China in Africa – Messiah or Monster

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Image Source: thesierraleonetelegraph.com
China’s incredible journey of colonizing Africa took off post 2009, when it overtook the United States as Africa’s biggest trading partner. BRICS today is Africa’s largest trading partner at almost $500billion with China, claiming the lion’s share of more than 40%. This story of incredible Chinese presence in the “Dark Continent” is a sordid saga, reminiscent of The East India Company and her draining of Indian coffers and resources; the difference being Chinese presence has the veneer of altruism.
 
The Chinese economy is almost a $10trillion economy and growing with an insatiable appetite for resources to facilitate this growth. This exponential growth has been backed by high volume- low cost manufacturing; plagued with current problems of labour shortage and excess production capacity with the State push to upgrade and replicate this national model internationally to increase the sphere of its political and strategic leverage commonly referred to as Beijing’s “Going Out” strategy to challenge the unipolar Western model. There is no doubt that in the time to come, Beijing will be a worthy opponent of the current standalone superpower Washington D.C.
 
The African Union consisting of 54 countries in Africa barring Morocco, is a region rich in natural resources be it oil & natural gas or minerals, with a growing population and a huge market, marked by ethnic diversities, continuous tribal wars, conflicts, violation of human rights, propped democracies and weak institutions. Though the percentage of  commerce with Africa is nothing much to write home about, Africa is important for China strategically in terms of its composition and a key experiment of Beijing’s Going Out strategy. 
 
The Unholy Trinity of Trade, FDI and Aid
 
Chinese presence in Africa is structured in 3 ways of Trade, FDI & Aid; all of which are interlinked.
 
The two-way trade between China and Africa since 2000 has been growing by about 30% each year reaching a record $166.3 billion in 2011 in comparison to $82 billion for the US. Trade with Africa crossed $200 billion at the end of 2014 and is expected to cross $400 billion by 2020. A notable fact here is 70% of Africa’s exports barring South Africa to China are in the primary sector of oil & natural gas and metals & minerals and agricultural products whereas imports to Africa from China are all finished goods mainly machinery, household appliances and textiles among others, giving China a trade surplus in excess of $2billion and  denying the host country the advantage of value addition (similar to the way British destroyed Indian indigenous industries) and killing local industries unable to sustain competitive manufacturing. This sentiment was also echoed by the outgoing Governor of The Central Bank of Nigeria Lamido Sanusi.  China’s largest trading partner countries are Angola, Sudan, South Africa, Nigeria and Egypt of which only South Africa is not an oil producing country.
 
When we talk about FDI and Aid, the lines blur so much, it’s almost impossible to tell them apart. The focus remains on high scale labour intensive manufacturing, developmental infrastructure and facility construction projects, with a key difference being they all come with the direct/indirect backing of the Chinese State. It is estimated that about 800 Chinese State owned enterprises operate in Africa with substantial investments in oil, metals & minerals ,telecommunications, infrastructure, transport and fisheries sectors. Cumulative Chinese direct investment has exceeded $15billion with projects spanning 50 countries as per the pledge made at the FOCAC meeting of 2009. The IMF estimates a growth of 5.8% Sub Saharan Africa as a result of the same. In 2013, Chinese State owned media announced a plan to invest a further $1trillion within the decade with Infrastructure development being directly and indirectly fundamental to this investment.
 
The Chinese government actively promotes investment in Africa through concessional loans, commercial loans, and regular and preferential export buyer’s credits. As stated earlier, these may be mingled with foreign aid or what is called “tied aid” to ensure feasibility and flexibility and usually favour Chinese builders and labourers alongside providing employment to Chinese nationals as opposed to the local population thereby ensuring that the financial benefits are being passed on to their nationals, plus creating ghetto like environments. When this very “tied aid” is linked to the profitability of Chinese companies, it begs a question whether China would prioritize Africa’s interests or its own. Nevertheless, whether defined as aid or investments, Chinese loans to Africa aim to be mutually beneficial: natural resources and service contracts for China and financing and infrastructure for Africa. 
 
It’s also worthwhile to note that China follows a policy of “strict non-interference” in the internal affairs of the countries it invests in, thus whether the economic gains reach the population or does the buck stop at the top of the weak institutions is irrelevant to China , so much so, that it  imposes no economic or political conditionality’s even for the provision of military hardware as long as it gains a foothold in the oil and resources business. One could even say that aid and funding is used as a tool to prop up unstable corrupt governments in exchange for the prized resources. This Molotov cocktail also necessitates the presence of private armies to secure its existing investments and facilitate logistics by the Chinese.
 
