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Is China Bad for Africa?

On balance, no. It turns out that greed works after all.

Published on January 1, 2011
The Dragon’s Gift:
The Real Story of China in Africa

by Deborah Brautigam
Oxford University Press, 2009, 300 pp., $29.95

While the emergence of China as a global power has been met in the main by a determinedly non-confrontational response, Africa is one front where the rhetoric has been less restrained. There some local politicians and international observers have accused China, the erstwhile anti-colonial champion, of harboring barely concealed imperialist ambitions. “China is building a lot of infrastructure—presumably to help it procure all the natural resources its firms are gobbling up”, reports the Economist. “You recruit Chinese doctors and they end up having Chinese restaurants in town”, charged Michael Sata, the Zambian presidential candidate who fell only 3 percent short of winning that country’s 2008 election. “They are just flooding the country with human beings instead of investment. . . . If we leave them unchecked, we will regret it. China is sucking from us.”

The stakes are large. Indeed, the seemingly sudden arrival onto the scene of a new player who flouts the established rules introduces what amounts to an alternate reality to the whole complex of relationships that defines the politics of development. China’s presence in Africa constitutes a fascinating and hugely important natural experiment as to how international engagement can most effectively support development on that continent. The stakes do not end there, however. After centuries of colonial and post-colonial engagement with Western countries, Africa is now in flux as a geopolitical sphere of influence, a fact with potentially far-reaching implications for the complexion of the 21st-century world.

Deborah Brautigam’s superb book The Dragon’s Gift offers a window into how China’s foray into Africa is playing out on the ground. Rich in vivid anecdotes and informed by the author’s three decades of academic work on both China and Africa, the book does many things, and does them all well. It describes how Chinese engagement in Africa has evolved, identifies its drivers, and assays its emerging impact on both economics and governance in nearly two dozen African states. It also looks behind the noble-minded rhetoric to the realities of aid-giving—Western as well as Chinese. The result is a fresh and compelling assessment of China in Africa with a counterintuitive bottom line. The Chinese approach, argues Brautigam, is less outside the development industry mainstream, more promising for Africa, and more risky for China than is generally perceived.

Into Africa, with Chinese
Characteristics

China’s economic engagement in Africa repeatedly makes headlines both for its massive scale and for the seemingly heterodox nature of the institutional arrangements that underpin it. In 2006, for example, the Nigerian government and the Chinese Railway Construction Corporation signed an $8.3 billion contract to rebuild the 1,698-mile colonial-era railway between the coastal city of Lagos and Kano, the capital of northern Nigeria. In 2007, the Export-Import Bank of China (Eximbank) agreed to loan $6 billion to the Democratic Republic of Congo to finance a broad array of infrastructure projects (including hydroelectricity, urban water supply, roads, railway rehabilitation and facilities for health and education). Additional investments of more than $3 billion would go into mining operations—and the proceeds from the mines would be used to repay the initial loans. Each of these deals is larger than the World Bank’s annual commitment to the entirety of sub-Saharan Africa ($5–7 billion annually from 2005–07).

Deals such as these seem extraordinary given current donor practices in Africa, but as Brautigam shows, they fit seamlessly with China’s domestic development strategy. In 2001, China’s tenth five-year plan called on Chinese companies to “go global.” The results of having gone global in Africa included the following:

      • In 2007, Chinese construction companies earned revenues of $12.6 billion and signed contracts for more than $29 billion in Africa.

 

      • Chinese construction companies are the largest recipients of (competitively tendered) World Bank construction contracts across the African continent.

 

    • In 2008, the Chinese exported more than $50 billion’s worth of equipment, consumer goods and machinery to Africa.

Clearly, China’s seeming generosity is also designed to serve its own interests. In this, however, China’s approach differs only in degree from Western practices.

The Chinese strategy in Africa is not just about lump sums of cash. It has a more sophisticated design than that. As Brautigam convincingly argues, “going global” also implies that China increasingly seeks to move low-wage and “dirty” industries offshore—a process that has already generated special economic zones in Ethiopia, Mauritius, Nigeria and Zambia and the emergence of both a nascent metal parts industry in Nigeria and leather processing in Ethiopia.

China’s tools for “going global” run counter to the (purportedly) rigid boundary in Western countries between public and private sectors, but are familiar to scholars or business middlemen dealing with East Asia’s “developmental states.” More important and interesting, however, China’s resource-backed deals in Africa, for example, run parallel to its own earlier experience as a recipient of aid and foreign investment, from Japan in particular. Thus, in the 1970s, writes Brautigam:

China used Japan’s interest in Daqing oil to build infrastructure for transport and energy, and export capacity. . . . Japan’s Ministry of International Trade and Industry (MITI) pushed hard to ensure that Japan’s first package of foreign aid loans was used mainly to facilitate the export of China’s oil and coal to Japan. . . .
[S]ubsidized yen loans funded power plants, urban water supply, telecommunications, and highways. . . . Compensatory trade characterized these deals. . . . [A] Japanese firm exported sewing machines to China and was paid with 300,000 pairs of pajamas.

