China's foray into Africa since the turn of the century has indeed been remarkable, with trade volumes increasing ten-fold and the Chinese government identifying Africa as the future engine of global growth. However, China's return to Africa has not been without controversy as the Asian giant is accused of manipulating weak African states to control access to their resources and for flooding markets with cheap goods from the Mainland.
Before delving deeper into Sino-African ties it is important to place things in context.
The new colonialists?
In Africa we speak of China 'colonising' the continent. There are at present 800 sizeable Chinese firms on the continent, whereas in Singapore (which is a fraction of the size of Gauteng), there are approximately 2500 Chinese companies. The Singaporeans are begging for more Chinese investment, while in Africa we are terrified of a perceived invasion! 800 companies in 54 countries on the second largest continent on earth is hardly the colonial venture that some claim it to be!
In addition, China's foreign direct investment (FDI) into Africa in 2007 represented less than 3% of its global FDI outflows and annual trade with the entire continent amounted to half the value of China's total trade with South Korea. The hype which has surrounded China's foray into Africa has created the impression that it has, in the space of a decade, become the dominant foreign player on the continent.
While Sino-African trade prospects are indeed very good, it will be decades before Western nations, and many of Africa's former colonial powers, will be replaced as the continent's largest trading partners. The Western media has latched onto the China-Africa story and promoted it to the front pages of its various publications - the effect of which is to create disproportionate attention around the Asian giant's foray into Africa, which is happening at the same time as other emerging powerhouses India, Russia and Brazil expand rapidly into the continent.
Regardless of its relative size in relation to other trading blocs, there can be little doubt that China's obvious interest in Africa is rapidly altering the nature and rules of the game for foreign investors looking to tap into opportunities on the continent. The most important factor in the relationship is the unprecedented level of importance China attaches to its relations with what the Economist called 'The Hopeless Continent' in 2003.
Changing perceptions of Africa's potential
The diplomatic attention paid by China to small, weak African states with little to offer foreign investors has rapidly altered global perceptions of Africa's potential.
Between 2006 and 2007 China's President Hu Jintao visited no less than 17 African countries, the most ever by any foreign head of state in such a time frame. In July 2007 Premier Wen Jiabao visited 7 African nations and in January 2008 Foreign Minister Yang Jiechi embarked on a high-level four-nation tour. These visits have had the explicit aim of securing stronger relations to improve China's access to Africa's resource wealth - as well as tying up allies to counter the geo-political influence of the West in international affairs.
Conversely, U.S President George Bush has made only two visits to Africa in a decade, the most recent coming in February this year where he visited Tanzania, Liberia, Rwanda, Benin and Ghana promoting humanitarian assistance and trying to gather support for the White House's Africa military command centre Africom.
For China, Africa is the final frontier and partnership with the continent's 54 states is regarded by Beijing as a top global priority. These perceptions are countered by the residual perception throughout Europe and North America of Africa as a developmental burden, a lost cause that is being propped up by corrupt dictators, oil revenue and debt relief. Where the West has failed Africa in terms of poverty alleviation and structural adjustment, China hopes to succeed.
Driving up Africa's bargaining power
China's push into Africa also provides several of the continent's states with a new and hugely influential trading partner to drive up price and increase the bargaining power of African government's when courting foreign investment. The Nigerian government has been particularly savvy in exploiting this opportunity by pitting traditional investors in the oil sector from the U.K, France and North America against state-owned Chinese firm's Sinopec and CNOOC. Add in ONGC from India and a host of new players in the market from Russia, Brazil and Malaysia and Nigeria is, for the first time since independence, presented with the opportunity to charge a premium for its valuable resources.
Increasing Africa's strategic importanceMutually beneficial trade and cooperation
Traditional Western players have enjoyed preferential and often monopolistic control over Africa's resources since 1960. China's voracious appetite for these same resources, and its surplus of capital to pay for them, has increased Africa strategic importance - and therefore its value in the global context. The commodity's boom which has led to five straight years of growth in excess of 5% in Africa has been led by demand from China and India. This boom is likely to continue for at least another 15 years - meaning that traditional players in the commodities sector in Africa will be forced to pay more, improve service delivery and engage in a healthy dose of competition. Aware of their value, African states are able to dictate the rules of the game to an extent that was previously impossible.
Speeding up development
Another major advantage of China as a trading partner in Africa is the speed with which Beijing is able to make and implement decisions. Where the World Bank takes five years to conceptualise and implement a road or rail upgrade project, China takes 6 months. Infrastructure developments in Angola, Senegal, Gabon, Nigeria and Ghana attest to the rapidity of these developments. Due to all major Chinese enterprises being state-owned and decision-making extremely centralised in Beijing, China is able to deliver on promises made in a way which no other trading partner has been able to.
