Chinese Investment in Africa: How Much?

How much has China invested in Africa? I just received a slightly breathless invitation to an event to be held at the Ritz-Carlton in Beijing, which led off with this statement:  "China's investment in Africa has increased a staggering 30-fold since 2005, with 2,000 Chinese firms now present in 50 African countries." 

Really?

Let's look first at the math. Here are the annual official figures for Chinese investment in Africa from MOFCOM:

Chinese FDI Flows to Africa (US$ million)

2005   2006   2007   2008   2009   2010   2011   2012
  392     520   1574   5491   1439   2112   3173   2520

Source: MOFCOM. This data has problems, as I've noted here before, although many of these problems are also shared by other countries' official FDI data,  And the leap from $392 million to $2520 million is not "a staggering 30 fold" increase, but a factor of 6.

Let's look at accumulated FDI figures:

Chinese FDI Stock in Africa (US$ billion)

2005   2006   2007   2008   2009   2010   2011   2012
1.60    2.56    4.46    7.80    9.33   13.04  16.24  21.23

Source: MOFCOM. The figure for 2012 is higher by a factor of 13, compared with 2005.

The most recent white paper on China-Africa Trade and Economic Cooperation noted that between 2009 to 2012, China's direct investment in Africa grew at an annual rate of 20.5%. This is a brisk clip, but I'm not sure I'd call it a "staggering" rate.  

How many Chinese companies are active in Africa? The figure on 2000 firms in 50 African countries comes from China's Ministry of Commerce. More precise numbers that I have from MOFCOM state that 2372 investments have gone through the required approvals for Africa, as of March 2013. Some firms will have multiple projects. On the other hand, it probably doesn't include a number of small enterprises that fly under the radar -- including all the Chinese shops -- so the true number of "firms" is undoubtedly higher.

China and the DR Congo

Jacob Kushner, a young journalist with a grant from the Pulitzer Center, has produced a new e-book on China and the Congo, which can be downloaded on Kindle for just $1.99. Viewing his creative effort is well worth the small expense. Kushner traveled to the DRC, interviewing Chinese managers, Congolese officials, visiting the Sicomines project, and immersing himself in a challenging environment. While as journalism, this isn't the detailed look at China and the DRC that scholars like Johanna Jansson have produced, it is a fascinating "new age of journalism" multi-media production. (Look past the catchy title: Kushner might have more usefully put "Congo Plan" in quotation marks, as he ends up doubting that there is a plan.) The talented Mr. Kushner combines short videos, excellent photographs, and traditional narrative to produce a book that is far more of an experience than simply a read. If this is the future of journalism as reflected in books, I'm looking forward to it.

China Africa Ec. and Trade Coop. White Paper 2013

Source: State Council, "China Africa Ec. and Trade Coop. 2013"

The Chinese State Council has published the new China-Africa Economic and Trade Cooperation White Paper (2013): click here. (hat/tip to Prof. Zhang Haisen).

While in China at the World Economic Forum/Dalian a couple of weeks ago, I heard that a new white paper on China's foreign aid will be published soon, probably in October.

While only one foreign aid white paper has been published so far, these overview reports on China-Africa trade and economic cooperation have been published annually since 2010, and are one of the signs of a new transparency in Beijing.  

Some of the highlights of this report:

• "In 2012, the total volume of China-Africa trade reached US$198.49 billion, a year-on-year growth of 19.3%. Of this, US$85.319 billion consisted of China's exports to Africa, up 16.7%, and US$113.171 billion was contributed by China's imports from Africa, up 21.4%."
• "From 2000 to 2012, the proportion of China-Africa trade volume as a part of China's total foreign trade volume increased from 2.23% to 5.13%." This shows that although China looms large for Africa, Africa is still a tiny part of China's overall trade.
• "In 2012, the proportion of mechanical and electrical products as a part of China's total commodity exports to Africa reached 45.9%." A lot of these are vehicles, generators, telecoms and factory machinery.
• Cumulative Chinese FDI to Africa now amounts to US$21 billion (by official figures). Of this, manufacturing investment is at US$3.43 billion.
• China Africa Development Fund has "invested US$1.806 billion for 53 projects". So far, only one is in agriculture.
• China's agricultural exports to Africa are now at US$2.49 billion, having increased 57.6% since 2009. Yes, China exports food to Africa, Africa exports mainly industrial inputs like rubber, cotton, sisal, along with oil palm, sesame, cocoa, and peanuts to China. 
• "In 2012, Chinese enterprises completed construction contracts worth US$40.83 billion in Africa." As I have been arguing, this is a huge and under-appreciated sector of commercial interest for the Chinese.
• "From 2010 to May 2012, China approved concessional loans worth a total of US$11.3 billion for 92 African projects." This includes preferential export buyer's credits, and foreign aid concessional loans. It is in fulfillment of the 2009 pledge of $10 billion over 3 years. All of these loan commitments would have come through China's Export Import Bank. This comes to about US$4.7 billion per year.

