In so many long-winded discussions about African development, China is the elephant – or perhaps the dragon – in the room. All too often, African and western analysts seem happy to ignore the huge impact that China’s helter-skelter economic growth, its hunger for Africa’s raw materials and its determined search for markets will have on Africa’s economic and political prospects in the next decade.
Together with India, whose economic impact on Africa is also grossly understated, China has the capacity to make or break Africa’s hopes of moving from a continent that predominantly exports raw materials and commodities to one that sells manufactured and processed goods and reaps the added value from them.
There are many African intellectuals and politicians who already see the writing on the wall – and it’s in Mandarin. They will pay special attention to the Asia-Africa programme that precedes the main World Bank/IMF meeting in Singapore this year, and they are already preparing for the China-Africa Cooperation summit to be held in Beijing in the first week of November.
For many African states, the outcome of that summit – in terms of new trade and investment deals – may be worth more than what they can secure from the combined resources of the IMF and the World Bank. Senegalese political scientist Adama Gaye’s new book, The dragon and the ostrich, argues that African governments must develop a more serious long-term strategy for relations with China, and how to balance those with Europe and North America.
Look ahead
Gaye says Africa must see beyond the short-term benefits of China’s trade, the spike in commodity prices and low-interest credit lines, to how Africa can learn from China’s transition from a fragmented agrarian economy in the 1950s and 1960s to its position as the world’s workshop by the end of the 20th century. Like so many westerners, Gaye says, Africans don’t understand how China works. That will have to change, he adds, if Africa wants to make the most of the world’s new economic order.
Moeletsi Mbeki, deputy chairman of the South African Institute of International Affairs, is less diplomatic: “China is both a tantalizing opportunity and a terrifying threat to South Africa.” Mbeki, whose business venture with Chinese companies makes him a frequent visitor to Beijing and Shanghai, sounds a warning siren: “We sell them raw materials, and they sell us manufactured goods, with a predictable result – an unfavourable trade balance against South Africa.” He predicts that, unless urgent action is taken, trade relations between South Africa and China will become “… a replay of the old story of South Africa’s trade with Europe.”
That the economic order is changing is not in doubt. Trade between China and Africa rose more than 40% in 2005 to $38 billion, led by Beijing’s fast-rising oil imports from Angola, Sudan and Nigeria. Chinese trade officials forecast trade between their country and Africa will easily top $40 billion this year, exceeding US-Africa trade and second only to Europe-Africa trade.
Also important is China’s demand for base metals: aluminium, copper, iron ore, nickel and zinc. This has given a huge boost to export earnings in Congo-Kinshasa and Zambia. Even Zimbabwe, which has substantial platinum reserves, is benefiting.
In 1993, China bought less than 10% of the world supply of those base metals, but by 2003 its purchases had doubled to over 20%. Between 2000 and 2003, Chinese demand accounted for 100% of the increase in world demand for copper, 99% for nickel, 95% for steel and 76% for aluminium.
Oil rush
However, it is the dragon’s thirst for oil that is transforming Africa’s export trade. China consumes about 6.5 million barrels of oil a day (bpd) and is the second biggest consumer after the USA. China has accounted for about 40% of the growth in world oil demand between 2001 and 2005, and Chinese demand is projected to reach 14 million bpd by 2025, with net imports of some 10 million bpd.
It is an obvious marriage with Africa’s under-explored hydrocarbon riches. Africa produces just under 10 million bpd or 11% of world production, compared to the Middle East’s 24.6 million bpd. But China regards the Middle East as already crowded out. Last year, China bought an estimated 28% of its oil imports from Africa.
This year, Angola replaced Saudi Arabia as the biggest oil exporter to China, supplying more than 20% of its domestic needs. The payback for Angola’s government has been huge. In December 2004, China extended a $2 billion low-interest credit line to finance Angola’s post-war reconstruction. Much is made of the fact that Angola took the Chinese credit line and then broke off negotiations with the IMF, which had been demanding tough conditions such as transparency in government spending and anti-corruption controls. The Chinese money came with no such strings attached – other than an insistence on prompt repayment.
China’s big three energy companies, China National Offshore Oil Company (CNOOC), China National Petroleum Company (CNPC) and Sinopec have a multi-billion dollar war chest to buy up oil and gas concessions globally. When India’s Oil & National Gas Corporation hesitated about paying the entry fee for Nigerian oil acreage in December 2005, it was quickly replaced by CNOOC, which bid $2.3 billion for the acreage.
Making contact
So significant was the move that president Hu Jintao stopped off in Nigeria to discuss the contract personally with president Olusegun Obasanjo and addressed a special joint session of the House of Representatives and Senate in Abuja, announcing that discussions between Chinese and African officials would produce a “2007-09 action plan” at the November China-Africa summit. He then attempted some inclusive diplomacy: “Africa is one of the birthplaces of mankind, and China is one of the cradles of human civilization. Being the two most ancient civilizations, China and Africa can and should make greater contribution to the development of human society in the 21st century.”
Beyond the warm words, the November summit will have to take a look at some tough problems in the relationship. From Africa’s viewpoint, the growing trade imbalance needs to be addressed. China has already agreed to voluntarily limit the export of its textiles and garments to South Africa as they were demolishing local production. Other states such as Kenya, Nigeria and Zambia are asking for similar agreements.
There is also the rogue state factor. Chinese investment has fired the rapid development of Sudan’s oil industry, while Beijing has also supplied the Khartoum government with fighter jets. This close relationship means China has blocked the UN Security Council from taking a harsher line towards the Sudan regime’s military offensives in Darfur, described by UN investigators as war crimes.
Irritated by such criticism, Chinese diplomats robustly defend their policy of “non-interference”, contrasting it with some recent disastrous interventions by western governments in Iraq and Afghanistan. That argument may work only so far in Africa, where the Sudan government’s attacks on civilians in the Darfur region have angered both governments and human rights activists alike, who are now arguing for a robust UN force to help the beleaguered African force protect civilians there. How Beijing responds to those demands will be an important test of its diplomatic agility.