China goes after Nigeria's oil

Via Tom Burgis writing in the FT:

A Chinese state-owned oil company is in talks with Nigeria to buy large stakes in some of the world’s richest oil blocs in a deal that would eclipse Beijing’s previous efforts to secure crude overseas.

The attempt could pitch the Chinese into competition with western oil groups, including Shell, Chevron, Total and ExxonMobil, which partly or wholly control and operate the 23 blocks under discussion. Sixteen licences are up for renewal.

Most prominently, CNOOC is hoping to buy 6 billion barrels of oil, equivalent to one in every six barrels of proven reserves in Nigeria. While the overall value of the offer has not been disclosed, some sources suggest that it caps somewhere around the $50 billion mark. Another issue yet to be disclosed is that of how the Nigerian government plans to allocate equity in the oil blocks; some suspect that it may involve forcing western groups to relinquish their stakes. Bring on the fireworks.

Whither America's Africa policy? No, seriously. Where is it?

I really can do no better today than to direct you to Shashank's well thought out post in which he concludes:

After seven months, a presidential visit and now this major trip, it's still unclear what the Obama administration wants to do differently in Africa. The most important U.S. agency that works on Africa, USAID, still has no leader. Clinton's trip was full of the same hopeful but canned rhetoric about "good governance," "food security" and "helping Africans help themselves." Folks who care about Africa hardly expect the continent to be the Obama administration's No. 1 foreign policy priority. But they will be disappointed with this trip.

Not only is it disappointing, but it's actually quite laughable - and not in a joyous laughter sort of way. I really don't understand how anyone is meant to take US policy towards Africa (the presently non-existent policy, mind you) seriously when the country's own Secretary of State makes such ridiculous statements as her proposal for camcorders in the Congo, and her lending of support to Somalia's Sheik Sharif - evidently unaware of the consequences - among others. Her utterly distasteful outburst in the Congo doesn't do much to bolster her, or American, credibility either (surely there was a classier, more professional way of handling the matter, even if it upset you, Madame Secretary), and neither does her outlandish comparison of the 2000 Florida recount to Nigeria's rigged elections. I am terribly sorry to discover that she is still seemingly bitter over the matter, but drawing such faulty moral equivalences jeopardizes the advance of democracy in countries like Nigeria and others across Africa where corruption is rampant. To draw my own comparison, the ridiculousness implicit in such a statement is tantamount to that which would compare women's rights in, say, Sierra Leone - the worst place in Africa to be a woman according to the 2008 UN Human Development Report - to those in the United States. Think on that.

While Secretary Clinton may be dancing away across the continent, the U.S. missed a prime opportunity to seriously engage with African leaders on matters of trade, foreign assistance, human rights - heck, even the objectives behind AFRICOM - and other matters of actual consequence to the continent. It's little wonder that African leaders are more seriously engaging with the Chinese as regards their countries' needs and policies. I probably would, too.

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.

"Among the worst employers everywhere"

Via Global Dispatch's Erin Conway-Smith I'm reminded of a report I've been meaning to link to for some time, but have continuously forgotten to do so - apologies! In May, the African Labour Research Network released a great 400+ page report on the labour conditions maintained by Chinese-operated firms in Africa. The report - "Chinese Investments in Africa: A Labour Perspective" - focuses especially on the cases of Angola, Botswana, Ghana, Malawi, Namibia, Nigeria, South Africa, Zambia and Zimbabwe, among the nations where the Chinese presence is most pronounced, and with which trade is particularly high.

Unfortunately for the Chinese, the findings are not at all favorable towards them. Quite generally, the report finds:

Chinese employers tend to be amongst the lowest paying in Africa when compared with other companies in the same sector. In Zambia, for example, the Chinese copper mine paid its workers 30% less than other copper mines in the country. In general, Chinese companies do not grant African workers any meaningful benefits and in some instances ignore even those that are prescribed by law. Wages above the national average were only found at those Chinese companies with a strong trade union presence. Chinese staff members enjoy significantly higher wages and more benefits than their African counterparts.

