World Bank officials and transparency campaigners yesterday raised concerns about China’s “asymmetric bargaining power” with Africa, while others emphasized the positive impacts of the expanding commercial relationship.
Shantayanan Devarajan, chief economist for Africa at the World Bank, told Emerging Markets: “Some feel that African governments are not as capable as negotiating as the Chinese, so that they may end up getting a deal that is not necessarily in their favour. But I think that is a question of the negotiation.
“If we can help improve or strengthen the bargaining power of African governments, that would be in their interest.”
Devajaran said he had seen a mining contract where all the risks were borne by the country, and none by the investor. Meanwhile, the investor would receive a fixed royalty payment.
“No matter how many minerals there are under the ground, and no matter what the price was, the country would transfer a fixed amount of money every year,” he said. “It seems to me that this is the result of asymmetric bargaining power.”
China has expanded its trade and investment relationship with Africa exponentially in recent years, and loans are mostly granted at non-concessional rates “or close to it,” said Devarajan.
Some of these contracts have proved controversial, such as the $9 billion deal struck between China and the Democratic Republic of Congo (DRC) in 2007.
Nevertheless, senior African Development Bank officials said they increasingly consider China has a “complementary partner”, especially as traditional trade partners and aid donors are struggling to overcome their own economic woes.
Mthuli Ncube, AfDB chief economist, said: “Chinese investors are engaged in Africa like everybody else, and they dig deeper. If they want to finish a project on time, they would work on it almost around the clock.”
Richard Schiere, co-author of the recent book, China and Africa: an emerging partnership for development, said: “China has a higher risk appetite [than Western investors]. They do not shy away.”
Daniel Balint-Kurti, campaign leader for the DRC at Global Witness, a London-based NGO that calls for strong anti-corruption safeguards, said that the Chinese investment offensive “could end up being good for Africa.
“The problem is, you cannot be confident in advance that it is going to be a good thing for [the DRC], because Congo’s history is corruption and China’s problem is corruption.”
The China-DRC agreement gives China access to copper and cobalt mines in return for investment in hydroelectricity, railways and social infrastructure. “When there is less transparency, it is easiest to come up with abuse,” Balint-Kurti said.