Chinese energy companies go global ... in the US

Chinese companies are big investors today -- not only in Africa, but in developed economies like the US and Canada, where they compete for engineering projects, real estate deals, and acquisitions of companies that have the competitive technology and marketing know-how that they lack. A new article in the Beijing Axis's China Analysis by Daniel Galvez, analyzes this outward investment. For those interested in comparisons with Chinese engagement in Africa, skip down past the luxury real estate deals to the "energy infrastructure" section, which describes the ways in which Chinese companies are engaging in the US energy sector. 

Chinese banks are playing a big role here, just as in Africa:

• In April, it was reported that Industrial & Commercial Bank of China (ICBC), China’s largest bank by market value, agreed to help finance plans for the USD 25 billion LNG export terminal in British Columbia, set to be among the 10 largest refineries in the world.  
• In September 2012, Seattle-based Summit Power Group LLC announced that Sinopec Engineering will manage the construction of a critical portion of the Texas Clean Energy Project, a planned power-generating facility near Odessa, Texas. The facility will be funded by China Exim Bank, and is in line to receive USD 450 million in US federal funding.

See more at: http://www.thebeijingaxis.com/tca/editions/the-china-analyst-sept-2013/201-chinas-increased-presence-in-the-developed-world#sthash.lLByn5O8.dpuf

Jo'burg: Chinese shops move out to the suburbs

All photos: Yoon Jung Park

China in Africa: The Real Story is pleased to welcome this guest post from Dr. Yoon Jung Park, sociologist and author of the acclaimed A Matter of Honour: Being Chinese in South Africa and a number of other studies on Chinese immigrants in Africa. She writes:

I was recently in Johannesburg and managed to spend part of my last day there at the China Discount Shopping Mall. While there are dozens of wholesale/distribution centers around Johannesburg, most are south of the city center, off the main highway towards Soweto … in an area that was reclaimed from the mine dumps that had been there for at least two or three decades. This one, however, is different in at least two ways: (1) it is located in the northern suburbs – typically whiter and wealthier, and (2) it is a retail shopping center… or at least a “wholesale prices to the public” kind of place.

It is also, in my view, an indication of some shifts … a sign of greater economic integration of the Chinese migrant community, certainly a sign of Chinese migrant “filling in the gaps” opportunism and risk-taking business behaviour, as well as a sign that the Chinese are looking to broaden their customer base and bringing the products closer to the people in the ‘burbs.

The consumer's choices...

The China Discount Shopping Mall has basically replaced the owners and installed new management and new shops in an existing mall, which likely suffered from the recent economic challenges. While I didn’t have enough time to do any real research, I did manage to chat with several of the new shop managers – amongst them mainland Chinese (recently arrived) and Taiwanese (20 years resident in South Africa), Pakistanis, and an Ethiopian. There were many clothing shops selling popular fashions, but also shops selling party supplies, beads, housewares, and curtaining. They even had a dragon-shaped kiddies’ jumping castle! They also have a website (http://www.sa123.co.za/), but it seems to be a work in progress. 

