Evaluating the Developmental Impact of Africa-Sino Relations

PESA Regional Integration Monitor, Sep 2018

The September 2018 issue focuses on evaluating Africa-Sino relations and its impact on African development - What is the relationship between SADC countries and China? what is China's foreign policy towards SADC countries? how do SADC countries benefit from their relationship with China? what is different in China's relations with SADC countries compared to the rest of Africa? The PESA Regional Integration Monitor, Sep 2018 examines some of these questions.

Evaluating Africa-Sino Relations and its Impact on African Development

Over the past two decades China has increasingly focused on Africa due to its need for natural resources to sustain its rapid economic growth and job creation. Faced by an infrastructure deficit, African countries are attempting to leverage their natural resources in their bid to attract investment towards infrastructure development[1]. The convergence of economic interests between the two has created an important economic and business relationship between China and African countries. This relationship has enabled China to have access to critical resources such as oil and minerals, while African countries benefit from investment inflows and aid that comes with Chinese diplomatic policy of political non-interference.[2]

 

In Africa, the impact of the Africa-Sino relationship is more visible in infrastructure development, investment, trade and human capital development[3]. It has also led to African commodity producers to command higher prices considering China’s massive demand for raw materials to fuel its growth. This relationship has also created considerable challenges on African countries that have not diversified their economies. Loans from China have provided African countries with an alternative source of capital, making them less dependent and overly reliant on the World Bank in development finance. As a result, this has made China the leading financier across the continent[4].

 

The relationship between Africa and China has been growing steadily over time, with African states benefitting through trade with China during the past decade to the tune of USD160 billion in 2011 from just USD9 billion in 2000[5]. The impact of this relationship is such that African countries have access to a very large export market in China for their raw materials and in turn they can acquire goods and other services from China to grow their economies. As part of the Africa-China relationship, China has extended more than USD 86 billion in commercial loans to African governments and state-owned entities between 2000 and 2014, an average of about USD 6 billion a year. China’s presence in African has been reinforced by the recent visit by the its president to some of the rapidly growing economies on the continent including South Africa. The visit to South Africa by the high-powered Chinese delegation on the eve of the BRICS summit saw the signing of investment agreements between the two countries. This could be read as a deliberate move by African nations who have made a shift from the over-reliance on the west and institutions which came with what African countries considered stringent, controlling conditions that came with high interests which ended up leaving them in debts to pay over long periods.[6]  

 

China’s role on the African continent has been defined by the financing of more than 3000, largely critical infrastructure projects[7]. At the sixth Forum on China-Africa Cooperation (FOCAC) summit in South Africa in 2015, the Chinese president Xi Jinping pledged USD 60 billion in commercial loans to the African countries, which would increase lending to at least USD 20 billion a year if that pledge is fulfilled[8].

 

China also has regional interests and relationships with African regional bodies like the Southern African Development Community (SADC). The relationship is geared towards regional infrastructure investment through the China-Africa Joint Chamber of Commerce and Industry (CCOIC)[9]. SADC gets to benefit through the priority infrastructure projects in the Energy, Transport and Water Sectors for the 15 years duration 2013 to 2027 as contained in the SADC Regional Infrastructure Development Master Plan blueprint that will guide the implementation of cross-border infrastructure projects[10]. The Master Plan is being implemented over three five-year intervals, with the first interval covering the periods from 2012 to 2017 and initial investment target of around USD 64 billion. The second and third intervals will cover the periods from 2017-2022 and 2022-2027 with a total proposed investment of between USD 428 billion and USD US558 billion respectively[11].

 

Individual African countries where China has been consistently making investments include Zimbabwe where China is the largest foreign investor.[12]. This relation has been viewed to be largely in favour of China, with the latter merely exploiting the natural and mineral resources of the former. However, Angola is by far the largest recipient of all Chinese loans, with USD 21.2 billion in cumulative loans.[13]. Currently, China imports one third of its oil from Africa, and some of its investments are tied to resource extraction[14]. For example, Angola has negotiated its oil resources for infrastructure development. Ethiopia follows second as the largest recipient of Chinese loans at USD 12.3 billion, Sudan at USD 5.6 billion, Kenya at USD 5.2 billion, and the DRC at USD 4.9 billion. These top five countries constitute more than 50 percent of all Chinese official loans to Africa[15].

 

Transportation constitutes the largest sector financed by Chinese loans sitting at USD 24.2 billion extended to projects to African nations. Energy, which is mainly electricity is the second largest sector that African countries benefit from, constitutes USD 17.6 billion in financial assistance. This is followed by mining and oil sectors at USD 9.0 billion, and communication projects at USD 6.5 billion. The rest of the loans are for funding miscellaneous projects in several sectors[16].

 

Of the USD 24.2 billion loans for transportation, Africa benefitted through road construction, maintenance at USD 9.6 billion and railways comprised USD 9.5 billion. Electricity infrastructure is the second largest sector at USD 17.6 billion in which African countries used the funds for hydroelectric projects, power transmission and distribution lines, gas pipelines, gas-power plants, and coal power plants constituting the top five categories. Hydropower projects alone constitute USD 8 billion. More than 83 percent of the mining sector loans went to Angola’s state-owned oil company Sonangol[17].

