Special issue on ‘Africa and China: Emerging patterns of engagement’

Introduction

On 16–17 November 2017, the Africa–Asia Initiative at Harvard University, a consortium of eight institutions and programmes with a focus on Africa–Asia collaborations, held a two-day conference at the Harvard Center Shanghai in China. With the theme ‘Africa–Asia Connections: Bridging Past, Present, and Future’, the conference brought together academic researchers, policymakers, and individuals from the private sector for stimulating discussions on Africa’s engagement with India, Japan, and China through the lenses of migration, trade, and aid; and environment, infrastructure, and industry. The three papers in this special issue were first presented at the 2017 conference and provide a window onto some of the discussions at the conference, this one with a focus on ‘Africa and China: Emerging Patterns of Engagement.’

In 2009 China emerged as Africa’s leading trading partner and also surpassed the World Bank as Africa’s top lender. While this may have caught some by surprise, Austin Strange in his contribution points out that this marked seven decades of China’s engagement with Africa. China’s phenomenal rise to become the second largest economy in the world after the United States intersected with the ‘Africa Rising’ story between 2002 and 2013, when six of the world’s fastest growing economies were in Africa – Angola, Nigeria, Ethiopia, Chad, Mozambique, and Rwanda. Africa’s rise was driven by a global commodity boom, especially demand from China and India for oil and other commodities, and net resources inflows in the post-HIPC era.¹ The slump in the commodity boom in 2014 with the slowing down of economic growth in Asia and Europe, aggravated by developments such as Brexit and America’s trade wars under the Trump government, have underscored the long-standing desire for African economies to diversify from commodity exports and to deepen South-South trade, which now accounts for over 50% of African trade, and intra-Africa trade. The signing of the African Continental Free Trade Agreement by 27 member countries of the African Union in Kigali in March 2018, and now by all 55 African countries, has given substance to the last-stated objective and positioned what would be the world’s largest free trade area by number of participating countries when operational. These developments have heightened the relevance and urgency of China’s relations with Africa: China’s development loans to Africa, the instrumental role of China in building and rehabilitating African infrastructure in the areas of transport and power, and the prospects of technology transfer between China and an Africa that seeks to build manufacturing potential.

China’s economic growth and its engagement with Africa

Unequivocally, the rise of the South or the developing South has been the most important characteristic feature and driver of tectonic shifts in the global economy over the last four to five decades, with the emergence of global value chains in a context of globalization a major catalyst. Since the 1980s the share of the developing South in global trade has increased significantly to overtake the contribution of advanced economies. The developing South now accounts for over 57% of global trade (OMFIF 2019; Fofack 2019a). This is set to rise even more in the coming years, supported still by robust economic growth and a rising middle class in countries like China. These shifts in the global balance of trade and asset allocation largely reflect strong rates of economic growth recorded by countries in the South and particularly the Asia region, which over the last five decades has consistently been the fastest-growing region of the world. However, while the first generation of emerging market economies drove robust economic growth rates and wealth accumulation in Asia, the major shift in the global distribution of wealth accumulation towards Asia was accelerated by the admission of China into the World Trade Organization (WTO) in 2001, about two decades after the successful implementation of economic reform which set it on a fast-track structural transformation path after 1979 and significantly improved its balance of payments.

Conservative estimates put China’s average gross domestic product (GDP) growth from 1978 to 2013 at between 9.5% to around 11.5% a year. Though slightly lower, 7.9%, the average growth rate recorded in China over the last decade of growth deceleration has been significantly higher than world average, 3.44%, and the African average of 3.9%. The impressive and sustained rates of economic growth achieved by China had significant implications both in terms of a shift in wealth accumulation and the distribution of global trade. Since the 1980s the contribution of China to global trade has increased significantly, rising from about 1 to 12% of global trade. In the process China overtook the US as the world’s largest trading nation in 2013 when its annual trade in goods crossed the $4 trillion mark for the first time. It has remained the leading trading nation since then. However, the rise of China to the apex of the global trade pyramid came after another important milestone when China overtook the US and Africa’s traditional economic partners and former colonial powers (France and UK) to become Africa’s single largest trading partner in 2009. China has consistently enjoyed that coveted position over the last decade, with the gap widening over time.

