Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa (16 page)

Although spasmodic, Africa’s FDI news is not universally bad. The UN Conference on Trade and Development (UNCTAD) has reported that ‘from the viewpoint of foreign companies, investment in Africa seems to be highly profitable, more than in most other regions.’ Japanese companies said in 1995 that they made more profit from their African investments than from those in South-East Asia, the Pacific, North America and Europe.
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American investors have said that they made a return on their African investments of 25 per cent in 1997. This is two thirds more than they made from their investments in Asia and the Pacific, and 50 per cent more than their return on capital invested in Latin America and the Caribbean. UNCTAD reports that British direct investment in Africa, excluding Nigeria, increased by 60 per cent between 1989 and 1995.

In the last sixty years, no country has made as big an impact on the political, economic and social fabric of Africa as China has since the turn of the millennium. It’s not the first time China has been there. One of the lasting monuments to its former presence is the 1,860-km (1,160-mile) railway, built in the 1970s for US$500 million, that connects Zambia, through Tanzania, to the Indian Ocean.

More recently, China (both public and private) has launched an aggressive investment assault across the continent. China is growing at a phenomenal rate. Its economy has grown as much as 10 per cent a year over the past ten years, and it desperately needs the resources that Africa can provide. The US Energy Information Administration calculates that China accounted for 40 per cent of the total growth in oil demand over the past four years. In 2003 it overtook Japan to be the world’s second-biggest consumer of petroleum products after the US.

But rather than conquer Africa through the barrel of a gun, it is using the muscle of money. According to its own statistics, China invested US$900 million in Africa in 2004, out of the US$15 billion the continent received, up from US$20 million in 1975. Roads in Ethiopia, pipelines in Sudan, railways in Nigeria, power in Ghana – these are just a few of the torrent of billion-dollar projects that China has flooded Africa with in the last five years, each one part of a well-orchestrated plan for China to be the dominant foreign force in twenty-first-century Africa.

The evidence is overwhelming. In November 2006, more than forty African leaders gathered at the first Sino-African summit – the Forum on China–Africa Cooperation – in Beijing.
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Very nearly every African leader was there: the big, the small, the credible and the not so credible. Amidst the fanfare (the Chinese had imported giraffes and elephants as part of the revelry to make the African delegates feel more at home, and lined the streets with fifty African flags), the Chinese government unveiled its African strategy.

In his opening ceremony address, the Chinese President, Hu Jintao, told his audience: ‘In all these years, China has firmly supported Africa in winning liberation and pursuing development . . . China has trained technical personnel and other professionals in various fields for Africa. It has built the Tanzam Railway and other infrastructure projects and sent medical teams and peacekeepers to Africa.’

The Chinese President went on: ‘Our meeting today will go down in history, we, the leaders of China and African countries, in a common pursuit of friendship, peace, cooperation and development, are gathered in Beijing today to renew friendship, discuss ways of growing China–Africa relations and promote unity and cooperation among developing countries.’ With this, he launched China’s new multi-pronged assault on Africa, which would focus on trade, agricultural cooperation, debt relief, improved cultural ties, healthcare, training and, yes, even some aid (but thankfully only a small component of their strategy).

In an effort to help fast-track Africa’s development, China has in recent years pledged to train 15,000 African professionals, build thirty hospitals and 100 rural schools, and increase the number of Chinese government scholarships to African students from the current 2,000 per year to 4,000 per year by 2009. In 2000, China wrote off US$1.2 billion in African debt. In 2003 it forgave another US$750 million. In 2002, China gave US$1.8 billion in development aid to African countries. In 2006 alone, China signed trade deals worth almost US$60 billion.
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The Chinese are moving in, and they are moving in in a big way. As well as many visits to numerous African countries by the Chinese leadership (including by the Chinese Premier, Wen Jibao), Chinese entrepreneurs, technical experts, medical staff and simply prospectors looking for that pot of gold are found everywhere.

