Emerging powers in Africa Watch
FOCAC 2009: A new impetus for Sino-African relations?
2009-11-05, Issue 456
The spotlight will fall on Sharm El’ Shaik, Egypt in November 2009 as the next chapter in Sino-African relations is forged at the occasion of the fourth Forum for China-Africa Cooperation (FOCAC). It will see representatives from African and Chinese governments converge at an ominous time as the world continues to grapple with a financial crisis. The FOCAC summit was initiated to serve as China’s primary vehicle to outline and structure its foreign policy in Africa. It serves thus to foster increased and in-depth dialogue amongst Chinese and African governments with a view to stimulate greater south-south cooperation and development through deepening aid, trade and investment linkages. The first summit took place in Beijing in 2000, followed subsequently with summits in Addis Ababa in 2003 and Beijing in 2006.
SETTING THE SCENE
China’s deepening engagement in Africa has received increased attention over the past number of years. Since the inception of the first FOCAC summit in 2000 the trade relationship has increased from US$ 10.5 billion to US$ 106 billion in 2008. Africa has been wooed for its provision of raw materials to fuel China’s impressive economic boom which recorded over 9% growth annually. The trade relationship has seen Africa supply these materials in exchange for Chinese manufactured and electronic imports- a skewed relationship that has drawn criticism over its lack of import diversification from Africa over time.
The effects of the global economic crisis have been felt from North to South. On the back of domestic consumer demand, the Chinese economy has however seen significant signs of recovery. So much so, the World Bank recently increased its previous estimate of 6.5% growth to 7.2%. The Asian giant’s traditionally export driven economy slowed as its manufacturing sector suffered due to lower demand for goods. The government acted swiftly in reaction to the global recession by focusing attention instead on growth through the domestic economy with the provision of a US$ 585 billion stimulus package. The package focused specifically on the development of domestic infrastructure projects, while the effects of the lowering of taxes and issuing of subsidies has been seen with economic growth figures up from 6.1% in the Q1 2009 to 7.9% in Q2 compared with the same period last year.
Domestic demand for raw materials from Africa would undoubtedly continue through the economic downturn as a result of infrastructure developments being identified as a priority sector within the stimulus plan. However new investment opportunities have also continued to be sought for China’s state-owned enterprises (SOEs) and private sector alike to expand activities. With over US$ 1 trillion in foreign reserves, Chinese banks have remained eager and willing to provide financing towards these endeavours, no doubt also to continue with the expansion of China’s ‘Go Global’ strategy. Deals in 2009 have continued to be signed throughout the continent for projects in countries including Liberia, Tanzania and Senegal. A prominent feature of future deals will be those investment agreements signed though Standard Bank, Africa’s largest bank, and the Industrial and Commercial Bank of China (ICBC), China’s largest bank. ICBC acquired a 20% stake in Standard Bank in 2008 and their first jointly-financed deal was signed earlier this year. The deal will see a US$ 1.6 billion investment in the Morupule B coal-power station in Botswana and is one of over 60 deals currently being considered through the partnership.
China has continued however to place emphasis on its relationship with the United States of America. The two countries are now more than ever intertwined in achieving economic recovery and growth in the current global climate. Diplomatic ties have deepened in the face of economic challenges illustrated with US Secretary of State Hillary Clinton’s visit to Beijing, Chinese Foreign Minister Yang Jiechi to Washington and a proposed visit by President Obama to China later this year.
President Hu and President Obama established the US-China Strategic and Economic Dialogue (SAED) in April this year. The first meeting took place in China in July where discussions focused on stabilizing bilateral trade, addressing America’s budget deficit and promoting further economic and financial cooperation to address the global financial crisis. Increased negotiations have been witnessed between China and America on issues such as nuclear non-proliferation and climate change since the newly elected US administration come to power. However, although The United States has seen its trade deficit decrease from US$ 56.8 billion in June 2008 to US$ 27 billion in June 2009, this is up from US$ 26 billion recorded in May this year. The United States is China’s largest trading partner while it also the largest holder of US treasury bonds. It is this bilateral trade and investment relationship that will remain foremost in the minds of Chinese policy makers, however its relations with Africa could play a strategic role in investment and trade opportunities for the Asian country as the US economy remains vulnerable and global demand for imports suffer.
