Chapter 8 - Conclusion: Challenges and policy options

China has prioritised Africa as a strategic partner at both the political and economic level, but the China- Africa economic relationship is still in its infancy. China `s drive for oil and raw materials has initiated a new scramble for Africa, the long-term implications of which are uncertain. As Christopher Clapham argues “China’s irruption onto the African scene has been the most dramatic and important factor in the external relations of the continent – perhaps in the development of Africa as a whole – since the end of the Cold War.”

Claude Kabemba's picture

Director of the Southern Africa Resource Watch (SARW)

October 11th, 2012

China has prioritised Africa as a strategic partner at both the political and economic level, but the China- Africa economic relationship is still in its infancy. China `s drive for oil and raw materials has initiated a new scramble for Africa, the long-term implications of which are uncertain. As Christopher Clapham argues “China’s irruption onto the African scene has been the most dramatic and important factor in the external relations of the continent – perhaps in the development of Africa as a whole – since the end of the Cold War.”

China seeks to expand its geopolitical influence in Africa to support domestic growth imperatives. Enhanced political influence, leadership in South-South co-operation, increased market share and guaranteed long-term access to Africa’s resources characterise China’s growing African footprint. China’s African agenda brings into focus the so-called Beijing Consensus which runs counter to the precepts of the Washington Consensus. The latter is characterised by the World Bank, IMF and western donor community conditionalities, including restrictions on macro-economic policy, a reduction in public spending, commitments to transparency and accountability, and the holding of democratic elections. The Beijing Consensus is predicated on non-interference in domestic affairs and the promotion of sovereign integrity. Some African leaders are attracted to the Chinese model of development, which has facilitated spectacular economic growth without a challenge to single party rule. Thus by design or by default, China is building a bloc of African states which buy into the Chinese vision of domestic and global affairs.

Africa’s challenges

The central challenge for African governments is to ensure that interaction with China is mutually beneficial, both politically and economically. While China bases its policy on friendship and historical solidarity and seeks a “win-win” relationship with Africa, the management of relationships to achieve this is not undemanding. Africa’s challenges in its relations with China seem to be similar to the problems it faces with western investment in its extractive industries. The critical one which has emerged through the chapters in this compilation is poor governance. The so-called “China problem” in resources can more accurately be folded into a larger set of concerns around the shortcomings of African governance in managing foreign investors in the mineral commodities sector, rather than any particular Chinese strain of malfeasance. In Africa, Chinese companies are now known for pollution, human rights abuses, weak safety and health conditions, and poor labour practices. While China might be dominating the headlines, many other companies (including western, Indian and Brazilian) cannot be exempt. Extractive companies regardless of their origin are taking advantage of the weaknesses of governance structures in most African states.

Given China’s apparent lack of interest in African governance and human rights issues, the implementation of Beijing’s Africa policy largely contradicts the African reform agenda. China’s actions signal a new effort to expand economic and political influence in Africa outside the confines of the Washington Consensus, and in some cases they contradict the OECD rules for engagement of “fragile states”. Beijing’s Forum on China-Africa Co-operation (FOCAC) is intended to provide a comprehensive and coherent framework for managing China’s engagement with Africa, but Africa’s failure to form a united response threatens to undermine the continent’s ability to shape the Sino-African agenda, or impact on the longer-term outcomes of the process. An appropriate policy response from Africa is required to ensure a mutually beneficial China-Africa relationship. In this context, policy options and dialogue processes become critical in advancing the interests of Africa’s economic development, human security and democratisation in the face of new challenges. Africa’s governance challenges manifest themselves in different ways. Some challenges can be addressed at the national level, while others require a continental or regional approach.

At the national level, it is up to African governments to maximise the benefits of China’s involvement. The process of ensuring a win-win relationship with China should include the following:

First is the building and maintaining an efficient and effective mining public administration. The development of a world-class mining public administration becomes critical for African countries to ensure effective administration of the mining sector, in particular revenue management and enforcement of mining policies, laws and regulations.

Second it is necessary to build the competencies to run the extractive industries. Policy-makers in Africa often lack sufficient expertise and analytical skills to elaborate sound legislative and fiscal policies, as well as industrial and sector development strategies adapted to the local context with the aim of maximising the development potential. This has led to imbalances in mining contract negotiation processes, resulting in inequitable deals between multinationals and the governments of commodity-dependant countries (to the detriment of the latter). These deficiencies have prevented African countries from negotiating beneficial mining contracts (e.g. Sicomine in the DRC). Badly negotiated contracts in favour of investors have undermined the business climate in Africa. Bad contracts deprive African states of the revenues needed for development and for service delivery. For this reason, the argument that discourages African government from renegotiating mining contracts (for fear that it undermines FDI) is contrary to African advancement.

