Sub-Saharan Africa and China: A Fairy Tale Match?

It seems that 2015 has been the year of Africa: Africa rising and Africa not rising. Yet, as the public is hearing more about the continent from news outlets, the discourse often centres on China and its role in Sub-Saharan African countries (Table 1). Although this conversation tends to split into two main camps, where China is either portrayed as an altruistic party or as a neo-colonialist jostling against the West for a new ‘scramble’ for Africa[1], it must be said that there is a plurality to China’s actions. When discussing Sino-African relations, China does not have a single ‘role’, but multiple roles—plural, that differ depending on the country and that go beyond mere aid.

These roles include providing foreign direct investment and implementing engineering contracts[2]. Although much of the foreign direct investment goes towards energy and mineral resources[3], public and private Chinese organisations are also financing agriculture[4], purchasing real estate[5] and providing services[6]. China has played a major role in building and rehabilitating physical infrastructure from roads, railway links and seaports, to telecom networks, power stations and dams[7]. Existing infrastructure in Sub-Saharan Africa (SSA) is often the legacy of colonial histories. It was never intended for the benefit of the peoples[8] and, thus, fails to meet their economic and social needs. The importance of infrastructure cannot be discounted. Good infrastructure facilitates access to employment opportunities, healthcare and goods and services. This is generally positive for improving welfare and living standards, as well as for businesses operating in SSA countries because it ensures greater mobility of the factors of production. As Alice Sindzingre notes, the poor level of infrastructure in SSA limits internal and external trade for the countries within the region; not only do ‘trade delays reduce export’, but the poor level of infrastructure has an adverse effect on export diversification[9]. Simply put, if the infrastructure to promote trade growth in existing sectors does not exist, it is much more difficult, if not impossible, to expand production to different sectors and diversify economies.

Image courtesy of Gavin Houtheusen/Department for International Development, © 2013, some rights reserved.

This point is quintessential. Since the beginning of the millennium, dependency on primary products in SSA has increased[10]. Let us take Ethiopia, Nigeria and Zambia as examples, since these three countries are amongst the recipients of the most Chinese overseas direct investment (ODI), and therefore will recur often in this discussion[11]. In 2014, export of oil and mineral fuels accounted for 90.85 per cent of Nigeria’s total exports (exports made up 16.1 per cent of the nation’s GDP)[12]. Similarly in that same year, exports made up 40.9 per cent of Zambia’s GDP and of that value, copper exports accounted for an enormous 74.43 per cent of Zambia’s total exports[13]. Although there was arguably more diversity in Ethiopia’s exports compared to that of Zambia or Nigeria, both of which centred, in that they did not centre on one resource, what Ethiopia exported was largely commodities. In 2014, exports made up 11.71 per cent of Ethiopia’s GDP[14]. These exports were dominated by oils and mineral fuels (19.03 per cent), coffee and spices (18.73 per cent) and vegetables (16.53 per cent)[15]. Similar patterns are seen across economies in SSA. It is this dependency on raw products and this failure to industrialise that makes African countries so susceptible to fluctuations in global commodity prices.

This is where Chinese investment comes in. If life is imagined as a story book and Sub-Saharan African countries are the protagonists, economic growth and development are the goals that the protagonists are attempting (and struggling) to realise and Chinese overseas investment is the deus ex machina that brings hope to the tale. As previously mentioned, good physical infrastructure is linked to greater producing potential and export diversification, possibly even reducing susceptibility to fluctuating commodity markets. Hence, the willingness of the Chinese to build infrastructure could, in theory, help spur necessary structural changes in the economies of Sub-Saharan African countries. Beyond simply the provision of infrastructure, the conditions under which the Chinese government and private firms are making this happen are perceived as more favourable than potential Western financers: Beijing promotes a mutually beneficial relationship between China and the African trading nations.

