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Friend or foe, my China?Dragons are everywhere, but they are not the same. To some, they bring destruction; to others, good fortune. The absolutely evil Western dragon familiar to fans of Tolkien and Wagner spends its waking hours amassing and guarding treasure and terrorising the population of whatever country is unfortunate enough to accommodate it.
In Asia, on the other hand, dragons are regarded as divine beings associated with abundance, prosperity and good fortune, so much so that Asian rulers would claim dragon ancestry (Hirohito traced his 125 generations back to Princess Fruitful Jewel, daughter of a Dragon King of the Sea) and the Chinese referred to themselves as Lung Tik Chuan Ren (“Descendents of the Dragon”); to be called “dragon face” was a supreme compliment.
According to a West African legend, the Creator God Nana-Buluku made a dragon called Aido-Hwedo which acted as co-creator of the world, flying around with the Creator in its mouth and fertilising the planet with its dung (the larger piles formed mountains).
Should significance be attached to African dragons bearing a closer family resemblance to the dragons of Asia than those of the West?
Will China’s involvement bring destruction or good fortune?
In Western-oriented media, China’s image leaves much to be desired. To be blunt, it is seen as pursuing its own interests and turning a blind eye to the doings of the kleptocrats that seem to run half the continent, supplying cellular networks, railways and football stadiums with equal aplomb while the population quietly gets on with the business of being oppressed in a myriad forms.
Reports and rumours from Zimbabwe – ranging from a Chinese minister singing “Happy Birthday” in flawless Shona in honour of a beaming Robert Mugabe, to the construction of a secret runway in the controversial Chiadza diamond fields to facilitate arms deals – do little to endear the Asian superpower to outraged Mail & Guardian readers; China’s insatiable thirst for oil (it is Angola’s number-one trading partner) has entrenched the grip on power of Angolan President José Dos Santos and his cronies in that far from democratic land; and so on.
What else do you expect? China pessimists will shrug. Although the Asian giant ranks third among the world’s economies, it has lagged behind in certain respects that the West considers de rigueur for any civilised nation.
In his book China 2020, Michael Santoro points out that the legacy of Chairman Mao has left an indelible stamp on Chinese society: a government that does not function under the rule of law, a questionable approach to human rights, endemic corruption, and widespread pollution.
Then there is the repressive stance on regional autonomy, censorship and a hypersensitivity to criticism that borders on paranoia and is increasingly finding expression in a burgeoning nationalism.
How could such a country possibly aid Africa?
Of course, the Chinese see things somewhat differently. China optimists like to contrast the bloodthirsty history of European involvement in Africa with its epic litany of slavery, genocide and railways, with China’s open-handed Africa policy, a “strategic partnership” based on “mutual benefit, reciprocity and common prosperity”.
In theory, it is a win-win situation. The formula for Chinese operations in Africa can be summarised as a form of barter agreement, with infrastructure development offered in exchange for raw materials.
In the case of the Congo, copper serves as a paradigm. In 2008, the Democratic Republic of the Congo (DRC) and China agreed to swap some 10 million tonnes of copper ore for mine and civic infrastructure to the value of US$9 billion. This ‘deal of the century’ was structured to achieve three goals:
First, as part of its strategy to ensure it has the resources to fuel its titanic growth, China saw a golden opportunity to secure a mother lode of copper and cobalt.
Second, DRC President Joseph Kabila was galvanised by the opportunity to show the beleaguered citizens of his war-ravaged country that their government indeed was making progress with reconstruction. The timing was fortuitous; general elections are due to be held in the DRC this year.
Third, the deal offered the chronically indebted DRC to wriggle out of the corner in which it was placed by its obligation, imposed by the International Monetary Fund (IMF), to focus on repaying its debts and reform its fiscal and financial regime instead of spending funds on social and infrastructure development, which is what the country desperately requires.
The DRC is a “Highly Indebted Poor Country” that owes some $11bn in foreign debt incurred under the kleptocratic President of then Zaire, Mobutu Sese Seko; of that, the IMF is owed $6bn.
IMF policy is based firmly on ensuring that the creditors it represents (the so-called “Paris Club”) get their money back; it uses the hope of debt relief as a carrot to ensure the interest payments continue to come in.
In this context, the Chinese offer was a lifeline that would enable the DRC to carry out vital infrastructure investment while continuing to service its debt to the IMF (the DRC paid $170 million in interest in 2009, in the teeth of the global recession). As a popular Congolese expression goes, “You can’t put a highway in your Swiss bank account.”
However, the IMF was far from pleased.
Claiming that the loan would overexpose the DRC to potential foreign debt, it threatened that unless the loan were halved, it would take steps to ensure that the DRC’s debt would not be written off.
The DRC capitulated; the Western dragon maintained its stranglehold.
As Gregory Mthembu-Salter from the South African Institute of International Affairs told the Ghana Business News, “The IMF’s opposition to the deal represents an attempt by the West to counter China’s investments in Africa.”
The credibility of this claim is strengthened by the IMF’s silence at the time of the Tenke Fungurume contract in 2005 during the transitional period before the DRC’s first presidential election in 2006.
At the time, with the assistance of the United States government – which ignored a World Bank moratorium on new mineral contract negotiations in the DRC – Western business interests finagled a deal in terms of which the DRC reduced the fee for an area approximately double that of the Chinese concession from $250m to $50m and shrank its own share in the concession from 45% to 17.5%.
