In September 2018, China hosted the third Summit of the Forum on China Africa Cooperation (FOCAC) in Beijing. For this occasion, President Xi Jinping welcomed no fewer than 53 African leaders. In conjunction with the launch of China’s Belt and Road Initiative (BRI) and the recent institutional consolidation of China’s development assistance efforts, this summit served to draw attention to China’s rapidly advancing engagement in Africa. Indeed, the “China-Africa phenomenon” provides insights into the emerging drivers and practices of China’s approach to emerging economies. For Africans, the China connection also represents a new dimension and, in some measure, a new “style” of globalization.
The summit featured announcements of US$60 billion in new flows in various forms to Africa’s development. They include development financing on both concessional and commercial terms, state-backed investment, credit lines, plus modest debt write-offs for the poorest, special initiatives in health, ecology and expansion of African imports into China. The announcement also included education, training and cultural initiatives.
As with other elements of its outward push in recent years, China’s role in Africa has not been without controversy, nor has it been free of mythology. On one end of the spectrum, China’s gathering role is seen by some as a model of fewer strings-and-conditions-attached good will - a manner of operating which all “donor” nations should take note. In broad terms, China’s investment and aid packages are largely welcomed by African leaders, notably due to their much shorter wait times to delivery.
At the other end of the spectrum, China’s approach may be, and is, portrayed as risking a new era of misdirected resources. While now vowing to avoid such practices, China is seen by some to promote low development value “vanity projects”, heavily tied to Chinese sources, and self-interested advantage-taking by foreigners on a continent that has witnessed so much of such behaviour in its past.
Apart from “aid” packages, newer dimensions of Chinese activity such as migration and security engagements have spawned a measure of unease over intentions. There are an estimated one million Chinese workers and small business people in Africa. In the spring of 2018, after the establishment of China’s first Africa military base in Djibouti, China’s Ministry of Defence convened the first China Africa Defence and Security Forum (CADSF). Whether or not the China-Africa relationship can yet be deemed “maturing”, it is without doubt becoming multi-faceted, now extending into the soft power realm. Over the last decade, China has outpaced the U.S., the U.K., Portugal and Germany for having the greatest number of cultural institutes in Africa, occupying a second place, after France.
In this context, the best framework for analysis, assessment and evaluation of the evolving Chinese approach to Africa will be one that encompasses development aid, trade, investment, security and other ties and that discloses the drivers at play, at home and internationally, which determine the character of interactions taking place and the tools selected. In aid, China has become Africa’s 3rd largest donor and is focused on energy, transportation and communications. Trade grew an average of 20 percent/year from 2000-2014, slowing thereafter due to a commodity price dip but nonetheless reaching US$179 billion in two-way trade by 2017. Investment growth, albeit from a small base in 2000, has risen spectacularly an average of 40 percent/year over the last decade, to a cumulative stock of approximately US$50 billion. Resources lead but, like trade, FDI is beginning to diversify into manufacturing and services, albeit mostly at the lower end.
Looking at the totality of the evolving China Africa encounter, the underlying dynamics and impacts are most in need of understanding, rather than the individual events and transactions. A framework through which China’s approach can be more accurately assessed and its benefits or drawbacks evaluated is needed, as systemically and as objectively as possible.
It is notable and perhaps significant that the spin placed by Chinese officials has seemingly taken account of the critiques made of its past efforts. As noted below, there is more “concessionality” in the transfers themselves though the terms do need to be examined more closely, particularly with the ramifications of debt loads. Angola, Kenya and Djibouti have received prominent mention in this regard of late. There is, seemingly, more attention to human resource development and social needs, as well as consideration of environment impacts. As earlier alluded, showpiece projects will henceforth be avoided. China assures, in favour of those with substantive economic and social benefits. Is this “better aid” or better public relations? Again, transparency and solid evaluation will be necessary.
Alongside legitimate concerns over project quality and debt imposition - and lately the military dimension, there are some criticisms of China’s emerging Africa role that are either fanciful, overblown or already dated. One such criticism is that Chinese businesses will likely continue bringing in too many Chinese citizens to Africa, especially for managerial and professional roles, to work in its major projects and enterprises. Yet as a McKinsey 2017 report points out, 89% of Chinese firm staff are now African and 44% of managerial staff are African. The image of large-scale agricultural land purchase transactions by Chinese are legend, as proved though professional research. Rather than 6 million hectors as alleged by advocacy groups, the total is 240,000 hectors, or 4% of that total. Still, impressions of “new colonialism” remain powerful and again make the case for analysis that is more dispassionate as well as providing markers for legitimate performance review.
It is indeed a framework of performance review that should underly the assessments undertaken of the Summit package – not only the terms of the transfers themselves, but their downstream impact on African development. Among the indicators worthy of tracking are:
- Progress in the volume and terms – the September 2018 summit package is more concessional, marginally perhaps, than the 2015 version at 25 percent in the form of grants;
- Alignment with African priorities – first impression: incremental improvement by China:
- focus on infrastructure is responsive to local needs – the African Development Bank estimates annual requirements of US$130-170 billion a year for infrastructure, monies that are not available from traditional donors or commercial sources; and
- onew attention to human resources such professional training is welcome in packages and more common practice among Chinese firms two thirds of whom now offer skills training or and half possess apprenticeship programs;
- Debt burden kept manageable - signs of enhanced Chinese awareness of risks but still a lack of specific measures to calibrate flows to anticipated returns and financial capacity;
- Measure in which environment protection is safeguarded before vs after Chinese investments, whether in resources or infrastructure – new rhetoric not yet matched by results; and
- Whether improvements in governance can be associated with China’s investments – skepticism is likely still in order; the Chinese interest in governance is mostly project-centric.
