What do you consider some major myths regarding China’s involvement in Africa?
Dr. Deborah Brautigam:
One of the biggest misunderstandings is that what China is doing in Africa is largely foreign aid, that they give huge amounts of aid in Africa. I think the reality is that this is much more about business than it is about aid. Most of the large loans that we see, to the extent that they’ll actually be delivered, are not being offered on a concessional basis. So this idea that China’s a huge emerging donor, which I think has gotten a lot of the foreign aid community alarmed, is actually probably not true.
Related to that is the idea that China is just in Africa for oil or mineral resources. This is a hugely important area of their interests in Africa, just as it is for every country or investors across Africa. The major exports out of African countries are commodities, and so that’s the case for everybody, they’re interested in that if they’re interested in business. But I think for the Chinese we actually see a lot more balance in their engagement in Africa than Europe or the United States. For example, when you look at trade statistics for Africa in 2008, they were almost evenly divided between imports and exports, though what that means is that African countries as a whole exported around $50 billion, 50, $56 billion work of goods to China, and then China exported about $50 billion worth of goods to Africa as a continent. Of course this was unevenly distributed around the different countries. Some countries with more money were bigger consumers of Chinese goods, and some countries with more resources were bigger exporters. So trade was not even on the country by country basis, but on a continental basis it was remarkably even.
If you look at trade from the United States we don’t see that kind of pattern at all. There are far fewer exports in the United States into Africa, and it’s overwhelmingly imports of raw materials from Africa to the United States.
The Chinese are very interested in Africa as a market, which is a huge area for them. Another thing that a lot of people are starting to understand, though they may not see the full dimensions of this, is that Chinese companies see Africa as a huge area for construction business: infrastructure. This is not just things related to extracted resources such as railroads that go to mines and ports that ship out commodities. That’s part of it but there’s been a lot of less of that than people believe. Far more has been simple infrastructure like building roads in capital cities, building bridges across rivers, connecting countries one to another. Yet another area is office buildings. If you go to downtown Dar Es Salaam in Tanzania, the view has just been transformed by Chinese companies who have built these incredible buildings there. Some of these are for the government, some for private people, some are for other Chinese companies. But they’ve been experimenting with a lot of interesting architectural styles and they’re building on a scale across Africa that we haven’t seen other companies from other countries doing for a long time. To give an idea of the dimensions of this, in 2008 Chinese construction companies reported revenues of $20 billion for construction in Africa across the continent with contracts of almost $40 billion. This money is mainly not being paid by China, they’re getting paid by all sorts of different actors such as the World Bank. In fact, the single largest country winning World Bank infrastructure contracts for Africa is China. They win more than half of all the construction contracts from the African Development Bank. Individual African governments that have money hire Chinese contractors. There’s one Chinese company in Nigeria that’s done almost 25 different projects that were all paid for by the Nigerian government, not China. Private individuals are hiring Chinese companies to build things for them. So there’s a lot of demand for these services, and they’re really putting up huge competition for Western construction companies like Siemens, Bechtel, Skanska, and the other large companies from the West that had been winning these contracts in Africa.
There is also a large interest in manufacturing investments by Chinese companies. This was pretty much under the radar, it doesn’t show up in the data, and it’s very anecdotal at this point, but there are a lot of Chinese companies setting up factories in different parts of Africa. They’re getting a lot of support from their own government to do this. That’s another area in which you see very little of that happening in the West.
The final interesting piece of evidence on this is that the largest project so far that’s been confirmed, where the money’s been delivered and actually under way, is not in natural resources, but a purchase of 20% of Standard Bank in South Africa by a Chinese Bank. That’s the single largest project, and that generates other kinds of projects, largely in infrastructure around the continent.
You’ve pointed out that China’s level of aid to Africa is far lower than most reports and also that they use more loans, that have increased over time. Does it matter what financial instrument is used if, some would argue, the effect is to gain influence in Africa?
I don’t think the goal is simply to gain influence in Africa. You have to look at China today as a nation following in the footsteps of Japan at an earlier period. What the Japanese government had and still has, is a number of instruments to promote its businesses, and they were particularly active in Southeast Asia as well as China. They have a lot of different kinds of finance, funds of different kinds, loans that governments overseas can take out in order to finance work by Chinese companies, or in that case Japanese companies. What we have in our country is export credits. This is basically a guarantee system, we don’t offer much actual finance through these export credits. In the United States it’s relatively small but in Japan, Germany, or China, these export credit agencies are enormous. They finance Chinese business, or in the case of Japan, Japanese business overseas. So that part of it isn’t really about getting influence, it’s about generating business.
A few years ago Moisés Naim described China as a rogue donor and that rogue donors “offered to underwrite a world that is more corrupt, chaotic and authoritarian.” Some say that the way China does business in China, attaching no conditions to aid money, and as reported by Transparency International, a willingness to pay bribes, undermines local efforts for good governance, and also the efforts of institutions like the World Bank and IMF. How do you respond to that?
