Investment with Strings Attached

Horand Knaup, Spiegel, December 9, 2010

China has strengthened its economic and political ties in Africa in recent years in an effort to open up new markets and secure much-needed raw materials. The leaked US diplomatic cables reveal that Africans are growing increasingly resentful of China’s aims and methods.

The young worker had had enough. He was fed up with all the accidents, all the broken promises, the anger of the supervisors and, lastly, the pay raises that were pledged but which never came. So, in mid-October, Vincent Chengele, 20, and some of his fellow coal miners gathered in front of the Collum Coal Mine in southern Zambia. Before long, there were a number of miners protesting against their bosses–Chinese investors who had bought the mine in 2003.

All of a sudden, shots rang out as Chinese overseers began firing wildly into the crowd. Chengele and 10 other miners fell to the ground injured.

A wave of outrage went through Zambia. Even President Rupiah Banda, who usually supported Chinese investment in his country, condemned the violent response. Elijah Muchima, a minister in Southern Province where the mine is located, complained that Zambians were “being treated like animals.” He criticized how the workers were paid as day laborers rather than being given contracts, and condemned their “slave salaries.”

It wasn’t the first time there had been conflict with the Chinese. The mine had already been closed on several occasions due to dangerous conditions. In 2006, some brusque Chinese foremen simply refused to allow the Zambian minister responsible for mining to enter the complex.

And allowing the Chinese in Zambia to have weapons would also appear to be a bad idea: According to the Tanzanian English-language daily The Citizen, a Chinese foreman fired upon striking workers at a copper mine in Zambia a few months ago. The paper reported that some people were even comparing the Chinese to “Africa’s former colonial masters.”

Hungry for Markets and Materials

China is currently more active in Africa than any other foreign power. Chinese President Hu Jintao has already visited 20 African countries, and the Chinese premier and foreign minister have also made regular visits to the continent. Likewise, ministerial-level meetings between African and Chinese officials are frequently held–and are popular with the Africans because they often return home with new contracts in their pockets. In 2009 alone, Chinese companies invested roughly $56.5 billion (€41.3 billion) in Africa.

In recent years, the Chinese government and private Chinese companies have signed hundreds of contracts with African partners. China has extended loans worth billions and sent thousands of workers to Africa, which is now home to almost a million Chinese. They have built hundreds of hospitals and thousands of kilometers of roads, as well as government buildings, railway lines and football stadiums.

If it weren’t for this aid, many African countries would be significantly worse off than they currently are. China, the manufacturing giant, needs Africa as a market for its goods. But, even more importantly, it needs Africa in order to satisfy its need for raw materials. And the Chinese have a thirst for all kinds of natural resources, including gold, wood, copper, coal, oil and coltan.

Growing Resentment

American diplomats posted in Africa keep a very close eye on the activities of the world’s only other major power. Indeed, they send very detailed reports to Washington from almost all of the countries in Africa. But the leaked dispatches don’t only include information about the skyrocketing growth in trade. They also discuss the growing resentment among Africans toward the Chinese. Naturally the whole discussion revolves around issues such as power on the continent, security interests and spheres of influence. And often billions of dollars are at stake.

For example, international observers were astonished at the end of 2007 when the government of the Democratic Republic of Congo reached a comprehensive deal worth over $9.2 billion with Beijing. The agreement guaranteed China mining rights that will help it secure 10 million tons of copper and 620,000 tons of cobalt.

“The Sino-Congolese agreement immediately raised concerns among both multilateral and bilateral donors regarding the loan-agreements on the Democratic Republic of Congo’s debt sustainability,” is how one dispatch from American diplomats later described it. Congo already owed billions of dollars to the World Bank and other Western creditors, so a new contract with China would make it more difficult for them to secure payments on either the interest or the principal of their loans.