That is the official flow picture, whether hard lending or grants. Unlike western nations, or their self-image to that effect, China has a less pronounced philanthropic tradition in its culture. Most aid has roots in economic interests and the concept of mutual benefit.
Like aid, hard or soft, business engagement should open to assessment and evaluation. Chinese economic engagements have well established drivers at home and abroad. Access to resources for a growing economy as does the diversification of sourcing options. Securing that access though connective and reliable infrastructure is part of that self-interest – as is political influence to that end. Some of that influence extension is proactive and policy-directed, some is more passive, a consequence of in-built dynamics and habits of operating. Even if exaggerated, suspicions of corruption are validated by too many examples where such activity has taken place – and with the consequent distortions of investment patterns and governance this brings, whether at home in China or in host countries.
For China, apart from resources and security of access to them, Africa represents a new and, lately, a somewhat more consumer-capable market for their products. Africa is also a cost competitive supply chain opportunity, at least potentially. For some manufacturing enterprises, wages are rising both in China and in other locations in Southeast Asia. It is an arena of new business activity largely left aside by North Americans and Europeans and therefore, with a longer view, a strategic opportunity to position for both the present and the future.
For Africans, the more specific indicators of benefits derived by Chinese business-based as distinct from official activity – and worth of evaluation - are:
- Degree to which entrepreneurship and productivity fostered and enhanced in African business - and what is the evidence?
- Innovation, new products, skills and technology introduced that help move African business up in global value chains – awareness of this as a worthy objective has grown, but in practice?
- Local employment directly and indirectly generated by Chinese investments, and whether and to what degree, upgrades are evident to managerial and professional levels;
- Are Chinese adding to economic activity, or simply crowding Africans, either in local markets (including fake brands) or in other areas such as sourcing capital? ; and
- How integrated are Chinese investments with local African economies? While labour use improves, Chinese firms operating in Africa still obtain only 47 percent of inputs by value from African sources.
Data is elusive on these indicators, several of which are qualitative in nature. The most general assessment is that the benefits of Chinese engagement have been positive, but that there is clearly room for improvement, not only in the foregoing areas but also in broader measures of labour conditions, human resource upgrading and environmental impact. Whether Chinese firms perform significantly better or worse on these qualities than North American or European firms remains open for debate.
While led by state-owned enterprises and financial institutions by value, investment by case in Africa is 90 percent private sector with sources of financing typically diverse, local and China-based, state or private lenders. Over 10,000 Chinese firms are involved. Therefore, while China’s engagement with Africa is strategic at the top, its operations on the ground are segmented and not without some challenges of coordination and competition among Chinese entities – hardly “China Inc”!
In the defence and security area, the drivers are complex. Beijing has traditionally been pre-occupied with balancing against the perceived threat posed by the U.S. and its allies in its own Asia-Pacific region. Outside this immediate security ring, Beijing opted for diplomacy over military posture, to offset the pressures of U.S. dominance in East Asia, seeking closer ties with countries in places such as Africa, the Middle East and Latin America.
From Beijing’s point of view, this strategy was best understood as its attempt to deepen economic linkages without getting embroiled in regional protracted political or military quagmires, in which it has had until now little incentive to engage. It allowed Beijing to develop friendly ties with countries of these regions, as Western interest and influence declined. China thereby emerged as an active player on the ground.
Beijing essentially remains a regional power with a global presence.”[i] However, China’s involvement in Africa and other parts of the world is evolving as its capabilities grow. The opening of its first oversea military base in Djibouti is evidence of just how China’s relationship with Africa is evolving beyond traditional economic interests, to take on a military-security dimension. It is a signal of an emerging trend – a more powerful China that is willing to take on a more active role in securing its interests. Under the aegis of protecting Chinese workers and maritime shipping passing through the horn of Africa, the creation of this military base suggests that China’s security ring is no longer confined to its own region.
In global terms, China’s recent Africa initiatives complement the proactive and even aggressive style of the Xi Jinping administration, with securing of political and economic influence at least partly motivated by positioning vis-à-vis the US and other western nations.
How much does Africa “need” China and therefore confer China with leverage, including unfair advantage -and to further extend its political, economic and military influence? This is worth watching, yet there is an irony in play. Over the past two decades, Africa has been, in many ways, a “good news” story, certainly relative to the three or four decades preceding. With annual GDP growth of 3.1 percent projected by the World Bank in 2018 and 3.6 percent over 2019 and 2020, despite the oil price dip, Africa with 6 of the top 10 fastest growing economies is arguably the most dynamic region.
There are exceptions and there have been setbacks, notably in the slower-than-hoped-for pace of poverty reduction, yet progress made in agriculture, resource development, public health and education has been impressive. If not uniform, there have been important advances in governance and services. Ultimately, neither the west nor China can take more than a modest share of the credit. The achievements are mainly those of Africans themselves.
As with all progress, nonetheless, there remains unfinished business and ongoing challenges in Africa, whether those of infrastructure and social development, of basic human needs and security, or those of enabling African nations to move up global value chains as per other emerging economies. Expectations, and indeed demands, for further improvement are acute, especially among younger Africans. Whether for China or other industrial nations, our ability to key interventions to respond to these needs and ensure progress made is sustainable, will define us as successful or otherwise for years to come.
Above all, inattention is not an option. Whatever the shortcomings of quality or motive in China’s efforts to date, China cannot be blamed for inattention. While others stay the course at best, China has become Africa’s leading economic partner. The question for African leaders, and indeed the West, is how this phenomenon can be best joined and shaped to mutual, shared advantage.
[i] Andrew Scobell and Alireza Nader, China in the Middle East: The Wary Dragon (Santa Monica: Rand Corporation, 2016), 9.