Royal Dutch Shell Group .com Rotating Header Image

Financial Times: China winning resources and loyalties of Africa

By FT correspondents
Some see it as a late-blossoming relationship, others as a new kind of colonialism. Either way, China is resolutely and rapidly extending its presence and influence across the African continent as its companies move into terrain where western businesses hesitate to tread.
The Chinese advance – government-backed, led by state-run corporations and propelled by the drive to secure oil supplies – has in the span of a few years changed the pattern of Africa’s investment and trade. A secondary player on the continent until recently, China is establishing a position as Africa’s top commercial partner behind the US and France, overtaking Britain.
For China, Africa offers an extra dimension: a continent three times its own size, less populated than itself and stocked with many of the raw materials it needs. Crude oil from Angola, platinum from Zimbabwe, copper from Zambia, tropical timber from Congo-Brazzaville, iron ore from South Africa: all are on China’s shopping list.
In return, the Chinese offer advantages to African governments. They bring first-hand experience of fast development, are attuned to conditions in poor countries and are unconcerned by scruples over governance standards or human rights. In a different way to the ideological competition that took place in Africa during the cold war, China is emerging strongly as an alternative option for governments more used to dealing with former European colonial powers and the US.
At one level China is involved in a straightforward resources grab, sinking billions of dollars into promising oil zones. But it is also engaged in a mix of influence-building and opportunism. Like Africa’s former colonisers, it cements its political and trade relations with aid, special concessions, debt relief, scholarships, training and the provision of specialists. It has recently sent peacekeepers and – perhaps more surprisingly – election observers. At the same time, again like Africa’s chief western partners, it has been ready to back its commitments with military assistance and arms, providing equipment to countries such as Zimbabwe and Sudan where other suppliers are barred by embargoes.
In post-civil war Angola, Chinese contractors are rebuilding the legendary Benguela railway, originally completed by a British company in the 1920s, between the mineral-rich heart of Africa and the Atlantic coast. In Uganda a Chinese company is transforming Entebbe’s decaying State House into a ceremonial complex for next year’s Commonwealth summit.
Trade between China and Africa has almost quadrupled since the start of this decade, jumping 36 per cent last year to $39.7bn ($22.8bn, €33.4bn), according to official Chinese figures. About half of China’s exports are machinery, electronic and high- technology products. Tens of thousands of Chinese have moved to Africa, including labourers in countries such as Ethiopia or Botswana as well as engineers, traders and small businessmen. One study found the number of Chinese registered in Sudan had tripled since the late 1990s to almost 24,000 in 2004. Chinese tourism to Africa has boomed, with official numbers doubling last year to 110,000.
According to the Beijing government, more than 600 Chinese-funded companies have been set up in Africa in the last 10 years. These include manufacturing operations aimed at regional markets or possibly exports to the European Union or the US, exploiting the duty-free access granted to products from poorer African countries.
China’s search for African political allies goes back to the 1960s and 1970s, when it competed for favour with the both the west and the Soviet Union – building stadiums, ministries and, most spectacularly, 1,850km of railway from central Zambia to the Tanzanian port of Dar es Salaam, a project that western partners had turned down. Some African countries transferred their allegiance to Taiwan during the 1990s as Beijing and Taipei vied to buy their support. But today all but six of Africa’s 53 nations – Burkina Faso, Chad, Gambia, Malawi, São Tomé and Principe, and Swaziland – maintain relations with Beijing. Senegal was the latest to switch back last year.
Li Zhaozing, China’s foreign minister, made a high-profile visit to six African countries last month. The trip, which took in Nigeria and Libya, two leading energy producers, also sent a signal to smaller countries about the technical and financial aid they could expect in return for co-operation.
China’s policy nowadays is subordinated to economic objectives, with core interests in not only oil and strategic metals but also food resources. As latecomers, Chinese companies have been willing to take risks that other investors have shunned and enter countries where others have held back. In Sierra Leone they have quietly filled a vacuum in sectors from hotels to building materials, while the Chinese government has bolstered the navy by donating a fisheries patrol vessel.