Third, there is need for ownership of policy options on how to transform the extractive industries in such a way that they become beneficial to African people. Most policy documents of most African countries are designed with the support of external institutions.

Fourth is the problem of weak taxation regimes. Fierce international competition, increasing freedom of capital movements, over-incentivisation to attract FDI, and corrupt practices by governments and private stakeholders regarding taxation have seriously undermined revenues arising from mining resources for commodity-dependant countries in Southern Africa. The revenue which is lost in developing countries is being “round tripped” via (or accumulated in) tax havens (e.g. through favourable international transfer pricing schemes) before being reinvested in the developed world. Southern African states must enhance state capabilities to collect tax.

Fifth is the need to build linkages between the extractive industries and local economies. There has often not been a direct link between the extractive industries and the local economy. The revenues from extractive industries have not been used to reinvest in the economy to promote economic diversification or broad-based development. Africa remains a net exporter of raw materials, and an importer of manufactured goods. A strict beneficiation policy (and implementation) is needed. No company should be allowed to export minerals in their raw form. Enhancing linkages between mining and the local economy, improving working conditions in the mines, upgrading local and regional infrastructure, and investing in education and training of manpower in line with economic needs are critical issues to be addressed. The processing of minerals on the continent is a serious issue. Countries on the continent are to add value to their minerals before they are exported. This is possible considering the comparative advantage that Africa has in terms of cheap labour and abundant resources. Processing of minerals would have multiplier effects in terms of infrastructure development: it would open-up opportunities for local companies and increase the national tax base. A larger tax base with reasonable rates would offer more opportunities to fund infrastructure development.

Sixth, there is need to use China’s massive finances to support regional infrastructure development. Southern African countries lack the necessary infrastructures at national and regional levels (roads and rail transport networks, energy, water, communication) to fully and sustainably exploit mineral resources and to increase competitiveness on the international market. Africa needs an infrastructure to support global demands. Infrastructure bottlenecks and inefficient energy supply are causing extraordinary frustration to mining companies who fear that their ability to capitalise on the Asia-led resources boom is being undermined. Lack of appropriate infrastructure is a constraint which impedes commodity-dependant countries from attracting investments and using their mineral resources to develop more value-adding economic activities (local first transformation of raw materials), and so to stimulate economic diversification and resource-based industrialisation. Simply focusing on infrastructure directly linked to extraction of minerals would produce an economy with both strengths and weaknesses. The strengths would arise out of the productive and infrastructural capacities that would have been built up around its core sectors. The weaknesses would arise from the failure to integrate it into the rest of the economy. The result would be an internationally uncompetitive consumer goods industry, and limited capacity across a range of intermediate and capital goods sectors. When governments and regions are planning infrastructures, they should have an integrated macroeconomic and industrial strategy, with clear plans on how Chinese infrastructure investments can increase industrial development.

Seventh, China has been let off the hook regarding corporate social responsibilities. Chinese companies are having a damaging impact in terms of environmental degradation, working conditions, displacement of local communities, corruption, and fiscal evasion (particularly in developing countries with outdated policies and weak institutions). There is a need to push Chinese mining companies to implement comprehensive CSR programmes if Southern Africa is to turn the recent positive trends in the mineral sector into sustainable and real development.

At the continental or regional, the focus of Sino-African engagement should be:

•                increased symmetry between FOCAC and NEPAD;

•                AU prioritisation of areas where China’s assistance is most needed;

•                closer Sino-African collaboration on Africa’s development agenda;

•                SADC prioritisation of needs;

•                closer policy synchronisation on the global economic reform agenda;

•                increased co-operation on UN reform.

The key to advancing a China-Africa “win-win” relationship is to ensure both international and national co-operation for mutual benefit. At the global level, a joint effort to reshape globalisation and international economic institutions can advance the interests of both Africa and China. However, the reform of multilateral institutions cannot be achieved overnight, and developing countries must in the meantime take responsibility for their own well-being. China’s challenge is to incorporate global best practice into its corporate engagement with Africa.

Southern African countries can individually or collectively negotiate better deals with China to ensure more local labour, and more technology transfers. A comprehensive approach to foreign investment (from China, or elsewhere) implemented by African governments would go a long way to ensuring a win-win relationship. Ineffective African governance and commercial regulation will inevitably allow for a poor result from any foreign involvement option. African nations need to be more steadfast in pursuing their national interests and achieving their long-term goals. Few African countries, for example, took full advantage of the AGOA framework, and market penetration of African products in the US remains low.