An excerpt from an article in the
Economist
magazine in 2006 illustrates the point wonderfully well:

In his office in Lusaka, Xu Jianxue sits between a portrait of Mao Zedong and a Chinese calendar. His civil-engineering and construction business
has been doing well and, with the help of his four brothers, he has also invested in a coal mine. He is bullish about doing business in Zambia: ‘It is a virgin territory,’ he says, with few products made locally and little competition. He is now thinking of expanding into Angola and Congo next door. When he came in 1991, only 300 Chinese lived in Zambia. Now he guesses there are 3,000.
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One of the most impressive aspects of the whole Chinese package to Africa is its commitment to FDI. This is achieved both directly through the government and, indirectly, by encouraging private Chinese enterprises to invest in Africa, usually through preferential loans and buyer credits.

Between 2000 and 2005, Chinese FDI to Africa totalled US$30 billion. As of mid-2007, the stock of China’s FDI to Africa was US$100 billion.

China has invested billions in copper and cobalt, in the Democratic Republic of Congo and Zambia; in iron ore and platinum in South Africa; in timber in Gabon, Cameroon and Congo-Brazzaville. It has also acquired mines in Zambia, textile factories in Lesotho, railways in Uganda, timber in the Central African Republic and retail developments across nearly every capital city. However, oil is the gusher.

Almost consistently over the last decade, Nigeria and Sudan have been the largest beneficiaries of FDI in Africa. In 2004, they received more than half of Africa’s FDI – Nigeria over US$4 billion and Sudan almost US$2 billion, while the rest of Africa got around US$4 billion. China’s part of this has been extensive. In January 2006, the state-owned Chinese energy company, CNOOC, paid almost US$3 billion for a 45 per cent interest in a Nigerian oilfield. China has built a 900-mile pipeline and invested at least US$20 billion in Sudan.

Angola has now overtaken Saudi Arabia as China’s biggest single provider of oil. In the first half of 2006, Angola alone supplied almost 20 per cent of oil imports to China, and, in total, African countries provided roughly 30 per cent of China’s crude oil imports. China has shown similar interest in other producers such as
Sudan, Equatorial Guinea, Gabon and Congo-Brazzaville, which already sells almost half of its total crude exports to Chinese refiners. In 2006, 64 per cent of Sudan’s oil exports went to China.

While it is true that China’s African investments have, for the most part, been directed towards resource-rich countries, and thus the mining sectors, over time a much broader investment approach is becoming evident. In the last few years, for example, Chinese FDI to Africa has diversified into sectors such as textiles, agro-processing, power generation, road construction, tourism and telecommunications. Furthermore, the Chinese government has pledged to step up China–Africa cooperation in transportation, communications, water conservancy, electricity and other infrastructure. Among other transport contracts, Chinese companies are rehabilitating the legendary Benguela railway, from the coast to the borders of Zambia and the Democratic Republic of Congo, originally completed by the British in the 1920s. And in Nigeria, an US$8.3 billion deal was recently reached with a Chinese contractor to rebuild the dilapidated colonial-era railway between Lagos and the northern Nigerian city of Kano, as the first stage of a twenty-year rail modernization plan. Financial services and banking have also been in China’s sights. In a move that confirmed the depth of its commitment, the Chinese state-owned Industrial and Commercial Bank bought a 20 per cent stake in Standard Bank (for US$5.5 billion), Africa’s largest indigenous bank in 2007.

The list of China’s involvement in Africa is endless. All but five African countries now have relations with Beijing: Burkina Faso, The Gambia, Malawi, São Tomé and Principe, and Swaziland had not yet signed up to the China–Africa Cooperation Forum at the time of writing. China’s African role is wider, more sophisticated and more businesslike than any other country’s at any time in the post-war period.

China’s African charm offensive has not gone unnoticed. Criticisms abound, notably from those who currently rule the roost in determining Africa’s destiny – the Western liberal consensus, who believe (often in the most paternalist way) it is their responsibility to look after Africa. But what exactly is their motivation? Is it that they care? Or is it the underlying political fear that, left unchecked, China will use Africa as a stepping stone on its relentless march towards world aggrandizement. Given the state of play, perhaps they have reason to be worried.

Whatever the case, the clamour of objections surrounding the Chinese presence in Africa grows ever louder, on a number of fronts: China’s record on governance and human rights, and the suggestion that Africans (as a whole) are getting a raw deal.

