Keynote: The Dragon’s Gift
BY DEBORAH BRÄUTIGAM
On hearing of one major Chinese deal in the Democratic Republic of the Congo, an editor at the Financial Times wrote: “Beijing has thrown down its most direct challenge yet to the West’s architecture for aiding Africa’s development.” I think he was right. This challenge is not just about low environmental, governance, social and labor standards, important and real as these issues may be. It is more fundamentally about how the aid and development finance architecture actually work, and how it might change.
Both the West and China itself present distorted images of Chinese engagement in Africa. In the Chinese media, the move into Africa is presented along wholly positive lines: “we are good friends who help each other”. China is a “sincere” partner. The Tanzam Railway is regularly trotted out as a symbol of China’s selfless intentions toward the continent. But in reality, Chinese companies really are down in the mud doing resource deals with dictators and, apparently giving kickbacks with gusto. On the other hand, the Western media is almost wholly negative. We read that the Chinese are the “new colonialists” that their aid is “toxic” and is “making poverty worse”. That China gives “billions” in aid to prop up pariah regimes like Sudan and Zimbabwe. That China is leading the charge to grab huge swathes of land across Africa, or that they bring in all their own labor and do not hire Africans. In fact, none of this is actually true.
I first went to China thirty years ago as a language student. My first trip to Sub-Saharan Africa was in 1983, when I set off as a student to study Chinese development aid. The Chinese government does not make this kind of research easy. Aid is no longer officially a state secret, but the Chinese are not transparent about their aid, publish almost no reports, and although there is more openness today, no one is quite sure just what penalties exist for talking. Still, there is a huge amount of information available in China if you know where to look and whom to ask. African governments were usually more helpful, although that varied: doing research in Zimbabwe was tough, but I went there too, as well as to Nigeria, Sierra Leone, Tanzania, Zambia, Mauritius, South Africa, Mozambique, and Egypt.
FOUR MYTHS
When I was writing this book, I often felt like Akira Kurosawa, the Japanese director of the famous film Rashomon, where an event takes place in the woods, and you are quite sure about what happened until he shows the event from multiple perspectives. We need to look at China in Africa from more than one perspective in order to have a better idea of what is really going on.
The book deconstructs much of the conventional wisdom that has arisen about China in Africa. Below is a sample of four myths and realities.
Myth 1: China is a new donor in Africa.
Contrary to the conventional wisdom, China is not a new donor, but has been giving aid in Africa for fifty years and has thus gained lots of experience. The Chinese have spent time analyzing their own past failed aid projects, and have come up with a different model of engagement, much of which does not actually involve foreign aid.
China’s long history in Africa gives it a lot of credibility. I often hear that the Chinese came, built the TanZam railway in Tanzania and Zambia and a few stadiums, and then left. While it is true that they scaled back their engagement, they didn’t leave. The first three chapters of my book focus on the build up to the current explosion of Chinese engagement, and on the experiments the Chinese undertook to try to get their own aid to work better in Africa, how they learned from their own experience as a recipient of aid and loans from Japan and the West, and how this affects their engagement in Africa today. It is very different from the aid consensus in the West.
Myth 2: Chinese aid is huge.
This is probably the biggest, repeated error on this topic. For example, in a study on Chinese infrastructure in Africa released in 2008, the World Bank reported that between 1960 and 2006, China had given Africa $44 billion dollars in aid. But this figure is a huge overstatement. As it turns out, the authors of the report found this figure in a Dow Jones article reporting on the visit of Chinese premier Wen Jiabao to North Africa. But what Wen Jiabao actually said was that that China had given 44 billion renminbi not dollars, or about $5.6 billion. This amount fits with what I found in my earlier research. There are many other examples of this.
Chinese trade is huge: $ 106 billion in 2008, up from $10 billion in 2000. Yet, China’s official development assistance to Africa is far smaller than aid from the US or even from Germany—averaging about $1.9 billion annually for the last 3 years.
Myth 3: Chinese projects and investors use all Chinese labor.
