China in Africa: Neo-colonialism or Development?

4 months ago Ricardo Hylton 0

(This is part two of a two part series. Last week we focused on Jamaica and the Caribbean. This week we’ll examine the Chinese in Africa).

 

Addis Ababa has a surprise in store for those who haven’t visited in a few years. Cutting through the heart of this booming city, where construction cranes are the most persistent feature of the skyline is the Addis Ababa Light Rapid Transit (AALRT) network. It rears up suddenly at Meskel Square, which until 2013 gazed out onto an expanse of chaotic traffic. The traffic now bustles beneath the shadow of what is only the second metro ever built south of the Sahara.

On the back of the green and white trains that trundle up and down the line are not one, but two logos: the Ethiopian Railways Corporation, and, next to it, the logo of the giant state-owned China Railway Group (CREC).

How did China get involved in developing an African metropolis that westerners tend to associate with famine and death? And this is just one project among many across the continent. In 2014 alone, China signed more than £56bn in construction contracts across Africa. Since the turn of the century, Chinese firms have built stadiums, highways, airports, schools, hospitals and, in Angola, an entire city that still stands empty. China has pumped hundreds of billions of dollars into African governments and infrastructure. In return, it has reaped hundreds of billions in commodities.

 

A Neo-colonial land grab

The China-Africa relationship — partly spontaneous and partly the fruit of an orchestrated push from Beijing — is shifting the commercial and geopolitical axis of an entire continent that many western governments had all but given up on. While Europeans and Americans view Africa as a troubling source of instability, migration and terrorism — and, of course, precious minerals — China sees opportunity. Africa has oil, copper, cobalt and iron ore. It has markets for Chinese manufacturers and construction companies. And, perhaps least understood, it is a promising vehicle for Chinese geopolitical influence.

 

“To have 54 African [nations as] friends is very important for China,” says Jing Gu, director of the Centre for Rising Powers and Global Development in East Sussex, who contrasts Beijing’s mostly good ties with African governments with the tense relationship it has with neighbors from Tokyo to Hanoi.

Many, including some Africans, are suspicious of what they see as a neocolonial land grab, in which companies acting as proxies for the Chinese state extract minerals in return for infrastructure and finance that will saddle governments with large debts. The behavior of Chinese actors in Africa, in common with those from the west, has often fallen short of the exemplary. There have been legitimate complaints about Chinese companies employing few locals, mistreating those it has and paying scant regard to the environment.

 

The New Scramble for Africa

Few in Africa are certain that there is fair quid pro quo at play here. Is this the dawn of a new colonialism, they wonder, a new scramble for Africa in which the continent is once again left in tatters? Or is it the beginning of an era during which Africans shakes off old colonial masters and look elsewhere for direct investment and aid?

At St Estfanos station, an empty USAID wheat sack serves as a garbage bag. This serves as a neat analogy of the competing interests in Ethiopia, and also of the different approaches. For the West, the country has always been a basket case, or alternatively, a bulwark against Islamist extremism. For the Chinese, it represents a vast, untapped market: a country of almost 100 million people, 90% of whom are unbanked, primed to roar through the remainder of the century as a force in Africa, and beyond.

 

Chinese priorities change: from politics to minerals

Over the course of the commodities super-cycle, the boom market for natural resources such as oil, steel, gold, manganite and platinum, lasting roughly from the turn of the century to 2013, China and sub-Saharan Africa’s economies were effectively coupled: when graphed, they mirrored each other. China purchased raw materials to fuel development at home, while massive state-owned organisations entered the African market, alongside Chinese-made goods and half a million Chinese migrants.

Did this epochal encounter between 1.3 billion Chinese, and 1.1 billion Africans – nearly a third of the planet’s population – maintain any of the coherent strands of a “win-win” friendship? Was the relationship still guided from above by bureaucrats in Beijing’s Ministry of Foreign Affairs who knew exactly what they wanted, and could easily benchmark the outcomes?

Not at all. The Sino-African phenomenon has become much more sophisticated and highly fragmented and is no longer stage-managed by governments. Nowhere is this better shown than by a project announced in Johannesburg in 2013. That year, the South African press began reporting on a vast £4.8bn real estate development in Modderfontein, north-east of the city, continually citing that fact that it would be financed and constructed by “the Chinese”.