 

One key criticism against China’s aid policy is its strong selfish motivation that puts its own political and economic interests ahead of recipient’s priorities of economic development. While Africa-Sino relation is often touted as "win-win" by Chinese and African leaders, the relationship has been criticised for being biased toward Africa's natural resource exports in return for Chinese manufactured consumer goods[18]. The argument is centred on whether this relationship is actually promoting African development or fuelling instead China's economic growth at the expense of African economies.[19] The argument is that China acquires raw materials at very low prices compared to the expensive processed finished manufactured goods that African nations buys from the Chinese, skewing the balance of trade. Additionally, an outcry from the local South African and Botswana textile manufacturers who complain about the flooding of Chinese textiles which seem to get dumped onto the local market at a very low prices that end up driving local producers out of business. Manufacturing is the main contributor to employment and economic growth; thus, African countries would be better off investing in manufacturing and beneficiation instead of merely exporting raw materials to China.

 

It can be said that China’s presence on the African continent presents both opportunities and challenges. It is the responsibility of African governments to be pro-active in harnessing these opportunities to their advantage. The case in point will be for African countries to strategically place themselves into benefiting from the USD 900 billion scheme that the Chinese are extending through the Belt and Road Action Plan. “One Belt, One Road” is an initiative spearheaded by the Chinese government to improve trade and economic integration across Asia, Europe, and Africa[20]. The strategy uses free-trade agreements and infrastructure projects – including roads, ports and railways – to create a modern Silk Road across 65 countries, which have a combined gross domestic product (GDP) of USD 21 trillion. It includes both an economic land “belt” through Eurasia, and a maritime “road” to connect coastal Chinese cities to Africa and the Mediterranean. For Africa, BRI isn’t only a better connection to the Chinese market. This, together with the promise of Chinese-funded infrastructure, has raised African interest in the initiative, even as some Africans have reservations about the rise of Chinese influence[21]. The launch of a new Chinese-funded rail network, which will link the interior of Kenya to the Belt and Road port of Mombasa in the country’s coast, revealed this doubt. As leaders praised it as a massive achievement that will supercharge Kenya’s future development, popular opinion was more divided, with complaints that the project is too expensive and will lead to undue Chinese influence in the country.

 

According to the Chinese government’s official plans, BRI has two African hubs: Kenya and Egypt. But Chinese-funded rail and communication networks are also linking other East African countries like Ethiopia, Tanzania and Rwanda to the BRI route[22]. The most significant of these is Kenya’s newly inaugurated Standard Gauge Railway. This Chinese-financed and built network links Mombasa and Nairobi, and future extensions will connect to an existent Chinese-built line between Ethiopia’s capital of Addis Ababa and Djibouti, as well as to other countries in the region. The combination of port and anti-piracy expansion will arguably smooth long-distance trade with China, while facilitating African trade via closer BRI hubs. Mozambique recently discovered offshore natural gas. While not officially a BRI country, it is positioned to benefit from BRI-related port and shipping expansion in order to sell natural gas to China[23]. The benefits to Mozambique here seem to be a clear positive.

 

Chinese inclusion of Africa in the Belt and Road Initiative means the continent is suddenly confronted with a whole new set of opportunities and dilemmas. On the positive side, some East African governments see the influx of Chinese investment in infrastructure and manufacturing as a way to bridge infrastructure gaps and to position their countries as new logistics and manufacturing hubs that could serve not only Africa but gain access to overseas markets.


[1] AU 2010. China & Africa: Assessing the Relationship on the Eve of the Fourth Forum on China Africa Co-operation (FOCAV IV), African Union: Addis Ababa. Available At: https://au.int/ [Last Accessed: 29 July 2018].

[2] Berhe, M.G. & Hongwu, L. 2013. China-Africa Relations: Governance, Peace and Security, Institute for Peace and Security Studies: Addis Ababa. Available At: https://www.africaportal.org/ [Last Accessed: August 2018].

[3] Ayodele, T. & Sotola, O. 2014. China in Africa: An Evaluation of Chinese Investment, Initiative for public Policy Analysis: Lagos. Available At: http://www.ippanigeria.org/ [Last Accessed: 22 June 2018].

[4] Thrall, L. 2015. China’s Expanding African Relations: Implications for U.S National Security, Rand Corporation: Santa Monica. Available At: https://www.rand.org/ [Last Accessed: 02 July 2018].

[5] Brautigam, D. & Hwang, J. 2016. Eastern Promises: New Data on Chinese Loans in Africa: 2000 to 2014, China-Africa Research Initiative: Washington, D.C. Available At: http://www.sais-cari.org/ [Last Accessed: 2 September 2018].

[6] Edinger, H. & Sandrey, R. 2013. Is China bad for Africa’s Industrialization? , on the International Centre for Trade and Sustainable Development Website, viewed on 29 July 2018, from https://www.ictsd.org/.

[7] Alves, A.C. 2013. ‘China’s ‘Win-Win’ Corporation: Unpacking the Impact of Infrastructure-for-Resources deals in Africa’, South African Journal of International Affairs, Vol. 20, Issue 2, pp. 207-226. Available At: https://doi.org/ [Last Accessed: 2 September 2018].

[8] Sun, Y. 2016. The Sixth Forum on China-Africa Cooperation: New Agenda and New Approach?, The Brookings Institute: Washington, D. C. Available At: https://www.brookings.edu/ [Last Accessed: 02 July 2018].

[9] SADC 2015. SADC China Investment Seminar, on the Southern African Development Community Website, viewed on 22 June 2018, from https://www.sadc.int/.