In the rare cases of aid to non-resource rich countries – there could be a quid pro quo of support of “One China” policy and/or support of China at various forums as a responsible citizen of the world; all of which only further China’s future  strategic goals. Recently China has also agreed for the first time ever to send its own troops as part of UN Peacekeeping forces in Africa  that are capable of combat capabilities. Whether this is a sign of responsibility of its influence in the world or part of the oil game is anyone’s guess.
 
Let us examine this in detail to understand how deep the tentacles of the Chinese State are and whether it should be termed as “development” or “colonization”: 
 
Oil and the “Angola Model”
 
The size of China’s economy  necessitate huge amounts of oil to sustain itself, in addition to requiring serious investment in future sources of oil to address future consumption. Even though most Chinese energy demands are met by coal, oil still factors heavily into Chinese energy plans. China is currently the second largest oil importer in the world following the United States, and is predicted to pass the U.S. at some point in the future. The Chinese have invested heavily in many African oil fields, particularly Angola and Nigeria. Both countries represent Chinese focus on oil in the region, but on different ends of the bilateral trade spectrum. China imports more from Angola than from any other country in Africa, while Nigeria is the second largest destination for Chinese exports behind South Africa.
 
Using what is characterized as the “Angola Model,” China uses resource-backed financing agreements to reach deals with recipient nations that are usually considered non-credit worthy and suffer from weak institutions that rely on commodities, such as oil or mineral resources, to secure low-interest loans from China that are available with certain conditions ignoring long-term negative consequences associated with issues of governance, fairness and sustainability. In Angola in 2006, this approach probably helped Chinese oil companies win the exploitation rights to multiple oil blocks through $4 billion in loans. In 2010, Sinopec’s (China Petroleum & Chemical Corporation) acquisition of a 50 percent stake in Block 18 coincided with the disbursement of the first tranche of China Eximbank funding, and in 2005, Sinopec’s acquisition of Block 3/80 coincided with the announcement of a new $2 billion loan from China Eximbank to the Angolan government.
 
Chinese oil giant China National Offshore Oil Corp (CNOOC) has a stake in deep water block OML 130 for many years. The purchase of Nexen by CNOOC also included significant offshore oil reserves in Nigeria. China National Petroleum Corporation has purchased claims in Nigeria, buying rights to blocks OPL 298, 471, 721, and 732 from the Nigerian government in 2006.  This purchase was recently followed by a 2012 purchase of the rights to blocks OML 64 and OML 66.  The Chinese oil giant Sinopec also has made inroads in Nigeria, recently finalizing a deal with Total to pay $2.5 billion for a 20% share in block OML 138. In return, China has invested over $15billion including a loan of $2.5billion in Africa’s largest economy for developmental finance such as rail, road, telecommunications, agriculture and housing. China has also invested over $10 billion in infrastructure projects in Sudan to take advantage of its substantial oil reserves even though Sudanese oil imports are only a fraction of its imports from Africa.
 
Africa – China’s New Rice Bowl
 
One of the most important reasons for “neo-colonialism” is food and absolute control over its resources and supply- especially with a food shortage crisis looking inevitable in the future. High on the list of priorities of the Chinese government is feeding its 1.3 billion people but with only 7% of the world’s arable land, and the loss of over a million hectares of arable land annually to pollution and desertification, China needs Africa- a region that has 60% of the world’s uncultivated land by World Bank estimates; to feed its huge population. Thus, Africa will be China’s new rice bowl. This is visible by the 20 odd demonstration centers’ set up by China in Africa to enhance production capacity in the agricultural sector. Though currently the focus of outward goods is more on oil and metals, it may be assumed that the long term goal is to import much more food from Africa than is made conspicuous. The leasing of thousands of unutilized hectares of land by the Democratic Republic of the Congo to a Chinese company called ZTE International, in a deal that Oxfam labeled a “land grab” only confirms the above. 
 
Metals and Minerals – The Curse of Abundance
 
China is almost exclusively reliant on Sub –Saharan Africa for cobalt, significantly for manganese (Gabon, South Africa &Ghana), timber (Gabon, Republic of Congo & Cameroon) and chromium (mainly South Africa, Madagascar & Sudan). Ghana with over 2billion ounces of gold reserves is second only to South Africa and enjoys strong Chinese presence too, and the benevolence of Chinese interest-free grants for construction of buildings, roads and hydroelectric dams.
 
