China’s Trade and Investment in Africa: Impact on Development, Employment Generation & Transfer of Technology 9811595720, 9789811595721

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China’s Trade and Investment in Africa Impact on Development, Employment Generation & Transfer of Technology Alpha Furbell Lisimba

China’s Trade and Investment in Africa

Alpha Furbell Lisimba

China’s Trade and Investment in Africa Impact on Development, Employment Generation & Transfer of Technology

Alpha Furbell Lisimba Melbourne, VIC, Australia

ISBN 978-981-15-9572-1 ISBN 978-981-15-9573-8 (eBook) https://doi.org/10.1007/978-981-15-9573-8 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Preface

It has been my dream to pursue the writing of this book and many people have assisted me in translating my dreams into reality. The subject of this book was not as such selected simply for impersonal academic inquiry and research alone. Having been born and brought up in Africa, I have observed with great curiosity the impact of greater Chinese trade and investment in terms of tangible differences, on the African continent. There has been a great interest in the academic and policy circles to undertake vigorous analyses of China’s growing profile in Africa. However, I feel that these analyses are usually approached from Western perspectives rather than from Chinese or African perspectives. China is viewed from the dichotomous prism of threat and opportunity. I have seen Chinese people in African cities taking over local businesses in various forms and industries. While women and men risk their lives swimming in the Mediterranean Sea trying to cross to Europe in search of better life opportunity, escaping tyranny, economic hardship, hunger and unemployment in their own countries, the Chinese on the other hand, in the recent years have been migrating to Africa in large numbers looking for better business opportunities because they do not want to miss out on money making opportunities Africa offers as a new emerging investment destination. I travelled to Khartoum, Addis Abbas and Kigali and have seen more Chinese nationals than locals travelling interstate from city to city and village to village searching for investment opportunities. This situation exists not only in these three countries, but also throughout the v

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continent one can see more Chinese nationals than locals walking in the city among crowds in local transport stations, shopping malls and airports. The Chinese are coming to Africa whilst Africans are leaving, looking for better life opportunities outside of the continent. In this volume I aim to investigate the impact of China’s aid, trade and investments on the development trajectories in Africa, focussed on Rwanda and Angola. My focus on Rwanda and Angola is based on the scrutiny that Rwanda, landlocked, natural resources deficient, aid-dependent and Angola resources-rich still struggles to develop are atypical destination for Chinese patronage and investments. In this book I would like to either confirm or challenge the assumptions about Chinese motives and their effects, and thereby fill the significant gap in this complex area of growing interest. I have written this volume to all prospective audiences but with high anticipation of potential significance to academic institutions and development sector professionals and policymakers who are likely to have an interest in this book. I hope to have contributed in a small way to the ongoing conversation about China–Africa relations in the policy and scholarly communities, we continue to be intellectually curious about—how much and to what degree can China present itself as a potential and viable alternative to the states at the periphery. First and foremost, I am grateful to Dr. Swati Parashar, for being my principal Ph.D. supervisor and encouraging me to write this book. I would like to thank Professor Jacqui True for her valuable comments and advice on my Ph.D. research and design. I am truly inspired by my mother and admire her as someone with a deep sense of humanity and as a strong woman who has always provided me the support that I needed to follow my dreams. A number of great scholars in the field have also generously supported this project through their feedback on early drafts and commentaries on text and ideas for improving it. I admit that it has been a long journey, but I have enjoyed every moment of researching and writing on this considerably engaging subject. Melbourne, Australia

Alpha Furbell Lisimba

Contents

Part I Conceptualising China-Africa Relations 1

China–Africa Relations: Historical Perspective Introduction Core Argument and Contribution Structure of the Book References

2

Theoretical Understanding/Literature Review Dependency Theory Introduction Dependency-One Theory: Many Thoughts Criticism of Dependency Theory Does Dependency Theory Explain China–Africa Economic Relations? Conclusion References

3

The Rise of China: Reforms, Growth and Modernisation: Overview of China’s Development Narrative Introduction

3 3 13 15 17

21 21 23 32 37 42 43

49 49

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CONTENTS

Colonial and Postcolonial Africa: Implications and Challenges: Overview of Africa’s Development Narrative Capitalism in Postcolonial Africa Implications of Development in Africa Transformation of OAU to AU as a New Advocate for Africa China–Africa: Overview of History of Relationship African Support for China’s UNSC Seat Postcolonial Relations with China Conclusion References 4

5

The Political Context of New Emerging Role of China in Postcolonial Africa: Complexity and New Challenge for Africa Introduction China–Africa: New Path New Initiative Soft Power in China–Africa Relations Conclusion References Critical Debate Surrounding Africa’s Shift Towards China: Perspectives on the Pros and Cons of Doing Business with China Introduction Disadvantages of China’s Presence in Africa Advantages of China’s Investment Conclusion References

55 60 61 66 67 70 71 72 73

81 81 82 84 91 94 95

99 99 107 113 118 118

CONTENTS

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Part II The Impact of China’s Trade and Investment on Employment Generation, the Transfer of Technology, Debt Trap and the Emergence of New Form of Dependency 6

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China and Africa: What Trade and Investment— Commercial Interests and Two-Way Trade Between China and Resources-Rich Developing Countries (RRDCs) and Non-Resources-Rich Developing Countries (Non-RRDCs) in Africa Introduction Trade Data: China–Africa China’s Foreign Direct Investment (FDI) Special Economic Zones (SEZs) Conclusion References China’s Energy Security: How Much Africa Matters to China Introduction Energy Security Industrial Growth and Energy Resources China’s Energy Consumption and Demand for Resources Local Production Geopolitics of China’s Approaches to Energy Security Role of Chinese National Oil Companies (NOCs) in Securing China’s Energy Supply Africa in China’s Energy Supply Calculation Revisiting Political Realism: China’s Military Build up and Western Fear Conclusion References Comparison of China’s Trade and Investment in Angola and Rwanda Introduction China, Angola and Rwanda: Historical Overview of Bilateral Relations

127 127 128 136 145 148 148

155 155 156 157 160 163 165 167 169 172 173

179 179 181

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Comparison of Chinese Investment in Angola and Rwanda Comparison of GDP Growth and Economic Development in Angola and Rwanda Conclusion References 9

10

What Investments, Employment Generation and the Transfer of Skills and Technology: Comparative Analysis of China Angola Rwanda Introduction Impact of FDI in Host Country Labour Force Trends, Unemployment Patterns and Challenges Labour Force Trends, Unemployment Patterns and Challenges Measuring Employment Generated by Chinese Trade and Investment in Projects Supported by the Energy, Construction and Transportation Sectors Construction and Telecommunications Sectors Data Analysis Conclusion References Observations: Has the Arrival of Chinese Labour Resulted in Local Jobs Being Taken? Introduction The Impact of Chinese Labour The Issue of Employment Generation for the Youth Skills Mismatch The Issue of Technology and Skills Transfer Language Barriers The Issue of Cheap-Value-Added Chinese Products Conclusion References

193 195 203 203

211 211 212 213 217

220 225 229 232 233

241 241 242 249 253 254 256 258 260 262

CONTENTS

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Conclusions: Discussion on Empirical Findings and the Way Forward: Who Benefits from the China–Africa Boom? Introduction Africa’s Share of Responsibility Revisiting the Objectives and Overall Arguments of the Book Discussion on the Empirical Findings of the Study Employment Generation and the Transfer of Skills and Technology Revisited Implications and Recommendations Revisiting Limitations of the Book Concluding Remarks References

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267 267 268 269 271 277 283 285 285 287

References

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Index

331

List of Figures

Fig. 3.1

Fig. 6.1

Fig. 6.2 Fig. 6.3

Fig. 6.4

Fig. 8.1

China’s economic growth 2000–2020 (Sources The above graph depicts author’s calculations based on the statistics released by the World Bank Database [2019], Chinese National Bureau of Statistics [2019], Chinese Statistic Yearbooks [2011/2017], Chinese Ministry of Commerce [2019]; Bloomberg News [2020]) China–Africa Trade Volume 2002–2018 (US$) (Source Chinese State Council, China Africa Economic and Trade Cooperation [2019]) Foreign direct investment inflows by region, 2017–2018. Date (Source UNCTAD [2019]) Top ten major investor economies in Africa by FDI stock in (US$ billions). Date (Sources UNCTAD [2019], China Africa Research Initiative [2020]) China’s investment in Africa by Sector 2015–2020 in US$ (Sources World Bank Database [2020], IMF [2020]) Angola, Rwanda GDP growth and GDP growth of sub-Saharan Africa 2000–2018 (US$ million) (Data Sources World Trade Organisation [2019], African Economic Outlook [2019], Global Finance [2020], United Nations Development Program [UNDP] Database [2018], World Bank Database [2020])

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131 137

138

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197

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LIST OF FIGURES

Fig. 8.2

Fig. 8.3 Fig. 8.4

Fig. 8.5

Fig. 8.6

Fig. 8.7

Fig. 9.1 Fig. 10.1 Fig. 10.2 Fig. 10.3

GNI of Angola and Rwanda 2000–2018 in US$ millions (Data Source World Bank Development Indicator Database [2019]) China’s GDP and real GDP growth (2000–2020) (Data Source Chinese Ministry of Commerce [2020]) Comparison of China and other countries imports from Angola, 2018–2019 (Data Sources African Development Bank [2019] and World Bank Database [2020]) Comparison of China and other countries exports to Angola 2018–2019 (Data Sources African Development Bank [2019] and World Bank Database [2020]) Comparison of China and other countries imports from Rwanda, 2018–2019 (Data Source African Development Bank [2020]) Comparison of China and other countries exports to Rwanda, 2019–2020 (Data Source African Development Bank [2020) Total labour force in Angola and Rwanda, 2019 (Data Source World Bank [2019]) Unemployment rates (As per cent of labour force in Angola, 2000–2019) (Source World Bank [2019]) Unemployment rates (as a per cent of the labour force) in Rwanda, 2000–2019 (Source World Bank [2020]) Unemployment among youth in the urban areas in Angola and Rwanda, aged 15–24 (in %), 2019 (Data Sources World Bank Database 2019; National Institute of Statistics of Rwanda 2019; United Nations Conference on Trade and Development UNCTAD 2019)

198 199

200

200

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201 218 244 248

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List of Tables

Table 6.1 Table 6.2 Table 6.3 Table 7.1

Table 8.1 Table 9.1 Table 9.2 Table 9.3 Table 9.4

Chinese official development aid distribution in Africa by country (top 7 beneficiaries) 2017–2020 Chinese imports from Africa by category, 2019 (US$) M&A and Greenfield FDI inflows into Africa 2016–2018 Top 15 crude oil suppliers of China: These countries alone supplied 90. 6% of the crude petroleum to China during the year 2018–2019 China’s imports and exports from Rwanda Contribution of China’s trade and investment on economic development in Angola and Rwanda Workforce localisation rates in Angola Some Chinese projects in construction and telecommunications, 2010–2019 Estimate of jobs generated by Chinese investment in Angola and Rwanda, during the period of growth 2007–2019: sector wise

132 133 139

162 193 213 215 228

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PART I

Conceptualising China-Africa Relations

CHAPTER 1

China–Africa Relations: Historical Perspective

Introduction One of the major noticeable changes that have taken place in the twentyfirst-century international order is the ongoing economic shift. The contemporary shift in the economic power from North to East, with the emergence of new economic powers such as China, South Korea, Russia and India is noteworthy. In order to keep the path of their economic growth rate, these emerging economies were searching for sources to avail raw materials and avenues for market expansion and new investments. Africa with its vast reserves of natural resources and sizeable market size, soon figured as the most desirable prize for the emerging economies (Alden and Large 2018). China’s spectacular economic growth and the enhancement of its strategic power is followed quite keenly around the globe, triggering anxiety as well as admiration in different parts of the world. The developing world has been quite appreciative of China’s rise in the global order and these countries look forward to closer cooperation with China to reinvent their own development model (Brautigam 2009; Moyo 2009; Broadman 2008). Africa for example, sees China as a powerful global actor that can aid development in the continent, given its own history of socio-economic development. Most of the African continent has been on the margins of the mainstream global economic development for a long time and China’s rise and its increasing interest in the African economy is viewed with a great degree of anticipation in © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 A. F. Lisimba, China’s Trade and Investment in Africa, https://doi.org/10.1007/978-981-15-9573-8_1

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the continent (Taylor 2009; Kagame 2009; Alden 2008). China has been building up considerable economic and political influence with countries in Africa in recent years (Alden 2007; Carmody 2011; Brautingam 2011; Taylor 2006; Naidu and Ampiah 2008). The China–Africa relationship has captured global attention due to its rapid rate of growth, geopolitical implications of the strengthening relationship and its longterm effects on growth and development in the African continent has become a subject of debate among scholars who are concerned with the rise of China and its developmental implications for the world and Africa in particular. The emerging economic and political integration of China and Africa has been studied by a number of leading IR and IPE scholars; they have examined China’s rise and its relationship with other developing countries (Alden 2007; Carmody 2011; Brautingam 2011; Taylor 2006). China–Africa relations have been analysed from different perspectives (Mlambo 2019; Lubieniecka 2014) as this emerging alliance of China and Africa has serious implications for geopolitics, geo-economics and geostrategic objectives, not only for China and Africa but also for the larger international community. A greater alignment of China–Africa objectives has generated a high degree of interest among different global powers as this relationship incorporates a crucial dimension of the global political economy (see for example Draper and Le Pere 2007; Carmody and Owusu 2007; French 2007). Draper and Le Pere have noted that there is a risk of China–Africa economic relations being caught in the ‘colonial trap’, a pattern of trade where Africa was mainly the supplier of resources, minerals and a market for the traditional trading partners and China exporting manufactured goods and advanced technologies to Africa. While China’s increasing trade and investment in Africa is a good opportunity for Africa to review its development strategies with this new partner, the key challenge for the African states is to manage and shape their interaction with China in a way which guarantees that it will benefit their own economies and not lead to building personal wealth at the expense of wider population—this is perhaps the most challenging task to test the maturity of the African leaders and their determination and political will to tackle the problems of poverty and other social challenges which the continent encounters today. China’s deepening economic engagement with Africa is one of the most significant developments in international relations and specifically in international political economy (IPE) in the post-Cold War era (Raine 2009). This debate is articulated within the context of South–South

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trade activities as opposed to the traditional South–North relations which has been consistently criticised by unfair trade advocates of hindering Africa’s development potential (Hirsch 2018). The criticism of North– South interaction is based on the ground that trade activities between the two benefits the Global North more at the expense of the Global South (‘Naidu and Ampiah 2008’ Shelton and Garth Le Pere 2007). China’s engagement in Africa has attracted significant attention from major global powers and it has also generated policy and scholarly debates on the nature, scope and implications of this relationship (Naidu and Ampiah 2008; Naidu et al. 2009; Alden 2007; Taylor 2006). It can be argued that China’s interest in Africa is not altogether new, however, in the current geopolitical climate, China’s reinvigorated economic, political, military and cultural links with Africa has created ripples in the established global order (Tan-Mullins et al. 2010; Friedman 2009). China’s ever-increasing involvement in Africa can be seen in the growing volume of China’s investment in the resources-rich countries (RRDCs) and non-resourcesrich (NRRDCs) countries in Africa. China has employed its economic power and political influence to build closer diplomatic and economic links with the African countries. Gradually with additional trade and investment in Africa, China has emerged as the most important trading partner in the region. China’s emergence as a key economic powerhouse in Africa has become the subject of intense global scrutiny, not only because of how China does business and consolidates its economic position in Africa, but also because of the impact of these relations on economic development outcomes and capacity building in Africa (Alden 2007; Taylor 2006; Naidu and Ampiah 2008). China is viewed as an enigma: on the one hand China symbolises a challenge to Africa’s long-term and sustainable development (Taylor 2009; Tull 2006), while on the other, China presents tempting and tantalising opportunities for economic growth and development of the continent (Moyo 2009; Shinn and Eisenman 2012; Alves and Power 2012). Although economic development models of Europe and the United States, which are based on the ‘Washington Consensus’ (WC), continue to dominate several parts of Africa; China’s development model known as Beijing Consensus (BC) has quickly become prominent and welcomed by all African states as an alternative to the former. The reason is that the BC is anchored on economic and political assistance to Africa in comparison to the WC that focused on institutional reforms especially in Africa as requisite for development assistance to

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Africa (Lopes 2012). The WC is a set of policies underpinning the World Bank’s operations, derived from neoliberal economic thought that placed the freedom of the market above all else, condemning state intervention and arguing that strengthening the market in the form of free trade and democratic stability would empower those in developing countries to achieve rapid economic success and democratic transformation (Lopes 2012). However, Washington-based international financial institutions namely IMF and the World bank responsible for imposing the (WC) Consensus policies in Africa ignored the specific circumstances of each country, adopting a one-size-fits-all policy which failed to spur growth in the continent. Following criticism of the World Bank’s track record during the 1980s and the 1990s in Africa, debate within Washingtonbased institutions led to a re-evaluation of the role of the state in Africa and support for domestic institutions necessary for successfully implementing capitalist donor projects (United Nations Economic Commission for Africa, UNECA 2019). The post-Washington Consensus era experienced new policies with arguments within these liberal institutions for more transparency in functioning and the strengthening of these institutions in developing countries, due to their failure to achieve designed goals in Africa, including the financial system, the civil service, government and local legal systems (Lopes 2012; Bretton Woods Project 2019). As Africa started to feel China’s growing economic influence, it gradually started to fully accept the Chinese model of economic development, the ‘Beijing Consensus’ (BC) as an alternative to the Washington Consensus (WC). Similar to WC, the rival Beijing Consensus (BC) is a term used to refer to the set of economic development or reform policies introduced after the death of Chairman Mao Zedong (Bennhold 2011). It is purely an economic model which is presented as an important challenge to the Washington Consensus (WC). In contrast to the WC, the BC, as an economic development model encourages the heavy involvement of the state in economic activities and country’s development process (Bennhold 2011). Moreover, the BC is seen by most African governments as most suitable because it provides loans and grants with more flexible conditionality in comparison to that of the ‘Washington Consensus’ (Mensah 2010; Baah and Jauch 2009; Thompson 2005). Most importantly the BC unlike WC which asks states to implement multiple donor projects only focusses on projects that benefit donor projects. On the other spectrum, the debate about development in Africa is regularly framed with reference to the historical baggage of colonialism.

