The role and impact of Chinese economic operations in Africa, and challenges to the government of China

01 မေလ 2007
Article
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1. The sectors of Chinese activities in Africa Evidence and information is gradually being built up in Africa on the full extent and rapidly growing role and interest of China in Africa. This is being noted not only in the much more evident export penetration from China into African markets (as elsewhere in the world), but also in
  • the domestic consumer commercial sector, that is in - wholesale trade through large-scale Chinese importers and suppliers located within Africa; - retail trade through the growing presence of small Chinese traders, street vendors etc
  • the extractive mining sector focused mainly on - fuel supplies, above all oil (and coal-to-fuel technology from South Africa) and uranium - industrial minerals, such as platinum, chrome, manganese, cobalt, nickel, tin, lead, zinc, copper etc
  • the construction sector, such as in - large-scale infrastructural projects, including roads, railways, dams, hydro-schemes, power lines etc - major social projects, such as public housing, hospitals, clinics, schools, sports stadiums etc
  • the capital equipment supply sector, including - large scale heavy construction machinery and transport equipment related to the above - information and communication equipment;
  • the production sector, that is in - some agricultural projects especially in basic food crops; and expected to increase - the beginning of some processing - related to minerals, and promised to increase
  • the financial sector, including - large scale interest free grants to governments and parastatal entities - concessional 'soft' loans attached to many of the above projects
And there are some Chinese projects in Africa that combine many of the above in complex integrated projects on a very large scale (such as in Gabon). Others operate in special economic zones set up for them by African governments (such as in Zambia). 2. The nature of the Chinese entities operating in Africa Further investigation is still required on the precise nature of the Chinese entities operating in Africa. This is complicated by the fact that most governments in Africa are not open and transparent about their international economic relations and investment agreements. And the Chinese government and Chinese economy is similarly, or even more, opaque and difficult to access and assess. Many questions are facing analysts in Africa who are concerned about the current modalities and aims of the Chinese government in Africa, and what could be the possible responsiveness and 'accountability' of Chinese enterprises in Africa. Such questions relate to
  • whether these companies are independent private enterprises operating on the same bases as their counterparts from the 'West', and that can therefore be expected to operate on the same straight 'profitability' criteria in Africa; or
  • whether these are private companies but that are heavily subsidised by national (or provincial) governmental authorities at home in China, which therefore gives them important competitive advantages over African companies; or
  • whether apparently 'independent' enterprises are, in fact, directly supported and assisted in their operations abroad by Beijing through political accords and through 'tied' financial agreements with African governments; or
  • whether some are semi-state or state enterprises that are not only backed by the Chinese government but could, in significant ways, be potentially accountable to political/economic directions, conditionalities and requirements from the Chinese authorities.
Given the very active and even directing role of the Chinese authorities in their own domestic economy, some significance could attach to the above and particularly the last point. The significance relates to the question as to what degree, or whether, it is strategically worthwhile and feasible for African activists to engage with African governments, separately or together through the African Union (AU), and other continental African entities (such as the African Development Bank- AfDB) to engage with the Chinese authorities to influence or determine the nature of, and criteria for, Chinese company operations within Africa? 3. The effects of Chinese activities in Africa Critical questions are beginning to be posed by civil society organisations in Africa - and even by some governments - as to the effects of such Chinese activities in Africa and on Africa. The main questions and criticisms relate to spheres such as
  • commerce - where Chinese imports and Chinese traders on the ground are ousting small local traders; which is, in turn, resulting in pronounced anti-Chinese feelings or xenophobia;
  • mining - where little attention is given to health and safety standards and workers rights, or to damaging pollution of neighbouring communities (1) , and broader environmental effects;
  • forestry - where vast extractive operations of precious woods and timber are being carried out by Chinese companies with no local processing and with highly destructive effects;
  • construction - where many such projects rely on imported Chinese workers, skilled and unskilled, and therefore do not create much local employment and do not transfer production/management skills;
  • capital equipment supplies being brought in from China - which therefore exclude possible local suppliers; and, being subsidised in China, easily outweigh, and even pre-empt, the emergence of local production of capital goods;
  • manufactured goods which are flooding into African markets and displacing small, and even relatively larger producers which do not enjoy the (direct and indirect) subsidies that Chinese industries receive from their authorities;
  • financial flows from China to Africa that are taking various forms: - enterprise investment in the above projects raise questions about the capital transfer rights back to China attached to such investments; and, with the growing scale of such investments, how this will affect African countries' international reserves and financial security and stability; - unconditional governmental grants given to unaccountable and even corrupt governments, which will strengthen such governments, reinforce these characteristics and help to entrench such abusive or authoritarian regimes in power; - 'soft' loans, provided to such governments and/or attached to projects, as above; which will over time inevitably accumulate into growing African indebtedness to the Chinese government and Chinese banks; repeating the patterns of indebtedness that were previously created by Western governments and banks.
