CHINA AND AFRICA: THINK AGAIN

Professor Deborah Brautigam School of Advanced International Studies, Johns Hopkins University Washington, DC

A  BIT  ALARMING…

“…ONCE  UPON  A  TIME…”

--- Financial Times

CHINA DOES PRESENT A CHALLENGE

MAJOR AFRICAN CONCERNS:

BUT PERHAPS THE BIGGEST CHALLENGE:

Africa is rich. We  haven’t  figured  out  a  way  to  link  Africa’s  riches  to  its  development.  The  Chinese are actively trying to do just this.

CHINESE AMBASSADOR IN NIGER:

CHINA AND AFRICA: THE FIRST WAVE

1st Wave

CHINA AND AFRICA: THE SECOND WAVE

East Wind Blows in Africa: 1950s & 1960s

China vs. USSR vs. USA

CHINA AND AFRICA: THE THIRD WAVE

CHINESE LEADERS Visits to Africa, 1995-2009

Premier Li Peng 1995, 1997

President Jiang Zemin 1996, 1999, 2000, 2002

Premier Zhu Rongji 2002

Premier Wen Jiabao 2003, 2006

President Hu Jintao 2004, 2006, 2007, 2009

South Africa

Namibia Zimbabwe

Botswana

Mozambique

Zambia Angola

Tanzania

D R Congo Kenya

Congo

Gabon

Uganda

Somalia

Ethiopia

Sudan

Egypt Libya

Tunisia

Morocco Republic

Chad

Niger

Mali

Mauritania

Western Sahara

Central Af. Republic Cameroon

Nigeria

Burkina Faso

Swaziland

Lesotho

Burundi

Rwanda

Equatorial Guinea Sao Tome and Principe

Malawi

Djibouti

Cote  D’Ivoire

Ghana

Togo

Benin

Liberia

Sierra Leone

Guinea

Guinea-Bissau

Gambia

Senegal

Mauritius

Seychelles

Madagascar

Cape Verde

Eritrea

Algeria

WHAT ARE THE DRIVERS OF CHINESE ENGAGEMENT IN AFRICA TODAY?

1. STRATEGIC DIPLOMACY

2. BUSINESS

TRADE

Trade: Exports to Africa, China (US Bil $)

0

10

20

30

40

50

60

70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Trade: Exports to Africa, China vs. US (US Bil $)

Bar: China Line: USA

0

10

20

30

40

50

60

70

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Trade: Imports from Africa, China (US Bil $)

0

20

40

60

80

100

120

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Trade: Imports from Africa, China vs. US (US Bil $)

Bar: China Line: USA

0

20

40

60

80

100

120

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

INFRASTRUCTURE CONTRACTS

Chinese infrastructure contracts, Africa (Turnover: US bil $)

0

5

10

15

20

25

30

35

40

2003 2004 2005 2006 2007 2008 2009 2010

Who is Financing Chinese Contracts?

•World Bank and African Development Bank •Bilateral Donors •African Governments •Private Businesses (Chinese and non-Chinese) •Chinese Government (20%)

Construction/Infrastructure

FOREIGN DIRECT INVESTMENT (FDI)

How Much to Africa?

Chinese FDI to Africa, % of Global FDI

0

10

20

30

40

50

60

70

80

2003 2004 2005 2006 2007 2008 2009 2010

Challenges 2009 Sinopec buys Addax Petroleum for $7.2 bn. Addax  is  “Swiss”,  but  assets  in  Nigeria,  Gabon,  Cameroon,  Iraq

CHINA’S  LARGEST  INVESTMENT IN AFRICA? $5.4  billion  for  20%  of  South  Africa’s  Standard  Bank (2008)

THREE MYTHS OF CHINESE ENGAGEMENT

MYTH  1.  “CHINESE  AID  IS  HUGE”

Africa: Official Development Assistance (ODA) 2008 (US$ bn)

USA, 7.2

EC, 6

World Bank, 4.1

France, 3.4

Germany, 2.7

UK, 2.6

Japan, 1.6China, 1.2

Source: OECD-DAC Statistics. *Chinese figure is author’s  estimate.

In billion US$

0

5

10

15

20

25

30

35

40

45

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

$ billion

China Eximbank (Annual Disbursements, 2002-2011)

Export Seller's Credits

Export Buyer's Credits

Letters of Guarantee

What  about  China’s  Huge  Commodity-backed Infrastructure Credits? • Ghana, Angola, DRC • Widely misunderstood  as  “aid” • Market-rate line of tied export buyer’s  credit • Secured by exports (Japanese model) • “Not subsidized  and  not  concessional”

Angola: Two Oil-Backed Lines of Credit (2004)

Amount Interest rate

Maturity Grace Period

China Eximbank

$2.0 bil LIBOR plus 1.5

12 years Until end of each project

Standard Chartered Consortium

$2.35 bil LIBOR plus 2.5

5-7 years none

China Eximbank (2004-2007)

• Ag. Machinery & equipment $22m

• 4 Irrigation systems $93m • Rebuild  Luanda’s  

electrical grid: $45m • Water treatment system

repair in 3 provincial cities: $21m

• 5 ag. training institutions

• 6 polytechnical colleges • 5 secondary schools $26m • Kifangondo-Caxito road:

$211m • 86 ambulances • 6 provincial health centers • Rehabilitate 7 regional

hospitals • …  etc. etc.

Standard Chartered’s Loan  Financed…

? ?

RISKS AND BENEFITS?

MYTH  2.  “CHINA  IS  LEADING  THE  GREAT  LAND  GRAB  IN  AFRICA”

MYTH  3:  “CHINA,  INC.”

DRC EXAMPLE

Contrasts The West Believes: • Countries need aid, good governance to develop • Our aid is driven by altruism • Conditionality can improve governance • Africa needs to be saved.

The Chinese Believe: • Countries need investment, infrastructure to develop • Aid is about diplomacy, soft power • Governance improves slowly, as economy develops • Africa is very interesting for business

Contrasts

What shocks us: China can build a presidential palace in Sudan and pay for it from aid budget

What shocks them: Western experts live in 5 star hotels & rich overseas lifestyle, paid out of the aid budget

Why is China Different? Foreign policy framework Core ideas about development and gov. Experience as a developing country East Asian developmental state

Blog: chinaafricarealstory.com