas.
“One benefit of China in Africa is that African countries get more choice in terms of who to engage with. When a country wants to build a massive railway, it may choose to work with the Chinese for any number of reasons, such as speed of construction or pricing of the project,” explains Eom.
“Or maybe China’s “non-interference” policy is attractive to countries that want the agency to keep governing in ways Western partners would frown upon.”
Access to resources
But the game is changing. From the outside view, China’s financing of Africa continues to expand. Chinese leader Xi Jinping announced a $60 billion program of deepening cooperation on a recent tour and Republic of Congo President Denis Sassou Nguesso recently completed a trip with a “focus on cooperation between the two countries.”
Looking at the patterns, most of the top recipient countries of Chinese investment have significant natural resources – such as diamonds, gold and oil. In return for that aid this wealth is made accessible for export. However, this is no one-sided arrangement.
The country’s involvement in Africa from Angola to Rwanda reinforces the growing internationalisation of Chinese companies, part of the “Go Out” policy over the last 20 years. At the same time, a slowdown at home means Chinese companies are pushed overseas to find a productive market for their overcapacity in manufacturing.
This underlines the longer-term view on Africa for the Chinese. Most of the cash-flows into African projects stem from state-owned enterprises which hope that supporting industrialisation and economic development will create space for increased exports in the future. Markets across Africa are already ripe for the mass-produced small consumer items that China does so well, and with further development this demand could expand to become a huge opportunity for companies across the board.
Moving away from the West
In combination, China’s plan to support low-end industrialization and the desire by many countries in Africa to grow their productive capacity makes the two successful bedfellows. An important factor is that unlike Western models of support China has put development as their key focus, without the push for transparency or democracy common in other development financing packages. It is also important to note that Chinese interests are modelled to local priorities – in an area larger than two smaller continents combined there can be no such thing as an Africa-wide strategy.
Dr. Martyn Davies, managing director for emerging markets and Africa, Deloitte Frontier Advisory South Africa, says that the region’s ability to trade is still subject to significant barriers. As such, opportunities to grow through Chinese partnerships will be significant for economic and human development.
“With Africa having reached a point where industrialization plans are ready to take off, China’s 10 major plans will help Africa realize inclusive, sustainable development that defines the structural transformation of the continent,” he said.
However, despite the ten goals for stronger cooperation with African states China has quietly grown more cautious in recent years, say officials. It is increasingly withdrawing money and workers because of financial and security risks, amid recognition of the need to carry out regular risk assessments to ensure balanced investments.
At the same time the role of China is changing. As its economic interests grow, so is its appetite for deeper engagement. Chinese peacekeepers are operating in the region for the first time in South Sudan and efforts to stop piracy are being supported with Chinese resources. It seems Beijing is coming to realise the need not just to develop, but also aggressively protect, its African interests.
So what does this teach us about Chinese efforts in Southeast Asia? Among the country’s new global interests is the Asian Infrastructure Investment Bank, a potential rival to the World Bank that will fund infrastructure development in the East. Altogether 57 nations have contributed to its $100 billion war chest, but 30% of that came from China alone.
Based on what we’ve seen in Africa expect to see an economic rather than diplomatic undertone to China’s intentions for the bank. Development, yes. Responsibility, yes. But consider the long view. Investments or policies that seem to be pinned in the best interests of others will almost certainly come to a new market or opportunity for China in the end.