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China in Africa: after the summit

The recent China-Africa summit in Beijing secured further business deals and offers of assistance for the continent. But did it allay the continent's fears about Chinese corporate social responsibility? Godwin Nnanna reports.
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While many in the west continue to criticise China’s approach to business in Africa, the recent China-Africa Cooperation Forum in Beijing ended with a large number of business deals being signed by representatives of the two regions. 

For instance, Algeria’s biggest corporation, Sonatrach, which over the years has been reluctant to open up to foreign companies, signed a deal with the China National Petroleum Corporation (CNPC) -- an extension of the petroleum cooperation protocol the two corporations signed two years ago.

Sonatrach is planning to construct a refinery at Tiaret, in western Algeria, with CNPC cooperation. Even before the summit, CNPC had commenced drilling activities at the Tenere block in Niger Republic, and has had the Nigerien president’s nod to begin similar activities in the Bilma area of the country.

The latest deals are not CNPC’s first in Africa. In 1996, eight years after its founding, CNPC commenced its African operation in Sudan. Today, the company also operates in Mauritania, Nigeria, Chad, and Egypt.  

Reports indicate that CNPC is currently considering the construction of new oil pipelines linking northern and western Africa. A senior CNPC official was recently quoted in the Wall Street Journal as saying that one pipeline will connect Sudan, Chad and Niger while another will go north, linking Algeria’s Mediterranean seaports with Mauritania. Nigeria is expected to connect to these two pipelines via Niger. CNPC is already joined by two other leading Chinese oil companies operating in Nigeria, CNOOC and Sinopec. It is a very ambitious project, which partly explains why concerns are mounting over the issue of corporate social responsibility.

China’s growing importance in world energy markets and the global environment requires that we all pay close attention, particularly since the country’s position in the world can only grow stronger as time goes by. China has already set a goal to quadruple its economy by 2020. If it meets this target, the country’s annual energy consumption is expected to grow by at least 12%, which would exert tremendous pressure on oil-producing countries in Africa. 

China’s desire for energy security drives its strategy of procuring controlling equity positions overseas, particularly in Africa. The scenario poses a dilemma for other emerging economies who would like to achieve security of supply, but who may not possess the same financial muscle as China. For African leaders, most of whom were at the summit in Beijing, the most interesting thing may be the increased bargaining power that the unfolding situation presents. Nearly all of the 46 African heads of state that were in Beijing last month came home smiling, buoyed by promises of increased development assistance. 

The Beijing summit secured a decision by China to double its assistance to Africa by 2009. The country will also provide US$3 billion preferential loans and $2 billion preferential credit to Africa over the next three years. The China-Africa Development Fund was established – to the tune of US$5 billion – to encourage Chinese companies to invest in Africa. China has promised to open its market to Africa by increasing the number of export items from 190 to 440 and receiving zero-tariff treatment from the least developed African countries that have diplomatic ties with China. Over the next three years, China has also pledged to train 15,000 African professionals and build 30 hospitals and malaria prevention centres in Africa.

In addition, China has decided to dispatch 300 youth volunteers to Africa, build 100 rural schools and increase the number of Chinese government scholarships to Africa from 2,000 to 4,000 per year by 2009. Ordinarily, these gestures would allay fears among Africans about the determination of Chinese enterprises to be good corporate citizens on the continent. But has it?

As a participant in the United Nations Global Compact Learning Forum held last month in Accra, Ghana, I was fortunate enough to have moderated one of the sessions, entitled “China in Africa: concerns over corporate social responsibility”. At the end of the deliberations it was clear that there is justification for some concern about China in Africa. China does seem to have demonstrated a different investment model than most of the receiving countries had seen in previous trade relations. But participants noted that there are some negative consequences – environmental and social – that will need to be recognised; and check measures need to be put in place to ensure that there is a balance between the positive and negative effects.

“The greatest challenges in times to come would be local job losses caused by changes in manufacturing structure due to growing imports of cheaper goods from China; friction due to reactions from locals to successful Chinese nationals who will become embedded in the society; and from a loss of local government flexibility in managing such situations,” said a Ghanaian attendee.

There was also the issue of economic diversification, which some observers believe has been relegated to the background by most countries currently witnessing massive investment in the extractive industries. The Organisation for Economic Cooperation and Development (OECD) noted in a recent report that China’s booming demand for commodities has reduced the incentive for most receiving countries to diversify their economies away from commodities, making them vulnerable to sudden swings in global prices.

