African Consensus can optimise gains in deals with China
SINCE the implementation of the policy of “opening up” under Deng Xiaoping in the 1980s, China’s evolving role in the world has attracted much attention from all continents including Africa. It is important to know, however, that China has been in Africa since the first Asia-Africa Conference in Bandung in 1955. In recent times the Forum on ChinaAfrica Co-operation is evidence of the deepening importance China attaches to its African engagement.
How has Africa viewed China’s involvement in the continent thus far? And what are the implications for Africa of an increasing Chinese role on the continent?
Official Chinese statistics indicate that foreign direct investment stock from China to Africa increased from below $50 million in 2000 to $2.6 billion (R21.9bn) in 2006.
One of the biggest landmarks in China’s investment in Africa was the Industrial and Commercial Bank of China’s $5.5bn purchase of a stake of about 20 percent in Standard Bank.
Annual trade between China and Africa grew from $20bn to over $100bn between 2000 and 2008. China’s engagements in Africa this year alone include partnership between Chinese telecoms firm ZTE and Movicel in Angola to introduce fourth-generation cellular services; aid for rice seed production in Nigeria; $3bn in loans from the China Development Bank for transport and oil and gas infrastructure projects in Ghana; and the construction in Uganda of a $350m Chinese-funded toll road from Entebbe International Airport to Kampala.
Certainly these are good signs of a beneficial role of China in Africa.
A number of critics have, however, viewed China’s involvement in Africa as suspicious and debilitating to Africa’s growth and competitiveness. It is argued that China’s growing presence in Africa is merely based on its search for energy and mineral resources, an export market for its light industrial products and a destination for migrant workers.
Simply put China’s presence in Africa is seen to be based on the exploitation of natural resources and a distortion of economic incentives in African economies. African businesses are being competed out of their own markets by China.
Is Africa really losing out? China is certainly obtaining a generous deal with energy supply from Africa and the benefits may be lopsided in China’s favour. To the extent that Chinese-owned small, medium and micro enterprises (SMMEs) are growing in African economies, Chinese firms have taken up some of the economic activity. But how many indigenous SMME businesses thrived in Africa prior to the recent Chinese economic engagements?
We ought to look at the net benefits of China’s engagements inAfrica and design strategies to engage China rather than focus on looking for bad investments.
Can we attribute the lack of vibrant indigenous SMME activity and growth to the presence of Chinese-owned SMMEs? I would argue that we ought to look at the net benefits of China’s engagements in Africa and design strategies to engage China rather than concentrate on looking for bad Chinese investments.
Take the Beijing model of giving aid in exchange for mineral resources, as applied in Angola and the Democratic Republic of Congo where loans were provided for economic and social infrastructure in return for oil, copper and cobalt. This model appeals to African governments given the absence of the usually intrusive aid conditionalities at Washington Consensus bodies.
As was reported by Jerker Hellström, an analyst at the Swedish Defence Research Agency, in his article “China’s emerging role in Africa”, an anonymous African leader described the Chinese as follows: “Their game is clear. They say: ‘I’ll build you a road, if you give me that mine.’ They are completely transparent.”
Though appealing, it is clear that Africa could be losing out in terms of giving up too much of its natural resources, if such deals are not designed strategically.
Hence rather than lobbying against China in Africa, there is a need for an African strategy on how to engage in such deals so as to generate optimal economic and social value.
Call it the African Consensus. Africa needs to have strategic and appropriate investment policy valuations, and this is by no means peculiar to China alone. Such valuations would indicate how much of a mineral resource should be given up for roads or railways, hospital equipment, agricultural inputs and machinery, among other things, and must measure economic value addition.
Another strategy that is often overlooked in Africa is the need to position domestic entrepreneurs to take advantage of foreign investment in the value chain.
For instance a major oil investment deal with China can be hinged on domestic businesses equipped to benefit from strategic partnerships on downstream activities such as production of fuel oil, paraffin wax, premium motor spirits, lubricants, synthetic rubber, plastics, fertilisers, antifreeze and pesticides.
Similar partnerships for agricultural investment would include rice and flour milling, leather tanning, cotton ginning, oil pressing and fish canning in midstream businesses and biscuit and noodle making, textile spinning and weaving, paper production, clothing and footwear manufacturing, and rubber manufacturers in down-stream businesses.
China has a long history of engagement with Africa, which is intensifying; it is up to Africa to decide whether to sit back and receive China on a Beijing Consensus basis or develop an African Consensus to engage China.