Collective bargaining hardly takes place in Chinese companies. They resort to union bashing strategies to discourage their workers from joining a trade union. In many instances, Chinese businesses were supported by host governments who defended Chinese investments against the demands of labour. Trade unions see the practices of Chinese companies as a threat to the limited social protection that unions have achieved over the years through collective bargaining.

In Namibia, for instance, some workers are paid $0.55 an hour by a Chinese company that is building the new Works and Transport Ministry headquarters - about half the legal minimum wage of $1.10 per hour for entry-level construction workers. In many cases workers don't wear safety helmets, as they are often required to pay for their own safety equipment - an investment they can ill afford. At a construction company in Malawi, too, workers had to mix cement with their bare hands. Many labour for 12 hours a day, 7 days a week. The general work day in much of Africa is 8 hours.

Of course it's difficult to expect high standards of working conditions in Chinese firms in Africa when Chinese firms in China don't fare any better. As I noted nearly a year ago, it's quite difficult to expect Chinese employers to improve labour conditions for foreign nationals working in their firms, when they have yet to do so for their own compatriots. For African states, the solution lies in legally regulating working conditions. But as the South African case demonstrates, where in place even such edicts are being circumvented. Thus while Africa stands to benefit from increased Chinese investment as such, it similarly stands to lose if such conditions continue. Change must occur, the lingering question is how.

Fake drugs in Africa? Don't blame the Indians - at least not entirely

Chinese-made drugs which are dangerous or otherwise fake are evidently being sold in parts of Africa with "made in India" labels, much to the detriment of the Indian pharmaceutical industry's inroads into West Africa. This problem appears to be especially pronounced in Nigeria, where Indian generic drugs are the preferred choice of importers:

Chinese, and now Indian, companies have been accused of selling fake drugs in Nigeria's $298-million pharmaceutical market, nearly 60 per cent of which comprises imports.

Although, the $298 figure looks small, it is attractive to fake drug manufacturers. According to a survey conducted in Nigeria in 2007, fake drugs make up for over 50 per cent of all drug sales in th country. The Pharmaceutical Society of Nigeria, puts the figure of fake drugs circulating in the country at nearly 70 per cent.

[HT: Appfrica]

What's wrong with this picture?

Via Joshua Keating we learn that China's Economic Observer has put together the following map of overseas expansions by CNOOC, CNPC and Sinopec - China's three major oil giants. Click here to access the interactive version, which provides (only some) added information:

Now I don't know about you, but I find this map to be highly inaccurate, and not just because the African countries have been mislabeled. The map grossly under-represents China's oil ventures in Africa; it's quite laughable, really! As Keating aptly observes, Sudan, where CNPC has extensive and very controversial holdings is absent. So is Niger, Gabon, Ethiopia (Sinopec is especially active in both); my goodness, where is Angola? Or Chad, for that matter? Kenya, Equatorial Guinea, and Algeria are all conspicuously absent as well. I really could go on. And while I'm not especially well-versed in China's energy holdings and exploration activities in Latin America, I'd venture to guess that the map greatly underestimates its ventures there, as well.

To be perfectly honest I feel as though I must be missing something; as though the map is intended to highlight specific cases of China's overseas oil activities, for instance, or perhaps is otherwise well outdated. Unfortunately, neither appears to be the case. There's no indication of any singling out of countries, and the sentence which begins "With China's recent $7.2 billion acquisition of oil explorer Addax Petroleum...." indicates that this map is very recent (Sinopec bought Addax in June of this year). So why in the world would the Observer put together such a misguided map? Is the Chinese public so unaware of its country's overseas activities, or do they think we are?

On China as Africa's biggest arms dealer

I'm currently working on a paper examining Sino-Zambian relations, focusing especially on Chinese activity in Zambia's mining sector. I've been sitting on this project for quite some time, and finally managed to overcome what had been a most serious case of writer's block with the help of a lovely glass of Bandol (Tempier). Ok, fine, two glasses. In any event, while doing a bit of extra desk research, I happened upon an interesting piece in the recent edition of the Jamestown Foundation's China Brief. Author Richard Bitzinger writes:

China is now, on average, the world’s fifth largest arms exporter, after the traditional leading suppliers: the United States, Russia, France, and the United Kingdom. In fact, in 2007 it was fourth in terms of global arms transfer agreements, ahead of France, Germany and Spain.