The press was never clear on what was meant by “the Chinese”. The details were surprising: the Modderfontein New City endeavour was headed by Zendai Group, a Hong Kong-listed company run by an eccentric, goateed entrepreneur named Dai Zhikang. Most of the group’s more successful projects were undertaken in Shanghai. The plan was that the South African community, stretching over tens of thousands of hectares, would include “all the functions of a city, such as finance, trade, logistics, commerce, technology, education, health care and housing”. Modderfontein New City, the company’s website insisted, would become “the New York of Africa,” with twisty postmodern skyscrapers and gigantic retail outlets, all operating on a green grid.

Was this a nothing more than an old-school land grab, orchestrated by Beijing in a tidy neo-colonial manoeuvre? That was certainly the implication of the earliest news coverage. But on closer inspection, Modderfontein was just an ambitious real estate play that required big injections of private equity from South Africans. Zendai purchased an initial 1,600 hectares of land for about £57m, and put another £22m into infrastructure. The idea was to attract partnerships and other dealmakers, who would in turn attract others – a growth strategy based largely on the same real estate agent spin encountered anywhere in the world.

Setting aside the big numbers, the big ideas and the big anxiety, there was nothing sinister about Modderfontein New City. Indeed, three years after the initial purchase Dai seems to have lost interest in real estate, and has dived into the Chinese art market. His South African arm, Zendai Development SA, is trucking along with the project. Whether the New City becomes a reality is anyone’s guess.

Nonetheless, as American and British populists prepare to close their doors to the outside world, and as Western influence dims across the continent, China may well be the catalyst Africa has required to leap forward into the future. But with the pros come some serious, unanticipated cons.

Addis Ababa’s light railway, while it hasn’t quite made beaten up Lada taxis obsolete, has so thoroughly transformed the city that it counts as a work of urban alchemy. But the social cost may yet prove immense: as Addis expands and explodes, the city’s borders push into land belonging to the Oromo people, causing social ruptures and violence. Ethiopia is facing its own muted version of the Arab Spring.

 

Globalization 2.0: A New Marshall Plan

 Mr. Xi, the Chinese President, is aiming to use China’s wealth and industrial know-how to create a new kind of globalization that will dispense with the rules of the aging Western-dominated institutions. The goal is to refashion the global economic order, drawing countries and companies more tightly into China’s orbit.

The projects inherently serve China’s economic interests. With growth slowing at home, China is producing more steel, cement and machinery than the country needs. So Mr. Xi is looking to the rest of the world, particularly developing countries, to keep its economic engine going.

“President Xi believes this is a long-term plan that will involve the current and future generations to propel Chinese and global economic growth,” said Cao Wenlian, director general of the International Cooperation Center of the National Development and Reform Commission, a group dedicated to the initiative. “The plan is to lead the new globalization 2.0.”

Mr. Xi is rolling out a more audacious version of the Marshall Plan, America’s postwar reconstruction effort. Back then, the United States extended vast amounts of aid to secure alliances in Europe. China is deploying hundreds of billions of dollars of state-backed loans in the hope of winning new friends around the world, this time without requiring military obligations.

Mr. Xi’s plan stands in stark contrast to President Trump and his “America First” mantra. The Trump administration walked away from the Trans-Pacific Partnership, the American-led trade pact that was envisioned as a buttress against China’s growing influence.

“Pursuing protectionism is just like locking oneself in a dark room,” Mr. Xi told business leaders at the World Economic Forum in January.

 

Changing Relationship

A few numbers illustrate the shift in Sino-African relations. In 2000, China-Africa trade was a mere $10bn. By 2014, that had risen more than 20-fold to $220bn according to the China Africa Research Initiative at Johns Hopkins School of Advanced International Studies in Washington, though it has fallen back because of lower commodity prices. Over that period, China’s foreign direct investment stocks have risen from just 2% of US levels to 55%, with billions of dollars of new investments being made each year. China contributes about one-sixth of all lending to Africa, according to a study by the John L Thornton China Center at the Brookings Institution.

Certainly, China has been attracted by Africa’s abundant resources: oil from Angola, Nigeria and Sudan, copper from Zambia and the Democratic Republic of Congo, and uranium from Namibia. Chinese companies appear to have made an effort to corner the market for cobalt, crucial for the production of electric car batteries, with multibillion-dollar purchases of stakes in mines in Congo, the world’s biggest producer. From Libya and Zambia to Ghana and Mozambique, Chinese businesses have gained a reputation for unbridled extraction, whether of old-forest timber, oil, gold or illegal ivory.

