On the Contentious Subject of Chinese Investment in Africa

Chinese economic expansion demands energy and natural resources that far exceed domestic supply capabilities, posing a serious threat to the nation’s security. From this, diversified Sino-African energy and resource trade relations have become more than just strategic, but rather, vital for Beijing. It is of no surprise that the literature on the subject of Chinese investment in African nations is polarised and influenced by value judgements regarding China’s role and agenda in the international economy. On one hand, Western critics regard it as neo-colonialist; on the other, proponents see it as pro-mercantilist. Using the case study of loans-for-oil trade deals struck between China and Angola, this article aims to challenge this binary stance that seems to essentialise the issue of ‘China in Africa.’

By Maria Patricia Bejarano

China’s extraordinary economic growth has led to a demand for energy that cannot be fueled by local supplies. [1] As the largest global consumer of energy with unrivalled goals for economic output, the Chinese government has seen energy security become one of its main priorities since the turn of the 21st Century. It is thus of no surprise that China is the biggest global investor in renewable energy and the world’s biggest producer of wind and solar energy. [2] In spite of this, the country consistently falls short in meeting its own goals to secure a self-sufficient energy supply. The nation remains highly dependent on coal and crude oil (56% and 18% of national consumption, respectively), since renewable energy only amounts to 14.3% of total energy consumption. [3] As a result, China’s presence in African countries like South Sudan, the Democratic Republic of the Congo (DRC), and Angola that are very rich in and dependent on natural resources such as crude oil and coltan, is of tremendous strategic interest.

Over the past two decades, China has invested aggressively and expansively in all corners of African industry. What started as an energy and resource security strategy evolved into a fully immersed business partnership, with China being involved in almost every single African sector. [4] Indeed, Chinese investment has been so extensive within the continent that it has been considered “inconceivable” to discuss “Africa’s economic and political destiny…without reference to China.” [5] This intense interest in the continent has been met with mixed sentiment, bringing about  “a burgeoning ‘grey’ literature in the popular and business press” and becoming a highly debated and polarising subject. [6] On the one hand, (and hypocritically enough), Western critics of Chinese involvement in the country label it as neo-colonialist and exploitative. [7] Notably, Western critics make a point of highlighting Chinese firms’ breaches of labour regulations in African countries, often in obvious attempts to demonise their involvement in Africa. [8] For instance, when previous-US Secretary of State Hillary Clinton famously warned that Chinese investments would “undermine good governance in Africa,” she was making a clear value judgement to signal Western involvement in Africa as ‘good’ and its Chinese counterpart as ‘bad.’ [9] On the other hand, those in favour of Chinese investment argue that Beijing’s motivations for entering the African market are purely neo-mercantilist, or ‘strictly business-minded.’ Proponents of this point of view argue that China’s main principles of external cooperation, non-intervention, and non-interference provide nations with domestic freedom that was previously curtailed under the Washington Consensus. Of course, these proponents often fail to recognise negative practices that China’s presence brings to the continent, such as predatory debt-trapping techniques closely resembling gunboat diplomacy strategies once used by colonisers to justify inequitable trade arrangements. [10]

As we have unpacked: energy and mineral security is crucial to China and its intense investment in Africa has caused much debate and has had a polarising effect. However, as Chipaike and Bischoff (2018) argue, this debate has simplified this complex subject into “China versus Africa,” not considering the nuanced interactions between heterogeneous state and non-state actors, different interests, and evolving political and cultural developments. [11] This polarising effect on the conversation simplifies the issue to an ideological or political issue. Using the controversial case of Sino-Angolan energy securisation, I will now illustrate how essentialising the issue of Chinese investment in Africa to neo-colonial versus pro-mercantilist inhibits our understanding of the complexity of issues in this sphere of security.

