Chapter 2 - Scale of Chinese Involvement

What is the scale of Chinese investment in Africa generally and in the countries we have studied? What form does it take? This chapter will set the scene for the analysis that follows by discussing the scale and nature of Chinese investment.

Data Deficits

Before discussing the details, however, it is necessary to note that the picture offered here is incomplete because data on China’s role is, for a variety of reasons, unreliable.

Claude Kabemba's picture

Director of the Southern Africa Resource Watch (SARW)

October 4th, 2012

What is the scale of Chinese investment in Africa generally and in the countries we have studied? What form does it take? This chapter will set the scene for the analysis that follows by discussing the scale and nature of Chinese investment.

Data Deficits

Before discussing the details, however, it is necessary to note that the picture offered here is incomplete because data on China’s role is, for a variety of reasons, unreliable.

Thus, in Angola, there is very little information on the real amounts of money negotiated with China. Angola is paying China 200 000 barrels of oil per day through the state oil company Sonangol. Credit lines and loans that government gets from different foreign governments and international financial institutions are not included in the national budget, and their management lacks accountability and transparency. This is part of wider difficulty with data collection, which hampered our research team.

In the Democratic Republic of Congo (DRC), the first group of Chinese came to the DRC as traders and not as investors or industrialists. They simply bought the copper from artisanal miners and exported it to China. This trend continues. The former Chinese ambassador to the DRC, Mr Wu Zexian suggested in a 2008 interview in Kinshasa that most Chinese individuals and small businesses are not registered with the embassy. It is therefore very difficult to give a correct assessment of Chinese investment in the DRC, because the relationship with the DRC is not  accurately documented.

Information on the timber trade between China and Mozambique is contradictory. As Carlos Nuno Castel-Branco recently mentioned, China-Mozambique business relations are very secretive, and it is difficult to obtain authoritative information. On the timber trade, the figures from the Chinese authorities show a different picture to those of the Mozambican National Directorate: exports of logs to China are reported to have indeed decreased since 2007, but they still make up the majority of timber exported to China. In 2009, around 65 percent of all timber exported by Mozambique consisted of logs. The discrepancies in the data provided by the Mozambican government and Chinese authorities are not small: in 2008/2009, Chinese authorities reported the import of more than 150 thousand m3 of Mozambican logs, whereas Mozambican authorities reported the export of no more than 20 thousand m3. This may suggest the growth in illegal trade between the countries. One of the most alarming concerns regarding the forest industry in Mozambique is the lack of accurate reporting on the amount and location of trees felled, and the significant illegal export of unprocessed logs.

In South Africa, Chinese officials dispute the trade statistics, claiming that South Africa ignores exports to Hong Kong which are intended for mainland China. There are no accurate figures on fixed investment that China has made in South Africa.

In Zimbabwe, the Chamber of Mines of Zimbabwe (CMoZ) represents the interests of all major mining houses in Zimbabwe and would be expected to have a record of all mining companies and activities in Zimbabwe since its member-companies produce about 90 percent of Zimbabwe’s total mineral output. But no information was available about two Chinese companies who applied for membership as smaller producers – there are also said to be several Chinese companies in the service provider category but CMoZ could not name any. The assumption is that these would be service providers to Chinese mining companies, strengthening the argument that there are many Chinese companies already operating in the extractive sector in Zimbabwe.

The gaps in the information held by CMoZ leave unresolved questions about Chinese mining operations. The Economic and Commercial Counsellor’s Office at the Embassy of the People’s Republic of China to Zimbabwe could not provide information on Chinese mining companies except for Sino-Steel, arguing that it was difficult for the embassy to keep track of the many Chinese citizens who come into the country as private individuals. One immediate explanation for this is the small-scale nature of most of the operations. It must be pointed out that this lack of information does not apply only to Chinese mining operations, but (according to the Chamber of Mines) to other mining activities too.

These data limitations obviously mean that no definitive account of the scale of Chinese investment is presented here – indeed, it is not clear that one exists. Rather, the goal is to give a broad sense of the nature of China’s economic role on the continent and in the Southern African countries which we studied.

The Big Picture: Wider Trends

China's foray into Africa since the turn of the century has been remarkable, with trade volumes increasing ten-fold and the Chinese government identifying Africa as the future engine of global growth. There were estimated to be 800 sizeable Chinese firms on the continent in 2008.

Although China's foreign direct investment (FDI) in Africa in 2007 represented less than 3 percent of its global FDI outflows, its injection of upwards of US$9 billion into the continent in 2005 dwarfed the World Bank's US$2,5 billion and South Africa’s US$1,2 billion in 2000. With foreign reserves of over US$1,5 trillion and a sovereign investment fund of around US$200 billion to plough into promising global companies, China has also registered sustainable growth of 10 percent per annum for the past 20 years. It has emerged as the largest consumer of iron ore, tin, coal, steel, copper, zinc, gold, aluminium, nickel, lead and other minerals, and is only second to the US in oil consumption. China has become the single largest destination of FDI, followed by India. Currently, China is also dominating world exports of manufactured goods.

Recent trends in Chinese global investments confirm moves towards acquiring raw material sources across the globe – Africa is obviously an abundant source and thus an object of Chinese interest.  To ensure the continued growth of the Chinese economy, Beijing must accelerate guaranteed and affordable access to key raw materials. Over the next ten years, China is expected to be responsible for most of the growth in global demand for raw materials. Peter Redward, Head of Emerging Asia Research at Barclays Capital predicts a significant expansion in Chinese demand for commodities over the next decade, given that China is experiencing an extended ‘industrial revolution.’

Of the total Chinese mining investment in Africa to date, most projects have been in the mineral-rich SADC region. Since the mid-1990s, China has begun importing large quantities of raw materials and has become the world’s leading consumer of raw materials. As Lucy Corkin puts it, over a remarkably short time, Chinese multinationals have claimed their share of the increasingly promising African market. Africa holds almost one-third of the world’s mineral wealth, including numerous un-exploited opportunities.

Clearly, then, China is expected to play a strong and growing role in Africa and, therefore, in the countries studied here. The remainder of this chapter will discuss investment in six SACD countries in turn.

About the author(s)

Claude Kabemba is the Director of the Southern Africa Resource Watch (SARW). In 2006, the Open Society Initiative for Southern Africa (OSISA) asked him to spearhead the formation of SARW. He holds a PhD in International Relations (Political economy) at the University of the Witwatersrand (Thesis: Democratisation and the Political Economy of a Dysfunctional State: The Case of the Democratic Republic of Congo). Before joining SARW, he worked at the Human Sciences Research Council and the Electoral institute of Southern Africa as a Chief Research Manager and Research Manager respectively. He has also worked at the Development Bank of Southern Africa and the Centre for Policy Studies as Policy Analyst. Dr. Kabemba’s main areas of research interest include: Political economy of Sub Saharan Africa with focus on Southern and Central Africa looking specifically on issues of democratization and governance, natural resources governance, election politics, citizen participation, conflicts, media, political parties, civil society and social policies. He has consulted for international organizations such Oxfam, UNHCR, The Norwegian People’s Aid, Electoral Commissions and the African Union. He has undertaken various evaluations related to the work of Electoral Commissions and civil society groups interventions in the electoral process in many African countries. He is regularly approached by both local and international media for comments on political and social issues on the continent. His publication record spans from books (as editor), book chapters, journal articles, monographs, research reports, and newspaper articles.

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