Truman member and sustainable development professional Adam Tiffen argues against China’s aid model of money without preconditions for social reform.
The first U.S. Africa Leaders Summit has come and gone, with nearly 50 African heads of state travelling to Washington, DC last week. Questions of governance, security, and most importantly business are purportedly on the agenda; stagnating trade between the U.S. and China in recent years has many leaders in industry interested in the talks. However, to think strategically about the long term economic wellbeing of Africa’s nations and people, U.S. leaders should look further eastward. It is critical that the U.S. step up investment to not only counter China’s influence on the continent but, perhaps more importantly, to understand the distinctions—and inherent dangers—of these Chinese model of engagement.
In 1978, China was one of the poorest countries in the world and had a real per capita GDP that was one-fortieth of the United States. Today, China’s real capital GDP is almost one-fifth that of the U.S., and it is poised to overtake the United States as the largest economy in the world. To support this booming economic growth, China’s demand for natural resources has become insatiable. In exchange for locking up access to natural resources, China has authorized billions of dollars in loans to African governments. With an increasing number of these governments beholden to China, a new imperial empire is taking shape in Africa.
Trade between China and the African continent grew 700% during the 1990s, and China is currently Africa’s largest trading partner. In 2011, the volume of trade increased a staggering 33% from the previous year to USD 166 billion. This trade dependence works both ways; one third of China’s oil supplies come from Angola and Nigeria. Up to 20% of Chinas demand for cotton is met by trade with Benin, Burkina Faso, and Mali. The Cote d’Ivoire supplies the vast majority of Chinas’ cocoa. Namibia is one of China’s main suppliers of Fish, and Kenya remains one of the main suppliers of Chinese Coffee.
In extractives, however, the trade imbalance is even starker. Across the continent, Chinese demand for iron ore, copper, and timber has led to trade agreements in which Chinese government-owned companies are granted rights to huge tracts of land for timber or exclusive access to copper and iron ore mines. In exchange, the Chinese government has authorized billions of dollars in loans to African governments. However, these loans often come with a catch: until this year, development work paid for by these funds were typically open only to tenders by Chinese companies.
Chinese government-backed construction companies are doing exceptionally well due to these policies. Companies like the China Henan International Cooperation Group (CHICO) a Chinese state-owned construction and engineering company, and CICO, a subsidiary of Chongqing Foreign Trade and Economic Cooperation Group Co., Ltd have become China’s vanguard in its thrust into Africa. Rather than infusing local African economies with cash, stimulating growth, and increasing local capacity, the main benefit has been to Chinese enterprises.
These companies, financed by their own government, systematically import cheap Chinese labor to staff their construction projects. As a result, for many African countries, the exchange of valuable natural resources for critically needed infrastructure has had limited impact on unemployment and little corresponding development of a vast African unskilled labor force. Today, there are an estimated 1 million Chinese living and working in Africa.
Abandoning its quintessential foreign policy of non-interference, instability in Africa has forced China to begin acting aggressively to protect its national economic interests. At the height of its production, south-Sudan was supplying 5% of China’s oil, and the state owned firm China National Petroleum Corp has a 40% stake in a joint venture developing the fields. With the ongoing rebellion threatening Beijing’s oil investments, Chinese diplomats were forced to intervene to help regional African mediators push for a halt to fighting after peace talks in Ethiopia began to falter. Moreover, for the first time ever, China has also agreed to deploy a full infantry battalion of about 850 troops to a UN peacekeeping mission in the Sudan.
The irony of the situation has not been lost on China, and Chinese government officials have been quick to refute any allegations of neo-colonialism. In May, Chinese Premier Li Keqiang’s visited four nations in Africa, and remarked “I wish to assure our African friends, in all seriousness, that China will never pursue a colonialist path like some countries did or allow colonialism, which belonged to the past, to reappear in Africa.”
The truth is the Chinese approach in Africa is a new form of colonialism. Chinese interests in Africa are motivated solely for China’s benefit; by combining government action with corporate interests, the Chinese are locking up rights to billions of dollars of valuable commodities. African nations, facing political pressure to show some development progress, are induced to barter what are often their only significant sources of potential wealth for mediocre infrastructure that does little to develop their economies and is worth a tiny fraction of the total value of the resources they sign over to the Chinese. The lack of sustainability in this trading partnership creates an inevitable African dependence upon Chinese largess for future maintenance and rehabilitation of this infrastructure.
Corruption and graft, rampant throughout African politics, has also enabled Chinese government backed businesses to influence political decision makers in their economic favor. Needless to say, Chinese construction on the African continent is also undertaken with little regard for environmental and cultural sustainability. The resultant destruction of rainforests, unrestricted mining, and pollution of fresh water supplies will have a lasting negative impact on the economic and security situation.
By contrast, the United States and the European Union have taken a more measured approach. Motivated in part by economic necessity, but also by the desire to help build local capacity within their African trading partners, the U.S. and E.U. have conditioned much of their economic assistance on social and economic reform. In countries like the South Sudan, the contrast is stark. While the U.S., Britain, and Norway are South Sudan’s biggest donor countries in terms of economic assistance, they do not have any stakes in South Sudanese oil production.
By requiring political, economic and social reform as a pre-condition of much of U.S. and E.U. assistance, the true costs of development aid are apparent up-front. Preconditions are designed to work to the long-term benefit of local governance and indigenous populations, and excesses are often tempered by social and environmental restraints. While not perfect, this focus on investment (as opposed to exploitation) creates far less excessive imbalances and stands to benefit Africa to a far greater degree over the long term.
China’s approach in Africa is a new form of economic colonialism. Chinese state-backed companies will continue to extract precious natural resources with little to no benefit derived by indigenous populations. China’s expanding economic influence will result in an increasing dependence that will dominate African economies and politics. This approach is unsustainable, and likely to have dire consequences. The U.S.-Africa Leaders Summit provided a perfect venue for the United States to reengage in smart, principled investment in Africa that can benefit all parties involved—an opportunity that couldn’t come at a more critical moment.
Adam Tiffen is a member of the Truman National Security Project’s Defense Council and a veteran of three tours of duty in Iraq and Afghanistan. He currently works in sustainable development. Views expressed are his own.
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