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One of the key arguments that explains most of the contemporary challenges that beset Africa, underlines the legacy of extractive colonial policies which had pushed Africa’s economy to an inferior position vis-àvis the European colonial states. Postcolonial Africa has experienced high incidences of ‘Civil Wars’ and ‘Political Instability’, not triggered entirely by ethnic divisions of colonial policies but also due to the lack of effective tools and resources for economic development and poverty alleviation due to the failure of the continent’s postcolonial leadership. Further to this, a number of these political upheavals and civil unrests emerge from the lack of successful tools and resources for inclusive economic development. This situation has further worsened by the lack of robust institutional and infrastructural capacities in Africa; certainly, a number of these structural insufficiencies are inherited from colonial rule (Sachs et al. 2004). Majority of African states since their liberation had access to some kind of foreign aid and assistance, mostly from the United States and one-time European colonial powers (Di Muzio 2016). These economic assistance packages but did not emerge out of humanitarian purposes, they were driven by the interest of donor countries such as gathering diplomatic support, extent of political influence and creating trade and investment opportunities (Hulme 2016; Hagmann and Reyntjens 2016). Although Africa did receive all types of foreign aids including development assistance as explained by Hulme (2016), these aids did not help African states to develop resilient and durable strategies that would have fostered a selfreliant economic development for its population due to factors including aid mismanagement and donor countries policies that required recipient countries to implement major institutional reforms that resulted in rather disastrous outcomes and strengthened corrupt practices. Within the international economic system, the comparative strength of countries becomes visible. States, especially those referred to as ‘Third World Countries’ (for example, African countries), are producers of raw materials which they sell to the advanced countries in the North and then procure a greater proportion of their manufactured goods and share in the advanced/new technologies from the developed economies in the North (Amin 2011). Today, emerging economies such as China, India, Brazil, etc. are already joining the train of developed economies in the North to source raw materials in Africa in exchange for new technologies, manufactured goods and hard currency (Yang and Mwase 2012). However and despite its long struggle and sad history, Africa has recently become an interesting landscape for emerging economies; China, India,

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Brazil, Turkey, South Korea and even the Europeans who colonised the continent and ignored it for decades as a part of their post-war containment policy, have recently started to look back to the continent because of its rich resources, growing population for the market place and other potential and untapped opportunities the continent is likely to offer (Amin 2011). These new emerging economic powerhouses are inspired by economic motives rather than ideological or philosophical bonhomie. For instance, countries such as Somali and Sudan, that have been experiencing long civil war, which the West had failed to help resolve, are now moving towards a peaceful solution with the help of emerging economies such as Turkey and China. Turkey in particular plays an influential role in Somali after the failure of United States’s efforts to end civil war in that country. The European Union, a one-time coloniser in particular, is not trying to establish a totally new relationship with Africa distinctive from the one it had during and in postcolonial era, it often sees the continent as having an inferior status which resulted in the continent being treated unequally within international economic system. However, and in many ways, Africa’s historical underdevelopment, political violence and chaotic situation can indisputably be attributed to the manifestation of the dark side of colonialism, which continues to influence the course of contemporary economic and social development in postcolonial Africa. Although the idea of colonisation as the main reason for Africa’s underdevelopment has been challenged by several scholars in recent times (Mangongera 2002; Shearlaw 2014), there are many who argue that while colonialism has its fair share in Africa’s underdevelopment, other factors such as lack of leadership, responsibility, corruptions, lack of accountability, evident within African government, civil wars, poor or lack of education have equally contributed to Africa’s underdevelopment. China as an emerging economic powerhouse, has been building up considerable economic and political influence in Africa in recent years (Alden 2007; Carmody 2011; Brautingam 2011; Taylor 2006; Naidu and Ampiah 2008). Because of China’s exponential growth, a number of African states appear to view China’s economic model for growth with its emerging market economy as an economic model worth copying as a potential vehicle for economic development. Additionally, Africa conceptualises its engagement with China as a historical opportunity to escape the neocolonial relations with the West and former one-time colonial trade partner such as France and Britain which still maintain colonial form of relationship with the continent. The newly emerged leaders in

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Africa, mostly educated in the West (Europe or America), use the failure of Africa’s former colonial rulers to defend the continent’s new policy of looking to the East and in particular Africa’s new relationship with China. We are looking to the East where the sun rises, and have turned our backs on the West where the sun sets (Hilsum 2005) -President Robert Mugabe

This text by the former Zimbabwean President, Robert Mugabe, is perhaps shared by most African leaders who are gradually disregarding the West and quickly embracing China as an alternative development partner that survived similar challenges impeding development in Africa. This book explores in detail whether China and Africa’s economic relationship or the rise of China in Africa represents a new opportunity for the continent to develop or China is simply a new neocolonial power replicating the Western model of development and exploitation, employing different engagement approaches. It also examines China’s trade and investment presence in resources-rich developing countries (RRDCs) and non-resources-rich developing countries (non-RRDCs) with a particular focus on two African countries; resources-rich Angola and non-resourcesrich Rwanda. The central purpose of this book is to understand how far, and in what ways, China’s foreign direct investment (FDI) affects economic and human development in terms of the creation of employment and the transfer of skills and technology. In addition, the book looks at China’s impact on human rights issues and negative influence on governance and leadership in Africa. These elements are important for local capacity building, increase in productivity and the overall economic development of Africa and that of the case study countries namely Angola and Rwanda. The book, thus, attempts to make a contribution to the ongoing academic debates on the rise of China and its developmental impact on Africa and who loses and benefits from this complex economic partnership. In doing so, the context and background of the research has been established by reviewing the existing literature and academic work. I identified dependency theory (Amin 1972) and the world system theory (Wallerstein 1974) as most relevant and as basis for analysing how the global economic configuration operates through the hierarchy of core, semi-periphery and periphery among the states. In the context of China– Africa, I deploy the two theories to examine to measure the outcome of this complex interaction for Africa and whether the Chinese coming to Africa reinforces dependency or generates a new interdependency type of

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trade relationship based on a win-win situation as Beijing often claims. As I am aware that considering the breadth and depth of China–Africa relationship, this book will never be able to explore all the possible aspects of China’s activities in the continent and therefore I will recommend a certain number of issues for further research in other volumes. This book, thus, is an attempt to make a contribution to the ongoing debate on the rise of China and its developmental impact on Africa. Therefore, now is an appropriate time to examine the impact of China’s trade and investment in Africa with particular focus on employment generation and the transfer of skills and technology. This because it has been almost two decades since China actively re-engaged Africa and thus far the African continent still struggles and faces enormous economic crisis, poverty and social inequality. And as public interest grows in the subject, it is a good time to examine what China actually offers to Africa. I opted to assess the transfer of technology and employment generation as most important elements for local development will make us understand whether China acts differently as emerging economic partner or replicates the policies of Africa’s traditional trading partners. The book situates the analysis in a specific case study to examine the applicability of the dependency and world system theory and their fundamental concepts to China–Africa relations. To this end, this book focusses on China’s growing investment in Africa and draws its analysis on Rwanda and Angola as case studies to comprehend China–Africa development discourse in Africa. I theorise that the case study represents certain continuities of the core–periphery association, from my standpoint and while contemporary China–Africa relationship suggests a case of growing interdependency, several aspects of dependency theory persist in this emerging relationship. Conclusions suggest that despite all Chinese bonhomie and commitment for fundamental structural reforms in Africa, the real challenge lies with African states to deploy Chinese assistance to gain self-reliance by addressing their genuine developmental needs and socio-economic priorities. In many RRDCs and non-RRDCs where China is the major investor in their resource and non-resource sectors, a large portion of the population, including young people and university graduates are unemployed and tend to migrate to developed countries in search of better jobs, because their country’s economy despite heavy Chinese investments remained poor, with high unemployment rate and social inequality where the gap between poor and rich was wide. This raises a question of who benefits from China’s 200 plus billion dollar

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trade with Africa. In drawing attention to this situation my point is not to condemn the movement of Chinese nationals in or within Africa. We live in a period of history in which China by default is a major player in the world and its trade activities have significant impacts on our daily lives ranging from the clothing we wear, televisions we watch or the cellphones we use, without which we can hardly imagine our lives today. Chinese people are hard-workers and one cannot hesitate to say that the Chinese whether in Africa or elsewhere do achieve the goals they design to fulfil. My analysis focusses more on why China’s trade and investment do not benefit local Africans or result in local development. Indeed, I have focussed on this issue as a starting point for this book. The question of who is benefitting from Chinese investment, and whether the benefits are meaningfully accruing to ordinary Africans in particular is a central concern of the book. To put it simply some of the critical questions this book seeks to address are: Who benefits from China–Africa partnership? Are the benefits of China–Africa economic relations symmetrically or equitable distributed? Or are Chinese trade investments in Africa advantageous only for the Chinese or do they benefit the local Africans as well? Is the growing partnership a win-win situation as Beijing claims? To what extent does China support Africa’s development agenda? What is the impact of the rising influence of China on the economic development and employment generation in resource-rich developing countries (RRDCs) and non-resources-rich developing countries (non-RRDCs) in Africa? What are the policy objectives driving China’s engagement in resources-rich and non-resources-rich developing countries? What are the effects of Chinese investment and policies on development outcomes in the states considered? How far and in what ways does China use ‘economic soft power’ strategies (e.g., provision of concessional loans with no conditions and with flexible repayment options), diplomatic support and credit lines for securing investment opportunities in resources-rich developing countries? Why Chinese presence remains contentious across the African continent? These questions enable us to develop a deeper understanding of China’s trade and investment and its impacts on local development in its trading partner countries in Africa. In an informal discussion about Chinese nationals’ presence in Africa, I have spoken to many locals in Addis Ababa and Kigalai, who were quick to point out to me that they feel Chinese invasion is everywhere, in street, markets, suburbs and even in rural areas. ‘Africa has many tribes, but the Chinese

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are becoming another tribe in Africa’, an Ethiopian friend told me over a cup of coffee at one of the busiest shopping malls in Addis Ababa. As mentioned above, in order to critically examine this issue, I have focussed on Angola, a resource-rich developing country (RRDC) and Rwanda a non-resource-rich developing country (non-RRDC). China’s relationship with RRDCs as a whole is too general to provide a useful and in-depth study in the context of Africa, since it combines different countries across the geographical-continental boundaries in one unit. I have compared the impact of Chinese investment and trade on employment generation and the transfer of skills in Angola, which has considerable volume of Chinese investment and with Rwanda, which relatively has less Chinese investment, and have made an attempt to analyse whether the impact on employment generation and the transfer of skills and technology is similar or different across the two African states with different economic compositions. The selection of Rwanda and Angola as case studies is driven by four critical factors: 1. Rwanda and Angola are of exceptional significance to China: Angola for its resources and market and Rwanda for its strategic position and as a smaller country that China uses as a centre for its strategic interests in the region. 2. Angola as a resource-rich country has received maximum Chinese investment in the recent past in the African continent. In contrast, Rwanda, which is a nonresources-rich developing country, has received comparatively less but still significant share of Chinese investment in Africa. 3. Since 2002 onwards Chinese state-owned companies and private enterprises have been heavily investing in the resources sector, telecommunications and construction, also establishing joint ventures and partnership with both countries (Brautingam 2011). Therefore, Angola and Rwanda provide an opportunity to compare employment outcomes in the light of China’s increasing involvement in similar areas. 4. In addition, Angola and Rwanda are in a region where the majority of states are already conducting considerable amount of business with China but still face large scale problems of unemployment, poverty and skilled labour; therefore, comparing and analysing China’s commercial activities in these two countries provides a broader understanding of what the Chinese development model offers to the wider African continent. Angola’s total area is 1,246,700 sq. km and its total population in 2020 was 32,522,339 Million (The World Factbook- Central Intelligence 2020). Rwanda on the other hand is a small country of total land area of 26,000 sq. km (African Development Bank 2013) and a population of 12,712,431 Million in 2020 (The

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World Factbook- Central Intelligence 2020). With regard to economic composition, Rwanda is one of the non-resources-rich countries and its main export commodities are hides, coffee, tea and tin ore. Angola is a country with rich resources and its economy relies heavily on oil, which represented 98 per cent of national income from oil and diamond export in 2019 (Angola Economy Outlook- African Development Bank 2020). According to the most recent available data, Rwanda had a total GDP per capita (PPP) of 880.00 million US dollars in 2020, (Trading Economics 2020), while Angola had much larger GDP per capita (PPP) of 3300.00 million US dollars (Trading Economics 2020 Angola 2020). China’s position in Rwanda is less prevalent than its position in Angola. These statistics demonstrate that the two countries are different across the specific parameters mentioned previously. It is expected that this book would provide a deeper understanding of whether the rise of China and its growing economic clout in Africa is assisting African states in their development or whether China is present in Africa only to access mineral resources and explore investment opportunities to support its own growth and development. In order to do so, this book examines China’s trade and investment in the three main sectors of the African economy namely resources, construction and telecommunications and their effects on employment generation as well as the transfer of skills and technology in Angola and Rwanda. Although this book looks at only two African countries among other 54, it covers substantial issues regarding China’s involvement in Africa. The two countries considered in this book represent all of Africa and their narrative with China provides a representative account of changes and challenges that the continent is encountering in its relationship with China.

Core Argument and Contribution China’s relations with Africa are multifaceted. While Beijing claims that the relationship is based on win-win situation, African states, however, are gradually becoming dependant on China. China’s relationship with Africa has witnessed exponential growth in the twenty-first century. The relationship is not confined to just economic aid and trade alone, it has grown into capacity building for security, crisis management and educational and training opportunities for human resources development. For instance, China has established Confucius institutions across the continent, and it is now complementing its loans and credit lines strategies

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with cultural exchanges that involve teaching of the Chinese language. In doing as a part of its long-term strategy, Beijing opened Chinese culture and language schools in Tanzania, Zambia, Uganda, Rwanda, South Africa, Angola-just to name a few. Based on current assessment, it is yet to be seen whether China’s expansion is aimed at developing Africa or for its own interests. It could be argued that China’s involvement in these activities is to win African minds and extend its influence, similar to what other power do to extend their sphere of dominance and China is no exception. (see Brautigam 2009). In the last two decades, China has emerged as the largest trading partner for Africa displacing Europe and the United States. China has offered generous financial help to the African states for ‘Capacity Building in areas such as Defence, Counter-Terrorism, Riot Prevention and Customs and Immigration Control’. This rapid transformation has not gone unnoticed by the erstwhile dominant powers involved in Africa. Consequently, there have been wide-ranging discussions on the implications of China’s growing engagement with Africa. Polarisation in viewpoints has emerged from the fervent debate on growing Chinese engagement with Africa; China is either portrayed as a transformative agent ushering in development on the basis of a win-win partnership or as an imperialistic, exploitative and neocolonial power out to squeeze maximum benefit out of the resource-rich Africa. However, these generalisations may strive to further the political interests of certain groups; they do not provide us with any meaningful analysis. The spectrum of different perceptions about Chinese engagement with Africa has been classified under three streams. Sino-optimism: China as the benign benefactor of Africa; Sino-pessimism: China as the aggressive exploiter; and Sino-pragmatism: China in the middle of the first two opposing perspectives. The core argument of this book is that China poses both challenges and creates opportunities for Africa, the transformative potentials of China–Africa engagements can be compared to Africa’s experiences with European colonialism. However, it would be patently misleading to claim any equivalence between African experiences of European colonialism with Africa’s engagements with China. Although, China does not replicate the exact colonial model, its actions have all elements of dependent relations, thus underpinning neocolonialism with Chinese characteristics. Although the literature on China–Africa relationship has proliferated over the past decades, there is a paucity of literature based on empirical analysis on Africa’s economic development and less on the

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potential catalytic role of China’s African ties on Africa’s industrialisation and structural transformation. This book is an attempt to fill the gap in existing literature on China and Africa. It does so by reflecting on the rapidly changing dynamics of China’s trade dealings with Africa. The key theme of the book is the potential of the catalytic role of China’s investment in Africa’s local development trajectory and economic transformation.

Structure of the Book This book is divided into two main parts. Part one explores the historical contacts between China and Africa and critical debate surrounding the rise of China in Africa and part two assesses the impact on China’s investment on local economic development focussing on employment generation and the transfer of technology. This book comprises eleven chapters and is organised as follows, each focussing on the different dimensions of China–Africa relations. Following the Introduction, Chapter 2 reviews key theoretical texts to illustrate and develop the theoretical framework for the book. In particular dependency theory, drawn from the fields of IR and IPE, provides rich yet distinct approaches to conceptualise this book’s key question/s. Empirical scholarship relevant to the question of Chinese investment and its impact on resource-rich developing countries is also considered in this chapter. Chapter 3 explores China’s economic growth and modernisation as well as the debate over the demand for energy resources that represents an important element in China’s domestic and foreign policy towards RRDCs and non-RRDCs. Chapter 4 explains the Political Context of New Emerging Role of China in Postcolonial Africa: Complexity and New Challenge for Africa. The objective here is to analyse the economic situation that has evolved both in China and Africa in the last three decades and the factors that have dominated the relations between the two countries. Chapter 5 explores critical Debate Surrounding Africa’s Shift towards China. The chapter discusses perspectives on the Pros and Cons of doing Business with China. As the emphasis of this book is on the impact of China’s relations on Africa and the rise in the investment in resource-rich developing countries in Africa, this chapter explores the existing debate on the issue. Part two of the book focusses on the impact of China’s economic influence on several issues and begins with Chapter 6 examining Commercial Interests and Two-Way Trade between China and Resources-Rich

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Developing countries (RRDCs) and Non-Resources-Rich Developing Countries (Non-RRDCs) in Africa. The objective here is to analyse the economic situation that has evolved both in China and Africa in the last three decades and the factors that have dominated the relations between the two countries. Chapter 7 discusses China’s energy and resources policy in Africa. In this chapter, I discuss the growing global demand for energy resources such as oil, China‘s role in acquiring these resources and Africa’s position in meeting the global demands. Chapter 8 introduces Angola and Rwanda as case studies which this book draws on to understand the impact of the presence of China in Africa. The chapter introduces historical overview of bilateral relations between China, Angola and Rwanda and compares Chinese investment in the two countries. Comparison of GDP Growth and Economic Development in Angola and Rwanda is also discussed in this chapter. The chapter draws on China’s trade links with both countries in the context of conceptualising China’s trade and investment in these countries while assessing the challenges to the development of their economies. This is done through a comparative analysis of China’s investment in Angola and Rwanda in order to gauge how much money flows into these countries. In addition, the chapter also includes an assessment of the Gross Domestic Product (GDP) in Angola and Rwanda during their active economic involvement with China. The aim here is to investigate whether the growth has resulted in comprehensive economic development and poverty alleviation in the two countries. Chapter 9 examines the impact of China’s trade and investment on employment generation and the transfer of skills and technology. This chapter focusses on the three sectors of resources, telecommunication and construction to measure the volume of employment generated and whether the generated jobs contribute to the growth and development of the local economy. Chapter 10 describes the pattern of Chinese labour migration and its impact on the employment generated through Chinese investments. It shed light on the issue of employment generation for the youth and cheap-value-added Chinese products and the impact of China’s involvement in Africa on local deindustrialisation and loss of employment is also discussed in this chapter. Chapter 11 concludes and discusses Empirical Findings and the Way Forward: Who Benefits from the China– Africa boom and the winners and losers of China–Africa partnership are also discussed in this final chapter. The chapter concludes the book.

