Africa: Focac V Brings Billions More

Talk of a 'new type of partnership' was overblown, but Beijing pledged $20 bn. and took first steps toward improving corporate and environmental regulations.

With a crucial leadership handover at the end of the year and growing domestic economic concerns, Beijing hosted the Fifth Forum on China-Africa Cooperation on 19-20 July with the usual dash of multibillion-dollar promises.

Foreign and finance ministers from more than 50 African countries attended, but only a handful of heads of state and government were present, notably South Africa's President Jacob Zuma, Côte d'Ivoire's President Alassane Dramane Ouattara and Kenya's Prime Minister Raila Odinga. However, FOCAC V won a different sort of feather in its cap in the presence of the United Nations Secretary General, Ban Ki-moon.

President Hu Jintao outlined a set of five new pledges to Africa. The first was on finance and includes US$20 billion in assistance to the continent, double the amount pledged three years ago in Sharm el Sheikh, Egypt, in 2009 (AAC Vol 3 No 1, FOCAC meets expectations, FOCAC 2009 brings more promises) . The theme of this year's meeting – to 'build on past achievements and open up new prospects for the new type of China-Africa strategic partnership' – sounded a little tired. Yet, with little competition, China finds it hard to outdo itself every three years at the FOCAC meetings. The politicians continued to proclaim that this FOCAC would bring new initiatives and a deeper strategic partnership, but that did not happen. Ahead of the summit, Zambia's Foreign Minister Given Lubinda advised African countries to form a united front instead of competing separately for attention from Beijing. Despite such calls for unity, the 2012 Beijing Declaration showed no signs of an African united front.

Although no formal audit exists on the fulfilment of China's pledges to Africa at FOCAC, the general consensus is that they have been delivered. According to President Hu, the Chinese government has cumulatively built more than 100 schools, 30 hospitals, 30 anti-malaria centres and 20 agricultural technology demonstration centres in Africa. Beijing has also successfully rolled out US$15 billion in preferential lending, trained close to 40,000 African personnel in various sectors and provided more than 20,000 scholarships to students from African countries. But analysts still argue that FOCAC will be of only limited effectiveness if the institution does not include a monitoring body or engagement and follow-up from the African counterparts.

Africa's largest financier

Chinese loans to Africa do not always count as overseas development assistance because the terms are not strictly concessional, and it is unclear how much of the new loans will contain a large enough grant element to count as such. Nonetheless, in addition to becoming Africa's largest trading partner, these loans will make China Africa's largest financier, ahead of the World Bank and International Monetary Fund. Hu said the move was designed to stop 'the big bullying the small, the strong domineering over the weak and the rich oppressing the poor'.

The loans will go towards supporting infrastructure, manufacturing and the development of small businesses. Yet China Export-Import Bank, the usual instrument for rolling out the Chinese credits announced at FOCAC, is not a micro-financier and the bank's minimum loan amount is far in excess of what most small African businesses can hope to manage, so this presumably refers to Chinese small businesses.

The second pledge this year is training. Beijing will launch an 'African Talents Programme' to train 30,000 people in various sectors and set up vocational training centres. It will also offer 18,000 government scholarships, send 1,500 medical personnel to Africa and continue with the 'Brightness Campaign', which provides free cataract treatment to African patients.

The third pledge is to build infrastructure partnerships. The fourth is people-to-people exchanges. These so-called 'friendship actions' promote exchanges between Chinese and African journalists and researchers, among others. The final pledge relates to security, led by the Initiative on China-Africa Cooperative Partnership for Peace and Security.

While China has maintained its focus on African infrastructure, Chinese Commerce Minister Chen Deming announced that such projects would now be approached from a regional perspective, rather than bilaterally as has been the case. China usually focuses on bilateral ties, leaving Japan to take the lead on multilateral forms of engagement.

Regional integration has been a buzzword in Africa for more than a decade now, but programmes such as the New Partnership for African Development have so far achieved little in advancing this agenda. With China's weight and money behind such initiatives, perhaps more can be done. Although African diplomats universally praised China's moves, the businessman and analyst A.L. Kitenge Lubanda of Congo-Kinshasa's Synergy-Group suggested that the promise to double loans is a small measure and that Beijing could afford to do much more.

Several new deals that will boost China-Africa trade were developed outside of the confines of FOCAC. China Development Bank officials announced in early July that the China-Africa Development Fund, which encourages smaller Chinese companies to invest in Africa, would have an additional $2 bn. to spend after investing its first $1 bn.

