China in Africa

2012-01-12 00:00

SHOULD we be happy that the growing Chinese economic footprint in Africa is growing through us? Does this displace us as a major economic power in Africa or do we grow in tandem with the Chinese? Does this hurt our long-term relations with Western economies that are being bumped off their spheres of influence by the dragon? These were some of the questions that sprung to mind after reading a report released last week by the Standard Bank showing the astronomical growth of Chinese business in Africa.

Of course, being the conduit through which most of this business is conducted, the Standard Bank casts this in a positive light. In 2007, China’s biggest bank, the Industrial and Commercial Bank, bought a 20% stake in Standard Bank. The South African bank is benefiting handsomely from Chinese business because it has financed its Chinese counterpart, which in turn relies on Standard Bank to manage it.

It is pleasing to note that the Chinese are making finance available for the building of essential infrastructure in the form of roads, bridges, new airports and ports in Africa at a time when international finance institutions, largely controlled by Western governments, have focused more on promoting democracy than economic rejuvenation. This has made the rise of China as Africa’s largest economic partner a strategic opportunity for Africa to negotiate out of the political agenda behind international finance. But this cannot be realised at the expense of the democratisation of the political space as demanded by ordinary Africans.

The report referred to suggests that the Chinese share of the construction sector in Africa is now larger than that of the United States, France and Italy combined. Chinese construction business was worth just under U.S.$60 billion in north, central and Southern Africa alone in 2010. Overall, the Chinese companies increased their share of the African market from under 20% in 2004 to well over 36% in 2010. The World Bank expects this trend to accelerate in the coming years, helping China to challenge the hegemony of international finance institutions in financing business and development in Africa.

Of course, the World Bank and the IMF, which for four decades have monopolised major financing in Africa, are worried about being swept aside by China and other emerging economies. Major Western economies that are experiencing economic crisis are worried about the long-term shift in economic power to the East or towards emerging economies generally.

There are also worries about the model that Chinese activity promotes, which African countries might replicate. Chinese investment is mostly state driven with the actual business conducted by major Chinese state-owned enterprises. Of course, China’s capitalism is a state-dominated one.

As the report shows, the challenge is that Western companies cannot compete, not just because the Chinese have larger cash reserves, generous guarantees for investment security or low labour costs, but because the Chinese strategy is supported by strong diplomatic engagement and oversight. Because the state virtually secures the first investment forays, Chinese enterprises have sufficient time to settle into new markets and build the networks and knowledge necessary to bid successfully for private contracts

Of course, while in the West the mantra is free markets, in practice their conduct in Africa is closer to the Chinese than Western governments wish to admit for it is also state-driven and benefits even the most undemocratic states as long as they have natural resources and are seen as friendly. So, the Chinese strategy is the same state capitalism that Western capitalist economies practise in Africa.

But the argument that the Chinese are serving their self-interests just like the Western nations do does not help Africa at all. What Africa needs to accept is that while its geo-economic position is attractive to both pillars of global economic power, it will not benefit until it learns to stake its own claim on this business competition. Africa needs to influence the choice of roads, bridges, ports, airports and dams to be constructed. Africa needs stronger regional infrastructure plans with detailed work plans to bargain successfully with Chinese or Western companies.

This is why the New Partnership for Africa’s Development (Nepad) needs to be re-energised and further developed into concrete action plans to form the basis of bargaining with the external economic giants wanting access to our natural resources. Africa cannot take advantage of the competition between the old and new economic powers unless it champions a common vision that links economic development across countries.

As for South Africa, the report shows that the country’s big business, including the banks, transport and logistics companies, are making a killing by supporting Chinese investments.

• Siphamandla Zondi is the executive director of the Institute for Global Dialogue. He writes in his personal capacity.

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