Dec. 12, 2006

China-Africa Ties Come Under Fresh Scrutiny

By Kaburu Mugambi, The Nation, Nairobi

Economic watchers say the partnership would sink countries deeper into debt and make them suppliers of raw materials to Chinese companies.

Bureaucrats left China-Africa Cooperation forum in Beijing elated after signing deals worth $1.9 billion (Sh133 billion) last month.

Even then, this has fuelled concerns among global economy watchers that the partnership would sink African countries deeper into debt and relegate the continent to a supplier of raw materials to Chinese manufacturers. China's voracious appetite for raw materials, the report says, coupled with its superior manufacturing advantage, could stifle Africa's attempts to diversify its economies from being bulk commodity exporters.

At the summit, the largest gathering held by China, 12 Chinese firms and African governments as well as companies signed deals covering areas such as infrastructure, telecommunications and technological equipment, mineral resource development and insurance.

African countries that benefited from the agreements are Nigeria, South Africa, Egypt, Ethiopia, Ghana, Kenya, Uganda, Seychelles, Lesotho, Cape Verde and Zambia. More than 40 African heads of state and government representatives attended the forum held on November 3 to 5.

The only countries that did not attend were the five states that continue to recognise Taiwan - Burkina Faso, Gambia, Malawi, Sao Tome and Principe, and Swaziland.

The biggest deal is worth $938 million (Sh65.6 billion) for China's state-owned CITIC conglomerate to set up an aluminium plant in Egypt. China Southern Airlines also announced the first regular direct commercial flight from Beijing to an African destination. The airline said it would start flying from Beijing via Dubai to Lagos, Nigeria.

Other measures announced were the further opening up of Chinese markets to exports from Africa's poorest countries. The list of items that are not subject to customs tariffs will be expanded to 440 from 190. China plans to train 15,000 African professionals, send 100 agricultural experts to Africa, and establish 10 agricultural technology demonstration centres.

A report by Standard Bank says China has become a major player in the continent's economic affairs. "With nearly $1 trillion (Sh70 trillion) in reserves and a voracious appetite for natural resources, the country has decided to spend some of its billions of dollars in savings to secure access to the oil, gas, copper, coal and other mineral riches that lie beneath the soil of many African countries," the report says. "Africa, in turn, looks at China as a source of cheap loans and merchandise."

China's interest in Africa also shows a growing push for the continent to become a market for Chinese products. Chinese exports to Africa totalled more than $15 billion (Sh1 trillion) in 2005, up from $12 billion (Sh840 billion in 2004.

Although Africa's trade with China is now roughly 10 per cent of its total, this is rapidly replacing trade with the continent's traditional partner, Europe, which has dropped from 44 per cent to 32 per cent over the past decade. The bank says China's outsized African presence and the summit have also sparked criticism that Beijing, with its UN Security Council membership and economic largesse, is exacerbating African debt and corruption and protecting human rights offenders such as Zimbabwe and Sudan.

In its latest report on the Chinese economy released late last month, the International Monetary Fund (IMF) pointed to a lack of transparency on loans to developing countries. China is not part of the "heavily indebted poor countries" arrangement for debt relief and only grants debt relief on a bilateral basis. The IMF said the provision of loans on a commercial basis to low-income countries "raises some concerns", particularly in the case of countries that have recently received debt relief. It said these loans could complicate debt relief efforts and countries could again find themselves with repayment problems.

During the summit China said it would provide $3 billion (Sh210 billion) in preferential loans and $2 billion (Sh140 billion) in preferential buyer's credits to Africa in the next three years. Some critics have voiced concerns over how Chinese-owned firms treat African workers. Protests broke out in Zambia in July about the alleged ill-treatment of workers at a Chinese-owned mine, and there have been reports of pay disputes in Namibia.

New agreement

According to the report, African business groups also complain about competition from low-cost imports. The New York-based group Human Rights Watch said all powers involved in Africa, including China, should place human rights at the centre of their policies.

However, the report says overall, China's growing economic ties to Africa are benefiting the region.

The new agreement between China and many African countries should go a long way towards furthering ties and trade, benefiting African residents. Two-way trade is projected to reach $50 billion (Sh3.5 trillion) this year, a fivefold increase from 2000, the report estimates.

"The problem arises when these ties come at the cost of the wider community and for the benefit of the already wealthy few," the report says. Authors of the report say as a growing foreign creditor to Africa, China is becoming an alternative to the increasingly rule-based lending from Western donors and institutions, as Western populations are increasingly demanding greater fair play and restrictions on investment and aid policies for the continent.