Tuesday, February 26, 2013

China International Fund & Zimbabwe's Diamonds

South African journalist Khadija Sharife's article "Disappearing Diamonds" shines a spotlight on the links between the notorious Hong Kong company known as China International Fund (aka the 88 Queensway Group headed by Sam Pa) and the exploitative tragedy of the Marange diamond fields in Zimbabwe. Copiously documented and a fascinating, detailed read.

Khadija's focus on CIF should not obscure the fact that other foreign companies are actively exploiting the Marange diamond fields, including South Africa's New Reclamation Group. Apparently Diamond Mining Corporation and Mdaba Resources also have foreign investors as partners. Which countries do these firms call home? I tried to find out by using google but drew a blank. Does anyone else know?

Wednesday, February 20, 2013

Chinese Copper Mines in Zambia: Are they improving?

Human Rights Watch has published a follow up report to their critical 2012 study. The new report, "Zambia Safety Gaps Threaten Copper Miners," monitors changes (and lack of changes) at the Chinese state-owned CNMC copper mines in Zambia. According to HRW, "The report focuses on important labor rights improvements that have been made by CNMC's subsidiaries during the last year, along with challenges that still remain for both the Zambian government and CNMC in Zambia." A Chinese version is available here.

A hat tip to Matt Wells.

Friday, February 15, 2013

"China and Africa: Think Again" lecture at JHU (Baltimore)

I will be giving a talk, "China and Africa: Think Again," at the main campus of Johns Hopkins University, Tuesday, February 19, 2013, 12 Noon -­ 1:30 PM, 526 Merganthaler. Sponsored by The Arrighi Center for Global Studies, Co-­sponsored by Department of Sociology’s Program in Global Social Change and Development, the East Asian Studies Program, and Center for Africana Studies.

Wednesday, February 13, 2013

USA and Chinese Engagement in Africa: GAO Study

A team at the US Government Accountability Office (GAO) has just released a long-awaited study comparing US and Chinese export financing (and development finance more broadly) in Africa, based on detailed case studies of three countries, Angola, Kenya, and Ghana.

I read it late last night and this morning. It is, quite simply, by far the best single analysis I have seen on China-Africa-US engagement in Africa. It is comprehensive, empirical, deep and broad, careful, and balanced. Readers of this blog will expect that I read it carefully. I did, and I'm almost surprised to find that I have nothing but applause for their work. A few highlights:
  • Evidence from our Department of Commerce point out that European firms, not Chinese, are our main competitors for host-country government contracts in the three countries covered by the study. 
  • Compared with the Chinese Eximbank, which supports its companies enthusiastically in the three case study countries, the U.S. Ex-Im has only provided a total of two loans to governments in the case study countries since 2001 (both to Ghana)
  • "Chinese firms are innovating and adapting quickly to local markets, such as in Kenya, where a Chinese firm in this [telecoms] sector has established one of Kenya’s largest training centers."
  • "Counterfeit goods and related products from China have adversely affected U.S. firms’ sales and reputation, especially in Kenya among our case-study countries."
  • "The Angolan government’s requirement that foreign firms take local firms as partners has posed some challenges for U.S. firms, while the Ghanaian and Kenyan governments’ strict requirements that foreign firms hire local workers have resulted in Chinese firms’ hiring more local workers for construction projects in these countries."
  • "China’s data also include data on the number of Chinese laborers in Africa and a few African countries, including Angola. The United States does not have comparable data on U.S. workers in Africa and in countries like Angola."
There is a lot more of interest in this study. The team first contacted me for an interview in April 2011, so they have been working on this for quite some time. Although I had some (infrequent) interaction with them, I admit that I approached the final report with some trepidation. I've seen some pretty awful "research" on China-Africa sponsored by other US government agencies, and error-filled studies done by researchers at the World Bank. But as citizens and taxpayers, we ought to be pleased by this careful account. I hope it gets the attention it deserves.

Sunday, February 10, 2013

Reflection of a Chinese Investor in Africa: Guest Post

This guest post by KF is reproduced with permission from the Comments section of my blog post, Nigerians Protest Conditions at Chinese Construction Project. I welcome other guest posts, particularly from Africans and Chinese with experience in the field.
As Prof. Brautigam noted, there is a huge cultural conflict in terms of work/business ethics and expectations towards labour. However, in my experience, after many periods of labour disputes, the companies acclimatise themselves to the locales in which they operate over time.

My parents (retired) had no concept of a holiday and often wondered why businesses closed on Saturdays and Sundays. Understanding they had come to a foreign country to invest, it was natural to them to work all the time. My father (the Bwana) himself would often join in the labour to demonstrate the task or to modify the task to enhance efficiency or complete a more complex task- innovation to African contexts. Even I (still in high school) was drafted into a foreman capacity, secretary, and sales office when the occasion required (all unpaid, of course), while all my expat classmates holidayed in UK or South Africa at their parents' multinational employers' expense.