South Africa’s former President Thabo Mbeki warned of “an unequal relationship” between Africa and China. Peter Brooks has also asked a critical question. “While China has the potential for doing good in Africa, the question becomes: Is China’s approach the answer to Africa’s problems or is it just a repeat of Africa’s colonial, mercantilist relationship with Europe? Or is it something completely different? Or is it perhaps too early to tell?”

China is in Africa primarily to satisfy its own economic need access to strategic resources. China will use any loophole in the relationship with Africa to access these resources cheaply whenever possible. It is in the interest of Africa to ensure a mutually beneficial outcome in its dealings with China and to build local capacity to meet the challenge. As many observers have pointed out, China has a clear strategy for Africa, but Africa has no strategy for China. Greater co-ordination at the AU could ensure that African values, interests and developmental objectives are factored into interactions with China. Hany Besada argues that the China-Africa relationship should be carefully managed “at ministerial level” to ensure a mutually beneficial outcome. The onus is on individual African countries and African institutions to provide appropriate regulatory frameworks and good governance. The responsibility does not lie with Beijing.

The country studies in this compilation make findings that can be extrapolated to other countries on the continent. The research on the relationship between Angola and China has suggested a desire for mutual benefit, but the results have been disappointing. An investigation of China-Angola relations suggests that the partnership is not mutually beneficial. Policies regarding the attracting of investment into the extraction industry of Angola are already in place, but need to be improved to both attract and manage new investments in Angola. China’s engagement with Angola provides infrastructure, but no new money into the country, which on one hand reduces corruption, but there is a need to ensure adequate monitoring and supervision of all Chinese construction activities.

The study of China-DRC relations argued that China represents an opportunity for the DRC, but Chinese companies have an obligation to abide by Congolese laws and regulations and respect international norms and standards of the extractive industries. Corruption is one of the main reasons for instability in the DRC. China should not be allowed to follow practices which undermine the fight against corruption and good governance.

Research into the China-Mozambique relationship has revealed that within the forestry industry there is a lack of accurate reporting regarding the amount and location of trees felled, and thus there is significant illegal export of unprocessed logs. The Forest and Wildlife Law and the regulation which supports the law stipulate the requirements, rights and obligations of both single license holders and concession licences, but despite these regulations, licenses are regularly awarded without meeting the necessary requirements, quotas are exceeded, harvesting under-reported, local communities are not compensated as agreed, and unprocessed logs are exported, undermining attempts to promote local industry.

From a short-term business perspective, the relationship between Chinese buyers and South African commodity producers is mutually beneficial. South African companies have direct and guaranteed access to the fast growing Chinese market, while Chinese steel makers have guaranteed supply at affordable prices. But the present Chinese business model for engaging South Africa’s ferrochrome industry presents both negative and positive features. Chinese investors are seeking supply at the lowest possible cost and all beneficiation is carried out by stainless steel manufacturers in China. On the positive side, Chinese investments in the form of joint ventures with South African companies offer the prospect of building more rewarding relationships with Chinese capital. Through joint ventures, Chinese companies are exposed to and are automatically supportive of existing corporate social investment programmes. The Sinosteel-Samancor relationship for example, offers a good model for Chinese business partnerships with South African companies which have well established CSI programmes.

The country paper on China-Zambia relations explored various aspects linked to the development and benefits of doing business based on Chinese foreign direct investment into the extractive industries. Government needs to reform and define how this sector 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.

In the country paper on Zimbabwe, the policy dichotomy between the Washington Consensus and the Beijing Consensus – non-interference in the internal affairs of other countries was explored in the context of China-Zimbabwe relations. To say that China’s engagement in Zimbabwe’s extractive industry conforms to a neo-colonial exploitative approach would be overstating the case. Large Chinese corporations whether state-owned or privately owned have entered into “win-win” joint venture operations with the Zimbabwe state enterprises and private indigenous investors. Chinese companies operating in Zimbabwe are not all the same. There are large corporations and there are small-scale individual investors. The latter group of investor’s operations, in the main, tend to capitalise on the excellent bilateral relations between Harare and Beijing to ease themselves into the mining sector, and the majority of them have generally ignored rules that have been laid down for those wishing to participate in this sector.