Unlike the World Bank, the International Monetary Foundation and other Western-oriented organisations and countries, Chinese investment in SSA tends to have fewer conditions attached. China’s policy of non-interference in the domestic affairs of other states means that China is wary to trade or give aid on the basis of the ability to meet stipulations, such as certain levels of good governance or human rights, or indeed, cultural or religious conditions[16]. While controversial, China’s non-interference has meant that the Chinese have invested in countries that Western bodies often do not or are cautious of—Sudan and resource-rich Angola for example[17]. Although it may be argued that China runs into ethical issues when forming ties with governments deemed ‘problematic by the West’, Zhiqun Zhu and Ian Taylor point out that China is not unique in this regard: many Western governments are guilty of the same behaviour [18]. Whereas condition-based aid may satisfy the conscience of the donating organisation, the time and resources necessary to fulfil any stipulations may inhibit countries from receiving aid. Moreover, setting stipulations for the receipt of aid assumes that the philosophy of the donor aligns with the needs and goals of the countries allegedly being helped. Often, the stipulations do more harm than actual good; the colonial and modern histories of many African countries examples attest to this. Ghana is one of many examples, where carrying out policy prescriptions, in this case those demanded by the International Monetary Fund (IMF), ‘led to socio-economic hardships and political instability’. It must be said that China’s policy of non-interference in domestic affairs is attractive to political leaders across SSA, regardless of whether they are involved in democratic, pseudo-democratic or authoritarian regimes[19]. Chinese non-interference permits Sub-Saharan African governments’ access to aid and investment with a perceived level of autonomy.

Yet, despite the attraction of Chinese involvement in many Sub-Saharan African countries, there are multiple concerns about the costs of Chinese financing. Given the history and current implications of China’s own development model, the environment is a huge point of contention. Although China managed to rise from low levels of economic development over the course of a relatively short period of time, China’s ‘growth-at-any-cost attitude’[20] to economy building has compromised the health of the environment and that of the public[21], calling China’s potential for long-term growth into question. Due to air pollution alone, life expectancy is 5.5 years lower north of the Huai River[22]. This reality is frightening. For SSA, there is significant worry given that Chinese ODI, as is the case of most foreign direct investment in African countries, concentrates in sectors that bear high environmental risk, such as fishing, oil and gas, mining and forestry, as well as in ecologically-fragile, remote regions that were previously under protection such as national parks[23] [24]. Chad has already fined and withdrawn exploration permits from the China National Petroleum Corporation for ‘unacceptable practices’ that caused oil spills at drilling sites[25]. Approximately 80 per cent of logged hardwood timber in Mozambique, which is largely exported to China, is harvested illegally[26]. Furthermore, in 2015 there was frustration over Chinese trawlers overfishing and illegally fishing off the coast of West Africa[27]. These are not isolated events, and neither are they restricted to any one Sub-Saharan African country or one particular industry, which raises questions about the true nature of China’s agenda in SSA.

Xi Jinping talks of embracing ‘a new era of win-win co-operation and common development’[28], and the Beijing government has been keen to invoke the idea of ‘South-South solidarity’[29]. Nevertheless, the relationship between China and many Sub-Saharan African countries appears to be one of a classic core-periphery dependency: the periphery (SSA) supplies the core (China) with primary products and the core exploits the periphery[30]. As a result, the demands of the core’s economy dictate the economy of countries in the periphery, and thus, the economies of the periphery are ‘very vulnerable to fluctuations’[31]. This is certainly the case for many Sub-Saharan African countries as China experiences a slowdown in its own economic growth[32]. It was China that drove the commodity boom, but China’s decreased growth has triggered a fall in commodity prices[33]. Zambia is perhaps the best example of this nefarious dependency. In 2015, the price of Zambia’s principal export, copper, fell 30 per cent, which led to loss of jobs in the copper mines and a 45 per cent depreciation in Zambia’s currency, the kwacha[34]. Similarly in Angola, which relies on petroleum exports to finance their economy[35], much of which is bought by China, the combined fall in global oil prices and decrease in demand from China has led to widespread job loss[36]. The National Bank of Angola, Angola’s central bank has spent a third of its reserves—$10 billion—to keep the depreciation of the Angolan kwanza against the dollar at around 30 per cent[37]. Depreciating currencies will make it harder for many Sub-Saharan African governments to repay the Chinese loans that are financing large infrastructure developments[38]. Moreover, despite the ‘broad diversification’ of Chinese investment, it tends to be channelled into extractive industries, like the production of natural gas[39]. With the exception of the Huajian shoe factory in Ethiopia and the Yuemei group in Nigeria, large export-oriented firms are not attracted to countries in SSA[40]. For those familiar with imperialism on the continent, this cycle is painfully familiar. Arguably, one way to mitigate the dependency of Sub-Saharan African economies on China’s economy would be for African countries to diversify their economies[41]. However, this depends on the will of governments and the political elites in SSA.