It has long been official Chinese policy to promote exports, and labor exports are part of this. In 2008, there were officially 140,000 Chinese working in Africa, which probably outnumbers the expatriates sent by all the Western aid agencies together. Chinese companies use more Chinese supervisors, managers, technicians and engineers than companies from any other country working in Africa. But the idea that the Chinese use all Chinese labor and do not employ Africans is empirically wrong.
All the evidence points to an average of about 20 Chinese to 80 Africans on a Chinese project or in a Chinese owned factory. In Angola, where there is only a small number of skilled Angolans (due to the war) to implement a large number of infrastructure projects by Chinese companies, the ratio of Chinese to Africans is the highest in sub-Saharan Africa. Yet even there, the actual ratio on 19 projects where we have data supplied by the Angolan Ministry of Finance is 45 percent Chinese, and 55 percent Angolans. In countries where Chinese companies have been operating for a long time, such as Tanzania and Zambia, the ratio tends to be 9 or 9.5 Africans employed to every Chinese.
Myth 4: Chinese aid and engagement in Africa are all about oil and/or mineral resources.
Countering this myth is more controversial. Empirical evidence on aid, particularly the grants and zero-interest loans, shows that it is primarily political. Reflecting the political purpose of aid, as a way to build friendships and influence, Chinese aid is widely spread across the continent and far more evenly than assistance from western donors who tend to have their “donor favorites” leaving other “donor orphans.” Every country in Africa, including Mauritius, South Africa, and other far wealthier countries, has received aid from China except Swaziland. The main criterion is not that you have resources, but that you have diplomatic ties.
Oil and minerals still represent a huge part of Chinese interest in Africa. Yet the Chinese have other interests as well. Year-to-year data shows that infrastructure contracts signed by the Chinese are far larger than any of the estimates we have on Chinese investment. In 2008, for example, Chinese companies in Africa signed new infrastructure contracts worth $40 billion, and they reported revenues of $20 billion. Chinese finance will pay for only a fraction of these. The others are paid by African governments, private companies in Africa, World Bank and African Development Bank (AfDB) loans, and other donors who have untied their aid and whose tenders are being won by Chinese companies. As a case in point, China’s single largest foreign investment in Africa to date is China Industrial and Commercial Bank’s purchase of 20 percent of South Africa’s Standard Bank, for close to $5 billion dollars.
It is not a coincidence that many of the large Africa deals are being headed by Chinese construction companies, and not Chinese oil or mineral firms, who prefer less complicated deals. As a Nigerian official said, the West comes here, and it’s oil, oil, nothing but oil. But the Chinese come, and they are interested in everything.
IMPACT OF CHINESE ENGAGEMENT
How does Chinese engagement affect development in Africa? My book focuses on three areas: agriculture, industry, and governance. Two chapters on agriculture give the background on Chinese engagement in that sector – aid and business – but also deconstruct the myth that “China” is orchestrating huge land deals across Africa. In fact, to my surprise, I found hard evidence for only one large deal: at least 100,000 hectare concession for palm oil in the Democratic Republic of the Congo (DRC), out of the many headlined in the press. And even that deal failed to go forward after the feasibility showed that it would be too expensive to get the palm oil to the port. Other reported Chinese land grabbing deals in Zimbabwe, Zambia, Mozambique and Senegal did not turn out to have any substance. This could change, but at present Chinese investors believe that agriculture in Africa is, as one Chinese analysis put it, “not a good chew on the bones.”
What about manufacturing? Chinese exports have been tough for African manufacturers, particularly in textiles. But there is another story here. First, the data on manufacturing in a number of African countries show that growth rates have expanded over the past five years, just when the Chinese competition was supposed to be wiping out Africa’s industrial sector. Some of this is due to China. Exports of equipment and machinery are the fastest growing sector among China’s exports to Africa. Chinese companies are actually investing in African manufacturing far more than Western companies, assisted by innovative programs like the $5 billion dollar venture capital fund: China-Africa Development Fund, as well as seven overseas special economic zones in Africa to be built by Chinese companies with assistance from Beijing. These are being developed on an interesting model, in two rounds of competitive tenders where more than 110 Chinese companies offered proposals, and 19 were selected, world wide.
