Chapter 7 - Recommendations for policy and practice

How could the problems and challenges identified by this study be addressed? What do Southern African governments and other actors with the potential to initiate change need to do to ensure that the potential of Chinese investment to meet the needs of the countries studied here is fully realised?

Claude Kabemba's picture

Director of the Southern Africa Resource Watch (SARW)

October 11th, 2012

How could the problems and challenges identified by this study be addressed? What do Southern African governments and other actors with the potential to initiate change need to do to ensure that the potential of Chinese investment to meet the needs of the countries studied here is fully realised?

In an attempt to contribute to debate on proposals for change, our country teams were asked to make recommendations for action to remedy the problems which they identified. The recommendations are ordered in the same way as the chapters of this report. We first list those which seek to improve the relationship between China and Southern African countries (Chapter 3), then we discuss ideas for improving the development impact of Chinese investment (Chapter 4). We list the recommendations on working conditions and social responsibility (Chapter 5), and on reducing or removing the internal constraints in the countries (Chapter 6).

These recommendations do not, of course, claim to be the last word on the subject – they are listed here only to initiate wider-ranging discussion on how to ensure that Chinese investment in Africa in general (and Southern Africa in particular) is a source of inclusive growth and development. It is hoped that the proposals will generate debate in the countries studied and further afield on how to turn the developmental potential of Chinese resources into a reality.

Building the Relationship

The country studies were, understandably, concerned to make recommendations which assumed that the relationship between China and Southern African countries was a commercial one (rather than an exercise in South-South solidarity). This meant that the proposals examined how this commercial arrangement could become more attuned to local needs (rather than on how the claimed solidarity could be deepened). A strong theme in the recommendations proposed is the need for civil society to play a greater role in the relationship between China and the countries studied.

Our Angolan team made these suggestions for ensuring that the relationship between that country and China is improved:

  • Initiate more research into the practical issues that involve China-Angolan co-operation – the implications of this relationship still need to be more fully investigated.
  • Make China more accountable, through public discourse.
  • Encourage Chinese investors to learn Portuguese, and encourage Angolans to learn Chinese to facilitate better understanding and negotiation.

Our Democratic Republic of Congo study proposed that Chinese companies be made to understand the important role that civil society plays in the DRC to ensure transparency and accountability. The role of civil society is important in matters of transparency of revenues and use of revenues for poverty reduction. Civil society challenges private firms for making unethical profit, and government for not collecting enough revenues or not using the revenues appropriately. This is why it is critical to ensure that initiatives such as EITI be strengthened, especially in weak states with inadequate institutions to control and monitor revenues. There is a need to lobby the Chinese government and Chinese civil society to force Chinese companies to open up to local civil society.

The Mozambican study urged that:

·      The links between the over-exploitation of the Mozambican forests and the demand for timber by China should be seriously discussed at the political level between the governments of Mozambique and China, especially when it is obvious that state companies are involved in the trade. China’s ban on logging of its own national forests should not be compensated by the over-exploitation of other countries’ forests.

·      Civil society organisations can play an important role in monitoring the activities of individuals and companies and the performance of government officials and institutions involved in the timber business, as well as providing policy alternatives to the government. Civil society organisations can also provide training to communities for a better forest management. Recently, for example, the organisations involved in the EITI Forum held a meeting in Maputo to prepare the launch of a Civil Society Platform that would strengthen the voice of civil society in discussions regarding the EITI and natural resources management.

·      The strengthening of local research institutes and think-tanks is important, since there is a dearth of information and policy analysis with regards to the extractive industry, and especially with regard to the complex issues that involve Chinese companies.

In the view of our South Africa study, civil society should become more directly involved in determining the impact and consequences of China’s growing involvement in Africa generally, and particularly in South Africa. The direct impact on unemployment and poverty requires more in-depth and broader analysis. Inputs from communities affected by China’s footprint in South Africa need to be considered, with a view to crafting an effective response to new challenges posed by globalisation and China’s competitive advantages.

Our Zambian study argues that China's presence in Africa may be progressively rejected unless the Chinese understand that they should urgently take into account what the vast majority of Africans want for their continent, instead of colluding with political leaders to achieve their own narrow interests. Issues of democracy, good governance and economic development are thus critical to Zambia, and to Africa in general. By over-emphasising sovereignty and non-interference, the Chinese are running the risk of losing the support of African populations. The fact that China closes its eyes and refuses to address publicly the lapses in good leadership can only lead to negative consequences: corruption, human rights violations, wars, and the destruction of democratic gains.