4. What are the intentions and role of China in Africa? In the light of the above, fundamental questions are being posed about the so-called partnership and 'brotherly' relationships declared between the Chinese and African governments, as in the Forum on China-Africa Cooperation (FOCAC) in Beijing in November 2006. However, looking past the formal declarations and South-South rhetoric, the overall question is whether the rapidly growing role of China in Africa is one of partnership and cooperation or more akin to "colonial" or "neo-colonial" patterns, or reflective of a "new imperialism"; or, to the contrary, whether China is pursuing contributing towards new South-South tactical and strategic alliances vis-à-vis the North.. 4.1 The first point is that, whatever good intentions the Chinese government may declare, the objective and fundamental problem is that these relations are based upon highly uneven levels of development and very different capacities to benefit from such interactions and 'cooperation'. This pronounced inequality in capacities will result in China making very much greater gains from what it obtains from Africa, even IF this is undertaken 'fairly' and with some generous gestures. Africa may indeed receive (some) quantitative returns, but it is China that will achieve the further vast qualitative transformation of its economy using the material and financial resources it gains from Africa. There cannot be genuine win-win development scenarios in such a situation. These grossly uneven gains are not necessarily the result of deliberate 'bad intentions' but are intrinsic to relations between such very uneven 'partners', unless deliberate efforts are made to compensate for such very different situations and capacities, to consciously counter the unbalanced effects, and to conscientiously avoid (or undo) damaging social and environmental impacts. 4.2 In the political sphere, major problems reside in the assurance by Beijing that it does not 'interfere in the internal affairs' of other countries. This, of course, means that it does not concern itself with the nature of the governments with which it enters into large-scale economic and 'aid' relations. But this per se constitutes an 'interference' into the internal affairs of African countries through the financial and other support provided to highly questionable regimes, thus helping them to entrench themselves in power. Without the full democratisation of African countries, the kind of domestic role that civil society organisations want their governments to play, and the kind of 'developmental' proposals that they want their governments to put to the Chinese authorities [see 5 below] will be prevented. 4.3 Other questions must be posed about China's perceptions of Africa and the location of Africa within its own geo-economic and geo-political strategies, and in relation to the powers of the North. This is posed particularly clearly with regard to China's role in the WTO, especially within the G20 and the G33 groupings of developing countries there. Both groupings reflect tactical alliances of resistance against the majors. But they also reflect differing economic/social interests and strategies vis-a-vis the North within and between the respective groupings/countries. The major question is why China has identified with both these groupings, even though not very actively and certainly not in any leadership roles. Such positionings by Beijing may reflect not only specific economic interests and international aims from within China - which all the world is focusing on - but also some possible emerging geo-political positionings with the rest of the South in relation to the interests of the North. The question is whether this represents mere tactical positioning to gain political allies in the South in what are bound to become increasing rivalries between China and the older industrialised economies in new versions of wider "inter-imperialist rivalries". The alternative question is whether this could be used to the advantage of the South in general, and how the respective civil society organisations can intervene and influence this geo-political potential , if at all? It is similarly important to obtain some insights into China's role in relation to the G77 in the UN. For a start why they don't simply join the G77 but insist on the "G77 plus China" designation. And, of course China's role and veto powers in the Security Council : where or whether this has been used in ways that reflect concerns to support Africa or other countries of the South politically. Such analyses would be useful towards fuller and more nuanced perceptions of the positioning and political role of China in the world today, as a purported emerging super-power... and not only it's economic interests and role. 5. Developmental challenges to be posed by civil society organisations on both sides The political and the economic dimensions go together. Political and essential human rights and social issues have to be posed to the Chinese political authorities in their practices abroad, as at home. There are, however, also developmental demands that independent African analysts need to present to African governments, and that official African institutions have to present to the Chinese authorities. These relate to the economic, environmental, and social terms and conditions under which Chinese companies operate in Africa. During the 'development era' of the 1960s and 1970s the common demand from development analysts and activists was that foreign investors from the West in the countries of the Third World should include some significant undertakings that would increase the 'gains' or improve the effects of such investment in the host countries, and minimise or reduce the losses or negative effects. These investment conditions that were applied by many Third World governments in various combinations included - defined