[10] SADC 2015. SADC China Investment Seminar, ibid.

[11] SADC 2015. SADC China Investment Seminar, ibid.

[12] Thompson, R. 2012. Assessing the Chinese Influence in Ghana, Angola and Zimbabwe: The Impact of Politics, Partners and Petro, Stanford University: Stanford. Available At: https://docplayer.net/ [Last Accessed: 2 September 2018].

[13] Brautigam, D. & Hwang, J. 2016. Eastern Promises: New Data on Chinese Loans in Africa: 2000 to 2014, ibid.

[14] Shelton, G. & Kabemba, C. 2012. Win-Win Partnership? China, Southern Africa and the Extractive Industries, on the Southern Africa Resource Watch Website, viewed on 2 September 2018, from http://gold.sarwatch.org/.

[15] Brautigam, D. & Hwang, J. 2016. Eastern Promises: New Data on Chinese Loans in Africa: 2000 to 2014, ibid.

[16] Brautigam, D. & Hwang, J. 2016. Eastern Promises: New Data on Chinese Loans in Africa: 2000 to 2014, ibid.

[17] Brautigam, D. & Hwang, J. 2016. Eastern Promises: New Data on Chinese Loans in Africa: 2000 to 2014, ibid.

[18] Edinger, H. & Sandrey, R. 2013. Is China bad for Africa’s Industrialization?, ibid.

[19] Alves, A.C. 2013. ‘China’s ‘Win-Win’ Corporation: Unpacking the Impact of Infrastructure-for-Resources deals in Africa’, ibid.

[20] Xia, L. 2018. China Signs More Trade Deals with Belt and Road Countries, on the Xinhua News Agency Website, viewed on 2 September 2018, from http://www.xinhuanet.com/.

[21] SADC 2015. SADC China Investment Seminar, ibid.

[22] Xia, L. 2018. China Signs More Trade Deals with Belt and Road Countries, ibid.]

[23] Yan 2018. China, Mozambique Sign Cooperation Agreements Worth USD 100 Million, on the Xinhua News Agency Website, viewed on 2 September 2018, from http://www.xinhuanet.com/.

Industry Spotlight: Renewable Energy

Reaching regional integration, poverty reduction and sustainable development have been an important agenda for African countries and in particularly with SADC countries. The infrastructure development is among the priority intervention areas which include, road, communication, transport, water, and energy. These constitute a major component for African governments in terms of development strategies. These sectors have been also attracting investment into the region[1]. The objective is to improve competitiveness and promote trade in order to create integrated regional value chain, cost effective infrastructure system and providing necessary links between regional markets, and produce valued added products[2].

 

The growing demand for natural resources and for other alternative sources of raw materials from African countries have contributed to high commodities prices such as oil, copper, ferrous and non-ferrous metals as well as precious stones, of which some of these African resource-rich countries have benefited for high GDP rates. For example, between 2009 and 2015, Angola recorded an average of 4.2% GDP growth, The Democratic Republic of Congo reached an average of 6.9% GDP growth, and Zambia averaged of 6.4% GDP growth[3]. Additionally, this has led to new large inflow of capital coming from traditional investors (e.g., EU and USA), and other new emerging investors, particularly China, and other Asia countries (e.g., Japan, India, Brazil) dived into Africa’s extractive industries sector[4]. In 2015, it has been estimated that a total of USD 83.4 billion investment came from outside into Africa, of which USD 20.9 billion was China’s fund[5]. This represents a share of 25% of the total fund.

 

Energy remains among the biggest challenges faced by most of SADC countries. Member states of SADC clearly recognised that energy plays an important role in industrial development - industrialisation and in fostering regional integration[6]. The SADC Energy protocol, the SADC Regional Infrastructures Development Master Plan (RIDMP) and, alongside with the Regional Indicative Strategic Development Plan (RISDP) called for an industrialisation strategies as the way of diversifying economies, poverty reduction and promote regional growth[7]. Consequently, energy seems to be one of the sector to achieve these goals. As it stands at the moment, most of SADC countries are still struggling with meeting their demand in energy. To remediate the energy issue, renewable energy become as an alternative and existing sustainable sources of energy solution which could be exploited, and bring massive collaboration in promoting regional power pools[8]. The Chinese investment has expanded in Africa into various sectors such as energy, communication, transport, water and etc.[9] Between 2000 and 2012, it has been estimated that Chinese development finance for the energy sector reach approximately a total of more than USD 16 billion. Making China as the largest development partner in the sector, compared to EU with USD 7 billion, and the USA with USD 0.5 billion according to the Aid Data figures[10].

 

Considering that, the renewable energy in Africa have also brought up an investment estimated at USD 8 billion in 2014, compared to USD 5.3 billion in 2013, of which 3% represented the global investment. From this investment, USD 5.8 billion accounted for three SADC countries which included South Africa, Mauritius and Tanzania[11]. While South Africa took just alone 95% of the investment. For example, in Tanzania, the National Development Corporation decided to build a 50 MW wind farm wind project in Singida region (West of Dar es Salaam) with financing from EXIM Bank of China[12]. Furthermore, Malawi’s government received a Chinese funded project to provide 250 solar street lights and 533 sets of mobile solar Photovoltaics (PV) systems for rural areas, directed to health clinics in 2015[13]. Additionally, between 2011 and 2015, South Africa commissioned/targeted a total of 2,660 MW wind projects and the solar PV projects which accounted for 1,899 MW, and CSP for 400 MW. This has been achieved through the Renewable Energy Independent Power Producers Procurement Programme (REIPPP), which enable to attract more investment in the renewable energy sector from private sectors, multinational manufacturers companies to local private banks[14]. All of these, seem to tell us that public and private sector investment from China has grown over the past decades, and targeting various infrastructure development projects in SADC[15].

