China, the US, and Africa: How Many Embassies?

President Obama with his Kenyan grandmother

The build up of media stories before President Obama's visit to Africa rarely fail to mention "China" as a prominent "complication" in the US-Africa relationship.  But a June 22, 2013 editorial in The Economist, "Late, But Not Empty-Handed" has an embarrassing error that affected its analysis:

American fears that China is taking over Africa are exaggerated. America and its Western allies are still more influential across the board, whereas Chinese knowledge and political engagement remain shallow. America has 51 embassies in Africa to China’s 41, of which many are largely limited to commerce (emphasis added).

There are 54 independent countries in Africa. It doesn't take much research to find out that America has embassies in 50 African countries (and a mission at the African Union). Four of the smaller countries are served by US ambassadors in a neighboring country. But China also has embassies in 50 African countries, not 41. Four countries continue to recognize Taiwan, and host embassies from the "Republic of China" (Taiwan).

As for the statement that many Chinese embassies are "largely limited to commerce," where did this come from? It's like saying that because US aid to Africa is so high, US embassies are largely limited to aid. Chinese embassies have commercial counselors, almost always in a building located separately from the embassy. This leaves the embassy itself free to concentrate on diplomacy and consular affairs -- which is their main role. China's political engagement in Africa has also expanded rapidly, although I agree: it is not close to the level of engagement from the West.

Guest Post: Chinese Illegal Gold Miners in Ghana

Ghanaian Workers at Chinese Mine (credit Yang Jiao, 2011)

This guest blog post is by Yang Jiao, a Ph.D. candidate at the University of Florida who has been doing fieldwork on Chinese business in Ghana.

On May 14th, Ghana's Ministerial Task force led by the President Mahama launched a crackdown on illegal gold mining. It targets any foreigners who operate in small-scale gold mining (or Galamsey as Ghanaians call it). By June 6, 169 Chinese miners were detained and sent to Accra. 124 of them were detained at Ghana Immigration Services and another 45 Chinese miners detained at the prison of Bureau of National Investigations. On Jun 10, all 169 were released and ready to return to China.

This is not the first time Chinese illegal miners were detained in Ghana, but certainly the most intense since Ghana’s last election. Large influx of Chinese miners in mineral-rich African countries is rare. But the incident in Ghana points to vulnerabilities in the governance of resources and state control of transnational capital and migration as China and many African countries embrace neoliberal economic policies.

Why have 12,000 Chinese miners come from Guangxi province?

Alluvial gold mining has a long history in Ghana. The first wave of Chinese miners came for Ghana’s gold during 1990s when there were very few Chinese in the country. Large numbers of Chinese gold miners arrived around 2010 when gold prices were soaring. The majority of them are from impoverished Shanglin county of Guangxi province. Others are from Hunan, Henan, Heilongjiang, and Fujian provinces.

Shanglin has been a top place of gold production in the gold-rich Guangxi province historically. Thousands of Shanglin miners have extensive gold mining experiences both in China and abroad. Shanglin officials estimate that 12,000 gold miners have been to Ghana. Many Chinese businessmen in Ghana believe there are approximately 20,000 gold miners in Ghana. They are predominantly doing alluvial gold mining because of their experience with this type of small-scale mining and lack of financial capital

How does illegal gold mining work?

Chinese Alluvial Mine in Ghana (credit Yang Jiao, 2011)

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According to the Ghana Minerals and Mining Act 2006, foreigners were prohibited from small-scale gold mining on plots under 25 acres. Guangxi miners usually pool capital together from family savings and bank loans or even usury in China to form a small company with an initial capital input of about US$500,000. This contrasts with capital-intensive Western mining companies in Ghana (see Table 1).

The arrival of Chinese alluvial miners changed the situation where traditional Ghanaian galamsey rely on inefficient human labor to wash gold sands. Chinese sand pumps helped increase the efficiency of alluvial gold production.

Chinese gold mining company would partner with a Ghanaian who holds small-scale mining license and use his company as a front. Chinese miners are both the investor and labor provider. Usually 10% of profits would go to their Ghanaian partner, and some share goes to the local land owner/chief (see Table 2).

Guangxi miners import machinery from China and recruit workers from Shanglin or other parts of Guangxi. Many workers have kinship ties or are from the same village in Shanglin county. Rags to riches stories of fellow miners motivate more young men to go to Ghana. Workers usually sign contracts for 2 or 3 years with their bosses.

During their stay in Ghana, they are mostly at mining sites with nearly no mobility. Due to harsh working conditions and limited access to medical facilities, many died of malaria each year.

How do Chinese workers get in and out of Ghana?