At a later point, William Garvelink, America’s ambassador to Congo, wrote: “Throughout 2008 and the first half of 2009, neither the Chinese nor the government of the Democratic Republic of Congo indicated any real willingness to revise the agreement to ensure compatibility with debt sustainability.”

The dispatches coming out of the US Embassy in the Congolese capital Kinshasa provide rare insights into the worlds of international finance and development policy. For example, in May 2009, Dominique Strauss-Kahn, the managing director of the International Monetary Fund (IMF), came to Kinshasa. “While the visit was ostensibly to discuss the impact of the global financial crisis on a number of African countries, in reality, however, it was used to push the government of the Democratic Republic of Congo to take the necessary political steps to engage the Chinese on renegotiating the Sino-Congolese agreement,” reads one cable.

Eventually, Western pressure had an effect, and Congolese President Joseph Kabila caved in. The agreement was trimmed down by about a third.

Old Friends, New Partners

Beijing has long had close relations with a number of African states. For example, Cameroon has been considered an ally since 1971, partly because of its government’s early decision to support China’s hard line against Taiwan. In return, the Chinese constructed a hydro-electric power station in Lagdo, built hospitals and roads, sent doctors to the country and trained Cameroonian officer cadets in China.

The Chinese are also extremely active in Angola. After the country’s civil war ended in 2002, Western donors were hesitant at first and were only willing to grant loans with tough conditions attached. But Beijing jumped right in. China’s Eximbank extended a loan worth over $4 billion and reportedly issued another one soon thereafter. At least one of the loans includes a condition requiring Angola’s government to grant major contracts to Chinese companies.

The Chinese also built four new football stadiums for the Angolans–in Luanda, Benguela, Lubango and Cabinda–which hosted the games of the 2010 Africa Cup tournament in January. They have spent millions to help repair the famous Benguela railway line. And they also plan to build a new international airport in Luanda, the Angolan capital.

Partners Who Don’t Ask Questions

The Chinese are also welcomed as partners in Africa because they don’t ask too many questions or set stringent conditions. They do without all the demands the West likes to set as preconditions for receiving aid, such as good governance, respecting human rights and decisive anti-corruption efforts.

The Chinese take a different approach. No matter whether it’s war in Darfur, repression in Zimbabwe or corruption in Nigeria–for the Chinese, it’s not their problem. For example, instead of taking Zimbabwean dictator Robert Mugabe to task for his totalitarian policies and looting of his own country, they bestowed an honorary doctorate on him in 2005 and declared him “China’s No. 1 Friend.” Three years later, in 2008, they sent Mugabe the An Yue Jiang, a ship full of weapons and ammunition.

In fact, many politicians throughout Africa have grown to appreciate the fact that China doesn’t impose conditions or ask questions. They also value how it grants lines of credit, builds parliamentary buildings and supplies arms without any hassle.

Access to Internal Documents

For example, Kenya, concerned about simmering political tension with its eastern neighbor Somalia, obtained some military hardware from China. But Beijing provided Kenya’s National Security Intelligence Service (NSIS) with much more than just computer and telecommunications equipment. Indeed, the scope of the Chinese involvement ultimately grew so large that the worried US Embassy in Nairobi reported in a secret dispatch to Washington that: “As of September 2008, (Chinese telecommunications equipment company) ZTE was building e-Government infrastructure on the NSIS headquarters compound. The project involved a secure network for Kenyan e-Government activities.” Since then, the Americans have been forced to assume that Chinese intelligence officers have access to much of the Kenyan government’s internal documents and communications.

Beijing even nurtures ties with a failed state like Somalia. For example, China was one of the first countries to lend support to the Transitional Federal Government (TFG) in Mogadishu when it started work in October 2004. A year later, China would sign a number of trade agreements with Somalia’s government. “We understand that China made additional periodic cash contributions to President Yusuf,” wrote diplomats from the US Embassy in Kenya in one cable, referring to Abdullahi Yusuf Ahmed, the former head of the TGF. “Our contacts told us that the support was always in cash payments and that most of it was disbursed within the TFG cabinet.”