As I was doing some research for my book project, I also learned that this sort of management takeover and auction purchasing of major shopping malls has occurred elsewhere in South Africa. “Rivonia Square” including the formerly exclusive “The Cloisters”, in a different part of the northern suburbs of Johannesburg, has recently been purchased by a Chinese migrant and is now called “Rivonia-Oriental City” ; they’re in the midst of trying to convince some of the food outlets and chain stores to stay in place as they attempt to attract higher-end Chinese retailers. Perhaps of greater significance, both the former “Highgate Shopping Mall” just outside Soweto and the former “Wheel Shopping Mall” in Durban are now part of the China Mall group owned and operated by Sino-African Property (Pty). Both are located in more economically marginal areas of the two cities and had recently suffered a serious downturn in foot traffic. 

The acquisition of these two shopping centres add hundreds of shops to the existing China Mall-JHB, which already had over 450 shops, a 1000 square meter food court and over 1000 parking bays! According to their website (http://www.chinamall.co.za/) this makes them the “biggest Chinese products market” in South Africa and perhaps on the continent.

Several restaurants from Cyrildene’s Chinatown (also in Johannesburg) have also expanded over the past couple years, opening up second “branches” in Rivonia. My friend and former research collaborator, Anna Chen, surmised that the rationale was two-fold: (1) restaurant owners wanted to capture the wealthier white South African suburban diner population and (2) they wanted more space to be able to open up private dining rooms for larger parties of their Chinese regulars. 

Because of growing crime in Cyrildene (increasing numbers of luxury cars were followed home from Cyrildene and people were carjacked and/or robbed as they pulled into their driveways and homes), these moves have proved to be a boon for restaurant owners, as increasing numbers of Chinese patrons now dine only at the Rivonia restaurants. On the evening that I was at the Rivonia branch of Northern Foods (a favorite), the restaurant was fairly quiet, but it was also quite early… by the time we were leaving, the place was packed.

I can’t say the same about the Chinese shopping experience … there were no huge crowds at the China Discount Shopping Mall on the Sunday that I was there… and the survival of this mall (and the others) will depend in large part on the health of the South African economy, which continues to be in the doldrums.

So… Chinese traders, having started out peddling wares in the streets of downtown Johannesburg and fighting with the black South African street hawkers, moved into wholesale supplying thousands of retailers from across the country and the southern Africa region, appear to be moving into retail again, albeit at a very different level. This is a phenomenon worth watching.

Guest Post: Visiting the Chinese-financed Zongo II Dam

Zongo Waterfall, Inkisi River. photo: Oldrich Neumayer

This guest post comes to us from Antoine Lokongo, a Ph.D. student studying international politics at Peking University. In August 2012, Antoine visited Sinohydro's Zongo II dam project in the Democratic Republic of the Congo. His report provides a useful lens into Sino-African relations.

As part of my field research, it was of great importance to me to visit some Chinese projects undertaken in my country, the Democratic Republic of Congo (DRC). I visited all such projects in and around the capital Kinshasa, including the expansion of the bridge over the Basoko River project, the reconstruction of Boulevard Lumumba, from Limete up to the International Ndjili Airport, the widening of Ndjili Airport’s runaway project and so on. But above all, spending five days in Zongo, the site of the construction of Zongo II Hydropower project over the Inkisi River waterfalls, living and working together with the Chinese there, was the most interesting activity of my field research. 

Zongo is a beautiful place on the bank of the Congo River in the Western Lower Congo Province of the DRC. Its topography very much resembles that of China’s Yunnan Province (which makes Chinese immediately feel at home). Here, the Congo River, which constitutes an artificial border between the DRC and the Republic of Congo-Brazzaville, is squeezed by rocky mountains, making the deepest river in the world coil like a big snake among those mountains.

Now, the inhabitants of Zongo’s hitherto quiet mountains and valleys are woken up by the sound of the Chinese hammer. From dawn to dusk, hammer beats echo here in these mountains and valleys. The hardworking and industrious Chinese people who have been building dams for thousands of years, have come to the Inkisi River to build a hydroelectric dam called Zongo II (during colonial times, the Belgians already built a first dam, Zongo I, over the Inkisi River to provide Kinshasa with electricity but had always postponed the construction of another dam over the Inkisi River).

