Afroshanghai Blog

Reading between the lines of extensive African and international press reports of Chinese president Hu Jintao’s visit to eight African countries this past week, one senses elements of double standards and sour grapes in the critical commentary as non-Chinese banks and construction, energy, mining and other companies lose out on African opportunities to their Chinese counterparts. We thought it would be useful to comment on some of the criticisms.

China, unlike just about every other country in the world, has a clear African strategy which is being implemented with military precision. President Hu Jintao’s visit is the third by a senior Chinese leader in twelve months; in November 2006, more than 40 African heads of state attended a China-Africa meeting at which more than US$ 3 billion of Chinese preferential credit was promised, China said it wanted trade of US$ 100 billion per year with Africa by 2010 and 16 agreements worth US$ 1.9 billion were signed; and the next AGM of the African Development Bank is scheduled to be held in Beijing later this year. China’s march into Africa is assisted by the fact that most large Chinese companies have a component of state ownership and can rely on cheap credit and access to foreign exchange generated as a result of China’s managed remnimbi.

A common criticism is that China has not done enough to persuade the Sudanese government to resolve the Darfur problem; at this stage only the participants know what was discussed when the Chinese and Sudanese presidents met last week. China, like the USA, is determined to reduce dependence on oil supplies from the volatile Middle East by developing African production even though this means developing relations with unsavoury regimes in places like Equatorial Guinea and Chad (for the Americans) and Sudan (for the Chinese). Over the years, South Africa’s President Mbeki has come in for a lot of criticism for not taking a tough line with the government of neighbouring Zimbabwe, though African leaders did again deny Sudan’s president the chairmanship of the AU, while G7 leaders are not exactly renowned for taking advice from foreign leaders, specially those in the third world.

Chinese low interest, no strings attached loans to African countries have also been attacked, though the arguments are not always consistent. Some say African countries should not borrow, yet look at how the US deficit balloons month by month. Others say there should be conditions of good governance attached, yet just look at all the critical analyses of conditional loans given by the World Bank, the IMF and other institutions over the past thirty years, most of which have failed to achieve their objective. In many cases, Chinese loans are being used to build infrastructure, something of a contrast to the expensive military systems foisted on African countries in a welter of bribery and corruption, still being sorted out in the UK, France, Germany and beyond. Now, in reaction to the Chinese activity, Germany is proposing a scheme of indigenous bond markets, to be discussed at a G7 meeting rather than at a forum where developing nations have full representation. Having said all that, there is probably an unsaid string attached to all the loans which will evidence itself in international forums where African countries increasingly back Chinese initiatives.

In Zambia, particularly, there’s a complaint about the low wages being paid on the Copperbelt by Chinese companies. Ten years ago there was next to no mining - or employment - in Zambia, while today the country booms thanks to Chinese demand. There’s nothing to stop the Zambian government, which has its roots in the union movement, introducing a minimum wage and ensuring workplace inspectors do a proper job. There’s also a complaint about the number of Chinese being employed on African projects, perfectly valid if there are locals able to do the job. However, unlike the pampered expatriates representing Western multinationals in Africa, Chinese expatriates live frugal lives in simple accommodation.

One of South Africa’s gripes is that there has been much more investment by South African companies in China than vice versa. Already this is starting to change with at least two recent reports of Chinese investment in South African mining companies. With the recent change in China’s stance on foreign investment anywhere in the world, we can expect to see this imbalance change significantly in the year ahead. I’m not sure African companies, used as they are to seeking capital in Johannesburg, London, New York or Toronto, have the new nous to attract Chinese investors?

There’s a lot been written about the flood of cheap manufactured goods into Africa - and indeed just about every country in the world - and how it has affected local industry. South Africa tried to stem the tide by restricting imports of Chinese clothing and textiles only to see them replaced by imports from Vietnam and the rest of East Asia, rather than by local producers. China has lifted import restrictions on a long list of African products, unlike the EU which uses subsidies and other hurdles to prevent imports from the continent. In time, Chinese standards of living and, by extension, wages, are going to rise making their products less competitive. High oil prices and carbon taxes are going to make unviable the transport of raw materials to Asian factories only for the finished goods to be transported back to Africa. African countries need to be proactive in looking at how they can compete by using their own low cost, unskilled labour harnessed to beneficiation and manufacturing, downstream from the mines and using cheap hydropower from the Congo and Zambezi River basins.

Sources: Mbendi.com

This entry was posted on Thursday, February 15th, 2007 at 1:53 pm and is filed under China, Africa. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.