A Chinese government policy document last month pledged easier market access for African commodities, duty-free treatment for some products and further encouragement for Chinese investment, backed by preferential loans and buyer credits. It set out a broad front of co-operation embracing agriculture, transport, tourism and defence as well as natural resources. While a US energy department study this month found China’s purchases of overseas assets to be economically neutral for the US, it pointed to potential problems arising from China’s readiness to deal with despotic regimes.
The clearest example of China’s energy quest clashing with western policies is Sudan, an emerging oil producer in which China is the leading investor and dominant client. China has consistently used its veto in the United Nations Security Council to block US-led efforts to impose sanctions on Sudan over atrocities committed in Darfur.
A Sudanese official describes China’s presence as important “not only on an economic level but also on a political level”. Since entering Sudan’s oil business China has stepped up sales of arms including fighter aircraft. The manufacture in Sudan of Chinese weapons and ammunition complicates the enforcement of a UN embargo on supplies to militias in Darfur. Chinese-designed arms and radios are reported to have been used across the border in Chad – where France keeps a garrison – by rebels alleged to be operating with Sudanese support.
In war-ruined Angola, the Chinese have leapt into one of the world’s most inhospitable investment environments, offering a $2bn oil-backed credit at a time when western banks and international institutions have been cautious about lending. An agreement between Angola and the International Monetary Fund has been held up, largely because of IMF concerns about how the government manages its oil money. Similar misgivings have prevented the holding of an international donors’ conference. “The Chinese are offering the loan as an alternative to working with the IMF,” says Princeton Lyman, director of Africa policy studies at the Council on Foreign Relations in Washington.
Up to now, the African view of China’s fast-growing involvement has been overwhelmingly positive. China is widely regarded as a model of modernisation, more responsive to African needs than western partners, able to build dams, roads and bridges more quickly and cheaply and providing consumer products better suited to African pockets. Although Africa’s non-oil countries have suffered from higher import costs, the continent is also benefiting from the rise in commodity prices driven by Chinese demand.
But criticism is growing. Trades­people from Cape Verde to Namibia complain about a Chinese invasion. In Lagos, West Africa’s main commercial hub, Nigerian authorities have been ejecting unlicensed Chinese market traders. Companies from China are censured for preferring Chinese labour or, when they employ locals, providing poor conditions. China’s cheap consumer goods displace local production.
Garment factories have been shutting across Africa, with devastating effect in countries such as Lesotho, where some were Chinese-owned. There is a clamour for protection. When South Africa’s Cosatu labour federation staged an anniversary celebration in December, participants peeled off their red union T-shirts in disgust when word went round that they were Chinese-made.
“There’s no altruistic relationship between China and Africa,” says Lyal White of the South African Institute of International Affairs. China’s interest is not in the high-value manufactured goods South Africa wants to promote. “Africa is a treasure trove of raw materials and that’s what China needs.”
Chris Alden, an expert at the London School of Economics, says of the relationship: “African actors are beginning to see this as a mixed blessing.” While in some countries China’s involvement appears benign, in others its approach undercuts efforts by the African Union and western partners to make government and business more transparent and accountable. Chinese co-operation provides a lifeline to countries such as Togo, largely cut off from European aid, and comfort to pariah regimes.
Avisit to Beijing in November by Jendayi Frazer, US assistant secretary of state for African affairs, marked only a first step in interaction with China over Africa. China does not provide figures for development aid, has declared no arms sales to the UN register since 1996 and its technological assistance has raised questions about its motives. For a satellite to be launched next year, Nigeria has turned to Great Wall Industry Corporation, a Chinese company against which the US has applied sanctions for allegedly supplying Iran with technology that could be useful for a nuclear weapons programme.
A senior Nigerian foreign affairs official says: “The perception is that China is catching up with the level of engagement that western governments have?.?.?.?Being a developing country, they understand us better. They are also prepared to put more on the table. For instance, the western world is never prepared to transfer technology – but the Chinese do. It is our view that, while China’s technology may not be as sophisticated as some western governments, it is better to have Chinese technology than none at all.”