Considering that the Chinese deal of 2008 included a $350-million signing bonus and 32% DRC share, it is difficult to believe that the IMF’s prime consideration in intervening was the financial welfare of the DRC.
A key difference in China’s Africa strategy is that it emerges from its own experience.
As pointed out by long-time China watcher Deborah Brautigam, author of The Dragon’s Gift: The Real Story of China in Africa, China was in a similar position to Africa today: hungry for technology and infrastructure but short on foreign exchange. So it leveraged its oil, coal and other minerals to get a $10-billion loan from Japan, paying for Japanese technology and infrastructure with oil and coal shipments.
Six major railway, port and hydropower projects were financed in this way beginning 1980 – the first of many projects in the building of the transport corridors and energy complexes that have underpinned and accompanied China’s well-documented but always startling rise to economic prominence.
The analogy is clear: Africa can emulate China – with China’s help.
Since 2004, that help has amounted to similar technology-for-resources barter deals – or resource-backed infrastructure loans – in seven African countries, including roads, railways, hospitals, schools and water systems for Angolan oil; hydropower in the Republic of the Congo and Ghana for oil and cocoa beans respectively, and transport corridors in Nigeria.
The market-rate loans are issued mostly by the Export-Import Bank of China (China Eximbank) under terms usually more favourable than Western deals. China’s massive foreign exchange reserves allow it to lend at highly competitive rates.
For example, Angola has received three loans with interest charged at the LIBOR (London Interbank Offered Rate) plus 1.25-1.75%; other commercial lenders, such as Standard Chartered, charged LIBOR plus at least 2.5% for repayment in a shorter period, with no grace period.
Looking to the future, China intends facilitating the construction of seven special trade and economic co-operation zones in Nigeria, Egypt, Ethiopia, Mauritius, Zambia and Algeria. China itself has more than 100 special economic zones, which played an important role in the early stages of its development. These zones can help the least developed countries of Africa increase the standard of their infrastructure, services and institutions within a limited focus area.
Experience also has taught Beijing that such zones must be sustainable. In the past, Chinese projects would be turned over to host governments that allowed them to fall apart once the Chinese teams left. Now it is required that Chinese companies take responsibility for the design, construction and management of zones.
Start-up costs are subsidised partially by the state.
The $5-billion venture capital China Africa Development Fund has equity shares in three of the zones: a $1-billion small and medium enterprise fund is intended to assist African businesses establish themselves in the special zones.
In contrast to the US, where Congress recently has banned the financing of any activities that could shift American jobs overseas, China is pushing its industries toward Africa so that it can climb the value chain at home. Polluting industries are no longer welcome in Chinese cities; the Chinese workforce is expecting its wages and benefits to rise. So the pollution, low wages and long working hours hitherto associated with Chinese industry will be replicated in the African zones.
Nonetheless, this is an excellent opportunity for Africa to follow China into the world rather than continue as a raw materials supplier.
President of the Republic of Zambia Rupiah Banda was quoted by China Economic Net as saying, “Chinese investors are the real helping hands for us, and their contribution to Africa’s economic development is evident.”
According to Rwandan President Paul Kagame, “The Chinese bring what Africa needs: investment and money for governments and companies. China is investing in infrastructure and building roads”, whereas the West’s involvement “has not brought Africa forward.
“Western firms have, to a large extent, polluted Africa and they are still doing so. Think of the dumping of nuclear waste in the Ivory Coast or the fact that Somalia is being used as a garbage can by European firms,” he said.
South Africa is no exception to the trend. As of 1 April, China’s status as South Africa’s leading trading partner was augmented with the signing of deals worth R2.3bn for products such as mohair, bulk wine, wool, frozen fish, copper, manganese, granite blocks, ferrochrome and lobster.
But what about that nagging issue of the rule of law? Should we be happy doing business with such a partner? What about guanxi, the indispensable but obscure Chinese form of business networking? Will it not merely encourage South African tenderpreneurs to take things to the next level?
Deborah Brautigam told Leadership: “As China has transitioned toward a market economy, it has been simultaneously developing the rule of law, primarily for commercial matters. But China does not have an independent or well-trained judiciary, and that makes it difficult to have the kind of checks and balances that characterise a place like South Africa.
“This is all changing very rapidly, but it is not correct to say that ‘the principle that nobody is above the law does not apply’.
The principle exists: everyone is expected to obey the laws, although these laws are not the same kind of laws that we have: no press freedom, for example.
“But in practice, as South Africans also know, it is hard for powerful people to be successfully prosecuted by those beneath them.
“Guanxi simply means ‘connections’ or ‘relationship’. It has good, bad and neutral connotations. It should be seen primarily as the phenomenon where a significant number of people report that they got their current jobs through their personal network of ‘connections’ or though knowing someone. It emphasises that relationships and knowing people are really key to business and professional life (this part is common sense),” she said.
“But with regard to getting contracts or succeeding in tenders, guanxi can foster corruption or cronyism. (Guanxi does not really apply to nepotism, as guanxi is not about family connections, but non-family connections.)
“To the extent that the tenderpreneur phenomenon comes from nepotism or cronyism (playing favourites), it seems to be the same kind of thing. But when the tenderpreneurs come from BEE policies, that would not be guanxi but something else,” added Brautigam.
Greg Penfold