China’s challenges

China’s readiness to support infrastructural development has earned Beijing the support from African politicians who are desperate to show some successes to their electorates. China is dispelling the myth that Africa cannot develop. The World Bank and the IMF abandoned supporting infrastructure development on the continent in the 1970s, arguing that it was too expensive. The Chinese role in mineral commodities in Africa is fast changing the landscape of investment in this sector. Southern Africa is the most important region of Africa in terms of Chinese capital investment. Chinese investments in Angola, DRC, South Africa, Zambia and Zimbabwe are among the biggest on the continent. Put together, they represent the biggest Chinese investment on the continent. Southern Africa is undoubtedly the region most attractive to China. The region has oil (Angola), timber (DRC and Mozambique), copper and cobalt (Zambia and the DRC) and other strategic minerals such as platinum, chrome, manganese (South Africa and Zimbabwe) that China needs.

Though China has introduced some features in its pursuit of African resources that are contributing to problems through poor practices of its firms, in most respects its comprehensive approach to resource acquisition brings with it tangible development gains in the form of new infrastructure. Where this has been visible is in Angola. China’s relationship with Angola suggests a new pattern of Sino-African interaction. Angola’s ability to switch from IMF funding to Chinese financial support, suggests that Africa has new options for development assistance. China is building roads and bridges, linking up towns and facilitating the movement of goods and people. Through Chinese infrastructural support the vast Congolese territory will soon be linked, and Congolese will be able to travel the entire country by road and rail.

However, the past decade of Chinese investment in the region has not been without problems. First, Southern African citizens have been vocal on matters of human rights abuses that they are subjected to by their Chinese bosses. Beijing has remained insensitive to human rights abuses perpetuated by its Chinese citizens. This silence has been informed by China’s conviction that African governments are unable to confront Beijing for fear of losing China’s financial support. Beijing is clear that Africa needs huge capital investment, and with the USA and Europe experiencing economic decline only China (at this juncture) is capable of providing it. For this reason, China is not interested in engaging its companies on the continent and steering them toward good corporate governance. China is more concerned to counter criticism from western capitals that China is exploiting Africa. China is clearly more worried about western criticism than it is about the behaviour of its companies on the continent. Chinese insensitivity to human rights violations perpetrated by Chinese companies on Africans is supported by the silence of most African governments. In many instances it has been African governments which have protected the Chinese who have committed human rights violations.

Second, China’s vertical integration formula of investment, project operation and business conduct in Africa is the greatest obstacle to the win-win policy. All inputs originate in China, with little or no local content. The dumping of cheap Chinese labour in favour of local labour is arousing growing anti-Chinese sentiment, popular resentment and antipathy across the continent. While Africans complain that China has not encouraged local participation, supported local business and transferred technology and skills, the Chinese counter that arguing that they find it very difficult to identify appropriate African sources and partners for their needs, and that project completion and quality could be compromised in such a search.

Third, China has been criticised for providing poor infrastructure in exchange for minerals and oil. This seems like the only way the outside world engages with Africa. As Jian Junbao argues, the path taken by China is consistent with the logic of market capitalism [and] liberal trade” and makes China not a colonialist but a successful capitalist in Africa.” The poor infrastructure allows the Chinese to remain in business. They are asked to repair the same facilities continuously, and China is making more money through infrastructure than it does with minerals. There are many Chinese companies operating in Africa, mostly in the construction and mining sectors. They are focusing primarily on profits, regardless of their harmful impact on society. Africans have not been able to hold Chinese companies to account. Chinese companies are allowed to operate using their own standards. African governments do not have internal capacity to undertake quality assurance on Chinese projects. Despite the major infrastructure developments in countries like Angola and the DRC and the creation of an economic zone in Zambia, the chapters is in this book suggest that China-Southern Africa relations need to be managed carefully if they are to be sustainable over the long term.

Fourth, China’s reluctance to engage with African civil society is worrisome. During the collection of data for this book, researchers in all the countries found it difficult to engage Chinese in the different companies. The debate on China-Africa relations lacks an effective and consistent input from civil society. Some research institutes and trade unions have voiced opinions, but a broader consensus is required to build an appropriate response to the challenges posed by China’s engagement with Southern Africa (and Africa as a whole). There has been a proliferation of China-Africa civil society engagement, but this has remained at the academic level. Chinese companies in Southern Africa refuse to meet with civil society.

Promoting a “Triple win” outcome

China trade with Africa will continue to grow. More credit for Africa to access natural resources will continue, and China is expected to step up its infrastructure building in Africa. Two-way China-Africa trade is set to increase within the next five years. At the same time, China’s development assistance will increase significantly, while investments in a wide range of African commercial sectors will continue to proliferate.

The long-term objective is a “win-win-win strategy” which implies a win for China, a win for African leaders and a win for ordinary African citizens – defined as job creation and poverty relief. Both China and individual African countries have a common interest in crafting this “triple win” outcome which will ensure a productive, rewarding and fulfilling China-Africa relationship not only for political and economic elites, but also for ordinary citizens.

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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