China can be good for Africa. But not alone.

South African landscape - courtesy of forksteel

With a little delay, I report from a really good conference held last week at the Royal Commonwealth Society, and organised by the Royal African Society, about the relationship between Africa and China, and whether anyone should start worrying about it (like I seem to do all too often).

The first speaker was Dr Nkosana Moyo, Zimbabwe’s former industry minister, now working for a private equity investor in emerging markets. After hammering out some data about investments, imports, exports and what not, he basically made one sole argument: when we point the finger at China’s lack of conditionality in its economic initiatives in the continent, we are actually de-responsibilizing Africa’s leaders, who are the ones who should be actually held accountable to their people and the wider world if the unexpected income is not channelled through appropriate socio-environmental institutional mechanisms. All very well, I’d say, but this doesn’t really help us deal with the problem, Dr Moyo, does it? Or are you suggesting regime change in Africa too?

The second speaker was far more intriguing. Stephen Chan‘s web-designing capabilities may be below average, but he’s got plenty of other skills to make up for this deficiency, in the academic, literary and – most importantly – martial arts fields. His presentation captured many aspects of the problem: for a start, China is pursuing strategic investments on the continent, and ensuring long-term contracts with African governments, having poured more than $900m of the $15bn of foreign direct investment to the continent in 2004. This might seem appealing to many African leaders, stripped for cash and desperate to build up their foreign exchange reserves, but it will probably turn sour 10-20 years down the line:

China’s export bank, Eximbank – explains Le Monde Diplomatique‘s Jean-Christophe Servant – has approved a $2bn line of credit to enable Angola to reconstruct infrastructure – including electricity, railways and administrative buildings – destroyed during 30 years of civil war. In return China would receive 10,000 barrels of oil a day. […] The line of credit – at 1.5% over 17 years – might look disadvantageous to China in the short term, but Chinese companies will secure the lion’s share of lucrative contracts for national reconstruction. Local people are unhappy. As independent economist José Cerqueira pointed out: “There is a condition in the loan that 30% will be subcontracted to Angolan firms, but that still leaves 70% which will not. Angolan businessmen are very worried about this, because they don’t get the business, and the construction sector is one in which Angolans hope they can find work”

The first issue, therefore, is one of renegotiability, i.e. the need for African leaders and businesses to understand the longer-term implications of the concessions they are granting to China, and ensure there are clauses for when the terms of trade are no longer appealing. The second one, which we are more familiar with, is that of the lack of ‘strings attached’ to China’s loans and aid packages, which are frustrating in particular the US’ attempts to link these with a committment to uphold a series of environmental and social standards. Continues Le Monde:

In the past, international organisations such as the World Bank have been criticised for making loans to countries in need conditional upon non-negotiable demands. Now the situation is reversed, with China granting unconditional, instant credits that encourage white elephant projects, without concern for financial transparency.

This is clearly related to the ongoing conflicts in Sudan, Chad and the Central African Republic, where revenues from the sales to China will undoubtedly be converted into arms, a concern which has led some commentators to declare Beijing 2008 the Genocide Olympics. This is where the EU can and should make an important contribution. Despite $40bn in trade recorded in 2005 (a fourfold increase since 2001), Africa still accounts for a less than 3% of China’s global commerce. An estimated 80% of Africa’s trade is instead with the EU, which remains its crucial partner for historical and geographical reasons, or perhaps because – to date – there isn’t a single university in the whole of Africa that teaches Chinese, a fact that surely limits any meaningful attempt at deepening the economic relationship between the two regions.

By avoiding the short-sighted pitfalls of competition – concluded Chan – Europe would be able to develop a healthy triangulation module, which would bring wealth and development at the heighest social and environmental standards. And indeed, Commissioner Benita Ferrero-Waldner’s recent visit to China has begun linking energy security and sustainable development objectives with engaged discussions on Africa. But these steps are still too tentative: strong and effective policy decisions are required soon if the EU doesn’t want to see itself outmaneuvered by an aggressive US and an intransigent China coming to blows in the not-too-distant future over Africa’s soil.

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