Since 2010, it is extremely hard for a Guangxi worker to get a Ghana visa in Beijing. Even with the help of visa brokers in China, getting a visa is quite expensive and time consuming. However, visa brokers in Ghana are able to get on-arrival visas for incoming workers from Ghana Immigration Services by bribing some Ghanaian officials. Some workers would obtain Liberian visas and flight tickets. When they land in Accra, brokers pick them up inside the airport. Some brokers direct them to arrive in Togo first then bring them across border with their on-arrival visas.

The visa brokers work closely with gold mining bosses and some corrupt Ghanaian Immigration officers to traffic Guangxi workers into the country. At its peak, more than two dozen Chinese mining workers are sitting on each arriving flight in Accra. When they arrive, they would be taken to the mining sites directly. Their passports are usually kept in the hands of brokers for visa extensions.

Kitchen in Chinese Miners' Living Quarters (Yang Jiao 2011)

All workers were on tourist visas and none of them have work permits legally obtained from Ghana Immigration Services. According to one Chinese visa broker who used to work for Guangxi gold miners, he partners with certain Immigration officers to extend visas for the workers. The official cost for a one month extension is 40 cedis, and the broker charges 150 cedis per person. The Immigration officer gets a lump sum of 100 or more cedis per request. For Guangxi workers, single re-entry visa cost about US$200, and multiple re-entry visa within 3 months cost about US$300.

Many Guangxi miners only have their visas renewed when they are leaving Ghana. Visa brokers would bribe certain Immigration officers in the Accra airport and negotiate a fixed fine for each worker. These immigration officers usually get an extra few hundred cedis in their pockets. These brokers also reserve hotels and buy flight tickets for Chinese workers.

All of these cannot be done without coordinated assistance from the Chinese visa brokers and corrupt Ghana immigration officers.

What about environment degradation and violence at the mining site?

In the late 1990’s, one Chinese entrepreneur comments, Chinese gold miners would rehabilitate the land. As more gold miners come, they start to pay and delegate the work to local chiefs, who often did not implement the rehabilitation. Digging without proper restoring has resulted in corrosion in the mining regions.

After getting rich quickly, some Guangxi miners show off their wealth by purchasing brand new trucks and extravagant SUVs. Exposure of their wealth and vulnerability as foreigners make them easy targets for criminals. After several armed robberies in the mining regions, every Guangxi mining site purchased rifles and pistols for protection. Since Guangxi workers are mostly illiterate and speak no English, there are huge language and cultural gaps between them and their Ghanaian counterparts. In a tragic incident, one Guangxi miner shot his Ghanaian excavator driver due to miscommunication. Last year, a 16-year-old Guangxi miner was shot dead during a Ghanaian crackdown operation.

At the moment, hundreds of Guangxi miners are still hiding on the mountains according to Mr.Z, a miner from Heilongjiang Province based in Dunkwa. Impacts of illegal mining on the environment and frequent violence at the mining sites have already brought local resentment towards these Chinese miners.

Will illegal mining continue?

It depends on how effective the Ghanaian government is in enforcing its mining laws, immigration laws and how effective it tackles the corruption problem. It also depends on how effectively the Chinese government curbs this kind of migrant work. However, it is a tough job for any government to monitor and control speculating capital and illegal immigration. The recent crackdown on illegal gold mining offers an opportunity for both China and mineral-rich African countries to learn to tackle this issue together.

The two countries enjoy a rather close relationship since Ghana’s independence. In 2012, bilateral trade between China and Ghana is US$5.4bn, increasing 56.5% over 2011. Ghana also signed a US$3bn loan facility with China Development Bank (CDB) to finance nine infrastructure projects. Chinese investment will continue to be an important factor in Ghana’s future growth.

Do We See Chinese Mining Migrants in Other Parts of Africa

I have not heard of large influx of Chinese miners in other African countries. The large number of illegal miners in Ghana should not eclipse the big picture that the majority of Chinese companies and entrepreneurs are investing legally in many sectors such as agriculture, construction, energy, fishing, manufacturing, telecommunications, and wholesale trade. The Chinese migrant population in Ghana is highly diverse in its demographic characteristics, business types and wealth level. The majority live in Accra and Tema and work for state-owned enterprises.

Reference:
Interviews with Chinese gold miners during my fieldwork in Ghana from 2010 to 2012.

Chinese Land Grabs Revised Downward

I've been critical of the Land Matrix's early efforts to post a very problematic "database" of large scale land acquisitions. That database was recently revised and has been re-posted (click here). I haven't yet gone through it (I will) but at least regarding China, it appears more accurate than the earlier version.

Why do I think so?

One of the lead researchers, Dr. Ward Anseeuw (from the French research center CIRAC) said to the BBC.  "We see from the new data that the activities of China have been overestimated... In the press you see China everywhere, but in the database there is not as much China as we think there is."