Nearly all of China’s arms transfers are to developing countries, and in this arena the Chinese defense industry is emerging as a formidable competitor. In fact, China ranked third in terms of arms deliveries to the developing world in 2007. China's largest markets are in Asia, the Middle East, and particularly Africa. In fact, during the period 2004-2007, China was the single largest seller of arms to Africa; and its major customers include Pakistan, Egypt, Bangladesh, Iran, Zimbabwe, and Zambia.

Leading Chinese weapons exports (to Africa) include:

• The K-8 trainer jet: China has exported nearly 250 of these lightweight trainer/attack jets since 2000, according to the Stockholm International Peace Research Institute (SIPRI) database on arms transfers. Its biggest client has been Egypt, which bought 120 K-8s, most of which were assembled locally from kits, between 2001 and 2008. Other customers include Ghana, Pakistan, Sri Lanka, Sudan, Zambia, and Zimbabwe, while Venezuela is in negotiations to purchase up to 24 K-8s.
• The F-7MG fighter jet: This aircraft is the export version of the People's Liberation Army (PLA) Air Force’s F-7E, itself an upgraded adaptation of the MiG-21. The F-7MG features a larger wing and, reportedly, a British radar. China has sold more than a hundred of these fighters to Bangladesh, Namibia, Nigeria, Pakistan, and Sri Lanka, according the SIPRI Arms Transfers database, since the mid-1990s.
• The WZ-551 armored personnel carrier: Although not a particularly high-tech system, the WZ-551 is notable for being sold widely around the world, including countries like Argentina, Gabon, Kenya, Kuwait, Nepal, Oman, Sri Lanka, Sudan, and Tanzania

It remains difficult to gauge how successful China will be in the global arms marketplace, with countries like the U.S. and Russia out-exporting the country by rather wide margins (in 2007, for example, Russia exported $4.6 billion worth of arms - four times as much as China. Even Germany out-exported China by 60%). Yet China's foothold in the African marketplace appears to be quite favorable. In Zambia, for instance, China's North Industries Corp. (NORINCO) is allegedly in talks to upgrade Zambia's T-59 tanks engines, armor and fire control systems. The Nigerian air force has been eyeing China's K-8 trainer aircraft (Nigeria imported Chinese J-7 fighters in 2006). Zimbabwe is equipped with Chinese K-8 trainers and J-7 fighters, and in early 2009 was negotiating the purchase of one squadron of FC-1 fighters from. Chinese arms now equip Angola, South Africa, Sudan, Algeria, Egypt, Kenya... the list goes on and on.

Chinese arms deals appear to be part and parcel of the "oil-for-infrastructure" deals China continues to strike across the continent. In Angola, for instance, arms are sold in exchange for the country's oil. In Zambia, copper is the currency of choice. While some argue that Chinese arms sales to Africa will drop once China acquires a satisfactory supply of natural resources, such claims are highly dubious. What constitutes a "satisfactory supply" for a country with massive energy demands? What's more, it's rather doubtful that China will be so foolish as to bypass a booming export market. If nothing else, the Chinese are exceptionally savvy businessmen, and arms sales to Africa is a brilliant business opportunity. While China may not be supplanting or joining the U.S. and European states as a large supplier of sophisticated arms on a global scale anytime soon, they have seemingly already done so - and continue to do so - in Africa.

A correction

Much is being made of the Oriental Post, Botswana's first Chinese newspaper, about which I blogged in early June. The surrounding hype is, however, somewhat misleading. Last week, France 24's The Observers ran a story on the newspaper, heralding the arrival of "Africa's first Chinese newspaper." A similar kind enthusiasm was echoed in a post on Appfrica, and picked up by Bill Easterly and Blood and Milk's Alana Shaikh on their respective Twitter pages. My, how quickly news spreads!