 

The China EXIM Bank have been supporting a number of energy projects in SADC member states, which include green energy development. In terms of Foreign Direct Investment (FDI) flow by sector in SADC, the coal, oil and natural gas sector has attracted more FDI, accounted for USD 109.2 billion, compared to USD 11.3 billion in the renewable energy sector. The metals and building and construction materials have attracted investment respectively of USD 59.1 billion and USD 9.0 billion[16]. The sector of communication accounted for an investment of USD 13.0 billion[17]. This reveals that, coal, oil and natural gas sector continue to be the major sectors attracting most of the investment in the SADC region, and in Africa in general.

 

China’s cooperation and investment in African continent have prominently grown over time, and created a dramatic shift from the traditional “African trade partners” in terms of trade and investment perspectives[18]. Sino-Africa relations seems to be for African government as an opportunity for business and an alternative development model of sources of finance, moving away from the eternal dependency on institutions such as the International Monetary Fund and World Bank, and Western foreign investment and development assistance which is usually attached with conditionalities[19]. To attract more investment and fostering long term growth in SADC region, infrastructure and skills development are necessarily required. Most investment in SADC region are oriented to natural resources (extractive) and services sector. However, there is also need to diversify investment in renewable and sustainable resources, of which will drive the domestic markets growth and achieve higher levels of development[20]. In addition, SADC regional trade should be moving to the direction of competitive value addition, rather than only based production.


[1] SADC 2012. Regional Indicative Strategic Development Plan, Southern African Development Community: Gaborone. Available At: https://www.sadc.int/ [Last accessed: 27 June 2018]; Cisse, D. 2015. China’s Engagement in Africa: What are the Potential Impacts on Africa’s Regional Integration?, University of Alberta: Edmonton. Available At: http://www.tips.org.za/ [Last Accessed: 27 June 2018].

[2] SADC 2012. Regional Indicative Strategic Development Plan, ibid.

[3] IMF 2018. Regional Economic Outlook: Sub-Saharan Africa Domestic Revenue Mobilisation and Private Investment, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 15 July 2018]; Edinger, H. & Pistorius, C. 2011. ‘Aspects of Chinese Investment in the African Resources Sector’, The Journal of The Southern African Institute of Mining and Metallurgy, Volume 111, pp. 501-510. Available At: https://www.saimm.co.za/ [Last Accessed: 19 June 2018].

[4] Gualberti, G., Bazilian, M., & Moss, T. 2014. Energy Investment in Africa by the U.S., Europe and China, International Association for Energy Economics: Cleveland. Available At: https://www.iaee.org/ [Last accessed: 19 June 2018Edinger, H. & Pistorius, C. 2011. ‘Aspects of Chinese Investment in the African Resources Sector’, ibid.

[5] Wu, Y. & Bai, S. 2017. China’s Infrastructure Development Strategy in Africa: Mutual Gain?, on the International Centre for Trade and Sustainable Development Website, viewed on 2 September 2018, from https://www.ictsd.org/.

[6] Mutanga, S. & Simelane, T. 2015. Electricity Generation: A Driver of SADC Regional Integration?, Economic Policy Forum and South African Institute of International Affairs: Berlin and Johannesburg. Available At: https://economic-policy-forum.org/ [Last Accessed: 2 September 2018].

[7] SADC & SARDC 2016. SADC Energy Monitor 2016: Baseline Study of the SADC Energy Sector, Southern African Development Community & Southern African Research and Documentation Centre: Gaborone & Harare. Available At: https://www.sadc.int/ [Last Accessed: 16 July 2018].

[8] Mutanga, S. & Simelane, T. 2015. Electricity Generation: A Driver of SADC Regional Integration?, ibid; SADC & SARDC 2016. SADC Energy Monitor 2016: Baseline Study of the SADC Energy Sector, ibid.

[9] Gualberti, G., Bazilian, M., & Moss, T. 2014. Energy Investment in Africa by the U.S., Europe and China, ibid.

[10] Gualberti, G., Bazilian, M., & Moss, T. 2014. Energy Investment in Africa by the U.S., Europe and China, ibid.

[11] REN21 2015. SADC Renewable Energy and Energy Efficiency Status Report, Renewable Energy Policy Network for the 21st Century: Paris. Available At: http://www.ren21.net/ [Last Accessed: 16 July 2018].

[12] REN21 2015. SADC Renewable Energy and Energy Efficiency Status Report, ibid.

[13] REN21 2015. SADC Renewable Energy and Energy Efficiency Status Report, ibid.

[14] REN21 2015. SADC Renewable Energy and Energy Efficiency Status Report, ibid.

[15] SADC & SARDC 2016. SADC Energy Monitor 2016: Baseline Study of the SADC Energy Sector, ibid.

[16] Bezuidenhout, H. 2015. SADC Investment Perspectives in a Changing International Investment Landscape, South African Institute of International Affairs: Johannesburg. Available At: http://www.saiia.org.za/ [Last Accessed: 19 June 2018].

[17] Bezuidenhout, H. 2015. SADC Investment Perspectives in a Changing International Investment Landscape, ibid.