In itself, China’s involvement on the continent is not necessarily harmful. China is using its large manufacturing base to provide much needed infrastructure in many Sub-Saharan African countries, and this infrastructure has the potential to increase production and promote growth in the long-run. Although China’s motives are not altruistic, and it would be foolish to maintain that they are, there are positive benefits to be reaped on all sides. The question becomes how do countries in SSA position themselves to maximise any potential benefits? Of course this will differ between countries, but in many cases, it will depend on the ability of political elites and governments on the continent to construct—and implement—smart policies: policies with the interests of the long-term health of their country’s economy in mind. Ultimately, pushing for economic diversification may be one way that SSA can utilise this alleged ‘partnership’[42]—to borrow Xi Jinping’s words—to improve the realities of the billions in the region.

Table 1. List of Sub-Saharan African countries by geographical region

Source: Wikipedia

* Rwanda and Burundi are sometimes considered part of Central Africa

^† Mozambique, Madagascar, Malawi, Zambia and Zimbabwe may be considered part of Southern Africa

^◊ São Tomé and Príncipe may be considered part of West Africa

^‡ Since gaining independence in 2011, South Sudan has largely been classed as Central African

Groupings vary depending on the classification scheme (often due to political recognitions and memberships). The above follows geographical classifications as closely as possible.

[1] Kopiński, D, Polus, A and Taylor, I, “Contextualising Chinese Engagement in Africa,” Journal of Contemporary African Studies 29, no. 2 (April 2011): 134, http://www.tandfonline.com/.

[2] “INFOGRAPHIC: China’s Total Investment in Africa.” South China Morning Post. December 7, 2015. http://www.scmp.com/news/china/diplomacy-defence/article/1887975/infographic-chinas-total-investment-africa.

[3] The Economist Intelligence Unit. Playing the Long Game: China’s Investment in Africa. Report. Mayer Brown, 2014. Accessed January 30, 2016. https://www.mayerbrown.com/files/Publication/4189bfee-0710-4614-af4f-7344189b6cef/Presentation/PublicationAttachment/1593bcb4-d17d-4d27-a120-cd72c7ecd73b/MB-Economist-Intelligence-Unit-Report-2014_ENFinalLR.PDF. 4 report

[4] Brautigam, Deborah. “5 Myths About Chinese Investment in Africa.” December 4, 2015. http://foreignpolicy.com/2015/12/04/5-myths-about-chinese-investment-in-africa/.

[5] INFOGRAPHIC

[6] The Economist Intelligence Unit, Playing the Long Game, 4

[7] The Economist Intelligence Unit, Playing the Long Game, 10

[8] Taylor, Ian. “Globalization in Africa: Recolonization or Renaissance? by P. Carmody Boulder, CO: Lynne Reinner, 2010. Pp. 195, £47.50 (hbk).” The Journal of Modern African Studies J. Mod. Afr. Stud. 50, no. 03 (2012): 536.

[9] Sindzingre, Alice N. “The Ambivalent Impact of Commodities: Structural Change or Status Quo in Sub-Saharan Africa?” South African Journal of International Affairs 20, no. 1 (April 24, 2013): 43. http://www.tandfonline.com/.

[10] Taylor, Ian. “Dependency Redux: Why Africa Is Not Rising.” Review of African Political Economy, October 23, 2015, 11. http://www.tandfonline.com/.

[11] Chen, Wenjie, David Dollar, and Heiwai Tang. Why Is China Investing in Africa? Evidence from the Firm Level. August 2015, 8. http://www.brookings.edu/~/media/research/files/papers/2015/08/why-china-is-investing-in-africa/why-is-china-investing-in-africa.pdf.

[12] Michigan State University. “Nigeria: Trade Statistics.” Accessed January 30, 2016. http://globaledge.msu.edu/countries/nigeria/tradestats.