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Draper, D., & Le Pere, G. (2007). Enter the Dragon: Towards a Free Trade Agreement Between China and the Southern African Customs Union. Institute for Global Dialogue. French, H. W. (2007). Commentary: China and Africa. African Affairs, 106(422), 127–132. Friedman, E. (2009). ‘How Economic Superpower China Could Transform Africa’. Journal of Chinese Political Science, 14, 1–20. Hagmann, T., & Reyntjens, F. (2016). Aid and Authoritarianism in Africa: Development Without Democracy. London: Uppsala: London: Zed Books, Uppsala: Nordiska Afrikainstutet. Hilsum, L. (2005). Re-Enter the Dragon: China’s New Mission in Africa. Review of African Political Economy, 32(104/105), 419–425. Hirsch, A. (2018, March). Trade Wars? Africa Has Been a Victim of Them for Years. The Guardian. https://www.theguardian.com/commentisfree/2018/ mar/07/trade-wars-africa-donald-trump. Hulme, D. (2016). Should Rich Nations Help the Poor?. Cambridge: Polity Press. Kagame, P. (2009, November). Why Africa Welcomes the Chinese. The Guardian. http://www.theguardian.com/commentisfree/2009/nov/02/aid trade-rwanda-china-west. Lopes, C. (2012). Economic Growth and Inequality: The New Post-Washington Consensus. RCCS Annual Review, 4. Online since 1 October 2012. http:// journals.openedition.org/rccsar/426, https://doi.org/10.4000/rccsar.426. Lubieniecka, E. (2014). Chinese Engagement in Sub-Saharan Africa: Can the Beijing Consensus Be Explained Under World-Systems Analysis? Fudan Journal of the Humanities and Social Sciences, 7 (3), 433–50. Mangongera, C. (2002). Should We Continue to Blame Colonialism? Global Policy Fourm. https://www.globalpolicy.org/component/content/article/ 211/44527.html. Mensah, C. (2010). China’s Foray into Africa: Ideational Underpinnings. African Journal of Political Science and International Relations, 4(3), 96–108. Mlambo, V. (2019). Exploitation Dressed in a Suit, Shining Shoes, and Carrying a Suitcase Full of Dollars: What Does China Want in Africa? Journal of Public Affairs, 19(1), 1–9. Moyo, D. (2009). Dead Aid: Why Aid is Not Working and How There is Another Way for Africa. London Allen Lane. Naidu, S., & Ampiah, A. (2008). Crouching Tiger, Hidden Dragon? Africa and China. Scottsville: University of KwaZulu-Natal Press. Naidu, S., Corkin, L., & Herman, H. (2009). China’s (Re)-Emerging Relations with Africa: Forging a New Consensus? Politikon, 36(1), 87–115. Raine, S. (2009). China’s African Challenges. New York: Routledge. Rwanda: Angola: The World Factbook- Central Intelligence. (2020). https:// www.cia.gov/library/publications/the-world-factbook/geos/rw.html.

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Rwanda GDP per capita. (2020). Trading Economics. https://tradingeconomics. com/. Sachs, J., McArthur, J. W., Schmidt-Traub, G., Kruk, M., Bahadur, C., Faye, M., & McCord, G. (2004). “Ending Africa’s Poverty Trap.” Brookings Papers on Economic Activity, 1, 117–240 Shearlaw, M. (2014). Africa Should Stop Blaming History for Its Economic Problems’—Is Obama right? The Guardian. https://www.theguardian.com/ world/2014/jul/30/-sp-obama-africa-colonial-excuses-poll. Shelton, G. (2007). China and Africa: Advancing South-South Cooperation. In G. Le Pere (Ed.), China in Africa: Mercantilist or Predator or Partner in Development? Midrand: Institute for Global Dialogue. Shinn, D. H., & Eisenman, J. (2012). China and Africa: A Century of Engagement. Pennsylvania: University of Pennsylvania Press. Tan-Mullins, M., Mohan, G., & Power, M. (2010). Redefining “Aid” in the China-Africa Context. Development and Change, 41(5), 857–81. Taylor, I. (2006). China’s Oil Diplomacy in Africa. International Affairs, 82(5), 937–959. Taylor, I. (2009). China’s New Role in Africa. Boulder, CO: Lynne Rienner. Thompson, D. (2005). China’s Emerging Interests in Africa: Opportunities and Challenges for Africa and the United States. African Renaissance Journal, 2(4), 20–29. Tull, D. M. (2006). China’s Engagement in Africa: Scope, Significance and Consequences. Journal of Modern African Studies, 44(3), 459–479. United Nations Economic Commission for Africa. (2019). https://www.uneca. org/. Wallerstein, I. M. (1974). Dependence in an Interdependent World: The Limited Possibilities of Transformation within the Capitalist World Economy. African Studies Review, 17 (1), 1–26. Yang, Y., & Mwase, N. (2012). BRICs’ Philosophies for Development Financing and Their Implications for LICs (IMF Working Paper).

CHAPTER 2

Theoretical Understanding/Literature Review Dependency Theory

Introduction Critical development theories have increasingly been ignored in the international political economy over the last three decades. The collapse of communism and victory of liberal norms in the post-war era has provided a new opportunity for modernisation theories to lead development discourse based on the policies of Washington Consensus (Burawoy 1992; Sudarshana 2017). On the other hand, dependency theory which opposes modernisation theories has been deemed ‘outdated’ and slowly vanishing from the development discourse, leaving a major theoretical gap in addressing issues of poverty, social inequality, trade imbalance and North–South unfair trade. As already discussed in Chapter 1, this book examines two major political-economic phenomena: 1. The investment in resource-rich developing countries (RRDCs) and non-resources-rich developing countries (Non-RRDCs) in Africa by the People’s Republic of China (PRC). 2. The impact of Chinese foreign direct investment (FDI) on the economic development of the two African countries of Angola and Rwanda. Most of the contemporary writings on China’s relations with other developing countries have focussed on the geopolitical and strategic © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 A. F. Lisimba, China’s Trade and Investment in Africa, https://doi.org/10.1007/978-981-15-9573-8_2

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consequences. These analyses are largely driven by the prevalent Western mode of China ‘opportunity-threat’ paradigm, which views international order as a zero-sum game (Mauldin 2019). However, beyond the dominant International Relations (IR) and development discourse, we need to adopt international political economy approaches to examine China–Africa relations especially from an African perspective. I argue that most of the IR theories are still in the process of development as these paradigms struggle to explain all the different global events, especially events unfolding within emerging economies like China. However, dependency theory and world system theory with their broader analytical frameworks provide us with a workable model to apply some of their assumptions, hypotheses and ideas to the real-life issues in global economic configuration. Modernisation theories, on the other hand, emerged as a victor out of the theoretical deadlock in the postWWII period era but their explanation of the new economic era and the emerging South–South cooperation have been challenged by more recent critical thinkers. The objective of this chapter is to reassess the decline of dependency theory and its validity in analysing the current emerging South–South relations and in this case China–Africa relations. I also discuss in the paragraphs that follow, certain elements of the theory that are significant analytical tools that explain the dynamics of the global trade system as it exists today. The phenomenal rise of China in the global order and its increasing engagement with the African states can be explained through the concept of ‘dependency’. The closer cooperation of China with African countries, specifically with the RRDCs and non-RRDCs may have some components of dependency theory perspectives of IR. I have taken into account the role of key Chinese policymakers, the manner in which China formulates its foreign policy towards Africa, and the objectives driving this interaction. Africa is a complex continent with many differences in not just the ethnic mix of population but also the mode of government, composition of economy and sociocultural norms. China has developed a multipronged approach to establish close relations with different countries in Africa. I argue that China–Africa relationship is too complex to be generalised as China adjusts its diplomatic-economic approach depending on the individual African country it is dealing with. I employ dependency theory to investigate the complex relations between China and Africa. As mentioned earlier no single theory or paradigm is adequately equipped to explain such a complex relationship between

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China and Africa (Chernoff 2005; Hesse-Biber 2010; Charmaz 2011; Tashakkori and Teddlie 1998). Certain aspects of dependency theory either as stand-alone or in combination with others may help us explain specific aspects of this complex relationship between China and Africa.

Dependency-One Theory: Many Thoughts Dependency theory is an international political economy standpoint that aims to explore capitalist development policies that keep developing countries poor while enriching the developed countries. Dependency emerged in 1960s–1970s with fundamental assumptions that were in direct opposition to the well-established propositions of modernisation theories influenced by the thinking of United States and to a lesser extent, Europe (Agbebi and Virtanen 2017). Aftermath World War II, modernisation theory emerged as the guiding doctrine in the United States and Europe to convey universal development all over the world. This theory’s core premise was that the concept of modernity as both as an ideal and an evolutionary process (Rostow 1959). Modernisation theorists (So 2010) contend that modernisation has prosperous ideas of development such as free trade, democratic stability and that continuous involvement of South with the North is significantly beneficial for developing countries. In other words, embracing Western development model of privatisation and openness leads to better development outcomes. O’Brien and Williams (2020) posited that there is only one single way to development and nations in the global North, mainly Europeans and North American were its spear headers, as a result less developed countries like these in Africa were obliged to follow that path under tutelage of their master nations (O’Brien and Williams 2020). Most noticeably, modernisation theory argued the underdevelopment was selfinflicted, the poor countries owed their backwardness to their internal deficiencies: ‘traditional culture, lack of leadership, systemic corruption, overpopulation, little investment, lack of attainment motivation’ (So 2010). Modernisation theorists’ arguments were grounded on notion of free trade democratic stability and comparative advantage (Felipe and Vernengo 2002). They consistently argued that in the international division of labour each country should focus on comparatively most dynamic branch of economy in order to take full advantage and benefit from the system of international trade. On the other side of the spectrum, the

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challenge to Eurocentric modernisation theory emerged from development countries, the critique was proposed by Argentinian economist Raúl Prebisch, the then Director of the United Nations Economic Commission for Latin America (Ferraro 2008). Along with UN Economist Hans Singer, Prebisch, developed the Prebisch–Singer thesis, which propagated some of the fundamental tenets of this structuralist school of thoughts on dependency which was popularly identified as ‘dependencia’, owing to the geographical focus of its scholars and its analysis (Prebisch 1968). Prebisch–Singer examined the trade data to conclude that while the Latin American countries exported primary goods like food products, lumber and minerals to the Global North, they reimport manufactured products made of their own raw material (Prebisch 1968). Thus, wealthy global core exists in a semi-permanent extractive relationship with a low-income periphery. Prebisch’s data examination disproved the aforementioned arguments of modernisation theory. In addition to his findings that North–South trade has been framed in a way that benefits the North, he further argued that the terms of trade specifically between Latin American countries, the United States and Europe was structurally imbalanced (Prebisch 1980). Prebisch constructed his contention on the grounds that the core countries import raw materials at cheap prices from the periphery and export goods manufactured from the same materials, selling them at high prices to the periphery and also increasing the prices of finished products from time to time, while the prices of raw materials they purchase from the periphery are low and fixed so that the core countries buy as much as they desire without price fluctuation (Prebisch 1968). Therefore, the periphery has no option but to consistently increase the production of raw materials each time to be able to buy finished products made from their own materials and receive hard cash currency from the core countries of the North (Prebisch 1968). Another prominent challenge to modernisation theory emerged in late 1960s was André Gunder Frank (1966), who argued that economic dominance runs across North–South geo-economic relations, with the North exploiting the raw materials of the South for its own benefits (Frank 1966). Frank depicted the world capitalist system in terms of international division of labour, which allows the dominant states (core) to absorb the surplus capital from the dependent states (peripheries) (Frank 1966). Theotonio Dos Sontas, identified dependency as ‘a situation in which the economy of certain countries is conditioned by the development and expansion of another

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economy to which the former is subjected’ (Dos Santos 1998). He classified three different types of dependencies namely colonial dependency, financial-industry dependency and technological-industrial dependency (Dos Santos 1998). Whilst, International Relations (IR) theories like ‘neoliberalism, a variant of modernisation theories and a lead post-war neoclassical theory’, were derived from the writings of Immanuel Kant, dependency theory had not been driven from the works of a single theorist. To this end, there is no unified thought that can be referred to as ‘dependency theory’. Instead dependency theory represents a volume of work produced by scholars mainly from developing countries who share similar views on economic relations between developed and developing countries. To this end, it may be difficult to trace the origins of ‘Dependency Theory’ as a coherent theoretical framework emerging out of one specific intellectual, institutional or geographical locale. Dependency theorist Samir Amin and Girvan (1973), had also argued that the developed European countries have shaped economic development and modernisation in Africa through colonisation and then neocolonisation, a practice that introduced Africa into international economy as a supplier of raw materials with prices determined by the industrialised countries of the West and their financial institutions, the International Monetary Fund and the World Bank (Amin and Girvan 1973). The notion of unequal trade was supported by the factual evidence that developing countries, such as those in Africa, continued to experience persistent economic crisis and poverty, social inequality, despite being resource-rich. As aforementioned, it is significant to keep in mind that there is no single unified dependency theory but there exists a number of intellectuals with different analytical views all of whom criticise the prescribed liberal development policies with some taking a hard line and others soft approach to their criticism (Radovanovic 2012). Their analysis depends on their knowledge and focusses on specific elements of trade between the Global South and the Global North. Remarkably, each dependency theorist introduces different explanation, prescription and definition of what constitutes dependency or dependent relationship (Ferraro 2008; Radovanovic 2012). One of the major differences is between Marxist thinkers and Latin American structuralist version of dependency school of thought (Radovanovic 2012; Amin 2011). Their thinking about development and underdevelopment is divergent when it comes to the issue

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of determination and possibility of development within the neoliberal economic system. Scholars such as Dos Santos and Andre Gunder Frank’s views on dependency are based on Marxism that describes the international economic system as being based on excesses of capitalism and exploitation. Andre Gunder Frank, in Capitalism and Underdevelopment in Latin America: Historical Studies of Chile and Brazil, observes that dependency theory illustrates the economic growth of underdeveloped states in terms of external dominance on domestic development policies that do not adequately address the issues facing the economies of developing countries. He characterises the international system as consisting of two types of states, the dominant and dependent, central/peripheral or metropolitan and satellite. Gunder Frank argues that the dominant states are the developed states, such as those in Europe and the United States, which enjoy a higher GDP growth per capita, while dependent states are those in the developing world that include states in Africa, Latin America and Asia, which experience a low GDP growth and accrue development problems (Frank 1966). Gunder Frank attributes this inequality to unequal trade exchange between dominant and dependent states; the latter has less economic growth and relies heavily on the export of a single commodity such as raw materials to the former in return for foreign exchange and earnings from developed states, namely the European states and the United States. Frank’s contention is that causes of underdevelopment are historically based on external pressures and that development within liberal capitalist system is unachievable. Because of the external factors, he proposes solutions to be international, political and ultimately revolutionary, with necessary delinking of dependent economies (Amin 2011). Like Gunder Frank, Dos Santos argues that economic development and industrial growth in capitalist (metropolitan) nations have resulted in the creation of ‘satellite’ underdeveloped countries, which in the global division of labour, occupy a subordinate position within the capitalist economic structure (Dos Santos 1998). Theotonio Dos Santos defines ‘dependency’ as: A situation in which the economy of certain countries is conditioned by the development and expansion of another economy to which the former is subjected. The relation of interdependence between two or more

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economies, and between these and world trade, assumes the form of dependence when some countries (the dominant ones) can do this only as a reflection of that expansion, which can have either a positive or a negative effect on their immediate development.

