Thursday, April 22, 2010

Africa-China Relationship

Recently China has anted up her investments in Africa, and it has opened up a great debate among folks who are interested in these issues. This months Atlantic magazine has a very balanced read on Chinese investment in Africa that is worthy of checking it out.

Some excerpts

The problem is to determine what is Africa’s place in the future of the global economy, and up to now, we have seen very little that is new. China is taking the place of the West: they take our raw materials and they sell finished goods to the world What Africans are getting in exchange, whether it is roads or schools or finished goods, doesn’t really matter. We remain under the same old schema: our cobalt goes off to China in the form of dusty ore and returns here in the form of expensive batteries

But also
“Statistics are hard to come by, but China is probably the biggest single investor in Africa,” said Martyn Davies, the director of the China Africa Network at the University of Pretoria. “They are the biggest builders of infrastructure. They are the biggest lenders to Africa, and China-Africa trade has just pushed past $100 billion annually.”

Davies calls the Chinese boom “a phenomenal success story for Africa,” and sees it continuing indefinitely. “Africa is the source of at least one-third of the world’s commodities”—commodities China will need, as its manufacturing economy continues to grow—“and once you’ve understood that, you understand China’s determination to build roads, ports, and railroads all over Africa.”

Everywhere I traveled in Africa, people spoke in defense of conditionality—the attachment of good-governance strings to loans from the West. “Many people look at Western conditions as a good thing, because nowadays so many things can be discussed openly, unlike the past—like corruption, for example,” said John Kulekana, a veteran Tanzanian journalist. “There are no more demigods here, and that is because of the growth of civil society, which has received lots of help from the West. Former ministers are called to account for their behavior. We are building accountability.”

The fact that China model of developing Africa neglect accountability from local government is troubling, because only with a strong government real development can be achieved. Westerners imposing conditions on loans (apart from lending to Mobutu) is an attempt to improve governance that Chinese seems not to care much about

Few Zambians have been lifted into the middle class by Chinese mining activity, and today, Sata remains unrelenting in his criticisms of China. “Our [Chinese] friends are too numerous, and we know their resources cannot sustain them,” Sata told me in his Lusaka office, taking phone calls from constituents and filling out a lottery card as he reeled off a catalog of reproaches. “Zambians do not need labor being dumped here. The Chinese are scattering all over the world, but there is no such thing as Chinese investment, as such. What we’re seeing is Chinese parastatals and government interests, and they are corrupting our leaders.”

“The idea that big influxes of wealth will help Africa has never really panned out,” Patrick Keenan, an Africa specialist at the University of Illinois, told me. “When the path to wealth goes through the presidential palace, there are enormous incentives to obtaining power and to holding on to it. This kind of wealth incites politicians to create economically wasteful projects, and it relieves them of the need to make politically difficult choices, like broadening the tax base.”

I welcome Chinese approach in investing in Africa, but it has to be done in ways that do not deviate from simple rules of economics. Building schools, and roads are noble things, but who is going to teach the kids and how are the roads going to be maintained in the future? The noble way will be to transfer knowledge to local people, so as they can sustain themselves. China's way is to have their own firms and their own workers doing the work. And the worst part is they take raw materials (not refined products) to their country for further processing. This is the same process that took place in Africa during colonialism.

What do you guys think about this?

The whole article is here


misokasick said...

Thuwein, I agree that this relationship should be careful measured. I actually believe that they can continue to make investments in Africa, but let us do take social responisbility to our own hands. When firsm hide under social responsibility very little finance trickles down to building the necessary infrastructure needed for our communities.
Also our governments should not rush into signing dubious contracts that lead to nowhere. We should embrace this relationship with caution.
Thanks for the article

Anonymous said...

It does not matter who invest. Weather it is the western countries or China. The responsibility of getting the benefit for the country from any deals is in the hands of the country leaders. China will build railway from kiwira and mchuchuma to the mtwara port who benefits more? China's extraction of our raw materials or our utilization of the rail road?

Japan likes to build roads in Africa. Ofcourse the aim is to export more cars. So who benefits more Tanzania or japan? and the most humiliating is the latest Barrick Afirica Assets. The company which has over 80% of its assets in TZ has only 4 Tanzanian public investors, two individuals and two companies. I am not sure why? but according to newspapers it is because the whole IPO process was not managed properly. So the company now it is worth more than $4bln which is close to 25% of TZ's GDP. and that is just one company. There is Uranium coming, there is Songas, there is Oil just declared, there is Aluminium, Iron ore, and most of all Diamonds among others.

If you read the latest mining bill passed last week it makes you feel that who ever drafted it never heard of Botswana - the only A rated country in Africa by S&P and Moody's. For those who want to know, that is better that Portugal or Spain. That A credit rating did not come by chance. The laws and Botswana's leaders have make sure that any deal (i.e. relationship) benefits the country. The government invests -- here I mean pure cash capital-- in all mining partnership. That way they come in as equal partners with board seats and all.

So Thuwein, it is a great question in an election year: Who benefits when we put our country in a business relationship?

salama said...


The Barrick co.'s assets details and the relationship it has with our country, cast a chill. It's grotesquely odd to learn that, almost a quarter of our gross domestic product's in their hands. With this in mind, how are we going to sit in the same room with a country like China and be able to come out with a constructive strategy for the benefit of OUR country? China, with a speed of Gonzalez invests all over the world, in the land and the seas.

Yap!, it should be one of the debate questions in this election year, should be interesting to hear how candidates will discuss it.