China-Africa deal a lose-lose situation
Written by Max Hamata and Wonder Guchu
Thursday, 16 July 2009
Informanté

Namibia became the first African country to suspend Chinese loans citing unfavourable terms and conditions described as ‘tough’ and ‘costly’ to the country. In this two part series Wonder Guchu argues that dealing with China, Africa is in a lose-lose situation.

The relationship between China and Africa is that of two friends who go to a bar and one lends the other money on condition that they drink it together.

Of course, they will drink together but the borrower will go home indebted. 

With many African countries looking east for help, China is that friend who lends money while Africa is the borrower who agrees to spend what she gets on buying Chinese products and services.

While Europe scrambled for Africa, China which was not part of the fracas is creeping in now like a sweet-talking lover who uses money to seduce, dupe and bribe his way.

Indeed, Africa has warmed up to China's seduction by offering low interest rates as well as suspending several trade requirements where the Chinese are involved. But it seems the Chinese are taking great advantage of Africa's willingness to embrace them by taking out more than what they bring in.

Although available figures indicate that by 2007, China had pumped into Africa US$2billion, a massive hike from a mere US$74,8-million in 2003, one wonders where this money has gone into and what Africa has to show for it.

I give you loan, you buy from me.

In order for Africa to benefit from China, it has to qualify for a loan and then buy from the eastern country.

Whatever names are given to the loan, it is nothing more than a bribe especially considering that the prices are 100 fold those asked for by non-Chinese companies.

Take for example the controversial X-ray deal which the Namibian Government had to pay N$120-million while the rest, about N$380-million, was to be a loan from Eximbank, the Chinese bank which finances business ventures in Africa.

Think of any other deal between either the Namibian Government or any other African country and China, there is always a loan involved. This way, the Chinese have a great advantage over other companies from elsewhere who cannot access such facilities from their governments.

It is like a shop owner offering a loan and telling you to use the money in his shop only where the prices of goods are exorbitant. It is bribery because one of the loan acceptance conditions is that the recipient country has to waiver tender procedures.

So when China says it has written off debts to about 33 African countries and reduced tariffs on a number of items from 32 least developed African countries, is there any need to celebrate such benevolence?

Fact is that, the debt would have been paid in full through overpricing and all the investments all over Africa are designed to channel all the money back to China.

And there are several such projects. There is the £800 million Angola oil deal; £1.2-billion Nigerian oil deal; and the £8-billion poured into the construction of a 900-mile pipeline in Sudan.

In 2007, China acquired a 20% stake worth US$5, 6-billion in South Africa's Standard Bank and in the same year, the eastern country lent US$5-billion to the Democratic Republic of Congo (DRC) for infrastructural development in the mining industry.

The DRC will, however, let China have almost unlimited access to its natural resources which in short can be described as mortgaging the country.
China also has interest in Zambian copper, textile factories in Lesotho, railways in Uganda, timber in the Central African Republic and retail developments in almost every capital.

They are building or renovating hotels and restaurants in Sierra Leone and running soybean processing businesses in Mozambique where they are also interested in prawn harvesting while in Senegal Chinese companies are into construction.

In Zimbabwe, they have pledged a US$950million credit line in return for platinum. The Zimbabwean loan has raised serious allegations of President Robert Mugabe's regime mortgaging the country for generations to come.

The Zimbabwean deal stipulates that the country gets a US$5-billion loan while China gets 50% equity in a US$40billion platinum concession without paying anything.

The US$5-billion would then be turned into Chinese equity even though it was short with US$10-billion of the total shareholding value. This is not peculiar to Zimbabwe but many other African countries that have accepted Chinese loans. This is very impressive and unprecedented but what is there for Africa? The worst employment record

A Labour Resource and Research Institute (LaRRI) report released early this year in Namibia states that Chinese firms pay three or four times less than the prescribed minimum wage in both the construction and retail industries. It also says that they engage in highly exploitative labour practices and do not adhere to labour laws.

The Report further states that Chinese employers do not allow their workers to join labour unions and that the workers are not given leave days.

Last month, the Namibian Food and Allied Workers Union (NAFAU) threatened to mobilise Namibians working in Chinese-owned businesses in the north, to campaign "vigorously" for their rights.

In 2004, Zambia had to ask Chinese managers at the Zambia-China Mulungushi Textiles Ltd, in northern Kabwe, to stop locking in workers at the factory at night.

And in June authorities shut down Collum Coal Mining Industries Ltd, in southern Zambia, saying miners had been forced to work underground without safety clothing and boots.

The government said the mine would re-open only after it was satisfied conditions had improved.

In 2005, Zambians who worked at Chambishi Mine one of the Chinese owned mines rioted demanding higher wages and better working conditions after an accident that killed 46 people. In addition, the workers demanded an end to exploitation and the observation of safety regulations.
During the rioting, five workers were wounded in the shooting believed to have been unleashed by some Chinese businessmen. When the Chinese President visited Zambia, he had to cancel his programme after protesters took him on.

Bringing their own, in most cases, Chinese investments come with own labour which in most cases is 70% while the other 30% comes from the host country.

This is what Angolans have agreed to where the unemployment rate is 80% and this is also what Algerians are living with where 7,000 Chinese are working on projects bankrolled by their country to a tune of US$1,5-billion.

By February last year, China had an estimated 750,000 nationals, drawn from the poor rural communities working in Africa amid plans of increasing the number to tens of millions in the near future.

Most of those who come to work in Africa enjoy it because they are usually kept on site thereby saving on rentals as well as rates while earning more than they do in China.

The head of China's Export-Import Bank which gives loans to African countries, Li Ruogu, early this year appealed for China's unemployed rural workforce to head for Africa to make their fortunes.

Li, who said there was no harm in letting poor Chinese farmers leave for Africa to become farm owners because there is plenty of land.

In Oshikango recently, some Chinese were involved in land scandals and Li's statement is proof that these poor Chinese farmers are set to become landowners in Africa after displacing poor African farmers from their land.

The land scheme is also alive in Uganda where the Chinese have won contracts to work on 10,000 acres of land while in Kenya they are building a corn-flour processing factory and running a farm project in the Ivory Coast.

Liu Jianjun, who runs the Baoding-Africa Business Council, did not mince his words when he spoke about the projects.

"We found local people lacked farming skills. Here in China on the other hand we are fast developing our industry, so many farmers no longer had land. The exchange was beneficial to both sides."

In Sudan, China brought in 10,000 of its own people to work on the oil pipeline and this raised complaints from the locals. Most of those brought from China could not drive.

A Sudanese professor, Ali Abdalla Ali, who has studied Chinese-Sudanese relations, says unlike in the 70s, Chinese workers in the country appear to have come to stay for good and that they are not just people picked randomly.

- To be continued in the next edition.