If we believe the news headlines, China is propping up dictators, dispensing billions of dollars for shady deals, and destroying whole ecosystems in its quest to extract oil and minerals from Africa. Beijing's scramble for Africa will establish a new era of resource colonialism, and intensify corruption, human rights abuses and economic dependence on the continent. The Dragon's Gift, a new book by Deborah Brautigam, looks behind this media hype. It offers surprising insights and challenges us to take a new look at Africa's development.
In 1978, an emerging powerhouse from East Asia found a new way to access the resources of a poor developing country. It offered a $10 billion line of credit, which the borrowing government could repay in oil and coal. Before the year was over, the borrower had taken up more than 70 such loans, all of them to be repaid in oil. The deals were touted as a form of "win-win" cooperation. They go to the heart of China's role in Africa. Surely, you will suspect, they must have resulted in a debt spiral and continued economic dependence?
Not quite. The lender in this example was Japan, and the borrowing country was China. While it was still poor, the Chinese government used its mineral resources to take up loans, including from Europe and the U.S., so it could build up the country's infrastructure and industry. It was very successful in this effort, but destroyed much of its environment in the process.
Within two decades, China diversified its economy, became the world's factory, and turned from an exporter to an importer of raw materials. Around the turn of the century, China started looking for new export markets for its industrial giants, needed to import more raw materials, and could generously step up its aid. It now offered developing countries the resource-backed loans which it had used to develop its own economy. These loans were neither altruistic nor a sinister plot to colonize African countries. They were rooted in China's experience that natural resources could help a poor country develop and diversify its economy. In China's view, they offered a win-win solution.
The Bui Dam in Ghana is an example for China's resource-backed lending. In 2007, China Exim Bank approved $562 million in loans for this hydropower project on the Black Volta River. Ghana mortgaged its cocoa exports to access the loan. China is not trying to lock Ghana into the role of a cocoa and hydropower producer though. Since the 1960s, Chinese aid has supported industrial projects such as a textile mill, a fishnet factory, and a cocoa processing plant in the West African country. While U.S. legislation forbids aid for projects that may transfer U.S. jobs abroad, Chinese aid is actively encouraging Chinese companies in certain industries to move their factories to Africa. And while Western aid tends to fund shiny new projects, the Chinese have made consistent efforts to maintain and restore their old projects, even if this is much less glamorous.
Chinese companies don't have a good track record when it comes to corruption. Yet Brautigam argues that resource-backed lending limits the amounts that can be siphoned off. In the case of Angola, China disburses an oil-backed loan directly to Chinese companies, which are building roads, railways, hospitals and other infrastructure projects in the war-battered country. While we can assume that bribes changed hands when the contracts were negotiated, the terms of the loan will ensure that some of Angola's oil wealth will actually end up in development projects. British, French and German banks issued oil-backed loans for Angola without any such restrictions, thereby increasing the risk that loans will be diverted into private pockets. While the Western media criticized China was for its Angola loan, the European bank lending did not create any headlines.
Deborah Brautigam, a professor at American University, has traveled the world and observed Chinese aid projects since the early 1980s. Her thoughtful and well-researched book introduces the different stages, actors and aspects of China's aid in Africa. It demonstrates how China has pragmatically adjusted its approach over the decades, learning from its own history as well as from international experiences.
Based on her intimate knowledge of China and Africa, Brautigam is able to shatter many prejudices: No, China's presence in Africa is not new. China's migration to the continent started in the 1820s, and Chinese aid, in the early 1960s. While Chinese aid for Africa has grown, it is still considerably smaller than the financial flows from the West. And while China has entertained close relations with the repressive governments of Sudan and Zimbabwe, it has started to put political pressure on them in recent years. (Without much public attention, Sudan continues to receive aid and investment from the West.)
Brautigam focuses on the positive aspects, but does not ignore the challenges and problems. China's aid remains non-transparent and unaccountable. Projects often still ignore local power relations, and don't involve host communities. The working conditions in many Chinese aid-funded projects -- including the Bui Dam -- are poor. And just like at home, many Chinese developers still view environmental destruction as a price to be paid for economic progress. The Bui Dam for example will flood a major part of a national park, and will likely emit significant amounts of greenhouse gases. Yet progress has been made. China Exim Bank for example has strengthened its environmental guideline, and has dropped at least one dam project over environmental concerns. I will elaborate this trend in my next blog post.
We need to keep up the pressure and advocate for further social and environmental reforms in China's aid and investment projects. Yet we need to do so with an open mind. Africa needs infrastructure and industrial development, and the Western track record in supporting this is poor. Deborah Brautigam's book -- and her ongoing blog on the topic -- offer the basis for a well-informed, interesting dialogue with African and Chinese actors.
Deborah Brautigam, The Dragon's Gift, The Real Story of China in Africa, Oxford University Press 2009
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