China’s growing presence in Africa

Go Into the casino in Tanzania’s capital, Dar Es Salaam and what strikes you? The overwhelming number of players is Chinese. If the Chinese are not quite everywhere in Africa their numbers, their investments and their trade has mushroomed over the last ten years. If one compares Chinese and US investment in Tanzania there is no contest despite Tanzania being one of the US’s favourites.

Overlooked is that China has been in Africa twice before. The first time was also in Tanzania when it came in 1970 complete with workforce and picks and shovels to build a new railway from Dar es Salaam all the way to the Zambian copper belt. For years the railway has been on its uppers, its locomotives and rolling stock ill-maintained and subject to regular breakdowns. The Chinese are now trying to bring it back to life.

Tanzania’s first president, Julius Nyerere, asked by his press secretary, Ben Mkapa, who later himself became president and told me this tale, what Mao had advised him during his visit to China, replied, “Not to create a middle class” and Nyerere didn’t. It was an unconstructive policy that was one of the ingredients in the lack of the country’s economic momentum until Mkapa reversed it.

Unlike the US, France and the UK, China has never tried to establish military alliances or bases in Africa but its provision of arms has been a long standing policy – first as aid to liberation movements and later, as its aid program was wound down in the 1980s, a commercial enterprise. For instance during the Ethiopian/Eritrean war in the late 1990s Beijing sold weapons to both sides and has sold weapons to Zimbabwe.

Now, in its third attempt to engage itself in Africa both the tone and size is different. There are probably a million Chinese living in Africa. China has become a major participant in UN peacekeeping in Africa. A report by the Stockholm Peace Research Institute says that “Chinese peacekeepers are rated among the most professional, well trained, effective and disciplined in UN operations”. (Yet in 1971, when China first took its seat in the Security Council, China opposed all peacekeeping operations which it regarded as interventions in sovereign countries manipulated by the superpowers.)

Five years ago China made a big splash when its Industrial and Commercial Bank bought a 20% stake in South Africa’s highly successful Standard Bank. This was the biggest foreign direct investment in South Africa since the demise of apartheid. This was not “a resources grab” as some critics of China keep accusing it of. It was, as the Financial Times editorialized at the time, “evidence of a deeper relationship.”

The relationship goes on getting deeper. Ngozi Okonjo-Iweala,, the finance minister of Nigeria, tells me that trade between Africa and China increased in value from $11 billion in 2000 to $166 billion last year. Nigeria’s trade with China increased in the same period from $1 billion to $7.8 billion.

According to a new book, “China and Africa” by David Shinn and Joshua Eisenman, “Economic relations between China and Nigeria have grown phenomenally. New deals, investments and agreements occur regularly. [Up to] 600 Chinese companies and joint ventures operate in construction, oil and gas, technology, communications, manufacturing, services and education”.

But Chinese activity is not just at the top end of economic life. In Lagos, Africa’s biggest city, the Chinese trader community lives and works in a large red fortress resembling the Great Wall of China. The estimated Chinese population in Nigeria is 70,000.

Chinese small time traders are to be found in many African countries, often causing resentment as they cut prices and expand businesses at the locals’ expense. In Zambia there were violent riots at a Chinese-owned copper mine over working conditions and pay. The issue became one of the important ones in Zambia’s subsequent general election. In Nigeria their activities have led to the collapse of the textile industry. In Tanzania, where imports from China have been about 15% of its total, Tanzanians complain about the growing number of cheap and counterfeit products. In 2011 the government ordered Chinese foreign traders to return home. But at the same time China’s Export Import Bank signed concessional loans for Tanzania to support the country’s broadband structure and to upgrade Zanzibar’s airport terminal.

China’s purchase of raw materials has become an important export for many countries. China-African trade now accounts for 14% of Africa’s trade and 4% of China’s. It is almost entirely raw materials to feed China’s booming manufacturing – mineral products, in particular iron ore, copper and platinum, base metals, oil, precious stones and wood products. (Much of the timber is illicit, although that is now lessening.)

China will be an important part of Africa’s future. Undoubtedly the relationship will broaden and deepen. Other investors in the West, India and the Arab world will have a hard job keeping up with it.

Copyright © Jonathan Power 2013