[18] Gualberti, G., Bazilian, M., & Moss, T. 2014. Energy Investment in Africa by the U.S., Europe and China, ibid.

[19] Ayodele, T. & Sotola, O. 2014. China in Africa: An Evaluation of Chinese Investment, Initiative for public Policy Analysis: Lagos. Available At: http://www.ippanigeria.org/ [Last Accessed: 19 July 2018]; Gualberti, G., Bazilian, M., & Moss, T. 2014. Energy Investment in Africa by the U.S., Europe and China, ibid.

[20] Bezuidenhout, H. 2015. SADC Investment Perspectives in a Changing International Investment Landscape, ibid.

Policy Spotlight: Chinese Foreign Policy in SADC and the Rest of Africa

The People’s Republic of China mediates its relations with SADC countries bilaterally and multilaterally. At a bilateral level China conducts regular state visits and has presence in five of the 16 SADC countries. Multilaterally, China engages SADC countries primarily through the African Union (AU), the triannual Forum on China-Africa Cooperation (FOCAC), and to a limited extent through the Brazil, Russia, India, China and South Africa (BRICS) grouping. This combination of institutions mediates Africa-Sino relations. However, security cooperation is done bilaterally with the relevant government or through the United Nations (UN). Despite the broad of array of what constitutes China’s foreign relations with the SADC region, most of the developmental or economic gains for both China and SADC countries are achieved through bilateral relations.

 

But what is the foreign policy of China towards SADC countries in terms of economic, military, political relations? In addition, what is the balance of power and how can the balance be improved to in favour of SADC countries?

 

Economic Relations

China’s economic policy is governed by its 13th Five-Year Plan for Economic and Social Development of the People’s Republic of China (2016–2020), which has 20 parts that focus on different aspects ranging from the development philosophy, economic development, social development, security and implementation[1]. The main objectives of the economic plan are to improve human capital, the environmental sustainability and strengthen domestic institutions[2]. Apart from the five-year development plan China also has specific policies such as Made in China 2025, which aims to improve China’s share of global trade and production whilst improving perceptions of Chinese goods[3]. Although these plans have a domestic focus, China’s foreign policy is directed at enabling and implementing these economic plans. China’s foreign policy towards SADC countries, and African countries more broadly, is drive by its interests to source natural resources and capturing markets for its exports.

 

China’s economic interest in Africa are primarily aimed at diversifying its sources of oil away from the conflict-ridden Middle East sources and expanding its exports. Despite having relatively abundant natural resources of its own, particularly coal and other fossil fuels, China has taken a decision to import natural resources from the rest of the world rather than exploiting its domestic resources due to the high cost of exploration and extraction[4]. Moreover, manufacturing is an increasing returns activity comparing to extracting resources which has diminishing returns because it becomes more difficult and more expensive to extract natural resources over time. Hence, China’s engagement with African countries has been mainly driven by the imperative of securing natural resources[5]. China has been drawn by the relatively low cost of investing in natural resources and importing them, which is used to bargain with African countries who are at very early stages of development. Moreover, China has taken advantage of unstable socioeconomic conditions in some SADC countries in order to satisfy its energy needs and disguise its true interest in Africa by posing as a development partner[6].

 

In the mid-to-late 1990s when Western countries were leaving places like Sudan, China entered the market by investing USD 15 billion in a 1,500-kilometre pipeline and began importing Sudanese oil at a large scale[7]. This made the China National Petroleum Corporation the largest shareholder in the Sudanese energy sector. Similarly, after the civil war ended in 2002 Angola became China’s largest oil supplier and accounted for 15.3% of China’s total oil imports in 2007[8]. Although China presents itself as a more conscientious development partner for African countries with promises of mutual trade and economic benefits, the profile of Chinese imports from Africa illustrates the real Chinese interests. Chinese imports from SADC and Africa more broadly are strictly limited to raw natural resources. Oil is the main natural resource that China imports from African countries, including SADC countries.

 

China Imports from SADC and Rest of Africa (1997-2017)
Source: UNCTAD 2018, UNCTADStat.

 

Even though the relative proportion of oil imports has declined since 2014, this is mainly a function of the lower oil prices than a reduction in quantities imported. Oil products contributed an average of 55.3% of total Chinese imports from SADC from 1997 to 2014, which declined to an average of 34.1% from 2015 to 2017[9]. Oil, gold, copper, metals and pearls contributed 78.7% of total imports from SADC to China in 2017 which illustrates the real Chinese economic interests - natural resources[10]. Therefore, China’s economic foreign policy is driven by investment in natural resource exploitation in order to extract raw minerals from the continent and the region, especially oil. The converse of this relationship, China’s exports to the SADC region and the rest of Africa, consists of diversified manufactured exports including clothing and textiles, telecommunication and transport.

 

China Exports to SADC and Rest of Africa (1997-2017)
Source: UNCTAD 2018, UNCTADStat.

 

Chinese exports to SADC are diversified with the top five products constituting less than a quarter of total exports. The top five exports from China to SADC constituted an average of 16.0% of total exports from 1997 to 2014, which increased to 19.0% from 2015 to 2017[11]. The top five Chinese exports to SADC include telecommunication equipment, footwear, furniture and parts, miscellaneous manufactured articles, and electrical machinery and apparatuses[12]. China exports mainly manufactured goods to Africa and imports raw minerals. Therefore, China’s economic foreign policy with SADC countries is almost identical to the highly criticised approaches of former European colonisers. However, unlike the former European colonisers China prides itself for not interfering with the domestic politics of African countries – at least not yet.