Angola is China’s largest source of crude oil in Africa. One key distinction between Chinese and Western involvement in Africa is the nature of the investments themselves. Whilst traditional Western investments are usually conditionally based on neoliberal economic restructuring - in previous occasions, these have been known as Structural Adjustment Programmes or Poverty Reduction Strategy Papers - China is not part of the Paris Club. [12] Therefore, it is not bound by international rules and regulations on foreign debt and is free from having to apply such conditions to its loans. This falls in line with its non-intervention and non-interference principle, part of the broader south-south cooperation (SSC) narrative, in which both China and African states view themselves as equal members of the Global South and thus share experiences of inequality with respect to the Global North. Chinese loans are also different to Western counterparts in that often repayments for infrastructure projects or loans are repaid with natural resources, known as the ‘Angola Mode.’ [13] This loans-for-oil arrangement began with Angola in 2004 and has quickly become popular in countries that do not have the financial guarantees for traditional loans. [14] The original Angola Mode deal provided the Angolan government with a loan of $2 billion in exchange for 10,000 daily barrels of Angolan crude oil. [15] Loans-for-oil arrangements quickly proved to be quite favourable to both parties, and thus the Angolan scheme was renewed in 2005 and 2007 for the same multibillion-dollar sums through China’s Eximbank. [16] However, this seemingly ‘sweet deal’ may have been too good to be true; recently, Angola has been trying to end this scheme as two-fifths of its external debt exists in the form of oil-backed loans owed to China. [17] Even more so, as Angola sought debt relief by joining an IMF programme in 2018, it was instructed to clear its collateralised debts and has appealed to negotiations with both China and the Group of 20 (G20). [18] This reflects back on the above-mentioned point regarding debt trappings and thus should of course not be overlooked, but we must ask if this shortcoming is enough to outstrip the entire debate, given that it is a new type of loan arrangement.

Others see this exchange as an alternative arrangement that resulted in a win-win scenario between war-torn Angola and oil-focused China. [19] Indeed, 50% of the first Angola Mode loan was solely directed to rebuilding infrastructure that had been damaged during the country’s 27-year-long civil war. [20] According to this viewpoint, Angola, much like other African states at the time, had been abandoned by the West, classified as ‘high risk’ states for lending, and thus was not able to secure the funds needed to rebuild after the end of the war in 2002. [21] Only through these alternative arrangements was Angola able to obtain much-needed infrastructure construction that would have not been possible under traditional Western aid. [22] As such, there is a case to be made in favour of pro-business approaches that not only provide the infrastructure and services needed, but that also come free from loans requiring arguably patronising neo-liberal policies and political adjustments.

In spite of this, many scholars have noted the presence of corruption in these trade deals and their negligible impacts on poverty reduction. [23] The key question here is whether these loans-for-oil and infrastructure-for-oil deals should be considered neutral business exchanges regardless of their social impact, transparency, and potential corruption. Should we let business be business at the expense of maintaining the corrupt system of Angolan oil production? Or worse, when knowing that organisations such as the China International Fund are actively involved with and supporting regimes that have committed human rights violations, such as Robert Mugabe’s in Zimbabwe or Moussa Dadis Camara’s in Guinea, in exchange for resources. [24] However, this is not merely a Sino-African issue, as Western companies (primarily American, British, French, and Italian) still have the largest presence in Angolan oil in terms of stakeholders and operational rights. [25] Not only do foreign oil companies have dealings with Sonangol, Angola’s state-owned oil giant, but Western consultancies such as PricewaterhouseCoopers (PwC) and Accenture are equally complicit in the chain of corruption of the petro-state, as detailed by The Guardian’s ‘Luanda Leaks’ exposé. [26] Therefore, this Sino-Africa debate is not as simple as its name implies: Western actors are also implicated just as much as Chinese.

To conclude, one thing that is clear when examining the ‘China in Africa’ debate is that it is not merely ‘China in Africa,’ but rather a whole host of actors with different interests interacting in a highly complex environment, often mixing with Western governments and other private actors. By showcasing both sides of the binary with regards to Sino-Angolan oil relations, we can see that when the subject is simplified to ‘neo-colonialist’ versus ‘pro-mercantilist’ it removes the nuance and more interesting questions that arise from such case studies. Whether or not business can be fully neutral and removed from political influences seems like a perennial question, but nonetheless one that merits attention by both academics and policymakers. To fully understand and begin to address such challenges, it is therefore a prerequisite to drop ideological value judgements and instead offer critical, context-based, and transparent arguments to the discussion.

Sources

  1. Downs, E. C. (2000) ‘China’s Quest for Energy Security,’ RAND Corporation [online] Available from https://www.rand.org/pubs/monograph_reports/MR1244.html.

  2. Delman, J. (2018) ‘China’s energy security: the transition towards a green energy system’ Asia Research Institute [online] Available from https://cutt.ly/PoJPTjo.

