China’s Role In Africa: Natural Resources

Shanley Knox — Contributor — @ BylineBeat

(Brooklyn, New York) Each year, the aid sent to Africa equals around 50 million USD. Conversely, the estimated value of resources coming out of Africa is in the region of 400 billion USD per year, after production costs, according to Jim Cust, Executive Director of the Natural Resource Charter and member of the Oxford Centre for the Analysis of Resource Rich Economies.

“What that means basically in principle is if these revenues are captured by African governments and well managed on behalf of the citizens then the opportunities to break dependence on aid and to undertake transformative economic are very real,” Cust said.

A wave of new resource discovery taking place has created a new perception of Africa based on resource and possibility, rather than aid, according to Cust. He attributes this to investment and natural resources along with a commodity-price supercycle that has persisted through the financial crisis in the West - largely driven by what he calls China’s insatiable demand for mineral resources.

“The scale with which the Chinese are extracting resources is something that we’ve never seen before,” said Eric Olander, an Asia-based multimedia journalist and co-host of ‘The China in Africa Podcast.’ “We’ve never seen this during the period of western colonization because we didn’t have the level of industrialization and computerization and mechanization that we have today - and the Chinese are taking full advantage of that.”

In John Hopkins University working papers titled “China’s Environmental Footprint in Africa” International Rivers’ Policy Director Peter Bosshard points out China and Africa have rapidly expanded their political and economic relations since the turn of the century. He writes that this is due to China - the “world’s factory” - trying to secure access to resources which it lacks at home and Africa’s provision of a welcome market for Chinese companies that would otherwise face stiff competition at home. In return, the Chinese state invests in African resources and works to create jobs in the midst of what he refers to as Africa’s “permanent unemployment crisis.”

China’s investment in Africa is being widely debated and discussed - partly because it is based on trade rather than dollars and thus more difficult to track. There is no doubt, however, that the Chinese model of trading infrastructure for resources in Africa has changed the landscape of African infrastructure, transit and communication.

“When China invests in mining, mostly, it’s also willing to invest in infrastructure - railroads, airports, power supply, etcetera,” said Ana Alves, Senior Researcher at the South African Institute of International Affairs (SAIIA). “It gives African countries more bargaining power when they negotiate with other investors. They can say, ‘If you’re not willing to invest in this infrastructure then we’ll give it to China because China has the money and they’re willing to do it.’”

China’s investment in Africa’s mining sector has largely centered in two regions, the Copper Belt in Southern Africa and the rich iron ore deposits in West Africa. Nigeria and Angola are Africa’s biggest oil producers, according to Alves, with Angola alone counting for nearly 20% of China’s imports from Africa - the country’s second largest oil supplier after Iran.

“They […] recognized that control of certain natural resources and particularly strategic natural resources like rare earths or certain natural minerals used for technology was going to be vital in this next era - and also making sure they were not entirely dependent on the west for their oil supply as their country becomes more energy dependent: that too was going to be something very important,” Olander said. “So they started reaching out to parts of the world that the west had either rejected, neglected or simply didn’t want to do business with. We bring up now Iraq, Iran, Sudan, Angola, Algeria - these are all places the Chinese moved in very, very aggressively, and they saw an opportunity to basically grab certain resources that the West couldn’t or wouldn’t.”

The China National Petroleum Corporation (CNPC) entered Sudan in 1995 and expanded its exploration after Western competitors withdrew because of public outrage over their complicity in the country’s civil war, according to Bosshard. By 2005, 5% of China’s oil imports were provided by Sudan, and China became the largest importer of Sudanese oil. True to form, China supported this role through investing in a pipeline, an oil refinery, a railroad and several thermal and hydroelectric power plants, such as the Merowe Dam. He notes that China is implementing investment packages in Angola, Congo, Ethiopia, Gabon, and Zambia.

China’s work in Africa is far deeper than BP, for instance, going in and buying offshore oil blocks, Cust pointed out in a Skype interview with Byline Beat. Instead, the Chinese involvement necessitates multiple different actors on different levels in African countries - and is integrated both vertically and horizontally.