Friday, February 8, 2013

Should we view the mega Chinese-DRC project as "aid"?

A reader asked this excellent question:

Thanks for all your excellent articles and The Dragon's Gift - my understanding of Chinese involvement in Africa has been significantly improved. However, regarding this article (n.b. my article on The Economist) I wanted to question one comment on the Sicomines deal in DRC. You say "the Congo Sicomines project, which is financed by non-concessional loans from China Eximbank."
However, SAIIA Johanna Jansson's detailed paper on the Sicomines deal (http://www.saiia.org.za/occasional-papers/the-sicomines-agreement-change-and-continuity-in-the-democratic-republic-of-congo-s-international-relations.html) implies that the final version of the deal does comply with OECD-DAC ODA definitions:

pg. 12 The OECD–DAC classifies a loan to a developing country as official development assistance (ODA) if it is: provided by official agencies, including state and local governments, or by their executive agencies; ... is administered with the promotion of the economic development and welfare of developing countries as its main objective; and ... is concessional in character and conveys a grant element of at least 25 per cent. The loans extended by means of the Sicomines agreement are provided by China Exim Bank, which is owned by the Chinese government and thus to be seen as an official agency. The credit line’s main objective is to finance post-conflict reconstruction in the form of infrastructure construction and refurbishment, which is to be considered promotion of economic development. The third and last element of OECD–DAC’s ODA definition is the grant element. This is a way to calculate that the cost for the loan is low enough – that it is concessional.38 The loan conditions provided in the original 2008 agreement did not meet the requirements for concessionality. However, in the revised 2009 version, the interest rate for the infrastructure loans was reduced from 6.6% to 4.4%.39 Currently, the grant element is estimated by the IMF and the World Bank to be at least 42%, which far exceeds the 25% minimum level required by OECD–DAC.40 This means that in its revised form, the loans extended under the Sicomines framework comply with the OECD–DAC’s definition of ODA.
Could you comment further on this difference? I would be very interested to hear your thoughts. 

Here are my thoughts. The finance does not qualify as ODA. The main reason is that although the finance was (supposed to be) extended by an official executive agency of the Chinese government, China Eximbank, it is not China Eximbank that agreed to change the interest rate. Rather, the implementing consortium of companies agreed that if the (variable) interest rate from China Exim Bank, which was set at LIBOR plus 100 basis points, rose above the rate of 4.4% where it was when the agreement was signed, they would pay the difference. This was a business risk they undertook, not a foreign aid transfer.

I wrote about this case in a paper published in 2011; the link is on this blog under the research tab:
The Chinese consortium agreed that if the bank interest rate on the loan (LIBOR plus 100 basis points) rose higher than the rate of 22 April 2008 (about 4.4 per cent), the Chinese consortium would be responsible for the difference.
My source for this was this document: "Avenant No. 3 à la Convention de Collaboration Relative au Developpement d’un Projet Minier et d’un Projet d’Infrastructures en République Démocratique du Congo du 22 Avril 2008 – 2009, October." See Article 7. Note that this agreement is not signed by China Eximbank, but by the Chinese investing consortium members.

Interestingly, the financing that we thought had been lined up for this project appears to be less firm than we all thought. According to Johanna's latest research, as of December 2012, China Exim Bank has still not released any money, and it is increasingly looking as though they may not finance this project. The project sponsors have been shopping the project around to other banks. 

Friday, February 1, 2013

Nigerian workers protest conditions at Chinese construction projects

Breaking news: Nigerian workers protest employment conditions at CCECC Lagos-Badagry highway construction site. As reported by Business Day, Nigerian workers complained:
 ``The management does not have any medical facility for the workers. Our salaries are poor and there is no increment.

``The suffering is too much. I cannot pay the school fees of my children,’’ Johnson said.

Mr Jack Aguto, who has worked with the company for six years, said that he was hired as an electrical engineer but had been working in other areas with no additional wage.

``It is sad that the money CCECC pays as salary is meagre. We need a basic salary. We work for seven days in a week and earn peanuts,’’ Aguto said.

A carpenter, Mr Henry Okoye, told NAN that he was currently earning about N17, 000 monthly as a junior worker, after working for three years as a casual.

``We work every day -- both on public holidays and weekends -- with no allowances. I was hired as a carpenter, but I am forced to work as a gardener and bricklayer on the same pay,’’ Okoye said.
This is a huge cultural conflict. Aside from the long hours, some of this reflects Chinese cultural assumptions about flexibility: work is work, and if the need is to develop the garden or lay bricks, and there isn't a need for carpentry, then carpenters should lay bricks. I've seen this with Chinese supervisors, who appear to be flexible enough to pitch in and move wheelbarrows if one needs to be moved. I have a photo from a factory visit in Nigeria of the Chinese translator, sweating as he picked up and moved big boxes full of brake pads.

a h/t to Ndubisi Obiorah