  3. CSIS China Power Project (2019) ‘How is China’s energy footprint changing?’ Center for Strategic and International Studies [online] Available from https://chinapower.csis.org/energy-footprint/.

  4. Zhao, S. (2014) ‘A Neo-Colonialist Predator or Development Partner? China’s engagement and rebalance in Africa’ Journal of Contemporary China 23 (90), pp1033-1052.

  5. Ajakaiye, O. and Kaplinsky, R. (2009) ‘China in Africa: a Relationship in Transition’ European Journal of Development Research 21, pp479-484.

  6. Ibid.

  7. See: Blair, D (2007) ‘Why China is Trying to Colonize Africa’ New York Times [online] Available from: https://www.telegraph.co.uk/comment/personal-view/3642345/Why-China-is-trying-to-colonise-Africa.html; French, H.W. (2010) ‘The Next Empire’ The Atlantic [online] Available from: https://www.theatlantic.com/magazine/archive/2010/05/the-next-empire/308018/; Grammaticas, D. (2012) ‘Chinese colonialism?’ BBC [online] Available from: https://www.bbc.com/news/world-asia-18901656; Sharife, K. (2009) ‘China’s New Colonialism’ Foreign Policy [online] Available from: https://foreignpolicy.com/2009/09/25/chinas-new-colonialism/; Walsh, C. (2009) ‘Is China the new colonial power in Africa?’ The Guardian [online] Available from: https://www.theguardian.com/business/2006/oct/29/china.theobserver

  8. Oya, C. and Schaefer, F. (2019) ‘Chinese firms and employment dynamics in Africa: A comparative analysis’ IDCEA Research Synthesis Report, SOAS, University of London [online] Available from https://www.soas.ac.uk/idcea/publications/reports/file141857.pdf

  9. Quinn, A. (2011) ‘Clinton warns against "new colonialism" in Africa’ Thomson Reuters. [online]. Available from https://www.reuters.com/article/us-clinton-africa/clinton-warns-against-new-colonialism-in-africa-idUSTRE75A0RI20110611

  10. Mourdoukoutas, P. (2018) ‘China is Treating Africa the Same Way European Colonists Did’ Forbes [online] Available from https://www.forbes.com/sites/panosmourdoukoutas/2018/08/04/china-is-treating-africa-the-same-way-european-colonists-did/#66984881298b

  11. Chipaike, R. and Bischoff, P.H. (2018) ‘A Challenge to Conventional Wisdom: Locating Agency in Angola’s and Ghana’s Economic Engagements with China’ Journal of Asian and African Studies 53 (7), pp1002-1017.

  12. The Paris Club is a group composed of major creditor countries that decide on solutions for payments owed by debtor countries.

  13. Foster, V., Butterfield, W., Chen, C., and Pushak, N. (2008) ‘China’s emerging role in Africa: Part of the changing landscape of infrastructure finance’ The World Bank [online] Available from http://documents1.worldbank.org/curated/en/888291468029095977/pdf/472180BRI00Box1ole1china1africa0111.pdf

  14. Ibid.

  15. Ibid.

  16. Zhao (2014).

  17. Whitehouse, D. (2020) ‘Seeking debt relief, Angola opens door of oilfield holdings to China’ The Africa Report [online] Available from https://www.theafricareport.com/29991/seeking-debt-relief-angola-opens-door-of-oilfield-holdings-to-china/

  18. Ibid.

  19. Chipaike and Bischoff (2018).

  20. Foster, et al. (2008).

  21. Ibid.

  22. Burgis, T., Sevastopulo, D., and O’Murchu, C (2014) ‘China in Africa: how Sam Pa became the middleman’ The Financial Times [online] Available from https://www.ft.com/content/308a133a-1db8-11e4-b927-00144feabdc0

  23. Oya and Schaefer (2019).

  24. Burgis, Sevastopulo, and O’Murchu (2014).

  25. Zhao, S. (2011) ‘The China-Angola Partnership: A Case Study of China’s Oil Relations in Africa’ China Briefing [online] Available from https://www.china-briefing.com/news/the-china-angola-partnership-a-case-study-of-chinas-oil-relationships-with-african-nations/

  26. The Guardian (2020) ‘Luanda Leaks Series’ [online] Available from https://www.theguardian.com/world/series/luanda-leaks