Senegal's President Abdoulaye Wade recently stated how he achieved more in an hour's meeting with the President Hu Jintao on the sidelines of the recent G8 meeting in Heiligendamm than he did during the entire summit where Western leaders promised little more than to honour lofty aid promises made at Gleneagles in 2005.
The speed of service delivery from China is forcing Western Developmental Finance Institutions to speed up their processes, reduce bureaucratic red tape and bottlenecks and implement policies in a more pragmatic fashion. Given how far behind Africa is in relation to the rest of the world, this urgency can only be a good thing.
Africa in China
In addition to this, the China-Africa relationship is all too often framed as a one-sided affair. While Chinese companies have rapidly moved into the retail and construction sectors in Africa, few African companies have taken advantage of the massive opportunity that exists in exporting to or setting up shop in China, a market of 1.3 billion people. Several large South African firms such as SABMiller, Naspers, Richemont and Sasol have moved into China and benefited hugely from access to the world's largest and fastest growing market. With bilateral trade agreements being signed between China and a range of African states, it is a matter of time before more African companies begin to benefit from access to the Chinese market.
Criticisms of China in Africa
There are valid criticisms against China's foray into Africa - such as how Chinese companies are driving out local competition through importing their own labour and driving down cost, and how the Chinese government has propped up illegitimate states such as Sudan and Zimbabwe through its policy of non-intervention in state affairs.
These are two valid criticisms which Beijing is attempting to counter through a variety of initiatives, such as the deployment of peace keepers to Sudan and the extension of bilateral aid to upgrade employment creation infrastructure in several African states. The road will be a long one for China to truly alter these negative - and deteriorating - perceptions.
However, the allegation that China lacks an ethical code when doing business with Africa is hypocritical and selective. All of Africa's corrupt leaders have enjoyed thriving trade with the West throughout their reigns. In the words of Zaire's former dictator Mobuto Sese-Seko, "it takes two to be corrupt - the corruptor and the corrupted". It was virtually impossible to do business in states such as Nigeria, Cameroon and Kenya during the 1970s and 1980s without engaging in improper practice - which in no way deterred the myriad of Western multinationals still plying their trade with great success in these and other equally contentious markets.
Another common but erroneous allegation is that China is becoming Africa's new colonial power by controlling resources while not stimulating local African economies. This misguided and dangerous allegation implies a weakness on the African side which flies in the face of recent developments.
It is up to Africa, and not the outside world, to decide whether it will be subjected to another colonial-type relationship with foreign powers. What is more, China and Africa have been trading for centuries - long before colonial powers carved up the continent. There are remnants of Chinese trade with Africa stretching back to 1200. Apart from contentious pseudo colonies in Taiwan, China is not and has never been interested in colonising foreign countries. Had it been interested in such activities, it would have dominated and controlled the majority of the world before the United States of America was formed, and certainly before Portugal and Britain 'discovered' Africa. China's push into Africa is a commercial one. Success for Africa will depend on the ability of its leaders to create strong legal and regulatory frameworks to guide foreign investment from China. Studies have shown that where rules exist and are enforced in Africa, China and its companies are happy to comply.
Mutually beneficial trade and cooperation
Beijing is also quick to state that it too is a poor country. There are as many people living below the poverty line in China than there are in Sub-Saharan Africa. For this reason, China does not talk of aid with Africa - but rather frames its discourse in the context of mutually-beneficial trade and cooperation.
African states know that in order to attract investment from China they need to have a valuable proposition - a process which is far more likely to lift the continent out of poverty than the traditional 'cap-in-hand' approach to courting additional foreign aid from the world's developed nations, which has done little to create long-term growth in Africa. In saying this, China injected upwards of US$ 9 billion into Africa in 2007 in the form of 'win-win' investment, an amount which dwarfs the World Bank's US$ 2.5 billion. The World Bank has since asked to partner China in financing projects in Africa. With foreign reserves of US$ 1.5 trillion and a sovereign investment fund of US$ 200 billion to plough into promising global companies, China's purchase of 20% of Standard Bank is likely to be the sign of things to come.
In short, China brings a model of economic recovery to Africa that is able to work without the involvement of foreign advisors, institutions or bilateral mentors. For Africa, looking back on half a century of failed Western-led efforts to alleviate poverty and enhance self-governance, the new model provided by Beijing is a refreshing alternative, and one which will increasingly be adopted as the continent looks to speed up reform and narrow the gap with the developed world. While some lament the nature of China's push into Africa, others on the continent are pragmatically realising the potential this shift is creating and increasingly becoming viable global market players.
By Simon Freemantle
Simon Freemantle is an Economist with Standard Bank Group, working predominantly in East Africa.
This article was originally published by South Africa - The Good News.
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