 

The balance of trade with China favours the SADC region but there are country specific differences and nuances that need to be considered. At a regional level the SADC balance of trade with China has been a persistent surplus that grew considerably from USD 490 million in 1997 to USD 55.7 billion in 2014, before averaging USD 21.4 billion from 2015 to 2017[13]. Meanwhile the rest of Africa’s trade balance with China remains a deficit which increased considerably from -USD 670 million in 1997 to -USD32.7 billion in 2014, before increasing further to an average of -USD 54.4 billion from 2015 to 2017[14]. Therefore, at a regional level SADC is in a better position than the aggregate of the rest of Africa. SADC’s trade balance with China has been a persistent surplus that grew at average rate of 3.3% from over the last 20 years. But given the high contribution of Chinese oil imports from SADC, this may only benefit a few net oil exporting countries like Angola instead of the whole region.

 

China also plays a vital role in terms of infrastructure development and investment in Africa. The particular appeal of China investment is that the financing comes at a lower cost (interest rates) and without the conditionalities associated with the traditional sources of public financing like the International Monetary Fund (IMF). In addition, due to limited access to certain technical skills and infrastructure construction experience in most African countries, Chinese financing is preferred because it comes as “a full package” which includes engineering, procurement and construction service providers (EPCs). But the specific practices of Chinese EPCs and financing undermine the gains of African countries.

 

Chinese EPCs have been criticised for not making use of indigenous labour even for repetitive and less skill-intensive tasks[15]. In addition, Chinese EPCs have been criticised for shoddy workmanship and poor quality of their construction. For example, the Government of Botswana has been engaged in legal disputes for poor workmanship and project delays against Sinohydro (Pty) Ltd. Sinohydro was contracted to build a new terminal at the Seretse Khama International Airport and to for construction of the Dikgatlhong Dam which have both ended in legal battles[16]. Similarly, China has been criticised for cheating the state or having colluding in misappropriation of funds in the development of new cities in Angola. For example the Nova Cidade de Kilamba outside of Luanda has remained unoccupied despite the exorbitant cost of USD 3.5 billion which was financed through resource-backed loans[17]. Nova Cidade de Kilamba is just one of many new cities as part of a deal championed by former President José Eduardo dos Santos to build new cities in Benguela, Namibe, Lubango and Malange which promised to deliver a million homes[18].

 

Therefore, the infrastructure investments supported by China in the SADC region are not realising value for money despite the cheaper and obligation-free financing. Firstly, the attractiveness of “cheaper” Chinese financing does not take the quality of workmanship into account. The true cost of Chinese-supported infrastructure investments is much higher if the lifespan of new development is remarkably shorter and the quality is subpar. Secondly, the overreliance on Chinese labour means that there is very little skills transfer and benefits for SADC countries. Thirdly, the perception of cheaper costs in terms of the interest paid disguises the true cost of Chinese financing because the costs are hidden through EPCs. Chinese EPCs have been criticised for poor quality workmanship due to cost-cutting measures and low-quality materials, and project delays which all works to increase their returns on the projects. Thus, the access to “cheaper” and non-conditional Chinese financing hides the unequal gains which favour China due to the contracting arrangements, sometimes at the expense of sustainable long-term development in SADC countries.

 

Military Relations

Over the last few decades the Chinese military strategy has primarily focused on China’s domestic security with limited external engagements and missions since the 1940s. However, in more recent years China has been heavily engaged in UN missions and established its first external military presence.  In 2015, China passed a law allowing the People’s Liberation Army to be deployed on overseas counterterrorism missions[19]. China’s external military engagements involve military operations other than war (MOOTW) in order to counter terrorism and other security threats to Chinese interests, primarily in Africa[20].

 

China built its first foreign base in Djibouti to secure its economic interests in the region and strengthening China’s geopolitical position[21]. In June 2017 the Chinese Deputy Prime Minister Zhang Yesui met with Djibouti President Ismail Omar Guelleh to discuss further expansion of China’s role in the country and the region[22]. The expansion of this relationship to matters of security should contribute towards stability in the country and the region given that relations between Djibouti and Eritrea have deteriorated after the recent US sanctions against Qatar led to Qatar withdrawing its peace-keep forces which were a buffer between the two countries. This is the only direct external military engagement by China and its first permanent external military base since 1949[23].

 

Apart from this, China is engaged in a number MOOTW through the UN institutions. In Africa, China has contributed troops and other personnel to UN missions in South Sudan (1030), Mali (395), Sudan (365), the Democratic Republic of Congo (218) and Western Sahara (12)[24]. Clearly China’s external military presence and focus is on Sub-Saharan African countries, which constitute 82.3% of its total personnel contribution to UN missions (2008 personnel, mainly troops and police)[25]. China’s approach and its involvement in the Democratic Republic of Congo (DRC) is to support the government to regain control and uphold the December 2016 political settlement until the next elections, which are planned for 23 December 2018[26]. China prefers limiting its interference and supports regional institutions such as the AU and International Conference on the Great Lakes Region (ICGLR) who are the primary mediators in the DRC conflict[27].