According to US diplomats, the Somali ambassador to Kenya admitted that: “China is not concerned with politics, only economics, and is positioning itself for commercial advantages in post-conflict Somalia.”

‘Failed to Create Jobs’

Nevertheless, despite the abundant help provided by the Chinese, the American cables reveal that criticism of China is growing in many African countries. For example, in many regions, the Chinese are viewed as being responsible for smuggling, poaching and overfishing. They are also accused of ignoring labor laws and of flooding the continent with counterfeit brand-name products.

For example, the US Embassy in Nairobi wrote that “the Kenya Wildlife Service noticed a marked increase in poaching wherever Chinese labor camps were located.” The wildlife service also apparently reported that “90 percent of the ivory smugglers detained at JKIA (Jomo Kenyatta International Airport) are Chinese nationals.” The US embassies in Cameroon, Zimbabwe and Nigeria also filed reports about Chinese ivory traders and went so far as to claim that some Chinese diplomats were involved in the smuggling efforts.

Similarly, Chinese investors in Angola have drawn much criticism despite all the aid they have provided. For example, one report from the US Embassy in Luanda claims that there were concerns that “Chinese engagement, financed by loans that Angola needs to repay, has failed to create jobs for Angolans, has failed to transfer technology to Angolans, and has often resulted in poor quality performance.” There were also concerns about a lack of transparency regarding funding for projects, which were handled by an office of the president.

Reports coming out of the US Embassy in Abuja, Nigeria, weren’t much prettier. “International press reports claim that some Nigerian officials are concerned about the Chinese practice of importing Chinese workers who could exacerbate local resentment, particularly in the Niger Delta where there are major grievances over the lack of employment opportunities.”

Above all, the report added, cheap Chinese textile imports had already destroyed the domestic industry, forcing more than 65 factories to close over the last 10 years. According to the document, the sector’s decline had affected over a million Nigerians who made their livelihood from the textile industry, whether as cotton workers, factory hands or salespeople.

‘Huge Problem’

In fact, the changes reportedly prompted the head of Nigeria’s retail trade union to voice bitter complaints to American diplomats. “The Chinese are here and that is a huge problem,” he apparently said. “The Chinese have no respect for local laws .     and they compromise a lot of things, including safety.” The man went on to complain that, while corruption is punished in China with the death penalty, Chinese people working abroad were quick to adjust to the laxer habits of their surroundings.

For example, within a one-week period in October 2007 alone, Tanzanian authorities in the port of Dar es Salaam seized 73 cargo containers with tropical softwoods that were bound for China. One cable from the US Embassy in Dar es Salaam bluntly states that the Tanzanian government’s 2004 ban on the exports of logs “is widely seen as ineffective.”

Reports from the US Embassy in Maputo, the capital of Mozambique, strike a similar tone. “Officially, bilateral trade between China and Mozambique was approximately $200 million in 2006,” reads one cable. “It may have been worth much more than this–Chinese fishing vessels (and others) are thought to be pillaging the marine fishery off Mozambique’s coast and Chinese businesses are believed to be heavily involved in illegally logging of Mozambican hardwoods.” Embassy officials added that they believed “Chinese assistance comes with strings attached.”

Guantanamo in Niger

The Chinese are apparently equally relaxed when it comes to health and safety regulations in the workplace. In Zambia, coal miners are sent underground half-naked and barefoot. In Niger and Zambia, workers mine uranium without any protective clothing and are housed in camps near the mines, with the result that they are constantly exposed to high levels of radiation.

The Tuareg people living in the area near the new SOMINA mine in northern Niger have even nicknamed the workers’ encampment there “Guantanamo,” because of the harsh working conditions and the Chinese foremen. And, in Namibia, the Chinese allegedly told complaining workers that they had to “suffer now, so that future generations can enjoy.”

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