The rise of China to global prominence in the dynamic of global and African trade came after several decades of deepening economic cooperation between Africa and China, two historical partners (see Strange, this issue). Several decades after China’s logistical support and contribution to the struggle for independence in Africa, trade between Africa and China has grown from US$1 billion in 2000 to US$182.5 billion in 2018. In contrast, the intensity of trade between the US and Africa decelerated even though the US–African Growth and Opportunity Act (AGOA), the landmark US trade act enacted by the US Congress in 2000, significantly enhances market access to the US for qualifying African Countries (Liser 2018). Similarly, the Economic Partnership Agreements between the European Union and African nations did little to slow the shift in the geographical distribution of African trade and deepening trade ties between Africa and Asia. After China, India has been consolidating its status as a strong economic partner of Africa. It overtook the US to become Africa’s second largest-trading partner in 2013 and has enjoyed that coveted rank since then. As a sign of the major shift in the global trading landscape and in the context of the accelerating pace of geographical diversification, it is not insignificant that two Asian nations, China and India, have become Africa’s top two trading partners. Together the combined share of these two countries in Africa’s export has expanded rapidly over the last two decades to more than 23.3% in 2018, up from 3.5% in 1998. Forecasts suggest that these two countries could become the destination of more than 25% of total African exports by 2025.

However, despite the shifting geographical patterns of African trade, raw materials and primary commodities continue to dominate Africa’s exports to both old trading partners in Europe and new trading partners in the developing South and especially in the Asia region, which has enjoyed long-running growth and success on the path of diversification of sources of growth and exports. Energy, metals, minerals, and agricultural raw materials continue to account for the lion’s share of African exports (Afreximbank 2019; Fofack 2019b). They represented more than 75% of total African exports in 2018, and the rates were even higher in the years preceding the end of commodity super-cycle in the second half of 2014, when oil prices were at historically high levels in a region where oil-exporting countries alone accounted for more than half of Africa’s combined GDP and more than 55% of its export earnings (IMF 2016).

According to most recent estimates, over one-third of China’s oil supply has been sourced in Africa, mainly from Angola and Nigeria. In the agricultural sector, Benin, Burkina Faso, and Mali supply up to 20% of China’s cotton needs. While Côte d’Ivoire supplies China with cocoa, the country primarily imports its coffee from Kenya. In contrast Africa’s imports from China have been dominated by manufactured goods and industrial products, including electric machinery and equipment, mechanical appliances, mineral fuel, and mineral oil, vehicles and parts, as well as consumer goods and clothing/footwear. The dynamic of trade with other emerging partners in Asia under the growing Africa-South trading relations has followed the same patterns with Africa exporting raw materials and primary commodities and importing finished manufactured goods and industrial products in return.

While these patterns of trade have created a symbiotic relationship between Africa and Asia, with imports from the former providing the fuel to expand manufacturing and industrial output in support of growth in the latter, the model is not very different from previous engagements between African and European nations, and has been the source of criticism, with a growing number of international observers and traditional development partners characterizing China’s deepening relationships with Africa as neocolonialist in nature. In part the characterization reflects the high costs and adverse implications of continued dependency on primary commodities and natural resources for Africa’s integration into the global economy, where trade has been largely dominated by manufactured goods with increasing technological content.

