Monday, July 21, 2014

Will China Be Buying African Rice?

Chinese rice imports at the port of Dakar, Senegal. China is exploring ways to feed its growing population using food grown in Africa. Photo by: vredeseilanden / CC BY-NC
Recently colleagues at Devex published a story about what China's move away from grain self-sufficiency means for African agriculture.  Curiously, they illustrated this story with the photo and caption above, of a pile of 50kg bags of rice ... coming INTO Senegal. Devex said these imports are from China. As the Ameropa label shows, this is unlikely. Ameropa is a Swiss multinational with a branch that specializes in importing Asian rice for African markets. The rice in this photo was probably sourced in Vietnam or Thailand, not China. As our recent SAIS-CARI conference on Chinese agricultural investment in Africa pointed out, China is not exploring ways to feed its growing population using food grown in Africa. At least, not yet.

I wrote my first book analyzing the problems and challenges faced by Chinese rice projects in West Africa (Chinese Aid and African Development, 1998), so this is a special interest of mine. Here's what is going on in Senegal -- excerpted from an excellent analysis by Adama Wade at
Senegal, with 13 million inhabitants, is the world’s tenth biggest importer with 700,000  to 900,000 tonnes per year. ... « It is strange that the rice produced in central Vietnam, transported to Ho Chi Min Port, loaded in bulk and shipped to the ports of Abidjan or Dakar, landed and then transported by road to Bobo Dioulasso or St. Louis is preferred by the population and is cheaper than local rice», wonders aloud an operator, formerly shareholder of Glencore International. ... Local production accounts for 200,000 tonnes of paddy rice, the equivalent of 140,000 tonnes of local rice. The Government’s goal is to reach 1 million tonnes by 2015, including 800,000 tonnes produced through irrigated rice. The Senegalese Government has made ​​food self-sufficiency its key priority. But, there are still some inconsistencies. More tax incentives are given to investors who make 80% of their turnover from exports. Amazing! This is just the tip of the iceberg- while Asian producers receive subsidies on energy, water and fertilizers, in the Senegal River Valley, support mechanisms remain elusive. So, there are no energy subsidies for rice production and development (offset). Urea, which was subsidised by 50% between 2006 and 2011 and sold at CFAF 6,000 now costs CFAF 9,000. Although the price of DAP actually decreased, the quantity available barely covers half of the requirements. There is an energy challenge in the processing of local rice.«There are fixed monthly electricity costs. Whether you work or not, you pay CFAF 250,000 a month.» Under such conditions, can local rice sold at CFA 12,500 mill price (12,500 for whole grain rice) be competitive and generate enough income for a quantitative and qualitative leap?
Adama's analysis makes it clear why the Chinese are not likely to be coming to Senegal for their rice. When it comes to that -- if it does -- they will go to Vietnam. Just as the Senegalese do.

Thursday, July 10, 2014

China's second foreign aid white paper published -- finally!

Last summer, we started hearing that Chinese analysts were working on the second white paper on foreign aid. It has been many months in the works, and unexplicably delayed for months, but now, at last, the second White Paper on Foreign Aid has been published. It is much less detailed than the first, and perhaps that reflects the triumph of whatever concerns delayed it. Here's what's interesting.

In the three years (2010-2012) since the last report, China provided (committed? disbursed?) $14.41 bn in official development assistance (ODA), or an average of $4.8 bn per year:
  • 7.26 billion yuan ($1.17 bn) of interest-free loans
  • 32.32 billion yuan ($5.21 bn) of grants
  • 49.76 billion yuan ($8.03 bn) in concessional loans (you hui dai kuan)
These figures do not include additional funding (over $1.3 billion) provided through the UN and multilateral and regional development banks over this period.

According to the paper, 51.8 percent of Chinese aid goes to Africa. This means an average of $2.5 billion per year between 2009 and 2012.

China is also still providing debt relief in Africa. Nine countries: Tanzania, Zambia, Cameroon, Equatorial Guinea, Mali, Togo, Benin, Cote d'Ivoire and Sudan, had 16 mature interest-free loans cancelled, for a total of 1.42 billion yuan ($229 mn). This continues the practice begun more than a decade ago of loan cancellation only for the interest-free loans. Countries thinking they might have their concessional loans cancelled need to think again: concessional loans have never been included in the loan forgiveness program.

The "Chinese Peace Corps" is still alive, with some 7000 volunteers sent abroad over the past three years. Why do we hear almost nothing about this program? Has anyone run across a volunteer in Africa?

Another interesting development: China is providing some assistance to Burkina Faso, a country that recognizes Taiwan. This is done as part of a WTO-related program, where Benin, Mali, Chad and Burkina Faso -- the Cotton-4 countries -- receive cotton seeds, farm machinery and fertilizers, technology transfer and training, and support for other aspects of their cotton value chain. Cotton is probably the top agricutural export from Africa to China, so this clearly shows economics trumping politics.

For official figures on foreign aid expenditures since 2000, click <here>

A hat tip to Winslow Robertson who was even faster than my google alert to pick up news of the White Paper!