The Zimbabwe study stresses the need for the Zimbabwe Mining Development Corporation (ZMDC) to become a major player in negotiating joint cooperation agreements (JCAs) with a mining component. It argues that it has to compete on its own strength and behave like any other mining house. In this way JCAs would have a strong business component.

Development Impact

One theme in this study is that Chinese investment can potentially make a developmental impact, but that it is not anywhere near reaching its development potential – concrete changes are needed to ensure that this potential is realised. The country studies proposed a variety of ways of enhancing development impact.

Our Angolan study urged measures to understand better the effect of China’s economic presence prior to regulating it. It urges Angola to:

  • Monitor the implementation of projects under the Chinese credit line.
  • Improve transparency and accountability with regard to the credit line and investments that have been made in Angola.
  • Establish a clear standard of what is required regarding construction before and after the inspection, and verify whether the work is in accordance with agreed standards.

The Democratic Republic of the Congo study argued that the DRC should not look at its comparative advantage (minerals) only; it should also look at its competitive advantage (land and agriculture). The DRC, which has fertile land, should produce agricultural products for export to China. Instead of selling land to the Chinese, the DRC must use it to increase agricultural production. China is expected to struggle to feed its population within a few years. Just as China has used manufacturing and cheap labour, the DRC could use agriculture and cheap labour as the foundation of its development and foreign income earning.

Our South Africa study made these suggestions for change:

  • Public-private partnerships could be helpful in strengthening the effective management of resources, towards a system in which industry returns are advanced along with significant local and national economic development. The World Bank is calling for the establishment of public-private partnerships between mining companies and the state, based on the argument that ‘co-operation between business, civil society and government can produce a win-win situation for all as it provides long-term benefits to the business sector, while meeting the social objectives of civil society and the state by helping create stable social and financial environments.’ This view is proposed as a guiding principle for South Africa.
  • South Africa should give consideration to negotiating a trade agreement with China to comprehensively address the trade imbalance and related job losses. The key objective would be to remove protectionist barriers against South African exports. There is a need for preferential trade access (such as America’s AGOA legislation) to the Chinese market as an important way for competitively disadvantaged less developed countries to access global value chains. A South African Free Trade Agreement (FTA) with China could increase exports to China, and markedly improve prospects for employment in some economic sectors as a consequence.
  • Any FTA negotiation process should include business, labour and civil society.

Our Zimbabwean study proposed a greater role for government in ensuring a greater developmental impact:

  • Beneficiation of raw materials before export should be made compulsory, and the percentage threshold to be processed locally should be based on the characteristics of each mineral. A process to ensure raw material beneficiation before export to China (or any other country) is increasingly urgent.
  • The Zimbabwe Investment Authority must ensure that approved investments are funded with specified foreign currency inflows.
  • At the same time, it is necessary to ensure that a significant percentage of the profits arising from the exploitation of natural resources are used to advance job creation and the fight against poverty.

Working Conditions and Corporate Social Responsibility

The working conditions in Chinese enterprises were a particular cause for concern, and many recommendations were proposed to ensure improvements in these conditions. Many of the recommendations rely on a greater government role, but the need to include worker organisations and to ensure that they have an effective say was also stressed.

Country study authors felt that Chinese companies were not contributing sufficiently to the society through corporate social responsibility programmes, and some suggested that governments intervene to enforce greater corporate social responsibility. A common thread was the suggestion that Chinese companies should be required to implement comprehensive corporate social responsibility programmes by adopting existing voluntary CSR initiatives and guidelines with a proven track record in terms of concrete contribution to local development (including environment protection, decent working conditions, human rights, relations with local communities, local companies and manpower, training programmes, and reinvestment of profits).

Our Angolan study urged that country’s government to:

  • Meet with Chinese companies and explain how they should treat Angolans workers.
  • Establish rules regulating working conditions and promote the creation of employment opportunities, because it is not worth having companies in Angola that do not improve the living conditions of the general population.
  • Supervise and monitor compliance with the employment rules by Chinese companies.