More specifically, it has been argued that low-cost Chinese manufactured goods and products are putting great competitive pressure on local industries and businesses and undermining the process of structural transformation required to enhance the integration of African economies into the global economy. At the same time, the easing monetary policy regime of low credit lines and longer maturities in effect in China and other leading OECD economies (most notably the US and Eurozone member countries) in a context of financial repression in Africa have tilted the business playing field in favour of foreign investors, who on average have enjoyed higher risk-adjusted returns in Africa than African investors. Still another major criticism levelled against the deepening economic ties between the two historical partners has been its limited welfare impact, most notably in terms of employment creation.² As a response to such criticisms the Chinese government took the important step of boosting Chinese investment in infrastructure in Africa, especially arguing that the development of physical and economic infrastructure in Africa will accelerate the process of industrialization and structural transformation of African economies, and ultimately reduce their exposure to recurrent adverse global shocks and growth volatility which have been associated with long-term deterioration of commodity terms of trade.³ At the same time, they will also create the conditions for a shift towards a fairer trade landscape, with increasing economic ties between the two partners leading to sustained per capita income growth over time in both Africa and China. In effect, Chinese investments in the region have grown significantly over the last decade and are further contributing to trade expansion with the strengthening trade and investment link. Although Asia, Europe, and North America remain the top two recipients of Chinese outbound foreign direct investment, Africa is emerging as an increasingly attractive destination. China has become the first external partner in the financing of infrastructure investment across the region, a trend which is accelerating the growth rate of its stock of investment within the region. Yuan Wang and Uwe Wissenbach in this issue examine the case of the Chinese-financed and built Standard Gauge Railway project in Kenya. One of the largest single investments carried out by China in Africa is the financing of a hydro power plant worth US$5.8 billion in Mambila, Nigeria (ICA 2018). The allocation of Chinese foreign direct investment towards the financing of infrastructure is set to continue and grow even more in the coming years, especially after the renewed commitment by the Chinese government to extend another US$60 billion in financial support to Africa during the last Forum on China-Africa Cooperation (FOCAC) held in Beijing, China in September 2018. During the second Belt and Road Forum for International Cooperation held a year later, the Chinese government reiterated its commitment to boost its level of infrastructure financing to connect more countries and continents through a global infrastructure network financed under the Belt and Road Initiative.

But Chinese investment in Africa is expanding beyond infrastructure. Despite the relatively poor state of public infrastructure in most countries across the region, the rising labour and other factor costs in China and the increasing use of special economic zones as enclaves of efficiency and stability in the process of economic development is slowly but steadily shifting the global competitiveness landscape. Africa is becoming more competitive and is attracting more Chinese investors in a growing number of sectors and industries previously shunted as too risky. Since 2000 Chinese companies have registered more than 1000 African manufacturing proposals with the Commerce Ministry in several sectors, including glass, recycled steel, ceramics, textiles, dying, tanneries, and shoe factories among others (Feng and Pilling 2019). Increasingly, Chinese companies based in Africa include light manufacturing industries such as ceramic manufacturers producing tiles and plates, a steel-pipe plant, factories making everything from furniture to tomato sauce, companies specialized in plastic recycling materials, construction materials, pharmaceutical and medical products, as well as textile and garment materials. Investment in these other sectors speaks to other levels of China’s engagement with Africa, as attention has often focused on the objectives of the Chinese government and the operation of state-owned-enterprises or of multi-national companies like Huawei (Akyeampong and Xu 2015). Xu Liang’s study in this issue on Chinese clothing firms located in Newcastle, South Africa, provides a good illustration of the changing landscape and increasing sectoral diversification of Chinese investment within the region. The contribution also examines the place of the Chinese private sector, in this case family firms in the textile industry in Newcastle, in the landscape of Chinese investment in Africa.