GOVERNANCE
Many argue that with China rising, progress in human rights, democracy, and good governance in Africa will be reversed. I predict that the impact of Chinese engagement is likely to be more marginal than most people believe. In fact, there is no evidence that China is more comfortable with authoritarian regimes or seeks them out. Their largest trading partner has traditionally been South Africa. Mauritius, Botswana, Ghana, among others. Hence, some of Africa’s best-governed countries are also some of the areas where Chinese companies are very active.
Moreover, China is not static. After a blowback from Sudan and Zimbabwe, they changed. In Sudan, the Chinese role has changed considerably, as both Andrew Natsios, President Bush’s special envoy on Darfur, and President Obama’s envoy Scott Gration have said: China has shifted from being part of the problem to being part of the solution., The African Union was shocked that the Chinese on the Security Council allowed Sudanese president al-Bashir to be prosecuted by the International Criminal Court, when, in fact, the Chinese could have vetoed this decision.
In Zimbabwe, I found that the Chinese were tired of Mugabe, deeply frustrated at the failure of their economic engagement there, and, according to all independent sources, had actually put very little money into the country. The economic office in Zimbabwe spent a lot of time running to the Ministry of Finance, trying to drum up payments for contracted work Chinese companies did six, seven, eight years ago. One Chinese company had tried for six years to finalize a coal-mining venture and electric power plant at Hwange. When Zimbabwe’s minister of finance, Tendai Biti, a key opposition figure, was in Washington, I asked him about Chinese support for Mugabe. He said: “Before and after the inclusive government, Chinese economic engagement was very minimal.” He also commented that press reports of huge new Chinese deals with Zimbabwe were “all fiction.” Mugabe, like the wizard of Oz, continues to project an illusion to the world and to his people that he has extensive support from Beijing. Yet, he doesn’t.
Chinese companies operating in authoritarian, resource rich countries like Chad, Congo-Brazzaville, or Equatorial Guinea are going to engage in similar murky activities that have been documented for Western companies: make shady deals, give kickbacks, disrespect the environment, and resist the Extractive Industries Transparency Initiative. Their labor standards are usually far worse, even if they actually employ more locals than most people believe. But most importantly: the large Chinese loans are less likely to be embezzled than loans from Western banks.
A resource-backed infrastructure model, while not foreign aid, provides an agency of restraint, where some of the funds from resource exports in poorly governed countries are actually locked into development expenditures, just as Japan did with China so long ago. The money stays in China: the Chinese almost never give cash. As one African official said to me: “with China you never see that money.” The Chinese and the African government sit down together and negotiate a list of development infrastructure projects that will be financed out of the loan and done by Chinese companies. In Angola, these projects and their costs are all listed on the Ministry of Finance website: hospitals repaired, secondary schools built, Water systems and bridges repaired, Electricity extended across Luanda, poly-technic and vocational schools.
CONCLUSION
Chinese aid is distinctive from western aid for at least three reasons. First, their core ideas about development are different, derived from China’s own development experience. They are far less prescriptive than we are. While western aid workers think they know how Africa can prosper, many of these certainties change every few years. The Chinese say at home: “to get rich, build a road.” Hence they focus their aid on infrastructure. They believe “agriculture is the foundation, and industry the leading edge” and so agriculture and industry have always been a big component of their aid and now their economic engagement. Second, China’s experience as a recipient of aid and loans, particularly from Japan, influenced their thinking about how countries can use aid and development finance for mutual benefit. And finally, China is becoming an East Asian developmental state, along the lines of Taiwan, Korea, and Japan. We know what this looks like: state intervention to promote economic prosperity. We just have not seen a country working like this in Africa, on this scale.
My book is a window into a changing world, on a topic with great importance for Africa and for those who care about development on the continent. We can see this rise as a threat, and in many ways it is: more competition, less regard for the environment, lower social standards, and neutral, at best, for governance. Or we can see it as an opportunity, for business engagement, for investment in manufacturing, for infrastructure. But first we need to understand it better, and this will help us engage more effectively with the Chinese.
Deborah Bräutigam is Professor at the School of International Service at American University. Her research focuses on China-Africa relations, foreign aid, industrialization, state-building, and development. She is the author of The Dragon’s Gift: The Real Story of China in Africa (Oxford University Press, 2009).