Wanting to know whether or not Congolese workers were absorbing Chinese people’s hard-working and organizational culture, I joined different teams on different days and worked with them on site (manual labour like mixing cement with sand, digging trenches to canalize rain water and so on). Although Congolese workers were skilled and knew what they were doing (especially electricians), they were constantly complaining. The culture of complaining in Africa stems from the harsh colonial experience, I guess, but Chinese should not become the new target in this very region of Lower Congo where so many Chinese and Congolese died of slave labour, forced to break the rocks with hammers, to build King Leopold of Belgium’s first railway in Congo, from Kinshasa to the port of Matadi.

"Why don’t we have shoes and uniforms, the same like Chinese workers?"

"Why have they not yet paid us our wages on time?"

"Why don’t they pay us $5 an hour but less?"

These are some of the questions Congolese workers fired at me, “one of them, who could speak Chinese”, as they put it.

I put those questions to a certain Mr. Li Gang, in charge of human resources, who was tirelessly addressing all the questions raised by the Congolese workers to ensure good relations between Chinese and Congolese workers. He told me that he had already many times and repeatedly explained to the Congolese workers that a cargo of new boots and uniforms had arrived at the port of Matadi, but the goods had not yet been delivered to the Zongo due to the slow customs clearance of goods at the port facilities. About pay delay, he explained: “Congolese workers usually get their wages on the 4th of each month. Today is the 6th of August and unfortunately they have not yet been paid. They will definitely get paid tomorrow. This postponement was due to the fact that our financial manager fell ill and went to Kinshasa for treatment."

Mr. Li Gang confirmed that unskilled Congolese workers (jobbers) are paid $2 to $3 a day, but highly skilled Congolese workers are paid $8 per day. “This is very fair,” he said.

The Zongo II Hydropower project, is being jointly built by Sinohydro (China) and Societe Nationale d'Electricite or SNEL (Democratic Republic of Congo). Neither partner is the "boss". SNEL has provided manpower; so has Sinohydro. But of course Sinohydro is injecting more money, expertise and equipment in the project. When the dam is completed, Sinohydro will get more out of the sale of electricty (entitlement is to each according to his contribution). After Sinohydro recovers its money, it will hand over the dam and the management of it to the Congolese government and will have nothing to do with it anymore unless Kinshasa solicits Sinohydro's assistance.

As a reminder, after recovering its investment over five years, Sinohydro handed back to Congo the Kinshasa-Matadi Highway it built, as commissioned by the Congolese government (Matadi is the Congolese port on the bank of Atlantic Ocean in the West). That is what the Chinese are doing all over Africa, and I think it is a good thing that does not leave African countries in debt. Of course due to cultural differences, there were a lot of misunderstandings. I particularly witnessed two negative incidents. The first one involved a Chinese worker. One afternoon, I saw a number of Congolese workers just standing there, chatting, chatting instead of working. This made the Chinese supervisor very angry and he slapped one of the Congolese in the face. 

I mediated between the two. I said to the Chinese supervisor that it would be better to report the matter to the office and the office will decide to sack inefficient Congolese workers. But he should not hit people! A second incident involved a Congolese worker who forged the signature of a Chinese manager, ticked more hours he did not work for in order to get more money. That is a crime! I told the Congolese workers to learn from the Chinese culture of working hard and abandon the habit of corruption.

But at end, the two sides got used to each other. Although they still ate separately, used separate showers and latrines, I could see Chinese and Congolese workers getting on well after all, playing football together on the sandy bank of the Congolese river after work. Local women were employed as cleaners and cooks.

The DRC is still very underdeveloped, but I think for both the Chinese people and Congolese people, this represents a great opportunity. Of course, some labour problems are bound to occur, but this a universal problem, that also occurs in American and European projects sites in Africa. As China begins to transfer its new technologies and expertise to Africa, practical solutions to some of these problems and issues will be found.

New Research on China/Brazil & Agriculture in Africa

Add caption

The latest edition of the IDS Bulletin reports on the first round of research from a four country project on China & Brazil's agricultural engagement in Africa, organized by the Future Agricultures Consortium.