periods or duration for such investment projects - agreed re-investment of (a proportion of) profits, for defined periods - agreed return of forex earnings from exports from the host country - payment of company and other taxes, and appropriate royalties - limitations on the geographical areas/zones and spheres open to foreign investment - a defined proportion of shares to be held by the host government and/or local shareholders - joint ventures or partnerships with local enterprises and/or parastatal entities - a defined proportion of production inputs, and services, to be acquired from local companies - payment of import taxes on equipment and other imported production inputs - transfer of technology with accompanying training and maintenance/services capacities;  - employment of local management and active transfer of management skills - employment of local technicians and active skills transfers - employment creation for local labour, and active skills development - observance of specified wage rates, health and safety regulations, The much weaker - or non-existent - requirement that foreign investors observe full trade union organisational and collective bargaining rights, at best reflected the frequently paternalistic and substitutionist nature of many of the 'developmental' governments of the time; or in some cases their active suppression of such rights. Similarly, the almost total silence on the observance of gender rights and appropriate environmental regulations also reflected the shortcomings of the development paradigm of that era. That development model also included various external trade strategies and tariff policies to support the 'infant industries' and economic development and diversification sought. Overall, the terms of the 'development' paradigm sought to 'improve' the benefits of foreign investment in Africa, as in other Third World countries, but those terms could not fundamentally substitute for internally generated capacities and resources. Some governments saw these foreign investment policies and terms as providing interim bases for 'industrial take off' in their countries, although, in practice, the major gains still accrued to the foreign investors and their home economies. Nonetheless, even those regulatory investment conditions that some of the more determined African governments (such as Tanzania) implemented, were largely swept away in the recent decades under IMF and World Bank structural adjustment programs (SAPs) imposed in most African countries. This onslaught has also been reinforced by various WTO trade and 'trade-related' agreements, and through the even more demanding 'liberalisation' terms within bilateral trade and investment treaties between African governments and the home governments of the major international investors. These, together, are central to the neo-liberal counter-offensive that has displaced the so-called 'development partnerships' of earlier decades….. limited and inadequate though those were. However, a very important 'test' question to be put to Chinese investors and to the Chinese government is whether they accept that the above terms and conditions would be very justifiable for African governments to require; and whether they would be prepared to agree, instruct and require all Chinese projects and investments in Africa to fulfill all the above terms. In this scenario, much will depend, of course, on the will and capacity of African governments, supported by institutions such as the AfDB and the United Nations Economic Commission for Africa (UN-ECA), to set and to monitor such terms. Without such basic 'developmental' terms, African governments, and their countries will simply be exchanging one set of long-standing 'Western' neo-colonial 'partners' for another new set of 'South partners'. If, indeed, these new partners from the South are or intend to be different to the established masters from the North, then the question to be put by African civil society organisations to African governments and, through them, to the Chinese authorities, is whether Beijing will accept and actively commit to all these very reasonable developmental terms? Failing this, the further question must then be asked - how do China's economic operations in Africa differ from those of the imperialist West? These issues also pose a significant challenge to emerging Chinese civil society as well. But this is not only about their responsibility to and solidarity with their counterparts in Africa - important though that is. It is also about their responsibility to themselves and their own people, as well. The terms and conditions posed within the 'development paradigm' of earlier years - and now being revived in many debates in the South - can be posed, just as importantly, within China, itself. These questions have to be posed with regard to China's own economy, about the damaging effects and impacts of international investors in China, and about the regulatory terms and developmental conditions that the Chinese authorities should be presenting to internal and international corporations operating within China. Note (1) The very neo-liberal government in Zambia was even recently forced to close down a Chinese manganese mining operation in that country owing to the outrageous pollution in the neighbouring community.
DOT KEET has written this paper as a Fellow of the Transnational Institute and as part of TNI's Asia program www.tni.org. The writer is Zimbabwean in origin and deeply immersed in African political economy, having been a researcher and lecturer in this field in various countries and universities in Southern Africa, most recently in the Center for Southern African Studies in the School of Government of the University of the Western Cape in South Africa. She is currently a Research Associate of the Alternative Information and Development Center (AIDC) in Cape Town, South Africa. dkeet@iafrica.com