Yet while the Post is Botswana's first Chinese newspaper, it surely is not the first in all of Africa. The Western African United Business Weekly, a Chinese newspaper run out of Lagos, Nigeria, has been in circulation since 2005. China Express has been publishing out of Johannesburg, South Africa (a SADC member), since 1994. And there may well be additional Chinese-language papers in other parts of the continent about which we are unaware. The Chinese community has been quite active in Cape Verde since the mid-1990s, for instance; I wouldn't be surprised if they have by now established a foothold in the country's print media.

While the Oriental Post further signals China's growing fascination with the African continent - and indeed the mass migration of Chinese to Africa - it is not novel in any way (save but signaling a significant intensifying of Sino-Botswanan relations). To state otherwise is, unfortunately, quite inaccurate.

Raising the bar on corporate social responsibility

In 1995, Nigeria's authorities executed Ken Saro-Wiwa, an environmental activist and a member of the Ogoni ethic group in the Niger Delta, whose land was being targeted and destroyed by the oil extracting activities of Royal Dutch Shell. At the height of his non-violent campaign, Saro-Wiwa was arrested along with nine other anti-oil campaigners. All were tried by a military tribunal and hanged by the Nigerian military government of General Sani Abacha. The charges were entirely politically motivated. 

This devastating human tragedy provoked much outrage and raised many important questions, the most crucial of which had to do with the human rights responsibilities of multinational corporations, especially when working in conjunction with corrupt national governments. In 1996, relatives of the nine executed campaigners brought a case to hold Shell accountable for alleged human rights violations in Nigeria, in Ogoniland in the Niger Delta in particular. The case accused Shell of being complicit in murder, torture and other abuses by Nigeria's former military government against campaigners in the region.

While the case was set to go to trial at the beginning of this month, Shell on Monday agreed to pay $15.5 million to settle the case. Shell continues to deny any wrongdoing, touting the settlement as a "humanitarian gesture" meant to compensate the plaintiffs for their loss and to cover a portion of their legal fees and costs. Regardless, the settlement indubitably brings a long-awaited peace to the families of the victims. Ken Saro-Wiwa Jr., son of the executed activist, had a moving piece in yesterday's Guardian in which he wrote: 

Nothing about this has come or will ever come easy. Every word, every phrase and every comma has been weighed, scrutinised and debated. These are life and death matters. Head versus heart. The case has been freighted with all kinds of agendas that it cannot possibly satisfy. In the end a settlement is a compromise; both parties agree to settle their differences by meeting in a so-called middle. That middle is a matter of perspective of course. To some this must be bewildering. To others it was too long in coming. In the end it is only those who are intimately involved, who have everything to lose and everything to gain that have to make a decision that will not satisfy everyone.

History will show that this was a landmark case. Multinationals now know that a precedent has been set, that it is possible to be sued for human rights violations in foreign jurisdictions.

Indeed, the significance of the settlement lies precisely in the fact that the bar for corporate social responsibility has been firmly set, sending multinationals a clear signal that their activities vis-a-vis local populations in the regions in which they work will be under close scrutiny. Surely a step in the right direction.

Decreasing the number of currencies in Africa as a means of stimulating growth and trade

Via VoxEU, Thorvaldur Gylfason writes:

Does every country in Africa need a currency of its own? No. Because national currencies constitute an exchange and trade restriction, a further reduction of the number of currencies in Africa would likely encourage trade and growth in Africa. This is why the African Union aims at pooling all the continent’s currencies into a single currency by 2028. In the meantime, several regional monetary unions are on the drawing board, and two monetary unions already exist, one de jure and the other de facto. First, fourteen countries belonging to the Economic and Monetary Community of Central Africa and the West African Economic and Monetary Union use the CFA franc. Second, Lesotho, Namibia, Swaziland, and now Zimbabwe use the South African rand. Botswana used the South African rand for ten years following independence, 1966-76, before introducing the pula.