Yet the emerging China-Africa relationship goes well beyond commodities. One of the top destinations for Chinese investment in Africa is Ethiopia, a mostly resource-poor country of 100m people that is pursuing Chinese-style state-led development. Ethiopia has few resources of interest to China other than its strategic location and potentially large market, should its fast growth of the past 15 years prove sustainable. Since 2000, Ethiopia has been the second-biggest recipient of Chinese loans to Africa, with financing for dams, roads, rail and manufacturing plants worth more than $12.3bn, according to researchers at Johns Hopkins. That is more than twice the amount loaned to oil-soaked Sudan and mineral-rich Congo. In fact, a far larger portion of US direct investment — 66% vs 28% for China — goes into mining.

From Africa’s perspective, although China presents risk it brings tangible benefits in finance and engineers. More importantly, it brings choice. That is welcome for African governments that have, for decades, been locked in often unproductive relationships with foreign donors who have brought billions of dollars in aid, but also, in the 1980s and 1990s, brought what many view as the ruinously prescriptive Washington consensus of market-based development and reform.

 

Disquiet

Yet there is disquiet about the rise of Chinese influence. “I think the Chinese know what they want. It is the Africans who don’t know what they want,” says PLO Lumumba, director of the Kenya School of Law. “China wants to control. China wants to be a world power,” he says, adding that African governments are taking on so much Chinese debt that they will be in economic and political hock to Beijing.

Godfrey Mwampembwa, a cartoonist better known as “Gado” whose political satire is syndicated all over Africa, says something similar. “It’s the same old story: now you have the Chinese conquering Africa, but what is Africa getting out of it?” In one of his cartoons, Lilliputian African leaders shake the hand of a towering Chinese figure. The caption reads: “We are equal partners.”

In an interview with the Financial Times, Uhuru Kenyatta, the Kenyan president who has used Chinese billions and engineering know-how to mount a huge infrastructure push, expressed concern at the fact that Africa has moved into trade deficit with China. Beijing he says, is “beginning to appreciate that, if their win-win strategy is going to work, it must mean that, just as Africa opens up to China, China must also open up to Africa”.

Chinese peacekeepers in South Sudan say Africans’ view of China “is still positive, but not as exuberant as it was”. People welcome the infrastructure, he says. But they insist their governments should not be taken for a ride, either by overpaying, accepting shoddy work or allowing Chinese companies to use all their labour and materials.

Africans resent it, he says, when corrupt governments inflate the price of projects — as has been alleged with the $4bn Mombasa-Nairobi railway, inaugurated in June — to make space for kickbacks. Still, he adds, Chinese companies have become more attuned to such issues than critics suggest. A decade ago, they thought that dealing with the government was enough. Now they realize, they also need to engage civil society and international non-governmental organisations on issues from local skills to the environment. Chinese companies like to be seen to be transferring skills. Huawei, which earns 15% of its global revenue in Africa, trains 12,000 students in telecoms a year at centers in Angola, Congo, Egypt, Kenya, Morocco, Nigeria and South Africa.

According to Johns Hopkins researchers, 80% of workers on Chinese projects are African, even if many are in low-skilled jobs such as trench-digging.

Yet Africans are increasingly suspicious of Chinese firms, worrying about unfair deals and environmental damage. Opposition is fuelled by Africa’s thriving civil society, which demands more transparency and an accounting for human rights. This can be an unfamiliar challenge for authoritarian China, whose foreign policy is heavily based on state-to-state relations, with little appreciation of the gulf between African rulers and their people. In Senegal residents’ organisations last year blocked a deal that would have handed a prime section of property in the center of the capital, Dakar, to Chinese developers. In Tanzania labor unions criticized the government for letting in Chinese petty traders.

Some African officials are voicing criticism of China. Lamido Sanusi, Nigeria’s former central bank governor says Africa is opening itself up to a “new form of imperialism”, in which China takes African primary goods and sells it manufactured ones, without transferring skills.

After years of bland talk about “win-win” partnerships, China seems belatedly aware of the problem. On a tour of the continent, the Chinese foreign minister, Wang Yi, said on January 12th that “we absolutely will not take the old path of Western colonists”. Last May the Prime Minister, Li Keqiang, acknowledged “growing pains” in the relationship.