I've read all of the papers that focus on China and Africa. Among them, I particularly recommend the overview paper by Ian Scoones, Lidia Cabral, and Henry Tugendhat, "New Development Encounters: China and Brazil in African Agriculture" for its scope and comprehensiveness, particularly in the five key questions it asks (pp. 10-13):

• What is the political-economic context for these development encounters?
• What relationships are being built on? 
• What perceptions and political interests underlie these development encounters?
• How are negotiations on agreements carried out?
• What project-level interactions occur that shape development encounters?

This is a useful way to organize our thinking about these issues. Also excellent (as always) is a paper by the thoughtful Lila Buckley, who has been a guest-blogger on this blog: "Chinese Agricultural Development Cooperation in Africa: Narratives and Politics".

There are case studies on Chinese and Brazilian engagement in Ghana, Zimbabwe, Mozambique, and Ethiopia. With regard to China, the Mozambique study was very good, with useful detail supplied by its seven (yes!) authors. It was the only case study to clearly reflect interviews and field visits. I was a bit disappointed that several of the other case studies appear to be descriptive overviews that could almost have been done (or perhaps were done) without any fieldwork. It's a starting point, at least, and no doubt the next round of this research will provide more detail.

China, Africa: Illicit Small Arms & Second-Hand Clothing Exports

Second-hand clothing market, Ivory Coast: Radio Netherlands

Security threats to Chinese workers and investors in Africa are part of what seems to be growing Chinese official interest in curbing (illegal) arms exports to Africa. A report from Xinhua via ChinaWire has some interesting quotes from Chinese attending a July 2013 conference on this issue in Nairobi.

ChinaWire also included this fascinating story on China's second-hand clothing exports to Africa. Africa watchers have long been familiar with the second-hand clothing markets. When I was doing my Ph.D. research in Liberia, a Peace Corps friend bought a used bowling league shirt in his market, and surprised me by wearing it when we went bowling in Abidjan during a trip to the Ivory Coast. Like China's export of new clothes, these used clothes from the West have long been a challenge to textile manufacturers in Africa. I guess we could have expected that Chinese exporters would join this market, as they have so many others formerly dominated by the West. 

ChinaWire is a great source for collecting Chinese media reports. They regularly collect material on China-Africa, as well as other topics of interest. Highly recommended.

'The Dragon's Gift' in Africa

Entebbe, Uganda airport bookstore. Photo: Linden McBride

When I published The Dragon's Gift, I hoped it would be available across Africa. But I knew little about the business side of publishing. Oxford's Southern Africa branch in Cape Town is mainly focused on textbook publishing, and declined to market it. Therefore, it was not picked up by any of the South African book chains. It is still available in Africa -- but at a high price (over $50 compared with $19.76 on Amazon.com) and generally in only a few locations. Just last week, however, I had two emails from people who saw it for sale in airport bookstores: in Entebbe, Uganda, and in Nairobi, Kenya -- at a hefty mark-up.

What I've learned from this: if you want to have your book marketed in Africa, do not sign over world-wide rights to your publisher. Keep the rights for publication in Africa, and negotiate this separately with a publisher based on the continent -- or one with a hearty distribution network.

South Africa or China? Who Will Win Race for Africa's Middle Class?

I recently came across an article on investing in Africa by South African journalist Thabang Mokopanele:

South African retailers are driving commercial development in Africa. As they expand so does the need for retail and office space in cities such as Lagos, Ghana, Nairobi, Maputo and others. "If you look at Lagos and Ghana the buildings around these cities are old and derelict and were built in the 1960s," Mr Mackintosh said.

What happened to the Chinese? Although a lot of people comment that the Chinese are "everywhere" in the retail sectors in Africa, I see a lot of small-scale Chinese activity and a lot of large-scale South African activity. Look at Arcades, Manda Hill, or another of the new malls cropping up in Lusaka, Zambia, for example. You can get a cappuccino at Mugg and Bean, groceries at Shoprite or more upscale food at Woolworths, appliances at Game, clothes at Truworths or Uzzi, have lunch at Ocean Basket, and did I mention the South African banks: Standard Chartered, FNB, Stanbic, and so on. If all that shopping tires you out, you can take a room at South African-owned Protea Hotel.