The relationship between core and periphery or the satellite and the metropolitan centre is often dependent rather than interdependent, because the satellite states do not possess adequate resources to design other options of responding to the constraints imposed upon their economies by the international capitalist economic system. In other words, the development policies of satellite states are influenced by the metropolitan centre in a way that disables the satellite states’ ability to formulate basic policies that affect the healthy growth of their economies. Therefore, the key task of dependency theorists is to explain not only the constant but also increasing inequality that shapes relations between these two sets of states, metropolitan centre and the satellite. In the ‘Structure of Dependency’, like Prebisch–Singer theory, Dos Santos endorses the idea that the unfair capitalist trade system had imposed a severe international division of labour, which has contributed to the underdevelopment of many areas of the world, particularly Latin America and Africa. Consequently, dependent states provided cheap mineral resources and labour, and also served as importers of technology and manufactured commodities from developed states (Dos Santos 1998). From this position of dependence, it is difficult for those reliant on extraction of natural resources to move to a more advanced economy in which greater profits can be gained through technology, innovation and skilled labour (Taylor 2007). Accordingly, the distribution of these resources is determined by the economic interests of the dominant states and not of the dependent ones. The result is that economic activities in the richer states often lead to severe financial problems in the poorer states. There are some other dependency theory scholars who take a slightly different stand and a more positive one with regard to the prospect for development, but they tend to focus more on internal factors that hinder development in the Global South. For instance, unlike Frank, Cardoso and Faletto (1979) argue that dependent development is achievable within a Capitalism system (Cardoso and Faletto 1979). Their work is focused on the role of social classes, state intervention and role of multinational firms in setting the agenda for development. Raul Prebisch and

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Mahbub ul Haq have approached their analysis of international economic system from a non-Marxist core assumption of capitalism and exploitation of the third world (Prebisch 1968). Haq in particular, focusses on inequality and living standards between countries, framing his theory in the terms of ‘poverty curtain’ (Haq 1976). Haq posited a poverty curtain had divided one world ‘materially and ideologically into two different worlds, two separate planets, two unequal humanities, one embarrassingly rich and the other desperately poor’ (ul Haq 1976). He has consistently argued that the poverty level has increased across the world, dividing the world into two categories, the haves and the have-nots, with the North being extremely rich and people in the South living in the other extreme end of poverty. He cites the structure of international system as the root cause for inequality and increasing poverty gap between developing and developed counties (Haq 1976). According to him the era of colonisation has enormously contributed to trade disparities between the developed and developing countries by positing the rich countries in the centre and poor countries in the periphery supplying raw materials to the rich to foster industrialisation. To Haq, the exploitation and inequality manifested in South–North economic relations, has its roots in historical inequality. Haq’s work focusses on finding solutions to change the current unequal pattern of engagement to one that mutually benefits both the developed and the developing countries. He argues that the present unjust system, if not reformed to being more equal, will continue to generate anti-Western rebellion that will possibly result in an eventful damage of the interests of the developed countries (Haq 1976). Haq’s assumption is that the elimination of poverty and inequality, which not only affect the poor countries but also has impacts on the lives of disadvantaged people within these nations, is an issue that needs to be dealt with, by both developed and developing countries. To narrow the poverty gap between the poor and the rich, Haq suggests two distinct solutions, as the only way to eliminate poverty and persistent inequality. He stresses that governments of both developed and developing countries must share this responsibility, developed countries in their part must ensure an equality of opportunity for developing countries to fully engage in and benefit from the international economic system (Haq 1976). On their side, developing countries must ensure internal reforms to improve development institutions. He concludes that cooperation between South and North is the base for mutual cooperation, a point where he differs significantly from other

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dependency theorists with Marxist views and who argue that revolution against capitalism is the only solution to poverty alleviation, fair trade and equality. In support of Haq’s views, one can refer to colonisation as the main cause for underdevelopment in developing countries, and in Africa in particular dependency literature stresses how colonisation has restricted the development potential for Africa, relegating them to being producers of raw materials and purchasers of the finished goods made from resources extracted from their own lands (Gordon and Gordon 2001). Similar to Haq’s views, Prebisch, for instance, points out that developed countries became richer at the expense of poorer countries, placing particular emphasis on the importance of external forces driving the development of periphery states (Prebisch 1968). Most of his arguments were developed from the paper he presented to the United Nations during the time when he was serving as the Secretary General of the United Nations Economic Commission for Latin America (UNECLA). However, Prebisch’s views differ from Haq’s in a manner which suggests that his writings focus on Western industrialisation and its impact on development of Third World countries while Haq focusses on the impact of colonial policies and their development models on poverty (Haq 1976). Prebisch encourages developing countries to industrialise by adopting import substitution to avoid being trapped as being only suppliers of resources to developed countries. He explains that import substitution would work only if the developing countries improved capacity not only to substitute imports but also to manufacture from their raw materials which they can then export to developed countries at a value-added price (Prebisch 1950). Eventually, both Prebisch and Haq linked the roots of inequality between rich nations and poor nations to be their historical past. However, while Haq highlighted the impact of colonialism on developing countries, Prebisch has credited these inequalities to the processes of Western industrialisation which occurred at the expense of the third World (Lubieniecka 2015; Agbebi and Virtanen 2017). In the same vein, the rapid development in global North which fosters unfavourable terms of trade for underdeveloped countries was made possible through the control of technology and manufacturing. Along the same line, Smith has argued that Western colonial and postcolonial trade activities have placed periphery countries in dependent relationships, resulting in their underdevelopment, economic crises, persistent poverty and inequality (Smith 2010). For instance, Africa was exploited both during and after colonisation, entering the situation of economic dependency in 1970s, ten years after most countries on

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the continent were decolonised (BBC NEWS 2006). During this period, newly independent African countries were exposed to complex policies of control and exploitation of their resources. The exploitation and domination were aimed at generating dependency in Africa, preventing the continent from developing and catching up with other developed countries. Similarly, Caroline Thomas and Peter Wilkin (2004) argue that interactions between the dominant and dependent states fashion the economies of dependent states towards complete reliance in obtaining money from the dominant states (Thomas and Wilkin 2004). In this context, the relationship between dominant and dependent states is dynamic because the interactions between the two sets of states tend to not only reinforce but also intensify the unequal patterns of trade in favour of the dominant state. Forbes adds that the policies of the dominant states in underdeveloped states are articulated in a way that serve their own interests and that people in underdeveloped states, such as in Latin America and Africa, undergo social and economic injustice and exploitation because of the policies of developed states (Forbes 1984). Dominant states often combine their interests with those of the local ruling elite who then allow the former to exploit the resources of the latter at the expense of the general population. This practice was created during colonisation and has continued into the postcolonisation period, in spite of the fact that these dependent states have gained political independence (Erb and Kallab 1975). This has led to the claim that the economic hardships and financial barriers, which capitalist industrialised states have enforced on underdeveloped states, have been to the advantage of the developed states. This has led to increasing economic hardship and the perpetuation of poverty in the developing states, as reflected in presentday Africa, for instance. However, the contemporary global economy is relatively different from the one based on colonial relations, as states are much more interdependent. Therefore, dependency becomes less applicable in many situations (Amsden 2003). Nevertheless, the concept of dependency remains significant in explaining some patterns of the global economy, particularly ‘China’s growing economic relationship with Africa’ (Reitsma 1980). Africa is the most cited case for dependency, as its economic growth has been affected by the external policies of the industrialised states (Amin 2011). The continent’s economic structure has been heavily shaped by the policies of former colonial rulers, which fit well within dependency claims.

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Much like dependency theory, world system theory emerged as a challenger to capitalist economic system and to critique modernisation theory’s dominance position in the international system. Immanuel Wallerstein (1974) developed the theory and argued that the capitalist world economy as ‘modern world system’ benefits only developed Western Countries, Europe and the United States, whereas other countries such as these in Africa are exploited (Wallerstein 1974). Wallerstein adopted the core principles of dependency theory and idea of international division of labour to divide this capitalist economic system into three categories: core, periphery and semi-periphery (Mlambo 2019). At the core are the industrialised centres of the system characterised by high wages, capital intensity, advanced technology and high skill level countries thereby producing manufactured goods, technology and hard currency (Mlambo 2019). The peripheries are the regions that pushed into subordinate positions in the capitalist economic system through colonialism, often suffer from unfair trade rules or other such means of exploitation and consequently end up as a producer of raw materials, consumers for commodities manufactured in the developed world, low capital intensity and low skill levels. Semi-periphery is the middle position between the core and periphery in terms of products, skill and wage levels (Wallerstein 1974; Arrighi 1990). Semi-periphery can be imagined both as a core state lessening downward like Italy from its glory or a periphery moving up the ladder like South Korea or Japan. The theory contends that appropriation of surpluses as the inherent nature of this system (Wallerstein 1974, 1988; Arrighi 1994, 2007). Wallerstein’s formulation of semiperiphery is of real significance to understand how the capitalist system perpetuates (Wallerstein 1974; Arrighi 1990). It represents the variability of the system, reflects the potential rewards and risk for the actors in the system and most importantly it acts as safety valves for the system. Semi-peripheries could ‘deflect the anger and revolutionary activity of peripheries, and they serve as good places for capitalist investment when well-organized labor forces in core economies cause wages to rise too fast’ (Chirot and Hall 1982). The semi-periphery position themselves between the core and the periphery and could be compared to the middle class between the capitalist and the workers class (Wallerstein 1974). Technological advancement is a major factor in the positioning of world’s countries and their economies by region in core or periphery situation. This understanding helps us grasp the role of emerging China in contemporary global political economy system. Wallerstein does not consider the

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world system as static and the rise of East Asian economies like Singapore, Korea and Taiwan can be explained through the opportunities afforded for upward mobility within the system (Wallerstein 2005; Arrighi 2007). In addition to the core–semi-periphery–periphery hierarchy Wallerstein suggests a hierarchical arrangement among core states around a ‘hegemon’. One can imagine changes in the world system triggered through contests among core states for the hegemonic status, however, any such changes would be intra-system instead of systemic transformations (Wallerstein 2005; Arrighi 1994, 2002). The rise of China has been construed as the declining of Western hegemony in the world economic and political system, especially by Arrighi in his book Adam Smith in Beijing (2007). However, despite his hopefulness even Arrighi is hesitant about the extent of changes to the system, since ‘the social outcome of China’s gigantic modernization effort remains indeterminate’ (Arrighi 2009).

Criticism of Dependency Theory There has been some criticism against the classical dependency theory used as an all-embracing theoretical framework to explain the major reasons for the economic backwardness in the developing world, especially in the African continent. Dependency theorists’ perspectives were considered the most resounding critiques of capitalist economic development policies in the 1950s and 1970s, when the United States and other Western nations were at the peak of an industrial revolution (Kaufman, Chernotsky and Geller 1975). Its distinct approach to development and underdevelopment, which was different from that of other theories at that time, made dependency theory most suitable for analysing development problems in poor countries in comparison to the interpretations of modernisation theories of the development problems in developing countries. However, this classical version of dependency theory has, to some extent, lost its explanatory power and started to disappear from the mainstream theoretical radar (Blaney 1996, 2008) one of the reasons behind the decline of dependency theory is its fragmented nature with many different scholars which prevented it from developing a coherent and unified analytical narrative that would provide a more robust explanation to an unfolding of international events. The failure of the theory to convincingly analyse economic development in South East Asia has compelled many scholars to believe that the theory is out of date (Sanchez

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2003). Furthermore, the dynamics and the pattern of global trade has shifted over the last three decades, following the collapse of communism, weakening the socialist and Marxist movements worldwide. Because dependency theory was structured around Marxist views of the capitalist economic system, the collapse of communism in the 1990s has weakened the position of dependency theory and rendered it invalid compared to neoliberalism’s market development prescription, which became a more dominant analytical framework (Blaney 1996, 2008). The emergence of liberalism’s trade regimes and powerfulliberal financial institutions such as the World Bank and the International Monetary Fund (IMF), which direct and administer development projects in most developing countries, including Africa, also contributed to the theory’s decline. Although some of liberalism’s development projects such as SAP introduced in Africa failed to achieve its developmental goals, dependency theory failed to take a lead in explaining the failure of SAP’s in Africa. Another cause could be found in the philosophical impact of specific historical events (such as the failure of import substitution industrialisation (ISI), in some developing countries, collapse of communism, development in South Korea, Japan, Singapore better known as asian tigers (International Monetary Fund-(IMF) 2007). These events took place despite Frank’s theoretical prescription which claimed that development within the capital system is impossible (Prebisch 1968). This economic progress aided by liberal institutions, rendered dependency theory unable to compete in comparison to more workable policy prescriptions of neoliberalism which have seen success in some part of the world. As time passes, the theory is seen by many scholars (Moles 1999; Amanor 2013) as outdated and unable to explain the current changes in the international political economy. I argue that its significance lies not just in the fact that it provides a complete explanation of the problems of development as many would think, but also that the theory’s broad analytical framework provides an important perspective on contemporary development discourse. Another important element that makes dependency more relevant today is that it predicts the possibility of countries, highly dependent on foreign development assistance, to face mounting financial dependency that would lead to wider social inequality and persistent poverty as well as getting trapped in the dependency syndrome. This contention makes the theory even more relevant to Africa’s situation of being the most indebted continent to the West and now to China (see Di Muzio and Robbins 2016; Brautingam 2011).

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As I previously mentioned, the aim of this book is to revitalise important elements of dependency theory and to separate them from their perceived historical failure to deal with development issues within the international trade system. The fact that many policy prescriptions made by the dependentistas were enormously difficult to execute does not lessen the analytical power of dependency theory. However, one can argue that despite the attempts of some scholars (Wilson, Matunhu and Cardoso) to question the relevance of dependency theory in IPE and the inherent weaknesses within it, its explanatory potential remains relevant in explaining the complex economic relations between China and Africa. Postcolonial Development Model in Africa: Dependency and World System Perspective There is sufficient evidence to suggest that Africa’s prospects of social and economic development have been adversely affected by continued periods of political turbulence and stagnant economic growth, leading to serious social problems during the last four decades. The challenging situation faced by the African continent during the period of decolonisation has worsened due to the lack of capable leadership, vision and effective governance. Numerous studies have been undertaken to analyse the underlying structural problems contributing to Africa’s current morass from a historical perspective in the postcolonial context. One of the most quoted incidents of Africa’s subjugation is colonisation and postcolonial development model which until present time dominates Africa’s development policies, which have failed to promote development in Africa unlike the rest of world. The core assumption of dependency theory is that the North, which is also a colonial force in Africa, its economy develops at a faster rate, the more it exchanges trade with the states in Africa, whereas the African states get poorer because of the value of exchange involved in their trade. This trade imbalance occurs as African states are forced to import hard currency and finished consumer products at high prices while they export their raw materials to the West at cheap prices. To put it succinctly, the aim of colonial administration was to exploit Africa’s vast natural resources to boost industrial development and growth back in Europe at the expense of Africa (Gordon and Gordon 2001). The impact of such dependent relations on economic development was extremely detrimental for Africa.

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More specifically, the developed European countries (Metropolis) have shaped economic development in Africa through colonisation, neocolonisation and dependency, with dependency being a practice that introduced Africa into international economy as a supplier of raw materials with prices determined by the industrialised countries of the West and their financial institutions, the International Monetary Fund and the World Bank (Samir Amin 2011). Despite the fact that Africa has achieved political independence, Western presence in the continent only changed from a more visible one and of direct control to a more subtle form because these imperial financial institutions still play a detrimental role in Africa’s development agenda and its quest to seek a better place in international trade. Africa’s current state of underdevelopment has been largely due to historical factors and structural policies practiced by the Europeans during the colonisation and postcolonial era of Africa (Acemoglu and Robinson 2002). Europeans engaged in extraction activities in Africa to support development in Europe and the colonies of European settlement rather than settling permanently in Africa in large numbers. Therefore, they introduced colonial institutions and colonial administrations that would support their short-term interests rather than promoting durable development in their colonies. In addition, neither did the colonial administration introduce sound economic development policies, nor did it establish meaningful institutions or sought to improve or to develop the human resource in colonies throughout the African continent (Gordon and Gordon 2001). In accordance with dependency theory, this type of policy pattern has resulted in the externalisation of the economic development policies of African countries that did not suit the continent’s developmental needs. Consequently, the economies of many states in Africa have remained underdeveloped since independence, thus establishing a strong link between dependency theory and colonialism. I argue that the postcolonial development model in Africa contributes to the understanding of the failure of Western economic development policies in the Global South (GS) and in Africa in particular. The international system and development policies are Western in nature and their successful application in Africa has often been purely from the perspective of dependency because Africa is still seen as a former colony. This perception has excluded the participation of local African people in the implementation of development projects, leading to the failure of economic development in the African continent. The colonial mindset

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of the West and their feeling of superiority over Africans, draw most criticism and anti-Western sentiment with trade system is mostly labelled as a process of an invasion to exploit resources in exchange for hard currency (O’Brien 1975). Consequently, the reforms fail to take into consideration the ground realities of the African situation. Sabaratnam like many other postcolonial IR scholars points out manifold failures of Western postcolonial development policies to address the problems ostensibly supposed to work towards resolving them. Sabaratnam further remarks that the partial failure of Western development policies to tackle Africa’s postcolonial era economic crisis has been linked to the initial colonial structure of politics of development. In this sense, Western donors and their institutions to some extent continue to operate with colonial mindset in Africa and in most situations they are in charge of implementing donor projects and hardly involve locals except the elite who correlate their interest with those of the donors (Amin 2011). Because of colonial exploitative connection, Western development workers and project donors feel superior to the targets of the development or local officials, often ignore local knowledge, experience and for this reason most of the Western development projects fail to achieve their designed goals and instead end up benefiting the donors and firms. This is not the only case. Western development policies in other parts of Africa have also failed to achieve their designed goals; rather as evidenced in countries like Somali and DRC in the Great Lakes Region (GLR), it created serious socio-economic problems and persistent violence that contributed to the failure of states in Africa. Because of the colonial mindset, Western development policies in most cases end up not achieving their goals but extending colonial influence and implementing projects that benefit the economy of the donor countries rather than the target host country. The proponents of neo-Marxist dependency theory do not attribute the underdevelopment and dependency from a ‘Third World’ point of perspective, to external factors to rationalise the backward economies. Some scholars have critiqued the lack of competent, responsible and honest leadership in Africa and have linked the failure to produce competent, development conscious leaders in Africa to the cultural heritage (Okowa 1996). According to this criticism, dependency theory cannot be used as a pretext to cover up for the lack of robust and competent leadership in the African states. The failure of the local leadership in Africa to achieve inclusive social and economic growth is evident; however, the lack of effective African leadership is not the principal reason

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for the economic backwardness of the African countries. Africa has been subjected to exploitative colonial economic policies that have resulted in the absence of efficient infrastructure, institutions and industrial base to enable African economy to graduate from primary industries such as agriculture and natural resources to value-added manufacturing and service industries (Gordon and Gordon 2001). The focus of classical dependency theory on external factors alone has been critiqued for ignoring the internal class divides in the decolonised African societies. The colonial powers distorted the economic activities in such a way that an indigenous capitalist class of any significance could not develop in these colonies, a phenomenon prevalent during the course of the capitalist transformation of the economies of the metropolitan nations (Santos 1998). The colonial powers marshalled a very small group of individuals (bourgeoisie) in the peripheral countries to become participants in the colonial economic activities. This very small but extremely influential indigenous bourgeoisie class were dependent upon their colonial masters to amass wealth and power and continued to defend their former imperial masters in the postcolonial period as well. In the globalised economy the multinational corporations operate as the conduit between metropolitan and peripheral countries. In decolonised Africa this indigenous capitalist class functions as the local associates of the multinational corporations and this association sustains the dependent relationships between the metropole and the peripheral countries (O’Brien 1975).

