Sierra Leone Telegraph: 23 August 2016
Many Africans who are supportive of China’s economic dealings with Africa, say that the global economic giant is being unfairly criticised, for simply doing what most developed nations have done throughout history to Africans – the exploitation of the continent’s natural resources, in return for shoddy infrastructure development projects and support for poorly managed healthcare facilities.
Critics do not see it that way. They say that China is taking more out of Africa than it is putting in.
In most countries of Africa where China is believed to be investing their capital, they say that such investments are largely concentrated in mining, road construction, fishing and large-scale mechanised farming for their own domestic consumption, invariably using their own imported labour force especially at management levels.
On the surface there is little wrong with such investments. But once the veneer is removed from the agreements that China signs with their African comrades, what is seen are the massive loans at huge rates of interest that critics say will burden Africa’s future generations, as well as sap much needed cash away from current spending on essential public services.
Writing in the conversation.com, Sharif Mahmud Khalid says there is much that African countries can learn from the northern city of Sheffield in the UK, where a $1 Billion investment agreement has been signed with the Chinese.
This is what he says:
The British press has been devoting acres of coverage to a £1bn foreign direct investment deal into Sheffield, a former mining town in northern England. Branded as an extension of the “golden era” of relations between Britain and China, the contract between Sheffield and Sichuan Guodong Construction Group has been heralded as a remarkable investment. It is easily the largest Chinese investment in Britain outside London. And it comes with a 60-year life span.
The deal elicits useful lessons for Chinese investments across the African continent.
The Sheffield deal came with clearly stipulated terms of engagement. These included the creation of employment opportunities, and an obligation to fill a clearly defined urban development gap. This includes a five star hotel, sport fields, new office and leisure properties and both high-end and affordable housing in the city centre.
Significantly, the developments are to be undertaken using local and not Chinese labour.
These conditions stand in contrast with what deals look like between many African countries and China. Despite a plethora of such deals, leaders on the continent have not shown enough commitment to ensuring equitable partnerships with China. The Sheffield case shows what’s possible if the negotiating partner is firm about insisting on certain conditions for any deal.
Chinese interest in Africa
Trade between China and Africa has risen significantly. It now stands at an estimated $198.5 billion. This has been shaped largely by Chinese hunger for raw materials.
By some estimates there are about 1,673 Chinese-backed projects dotted across 51 African countries. This is obviously significant and surpasses any other region of the globe. By and large the terms of these pacts have been dominated by China’s needs. This is inimical – but it needn’t be the case.
The Chinese probably possess the most malleable foreign and trade strategy on the international landscape. As such it responds to the strategic investment programmes of its partner states. Chinese investors respond to the robust policy of Europe and America just as easily as they meet Africa with what demands it brings to the table.
Current Sino-Africa relations are best understood against the backdrop of the strategic Beijing China-Africa Summit of 2006 and the recent Johannesburg Forum on China-Africa Cooperation. Since then numerous loans, grants and infrastructure contracts have been inked between African governments and Chinese entities.
In addition, Africa plays host to a flourishing “barter” enclave. Under these deals the continent feeds sprawling Chinese industries in exchange for development loans and infrastructure contracts.
This form of barter comes with significant implications for Sino-Africa relations. In most instances the barter promotes an indirect involvement of China’s corporations in the extraction of Africa’s mineral resources. A case in point is the £3 billion loan agreement between China Development Bank and the government of Ghana, as well as other deals with Exim Bank China. These formed part of a $13 billion concessionary agreement for the development of infrastructure in Ghana, including its oil sector.
About 60% of contracts emanating out of this relationship are in the hands of Chinese corporations. Vital ingredients are missing. Issues such as corporate governance, social responsibility, corporate reporting, stakeholder engagement and responsible investment are ignored. These governance factors come to be treated as nonessential.
Many Chinese investors are also not directly involved in the actual mineral extraction. They often work through third parties. This means that the investors themselves cannot be held directly accountable and often evade their responsibilities.
The social and environmental effects across Africa’s resource value chain are massive. And African governments are left to deal with the environmental damage.
Africa has a strong hand to play
Given China’s need for raw materials, there is undoubtedly an opportunity for Africa to redefine power relations in its dealings with the new global giant. The mineral rich continent can set on course a win-win situation within the rubric of this existing relationship. Failure to do so might perpetually limit the continent’s ability to maximise economic value from its mineral resources.
Key factors must include skill transfer initiatives, localisation and fit for purpose infrastructure development.
Since the first Beijing Ministerial Conference in 2000 Africa has made little progress in preparing itself to meet China as an equal partner in economic dealings.
The conference set in motion the Forum on China-Africa Cooperation and Programme for China-Africa Cooperation in Economic and Social Development. It could have spurred Africa to develop a more strategic response designed to accelerate development.
Africa needs to assemble the required mettle to change power relations in its dealings with China. The continent’s relations with China must be tailored to yield commensurate benefits.
Sheffield’s City Council seems to have been empowered enough to engage China on a mutual benefit bases. Given that Africa is the epicentre of most Chinese foreign direct investment it has a much stronger hand to play.
Even though the Sheffield case involved a private sector player, Africa must also turn agreements at government level into deals that deliver maximum economic value.
And African countries must use existing safety valves, like constitutional clauses and parliamentary agreements, to their advantage.
About the author
Sharif Mahmud Khalid is a Lecturer in Accounting at the University of Sheffield, Yorkshire, UK.