A private Chinese company has built a big new hotel in Lusaka: the Golden Bridge (right). But in my recent visit it was not easy to find any prominent reflection of the more upscale Chinese retail sector. Little Chinese shops were scattered here and there. Chinese were selling chickens at the city market, and vegetables at the Tuesday market.  I walked through Kamwala market several times, and found a few Chinese shops, but staffed by Zambians; their Chinese bosses were not on the premises. An upgraded section of the Kamwala market was constructed by the same Chinese firm that built the Golden Bridge in a joint venture with the city of Lusaka, but their tenants seem to be mainly Zambian.

Chinese cities have the fanciest of malls, just as South African cities do. But while the South African companies that invest in Zambia's retail sector come from the prominent side of South African retail, that doesn't seem to be the case for the Chinese. Why not?

Chinese journalists interested in exploring China-Africa issues

The University of Witwatersrand's School of Journalism in Johannesburg, South Africa, has a program to support journalists who want to do deeper reporting on China-Africa relations. They are now issuing a call for five Chinese journalists who wish to spend 2 to 3 weeks with an African journalist exploring a China related topic in Africa. Applications and description here.

Or in case that doesn't work:
http://www.journalism.co.za/index.php/opportunities/opportunities129/5440-call-for-applications-chinese-journalists-to-participate-in-african-reporting-project-2013.html

This is a great program. I've met Anton Harber, Brigitte Read, and the others leading the program at Wits. They're top notch journalists themselves, and doing a very useful service for unpacking this complicated relationship and getting reality-based reporting. Highly recommended.

A Booming Chinatown in South Africa

Cyrildene, Johannesburg            Mail & Guardian

Another fascinating, detailed read on Africa's new Chinese migrants, by a gifted writer.  Ufrieda Ho tells the inside story of Cyrildene -- one of Johannesburg's two Chinatowns -- and the people who make their lives there. This was the old Jewish neighborhood when my husband lived in Johannesburg. As a political scientist, I have always been impressed by the large number of Chinese associations signposted in Cyrildene. Ufrieda Ho says there are 54. Anyone up for a Robert Putnam-esque study?

See the full story in the Mail & Guardian, July 12, 2013. A hat tip to Yoon Jung Park. 

Obama, China, and Africa: Manufacturing

Chinese factory in Tanzania

So far, President Obama's visit to Africa has produced no comments as sensational as the "new colonialist" remarks directed at China by former Secretary of State Hillary Clinton when she visited Senegal and Zambia in previous years.

Yet during a town hall with young African leaders, the President invoked a similar sentiment in his remark that "I want to make sure that as countries come to Africa, that it’s benefiting Africans. ... If there’s going to be manufacturing taking place of raw materials, locate some of those plants here in Africa."

Well ... I wish whoever prepped him for this trip had at least tried to get an accurate picture. Two chapters of my book cover China's many manufacturing investments across Africa. I've since followed up with fieldwork on Chinese factories in the (raw material) leather processing sector in Ethiopia and several articles about the special economic zones -- focused on manufacturing -- being built by Chinese companies in Africa.

A recent guest post by SAIS student Yuan Li on this blog provides another example. In South Africa, the country where President Obama made this comment, the China Africa Development Fund has seven projects: two are in mining, and five are in manufacturing.

Chinese textile factory in Tanzania. Photos: D. Brautigam

The Chinese state that as of the end of 2011, 15.6% of their Africa investment is in manufacturing and 30.6% in mining, with finance (purchase of 20% of Standard Bank) at 19.5% and construction at 16.4%.*   From what I can see, there is far more manufacturing investment from China than from the United States. This includes raw materials processing: oil refineries in Chad and Niger, copper smelters in Zambia. According to the US Bureau of Economic Analysis, the US total stock of investment in Africa as of end-2011 was $56.6 billion. Mining made up $33.3 billion (59%) and manufacturing only $3.6 billion (six percent).

Yes, despite concerns about costs and competitiveness, manufacturing is going to be vital for Africa's future employmet generation. So, President Obama: what is the US going to do to catch up to China here?
------------

* Chinese Academy of International Trade and Economic Cooperation, "China-Africa Trade and Economic Relationship Annual Report 2012." I don't think this is available online yet. I was given a copy last month by the Chinese embassy in Lusaka.

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)

.

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.