China and Africa: Emerging patterns of engagement

Austin Strange’s contribution reminds us of China’s long engagement with Africa over a period of seven decades. Drawing on new databases on Chinese investment overseas, the article examines criticisms of the nature and consequences of Chinese state financing in Africa. It combines historical and contemporary evidence to provide a long-term view of Chinese state engagement, identifying four distinct periods of China’s engagement and state financing overseas: the early years (1949–1962); the use of aid as revolutionary foreign policy (1963–1977); pragmatism under economic reform (1978–1997); and Chinese development finance goes global (the period after 1998). This longer period of review establishes certain patterns in China’s state financing overseas that enables Strange to interrogate three narratives about Chinese state financing in Africa: that of China being a ‘rogue’ donor; the socio-economic and political consequences of Chinese state presence for African societies; and the potential debt risks for African states who receive Chinese state financing. Strange argues that:

Throughout the 2000s, China’s government has dramatically increased its investment in both traditional gift-like aid and loan-based development finance. In doing so it has blended elements of Mao’s politicized, highly concessional aid strategy and Deng’s more economically driven model of aid provision.

Africa has remained an important recipient of Chinese official development assistance (ODA), accounting for approximately 60% of Chinese ODA-like financing since 2000. In his conclusion, Strange notes that ‘Chinese state financing is neither a danger nor a panacea for African countries’. The onus is therefore on African governments and publics to comprehend the increasingly diverse portfolio of loan types the Chinese government offers and to ensure that they make prudent deals.

Yuan Wang and Uwe Wissenbach’s contribution on the Chinese financed and built Standard Gauge Railway in Kenya speaks to this need for African agency in how African governments evaluate and deal with Chinese financing, and the result is a nuanced picture. In this project, China took up the challenge to finance and build a new railway from Mombasa to Nairobi with future plans to extend it to Uganda and Rwanda to provide an integrated rail network for East Africa. Reminiscent of the financing and construction of the TAZARA railway from Zambia to Tanzania in the 1970s (Monson 2011), the World Bank had advised against the new Kenyan Standard Gauge Railway, weighing the cost against the predicted freight traffic, recommending instead a rehabilitation of the old colonial railway. The Uhuru Kenyatta government in Kenya took a forward-looking position and decided on the new railway. The project was funded by the Export and Import Bank of China (Exim Bank) with the construction executed by a Chinese state-owned-enterprise, China Road and Bridge Corporation (CRBC). Chinese multi-national Huawei was contracted to install the communication infrastructure along the 472-kilometre Standard Gauge Railway.

Drawing on over 100 interviews collected during fieldwork in 2015, 2017, and 2019, together with media and government reports, the authors are able to provide pertinent insights and perspectives from Chinese company officials, Kenyan government officials, Kenyan politicians, service providers, land owners, and trade union leaders during the construction of the railway, the immediate aftermath of its completion, and a review two years after it had become operational. The new railway and the envisioned future of a growing economy became closely associated with President Kenyatta and his government, who laboured to ensure that the railway was completed in 29 months, well ahead of the five-year planned schedule to enable its inauguration on 30 May 2017 to serve as part of the platform for his re-election campaign that year. That the project became entwined with election politics – the ruling government and the opposition critics – made government sensitive and responsive to criticisms around land compensation and labour disputes. In 2014, the year construction began, President Kenyatta announced that there would be 40% local input for the railway project, higher than the China Exim Bank’s required 70% Chinese inputs. The Kenyan Railways Corporation also requested design modifications to accommodate local requests, instances that spoke to African agency in the supposedly asymmetrical relationship between China and Kenya. Clientelism, however, produced mixed results in the local sourcing of materials, and politically-connected Kenyan companies landed the major contracts, but with spillovers as they outsourced to other companies. The highly inflated price of the project, originally estimated at US$3.8 billion, also points to how clientelism is conducive to corruption, with cost overruns in areas like land compensation which was the responsibility of the Kenyan government. We learn from this contribution that clientelism is not necessarily incompatible with development or responsive government, and that in African states where formal institutions are weak, clientelism can bridge the gap between the state and individuals.