Yes. Exactly what I and others have been saying for some years now.

H/t to Eckart Woertz and Martin Keulertz.  Eckart's new book, Oil for Food, on the Gulf States and land acquisitions has just been published by Oxford University Press.

Developmental State Meets Post-2015 Development Finance

A really excellent background paper for the high level panel on the Post-2015 development agenda, by Jiajun Xu and Richard Carey on development finance: "The Renaissance of Public Entrepreneurship: Governing Development Finance in a Transforming World." Xu, a Ph.D. student at Oxford, and Carey, formerly a thought-leader at the Development Assistance Committee of the OECD (where I got to know him during my time with the China-DAC Study Group), argue that the frameworks set up by today's rich countries are undergoing a period of "creative destruction" as new actors rise, challenging the assumptions and the decisions by (essentially) the West. Thoughtful, pragmatic, and highly recommended.

Call for Proposals: China, UK, Low-Income Countries and Agriculture/Food Security

CALL FOR PROPOSALS

AgriTT launched a Research Challenge Fund on 17^th May, inviting teams of researchers from China, UK and low income countries in Africa and Asia to apply for funding to carry out research on agricultural technology transfer and innovation for food security. Researchers from international organisations or other countries can apply, but there must be a UK, China and LIC research partner in the team. More details are available at http://www.agritt.org/                                         

AgriTT is a new initiative between the UK Department for International Development (DFID) and the Ministry of Agriculture, China, and the Forum on Agricultural Research in Africa (FARA) to promote transfer of agricultural technologies, knowledge and management innovations from China to low-income countries in Africa and Southeast Asia. 

AgriTT has three components:

1.      Pilot Development Projects in selected countries 

2.      A Research Challenge Fund

3.      Knowledge and communication of lessons on effective partnerships between China, UK and low-income countries to improve agricultural productivity and food security. 

The AgriTT Research Challenge Fund invites teams of researchers to apply for grants to work on one of the following themes:

1.  Critical agricultural technologies: taking an agricultural technology innovation originating from China, and developing and adapting it to an LIC context with attention to the whole value chain from field to consumer.

2.  Effective value chain development: enhancing a commodity supply chain, where the commodity represents an innovation of proven technical feasibility sourced from China or elsewhere.

3.  Innovation in knowledge sharing and communication: enhancing agricultural information and knowledge flows related to a technology innovation to enable poor rural communities to make better informed decisions about their livelihoods.

Guest Post: China-Africa Development Fund in South Africa

This guest post is by Yuan Li, a master's degree student at Johns Hopkins University/School of Advanced International Studies. It is based on interviews she conducted in Johannesburg, South Africa, in January 2013.

China-Africa Development Fund in South Africa

The China-Africa Development Fund (CADFund) is a private equity fund established in June 2007. It was initiated by President Hu Jintao at the Beijing Summit of the Forum on China-Africa Cooperation, as one of the measures to forge a “new type of China-Africa strategic partnership, strengthening bilateral cooperation in more areas and at a higher level” (CAD-Fund, China Development Bank) and to encourage and support Chinese enterprises to invest in Africa. According to its promotional materials:

 “CADFund aims to promote economic cooperation between China and Africa and to advance Africa's economic development. CADFund works differently from economic aid to Africa in that it is not allocated by nation but independently operated and based on market economy principles, the Fund invests in projects and requires investment benefits. CADFund is also different from credits, it invests together with enterprises in projects and takes the risk, by that the CADFund not increases enterprises' burden but increases enterprises financial resources.  For the African countries, CADFund will not increase their debt. CADFund assumes sole responsibility for its profits or losses and at its own risk. Under a standardized corporate governance structure, CADFund will appoint a specialized team to manage CADFund.” (CAD-Fund, China Development Bank).

 Currently, CADFund manages about 60 projects in over 30 countries in Africa, of which eight are in South Africa. The Fund has five different areas of focus: agriculture, industrial parks, infrastructure, manufacturing, mining and resources. By the end of 2012, CADFund had seven projects in South Africa, the largest number of any country. Of the seven projects, five are manufacturing, two are mining projects. The total investment CADFund has made in South Africa exceeds US$ 400 million;  this is also the largest total CADFund investment in any African countries. Details of these seven projects can be found in the table below:

 