... A strive for efficiency dictates the use of fewer and larger currencies and so do foreign investors who are understandably wary of weak and volatile currencies. This centripetal force is opposed by a centrifugal force rooted partly in national pride but also, more importantly, in the belief that sovereign national currencies make it possible to pursue independent and flexible monetary policies to foster economic and social development. This was the vision of Nigeria’s leaders in 1973, even if things turned out differently.

Nigeria's booming entertainment industry

I confess to be just as surprised as the next person (sadly my knowledge of African pop culture doesn't quite measure up to what I know of the continent's politics): Nigeria's music and film industries are booming. So much so, in fact, that the country's film industry (known as Nollywood) has surpassed Hollywood (!) to become the world's second largest after Bollywood:

According to the UNESCO Institute for Statistics (UIS) survey, Bollywood – as the Mumbai-based film industry is known – produced 1,091 feature-length films in 2006. In comparison, Nigeria’s moviemakers, commonly known as Nollywood, came out with 872 productions – all in video format – while the United States produced 485 major films.

“Film and video production are shining examples of how cultural industries, as vehicles of identity, values and meanings, can open the door to dialogue and understanding between peoples, but also to economic growth and development,” said UNESCO Director-General Koïchiro Matsuura.

“This new data on film and video production provides yet more proof of the need to rethink the place of culture on the international political agenda,” he added.

To gain a better appreciation of the Nollywood industry, I strongly suggest you watch Franco Sacchi's film, 'This is Nollywood.' 'This is Nollywood' shows not only how the introduction of digital technology has revolutionized (loosely stated) one of the world's poorest (and by some accounts failing) countries, but also speaks to the very theme of culture highlighted in the UNESCO report. Ethan Zuckerman blogged about the film back in 2007 (I'm a bit behind, it would seem).

But there's more: according to CNN, Nigeria's hip hop industry is also growing. Like the film industry, Nigerian hip hop is regarded as a cultural alternative to Western music and in some sense serves as a unifier in what is a most ethnically diverse state:

While no one is so naive as to suggest that the film and hip hop industries are the panacea to Nigeria's problems, their respective success may nevertheless be a small, albeit important, step on the road to economic growth and development. One can only hope and, indeed, enjoy.

[HT: Joshua Keating, Africa is a Country]

Chocolate City: Africans in China

Despite pledges of "mutual benefit" and "win-win" cooperation on the part of Chinese government and business leaders, this current phase of Sino-African relations remains very much a one way street. We constantly hear about Chinese enterprises breaking into African markets and Chinese merchants migrating to various African states, but quite little about similar incidences going the other way. Even the China-Africa Business Council, a flagship of the UNDP, remains based in Beijing and has as its focus the grooming of Chinese businesses for entry into African markets, paying little heed to the prospects for African firms seeking to break into the Chinese market. 

There is, however, a growing population of Africans across China. In the most recent issue of The New Yorker, Evan Osnos writes about African merchants living in Guangzhou, in a part of town now referred to as "Chocolate City." You can read Osnos' piece here, and watch a narrated slideshow about the economic, social and religious life of African migrants in Guangzhou here.

A slowdown in Sino-African relations?

If the Nigerian case is any indicator, the global economic crisis may be causing a slowdown in Sino-African trade:

The global slowdown has prompted a Nigerian cement company to postpone plans to buy $3.3bn (£2.1bn, €2.3bn) in plant building and materials from a Chinese contractor in a sign that China’s burgeoning trade with Africa may be starting to soften. Dangote Group signed a deal with Sinoma International Engineering, the Chinese construction company, in February to build a series of plants needed to fulfil its goal of overtaking France’s Lafarge to become Africa’s largest cement maker.

The deal was one of the biggest struck between an African and a Chinese company, symbolising Chinese businesses’ progress in carving a foothold in African markets long dominated by European rivals. Africa-China trade was estimated at $55bn in 2006. But Aliko Dangote, founder of the Dangote Group trading and manufacturing empire, has postponed most of the projects in part because the global crisis has clouded the outlook for the construction sector.