China’s interest in Africa has not waned under current economic conditions. This was confirmed during Chinese President Hu Jintao’s visit to Tanzania in February this year, at which time he stated the need for China and Africa to work together in the face of prevailing harsh economic realities and the effects of the financial crisis particularly on the developing South. Indeed, China’s Ministry of Commerce announced an 81% increase in foreign direct investment from China to Africa in the first six months of 2009 totalling US$ 552 million compared with the same period in 2008. This is in stark contrast to a drop of over 30% in Sino-Africa trade to a value of approximately US$ 37 billion in the first six months of 2009, compared with the same period in 2008.
Africa thus remains an important strategic partner for China. Africa’s infrastructure needs amount to approximately US$ 75.5 billion annually to maintain and construct necessary structures according the Africa Infrastructure Country Diagnostic study conducted by the World Bank. However this amount is sure to increase as a result of the financial crisis and depleting funding for such needed projects from the West. Africa therefore provides a good hunting ground for SOEs looking for deals to expand their operations. This attention could thus serve Africa’s interests as it faces a decrease in demand for commodities from the continent and simultaneous lack of demand for China’s manufactured goods which ultimately fuels its demand for resources from Africa. This as a growth rate of 2.8% is expected in 2009 for Africa, down significantly from 5.7 % in 2008.
A NEW CHAPTER IN SINO-AFRICAN RELATIONS?
It is under these circumstances that FOCAC will play itself out in November 2009. In the run up to the meeting a number of high level visits have taken place. President Hu Jintao conducted a significant four nation Africa tour to Mali, Senegal, Tanzania and Mauritius in February 2009 where he reiterated an unwavering commitment to the continued implementation of the 2006 Beijing Action Plan, further aid provisions, debt forgiveness and trade and investment activities. He also alluded to “pragmatic cooperation” and a “new strategic partnership” perhaps highlighting a more cautious approach under current economic conditions.
Furthermore, Chairperson of the Commission of the Africa Union (AU) Jean Ping visited China in September 2009 during which time he participated in a strategic dialogue between China and the AU. Regional organizations have also received ongoing attention as highlighted through a trade pledge of US$ 100 billion to be reached by China and the East Africa Community by 2010. A meeting was also conducted in March this year between the China-Africa Development Fund and representatives from the African Union Commission, NEPAD, African Development Bank and Economic Commission in Ethiopia to outline areas of mutual interest and possible partnership.
Relations between China and Africa have clearly not waned and 2009 FOCAC will certainly prove to further consolidate ties. There are signs however that it could usher in a new direction within this strategic partnership, as mentioned by President Hu during his tour of Africa. First, state-owned enterprises have gained increased experience in establishing themselves and operating in Africa over the past number of years, while the growing trade relationship, which continues to burgeon, has highlighted an unfavourable dependence on the exporting of raw materials from the Continent. Comments by President Hu suggest that while its commercially driven approach in Africa will continue, the PRC government would also need to promote greater employment opportunities for local African communities, transfer of technology and social responsibility through their operations.
Second, a more people-centred approach would serve to deepen the engagement between the China and Africa as cultural and language barriers continue to provide challenges across the spectrum of activities by Chinese activities on the Continent. Private firms and state owned enterprises alike highlight cultural misunderstandings, miscommunication clashing with profit making and provision of efficient services. Perceptions of Chinese operations on the ground have been forged through lack of understanding of local labour laws and other communication challenges. People-to-people exchanges must serve to bridge the cultural divide which will otherwise continue to shroud commercial gains if mutual learning and understanding is not advanced. Social issues should thus be advanced at FOCAC 2009 and President Hu’s emphasis in his February speech on developing greater exchanges in the fields of health, culture, education, tourism and amongst youth could serve as an indication of this.