Does Dependency Theory Explain China–Africa Economic Relations? As shown in the above discussion, ideas and version of schools of thought on dependency, despite certain differences, share the same philosophical convergence in their study of the global capitalist system and its inequalities, which form the conceptual core of this book’s arguments about dependency and world system in this book. At the most fundamental level all the three schools consider capitalism as a global phenomenon, which holds disproportionate control over the global structure and the national economic system of each individual country. From this perspective, imperialism, colonialism and globalisation are not just the different historical stages of the world capitalist system but are the processes that sustain the dominance of certain rich nations over the vast majority of other nations. Dependency is then, co-constitutive to this capitalist system, a

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historical process associated with the internationalisation of capitalism. The most significant point of concurrence among all the three schools is the clear distinction between two sets of states in the international system, characterised as dominant ‘as dominant/dependent, center/periphery or metropolitan/satellite’ (Ferraro 2008). China’s position in its trade relations with the states in Africa does not fit neatly into either a centre or a typical peripheral role of the state, as described by radical dependency theorists such as André Gunder Frank (1966). However, there are four elements of China’s policy towards Africa that demonstrate the dependency relationship. (1) China’s dominant position in trade negotiations; (2) trade based on the export of raw materials in exchange of value-added products and technology, which primarily makes the economies of countries such as Rwanda, dependent on China; (3) Chinese influence on the ruling elite in these countries who serve their own interests and the interests of Beijing; and (4) the flow of hard currency from China in the form of loans, cash or credit lines with the prerequisite of providing investment opportunities to Chinese companies (Samir Amin 2011). The nature of interactions between China and Africa suggests that although dependency theory is perhaps less relevant today on a wider scale, it is still used as an analytical lens to comprehend the characteristics of China–Africa relations which subordinates Africa’s position as a resources supplier and marketplace and China as a supplier of finished products manufactured from the raw material shipped from Africa (Taylor 2007). Sarah Raine asserts that the fact that China’s interests in Africa are based primarily on its growing demand for raw materials, its policies are likely to have profound implications for African development similar to that of former colonial trading partners (Raine 2009). Therefore, China’s investment and policies towards the continent demonstrate many of the classical features of dependency theory. It is worth mentioning that as USSR disappeared as a dominant global power, the ideology underpinning Marxist economic thoughts has also lost some of its global appeal as an alternative. The world started to see a new world economic order, new form of dependency. Technological and financial dependency emerged together with the emergence of new economies, BRICS, a short name for emerging economies (BRICS, a short form for emerging national economies of Brazil, Russia, India, China and South Africa, together represent 42 per cent of world population, represents over 50 per cent of global economy and combined nominal GDP of US$ 16.029 trillion,

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equivalent to approximately 20 per cent of the gross world product (Larionova 2020; World Bank 2019a). These countries now widely contribute to world economic system, China the richest of this group is ranked the second largest economy in the world and is a prominent global player with slightly different monetary system in its business dealings with peripheries including Africa. As discussed above, BRICS are middle powers and their developed economies ‘fits them well into Wallerstein’s (1974) articulation semi-peripheries with world system theory’ (Wallerstein’s) (1974). These economies currently play an important role in shaping global trade activities in particular within the context of South–South economic cooperation. This leads to a revaluation of the basic premise of classical dependency theory (Amadi 2012). Unlike old dependency, which focussed on external forces that hinder development in developing countries, this new form of dependency focusses on internal factors that hinder development within periphery countries. These internal factors include class conflicts, the role of the elite, the involvement of state in economic development, sustainable local employment generation, and development of robust, responsible and durable institutions and along with the classical dependency factor, financial and monetary dominance of the metropolitan states through trade imbalance or investments (Amadi 2012). This book attempts to evaluate the impact of Chinese trade and investments on the employment generation and transfer of skills to the local population of the African states namely Rwanda. In this context, it is imperative that the economic relationship between China and African states is examined through the nuances of dependency theory to assess both classical and new forms of dependency. Dependency theory, thus, forms the basis for this book’s arguments because China’s trade and investment in Africa has enormous impact on local employment generation, and the transfer of technology and skills. China, as an emerging industrialised country, and as a top emerging investor in Africa’s resource and non-resource sectors, plays a pivotal role in shaping the development outcomes in Africa. More importantly, China is considered as a major source of finance, technical expertise and tools and machinery in the global South. Particularly in the case of Africa, the Chinese state-owned enterprises act as the most important supplier of advanced technology, concessional loans, credit lines, flow of capital and investments. This necessity of Chinese finances and technology highlights the new dependency of African states on China. However, some scholars such as Moyo argue that China’s relations allow Africa to decrease their dependency on Western sources (Moyo 2009).

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The overarching reliance of African states on China’s financial resources, technology and expertise is generating a new form of dependency in Africa. It can be argued that the trade exchanges between China and Africa have created some new avenues of income and infrastructure in some African states. However, the increased Chinese investments have led to greater inequality and poverty in many countries, including the case study country of Rwanda and Angola. This new form of dependency is essentially the continuation of classical dependency of the African states; their dependence has moved away from their former colonial rulers to China. This new form of dependency is a continuation of the familiar patterns of dependency, exploiting the natural resources of the poorer countries to boost the industries of a financially stronger country (Moyo 2009). For example, Chinese oil companies and private enterprises are heavily investing in countries such as Angola, bargaining from a position of strength in the sectors of the economy that are most beneficial to China (Campos and Vines 2008b). This type of dependency arrangement distorts the local economy and results in an unbalanced development agenda causing severe hardships for the local communities. The new type of dependency in African states is underlined by the fact that since 2000 while China has made massive investments in Africa, African states continue to operate as sources of raw materials instead of producing value-added products and services (Lederman and Maloney 2007). This dependent economic relationship between the African states and China endorses the central argument of this book that dependency theory is an appropriate analytical tool to explain Africa’s economic relationship with China. The next section explores the prevalent and persistent narrative of the impact of colonialism and postcolonial development model in Africa based on dependency theory. China is not a typical ‘Centre’ state as defined by Frank (1966) and Santos (1998), neither semi-centre nor typical semi-periphery state, because China is a comparably developed economy with advanced technologies, much wealthier and well industrialised than the states in Africa. One cannot hesitate to argue that Western developed countries, which Frank described as core/centre states; now rely heavily on China’s technologies for sustaining their economies. This is to argue that China is moving in the direction of becoming full core/centre country despite its history of being classified as a developing country. Further to this, BRICs of which China is a prominent player, has created different economic and financial systems to compete with institutions of the traditional core, their

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economic system operates in a similar fashion to that of core states and/or countries of global North. Their pattern of trade with Africa resembles that of the West; imports of raw materials in exchange of exports of manufactured goods and prevision of loans. In comparison to Africa, BRICs are more developed and economically well off, their relationship with the states in Africa is structured in a way that benefits them more than their trading partners, because states in Africa still struggle to escape the status of being a periphery and heavily indebted. To this end, dependency theory remains relevant as Africa’s position in global trade has not yet changed and as Olukoshi (2017) argues, Africa is still exposed to external pressures, its economic development is still conditioned by donor countries’ interests, structural weakness and it is economically dependent to some degree on Chinese and Western loans and credit lines. On the other end of the spectrum is Rwanda, despite registering steady GDP growth over the last ten years, the country still struggles with high rate of poverty, unemployment and social inequality and still has a long way to go to get to the point where China is today. These developmental challenges and shortcomings, despite limited progress, make Rwanda a case for analysis using dependency theory. Moreover, China and Rwanda are quite noticeably different; Rwanda tends to have social inequality, a higher rate of poverty, dependent on foreign aid, high dependency on donor countries. This makes sense since China–Rwanda partnership resembles a centre–periphery type of relationship as outlined by Frank and Prebisch. Although Rwanda is not a resource-rich country, its exports to China are mainly raw minerals and imports from China are finished products and technology. To justify the degree of dependency in China’s relationship with Rwanda, I analyse data on the amount of China’s investment, trade and concessional loans to assess the impact of the level of dependency on economic growth and development in Rwanda. I argue along the line that as Rwanda becomes dependent on China’s loans and credit lines, it is likely that the country will be lured into the ‘debt trap’ and if this happens it will give China more control over Rwanda’s economy. Analysis by the World Bank (2019b) and African Development Bank (2019) on Rwanda’s short-term economic outlook (2017–2025) have expressed concerns about the rising debt component of its national economy. Both WB and ADB project Rwanda’s debt to GDP ratio to hover around 53– 55 per cent while the foreign assistance (grants and loans) to account for 20–22 per cent of the gross national income (IMF 2019a, b; The World Bank 2019c, d; The African Development Bank 2019). Consequently,

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dependency theory offers a detailed explanation of classical North–South relations and despite being deemed as outdated, the theory still has something to contribute to the study of China–Africa relations. Therefore, China is gradually changing the global financial power distribution resulting in a shift from classical dependency of Africa on the developed North to neo-dependency of Africa on China. China is now moving to the centre or core of the global political economy while Africa remains in the periphery.

Conclusion This chapter reviewed dependency theory’s applicability to this book and outlined its justification for using in analysing the key issues in China–Africa relations as discussed in this book. Based on the reviewed theoretical text, dependency theory appears to be most appropriate for analysing the central theme of this book. As mentioned earlier, the combination of aspects from theory provides for a more comprehensive analysis of this complex relationship between China and Africa. One of the core assumptions of dependency theory is that dominant states’ policies in the underdeveloped countries are articulated in a way that serves their own interests. The net effect of these policy results in social and economic injustices and exploitation of the people in underdeveloped countries such as in Africa, due to the domineering presence of the developed or dominant states. In the case of this book’s central case study country Angola, as a developing country it exports resources and raw materials to China, which then uses these primary resources to manufacture products before selling them back to Angola at a much higher price. This trade delivers vast amount of profits to China, as the developed country partner, and prevents Angola, as the underdeveloped country partner, from benefitting in any way from their trade exchange (Amin 2011). In Rwanda, markets are flooded with cheap Chinese products in exchange of Rwanda’s non-resources products to China. This thought seems to capture the relations between China and Africa; therefore, dependency theory provides an appropriate analytical tool to study the flow of Chinese trade and investment in Africa focussing on these key dependency assumptions. The next chapter discusses the new emerging Role of China in postcolonial Africa, in order to contextualise the current relations between China and the developing countries in Africa.

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(English). https://datatopics.worldbank.org/world-development-indicators/ stories/services-drive-economic-growth.html The World Bank. (2019b). Future Drivers of Growth in Rwanda: Innovation, Integration, Agglomeration, and Competition. Washington, DC: World Bank Group. (English). http://documents.worldbank.org/curated/en/522 801541618364833/pdf/131875-V1-WP-PUBLIC-Disclosed-11-9-2018.pdf The World Bank. (2019c). Doing Business 2019 Fact Sheet: Sub-Saharan Africa. https://www.doingbusiness.org/content/dam/doingBusiness/media/FactSheets/DB19/FactSheet_DoingBusiness2019_SSA_Eng.pdf The World Bank. (2019d). Rwanda Systematic Country Diagnostic. Report No. 138100-RW. June 25. World Bank Group. https://www.doingbusiness.org/ content/dam/doingBusiness/media/Fact-Sheets/DB19/FactSheet_DoingB usiness2019_SSA_Eng.pdf

CHAPTER 3

The Rise of China: Reforms, Growth and Modernisation: Overview of China’s Development Narrative

Introduction Chapter 2 discussed theoretical debate and how it applies to this study. This chapter briefly outlines the historical developments that have taken place in China over the last five decades from successful economic performance at home to its rise at global stage. The chapter discusses historical events between China and Africa in an attempt to investigate different dynamics between strategic, economic, political and cultural factors that have contributed to the current level of China’s involvement in the African continent. The chapter explores Africa development challenges and some of the significant challenges and opportunities China presents— to the continent. This chapter explores the history of these relations since the establishment of the People’s Republic of China under the leadership of the Chinese Communist Party to the present day. It explores some institutional transformations that have taken place in the continent in the post dependence era. According to Angus Maddison China was the largest economy in the world in the period between 1700 and 1820, with an estimated GDP of US$228.6 billion—much bigger than the United States (US$12.5 billion) and Europe (US$184.8 billion) (Maddison 2007). However, poor governance and dominance of western powers created internal conflicts and economic problems within China between 1840 and 1950 (Cheung and Qian 2009; Buzan 2010). As a result, by 1952, China’s © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 A. F. Lisimba, China’s Trade and Investment in Africa, https://doi.org/10.1007/978-981-15-9573-8_3

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GDP declined to 5.2 per cent of the global economy, while the United States’ share of GDP grew by 27.5 per cent, overtaking China until the present day (Maddison 2007). Communist rule in China was accomplished with the victory of Chairman Mao’s forces over the nationalist Kuomintang. This laid the foundation of the modern state of the People’s Republic of China (hereafter, the PRC or China) (Taylor 2006). Upon assuming the control in 1949, Mao Zedong initiated long-awaited internal reforms in areas such as land, industries, railroads, shipping and banks, securing China’s borders and legitimising the Communist Party of China (CCP) rule over all of China (Taylor 2006). CCP’s leadership also initiated campaigns to unify the Chinese people under the communist party by reorganising the Chinese society, which had been divided during the long period of the Civil War (Ogunsanwo 1976). The economic policies of the communist leadership from the 1950s to the 1970s resulted in a rather sluggish growth of the economy and large-scale unemployment, as most trade activities were controlled by the central government, which imposed protectionist economic policies. These policies restricted trade activities in the country, as there was no competition between businesses, firms and farmers (Gallagher 2002). Trade with the outside world was also non-existent. As a result, there was widespread poverty among the Chinese population, with living standards much lower than most other countries. Furthermore, the economic disaster unleashed by the failure of the Great Leap Forward in late 1950s and the socio-economic disaster unleashed by the failed cultural revolution of 1970s had a serious negative impact on China’s growth and development (Borensztein and Ostry 1996). However, after the death of Mao Zedong, Deng Xiaoping (1978–1992) introduced reform policies, resulting in an enormous economic transformation of a centrally managed economy to a calibrated capitalist market economy (Tisdell 2009). This economic transformation from a socialist, centrally planned economy to a market economy began in 1979 (Naughton 1993). Until these times, the central communist government controlled most of the economic activities, CCP officials planned and managed all the industrial production, set goals for large commune farms in rural China and distributed resources throughout the country. The changes introduced by Deng Xiaoping provided individuals with the right to own property, establish private non-agricultural businesses, and share responsibility and accountability for advancing and modernising China, in an attempt to achieve better growth and improve the standard

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of living of the people of China. Deng Xiaoping’s administration established policies that enabled farmers to sell their crops in the free market at competitive prices, and also encouraged them to move from traditional farming to manufacturing and other businesses, such as importing foreign commodities and promoting the export of local products (McMillan and Naughton 1992). This change from traditional agricultural business activities to high value-added trade helped many Chinese to earn hard currency through foreign trade. The increased earnings of Chinese people resulted in higher tax revenue collections for the Chinese government, while providing the Chinese government with an income avenue it did not possess before the reform policies were introduced (Zuliu and Khan 2007). As economic reforms continued successfully, the government in Beijing reduced control over prices and private enterprises and encouraged the establishment of more private businesses and ‘Special Economic Zones’ (SEZs) to attract foreign investment and establish links with the outside world (McMillan and Naughton 1992). By the mid-1980s, China had shifted from a centrally administered agrarian economy into an open market economy with enormously advanced manufacturing sectors, perceptibly increasing the importance of the country as an exporter of consumer goods and as a foreign direct investment (FDI) destination (McMillan and Naughton 1992). The reforms and economic incentives focused on establishing SEZs in major cities such as Shanghai and Shenzhen, allowed foreign investors to pay low taxes and receive special support from the Chinese government. The newly created SEZs and increased participation of the private sectors in business activities within China led to the opening of the Chinese economy to the outside world. The reform policies continued through the 1980s and 1990s, with China’s GDP showing 9.5 per cent growth rate at an average for each year (Panagariya 2004). These reform policies led to changes in China’s central economic model and assisted in re-establishing China as one of the major leading economies in the world. As of 2020, China has become the second largest economy in the world right behind the United States, enabling it to play an essential and principal role in the operation of global economy, particularly in developing countries, including those in Africa (World Bank Database 2020). During the era of economic reforms, global manufacturers were moving from capitalist countries and relocating their production facilities to China. For example, in 2001, China received over 390,000 foreign direct investment projects, with capital valued at US$745.91 billion (Sachs and Woo 2003).

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China Continues to experience an increase in FDI and according to the most recent UNCTAD data, China ranked the second FDI recipient after the United States and before Hong Kong (UNCTAD 2019). In the period between 2017 and 2018 the FDI inflow increased from US$136 billion to US$139 billion, an increase of 3.7 per cent, this increase is seen as—(all-time high) (UNCTAD 2019). Even though there is a trade war between the United States and China, more than 60000 foreign companies started operating in China in 2018, a 70 per cent increase in comparison to 2017 (UNCTAD 2019). In general, the rising costs of production in developed economies have led to many foreign manufacturers relocating their operations to Mainland China for cheap labour and general operation cost, in addition to incentives such as tax exemptions offered by the Chinese government to businesses relocating to China. Industrialisation in China developed on the firm foundations of a static approach in the process of leading the market to create opportunities and competition among investors (Benson et al. 2000). The sole attraction for foreign companies relocating to China was not lower wages alone but also that China provided lower operational costs, efficient infrastructural set up and business-friendly labour laws as compared to those in capitalist and liberal democratic countries. The influx of foreign direct investment (FDI) in China during the last four decades and the rapid growth of China’s own economy— including the momentous growth of the private business sector—turned the country into a major global manufacturing hub, with worldwide recognition as an easy and cost-effective place to do business (DayalGulati and Husain 2002). Furthermore, lower taxes, infrastructural support and cheaper labour costs continue to attract even more FDI into China from around the world, raising the importance of China in the world economy (McMillan and Naughton 1992). More importantly, the economic growth in China has assisted around 850 million Chinese nationals—have been lifted out of poverty—and more than 100 million people to move up into middle class within a relatively short period of time (World Bank Database 2020). The reason why African states have shifted their policies to China is because they want to learn from China’s success story in escaping extreme poverty by copying China’s successful model of development and lessons that can be drawn from China’s success and its willingness to pass it to its trading partners in Africa (World Bank 2015). Prior to 1980s China was considered one of the poorest countries in the world and even poorer than some countries in Africa, but

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it managed to eradicate poverty and develop its economy (Bikorimana 2019). Over the period of 35 years, China has been constantly experiencing ambitious and sound socio-economic transformations that allow it to achieve pragmatic progress in economic and human development and consequently leading to a dramatic reduction in poverty. This has inspired many leaders in Africa picture China as an alternative trading and development partner. While most countries in Africa remained underdeveloped, they are now determined to develop and decrease poverty as they seem to be greatly impressed with the progress made by China in its efforts to reduce poverty in the country. To this end almost all African countries are hoping to draw important lessons from China’s successful economic development. Currently lot of leaders, President Jiang Zemin (1993–2003) and President Hu Jintao (2003–2013) continued to link China’s economy with international markets. However, Hu Jintao‘s era in particular was more challenged by the country’s energy needs and its rise to the status of an emerging great power state. This means that it is more difficult for emerging China now than before to maintain a low profile and evade its position in world affairs especially since China ranks as the second largest economy in the world right behind the United States and is a permanent member of the United National Security Council (UNSC). China’s energy supply and security are discussed in detail in Chapter 4. In the 17th convention of Communist Party of China (CPC), Hu Jintao expressed support to economic reform policies. Hu Jintao while presenting a report to the Seventeenth National Congress of the Communist Party of China (CPC) on behalf of the Sixteenth Central Committee said that ‘The theme of the congress is to hold high the great banner of socialism with Chinese characteristics, follow the guidance of Deng Xiaoping Theory and the important thought of Three Represents, thoroughly apply the Scientific Outlook on Development, continue to emancipate the mind, persist in reform and opening up, pursue development in a scientific way, promote social harmony, and strive for new victories in building a moderately prosperous society in all respects’ (MOFCOM-Ministry of Commerce People’s Republic of China 2012). As Hu Jintao continued on the same reform path, China’s Gross Domestic Product (GDP) grew at an average of 10 per cent between 2007 and 2011. In some sectors, China achieved a double-digit growth rate, followed by an average rate of 11 per cent per annum between 2007 and 2012 (National Bureau of Statistics of China 2011) and continue to