[13] Michigan State University. “Zambia: Trade Statistics.” Accessed January 30, 2016. http://globaledge.msu.edu/countries/zambia/tradestats.

[14] Michigan State University. “Ethiopia: Trade Statistics.” Accessed January 30, 2016. http://globaledge.msu.edu/countries/ethiopia/tradestats.

[15] Ibid.

[16] Taylor, ‘Contextualising Chinese Engagement in Africa,” 130

[17] Mungai, Christine. “China’s Investment in Africa Isn’t What You Think, and It’s Not Mostly with ‘rogue’ States.” September 8, 2015. http://mgafrica.com/article/2015-09-08-china-investment-in-africa-the-myths.

[18] Taylor, Ian. “China’s New Diplomacy: Rationale, Strategies and Significance.” The Round Table 103, no. 1 (January 30, 2014): 133.

[19] Taylor, ‘Contextualising Chinese Engagement in Africa,” 130

[20] Wong, Edward. “Beijing Takes Steps to Fight Pollution as Problem Worsens.” The New York Times. January 30, 2013. http://www.nytimes.com/2013/01/31/world/asia/beijing-takes-emergency-steps-to-fight-smog.html?ref=environment&_r=0.

[21] Albert, Eleanor, and Beina Xu. “China’s Environmental Crisis.” January 18, 2016. http://www.cfr.org/china/chinas-environmental-crisis/p12608.

[22] Ibid.

[23] Ibid.

[24] Bosshard, Peter. China’s Environmental Footprint in Africa. Report. April 3, 2008, 3. https://www.internationalrivers.org/files/attached-files/saiia_policy_briefing_508.pdf

[25] Shinn, David H. “The Environmental Impact of China’s Investment in Africa.” August 4, 2015. http://intpolicydigest.org/2015/04/08/the-environmental-impact-of-china-s-investment-in-africa/.

[26] Ibid.

[27] Igwegbu, Ada. “West Africa’s Coastal Problem: Foreign Trawlers.” November 3, 2015. http://foreignaffairsreview.co.uk/2015/11/west-africas-coastal-problem-foreign-trawlers/.

[28] England, Andrew. “China’s Xi Jinping Commits to ‘win-win’ Co-operation with Africa.” December 4, 2015. http://www.ft.com/intl/cms/s/0/b17f4ed4-9a84-11e5-be4f-0abd1978acaa.html#axzz3yqMEy9xk.

[29] Taylor, ‘Contextualising Chinese Engagement in Africa,” 131

[30] Ibid., 132

[31] Ibid., 133

[32] AFP. “Xi Heads to Africa Summit as Chinese Investment Slows.” Times Live. December 2, 2015. http://www.timeslive.co.za/world/2015/12/02/Xi-heads-to-Africa-summit-as-Chinese-investment-slows.

[33] AFP, Xi Heads to Africa Summit as Chinese Investment Slows.

[34] AFP, Xi Heads to Africa Summit as Chinese Investment Slows.

[35] McGroarty, Patrick. “Angola’s Boom, Fueled by China, Goes Bust.” The Wall Street Journal. October 28, 2015. http://www.wsj.com/articles/angolas-boom-fueled-by-china-goes-bust-1446072930.

[36] Ibid.

[37] Ibid.

[38] Onishi, Norimitsu. “African Economies Shaken by Slowdown in China.” The Hindu. January 27, 2016. http://www.thehindu.com/news/international/african-economies-shaken-by-slowdown-in-china/article8155422.ece.

[39] Pigato, Miria, and Wenxia Tang. China and Africa: Expanding Economic Ties in an Evolving Global Context. Report. March 2015. Accessed January 31, 2016. http://www.worldbank.org/content/dam/Worldbank/Event/Africa/Investing in Africa Forum/2015/investing-in-africa-forum-china-and-africa-expanding-economic-ties-in-an-evolving-global-context.pdf.

[40] Ibid.

[41] Taylor, ‘Contextualising Chinese Engagement in Africa,” 133

[42] England, Andrew, China’s Xi Jinping Commits to ‘win-win’ Co-operation with Africa.