Focus on frontier markets – has China’s economic interest helped or hurt Africa?

The relationship between China and Africa is without question one of the most important economic and, some would argue also political, developments of the past decade.

The announcement from Chinese president Hu Jintao last month to make $20bn of new investments in Africa over three years, extended the long and contentious economic relationship between the world’s second largest economy, and some of its poorest ones.

Speakers discussing it at a recent summit in London voiced divided opinions about its value to Africa’s frontier markets.

Funmi Olonisakien of the African Leadership Centre said the relationship leaves “no one indifferent and if you talk about China it generates a broad range of emotions, whether around human rights issues, or whether the relationship [with Africa] has lacked conditionality, and whether you can trade fairly with China as a partner. Also, as a western donor government you cannot be indifferent to China.”

The speakers did not question the economic boost to Africa – the $20bn represents about one third of current foreign direct investment in Africa – nor the intrinsic worth of infrastructure projects, which soak up about half the finance coming from Beijing.

But speakers said Africa must manage the relationship “skilfully and carefully” to ensure it gains new skills from it. They added the dependency some African governments have on China have stopped those nations developing ‘social contracts’ with their own peoples – to their detriment.

Either way, the relationship plays an important role in the thinking of both nations – shown by last month’s fifth annual Forum for China Africa Co-operation in Beijing.

Dipo Salimonu of The Africa Report Magazine said Beijing’s recent $20bn commitment was “a huge amount of money”, roughly as much as Nigeria’s annual budget.

Yiting Shen, a Chinese national who has worked in Africa for many years and is now head of strategic initiatives treasury and trade solutions at Citi, noted the relationship stretched back at least to the Bandung Conference on Asian/African relations in April 1955, and thereafter to loans and aid that China extended.

By the late 1970s, she said, Beijing gave aid to more African nations than the US did. By the mid-1980s it ranked eighth in the world for bilateral support to Africa.
But it is over the past decade that the economic relationship has really taken off. The $12bn of investments from China in 2010 dwarfs the $100m it committed in 2003. “The amount of growth in terms of commitment is phenomenal,” Shen said.

The $20bn promised over three years is about four times the volume of private equity funds committed to African investments.

Shen said: “It’s a long history, and in terms of support there’s a great deal of it. We could see more strategic investments in terms of…getting more aligned at the country level support needs, and getting involved in strategic project development for longer-term sustainability.

“The Chinese way of operating in Africa countries is more than just on specific projects. China can set up agricultural project test centres, for example.”

At the same time, Shen defended China’s widespread use of its own labourers in infrastructure projects. “It has been big issue, and that there is no direct involvement with local communities so there are no labour issues. But China wants to get the speed, and they often work three shifts, for 24 hours non-stop. Western aid projects have more Western standards.”

Nevertheless, she acknowledged, more engagement with local communities is needed.

Dipo Salimonu of The Africa Report Magazine said there was “a fundamental problem in a lot of African countries, in that the governments do not draw common cause with the people they lead. A lot of African countries think their biggest asset is the relationship with China or with the West.”

He spoke of the ‘Wimbledon illness’ plaguing the relationship. Wimbledon is the tennis tournament in Great Britain, where historically everyone but the British have been capable of winning.

“People come from all over the world and everyone can win, but not the locals – and here, the people in Africa do not have the chance to win,” Salimonu said.

“Maybe with the exception of Rwanda, governments do not feel it is important enough to ask for another model [for the relationship]. Who has dared to question countries like China when it comes in? Is it because of China that Africa has inequality in the way labour is used, or because Africa has elites that do not care how their people are employed?”

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