The President of state-owned China National Gold, China’s & the world’s largest gold company, during a visit to Vancouver said he was actively on the hunt for global acquisitions and partnerships in gold, silver and copper. In 2011, China’s Sonagol International – a JV between Angola’s state oil company and private Chinese investors’ backed China International Fund acquired an 18% stake in Catoca diamond mine of Angola – the world’s 5th largest diamond mine by reserves for $400 million. It was the 1st Chinese company to own part of an Angolan diamond mine. It is speculated that Sonagol International’s corporate structure has links to the Chinese Govt and related agencies. China National Nuclear Corporation invested nearly $200million has a large stake in one of Africa’s largest uranium mines in Namibia. In 2008, the China Railway Group used the “Angola Model” to secure the mining rights to the Democratic Republic of the Congo’s (DRC) copper and cobalt mines. Chambishi Copper Mine was obtained by China Non Ferrous Metal Corporation through an international bid in 1998 for $160million for a lease of 99 years with resources of 5 million tons of copper and 120,000 tons of cobalt. This was the largest nonferrous metal mine overseas approved by Chinese government for development and construction.  In 2014 China was a co-party in a $20billion deal between Rio Tinto, Chinalco , the International Finance Corporation and the Government of Guinea to develop Guinea’s Simandou iron ore deposits eyed by mining giants for years now. It is the largest combined iron ore and infrastructure deal ever attempted in Africa. China is the largest importer of iron ore in the world.
 
Last year in May, The National Development and Reform Commission, China’s powerful economic planning agency put into effect a new regime to make overseas investment easier-Called Order 9 for deals less than $1billion, to facilitate domestic companies to make acquisitions and set up JV’s. Subsequently, Zijin Mining Group, China’s foremost listed gold miner, with funds of $1.3 billion expressed interest in African gold and copper projects with more than 100 tons and 1 million tons of reserves respectively. The Tibet-Hima industries consortium is all set to begin mining the copper mines of Kilembe Mines in Uganda rich in copper and cobalt where production was halted since 1982. 
 
Infrastructure –The Money Machine
 
Chinese firms have made major investments in African infrastructure, targeting key sectors such as telecommunications, transport, construction, power plants, waste disposal and port refurbishment. Given the scale of Africa’s infrastructure deficit, these investments represent a vital contribution to the continent’s development but it would be myopic to view this as mere goodwill. Chinese assistance to Africa for infrastructure development or “tied aid” makes Africa, China’s second-largest supplier of service contracts. Bulk of these service contracts go to “approved,” mostly state-owned, Chinese companies, and the rest are open to local firms, many of which are also joint ventures with Chinese groups. . According to Chinese analysts, Africa is China’s second-largest supplier of service contracts, and “when we provide Africa assistance of ¥1 billion, we will get service contracts worth $1billion from Africa”. In 2012, The China Railway Construction Corp (CRC) signed a $1.5 billion contract to modernize a railway system in west Nigeria. Simultaneously, China South Locomotive and Rolling Stock Corporation – the largest train manufacturer in China signed $400 million deal to supply locomotives to a South African firm Transnet. Subsequently, in February 2012 CRC announced projects in Nigeria, Djibouti and Ethiopia worth almost $1.5billion. In September 2014 the Ethiopian Roads Authority also signed an agreement with China’s CGC Overseas Construction Group to upgrade the Dire Dawa–Dewele highway, which provides a link to the Port of Djibouti. In May 2014, Chinese Premier Li Keqiang spoke of connecting African capitals using China’s high-speed rail technology.
 
In November 2014 China Railway Construction Corp signed China’s largest-ever overseas investment deal, agreeing to build a 1400 kilometer railway along the coast of Nigeria, Africa’s largest economy. An ambitious project of building an  East African Railway Line connecting Mombasa to Nairobi and eventually Uganda, Rwanda, Burundi and South Sudan was announced in May 2014 – the main contractor being China Communications Construction Co. China’s omnipotent presence in Africa was reiterated with the “Three Major Networks” of railway, road and regional aviation deal subsequently signed in 2015 at the heads of State meeting of the 54 member African Union (AU) and has been billed as “most substantial deal ever the AU has signed with a partner”. 
 