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grow at an average rate of 7.5 per cent per annum between 2011 and 2019 (National Bureau of Statistics of China 2019). However, China’s economic growth suffered a historic shrinking in the first quarter of 2020 with the GDP falling to 6.8 from the same period in 2019, due to anticoronavirus shutdowns combine with a collapse in global demand of made in China because of pandemic (Bloomberg News 2020) (Fig. 3.1). The continuation of positive growth in recent years suggests that China did not suffer too much from the Global Financial Crisis (GFC) of 2008– 2009 that had a negative effect on most developed economies. Available evidence suggests that in the first quarter of 2019, China had exports value of 2,494,230,194.97 billion despite the impact of coronavirus and trade war with the United States that resulted in a massive drop of China’s export to the United States (World Bank 2020). Manufactured products such as clothing, telecommunications equipment, high technological products, computer equipment, office furniture, textiles, automobiles and electronics represent important components of China’s export products. These exports in return generate productivity growth in the manufacturing sector, which is heavily reliant on the use of energy resources. As the GFC created major setbacks for Europe, the United States and Asia in 2008; China responded quickly when it became obvious that GFC would

Fig. 3.1 China’s economic growth 2000–2020 (Sources The above graph depicts author’s calculations based on the statistics released by the World Bank Database [2019], Chinese National Bureau of Statistics [2019], Chinese Statistic Yearbooks [2011/2017], Chinese Ministry of Commerce [2019]; Bloomberg News [2020])

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adversely affect the global demand of Chinese products and thus would restrict China’s manufacturing sector’s growth rate (UNCTAD 2010). China provided substantial funds in the form of stimulus packages to support the main sectors of the economy and as a result domestic output growth picked up again in China in part due to governmental support and the rise in domestic consumption of Chinese products. The industrial sector’s contribution to China’s GDP growth is almost half of it. Consequently, China required large volumes of energy sources such as oil, natural gas and coal to continue its manufacturing-based economic growth model. In order to meet the greater demand of energy sources in the industrial sector, the Chinese leadership decided to diversify energy sources, look for favourable energy deals including investment in countries with rich natural energy resources (Downs 2007). Because of its exponential growth, a number of African states appear to view China’s growth model with its emerging market economy as an economic model worth copying as a potential vehicle for economic development. The African leadership defends its new relationship with Beijing by viewing its engagement with China as a historical opportunity to escape the neocolonial relations with the West and former colonial trade partners such as Britain.

Colonial and Postcolonial Africa: Implications and Challenges: Overview of Africa’s Development Narrative The Impact of Colonisation There is sufficient evidence to suggest that Africa’s prospects of social and economic development have been adversely affected by continued periods of political turbulence and stagnant economic growth, leading to serious social problems during the last four decades (Gordon and Gordon 2001; Gailey 1983; Binns et al. 1999; Ibhawoh and Dibua 2003). The challenging situation faced by the African continent during the period of decolonisation has worsened due to the lack of capable leadership, vision and effective governance (Rodney 1972; Amin 2011). Numerous studies have been undertaken to analyse the underlying structural problems contributing to Africa’s current morass from a historical perspective in the postcolonial context. One of the most quoted incidents of Africa’s

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subjugation is the Berlin Conference of 1884–1885, which initiated European colonisation and led to a scramble to exploit Africa’s rich resources (Gordon and Gordon 2001). The Berlin Conference was a historic event that led to a gathering of all great power states in Europe at the time with the aim of colonising Africa. The scramble of Africa and its resources started with this conference. The scramble for Africa’s resources started 125 years ago (ibid.) and was an example of the intra-European rivalry for territory and resources in Africa, a process commonly known as ‘Divide and Rule’ (Gordon and Gordon 2001; Wesseling 1996). ‘Divide and Rule’ was a policy imposed by British colonial rulers all over colonial territories in Africa. British colonial administration implemented this policy in its colonies in Asia and Latin America. The policy aimed at dividing communities and territories that co-existed peacefully before colonisation, as the most efficient way to facilitate an effective colonial rule. During the Berlin Conference massive socio-economic structural changes were forced on Africa that not only led to an immediate division of the continent of Africa among the European powers, but also created artificial boundaries and divided social groups that had co-existed cohesively (Gordon and Gordon 2001). It is worth noting here that prior to colonisation, Africa’s economy had advanced on a similar scale to that of Europe at the time, and it was particularly strong in the area of trade that connected Africa with ancient regions of the world including China (Wesseling 1996). However, once Africa was conquered by the colonial powers, its precolonial trading system was replaced by a new colonial economic system that was structured to suit the needs of the colonial powers (Gordon and Gordon 2001; Sandbrook and Barker 1985). These European practices diminished Africa’s potential and altered its future direction; it was obvious that the aim of colonial administration was to exploit Africa’s vast natural resources to boost industrial development and growth back in Europe (Gordon and Gordon 2001). The impact of colonisation on economic development was extremely detrimental for Africa as illustrated by several scholars who have examined the legacy of colonisation in the continent. For instance, dependency theorist Samir Amin and Girvan had argued that the developed European countries shaped economic development and modernisation in Africa through colonisation and then neocolonisation, a practice that introduced Africa into international economy as a supplier of raw materials with prices determined by the industrialised countries of the West and their financial institutions, the International Monetary Fund (IMF) and the World

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Bank (Amin and Girvan 1973). Amin explains that because of the importance of resources, colonial politics was determined by the nature and volume of the exploitable natural resources of the colony. As a result, the extraction of resources during the colonial era did not contribute to Africa’s own economic development because resources extracted from Africa were directly transported to Europe to fuel industrial development there. In most cases, raw materials taken from Africa were transformed into finished products that were then shipped back to Africa and sold at much higher prices in the markets. This practice later becomes a major justification used by dependency theorists in the 1960s and the 1970s to argue that resources exploitation and colonial trade which continued to operate in the postcolonial era has contributed to the creation of unjust international trade system in a way that only benefits the Global North (Amin 2011). Acemoglu and Robinson (2002) have argued that Africa’s current state of underdevelopment is largely due to structural polices practised by the Europeans during the colonisation of Africa and which continue to influence development policies in Africa. According to them Europeans engaged in extraction activities in Africa to support development in Europe and the colonies of European settlement rather than settling permanently in Africa in large numbers. Therefore, they introduced institutions and colonial administrations that would support their short-term interests rather than promoting development in their colonies (Wesseling 1996; Baah and Anthony 2009). In addition, neither did the colonial administration introduce sound economic development policies, nor did it establish meaningful institutions or bring any improvements to human resource development in colonies throughout the African continent (Gordon and Gordon 2001). Consequently, the root causes of the economic underdevelopment and tribal conflicts that postcolonial Africa inherited can be traced to the factors originating from the process of colonisation (Nkrumah 1965). Although it is undisputable that colonialism left a clearly insufficient system of nation states with completely imagined borders, it is not the only biggest cause of Africa’s problems. As I have argued elsewhere, there are other factors which equally contribute to underdevelopment in Africa which include state failure, corruption, lack of leadership. Moreover, ethnic divisions imposed by political borders, and the weak governance institutions inherited at the time of independence from colonial rule have generated massive socio-economic problems among Africans in the post-independence era (Delancey, cited in Gordon and Gordon 2001).

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The political and ethnic separations have resulted in many Africans losing their sense of community and integration, and consequently have been the principal driving factors behind several anti-colonial movements. Efforts by postcolonial African leaders to reconcile and reunify African communities divided during colonisation have had little success due to the complex ethnic divisions and political competition created by colonisation (Harbeson and Rothchild 2000). African thinker and former Ghanaian president, Kwame Nkrumah, noted that postcolonial Africa’s situation was disappointing, similar to the story of its colonisation (Nkrumah 1965). Nkrumah argued that despite the fact that Africa was decolonised, its development policies are still shaped by the former colonial rulers, creating ‘neocolonialism’. According to Nkrumah, Africa was liberated from colonisation only to be trapped in neocolonisation, while its economic future was determined by the interests of the former colonial masters (Nkrumah 1965). This is reflected in the control, the Western nations and financial institutions have over government policies in Africa through foreign aid or through the transnational companies that serve their own interests (Harrison 2004). As a result, the legacy of colonisation and colonial political-economic policies continue to shape Africa’s future even today. One of the major contributing factors to Africa’s social and economic crises is that until recently, the former colonial rulers continued to influence Africa’s development policies (Moyo 2009). Moyo argued that Africa’s development issues have been colonised as Africa itself was colonised several decades ago (ibid.). This is largely because the African leaders who replaced colonial administration maintained strong relationships with former colonial rulers and these former rulers still influence the post-independence international economic relations of Africa through foreign aid policies (Rodney 1972; Ayodeji Bayo 2011). Africa’s underdevelopment has been further exacerbated by the massive outbreak of civil wars, endemic and institutionalised corruption, and the failure of governments to produce sound development policies (Bodea and Elbadawi 2008). This has resulted in a complete failure of governance in the African continent and has rendered the government either ineffectual or completely absent by their loss of control over their own affairs. In fact, the legacy of colonial rule was so noticeable that, after independence in the 1950s and 1960s, the new African nations were not in a position to manage their own development policies due to the limited institutional capacity, education and insufficient pool of human

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resources the continent had at independence (Calderisi 2006). At the time of their independence most countries in Asia and Latin America faced two major challenges of attaining domestic political stability and altering their economies from a colonial trade pattern. This had placed them as suppliers of raw material, rather than developing their own industrial production (Mbeki 2005). Most countries in Africa in their post-independence period were trapped in long-lasting and devastating civil wars, tribal warfare and struggles for power. Countries like Angola, Eritrea, Sierra Leone and Ethiopia were all engaged in civil war, political upheavals and economic crisis in the 1990s (De Waal 2007; Collier and Hoeffler 2002; Smillie 2002; Richard and Bhavnani 2005; Gilmore et al. 2005). The long-drawn and violent conflict between Sudan and South Sudan ended in 2011, resulting in the partition of Sudan into two states. It was hoped that this partition would bring lasting peace in Sudan. However, this independence has instead become a new source of another ongoing conflict between the people of South Sudan itself (Themnér and Wallensteen 2012). Mbeki (2005) notes that Africa’s ethnic conflicts, political instability and economic problems today are the result of colonial policies that created arbitrary boundaries and incongruous political systems without any regard for the existing ethnic and cultural affinities among the African people. These political instabilities combined with the absence of good governance have caused enormous developmental challenges for the continent of Africa resulting in laggard economic growth and almost insurmountable social problems. This is evident by the fact that despite the passage of five decades or more since most countries in the continent gained independence, Africa remains underdeveloped, mostly dependent on foreign aid and loans (Andreasson 2005). Colonialism left many countries in Africa severely ill-equipped to cope with the responsibilities attached with a functioning independent state, and therefore, has severely constrained the participation of newly independent African states in the global economy (Abrahamsen 2003). Most countries started out without a stable, indigenous political system; with poor infrastructure, education and health care; and a high dependence on labour intensive, low yield sectors, particularly agriculture.

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Capitalism in Postcolonial Africa The Failure of the World Bank and the IMF: Structural Adjustment Programs An important factor that pushed the African continent into a complete economic disaster was the Structural Adjustment Programs (SAPs), introduced in the 1980s and 1990s by international financial institutions such as the World Bank (WB) and the International Monetary Fund (IMF). These programs failed to achieve their desired goals of increasing trade and investment opportunities in Africa; rather, they created serious socioeconomic problems (Shah 2013). The SAPs of both the World Bank and the IMF, which included the provision of developmental aid and loans to Africa came with conditions such as requiring the recipient countries to deregulate and adopt liberal economic policies, privatise big stateowned sectors of the economy and reduce welfare payments and state services (Herbst 1990). The SAPs were based on liberal institutionalism that limited the role of the state in economic affairs by arguing that state intervention distorts the market potential (United Nations Economic Commission for Africa 2013). This led most of the African governments, which were quite eager to receive loans from the WB and the IMF, to renounce their state-led development plans, and instead adopt marketdriven and corporate-friendly policies towards institutional reforms to protect property rights and create an environment favourable to Western investors (Harrison 2004). The economic policies in Africa have been externalised in such a profound way that most of the policies blindly followed the IMF and the World Bank without any real input from African governments (IMF 1999). Consequently, major socio-economic problems emerged in the region due to the inequitable distribution of goods, services and resources as most countries were constantly forced to pursue projects that privileged private capital and the privatisation of collective resources and public goods (Harrison 2004). However, attempts by the African governments to adhere to and implement these conditions and continue to reform institutions have led to catastrophic socio-economic crises, unemployment and poverty, causing massive social unrest throughout the continent. This is because these reforms failed to take into consideration the ground realities of the African situation (Baah et al. 2009). The SAPs created even more political instability and poverty than what had existed during the colonial era, resulting in downturn of Foreign Direct Investment (FDI) and negative economic

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growth rather than improvements in the economic situation (Baah et al. 2009). As recorded by the World Bank (2001), the failure of SAPs was largely attributed to the lack of program implementation by the recipient countries. Furthermore, IMF and World Bank which enjoyed high standards of authority, representation and accountability of governments under the guise of ‘good governance’, have been increasingly condemned for not fully following with the standards themselves and instead working for the interest of donor countries at the expense of poor aid recipients countries (Woods et al. 2010). However, options for aid beneficiaries to resist or negotiate the attached conditions were limited, resulting in the programs being largely unresponsive to the needs and circumstances of the recipient countries and their population. These SAPs were strongly criticised as the most adverse development programs ever introduced by external forces in Africa particularly in the Sub-Saharan region, as they failed to stimulate nominal economic growth in the region (United Nations Economic Commission for Africa 2013). During the SAPs period, Africa’s growth rate dropped from 4.7 per cent in the period between 1961 and 1970 to 2.7 per cent in the period between 1980 and 2000. Ultimately it increased once more to 4.6 per cent in the period between 2001 and 2020 (UNCTAD 2020). As the SAPs failed to help Africa achieve desired economic growth and development or reduce poverty, African states struggled to cope with the post-Cold War global changes shaped by a shift in the international system led by the United States’ unipolar global order. As a result Africa continued to be in the periphery of the global economic growth throughout the 1990s, mainly as a supplier of resources to the West, while its own indigenous economy and industrial sectors by and large remained underdeveloped (UNCTAD 2009).

Implications of Development in Africa As discussed in this chapter Africa’s history of engagement with the West both during and after colonisation has been a force of destruction to the continent, as it completely destroyed Africa’s way of thinking for development, something the continent has never been able to recover from to date. To this end, Africa has experienced chaotic periods of civil wars, political instability and corruption during the Cold War period (Gordon and Gordon 2001: 144). Africa’s post-Cold War international relations have been determined by a number of factors, including its poor

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economic performance along with domestic factors such as political instability, poverty and new threats such as HIV/AIDS, and more recently, Ebola (Skard 2003). The struggling economic situation and increase in poverty throughout the African continent immediately after the end of the Cold War demonstrated that even the most minimal requirements for survival were almost impossible to obtain without receiving aid from the developed countries of the West, mainly the former colonial rulers (Harrison 2004: 87–90). The combination of the above factors, ongoing political crises and the increasing marginalisation of Africa in the world economic system have led the African continent to suffer further from political turbulence and a stagnant economic growth with little hope for development. In fact, most countries of the African continent especially those without abundant natural resources, have had little connection with the global economy and, as a result, their economies have deteriorated at a much higher rate than some other countries in the region (Calderisi 2006). In particular, its marginalisation in the world trade system has limited Africa’s potential to participate in any meaningful manner in the global economy. Africa has been largely left out from the economic and trade exchange benefits that resulted from the process of economic globalisation. The impact of the marginalisation of Africa is evident in two main areas: Africa’s declining official development assistance from OECD countries; and its lessening share of FDI especially from the developed countries in Europe and North America (Akokpari 2001). Official Development Assistance (ODA) to Africa has gradually declined as the major Western powers had started losing interest in Africa because they viewed the continent as bleak and unpromising. For example, despite the fact that international donors and financial institutions made a commitment to increase the ODA to developing countries from US$20 billion in 1990 to US$21 billion in 1991, the amount of ODA to Africa over that period declined from US$0.6 billion to US$0.4 billion (IMF 1999). The decline of ODA in Africa began in the 1990s following the end of Cold War. This was because the ODA was tied to the Cold War situation and was established on political motives. As a result, the United States and states in Europe provided ODA for both economic and political reasons including gathering support and alliance in Africa. However, the emergence of new states following the end of the Cold War and collapse of the Soviet Union has increased the demand for ODA, promoting donor countries to gradually shift some of their aid from Africa to new states. Furthermore, in the period between 1983 and 1990, development assistance

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to the African continent declined from more than US$8 billion to just US$1billion (Africa Recovery 2001). While aid to the continent reached US$25.2 billion in 1991, this amount declined to just US$17 billion in 1998 and further reduced to US$15.7 billion by 2000 (Africa Recovery 2001). As ODA was decreasing, FDI in Africa also declined from US$8.6 billion to US$6.5 billion in 2000 (Africa Recovery 2001). The decrease in Western ODA combined with the perception of Western governments of Africa being a risky place to do business has discouraged FDI flows into Africa. As a result, compared with the rest of the world Africa has received a very small-scale FDI from the 1990s until 2000 onward (UNCTAD 2012: 10–20). However, the emergence of China as economic power and its increasing trade and investment in Africa, has encouraged the west to increase investment in the continent. Further to this, the African Continental Free Trade Area (AfCFTA) agreement has bolstered regional trade and investment cooperation tralac (Trade Law Centre 2020; African Union 2019). According to the latest UNCTAD’s World Investment Report 2019, FDI flows into Africa rose to US$46 billion in 2018; an increase of 11 per cent from the previous year (UNCTAD Report 2019) A number of significant changes have taken place in the global political and economic orders in the post-Cold War period. The unipolar political order and increasing levels of globalisation have further exacerbated Africa’s marginalisation from the mainstream global system. These include the emergence of new states after the collapse of the Soviet Union that have offered favourable investment opportunities to the West as compared to Africa where violent conflict and political instability were widespread across the continent (UNCTAD 2010). The structural and institutional problems such as lack of good governance, systemic corruption and the lack of stable institutions have also held back the African continent from attracting FDI in any significant amount, particularly from Europe and the United States (Transparency International 2019). African countries, particularly the Sub-Saharan ones, have seen the least success with their economic development. For instance, in the 1980s and 1990s their combined income was equivalent to 5 per cent of the OECD members and developed economies, but by 1999, that amount had fallen to a paltry 2 per cent. However, over the last two decades Africa has seen drastic changes in its economic performance due to its engagement with emerging economies such as China, India and Brazil (United Nations Africa Commission 2020). As of 2020, Africa accounts for around 17 per cent of the world’s population (1.307 billion people) and its economy