The hybrid public-private operation of China’s Eximbank—the major provider of loans to Africa of the kind detailed above—is another familiar feature of a developmental state in action. It again parallels the approach taken four decades earlier by the Japan Bank for International Co-operation. As Brautigam documents, China’s Eximbank has become by far the world’s largest official export credit agency: Its 2007 worldwide commitments of almost $30 billion were double those of each of the next-largest agencies (the Export-Import Bank of the United States and the Japan Bank for International Co-operation). The majority of its financing comprises commercially priced suppliers’ credits tied irrevocably to Chinese suppliers; in 2007, lending on “soft”, concessional terms made up only 3 percent of the Eximbank’s financial commitments. Indeed, as a provider of unambiguously concessional aid, China’s total contribution is small: The $1.4 billion it committed to Africa in 2007 is about a fifth of the amounts provided by the United States ($7.6 billion) and the World Bank ($6.9 billion), a third of the European Commission ($5.4 billion) and France ($4.9 billion), and about half as much as aid provided by the United Kingdom, Japan and Germany. But the intermingling of commercial and concessional terms in non-transparent ways that are difficult to unravel make China a challenging competitor.

China’s engagement in Africa, Brautigam documents, predates the 2001 call to “go global.” It goes back all the way to the 1960s. One of the most intriguing aspects of the story is how Chinese authorities engineered an apparently seamless transition in their own thinking from ideological to commercialized engagement. In Sierra Leone, for example, early Chinese support for development projects (a sugar complex, irrigated rice, fishing) was accompanied by an injunction from a Sierra Leonean government minister that “if we listen and practice the teachings of [then Prime Minister] Siaka Stevens [à la Mao], we shall have a revolution of the [China rural] type here.” This was accompanied by Sierra Leone’s 1971 diplomatic recognition of China over Taiwan. China generally tried to stay for the long haul. Even as governance in Sierra Leone deteriorated in the 1980s, China ensured that its projects continued to operate, keeping the sugar project going by using its aid budget to make up shortfalls from corrupt practices. In the 1990s, the sugar complex, still owned by the Sierra Leonean government, was restructured to operate on a for-profit basis. In 2003, it was leased by the Sierra Leonean authorities to a Chinese company, Complant, listed on the Shanghai Stock Exchange. Perhaps unsurprisingly, in 2006 Chinese companies were well positioned to close on a major Sierra Leonean telecommunications project, as well as subsequent hydroelectricity initiatives. Patience paid off.

What Will the “Dragon’s Gift” Bring Africa?

Why has there been so much disquiet, especially among Western aid donors, about China’s engagement in Africa? Part of the reason, of course, is that China’s rapid emergence has destabilized the status quo, but the disquiet goes deeper than that: Over the past two decades, Africa’s mostly Western aid community has taken a hard look at its deficiencies, and sought to transform its approach to aid. Donors believe that China’s incursion threatens to erase the gains that Western experts hope they have made in recent years in efforts to improve “best practices.” Though not dismissing their concerns out of hand, Brautigam is not about to join the chorus of Western aid-givers.

In the first decades of the post-World War II aid endeavor, donors were content to package aid in the form of discrete investment projects that generally focused on infrastructure. But beginning in the 1980s, frustrated with the manifest limitations of this approach, the focus shifted from straight-up investment to shaping the economic policies of recipient nations. This shift then moved further, from a focus on policies to one on institution-building. The instruments of aid changed accordingly, from “ring-fenced” self-standing projects to more flexible forms of aid (even general budget support, at the limit) that flowed into and through the governmental systems of recipient countries. The intent was to help strengthen the recipient countries’ own governance systems, not to displace them by sucking effort and expertise into a parallel donor-financed investment universe. The shift from projects to policies to institutions, however, increasingly brought to the fore the extraordinarily difficult issues of corruption, social contract, democracy and the rest as the boundaries between economic and development agendas became increasingly blurred.

China’s continuing exclusive focus on projects flies in the face of the new Western consensus. The fact that this focus enables the Chinese to fly high above the political flak of the aid/development relationship seems particularly aggravating to Western policymakers, who, believing that they have finally come to the real issues, resent the counterflow coming from Beijing. But, as Brautigam details, China’s approach to aid is not as subversive as the Western development industry often thinks. For one thing, project aid has hardly disappeared from the arsenal of Western donors; well more than half of World Bank support to Africa, for example, continues to take the form of investment lending. For another, there’s a crucial distinction to be made between aid and investment finance. The latter is the norm, not a rare exception, in the global market economy; it is how banking and “real” corporate sectors come together to finance business in the developing world. It is how many supposedly privately financed infrastructure projects are packaged. Indeed, directing the proceeds from natural resource exports into offshore escrow accounts is a standard way of providing security for foreign portfolio investors.

