Chinese Aid and Investment: Aiding Africa or Themselves?

By Hodhan Jibril
International Relations & Arabic Student

In 2006, China invited 48 African heads of state to Beijing and with them, a fierce debate on the nature of foreign investment in Africa. According to Dambisa Moyo, a Zambian-born international economist, Africa needs foreign investment to supplement its growth. Despite the continent’s resources and low labour costs, potential investors are faced with the realities of poor road, telecommunication and power supply conditions. In contrast, Moyo argues that at 10 percent annual growth, the Chinese economy needs resources to feed its development. In 2000, Chinese investment in Africa was USD 210 million, but by 2011, the figure stood at USD 3.17 billion. China’s demand for resources and African demand for infrastructure appears to create a unique opportunity for mutual gain that has not gone unrecognized by China.

With China rapidly gaining influence in Africa, China’s non-interference policy in Africa’s domestic affairs faces increasing scrutiny. Critics allege that Chinese investment in Africa coupled with its inaction on the continent’s human rights issues, actively discourages reform. In contrast, Western models offer loans to African states contingent on their adherence to international norms. The interplay of these two models has ultimately been to the detriment of the Western investment scheme, as African leaders are seizing China’s seemingly less politically expensive alternatives to conditional aid. For example, the recent IMF calls for the Angolan government to disclose information on their natural oil industry were ignored, as Angola can now rely on the Chinese Export-Import Bank to supplement funding lost from the IMF. To its north, Nigeria opted for a $9 billion Chinese railroad project over the World Bank’s proposal, which included anti-corruption measures where the Chinese plan did not.

In reality, Chinese investment may come with its own set of strings. Often, major infrastructure projects are given to Chinese companies because of their cost-saving appeal. Consequently, China’s manufacturing imports to Africa also increase. The Africa Research Institute found that between 2001 and 2010 an upward of 78,000 jobs were lost as a result of the flooding of the market with Chinese imports in South Africa. In the east, Kenya has attempted to curb this threat to local firms by contractually ensuring the quality of the goods flowing into the country from Chinese companies. On the ground, Chinese companies are accused of not hiring Africans, underbidding local firms, and operating under low safety standards. Although some firms do hire locals, they are accused of keeping wages low.

In contrast, Sino-Hydo in Uganda illustrates the benefits Africans can reap from Chinese firms when their operations are executed with care. In particular, the company’s construction of the Karuma National Dam in conjunction with local firms and with the use of well-trained, largely Ugandan employees. By drawing more fully on the domestic economies of African nations like Uganda, the Sino-African partnership offers a more sustainable basis for African growth.

 

karuma11-671x330
Chinese and Ugandan supervisors at the Karuma National Dam construction site, funded by the Chinese firm, Sino-Hydro.

But all of this leaves aside the fact that aid is often used as a means of robbing Africa of its natural resources. This is most evident in Chinese loan conditions. While China offers low-interest loans to commodity-based African states that appear advantageous, particularly given the recipient states often have low credit scores that would otherwise disadvantage them in the international market, these loans place African commodities as collateral. In other words, if African states cannot pay back their loans, they literally end up trading “[Infrastructure] projects for resources.”

To its credit, China appears to be living up to its end of the deal. Simply put, “there are now roads where there were no roads and jobs where there were no jobs.” Further, the voice of the U.S. and Western European bodies as the authority on ethics in Africa seems to be drowned out by the Western legacy of conquest and exploitation on the continent. As Moyo points out, “It is, after all, under the auspices of Western aid, goodwill and transparency that Africa’s most notorious plunderers and despots have risen and thrived.” Western involvement in African affairs over a long colonial history to present-day informs opinions such as that of José Cerwueire. The Angolan economist says, in reference to the IMF’s relationship with Africa, “For them, we should have ears, but no mouth.”

Unlike its Western counterpart, it appears that the Chinese model of investment encourages an African voice, or at least, an African voice echoing their own. During the Third Round of Political Consultations in 2013, the Foreign Minister of China, representatives of 40 African countries and representatives of the African Union reasserted that ‘The international community should respect the leading role of African countries… and oppose external forces interfering in Africa’s internal affairs for their own interests.”

However, according to findings by Aid Data in 2015, Chinese official development assistance is directed at poorer countries but the amount of aid given is influenced by how often African states vote in the UN General Assembly towards Chinese interests. In pursuit of their foreign policy agenda, the paper also finds that “China provides less official financing to African states that recognize Taiwan”. Notably, Gambia’s withdrawal from relations with Taiwan in 2013 was explained as a matter of “strategic interest”.  China’s behaviour towards African governments is likened to the “carrot and stick” method, in which “they [African states] are rewarded if they follow China’s rule of conducting business and punished if they decide to do otherwise.” Similarly, China’s official policy of non-interference in the domestic affairs continent is called into question as the country continues to take an active role in security concerns. In an effort to protect their investments, China was involved in six out of seven of UN peacekeeping missions in 2012 and from 2008 onward, have performed as “anti-piracy” escorts.

Admittedly, Africa is paying a steep price for the investment and infrastructure that it desperately needs and that Beijing can provide. Simultaneously, claims that China is plundering the resources of Africa while allowing for bad governance practices remain unconvincing from those who have and continue to do the same. More convincing perhaps are the criticisms of Chinese business practices, but as demonstrated by Uganda, when handled with care, African states have much to gain. Chinese economic interest in Africa and Western opposition to it, importantly, represents an opportunity for African states. As international competition for its resources and political allegiance continues, Africa is uniquely situated to leverage its position for better deals for Africans.


Featured image of Karuma National Dam by Construction Review
Secondary image by New Vision

 

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