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is worth $2.5 trillion (Nominal; 2020) $6.36 trillion and the continent is regarded as a second fastest growing economies in the world with most countries registering annual GDP growth at an average 6 per cent (UNCTAD 2020). Moreover, in the last few years, the World Bank has adopted different accounting methods to measure national economic growth, therefore it would be incorrect to assume that the results indicating an improvement or otherwise in comparison to earlier period are not necessarily accurate (World Bank 1994b). Africa does not lag behind in statistical economic measures; there are also major problems in other quality of life indicators such as infant and maternal mortality rates. Hundreds of thousands of children die every year from malnutrition, preventable diseases and other poverty-related causes (World Health Organisation 2013). Extreme poverty is the single major cause of more than 500,000 women dying in childbirth. By the year 2000, more people had died from HIV-AIDS in Sub-Saharan Africa than any other part of the world (WHO 2012). Hundreds of thousands of people live without access to safe drinking water and/or sanitation, and millions die every year from malaria, which is preventable in the first place and completely treatable otherwise. As a result, Africa has become the major destination of humanitarian assistance and has been the world’s biggest recipient of foreign aid throughout the 1980s and 1990s despite its rich natural resources (World Bank 2001). By the mid-1990s, most African states had become extremely dependent on foreign aid as their main source of income. By the year 2000, foreign aid amounted to more than 75 per cent of government gross national income in most of the countries, locking the continent into a cycle of dysfunction (Moyo 2009). In several African states, donors who have an overwhelming authority on local institutions in these countries have funded almost the entire government budget. Some African countries were relying so heavily on foreign aid that some of the basic government functions have been taken over by the donors (Rothchild and Harbeson 2000). Most government ministries that are dependent on foreign aid and external technical assistance have gradually moved away from delivering on their core responsibilities and have redirected all their energies towards coordinating aid projects from outside. The attention of these national decision-makers is focussed on managing and attracting larger international aid rather than on the socioeconomic development of African communities (Rothchild and Harbeson 2000). This strategy of advancing the interest of external donors, in

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many respects, has made government officials lose their sense of purpose and responsibility, in many instances these officials have become more accountable to the international donors rather than to their own people. As Western finances failed to achieve their designed goals, Africa has accumulated massive debts to the point that the continent pays around US$10 billion per annual in debt service four-times more than the cash the continent spends on basic services like health, education and service sectors (Hulme 2016). Furthermore, the massive flow of donor aid has also decreased the chances of large-scale economic reforms, since the interests of the donor countries and their aid-related projects have been served by government elites who want to maintain their own power and position (Di Muzio and Robbins 2016). There are some indications that foreign aid has caused ‘Dutch Disease’ whereby the value of the local currency escalates and in turn damages the domestic export sector (Harbeson and Rothchild 2000). This happens particularly in countries with raw material export-driven economy. Dependency on foreign aid has influenced Africa’s international relations and its economic development (Moyo 2009). In the 1990s, debate around aid and economic performance had overtaken economic issues in Africa’s international relations, resulting in a very narrow focus on aid disbursement rather than dealing with mounting social problems in Africa. The preceding discussion depicts the history of Africa’s turbulent relationship with the West; Africa has been rendered largely dependent and thus exploited by dominant geopolitical powers. The West continued to govern Africa’s development agenda during colonisation and also in the postcolonial period; however, this Western dependent development model has not provided Africa with any significant benefits. In addition to this, in the last 60 years, Africa has suffered from marginalisation and the decline of Western investments in sectors of economy such as service sectors and manufacturing sectors that create stable employment for locals, inhibiting the continent’s ability to benefit from the process of economic globalisation. The only Western investment in the continent was in extractive sectors as an extension of the colonial policy of extracting resources and shipping them to the West, giving very little attention to the economic development for the African people. It is also widely acknowledged that the African nations have also become patrimonial states in which economic development has been in the interests of a narrow group of ruling elites who protect the interests

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of former colonial rulers rather than working for the benefit of their own people (Gordon and Gordon 2001).

Transformation of OAU to AU as a New Advocate for Africa The changes that took place following the end of the Cold War and the beginning of the twenty-first century brought new opportunities for the African continent. Furthermore, the end of the Cold War signalled the decline of sponsorship for major intra-state conflicts in Africa, as the support for these proxy wars dwindled from major powers. The diminishing support for large-scale civil wars rendered several conflicts ineffectual such as the Angolan civil conflict that ended in 2002. Consequently, at the beginning of the new millennium, Africa’s economic situation began to show a gradual improvement; by 2002, African leaders had transformed the Organisation of African Unity (OAU), established in the 1960s, into a more proactive and dynamic African Union (AU), modelled on the lines of the European Union. This change was seen as a prospect for better regional cooperation and unity and it was hoped that the new organisation would act differently from its predecessor. The transformation of OAU into AU was largely due to the failure of the former in playing an effective role in regional cooperation, integration of borders and civil conflicts in Africa. As African leaders decided to take on a more active role in addressing Africa’s social and economic problems, there was a need for reforming the OAU. Consequently, the AU was established with new objectives which brought African governments together, working more closely, than ever before, for the common good of Africa. For instance, since its launch in 2002, the AU has been involved both militarily and politically, to resolve problems in a number of African countries including Somaliland and the Darfur region in Western Sudan, as a part of its mission of promoting peace and security in Africa. All African countries have been members of AU except Morocco, which withdrew from OAU in 1984 due to the dispute with the organisation over Western Sahara’s membership of the OAU and rejoined the African Union in 2017, when AU Secretariat approved its membership in January 2017 (African Union 2020). The OAU was considered to be largely ineffective as this organisation had failed to address basic developmental issues in the region and had been unable to promote major socio-economic changes in the African continent (Harbeson and Rothchild 2000:13). In

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the same year, the New Partnership for African Development (NEPAD) was established, as a venture of the AU with independent authority to formulate pan-African development programs by facilitating intra-African trade as well as increasing FDI flow into the continent. A number of factors promoted the need to transform the old OAU and to establish NEPAD; most significantly, the desperate need to put an end to Africa’s perpetual marginalisation and to re-establish Africa in contemporary global political and economic order (Harrison 2004). The two organisations aim to promote peace and security in Africa, taking the responsibility of addressing Africa’s problems in an attempt to reduce Western dominance. NEPAD also aims to assist African states to formulate their foreign policies that would serve the political and economic interests of the continent. Even though the two bodies were created with a clear agenda and visions for Africa, the political divisions among African leaders have continuously interrupted their work, which restricts the organisation’s ability to assist the continent in achieving economic development and political stability.

China–Africa: Overview of History of Relationship Sino–African relations can be traced to the era of the Ming Dynasty, as discussed in the introductory chapter, and contemporary relations between China and Africa began in the 1950s (Taylor 2006), also current economic relationships entered a new era of commercial exchange in the 1990s transforming the nature of China–Africa relationship (Alden 2007). As discussed in the introductory chapter, Africa and China have passed through similar histories of civil wars, political instability, and challenges of economic development. However, China has a sustainable level of economic development, while African states are still struggling with infrastructural deficit and overall lack of economic and human development (see introductory chapter). Consequently, because of China’s successful economic growth, African states see China as an alternative development partner with the capability to assist the continent to develop and modernise just as China has already done for itself (FOCAC 2000a). On the other hand, two main factors are responsible for making Africa an important partner for China. First, Africa—which is composed of 54 states—is an important ally that can support China in the international arena. Secondly, Africa’s wealth and untapped resources, as well as its

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growing population, are vital for China’s energy supply while providing a market for its products. As a result, China’s trade and investment presence in the African continent is noticeable across the 54 African states, with its companies conducting their commercial activities throughout the continent (Naidu et al. 2009). This engagement has encouraged many Chinese entrepreneurs to travel to Africa and pursue business activities (Polus et al. 2011). This movement, according to Polus et al. (2011) increases the development prospects for local African businesses, while at the same time allowing Africans access to a new range of Chinese products, services and experience in business. However, China is not a newcomer to the African continent; their relationship in the postcolonial period can be traced to the Bandung Conference held in Indonesia in 1955 (Ogunsanwo 1976). The Bandung Conference marked the turning point in the evolution of China’s foreign policy because it was an opportunity for the Chinese leaders to establish initial contacts with the leaders of the developing countries. Six African states were represented at the conference: Egypt, Sudan, Ethiopia, Ghana, Liberia and Libya (Yu 1975). Chinese Premier and Foreign Minister Zhou Enlai seized the opportunity to interact with the African delegates, and established working relations with Egypt’s President, Gamal Abdul Nasser (Yu 1975). At the conference China committed itself to offer technical, military, economic and political support to the nationalist movements in Africa. China supported African nationalist movements for independence, counter-balancing the dominance of the former Soviet Union and opposing the presence of European and United States in the continent. Marcel Kitissou’s study further demonstrates that, following the end of Cold War; Beijing’s commercial interests in Africa superseded its ideological activities, with Chinese firms continuously exploiting gas and oil resources throughout the African continent, pushing Africa to the second wave of colonialism with Chinese characteristics. The economic development course was devised by the paramount leader Deng Xiaoping (1978–1992), for his decisive role in transforming China from a socialist protectionist economy to a capitalist market economy. Brautigam refers to this unique Chinese miracle ‘Capitalism with Chinese Characteristics’ as a part of the ‘Beijing Consensus’ in which economic growth and the expansion of Chinese private and state-owned enterprises assume a primary role in China’s trade policy towards Africa. As Taylor remarks that during the 1960s, China’s foreign policy towards developing countries, including the

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African states, was based on the principle of Non-Alignment Movement (NAM). NAM was formed in 1963 by a group of developing countries that refused to become blind followers of the two major camps during the Cold War. NAM aimed at protecting the rights of developing countries against imperialism. China did play a central role within NAM, by supporting its members to achieve independence, unity and sovereignty of their choice. However, despite the communist leadership in China demonstrating sporadic interest in Africa from 1950s onwards, this interaction plummeted in the 1980s, following Deng Xiaoping’s decision to ignore Africa by shifting its policy focus away from Non-Alignment and ideologically driven international solidarity to focus largely on domestic economic development. According to Raine (2009), China needed to obtain global recognition that would help the leadership in Beijing to later claim a permanent seat in the United Nations Security Council (UNSC). For this reason, African support was crucial for the CCP’s leadership to gain a majority vote in the UN General Assembly (Raine 2009). In 1963–1964, Premier Zhou Enlai visited ten African countries and outlined five principles for collaboration with Africa and eight principles to guide Chinese aid to the continent. Aid and political cooperation became the main elements of engagement for this period. China’s primary goal was to unite African and other developing countries into a true ‘Third World’ alliance, with China as its leader, to counterbalance the superpowers of that period. For the CCP, the global focus was on building alliances in the Third World, based on the belief that wars of national liberation would deteriorate and destroy the imperialist system. Thus, in advancing Mao’s anti-imperialist struggle and having examined similarities between the early stages of the Chinese communist revolution and the revolutionary situation in Africa, China decided to support Africa’s liberation movements (Paz and Rorttt 2008). China provided significant political and financial support to many political movements in states such as Angola and South Africa between the late 1950s and the 1970s (Raine 2009). China’s projection of its own identity in relation to its contemporary economic and trade partnership with resource-rich developing countries (RRDCs) is essentially driven with the motive to introduce itself as a developing country that has suffered humiliation, similar to colonisation, from Western powers and Japan in the nineteenth century (Cheung and Qian 2009; Buzan 2010). China maintained strong links with nationalist movements for independence

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providing the people with military hardware, infrastructure, medical assistance and training until most of these states gained independence (Alden and Large 2011). Taylor’s analysis indicates that, during the early 1970s, over 70 per cent of the military assistance provided to African liberation movements came from China (Taylor 2006). The CCP’s relations with African countries were developed on its policy of non-interference, non-aggression, mutual benefits and peaceful coexistence. During this period, China and Africa identified themselves as fighting against neocolonialism. As a result, China considered Africa as the front line in the global struggle against colonisation, imperialism and capitalism (Raine 2009). At the Eighth National Congress of the CCP in 1956, Mao Zedong stated that China must provide active support to the movements for national independence of various countries in Latin America, Asia and Africa. Since then, relations between China and Africa have been deepened by the strong personal relationships between their respective leaders (Rotberg 2009). After most African countries were decolonised, China mobilised the continent as an ally against Western hegemony, imperialism and Taiwan.

African Support for China’s UNSC Seat One of CCP’s earliest policy goals was to obtain global recognition and claim representational rights of the Chinese state in the United Nations Security Council (UNSC). Africa, with over 50 states, was a battleground for governments in Beijing and Taipei throughout the 1960s and 1970s, as China continued to fight for recognition in the face of Taiwan’s diplomatic efforts. As already noted, the votes of the African states that supported China played a significant role in gaining China the permanent seat in the UNSC, unseating Taiwan in 1971 (Alden 2008). The rejection of Taiwan’s status as a separate and sovereign state is essentially the only political condition put on most African countries. Evidence shows that China’s strategy of containing Taiwan has been subsequently successful, since most African states had switched diplomatic relations from Taiwan to China by the end of the 1960s (Alden 2008). China considers African states as politically important in international relations, particularly in strengthening its position in the United Nations and other international institutions (De Oliveira et al. 2008). In 1971 China’s bid to take the permanent seat in the UNSC from Taiwan was successful largely because of the support of African states. In the vote at the United

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Nations General Assembly, 26 African States supported the motion recognising China as the only lawful representative of the Chinese people in the United Nations, giving China enough votes and support to win over Taiwan (Raine 2009).

Postcolonial Relations with China With the demise of Mao and the ascendancy of Deng Xiaoping, China reassessed its foreign policy strategies and began to focus on economic growth. Raine (2009) indicates that during the 1970s Sino–African relations experienced its lowest point (Raine 2009). In addition to the CCP’s post-Mao foreign policy change, the political situation in the African continent had also changed dramatically; as more countries gained independence without any real revolutionary struggle, they swiftly adopted the constitutional and legal frameworks that had been left behind by the colonial rulers (Taylor 2006). In addition, African countries that had received little support from China during their nationalist movement for independence did not embrace China’s policies at the time. It may be claimed that during this phase China had lost its influence in Africa. However, despite a drop in China’s popularity in Africa, Beijing continued to provide development assistance to several of the African states (Raine 2009). The most remarkable example of this was the construction of the Tanzam Railway, which linked Zambia to the coastal port of Tanzania (Yu 1975). The fact that Tanzam Railway project was completed even during the peak of the Cultural Revolution demonstrates the strength of close relations between China and the continent of Africa (Alden 2008). In the late 1980s, the Chinese Premier visited Africa and announced four principles of economic and technological cooperation with Africa, shifting China’s African focus from a largely strategic political engagement to an economic and development agenda (Taylor 2006: 32–33). China’s domestic development and the need to promote global peace and stability to achieve this end, translated into a new policy initiative aimed towards Africa entrenched in commercial interaction and practical economic goals. China’s new approach shifted from providing free aid to African states to aid motivated by China’s economic and political interests in the continent (Shinn 2007). According to Shelton and Paruk (2008), China sought to represent itself as a trade partner, an investor, a technology supplier, a provider of credit and development assistance, and a political friend based on the principle of non-interference in the internal affairs of its partners

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in the region (Shelton and Paruk 2008). As the 1980s drew to close, African states saw a significant decline in relations with China as China put a much stronger focus on economic cooperation with developed Western countries rather than Africa. Following the crackdown on Chinese pro-democracy protests at Tiananmen Square in June 1989, the West condemned and turned away from China, further isolating Beijing from the international community (Mawdsley 2007). As a result, China started to open up to Africa again and look to its old friends for support—especially those who supported them in the United Nations—with hopes they would also support China against Western countries (De Large and Alden 2008). Most African countries did not criticise China’s actions, and in the following years a significant number of diplomatic visits took place between the African countries and China (Alden 2007). China was trying to gather political support to reduce Western criticism of China’s handling of the Tiananmen Square event and saw potential support from African states. Following the fall of the Soviet Union in 1991, China continued building and renewing its relations with Africa, partly due to its political agenda and partly for the economic objectives, as African countries were important as a counterbalance to the West (De Large and Alden 2008). The timing was in China’s favour, since Western countries’ involvement in Africa had been declining during the late 1980s and the 1990s. The relationship between Africa and China was again consolidated based on the understanding of the four principles of respect, non-interference, peaceful coexistence and mutual benefits (Tjønneland et al. 2006). China agreed to support African economic development by increasing aid and expanding trade and foreign direct investment. In return, African countries pledged to support China in Tiananmen Square as well as the Taiwan issue (Shelton 2007). Since the end of 1989, China’s emphasis has been on access to natural resources, commercial relations and political influence. This has been especially true since the Chinese economy became powerful and dominant, and its need for energy resources from resource-rich developing countries, particularly Africa, has witnessed a sharp increase.

Conclusion This chapter is an overview of China–Africa relations. Given the nature of China’s relations with Africa and its implication for economic development, the chapter throws light on the development challenges that

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both Africa and China faced during their historical struggle. Given the importance of China’s economic links with countries in Africa, this book is a contribution towards providing clarity in understanding the impact of China’s trade and investment on economic development outcomes and capacity building as they exist in both China and Africa as well. This chapter has provided the background information to the subject, which will be useful for further discussions in the following chapters. As demonstrated in the chapter, both Africa and China have experienced historical challenges of development and civil conflict, and humiliation from Western powers, with Africa being the victim of colonialism. These shared events have facilitated the current relationship between Africa and China. The next chapter provides a review of China’s energy security policies in Africa.