Chinese investment in Angola, it argued, should promote permanent jobs and not temporary work, should provide security for Angolan workers, and employment contracts should be in place.

The DRC study suggested that privately-owned Chinese companies (although involved in beneficiation of copper into copper cathodes) often flout local labour and environmental laws. It recommended that:

·      The DRC government, especially at the provincial level (notably Katanga), must build its capacity to investigate and punish companies that do not respect the law.

·      Chinese companies must accept the need for constant monitoring and evaluation of their activities by state institutions and civil society.

·      Chinese investors must be compelled to monitor and safeguard the environment they operate in. Environmental impact assessment reports must be conducted and properly scrutinised before permits to start operations are given. A follow-up mechanism must be put in place to monitor compliance.

·      The DRC government must properly define CSR in law. Boundaries between the respective roles of the state and corporations must be clearly defined, and Chinese companies must be compelled to engage with corporate social responsibility. Chinese companies must understand that CSR is an obligation on companies to invest in communities they operate in.

The South Africa study made comprehensive proposals to enhance worker protection and enforce corporate social responsibility. Many were directed at Chinese enterprises rather than the host government.

On the former (worker protection) it recommended that:

·      Workers should be full participants in the implementation and evaluation of sustainable development programmes and interventions. Workers and unions should be consulted on safety, environmental issues, and job security throughout the mining life-cycle.

·      China should be encouraged to provide more assistance in terms of skills development, and include a skills development component in all investment deals. China should also be encouraged to step up training of South African artisans and engineers along with an expansion of scholarships.

·      Chinese mining companies are important sources of new capital to develop the industry, but should focus on sourcing local labour and ensuring the transfer of skills and knowledge.

On corporate social responsibility, it urged that attention be given to these basic standards which are relevant in the extractive industries:

·      Obtain free, prior and informed consent of affected communities.

·      Ensure that projects do not force communities off their lands.

·      Refrain from dumping mine wastes into the ocean, rivers, lakes or streams.

·      Ensure that projects do not contaminate water, soil, or air with toxic chemicals.

·      Cover all costs of closing down and cleaning up mine sites.

·      Fully disclose information about social and environmental effect of projects.

·      Fully disclose all money flows to governments.

·      Adhere to all relevant international labour standards.

It also urged that:

  • Communities should be empowered to play an active stakeholder role in minerals, metals, and mining development. Mining companies should be required to provide information on the impact the mine will have on economic, environmental and social aspects of society. Adequate compensation to communities, based on the mineral value, should be provided. Any relocation of communities should be through consultation, carefully planned, and fully compensated. Heritage and cultural sites should be respected and protected.

·      China can help to eliminate the ‘second economy’ in South Africa by including local communities in business promotion and preferential procurement.

Our Zambian study made several proposals to address concerns about labour conditions and rights:

  • Issues of labour need to be seriously addressed and this should not be done in a piecemeal way. It must be borne in mind that the widespread use of casual labour has serious consequences, as it involves human dignity. The onus is on the Zambian government, especially the political leaders, to ensure compliance with laws that would compel mine owners to engage workers on a permanent basis, with full benefits. There is a positive move in this area at the Luanshya mine, but it is an exception rather than a norm. Despite promises to have this situation addressed before and after 2006, little has been done to compel the new mine owners to engage more permanent employees.
  • It is widely acknowledged that work is an essential part of human life. One needs to work in order to earn money for buying food, paying bills, and generally meeting other necessities of life. Workers need to know their rights, and there lies the role of trade unions and other civil society organisations. Together with the employers, employees need to recognise the importance of working in safe and clean environments to avoid accidents and illnesses. It is the duty of every employer to provide safe drinking water, reliable sanitary and other facilities.
  • Associated with the problem of employment is the issue of mine safety. It would appear that standards of safety have declined since privatisation, which has contributed to an increase not only in mine accidents, but also in fatalities. As a matter of urgency, the authorities which play a role in regulating the mining sector need to be strengthened. This needs to be done in line with their developed strategies, and as a response to the increasing role they are expected to play. Employers should ensure that machines and mining equipment are serviced regularly to avoid accidents. Government should play a major role in ensuring that safety measures are implemented in all workplaces.

