China: Africa’s New Creditor.💰

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A multi-faceted friendship, billion-dollar agreements, a giant in a supermarket… The relationship between China and Africa can be summarized that way. A relationship that has been growing in recent years. For both protagonists, the conception of this collaboration is different. One thinks it has found its financial windfall. The other has found its inexhaustible source. What was the trigger for China’s interest in Africa? What changes does this union bring? Is Africa benefiting? What are the problems within this couple?

 

Why is china interested in Africa?

China’s interest in Africa is not new. In the 1960s, China became enamored with the newly independent African nations. Following the lifting of the Western grip, China made new allies on the continent. A political strategy that soon resulted in Taipei’s withdrawal from the UN General Assembly in favour of Beijing in 1971. The world’s second largest economy is aiming for even more. To establish its hegemony, China needs more raw materials, oil, natural gas and natural resources. So, it has turned to Africa, which has them. Moreover, with its “New Silk Roads” project launched in 2014 by President XI JINPING, the “African asset” becomes essential. It is crucial in the realization of this plan. China’s interest in Africa is both economic and political.

What does this partnership mean?

The Chinese impact on the continent is far from being invisible. In 2009, China became Africa’s largest trading partner, ahead of the United States. Trade between China and Africa has accelerated by about 20% per year. Chinese companies operate in many sectors of the African economy. In the industrial sector, 12% of production or $500 billion per year is managed by Chinese companies. Textile industries in Ethiopia account for a significant part of this revenue. In infrastructure, the dominance of Chinese companies is even more pronounced. They claim almost 50% of the construction market on the continent. The construction of an aerial metro in Ethiopia and an industrial city in Morocco are evidence of China’s strength in building on African territories. China spent $200 million to provide the continent with the new AU headquarters in Addis Ababa in 2012. Among the big companies operating on the continent is the China Railway Construction Corporation (CRCC). Present in 39 African countries including Benin, Tanzania, Côte d’Ivoire, etc., this company specialising in railways linked the port of Mombasa and the capital Nairobi in 2015, and the China Communications Construction Company (CCCC), which built the extension of Bole airport in Ethiopia, the modernisation of the port of Banjul in Gambia and many others. These Chinese brands are proliferating on the continent. Indeed, China’s trade policy of offering services at a third of the cost is an asset that handicaps the competition. In this regard, former Tanzanian President John J. MAGUFULI said “China is a true friend who offers help without conditions. (…) Free things are very expensive especially when they come from certain countries. The only things that cost nothing are those that come from China.” Added to this is the availability of a skilled and dynamic workforce. This is what the China State Construction & Engineering Corporation (CSCEC), a construction giant that has been operating in Algeria for nearly 20 years, offers. The Chinese hold is not limited to infrastructure. Chinese investors are also interested in African agriculture by modernizing it. In the health sector, they are involved in building hospitals, donating medicines and new medical technologies. Some Chinese NGOs are involved in the education sector in remote areas. Chinese actions on the black continent help it to shorten the gap with other continents.

A two-faceted agreement

The Chinese government is particularly active in strengthening Chinese investment in Africa. Chinese initiatives are supported by cooperation mechanisms, particularly in access to raw materials. In October 2000, Beijing signed the Forum on China-Africa Cooperation (FOCAC) with 49 African countries. China thus became the leading investor on the continent. Both parties are committed to a “win-win” agreement. China remains in the role of creditor and Africa in the role of debtor. The agreement includes new so-called security clauses. According to these, if a nation is unable to repay in funds, it will have to do so in kind. China can collect its dues in raw materials, gold, oil or even infrastructure. It was on similar principles that China took over a port in Sri Lanka for 99 years. In 2015, the Chinese government took control of a port in southern Sri Lanka that it had financed itself. At a cost of billions in debt, Sri Lanka has done nothing more than comply with the demands of Chinese power. Similar things are likely to happen to African countries. A study on the dynamics of Chinese activities in Africa concluded that “the number of private companies and the amount of investment they are making in Africa are increasing simultaneously. This proves China’s intentions on a continent with a very low repayment rate. Debt-ridden Kenya is forced to hand over the port of Mombasa to China.

Does Africa benefit from these Chinese settlements?

In a report published by McKinsey, the authors are rather optimistic: “Overall, we believe that China’s growing involvement in Africa is strongly positive for African economies, governments and workers.  On the continent, Chinese action also has benefits: job creation, skills development, knowledge and technology transfer, financing and infrastructure development. However, the reality of trade between Africa and China also reveals dark sides. Only 47% of Chinese companies’ procurement comes from local African companies. Only 44% of local managers of Chinese companies are African. Experts point to Chinese companies in labour and environmental violations. The emerging discord between China and the DRC is one of the cases that shows China’s non-compliance with agreements. Congolese civil society accuses the management of SICOMINES of various frauds. Since the beginning of the second half of 2021, the mining company has been suspected of embezzlement and illicit gold mining in South Kivu. These types of insurgencies between natives and Chinese workers are becoming recurrent on the continent. These weaknesses reflect, above all, the nuances in the approach to relations between some African countries and China.

 

The rosy world sold to Africa by China is a utopia. In its desire for supremacy, China shows no mercy to small nations. As for Africa, which is now financially subjugated by China, it is just one more step, one more piece of China’s control over the political arena.

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