 

Political and Cultural Relations

Although China prides itself for not interfering with the domestic politics of foreign countries, the Communist Party of China (CPC) has established close relations with political leaders in African countries, particularly in SADC. In July 2018, the CPC hosted a two-day conference with 40 political parties from 36 African countries with the aim of expanding dialogue on the developmental path taken by African countries[28]. The CPC conference focused on political institutions and is seen as complementing the FOCAC Summit, which focuses on economic and trade relations. However, this can be seen as China trying to extend its influence beyond economic and trade relations by directly engaging political leaders.

 

The Minister of the International Department of the CPC Central Committee have vehemently denied speculations that China is trying to export its developmental model to African countries, affirming Chinese President Xi Jinping’s assertions that the policy decisions and developmental path of any country depends on its history[29]. The CPC has also invited a few political parties for training on building institutions and strengthening political organisations. For Example, a delegation from the African National Congress of South Africa attended such training in 1999[30]. Although the China prides itself for not interfering in domestic politics of African countries, its foreign policy has vindicated some repressive regimes and has been criticised for emphasing political strategies like the subordination of the military and government to the political party.

 

Before the rising influence of China in Africa, most countries relied on financing from the IMF and WB that provided conditional loans. Most of the conditions attached to financing included fiscal and political policies aimed at stabilising African economies, encouraging democratisation and liberalism. These policy approaches were often referred to as the Washington Consensus, because IMF and WB economists aimed at discovering the right set of policies to assist government pursuing economic development in the context of market failure[31]. But with the ineffectiveness of Structural Adjustment Programmes to resolving market failure prompted a change in the approach taken. The post-Washington Consensus policies shifted away from trying to resolve market failure and focused on resolving state failure, which was understood as the primary cause for market failure[32]. Hence, the post-Washington Consensus emphasises “good governance” in order to improve state institutions and the state’ capacity to provide public goods.

 

Regardless of one’s view on the success or effectiveness of these policy approaches and conditionalities attached to finance – the Washington Consensus and post-Washington Consensus were useful disciplining mechanisms. The “no strings attached” approach of Chinese financing therefore undermines institutional development and political discipline. In addition, this approach by China is akin to the widely criticised “Silent Diplomacy” approach of former South African President Thabo Mbeki, which vindicated a number of repressive regimes in the SADC by turning a blind eye towards poor political and policy decisions. Moreover, the “infrastructure for resources” approach taken by China undermines domestic state resource mobilisation and enables repressive regimes without requiring legitimacy. Whilst it is commendable that China is creating a counter-balance to the existing models of development and finance, it is problematic that the financing provided by China does not come with any governance requirements or criteria for political legitimacy such as reducing poverty, inequality and improving the livelihoods of African citizens.

 

Lastly, Chinese model emphasises the subordination of the military and government to the political party which is problematic in the African context since ethnic differences and competition to control natural resources is a major cause for conflict; resulting in militaries that are attached prominent personalities and political parties [33]. Moreover, the party army approach is very problematic in Africa given the ethnic divisions that were heightened by colonialism which still remain. The Chinese model seem incoherent with the history and realities of African countries. The political relations between China and SADC are therefore problematic in that they encourage political leaders to draw lessons from the Chinese experience even though the Chinese experience is incoherent with the African context.

 

How to Improve the Balance of Power in Favour of SADC?

From the foregone analysis it is clear that China’s economic relations with Africa are driven by the need to secure natural resources. This approach is no different from the colonial and post-colonial relations between African and European countries, particularly former colonisers. China’s increasing involvement in African peace-keeping is primarily to secure China’s economic interests rather than domestic political stability. Lastly, China’s political relations with African countries provides little gains for ordinary citizens because the Chinese model is not compatible in the African context. Moreover, the non-conditional financing approach risks legitimising and even enabling repressive regimes. Despite the failure of IMF and WB in resolving market failures in Africa, the conditionalities attached to loans encouraged accountability; which is being undermined by the current Chinese financing approach.

 

The balance of power between China and SADC countries can only be improved through greater civil society involvement and demands for accountability. Civil society organisations at a national level should demand transparency and accountability from political leaders. In addition, civil society organisations need to focus on value for money rather than commending the introduction of new infrastructure and investments. At face-value, new power stations and roads are typically commendable because they contribute towards development. But a deeper analysis of the value for money including the quality and lifespan of new infrastructure will reveal the true cost of Chinese financed infrastructure developments. This needs to be done at a domestic level by comparing existing and new infrastructure developments. In addition, a cross-country comparison would also reveal the development deficits because the gains from Sino relations are inextricably linked to each country’s bargaining power.

 

SADC countries in particular, and African countries generally, need to pool the negotiations and deal-making with China at a regionally rather than bilaterally in order to level the playing field.  Although the China emphasises mutual gains in its relations with African countries, this is merely rhetoric because the deals are concluded bilaterally where China is at its biggest advantage. This is a rational approach for China given its overwhelming bargain power in bilateral negotiations with SADC countries. The balance of power can only be improved if investment and infrastructure deals are concluded at a regional level with the aim of connecting SADC economies and promoting industrialisation through the development regional value-chains. SADC countries need to pass terms of reference that are collectively agreed upon as the basis for any and all bilateral and multilateral negotiations with China. SADC countries will never improve their gains by engaging China through continental dialogues whilst concluding bilateral deals without any terms of reference to level the playing field.


[1] NDRC 2016. The 13th Five-Year Plan for Economic and Social Development of the People’s Republic of China (2016–2020), National Development and Reform Commission of the People’s Republic of China: Shanghai. Available At: http://en.ndrc.gov.cn/ [Last Accessed: 30 August 2018].