The European Investment Bank (EIB) has expressed concern that the world’s development banks may have to water down the social and environmental conditions they attach to loans in Africa and elsewhere because they are being undercut by Chinese lenders. In 2006, Philippe Maystadt, the EIB’s President, referring to Chinese lenders said, ‘they don’t bother for social or human rights conditions’. Maystadt claimed Chinese banks snatched projects from under the EIB’s nose in Asia and Africa, after offering to undercut the conditions it imposed on labour standards and environmental protection.

In a similar attack, in February 2007, the editor-in-chief of
Foreign Policy
magazine, Moisés Naím, expressed concern about how Chinese economic pragmatism appeared to override principles of openness pursued by Western donors. He tells of how the Chinese trumped a World Bank deal for aid to Nigeria. The country’s railway system had been brought close to disuse as a result of bad management; after extensive negotiations, the World Bank and Nigerian government agreed on a US$5 million project that would allow private companies to help clean up the mess. On the point of signature, however, the Chinese stepped in
with an offer of US$9 billion to rebuild the entire rail network. Nine billion dollars, no strings attached, and thus no reform required.

The fiasco of the 2008 Olympic torch multi-city stopover (London, Paris, Buenos Aires, New Delhi, St Petersburg, San Francisco and Dar-es-Salaam, to name a few) en route to Beijing serves as a reminder that China’s human rights record is less than stellar, and in Africa most pointedly in Sudan. China’s insatiable appetite for oil has led it into partnership with a country where in the region of Darfur more than 200,000 people have been killed.

Eyebrows were also raised when in 2005 on an African tour Premier Hu Jintao visited Zimbabwe’s Robert Mugabe. (Ignoring the fact, of course, that both the US and UK have maintained diplomatic ties with Zimbabwe throughout Mugabe’s regime, and as recently as 2006 international donors have given Mugabe a combined aid package of US$300 million.)

More generally, many Africans scoff at the notion that Westerners should be outraged by Chinese implicit support for Africa’s corrupt and rogue leaders. 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 – Zaire’s President Mobutu, Uganda’s President Idi Amin and the Central African Republic’s ‘Emperor’ Bokassa (who kept his victims’ heads in a fridge), to name just three.

African leaders appear less willing to be micro-managed than they once were – even if it is in exchange for cash. Perhaps fed up with acres of paperwork and the revolving door of commanding Western donors, or simply desperate to try out a new development model that might actually work, they are increasingly drawn to the more hassle-free, no-questions-asked China route. For Angola, for example, which has been keen to get going with the reconstruction of its infrastructure, China’s straightforward approach is an attractive alternative to what is seen as the endless nit-picking of the IMF and the Paris Club of creditors, which have been quibbling over terms for years. José Cerqueira, an Angolan economist, notes that China is welcome because it eschews what he sees as
the IMF’s ideological and condescending attitude – ‘For them, we should have ears, but no mouth.’
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No one can deny that China is at least in Africa for the oil, the gold, the copper and whatever else lies in the ground. But to say that the average African is not benefiting at all is a falsehood, and the critics know it.

Revealingly, despite some of the negative headlines about China’s emergence in Africa, in surveying some ten African countries (Ethiopia, Ivory Coast, Ghana, Kenya, Mali, Nigeria, Senegal, South Africa, Tanzania and Uganda), the June 2007 Pew Report (entitled
Global Unease with Major World Powers
), finds that the balance of opinion regarding China is decidedly positive, reflecting, to a large extent, the widespread view that ‘China’s growing economic power has a positive effect on respondents’ own countries, especially in the developing world’. More specifically, four important points emerge from the surveys on how many Africans view the Chinese.

First, across the continent, favourable views of China (and its investments in Africa) outnumber critical judgements by at least two to one in almost every country. In Ivory Coast and Mali more than nine in ten have a favourable view of China, and positive opinions dominate negative ones in Senegal and Kenya, where 81 per cent view China in a good light. Three quarters of those surveyed in Ghana and Nigeria hold an approving view, as do two thirds of Ethiopians. In Uganda, twice as many have a favourable view of China as unfavourable (45 per cent to 23 per cent, respectively). In terms of trends, in just the past year, favourable attitudes towards China in Nigeria rose 16 percentage points from 59 per cent to 75 per cent.