It’s true that the Chinese don’t attach any governance related conditions to their finance. In that sense they are not making the situation better because they’re not withholding their money in those kinds of situations. In order to address that kind of critique though, you have to look more broadly at what are the sources of finance the countries actually have.
In Chapter 11 of the book I talk about the Chinese putting a two billion dollar infrastructure credit into Angola (2004). This was largely looked at as overthrowing efforts that the IMF was making at trying to get Angola to become more transparent and to have less corruption. But the Chinese were not alone. There were dozens of Western banks lined up in consortiums and they were also contributing finance to the Angolan government, we just didn’t hear very much about them. The point is that a government like Angola’s, that has oil or some other commodity, can attract finance from a lot of different actors, it’s not just the Chinese. In this light, to look at the Chinese as being, what Moisés Naim calls “rogue donors”, is actually wrong. What the Chinese were doing in Angola was not even concessional, it was a business arrangement. Just like the Western banks that were doing business arrangements there. There are many countries that have access to western banks, and those banks don’t put any kinds of governance related conditions on their loans either.
I think the World Bank and the IMF do value better governance, at least they impose corruption-related conditions. But they don’t impose democracy-related conditions, so they will finance non-democratic governments. If you look at the development finance system as a whole, the Chinese are not that different from many of the other mainstream actors in the West, such as the IMF, the World Bank, and the private banks when it comes to democracy conditions, or the private banks when it comes to corruption-related conditionality. The bottom line is that they’re probably not going to be changing the situation very dramatically from the way it was before they arose as a major financer.
What about human rights issues?
This is an area in which we are not going to see conditionality from the Chinese. What is this going to do for the situation of human rights around the world? We don’t really know right now. If you look at the case of Angola with regard to corruption, I think it’s interesting that, since 2004, the government there has become increasingly transparent. They’ve been following many of the recommendations by the IMF and have had IMF teams there advising them on how to better manage their oil revenues. The IMF has been pleased in regards to the improvements the Angolans have made, and they’ve done this without conditionality.
When we look at human rights in terms of what impact Chinese finance is likely to have on that, it’s a sad reality that conditionality, whether it’s done with aid or non-aid development finance of various kinds, has not had a good track record at improving the human rights situations in countries. This is something that is widely known in academia, but it isn’t widely known or believed in the NGO community, or in the advocacy community. That’s fine because I think it’s good to advocate for human rights. It’s an area in which there all sorts of pressures can ultimately perhaps be helpful in creating a normative climate for these kinds of behaviors to be increasingly looked at as being outlawed.
Using sanctions doesn’t appear to be the answer. I was at a conference of the International Studies Association recently and attended a panel discussion on sanctions, and it’s such a sad thing that over and over again the data shows that imposing sanctions actually doesn’t make human rights better. One can look at Iraq after the Gulf War, while Saddam Hussein was there, or Cuba under Fidel Castro, and all these are examples of long term sanctions without much in the way of improvements in human rights. There are many others.
This is not to say that I think sanctions are useless. They express the horror and the outrage that people feel about these egregious situations. But I’m not sure the fact that the Chinese don’t impose sanctions actually worsens the human rights situation in general.
And environmental issues?
Environmental issues, yes, and if I could just add to that, social standards. This is an area where Chinese companies are really behind the curve as compared to Western companies. This is because, in large part, these issues are just now gaining a lot of publicity within China. It’s a poor country in many ways, a developing country, and their labor and environmental standards reflect their level of development. China has a set of policies on things like “green credit” where the banks have been trying to phase out credit for polluting industries and giving beneficial lower rates to more environmental kinds of projects. This has not yet reached their overseas credit banks, their expert credit agencies or China Development Bank, but they’re aware of these issues.
We see this changing all the time. Sinohydro Corporation, which is a major Chinese implementer of hydro powered dams overseas, are putting together a set of standards that they hope to be world class for environmental protections on their projects. If they actually implement them, that’ll be a huge improvement.
However, I think that right now the level of effort on environmental impacts is not very good. There is some evidence that it may be improving, and if it does improve it has a long way to go. So I agree with the critique on those kinds of issues wholeheartedly. And the social standards, labor standards, all of these are areas in which there’s huge room for improvement and ample area to criticize the Chinese companies.
You discuss in your book how the West has not been particularly transparent in aid reporting in the past, but in general it’s improved. Should China be encouraged to provide numbers on aid practices?
Yes. I would love it if they would. The only reason I think they don’t do this right now is that aid in the Chinese context is very political. I’ve been making the point that a lot of these flows of finance that were seen in Africa are not aid. With those kinds of things there’s a chance that we’ll see more transparency on flows than we will on the more diplomatic flows of grants, and zero interest loans. I think they won’t publicize the grants and zero interest loans which are the more political aid. There is a better chance that the concessional loans that come out of the China Eximbank will become more transparent because they were in the past. They published those until about 2001. But I’ve also been told that a decision of this nature would have to be done at the very highest levels in China, and right now the very highest levels have a lot of other things on their plate other than making a decision to release this kind of information. It just hasn’t happened yet.