Africa's wish list

Before the meeting, Senegalese China-Africa specialist Adama Gueye revealed that African diplomats were disappointed by their inability to influence Beijing's agenda. Establishing more processing and industrial capacity in Africa has long been on the wish list for African policymakers. At the 2012 Africa Mining Congress in July, the China Mining United Fund and Ruukki South Africa announced a private equity joint venture that would target value-added projects in Africa.

Total China-Africa trade for 2011 was $166.3 bn., a three-fold increase since 2006. Despite the worsening financial climate (see Box, Big promises abroad, more worries at home), China has maintained its status as the continent's largest trading partner for the third consecutive year. Bilateral trade is expected to reach $180 bn. by December. Some 2,000 Chinese companies have dealings in Africa, with investments totalling $14.7 bn., according to Chinese Foreign Minister Yang Jiechi.

The deals signed on the sidelines of the conference were disappointing in volume this year, compared to previous FOCAC sessions, and amounted to only $341 million. Chinese investors in Africa have had a rough ride for the last three years, which perhaps explains their uncustomary lack of enthusiasm. The political turmoil in Libya and Egypt took them by surprise: an estimated $4 bn. in deals were suspended in Libya alone.

The need to effectively assess country risk and to safeguard the public image of Chinese companies in Africa has not gone unnoticed by Beijing. A declaration on corporate social responsibility was given at FOCAC's closing ceremony. The code of conduct, which does not appear to have any means to punish those who violate it, was endorsed by entities such as the China Council for the Promotion of International Trade, the China-Africa Development Fund and China Development Bank. They pledged inter alia to respect local customs, pay more tax and protect the environment. China Nonferrous Metal Mining, the largest Chinese investor in Zambia's Copperbelt, was also a signatory. The company's operations have been plagued by demonstrations against poor wages, climaxing in 2010 when a Chinese mining boss shot and killed several rioting Zambian workers (AAC Vol 3 No 12, Shoot first, negotiate later). President Michael Chilufya Sata's election was in part due to his platform on growing anti-Chinese sentiment.

Remarkably, this tone found its way into official speeches. President Zuma reiterated Hu's inferences about Europe's colonial history in Africa. Interestingly, however, he also warned African countries against falling into the same trap with China, describing the trading model of Africa exchanging raw materials for manufactured Chinese imports as 'unsustainable' in the long run. This was unusually outspoken for the South African President and a veritable volte-face when compared to his frequent effusive praise for China-Africa relations (with which much of the rest of his address was admittedly peppered). His predecessor, former President Thabo Mbeki, and his brother, the well-known businessman Moeletsi Mbeki, have both made similar pronouncements to little effect. For years, Pretoria has failed to assert itself in relations with Beijing. In fact, despite heavy international criticism, South Africa has effectively worked in tandem with China at the UN Security Council.

South Africa will have the opportunity to exert significant influence on China-Africa relations in the next few years. FOCAC 2015 will be held in Johannesburg and South African Minister of International Relations and Cooperation Maite Nkoana-Mashabane has assumed the FOCAC co-chairmanship. South Africa now also heads the African Union, with Nkosazana Dlamini-Zuma, President Zuma's ex-wife, assuming the chair from Gabon's Jean Ping. Dlamini-Zuma is likely to solicit support from China for the AU/NEPAD Presidential Infrastructure Champion Initiative, also currently chaired by South Africa. This will combine with the plan of the BRICS (Brazil, Russia, India, China and South Africa) to establish a development bank, which South African intends to direct towards African infrastructure.

Ultimately, the 2012 FOCAC was less about big numbers and more about consolidating a sustainable partnership and improving China's image in Africa. To that end, Beijing and several African diplomatic missions commissioned the World Wildlife Fund to draft proposals for incorporating the concept of 'green economy' into the China-Africa relationship. The move was well timed, as WWF released a report in late July highlighting the Asia-Africa links that threaten endangered species including rhinoceri, elephants and tigers. The invitation to a non-governmental organisation to participate in the main event was unprecedented.

Beijing hosted the Fifth Forum on China-Africa Cooperation on 19-20 July

Talk of a 'new type of partnership' was overblown, but Beijing pledged $20 bn. and took first steps toward improving corporate and environmental regulations.