He said that he believes there are two looming questions when it comes to the Chinese trade of resources with African infrastructure. The first is - “What does this mean for particular African governments?” The second: “What does this mean for citizens of the continent as a whole?”

Alves pointed out that there are several positive effects of China’s relationship with Africa, the first of which is that it provides leveraging power. Secondly, China is willing to invest more and take far greater risks in their investment than Western companies, a move that has not only created infrastructure, but employed locals and created thousands of jobs.

The list of negative factors in China’s investment is longer. It includes problems in terms of integrating and benefiting local communities and large environmental concerns - as evidenced in Gabon, where an oil project was developed in protected, natural park. While China may want to improve corporate social responsibility, Alves said they still don’t seem to be sure as to how. Beyond this, Chinese projects are often dangerous, contracts are temporary, and there is little technology transfer, local beneficiation and spill over to local economies.

Alves was quick to point out that the responsibility for fixing these problems does not lie solely with China. Because China doesn’t have a civil society at home keeping them accountable, there is no regulatory framework in place, or if there is, there’s no means to implement them. A lot of problems could be solved if recipient African governments would be more assertive in the way they initiate contracts, and initiated both regulatory systems and the mechanisms to ensure their implementation.

“The Chinese companies when they come to invest in Africa…the order they bring from China is that they have to abide by the local rules,” Alves said. “If there are no local rules then they will do what they do in China and obviously the result won’t be the best […] that’s not just for environmental issues, but that’s also for social issues […] they have little experience in social responsibility.”

Olander is quick to point out that the lines gray very quickly when looking critically at China’s environmental impacts in Africa.

“You wonder where the wood for your Ikea sofa comes from? Well, often it comes from places like Africa that the Chinese have clear cut,” Olander said. “They are clear cutting forests in Congo and Tanzania among other places at a speed that is just breathtaking.”

Even the phrase “Chinese” has to be carefully pulled apart. According to Olander, Chinese entrepreneurs are often the ones clear-cutting and selling the wood to Chinese state run enterprises - a private industry he says is actually fueling a movement in corporate social responsibility for China.

”The Chinese are becoming much more aware of the impact that this perception is having on their business relationships,” he said.

CNPC and China National Offshore Oil Corporation (CNOOC) are among several Chinese state oil enterprises doing impressive corporate social responsibility (CSR) work in places like Mali. Olander said that this is first to offset what he refers to as the perception that Chinese companies are “evil assholes” and second, because the Chinese government sees this investment as healthy for business in the long term.

“There are some very effective CSR programs that are in place right now that are far more effective than what we have seen in the west” Olander said. “We hit the grays very easily. It’s not black. It’s not white.”

Olander, also, pointed out that much of the responsibility for Africa’s social and environmental responsibility lies on its own shoulders.

In the midst of mineral debates coming out of Angola and diamonds out of Botswana, he notes that often times the contracts that they’re negotiating are highly unequal and unfavorable to the host government.

“Remember that the money that is going to the Congolese often times is just going into the pocket of Joseph Kabila. So Joseph Kabila, at the end of the day, doesn’t really care that his people are not benefiting from the natural resources because Joseph Kabila only cares about Joseph Kabila,” Olander said. “So for the Chinese this is just a contract, and if the African leader is willing to pocket so much and not necessarily share with his own people, the Chinese mindset says, ”well that’s their problem not mine.’”

While the West is quick to criticize China’s investment methods and environmental impact, Olander said it has not provided near the amount of investment in Africa that China has.

“We are very much engaged in Africa when it comes to oil, and our hands are not clean either,” Olander said. “[The Chinese] are making investments today in Africa that in their minds go for the next 50 to 100 years, and we just don’t think like that.”


Editor’s Note: Shanley Knox manages a social enterprise building the capacity of female artisans in rural Uganda. She spends several weeks in southern and central Uganda each year.