One more point is that many people in China don’t like the idea of the Chinese government having a foreign aid program because there’s so much poverty in China still. This could end up being politically contentious, and that’s another reason why they just put it off, and they don’t gain a lot by publicizing it. It might be a risky thing for them domestically. In that sense they’re going to hold off on this for a while.
Would you comment on how – or if - Chinese engagement has affected African agriculture?
At this point there is not a lot of Chinese engagement in agriculture in Africa. There have been a few private farms that have been set up in places like Zambia, Cameroon, Ethiopia. By and large these have been relatively small. People who have looked into this have said that there aren’t any large confirmed Chinese projects that have actually been implemented above 50,000 hectares. This sounds quite large but it isn’t all that large when you think of the size of projects, the size of the African continent, and the size of other plantations that exist there. I actually have seen very few that are even above 10,000 hectares that are confirmed and actually in operation. So there’s not a lot of really large engagement by Chinese companies, and I suspect the government is not encouraging this because they know that this is an area in which there’s been a big backlash already after the food crisis of the past few years.
There are other areas of Chinese engagement in agriculture, and one of those is foreign aid. On the whole their engagement in agricultural foreign aid hasn’t had a lot of impact. They’ve sent a lot of agricultural technicians and they’ve had projects in almost every country across the continent over the years. Those projects haven’t had a lot of broad impact. They’ve had local impact but they’ve been very difficult to sustain, in part because local governments haven’t done a very good job of sustaining the benefits once the Chinese went home. Now they are proposing a new model that is a way of using aid to boost Chinese companies to set up a kind of a hybrid public private model. They will be doing this in 20 countries, and this will be relatively small scale. But these companies are going to try to find some kind of technology or technique, or some kind of product or idea that they can sell and that can make a profit. So this won’t just be something that requires continual subsidies but something where, for example, they might be promoting low technology but appropriate technology winnowing machines for rice, or promoting hybrid seeds for rice, or promoting fish ponds. There are other areas in which Chinese companies are supposed to explore what kind of product they could provide that would actually be of interest to Africa farmers, that they might want to buy or receive training in. This will ultimately be something that enables the company to sustain its operations there. So they get about three years of support and they have to make it on their own.
It’s an interesting model, it starts out as aid, but then it has to turn into a business so there would be some way that this company can create something that has a demand in Africa. It’s an actually more sustainable way of approaching agricultural engagement and assistance than most of what the Chinese have done in the past, or frankly what the West has done in the past which also hasn’t been very sustainable.
What is your outlook for the Chinese experience in Africa?
I think right now there’s a window of opportunity for African countries. Many of the approaches that the Chinese government is taking are coming under what’s called the FOCAC, the Forum on China Africa Cooperation. This whole effort is to position the Chinese well in Africa, for two reasons. First, because of their interest in resources, where they want to look like they’re coming in not just as “taking” but also “giving” and doing things that are of mutual benefit. But also because as Chinese government sees Africa as being an area of opportunity, and a broad based opportunity, not just in natural resources.
That window won’t be open forever. There will be areas where the Chinese will get frustrated just as Western companies have in the past. Nigeria is one example. Two Chinese companies there are building overseas economic zones but they are already having frustrations getting those up and running. Ethiopia is a similar case. While this window is open, African governments have an opportunity to parlay this Chinese interest in mutual benefit into things that they want.
Resource-based infrastructure loans is another example. Countries exporting resources can use these loans as a way to channel some of their natural resource wealth into infrastructure in ways that they haven’t been able to do in the past. It’s an “agency of restraint”, I argue, a window of opportunity for countries to take advantage of Chinese interest and then leverage it to their advantage.
As for the longer term, I imagine that the Chinese will probably go down one of two roads. They’ll either become more like the Japanese in Southeast Asia: known for promoting their own companies’ business but where local interest can also gain. A lot of the economic development we see in Southeast Asia can be attributed to Japanese infrastructure and Japanese investment in the 1970s and the 1980s. This is an underreported aspect of the Southeast Asian economic miracle. There’s a possibility that some parts of Africa could turn out to be more like some of the Southeast Asian countries in that regard.
There’s a saying in West Africa, W.A.W.A., that expatriates say whenever something just doesn’t work. They would say: “West Africa Wins Again: W.A.W.A. (wa-wa).” I think that many of the forces that are pushing against development in many African countries are very strong, and so I don’t think Chinese interests alone or Chinese engagement will be able to overturn those. In many countries we’ll see those forces rendering Chinese interests and Chinese engagement just as impotent as interest and engagement from the West has been over the years.
Professor Deborah Bräutigam is Associate Professor at American University. Her research focuses on China-Africa relations, foreign aid, industrialization, state-building, and development. She is the author of The Dragon’s Gift: The Real Story of China in Africa (Oxford University Press, 2009)
as well as publications on foreign aid and governance; taxation and state-building; global networks and comparative development in Africa and Asia. Her blog, chinaafricarealstory.com continues to delve into myths and realities of China's African engagement.
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