Table 1: Investment Projects Managed by CADFund in South Africa

Project	Year	Size US$ mil	CADF Invest.  US$ mil	CADF Equity	Sector	Project Description	Partners
Auto- mobile assembly	2010	100	45	45%	Manu- facturing	JV—FAW African Investment Co. Ltd. aims to produce annually 20,000 complete cars, 10,000 mini cars, 5,000 trucks. The project will start production in 2013 and will create about 700 local jobs. This is the largest automobile project led by CADFund	First Automobile Works
Bus- iness process reengineering of Super Group	2010	24.5	9	36.73%.	Manu- facturing	JV by CADFund, China North Vehicle Co. Ltd., Beiben Heavy Duty Truck Co. Ltd., and Super Group Trading (Proprietary) Ltd. The company imports parts in SKD from Beiben and assembles locally.	China North Vehicle Co. Ltd., Beiben Heavy Duty Truck Co. Ltd., Super Group Trading Ltd.
First Tractor Co. Ltd. Assembly Factory		4.54	2.04	45%	manufacturing	The factory will build assembling and sales center in Durban, and produce agricultural and engineering machinery	First Tractor Co. Ltd.
Cement factory	2010	100	20.4	20.4%	manufacturing	The project is aiming to build a production line that produces 2,500 ton of cement a day with a 5 MW power generating system. The funding of the project comes from both China and South Africa, and Chinese investment accounts for 51% of the equity. The project is expected to create 300 local jobs.	Tangshan Jidong Cement Co. Ltd., Continental Cement, WIPHOLD
Hisense Africa platform project	2012	100	45	45%	Manufacturing	This platform company will be the only one that manages all Hisense’s business in Africa and the Middle East. The project will include building fridge production base in South Africa, Egypt and Algeria.	Hisense
Gold One gold mining project	2011	635	190.5	30%	mining	This is an M&A deal of Gold One International Ltd., a double listed mining company in Johannesburg and Australia. The Chinese investors formed a JV and bought 89.17% of the equity	Baiyin Nonferrous Group, Changsanyue Capital Co. Ltd.
Acquisition of Wesizwe Platinum	2010	227	102	45%	mining	CADFund and Jinchuan Group Co. Ltd formed a JV and bought 51% of Wesizwe Platinum. It then applied for US$ 650 million loan from the China Development Bank. The project has 5 years of construction and 35 years permit to develop the mines.	Jinchuan Group Co. Ltd.

Source: CADFund

All the projects that CADFund has invested in in South Africa have at least one major partner that is  a Chinese state-owned enterprise (SOE). This is because most private enterprises from China operate on small scale in Africa, and their markets are usually limited at local consumption. CADFund looks for projects that are promising in return, and the minimum investment can be no less than US$ 5 million. Another strategy to control risk and maximize profit is to develop long-term partnerships with some major investors. For example, CADFund has decided to take Jidong Cement Co. Ltd. as its only partner for investment in cement projects, and will cooperate with Jidong in opening up more cement production lines across Africa[1].

South Africa is very different in terms of its investment environment in the African context. Unlike many other African states, South Africa has a stable government, well-established legal system, and the necessary infrastructure to produce and transport goods. At the same time, South Africa has already seen massive investment from all over the world, and has long been experienced in dealing with foreign investment, which makes it much more standardized and systematic to conduct international deals. While as these features of South Africa are appealing to Chinese investors, they receive much less preference or favorable offers on the other hand. As Mr. Li Shenglin, the Executive Director of CADFund pointed out, in countries where there is not vibrant interest of foreign investment, the government usually approaches Chinese investors quite actively and pledges with a lot of preferential conditions, such as lower tax. “We never receive such treatment in South Africa.” Mr. Li said. 

Another attractive fact about South Africa is its rich mineral resources. South Africa is one of the largest mineral resource-rich countries in the world. It ranks first in the reserves of gold, platinum group metals, manganese, vanadium, chromium and aluminosilicate; second in vermiculite, zirconium, titanium and fluorspar; fourth in phosphate and antimony; fifth in uranium and lead; eighth in coal and zinc; ninth in iron ore; fourteenth in copper. China has a strong demand in these minerals. This drives capital to flow into resource-rich areas. 

Besides the mining projects supported by CADFund, some central SOEs from China also have mining projects in South Africa. Sinosteel entered South Africa in 1996 and formed a joint-venture, ASA Metals Pty., Ltd with Limpopo Economic Development Enterprise of South Africa. Its wholly owned subsidiary, Dilokong Chrome Mine (Pty) Ltd, manages and develops the Dilokong Chrome Mine. Minmetals First Chrome Mining Co., established in 2009, is a wholly-owned subsidiary of China Minmetals Corporation in South Africa. The company’s major business focused on developing two chromite projects it acquired in South Africa. Earlier in 2013, CADFund together with Hebei Iron&Steel Group (the biggest steelmaker in China) invested over US$ 600 million and acquired Palabora Mining Co. from Rio Tinto and Anglo-American, making it the eighth project of CADFund in South Africa[2].

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[1] Information obtained through interview with official, CADFund SA Rep Office

[2] Ibid.