Xu Liang’s contribution in this issue takes us down to the second level of Chinese engagement, away from state financing and the state-owned enterprises, and here we see several large and medium-scale, family-owned textile factories in Newcastle, South Africa. Again, the use of extensive fieldwork allows a granular analysis of the operation of Chinese entrepreneurs in the diaspora and the impact of their factories on the predominantly female Zulu factory workers in the KwaZulu homeland. Responding to Immanuel Wallerstein’s 2013 article on ‘end of the road’ capitalism, suggesting a structural crisis in capitalism as it migrates to peripheral geographical areas, Xu Liang rather points to capitalism’s capacity to reinvent itself on the frontier. In Newcastle, Chinese workers who had come to South Africa to work for large Taiwan, Hong Kong, and Mainland Chinese textile factories in the 1980s and 1990s took advantage of the exit of some of these companies in the worsening business climate from the early 2000s to lease factory space, buy used machinery, and set up smaller textile factories. Now catering for a largely domestic market, and drawing on Zulu women from adjoining townships as factory workers, both these ethnic Chinese industrialists and their Zulu female workers creatively utilized and reshaped familial arrangements to operate factories and to maintain a stable labour force.

Two structural innovations in the family form the basis of this fascinating case study. Several works have pointed to the importance of the family in diaspora businesses (see Xu Liang in this volume), and the Chinese, Indian, and Lebanese overseas diasporas are important examples. In Newcastle, family-owned (husband–wife) textile businesses had become the norm, that as Chinese factory workers who had migrated alone to South Africa assumed entrepreneurial positions, they partnered – a male mechanic and a female floor supervisor – to form a ‘production couple’. The partners may be married back in China, but the Newcastle Chinese community recognized and respected the relationship as genuine and treated them like a couple. This was a production partnership and not designed for reproduction, so the Newcastle Chinese production couples did not have children and both partners continued to support their families back in China, whom they planned to rejoin. Zulu women also availed themselves of the factory work in the Chinese textile industry to seek financial autonomy and with it redefine their expectations of courtship, marriage, and family. Female-linked households emerged, sometimes covering three generations to provide care for dependent elderly and children, and not necessarily including male adults. A new social category emerged, ‘mama mabhodini’ (factory mothers), with associated values of industriousness and reliability.

Conclusion

It is clear that the Africa–China relationship has a long future ahead. African countries are not only availing themselves of Chinese state financing to close their infrastructure deficits and to link regional markets, they are experimenting with the Special Economic Zones and the Agricultural Technology Demonstration Centres that have underpinned China’s industrial and agricultural successes. While the Chinese state increasingly self-monitors its operations overseas mindful of western criticisms, it is worth noting Strange’s point that ‘a wave of Chinese-induced debt crises across developing countries is not in China’s political interest’. It is up to African governments and business partners to be more strategic in their engagement with the Chinese state and businesses, to be informed and astute in the negotiation of loans, to insist on larger proportions of local inputs to create domestic economic opportunities, and to privilege the transfer of technologies that would facilitate the development of manufacturing in Africa.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Emmanuel Akyeampong is the Ellen Gurney Professor of History and of African and African American Studies at Harvard University and the Oppenheimer Faculty Director of the Center for African Studies.

Hippolyte Fofack is Chief Economist and Director, Research and International Cooperation Department at the African Export-Import Bank (Afreximbank).

Notes

1 African countries that met strict criteria could avail themselves of reduced debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative. The HIPC Initiative and related Multilateral Debt Relief Initiative (MDRI) were established in 1996 by the International Monetary Fund, the World Bank, and other multilateral, bilateral, and commercial creditors. By the end of 2017, 30 African countries had benefitted from the initiative.

2 On average it has been estimated that the job creation of Chinese foreign direct investment into Africa has been lower than averages in other regions of the world: 1.78 people for every US$1 million investment in Africa versus 2.24 people for the same level of investment in other regions (Brooks 2019).

3 The Chinese government also issued Nine Principles to Encourage and Standardize Enterprises’ Overseas Investment, a charter and guide of conduct to Chinese companies operating abroad. For further details on these principles see Sautman 2009.