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Africa: Chinese dragon shifts its weight Print E-mail
Written by Tom Minney - Inter Press Service   
Thursday, 02 October 2008
Behind the media headlines about China's scramble into Africa, new trends are emerging of far-reaching involvement in finance, infrastructure and manufacturing. A two-way engagement even sees African lessons shaping Chinese foreign policy.

This is the argument presented by researchers from the South African Institute of International Affairs (SAIIA), a foreign policy think tank.

They were hosted by the African Union's Department of Economic Affairs in Addis Abeba recently. "We're at the end of the beginning of the Chinese surge into Africa," said team leader Chris Alden of the London School of Economics and Political Science. "China is diversifying its investments and changing its policies. It is developing a sustainable engagement."

Alden said media headlines describe China as "leading the charge" in a recent investment surge into Africa, under a "no conditions" aid and investment policy and welcomed by Africans rebelling against Western donors who link aid to democracy and governance conditions.

China's arrival is backed by deep financial pockets and a history of strong support for African independence. It has rapidly become a significant player in resources, especially in oil-rich Angola, Sudan and Nigeria, is Africa's leading infrastructure lender and is in the forefront of two-way trade.

Chinese construction firms are turning to Africa. Projects are often linked to access to Africa's rich resources but, once established, Chinese firms also compete in the local market.

Researcher Isaac Idun-Arkhurst, of the UK's Cambridge University, said China's growing aid programme to Ghana includes the 600 million dollar Bui Dam on the Black Volta River. China's Sino Hydro is building it and China's ExIm bank is financing it, backed by cocoa revenues. Sino Hydro has since won contracts on four more hydro-electric projects.

Chinese manufacturing in Africa is a change in a market used to deadly competition from cheap Chinese imports. In October 2007, Beijing’s Tianpu Xianxing Enterprises and Kenya's Electrogen Technologies started building the first solar panel factory in Eastern Africa, in a 125 million dollar joint venture. The plant highlights China's new role in creating local employment, technology transfer and a lasting partnership.

SAIIA’s Tsidiso Disenyana said solar energy is growing fast in Kenya, particularly in rural areas affected by poor transmission and distribution infrastructure. Some 200,000-350,000 photovoltaic systems are in use, demonstrating that solar power is viable even for poor households in an unsubsidized market. The new plant could bring the cost of panels down by 40 percent, ensure faster take-up of solar energy and be replicated elsewhere in Africa.

Chinese banks are entering emerging banking and capital markets just as the West is reeling and likely to focus on rebuilding at home, said SAIIA financial consultant Riaan Meyer. Chinese banks have little exposure to the "toxic products" that are crippling Western banks. "China has a unique problem -- it has too much cash," he said. Acquisition is one route into new markets, such as the Industrial and Commercial Bank of China's 5.5 billion dollar investment for 20 percent of South Africa's Standard Bank in October 2007; that purchase brings ICBC good banking systems and a presence in 18 African countries and London.

In project finance, Sonangol-Sinopec International, a joint venture between Angola's state oil company and a Chinese refiner, successfully bid a record 1.1 billion dollars for oil bloc 18 off Angola's coastline. The deal was opened to Western banks to help finance what one magazine termed African oil and gas "deal of the year".

Elaborating on China's policy after the presentation, Zhang Yeubang, Counselor at the Chinese Embassy in Addis Abeba, said China's cooperation with Africa follows principles of mutual respect, believing that countries should respect each other’s "dignity" and work on the basis of equality and mutual benefit.

Summing up, Alden said China is proving "the catalyst for African development", but must calm disquiet. On the positive side is the substantial hard infrastructure, including roads, railroads and hydro-electric dams, where the skills and overcapacity of China's construction sector means mutual benefit from the interaction.

On the negative side is "de-industrialisation" as Chinese imports destroy local manufacturers. In some countries, infrastructure projects are run by the Chinese embassies and handed over when complete. There is concern whether project supervision is adequate to ensure Chinese companies deliver to their potential. While state-owned companies are getting better at governance, private Chinese firms have a reputation for exporting "worst practice".

Problems such as sole sourcing, corruption and environment are not limited to the Chinese and many of Africa's previous partners are also guilty. Controlling them requires effective regulatory regimes and civil society, says Alden, and getting the best of the new partnership could "come down to African governance".
Last Updated ( Thursday, 02 October 2008 )