What is really different about the Chinese approach, argues Brautigam, is the level of risk the Chinese are prepared to run. Infrastructure-for-resources strategies are inherently riskier than lending directly into an export oil or mining facility. Moreover, lending for inland natural resource development in fragile states—Sudanese oil or Congolese copper, for example—is certainly riskier than targeting offshore oil resources like Nigerian oil. It is also obviously riskier than targeting investment in stronger country settings. Riskier still are Chinese companies’ investments in African agriculture or industry.

Western donors and investors backed away from such investments decades ago and have mainly stayed away since, because the results generally were poor. Paradoxically, China’s current engagement can thus be viewed as a bet that the governance and policy reforms pushed by Africa’s domestic reformers and their Western allies these past three decades have been sufficiently deep, and are sufficiently irreversible, that this time around investments in these kinds of projects will pay off—both in underpinning development in the host country and in repaying the (Chinese) lender at the expected (commercial) rate of return. The outcome of this bet is as yet uncertain.

What of the Western resentment that China offers its support indiscriminately, with no policy or governance strings attached, thereby supposedly undermining an emerging continent-wide norm to isolate and ostracize the most egregious practitioners of poor governance? Brautigam argues that scenarios which cast China as villain are overwrought. This is not because she views either China or Africa through rose-colored glasses. Indeed, she describes in detail China’s extensive economic involvement in countries with very poor human rights records, including Sudan, Zimbabwe, Angola and Equatorial Guinea. In assessing whether China is making corruption worse, Brautigam concludes “probably not worse, but definitely not better, either.” But she also insists on posing the question: Against what comparator is it appropriate to judge China’s impact on African governance?

Certainly, China falls short compared to the governance-promoting “best practice” standards of the West. But how effective have these standards been over the years? After all, corruption requires someone to pay the bribe as well as to receive it. Have none of the former been from, say, Western-owned extraction industries? There are many relatively recent Western initiatives from which China has remained aloof—the Extractive Industries Transparency Initiative (EITI), the Kimberley Process on Conflict Diamonds, the Forestry Law and Economic Governance Initiative, and various international anti-corruption conventions, treaties and voluntary initiatives—that have sought to address these shortcomings by fostering greater global transparency and combating economic practices that contravene human rights and promote corruption. But it is no simple matter to determine, even with these recent efforts, whether Western aid over all these years has done more good than harm.

Consider, for example, that while EITI does help foster transparency, even its strongest advocates recognize that its direct impact on corruption is likely to be very limited. (As of early 2010, the only two members that had fully complied with its provisions were Azerbaijan and Liberia.) More than 140 countries have ratified the United Nations Convention Against Corruption, yet only the most rudimentary arrangements have been put in place to monitor whether countries actually implement their commitments. At the corporate level, as The Dragon’s Gift documents: Japan, India and Malaysia have all purchased Sudanese oil; a Canadian company was the main foreign player in Sudan’s non-oil minerals and mining; the U.S. Eximbank provided loans to Angola; Exxon Mobil is active in Equatorial Guinea; Rio Tinto and BHP Billiton are significant sources of investment in Guinea and Zimbabwe; an American company was contracted to log the last remaining old-growth rainforest in Sierra Leone and ship the tropical hardwood timber to China.

In sum, much of the criticism directed against China’s activities in Africa is made from the vantage point of “aspirational” standards: how aid should be delivered, how donors should ensure a level playing field in their engagement in developing countries, and how private companies should conduct themselves in the international realm. Judged against these standards, yes, China falls short, but the standards themselves neither reflect consistent practices for non-Chinese donors and investors nor (in the case of modalities of aid transfer) has their worth incontrovertibly been demonstrated. Development practitioners increasingly recognize that nostrums of “best practice” governance are of limited, if any, help as a guide in these settings. Most acknowledge, too, that their own understanding as to what are feasible and value-adding “next steps” in such settings is at a humbling, early stage.

Once the real terms of comparison are acknowledged, Brautigam argues, it becomes clear that China is likely doing more good than harm for Africa. China may profit too, but no Westerner who has ever heard of Adam Smith will be surprised by the possibility that both sides can gain from economic engagement. And China’s approach continues to evolve, suggesting at least the possibility that China’s involvement could turn out to be a valuable asset for African countries, perhaps even an important contributor to a 21st-century turnaround across the continent. Whether this turnaround is anchored in a self-assured set of African identities and participatory political preferences, or comes more to reflect an entrepôt-like embeddedness in an interdependent global economy, remains uncertain. But whichever pattern emerges, the centuries-long era of an African continent in thrall to Western visions of one kind or another finally appears to be coming to a close. That prospect might set Cecil Rhodes and Jules-François-Camille Ferry spinning in their graves, but for many an African, it comes not a moment too soon.

Brian Levy is an adviser on governance issues at the World Bank, where he has worked for the past 21 years.