The study urges Chinese companies to show greater responsibility to people in their neighbourhood. It argues that there is a need for Chinese companies to proactively respond to concerns about sustainable development in the areas where they are operating. For instance, mining establishments such as Collum Coal mine should work in collaboration with the local community and the Forestry Department on reforestation projects, and support initiatives by the community in which they can earn a living from other forestry products (e.g. bee-keeping, wax tapping etc) that have economic value and contribute to improved livelihoods.

Our Zimbabwean study recommended three areas for reform, aimed at enhancing work conditions:

  • Workers’ organisations need to find ways to monitor the application of the Labour  Act in conjunction with the Ministry of Labour. The capacity of the two should be enhanced.
  • Zimbabwean skilled personnel in the mining sector should make serious efforts to learn the Chinese language to facilitate skills transfer.

·      In terms of mine safety, the UK, Canada and Australia have shown that stricter laws lead to improved safety. This has obvious implications for Zimbabwe.

It urged two measures to enhance corporate social responsibility:

  • Zimbabwe should engage the Chinese companies (particularly the small-scale companies) on issues to do with legality, corporate social responsibility, environmental impact assessment, and compliance with the labour legislation. Such engagement should include Chinese conglomerates as best-practice cases to be emulated by the small-scale miners, and should involve the ambassador (as the Chinese representative in Zimbabwe).
  • Mining companies should be obliged by law to transfer 10 percent of gross profit (as is proposed by government) to the communities they operate in as part of their corporate social responsibility.

Removing Internal Constraints

This report has argued repeatedly that Chinese investment will not trigger sustained development unless host countries become more active in legislating to ensure a fit between Chinese resources and local needs, and in ensuring that laws are respected. It has argued that development impact is hampered by local constraints which need to change if the Chinese presence is to be more appropriate to countries’ needs. The country studies contained copious proposals for ensuring that the environment in the countries studied was better suited to ensuring that investment is in the national interest.

The Angolan study recommended that its government should:

·      Demand greater transparency and social responsibility in the relationship with China.

·      Meet with Chinese companies, and explain what is expected of them and how they should treat Angolans workers.

The DRC study’s recommendations were more concerned to suggest what the DRC should do than what China should do. This approach is premised on the position that a sovereign country has the right to put in place rules that govern the extraction of its resources. It is the responsibility of the DRC government and its people to ensure that Chinese companies behave in accordance with national and international standards.

It made these proposals:

·      The people of the DRC have been excluded from benefiting from their mineral resources mostly because of elite corruption. This is why the win-win relationship between China and the DRC (according to China) must be changed to a ‘triple win’. The Congolese people (and not only Chinese companies and Congolese elites) must be part of the win-win to make it win-win-win. Congolese civil society and government must work toward this objective.

·      The DRC must reform its tax system, and improve its revenue collection through monitoring and auditing financial accounts of foreign multinationals operating in their home countries. The efforts to redress unbalanced mining contracts must continue, and this must include contracts signed with China.

·      The DRC, if it is to benefit from its extractive industries, has to develop a world-class public administration, especially when it comes to mining. Because of the critical importance of the mining sector for the economy and for the public budget, commodity-dependent countries need to develop world-class public administration within relevant government departments, including public representation on the boards of mining companies. This would require innovative approaches (including a revised system of merits and incentives, and revised terms and conditions of employment) to allow the recruitment of competent staff and the retention of the best officials in key positions in the public service.

·      The DRC government must commit itself to transparent and balanced mining tax regimes, as opposed to secret tax deals with Chinese companies or joint-ventures. This is the best way to avoid corruption and assure citizens and investors that the rents from mining are being shared fairly.

Our Mozambican study argued that the development of a sustainable timber industry will depend on a clearer commitment from the government, whose strategic thinking and vision with regards to the forestry sector has been largely missing. Policies and strategies exist, but they are loosely related and do not provide a coherent vision for government officials and companies to work with. A strong and sustainable timber industry does not seem to be an important part of the country’s development strategy. It made these proposals for change:

·      With regards to the regulatory framework, the most pressing issue is implementation. Laws and regulations should be clearly disseminated at the lower levels of the state, and officials should be trained on the importance of implementing these laws and regulations for the sustainability of the forests

·      Proper implementation of the regulatory framework will depend on improvements in the capacity and governance of lower levels of the state administration. More officials with access to better equipment and higher salaries are necessary conditions for curtailing corrupt and illegal practices in the forestry sector.