Participants agreed that African governments need to ensure that investing Chinese enterprises adhere to best practices and respect labour laws. They should also ensure locals will benefit from the investment, in terms of employment, competitive wages and the availability of an infrastructure that will pave the way for further socio-economic development. While it might not be a magic formula, most of the participants believed that this would help to reduce poverty in host communities, while also ensuring a peaceful atmosphere for business.

Whatever one’s opinion on China’s rise, the summit saw it as a trend that the international community has no choice but to accommodate. Georg Kell, Executive Director of UN Global Compact, says: “If you allow African entrepreneurship to evolve, to compete and to learn from foreign investors – partly working with them and partly competing with them – you are sure to have great success stories emerging. The more you can take advantage of revenues from natural resources to invest in the long term, the better.”

Godwin Nnanna is assistant editor at Business Day Nigeria and winner of the Kalaam Award for Consumer Journalism 2005.

Homepage photo by Easten Law

Also by Godwin Nnnanna on chinadialogue: The new face of Nigeria's oil industry

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Default avatar
匿名 | Anonymous






Different scenario!

A question for the author: In your opinion, what is the difference between China's huge investment in African in recent years and the West's exploration of Chinese market in the past 20 years.

Even they have similar aspects, but I think they are different scenarios.

Meanwhile, I am very curious about western countries' investment in Africa. What is the situation nowaday? Have they helped improve the African development, economically, socially and environmentally? Personally,I doubt about it.

So please take a balanced view about China's investment in Africa. What are exactly the positive and negative points of China's businesses in Africa?

Default avatar
匿名 | Anonymous



Obligation from both sides!

Both African nations and Chinese companies are under similar obligations for helping improving investment social responsibilities for Chinese businesses in Africa.

Default avatar
匿名 | Anonymous


我相信中国是提供了卓越的财务资源来促使非洲經濟获得跨越式的發展。然而,他们必须显现出意愿以随逐已被制定的模范和标准来进行运营。今日,对于在尼日尔三角洲开始进行石油开采的公司扮演了主导者而不是合作伙伴的角色, 这就引发了了矛盾和冲突。

Re:Obligation from both sides

I believe that China offers a great opportunity for the financial resources Africa needs to leapfrog its economy. But they must show willingness to go by the established norms and standards for their operations. There is conflict in the Niger Delta today because the oil companies that started exploration there saw themselves as lords rather than partners in progress.

Default avatar
匿名 | Anonymous



No need to discuss this issue

In fact, there is no point to discuss this issue. Look at the history; we will be able to get the answer. From the past, economy in developing country always is being as predator by developed country. The current issue is, would China join in the club of developed nations? Since the 2nd World War, what are those countries that have become new members of this club? Is there any country from Africa? Africa, used to be French and British colonies, the French and British governments have assisted in building up governances there, however, did they help boost economies and democracy in those countries? What has happened in the past, we can do nothing on it, the way how China practices it’s investment might be not reasonable, but it could a new opportunity though.

Default avatar
匿名 | Anonymous


中国介入非洲的经济,对非洲是有好处的。一些人把它视为侵略性的作风那只是回应着西方国家的意见。总而言之, 我不见得有任何负面的后果。同意在石油生产国中是存有环境挑战的问题。 然而, 一旦遵从自然环境所规定的准则, 那么, 这问题是可以解决的。布瓦利亞, 赞比亚

Chinese investment is for Africa's good

Chinese incursion into the economies of Africa is for Africa's good. Those who see it as colonization are only echoing the voice of the West. I see no negative consequences whatsoever. Agreed for oil producing countries, there is the environmental challenge but that could be tackled when compliance to environmental standards is ensured.

Bwala, Zambian

Default avatar
匿名 | Anonymous



Thanks to be fair to China!

Comment 5 is to be fair regarding China's investment in Africa. Meanwhile, he/she has also pointed out the actual situation as well as key points to resolve the problem. Excellent!

Default avatar
匿名 | Anonymous



Desirable Chinese involvement in Africa

Greater engagement with China is both desirable and inevitable for Africa. However, it ought and should be done with the future in view. It should be done with the determination to foster interdependence and dependence on the part of Africa.
Kwesi, Ghana

Default avatar
匿名 | Anonymous



china and the west

I think we Africans need to look beyond Africa to understand the issues. The West wants China to join their predatory club and are using the standard criticisms of environment/human rights etc to threaten China with ostracism. But China has a history of exclusion and we in Africa should adjust to the change and not be victims of change! We have a duty to respond to opportunities.