Ports – A Strategic Investment
 
A large component of China’s efforts to establish ports and bases in the Indian Ocean is to formalize logistics support agreements for Chinese naval forces conducting anti-piracy efforts off of the Horn of Africa. Chinese state-owned companies are responsible for the construction of a railway link between Khartoum, the capital of Sudan, and Port Sudan, the country’s major port on the Red Sea. China has also agreed to finance and build a $10 billion port in Bagamoyo, Tanzania, which is expected to be completed in 2017 and handle 20 million shipping containers annually.
 
Beijing is also investing over $20billion to create 7 strategic ports on the African coastlines called Strategic Maritime Distribution Centers (SMDC) connecting the Pacific with the Andaman Sea under their watch for the main commercial fleet coming from Asia. They are Djibouti, Dares Salaam, Maputo, Libreville (Gabon), Tema (Ghana), Dakar (Senegal), and Bizerte (Tunisia).These ports will then serve as hubs to secondary ports with their own smaller ships as well as road systems connecting to local and regional markets. These ports added with the East African railway line of connecting the hinterland to the Indian Ocean will add another strategic layer to the realization of The Maritime Silk Route.
 
As is clear from the above, China is omnipresent in Africa with its influence increasing year after year and there is a clear method and a bigger picture at play.
 
Geopolitical Impact 
 
International trade is controlled by Maritime routes and control of the choke points and the country that controls the same, is the Kingmaker in the strategic waterways. With Middle East tensions’ not resolving anytime soon, Africa is now an important theatre of control. In 2010, United States and Yemen set up a military base in Socotra –an area of strategic geographical location, minimal population and isolation to counter piracy and Al-Qaeda. Currently with the situation in Gulf of Aden, this position is a bit shaken up in terms of strategic maritime position and influence. A unified and sovereign Somalia could shake things up significantly in the Indian Ocean and the Red Sea.
 
As can be seen from above, Chinese aid is linked either to its tactical and strategic goals or cultivating other nations to act as “Proxy” states for it.  Various infrastructure goals in the region serve its own national interest, an e.g. being East African Railway line that will be a cog in the wheel of The Maritime Silk Route Project.  As China starts flexing its muscle in the region, these strategic ports that thus far served only as commercial (per the limited port access agreements) will cease to be enough. This is evident by China negotiating a military base in the strategic port of Djibouti in Obock, the northern port city located across the Gulf of Tadjoura from Djibouti’s main port, which is crowded by commercial vessels and used by the United States. Djibouti is already home to Camp Lemonnier, the US military headquarters on the continent, used for covert, anti-terrorism and other operations in Yemen, Somalia and elsewhere across Africa. It is the only permanent US base on the continent. Djibouti and Beijing signed a military agreement allowing the Chinese Navy to use Djibouti port in February 2014, a move that angered Washington.
 
 Thus the presence of Chinese navy present in the guise of protecting both the investments as well as the shipping lines to China has ramifications not only for Africa but the entire region. When this is combined with Chinese flexing military muscle in South China Sea and also asserting control over the Indian Ocean via their “String of Pearls”, this presents a clear ploy to actively challenge the hegemony of the West over the world, of which Africa is an important investment. This will only cement the Beijing Consensus vs. Washington consensus reality of the times to come.
 
Last but not the least, now that it is evident that Africa’s location and resources make it extremely necessary for China, it could be argued that China may not have much to gain to change the status quo of the region. Weak institutions and propped governments engaging in perpetual silent wars are easier to control than strong independent economies. Add to this the presence of Blackwater in China operating on behalf of the State -China’s bilateralism replays the colonialist divide and conquer tactics- From Sudan to Congo and Libya to Nigeria, natural resources such as timber, oil, diamonds and other most needed precious minerals have helped fund armies and militias – in the guise of logistics and security but in reality are fuelling these existing conflicts in the region and perhaps laying a platform for things to come. When one thinks of the roots of Blackwater and its close ties, this paints a picture of a completely different game being played out.
 
In conclusion, it may be said that the colonization of Africa is much more than just a game of resources. Whether this will result in the “Dark Continent” truly seeing the light or have history repeat as being used as a pawn, first by the Western world and now by the Imperial Chinese, is a million dollar question. History is witness that nations that are “colonized” take very long, if at all, to recover from their post-colonial hangovers and start their own journey and often by then its game, set and match.

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