Third, African representatives need to forge direction in matching Chinese engagement with policy priorities towards the final Action Plan for 2009. The next three years should have greater concern and focus on African priorities as a result. Corresponding needs with commitments made will ensure synergy toward mutually beneficial goals. Furthermore, accountability needs to be maintained towards implementation of commitments made. Commitments in the 2006 Beijing Action, such as those listed below, should be adequately reviewed, with constraints and challenges being identified by both African and Chinese stakeholders.
Part of this African response should be directed at African participation in the follow-up and implementation of actions agreed to at the FOCAC meeting. A greater focus on African participation will necessitate greater African ownership of the agreements made. It is under the backdrop of these previous set of commitments that African politicians need to address pitfalls in order to progress and implement lessons learned towards the next set of commitments made at FOCAC 2009 and thus have direct involvement in the implementation of the commitments made:
- Doubling of China’s 2006 aid commitments to the continent by 2009;
- Provision of US$3 billion in preferential loans and US$2 billion in preferential buyer’s credits over 3 years;
- Establishment of the China-Africa Development Fund providing US$5 billion towards Chinese companies investing in Africa;
- Cancelling debt arising from all the interest-free government loans that matured at the end of 2005 owed by heavily indebted poor countries and the least developed countries in Africa that have diplomatic ties with China;
- Increasing from 190 to 440 the number of export items from Africa to China receiving zero-tariff treatment from the least developed countries in Africa that have relations with China;
- Providing training for 15,000 African professionals;
- Sending 100 senior agricultural experts to the continent and establishing 10 agricultural demonstration centres;
- Building of 30 hospitals;
- Providing a RMB 300 million grant towards anti-malaria drugs and construction of 30 malaria prevention and treatment centres in Africa;
- Building 100 rural schools and increasing the number of Chinese Government scholarships to 4,000 per year by 2009;
- Dispatching 300 youth volunteers to the continent;
- Establishing three to five overseas economic and trade cooperation zones.
Fourth, greater synergy between policy priorities and commitments made will ensure African stakeholders create a partnership towards sustainable economic benefits for ordinary citizens. The Millennium Development Goals are often reiterated by both African and Chinese policy makers as a common developmental priority and this was also reinforced by President Hu during his African tour in February. However if these Goals are to indeed be targeted and achieved though engagement between China and Africa, activities will need to filter down to Africa’s grass roots level, beyond the remits of Africa’s elites. African ownership over the implementation of FOCAC commitments must not be understated. For a new strategic partnership to be witnessed however, buy-in from both sides will be needed to ensure its success. African stakeholders need to take advantage of this multilateral forum to learn from China’s domestic developmental experiences, and transfer such lessons to Africa. In order to move beyond the traditional relationship based on Africa’s provision of minerals and natural resources, practices towards sustainable development need to be sought.
The success of Sino-African relations will lie in addressing the current imbalances that exist. Mechanisms to improve and promote African investments in China, development of Africa’s manufacturing sector and food security must be fostered. African leaders will need to be vocal in stressing the benefits for the African people.This was illustrated most recently at the World Economic Forum in Dalian. Zimbabwean Deputy Prime Minister Arthur Mutambara was outspoken regarding China’s exploitation of raw materials on the Continent, and emphasised the need to focus on manufacturing and agricultural investments in order to foster real economic growth in his country. As he stated “we are not going to produce raw materials in Zimbabwe for China. China will come on our own terms as partners”- a sign perhaps that the growing imbalance in Sino-Africa relations needs to be addressed in order for a real “win win” partnership to prevail.
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* Hayley Herman is the research manager at the Centre for Chinese Studies, Stellenbosch University
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