[2] NDRC 2016. An Overview of the 13th Five-Year Plan, on the National Development and Reform Commission Website, viewed on 30 August 2018, from http://en.ndrc.gov.cn/.

[3] MIIT 2015. The "Made in China 2025" Plan has Been Reviewed and Approved and Will be Officially Issued in the Near Future, on the Ministry of Industry and Information Technology Website, viewed on 30 August 2018, from http://www.miit.gov.cn/.

[4] NDRC 2007. China’s Energy Conditions and Policies, National Development and Reform Commission of the People’s Republic of China: Shanghai. Available At: http://en.ndrc.gov.cn/ [Last Accessed: 30 August 2018].

[5] CR 2010. China's Interests in Africa and its Maintenance Strategy, on the China Reform Website, viewed on 30 August 2018, from http://www.chinareform.org.cn/.

[6] CR 2010. China's Interests in Africa and its Maintenance Strategy, ibid.

[7] CR 2010. China's Interests in Africa and its Maintenance Strategy, ibid.

[8] CR 2010. China's Interests in Africa and its Maintenance Strategy, ibid.

[9] UNCTAD 2018. UNCTADStat, United Nations Conference on Trade and Development: Geneva. Available At: http://unctadstat.unctad.org [Last Accessed: 30 August 2018].

[10] UNCTAD 2018. UNCTADStat, ibid.

[11] UNCTAD 2018. UNCTADStat, ibid.

[12] UNCTAD 2018. UNCTADStat, ibid.

[13] UNCTAD 2018. UNCTADStat, ibid.

[14] UNCTAD 2018. UNCTADStat, ibid.

[15] CR 2010. China's Interests in Africa and its Maintenance Strategy, ibid.

[16] Ramahosi, G. 2015. Government Ordered to Create Fund for Sinohydro Claims, on the Weekend Post Website, viewed on 30 August 2018, from http://www.weekendpost.co.bw/; AGC 2012. Sinohydro Botswana Pty Ltd V Botswana Insurance Co Ltd 2012 BLR 527 HC, High Court of Botswana: Village Court. Available At: http://www.elaws.gov.bw/ [Last Accessed: 30 August 2018].

[17] DM 2012. Why Has China Built a Ghost Town in Africa? Eerie Footage Shows Brand New Angolan City Designed For 500,000 Lying Empty, on the Daily Mail Website, viewed on 30 August 2018, from http://www.dailymail.co.uk/.

[18] Bednarski, C. M. 2015. ‘Urbanisation in Africa – Taking Angola as an Example’, Structural Engineering: Providing Solutions to Global Challenges, Geneva, Switzerland, 23-25 September 2015. Available At: https://www.salzburgglobal.org/ [Last Accessed: 30 August 2018].

[19] Nantulya, P. 2017. Pursuing the China Dream through Africa: Five Elements of China’s Africa Strategy, on the Africa Center for Strategic Studies Website, viewed on 30 August 2018, from https://africacenter.org/.

[20] MoD 2018a. Defense Policy, on the Ministry of National Defense of the People’s Republic of China Website, viewed on 30 August 2018, from http://eng.mod.gov.cn/.

[21] MoD 2018b. Defense Ministry's Regular Press Conference on May 31, on the Ministry of National Defense of the People’s Republic of China Website, viewed on 30 August 2018, from http://eng.mod.gov.cn/.

[22] PRD 2017. President of the Republic Receives Deputy Prime Minister of China, on Presidency of the Republic of Djibouti Website, viewed on 27 June 2017, from http://www.presidence.dj/.

[23] Nantulya, P. 2017. Pursuing the China Dream through Africa: Five Elements of China’s Africa Strategy, ibid.

[24] UNP 2018. China, on the United Nations Peacekeeping Website, viewed on 30 August 2018, from https://peacekeeping.un.org/.

[25] UNP 2018. China, ibid.

[26] PMPRCUN 2018. Remarks by Counselor Cheng Lie at the Security Council Briefing on the Democratic Republic of the Congo, on the Permanent Mission of the People’s Republic of China to the UN Website, viewed on 30 August 2018, from http://www.china-un.org/.

[27] PMPRCUN 2018. Remarks by Counselor Cheng Lie at the Security Council Briefing on the Democratic Republic of the Congo, ibid.

[28] Mutethya, E. 2018. CPC holds dialogue with African political leaders, on the China Daily Website, viewed on 30 August 2018, from http://www.chinadaily.com.cn/.

[29] Mutethya, E. 2018. CPC holds dialogue with African political leaders, ibid.

[30] ANC 1999. ANC Delegation Returns from Visit to China, on the African National Congress Website, viewed on 30 August 2018, from http://www.anc.org.za/.

[31] Adam, C. & Dercon, S. 2009. ‘The Political Economy of Development: An Assessment’, Oxford Review of Economic Policy, Volume 25, Issue 2, pp. 173-189. Available At: https://doi.org/ [Last Accessed: 30 August 2018].

[32] Saad-Filho, A. 2010. Growth, Poverty and Inequality: From Washington Consensus to Inclusive Growth, United Nations: New York. Available At: http://www.un.org/ [Last Accessed: 30 August 2018].

[33] Nantulya, P. 2017. Pursuing the China Dream through Africa: Five Elements of China’s Africa Strategy, ibid.

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