·      Coherent and consistent policies and strategies are necessary with regard to the timber business, clearly advancing a vision for the sector and for its sustainable development, and linking it to a national development strategy. The country’s leadership must make clear to government officials, individuals and companies that the forestry sector is an important part of the country’s national development, and that the government will make efforts towards the sustainable expansion and the improvement of the quality of the timber industry.

The South Africa study suggested that the government could not be expected to achieve the necessary changes on its own. It thus urged that a coalition of stakeholders should address and investigate sustainability for the mining industry and ensure that foreign investors (including China) adopt appropriate policies. Participants could include:

o   African Network for Social Accountability (ANSA)

o   African Social Forum (ASF)

o   Bench Marks Foundation

o   Business and Human Rights Resource Centre

o   Civil Society Research and Support Collective (CSRSC)

o   Collaborative Research on corporations

o   Corpwatch

o   Diakonia Council of Churches

o   Extractive Industries Transparency Initiative

o   Framework for Responsible Mining

o   Global Witness

o   Industrial Mission History Project

o   International Fatal Transactions Campaign

o   Jubilee South Africa

o   Mines and Communities

o   Mining, Minerals and Sustainable Development (MMSD)

o   Nederlands instituut voor Zuidelijk Afrika (NiZA)

o   SOMO (Netherlands)

o   Southern African Peoples Solidarity Network

o   Southern African Regional Poverty Network

o   Tax Justice Network for Africa

o   Third World Network

o   War on Want.

It does, however, also assume that the government has a significant role in addressing the challenge of ensuring a greater alignment with local needs:

·      Through legislation, foreign investors in the mining industry should be required to include at least first-phase beneficiation before export. Increased governmental control of mining contracts and processes could assist in promoting beneficiation processes and related economic activity.

·      In the context of Chinese investment in South Africa, the South African government should promote China-South African joint ventures; require local procurement; ensure job creation with all Chinese investments; insist on technology and skills transfers; require a commitment to the local economy; maintain investment and transaction transparency; draft an appropriate investment code to protect workers; insist on corporate social responsibility and ensure that all projects are consistent with national development plans and policies.

The Zambian study also made proposals for a more effective government role:

·      The Zambian government should, working with various stakeholders, define the priorities and interests of engaging with China, noting that the ultimate benefit would be for the extractive industry to contribute to meaningful and sustainable economic development.

·      Government needs to reform and define how the mining industry should operate. The policy decision here would be to accelerate and make operational the Extractive Industry Transparency Initiative (EITI), which the government has already agreed to in principle. This will ensure that both government and society have information on what is happening. Enhancing transparency in the mining sector is important to ensure that publicly-owned resources from the sector are realised and used effectively. To this end, the government needs to go beyond signing of the EITI, and to begin to implement its principles. Key to this is the commitment of mining companies to disclosing incomes and taxes paid to government, and of the government to disclosing all material revenues received from the mining sector.

·      The issue of taxation in the mining industry is a critical area of discussion, and the Zambian government needs to deal with this issue as a matter of urgency because of its implications for national development. There is a very potent argument (advanced by different interest groups) for the Zambian government to have a taxation regime which not only captures more revenues for the treasury, but also ensures that the country meaningfully benefits from these finite resources. In the short to medium term, the windfall tax is perhaps the most appropriate route to take.

The Zimbabwean study offered that country’s government several recommendations aimed at enhancing effectiveness:

  • Zimbabwe has a well-defined minerals policy and all the necessary rules and regulations are in place. What is needed is to tighten them through reforms agreed upon by stakeholders in the industry, and the government must follow this up by establishing effective structures to monitor the conduct of investors on the ground.
  • Regular auditing of compliance by mining companies should be made mandatory to detect those who want to beat the system.
  • Synchronise the rules, regulations and procedures at the national and local levels, such that no investor is given a licence by local authorities without the necessary documents from the ZIA.
  • The government should be obliged by law to disclose, publish and subject to public scrutiny all agreements and contracts entered into with foreign mining houses.

·      Active exploration for minerals based on an effective ‘use it or lose it’ principle should be pursued.  Government is already in the process of establishing the Zimbabwe Exploration Company to put value to the mineral resources.

·      There should be a system to efficiently and effectively allocate and manage mining titles.

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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