Money flows to oil
In less than 10 years China has secured oil production and exploration deals in a swathe of countries reaching across Africa from the Red Sea to the Gulf of Guinea.
Its rapid emergence in African oil reflects the explosive growth of its energy needs and its desire – in common with the US – to find sources outside the Middle East. China relies on Africa for between one-quarter and one-third of its oil imports. “It’s the same as US policies [on oil],” says Li Zhibiao, a researcher at the Chinese Academy of Social Sciences, a state think-tank. “China wants to have diversified channels in case of disruptions.”
Its first big foray came in late 1996 when state-owned China National Petroleum Corporation took a 40 per cent stake in concession blocks in Sudan originally held by Chevron of the US. The Chinese co-built a 1,500km pipeline from the oilfields to Port Sudan, and a refinery near Khartoum. China now takes half or more of Sudan’s oil exports, while western oil majors have kept their distance. US oil companies are barred from doing business there.
Remaining Canadian, Swedish and Austrian interests were almost all sold in 2002 and 2003 after pressure from church and human rights groups over the role of oil in fuelling the long war in southern Sudan. More recently, China has invested heavily in larger African oil exporters. In Angola, China National Petrochemical Corporation (Sinopec) bought into a BP-operated offshore block in 2004, securing its entry with a $2bn credit line to rebuild the country’s infrastructure. It has tied up with Angola’s Sonangol to run another block, previously run by Total. China is already Angola’s second customer for oil after the US.
In Nigeria, Africa’s biggest producer, the state-controlled China National Offshore Oil Corporation is to pay $2.3bn for a 45 per share of output from an offshore block. CNPC is in talks over a Nigerian refinery in an effort to win preferential treatment in oil block allocations.
CNPC also has exploration deals with Algeria and Niger and a stake in exploration in Chad, a country that officially deals with Taiwan rather than China. Sinopec has signed an evaluation contract in Gabon, where activities headed by Shell and Total have dwindled. In Equatorial Guinea, where US groups dominate a surging oil business, China is said to be providing military training and specialists in the hope of gaining oil concessions. Teodoro Obiang Nguema, that country’s dictator, describes China as its main development partner.
Mugabe gets shelter
Zimbabwe, according to president Robert Mugabe, is “returning to the days when our greatest friends were the Chinese”. On independence day last year he told supporters: “We look again to the East, where the sun rises, and no longer to the West, where it sets.”
Mr Mugabe’s ties with China date from the pre-1980 struggle against white minority rule, when the Soviet Union backed the rival Zapu movement and his Zanu relied on Chinese support. The relationship has flourished anew. Mr Mugabe is no longer welcomed in Europe or the US but is still fêted in China.
Last year China became Zimbabwe’s largest supplier after South Africa, shooting up from 11th place in just three years. Businesspeople believe the figures may be understated because of the large volume of Chinese goods – disparagingly referred to as “zhing zhong” – smuggled in or re-exported from neighbouring countries.
Zimbabwe’s pro-government media tout China as the main target market for tourists, the main source of inward investment, the most likely foreign partner to help finance the government’s plans and the single most important source of defence equipment. The state investment agency talks of proposed Chinese investment of more than $1bn. But it is hard to separate fact from government efforts to convince Zimbabweans that an economic boom is about to materialise.
Reports of Chinese plans include a joint coal venture, a glass factory, a ferrochrome smelting plant, telephone assembly and beef production on vast tracts of acquired land. China’s ambassador recently told some western counterparts that none of the seven co-operation agreements signed a year ago had yet been activated. But there is no doubt about China’s interest in Zimbabwean tobacco and platinum and other mineral reserves, which are mostly controlled by South African or British companies.
China was reported in 2004 to have agreed to sell Zimbabwe FC-1 multi-role fighters as replacements for its F-7s, the Chinese version of the Russian MiG-21. Defence sales are also said to include equipment to enable intelligence services to spy on internet and e-mail traffic. Struggling Air Zimbabwe has meanwhile received three Chinese MA-60 aircraft, on a buy-two-get-one-free basis.
Defending himself against charges of extravagance in building a mansion in Harare, Mr Mugabe retorted: “Of course it is lavish: the Chinese are doing the roofing. They are our good friends, you see.”
Reporting by David White, with Andrew England, Tony Hawkins, Dino Mahtani, John Reed and Andrew Yeh

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

Comments are closed.

%d bloggers like this: