On China's burgeoning relationship with Francophone Africa and oil-for-infrastructure contracts

The July issue of The China Monitor - a publication of the Centre for Chinese Studies at the University of Stellenbosch - is focused exclusively on the relationship between China and Francophone Africa. I find the focus most interesting, as it seems to suggest that the colonial history of African nations in some way affects the nature of China's engagement with them. Is China's engagement with Francophone Africa different, then, from its engagement with English Africa? Or Portuguese Africa? I admittedly hadn't given such a possibility much previous thought, but it is a hypothesis worth exploring.

Page 7 of this issue also features a piece by a colleague of mine, Dunia P. Zongwe, in which he interestingly writes on China's ore-for-infrastructure contracts, and the economic complementarities between China and Africa. The crux of Dunia's argument suggests that:

[...] the terms of economic exchanges in the mining sector between China and resource-rich African countries should assume, whenever possible, a R4I [resource for infrastructure] form.

In their essence, R4I contracts mirror contrat d'echange (exchange contracts), which do not involve any direct transfer of money to host governments, thereby reducing the risk that governments will mishandle investments. According to Dunia, such contracts carry further positive distributive outcomes, as African countries are able to retain and spread more widely the benefits of FDI than under traditional investment contracts. Such positive externalities are visible in Angola, which was recently lauded for its effectiveness in managing Chinese investment.

The Angolan case indeed seems to suggest that R4I contracts may be a valuable tool by which to optimize China's FDI in Africa if managed accordingly. The case further does well to bring African governance back into the equation; ultimately it is up to African governments to devise appropriate investment policies which optimize Chinese FDI and assist in developing the state and economy. The Chinese are making their moves, and African leaders must make theirs.

Thank you for your message... again

The CS Monitor has compiled a most noteworthy map of sorts detailing the content of Hilary Clinton's message on her recent trip to Africa. The image accompanies a great piece by CS contributor Tracey Samuelson from which we learn that, well, American politicians quite generally have very little to say to their African counterparts, having instead opted to master the art of recycling messages that have been touted since the 1970s - or thereabouts (Ms. Samuelson does not mention this point; I have noted it here to stress the general absurdity and lack of a U.S. policy towards Africa).

Honestly, what's the point of undertaking an extensive African tour if the message will more or less be the same across the board? Presumably it's much more efficient to go to one country, get all the points out and instruct all other African governments to "See [insert country here] for message."* Based on the CS Monitor's map, a simple trip to Angola would have more or less done the trick:

Now don't misunderstand me, the vast majority of the issues Secretary Clinton brought up are quite worthwhile and indeed applicable in the contexts in which they were raised. Yes, of course we must discuss HIV/AIDS in South Africa and the security crisis in Kenya. And given that Angolan oil exports are of particularly great importance to U.S. strategic interests, the trade terms surrounding them must also enter into discussion. I'm not at all suggesting that her rhetoric was necessarily wrong, only that it was quite generally meaningless and did absolutely nothing to carve out an American policy towards the continent. Blanket statements are fine and dandy for a time, but at a certain point it becomes necessary to delve into the nitty gritty details of policy. Well, we are well beyond that point and seemingly no such efforts are being made - not by the U.S. at least; the Chinese have been on point for quite some time now.

* I am, of course, being completely facetious in suggesting such a thing and strongly favor a much more nuanced U.S. policy towards Africa. Unfortunately, few in State have yet to catch on to this novel idea...

Over-exaggerated Asian scrambles and praise-worthy Angolan management on a Monday morning

Chatham House released a new report today which provides a comparative study of the impact of Asian oil companies on Nigeria and Angola - the two leading oil-producing companies in sub-Saharan Africa. While the report considers Indian, South Korean and Japanese national oil companies, the primary focus is on Chinese oil strategy. Specifically, the report considers why Chinese oil strategy has been - and remains - so successful; how it is that Angola emerged as the second largest supplier of oil to China in 2008; how Chinese companies negotiate deals; and how such deals benefit Angola and Nigeria, respectively.

Among the more interesting findings emanating from the report is that which suggests that Angola does not fit the stereotype of a weak African state being exploited by the resource-hungry Chinese. Indeed, the Angolan government has been quite successful in managing its relationships with China and its oil companies, as well as handling its own version of the oil-for infrastructure scheme. The case of Angola is contrasted with Nigeria, where the Obasanjo government largely failed to manage the scheme:

While Nigeria was playing politics with its Asian partners, Angola was driven by economic necessity to quickly access funds to finance its reconstruction [...]

[...] The scale of corruption, mismanagement and non-execution of projects in the Obasanjo years has sent shockwaves through Nigeria. [...] His intentions were good but officials failed to spell out the full implications of the scheme. And many used the scheme for private profit.

The report further suggests that Western fears about an Asian takeover in the Nigerian and Angolan oil sectors are highly exaggerated:

Except for Japan, [Asian oil companies] only acquired equity participation in both countries in the last five years. More important, the [western] oil majors remain the leading players in both countries. They dominate production and hold the majority of reserves.

While Western oil companies do, indeed, still own much of Africa's oil reserves, the Chinese scramble for African soil should not be downplayed. As the report itself notes, Angola is now the second largest supplier of oil to China, with Nigeria, the Congo, Kenya, and other oil-producing states not too far behind. In 2005, China imported nearly 701,000 bpd of oil from Africa - approximately 30% of its total oil imports. This figure has been rising in recent years, and is estimated to reach some 40-50% in the next decade.

The full report - Thirst for African Oil: National Oil Companies in Nigeria and Angola - may be found here.

Debunking the 'China retreat' theory

Recent speculation over China's alleged disengagement from Africa (see earlier posts here and here, for instance) could not be further from the truth. While pundits continue to tout China's withdrawal from the continent in light of growing (global) economic troubles, the data seemingly suggests quite a different reality.

A report released yesterday by South Africa's Standard Bank (download pdf here) lends much credence to this claim. Among the report's key findings:

• Premature conclusions regarding China’s perceived reduction of interest in Africa due to a realignment of its global priorities in light of cyclical economic uncertainties should be guarded against.
• In stark contrast to Africa’s traditional partners, China’s diplomatic engagements of Africa have been escalated in H01 2009 in anticipation of the Forum on China Africa Cooperation Summit (FOCAC) in Egypt in November. Following this, bilateral assistance from China to Africa has remained steady in 2009.
• The large infrastructure-based component of China’s ambitious stimulus plan has bolstered demand for African commodities in 2009, averting potentially greater declines in Sino-Africa trade volumes. Meanwhile, African demand for low-cost consumer goods from China has remained relatively resilient. '

With respect to the DRC deal which initially lead some to raise red flags over China's withdrawal, the report notes the following:

Chinese firms are also taking the opportunity to re-price several of their commodity-based investments in Africa in order to ensure that valuations reflect current realities rather than those in place during the height of the commodities boom in 2007, when many of the investments were initiated. This prudent recalculation has been perceived in the DRC and Gabon as a cooling off of interest from relevant Chinese investors, where in truth it is a calculated strategy by Beijing to leverage its competitive advantage in still being able to engage commercially to negotiate more favourable terms.

I hate to say 'I told you so,' but I told you so. Rather than retreating, China is merely shifting its strategy in the continent in response to ever-changing economic realities. If nothing else, the Chinese are exceptionally quick on their feet. With that said:

Any discussion on the sustainability of bilateral ties is deficient without a realisation that a withdrawal of China from Africa presents only one side of a complex picture. It is not in Africa's interests, particularly in today's liquidity starved international environment, to see China withdraw from Africa. Neither [...] is it in China's interests to do so.

Chinatown, Angola

A superb video from Current TV examining the growing presence of Chinese in Angola. While the video's focus remains largely on China's infrastructure projects across the country, it nevertheless does a great job touching upon the variety of sectors in which the Chinese have become quite active. The video itself is somewhat lengthy, but certainly worth a viewing for those seeking to gain a better sense of 'China in Africa' (or Angola, as the case may be):

HT: Africa is a Country