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CHAPTER 4

The Political Context of New Emerging Role of China in Postcolonial Africa: Complexity and New Challenge for Africa

Introduction Chapter two analyses the political context of China’s move towards investing in Africa; it briefly outlines new developments that have taken place between Africa and China in recent times in an attempt to investigate the different dynamics between strategic, economic, political and cultural factors that have contributed to the current level of China’s involvement in the African continent. The chapter explores further some of the key factors driving Africa’s increasing engagement with China and the debate surrounding this shift. While Sino-African relations can be traced to the Ming Dynasty as discussed in previous chapters, contemporary relations between China and Africa began only by the turn of the new millennium, year 2000, when China’s economy emerged with quite a remarkable growth and gave a new direction to global economic activities. China began to challenge Africa’s traditional trading partners who found themselves with no option but to acknowledge the growth of China’s power both economically and politically in Africa. This chapter explores a new path in China–Africa relations which provides an idea about the future of China’s role in the continent.

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China–Africa: New Path The new path of China’s growing relationship with the African continent is, in recent past, one of the most observed aspects of the continent’s expanding global engagement, as the continent is emerging as a strategic marketplace and is rich in resources. On the other hand, African governments see the rapid industrialisation of China as an opportunity to escape Western postcolonial aid based on dependent relations. Given Africa’s disappointing history with former colonisers, could China’s increasing investment in Africa be seen as a source for growth, neocolonialism or shift in Africa’s dependency on the West to the East? China shifted its focus back to Africa and started investing in resources-rich countries such as Angola and Zambia, both of which had emerged from civil wars and were experiencing post-conflict development challenges. The two countries were also at politically low conflict risks as they were, overlooked by the West. By investing in the resources-rich Angola, Beijing managed to establish its footprint in the continent’s resource sectors. This was followed by China intensifying and shifting its projects to East Africa and the Great Lakes Region (GLR). Rwanda, Kenya, Ethiopia, Djibouti, Tanzania and Uganda have been busy singing commercial deals with Chinese companies over the past decade, perhaps anticipating China to be more of a value partner than former colonisers and also embraced by the rhetoric that China has experienced similar development challenges that Africa faces today. China offers the continent loans and credit lines with fewer prerequisites and long-term repayment in comparison to loans from the World Bank and the IMF, which often come with ‘strings attached’, such as requiring the recipient country to conduct major institutional reforms. Furthermore, China is regarded as an alternative development partner to Western powers; most African governments view these Western development policies as exploitive and as failing to assist the continent to achieve sustainable growth and development. Unlike Europe and the United States, China has directed large amounts of its outward investment to Africa including in countries in GLR, targeting resources and resource-rich and non-resources-rich countries in the continent. As a result, countries such as Uganda that were previously struggling to attract Western investment and were largely dependent on aid, now find China as a willing and unobtrusive partner. As a part of its ideal Africa policy over the last two decades, China’s leaders have visited different states in

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Africa in an attempt to strengthen relations and promote friendly partnerships. China’s decision to build business partnerships with African countries is based on China’s assessment of Africa’s colonial experience and also the subsequent problems faced by these countries due to poor economic performance, aid dependent relations with the West, and its global marginalisation. Such an experience has led African leaders to acknowledge that Africa’s interactions with its former colonial rulers have not, in any capacity, helped the continent to either achieve economic development or reduce mounting poverty and instead pushed the continent to the periphery of the global economic system. To this end, the unbalanced pattern of the Africa–West economic relationship has inspired African ruling elites to embrace China. Given China’s successful growth, African leaders have a lot to learn from China’s industrial development and policies that led to poverty alleviation. However, whether this new path of China’s increasing presence in Africa is going to be a win-win scenario as Beijing often claims, depends on how the African government learns from the experiences of its relationship with the West and adapt conducive environment beneficial for both China and Africa. However, it is important to note that Africa with its rich resources was a target of colonialism and again re-emerged as the main target for supplying resources for emerging economies like China, which employs different strategies to engage with the states in Africa. Unlike the West, China is neither interested in physical invasion, nor does it show any interest of formal political control. Yet it boosts its economy through direct imports of resources from Africa, replicating the Western model of resources exploitation. Whilst the Western colonialism was based on physical invasion and heavy state involvement, China involves non-states actors such as oil companies and private businesses, highly regulated by the Chinese government. These second-tier actors play an important role in the process of resources exploitation with Chinese government facilitating their movement and business opportunities across the continent. To this end, analysing China’s growing economic relations with Africa through the lens of core dependency assumptions, it is obvious that Africa’s underdevelopment situation does not indicate a significant point of departure from the colonial model of development because China’s actions in Africa, although not exact colonial, have all possibilities of neocolonial model with Chinese characteristics. To this point, Aleves and Alden view this relationship as emblematic of an overall redirection of Africa’s postcolonial

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development model away from Western-based orientation, which placed the continent in the permanent position as a supplier of raw materials. Africa has been supplying resources to the West during and after colonisation and today it provides resources to China and is a huge marketplace for Chinese products made from the continent’s own raw materials—in other words it is a history that has repeated itself with a different actor.

New Initiative Forum on China–Africa Cooperation (FOCAC): A New Template for Economic Cooperation In October 2000, a group of officials from the Chinese Ministry of Foreign Affairs, Ministry of Trade and International Cooperation and senior government representatives from 44 African countries met in Beijing for the establishment of the Forum on China–Africa Cooperation (FOCAC) (Beijing Declaration of the Forum on China–Africa Cooperation October 2000). Beijing Declaration of the Forum on China–Africa Cooperation was adopted in China–Africa Consultative Forum (CACF) held in Beijing and which led to the formation of the Forum on China– Africa Cooperation. The meeting was the first of its kind and the largest high-level ministerial gathering in the history of interactions between China and Africa during which both sides agreed to consolidate cooperation in all areas of development (FOCAC 2000). The establishment of FOCAC was initiated by the Chinese government as the topmost institution to formulate its regional policy on the African continent (Alden 2007). FOCAC focusses on future partnerships, peaceful coexistence and reciprocal exchange based on the idea of South–South dialogue. All participating ministers from both sides agreed to meet again to follow up on the implementation of FOCAC recommendations and the second FOCAC ministerial conference was held in the Ethiopian Capital, Addis Ababa in December 2003 (FOCAC 2000). This was followed by the 3rd FOCAC ministerial meetings held in 2006 in Beijing and the 4th conference held in 2009 in Sharm el Sheikh, Egypt, while the 5th ministerial conference in Beijing was held in 2012 to follow up on the progress of the recommendations, actions and to evaluate the work accomplished so far. At the end of the 1st FOCAC conference the following declaration was made by the participating countries:

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We reaffirm that the injustice and inequality in the current international system are incompatible with the trend of the times towards world peace and development, hinder the development of the countries of the South and pose threats to international peace and security. We stress that the establishment of a just and equitable new international political and economic order is indispensable for the democratisation of international relations and for the effective participation of developing countries in the international process of decision-making. (Beijing Declaration of the Forum on China-Africa Cooperation. (FOCAC October 2000)

This quotation makes it clear that China is using an anti-Western rhetoric to influence the states in Africa by stating that the current international system is not fair for Africa and that China will be more beneficial for Africa’s economic development ambitions. This new platform for cooperation and partnerships is made possible by three main factors—Chinese economic growth, its willingness to trade and invest in Africa, and increase in its developmental aid for the continent (Naidu and Mbazima 2008; Raine 2009). With the continued decline of FDI from the West and the commitment of the Chinese leadership to encourage its state-owned and private enterprises to invest in Africa, African governments have enough incentives to consider China as an alternative source of trade and investment. As discussed in the Introductory Chapter, China and Africa share common interests that stem from the sense of belonging to the developing countries that share similar histories of colonisation and developmental challenges (Bayo 2011). However, although FOCAC is perceived by some African leaders as a significant mechanism through which Africa and China can engage in constructive discussions for mutual understanding and benefits, in practice it is not yet clear whether FOCAC is a model for development or replicates policies of other institutions such as the World Bank and the IMF. This is because the role of Africans in the management of FOCAC and participation in the decision-making in terms of negotiating business deals is limited (Wissenback 2011). Another concern is that there is no permanent representation from African countries in FOCAC in Beijing. It also lacks any monitoring mechanism from the African side to ensure that the economic deals that China signs are implemented in ways that not only contribute to economic growth but also to the overall economic development of the countries involved. Justina (2018), argues that China has poured tens of

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millions of dollars into Africa through FOCAC for development projects but African states need to develop a better strategy if they want to avoid the Western form of trade with China and properly reap the benefits (Blanchard and Shepherd 2018). Though there are some agreements and recommendations, the material benefits for African states are not achievable under China’s current policy in Africa. An example of this is the way loans which were not planned to promote development in Africa, are negotiated with the recipient African states, and in the way those loans and funds are spent on the projects. These are some of the issues over which China has more power than the receiving African countries (Wissenback 2011). Most deals are focussed around businesses that benefit China more than local economies in Africa. This is to argue that although China engages Africa through bilateral agreements and business deals, it understands what it wants to get out from Africa. On the other hand, African countries do not have a unified strategy that can guide them to deal with China and as a result some African countries, struggle to negotiate a best business deal with China (Justina 2018). This makes Africa vulnerable when it comes to trade negotiation with China as China is often in a dominant position unlike the periphery, Africa. For instance, in Ethiopia, an electric train line constructed by China and which runs from Addis Ababa to Djibouti opened in 2018, was completed at the cost of US$ 3.4 billion, for just 756 kilometres; is seen as the most expensive Chinese financed railway in Africa due to Ethiopia’s poor negation position (Soule 2019). According to Christopher Dent (2011) FOCAC is a loose framework that needs to be carefully assessed if it aims to make a difference in Africa and work in the interests of both parties (Dent 2011). However, to make FOCAC amenable to Africa’s needs, African governments must enjoy equal or at the very least some reasonable bargaining power to avoid the externalisation of Africa’s development policies. At its current level, Beijing uses FOCAC as a platform to advance its own developmental goals while stressing that it is determined to contribute to the development of Africa and that FOCAC is a platform to facilitate development in Africa. Furthermore, Africa’s collective bargaining power through the African Union (AU) and the recently established, New Partnership for African Development (NAPAD) has not yet been incorporated into FOCAC’s framework, as African states still negotiate with China through strong bilateral relations, while China uses FOCAC to enforce bilateral deals. In the absence of African agency, it is difficult or perhaps too early to

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conclude whether FOCAC will deliver what Africa needs or will emerge simply as another institution through which China exploits Africa’s resources. In the perspective of FOCAC policy, Beijing released its new policy towards Africa in 2006, China African Policy 2006. Part III of the document indicates that: China will unswervingly carry forward the tradition of China-Africa friendship, and, proceeding from the fundamental interests of both the Chinese and African people, establish and develop a new type of strategic partnership with Africa, featuring political equality and mutual trust, economic win-win cooperation and cultural exchange. (China African Policy 2006)

The China–Africa Policy and FOCAC framework articulates Beijing’s perspective about Africa and China’s plans on how to push forward, its economic and political relations with the continent (FOCAC 2019). All African states are considered economically and politically very important for Beijing in its pursuit of ambitious economic and political goals. Although Chinese aspirations are made quite clear from the statements and declaration of both FOCAC and in policy documents, in reality most recommendations have so far remained statements aimed to win the hearts and minds of the African leaders (Brautingam 2011). A number of these ambitious statements of Chinese partnership with the African continent have not actually been implemented due to the lack of enforcement and monitoring mechanisms. This issue will be discussed further in the context of China’s relations with Angola and Rwanda. It is clear that the new model of China–Africa relations is heading in the direction that differs from the relationship China had with the continent in the past decades. President Xi Jinping’s active defence of Beijing’s partnership with Africa has pushed forward the possibilities of more trade agreements and market openness for Chinese companies in Africa (FOCAC 2020). China’s signs of a new focus on Africa are coincided with US President Donald Trump’s policy that does not seem to pay much attention to Africa; thus, driving African countries into doing more business with China. During the 8th meeting of the forum on China–Africa Cooperation that took place in Beijing in 2018, Chinese leadership renewed its interest and surprisingly pledged US$ 60 billion in aid and loans over the next three years (FOCAC 2018). But what is actually US$ 60 billion composed of? To sum up the breakdown: US$ 15 billion in grants,

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interest-free loans and concessional loans, US$ 20 billion in credit lines and a US$ 10 billion special fund for development financing. Chinese companies will be encouraged to invest at least US$ 10 billion in Africa over the next three years (Fifield 2018). Additionally, Xi Jinping has also made a commitment towards medical assistance, environmental protection package, more cooperation in agricultural training and assistance and government scholarship and vocational training for over 1,00,000 African youth (Fifield 2018). While Beijing clearly states that the aid package is allocated for an infrastructure to assist the continent develop faster, critics argue that China’s aid that often comes in the name of infrastructure development projects, lures African countries into a debt trap, a claim China and some leaders in Africa categorically deny (Piling and Hornby 2018). In terms of trade, FOCAC has assisted China in promoting its commercial interests across the continent. Evidence suggests that China has emerged as the largest bilateral source of annual Foreign Direct Investment (FDI) in the African continent’s 54 states over the last five years (World Bank 2011). This massive FDI from China is driven by the Chinese NOCs actively investing in energy, mining, banks, real-estate and construction sectors all over the African continent (UNCTAD 2010). More than 2000 Chinese companies have so far invested in Africa, and most of the investment has gone into energy, mining, construction and manufacturing. As discussed in the previous chapters, the two-way trade in oil, minerals and commodities between the PRC and African states and the volume of trade increased drastically from US$ 500 million in the 1990s to US$ 198.49 billion in 2012 and US$204.19 billion in 2018. The bulk of China’s investment is focused on the resource-rich states. In the period between 2003 and 2019, Nigeria, South Sudan, Angola and Zambia, all resource-rich states, received more than 70 per cent of China’s investments, while 30 per cent went to non-resource states such as Rwanda and Zimbabwe—an important ally of Beijing (UNCTAD 2019). These figures show the swiftness with which China’s economic influence has been increasing in Africa from 2000 onwards. According to the African Development Bank, China’s shares in trade with African states have been growing rapidly, from three per cent to 13 per cent during the last ten years (African Development Bank 2019). The main reason behind China’s access to these countries’ resources is that China’s increasing investment in Africa has occurred at a time when most companies in Europe and the United States are retreating from the continent.

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China is simply filling the gap left by Western companies (UNCTAD 2017). The disinterest of major Western economies in Africa has enabled China to establish a web of commercial activities and also gain access to the energy infrastructure in the continent. The major oil companies from Europe and the United States have been investing in Africa over the past five decades, the bulk of their investment combined in Africa’s resource sectors still exceeds that of China, reaching US$ 202 billion in 2018. However, the speed at which China’s investment is growing suggests that it will overtake all the Western investments in the near future. China’s economic and political penetration in Africa strongly reflects the imperatives of its economic expansion which is driving China’s search for natural resources, especially oil and iron ore, raw copper, cobalt and aluminium in Africa today. This need for resources delineates the four key objectives of Beijing’s renewed economic interaction with Africa, first to secure supplies of energy resources, mainly oil; second, to establish itself as a key player in Africa’s resources sector; third to assist China to play a more prominent role in the international oil market (Fuzhan 2019), and fourth, to assist Chinese National Oil Companies (NOCs) to establish influence in Angola’s resources sector given that they are new to the oil business compared to European and American companies which have been trading in Africa for decades. China’s support for these companies is important because their business interests are considered to be convergent with Beijing’s overall national interests in Africa. NOCs activities in the resources sectors of Angola and markets in Rwanda are regarded as more supportive of the purpose of realising China’s objective of securing oil supply and creating marketing opportunities for Chinese businesses. In order to attain its national interest in Africa, Beijing lessens traditional rigid and state-centric foreign policy and instead employs various sub- national actors, including individuals and institutions, companies and departments that have expertise in specific areas to ensure the achievement of China’s policy objective. Some of the key Chinese foreign policy actors and their tasks are: 1. Chinese embassies are assigned with the task of executing Chinese Government investment policy, support and direct the activities of key players (including companies), provide financial and policy advice to Chinese businesses in resource-rich developing countries.

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2. State-Owned Enterprises (SOEs) aim at expanding Chinese overseas economy by investing in resources and construction sectors and creating employment opportunities for Chinese labour migrants. 3. Chinese government creates investment opportunities for Chinese companies and businesses and organises high-level state visits to RRDCs, sign trade agreements, provide technical and financial support to both private companies and SOEs and provide protection to Chinese firms in RRDCs. 4. Chinese workers are driven by Chinese investments in Angola, which offer them employment opportunities, work for Chinese companies and businesses and promote productivity in Chinese firms overseas. 5. Private companies are in Africa to search for investment opportunities and assist SOEs in implementing small projects. 6. Chinese Exim bank is the main financier and lender for overseas projects and provides technical assistance and policy advice to Chinese firms in Africa. These objectives are directly related to China’s economic growth and the political stability of the Chinese Communist Party (CCP) (Eisenman and Shinn 2012). Achieving these objectives helps the CCP to keep path of economic growth, generate employments to millions of Chinese inside the ‘mainland’ in Africa. This increases the popularity for the CCP as well as ensures that the leadership has necessary resources to encounter possible challenges in the future China becomes global power both in military and economy (Beina et al. 2020). In addition to these tasks of key players listed above, China aims to access new consumer markets for its value-added products to boost its industrial output (Eisenman and Shinn 2012). These new African markets open opportunities for Chinese business to continue to invest in resource-rich countries, particularly in the profitable construction and telecommunication, retail and transportation sectors (Pannell 2008; Alden 2007). The domination of African markets has two objectives for China: it directly creates jobs for increasing the number of Chinese migrants to Africa, especially in Angola which hosts the largest number of Chinese population in Africa and Rwanda (Alden 2007), and expands the sale of Chinese products, particularly building materials and consumer goods. This market expansion, in part, is driven by China’s need to help pay for the resources which it purchases especially from countries such as Angola (Van Dijik 2009). Moreover, access to African markets is also

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a practical way for China and its expanding commercial enterprises to finance its other political and diplomatic objectives such as in Angola and Rwanda and beyond while sustaining economic growth back home. All these policy objectives are pillars of China’s operations in Africa with resources security representing the major driving force behind its rising role in Africa, and in particular in Angola. Although China’s sympathetic expressions such as strengthening cooperation, mutual benefit and the building of peaceful engagement became the key themes of its Africa Policy 2006 as already mentioned, access to resources and market opportunities remained the primary objectives of Beijing’s diplomacy in Africa both in the short- and long-term plans (China African Policy 2006). China continues to develop action plans for Africa and in the most recent China’ Action Plan 2019–2021, Beijing extended its policy to include investment in sectors such as agriculture, maritime economic cooperation and military cooperation (Forum on China–Africa Cooperation 2018). The rationale for these policy objectives and their impacts on economic development outcomes and capacity building are discussed in Chapters Four in the context of Angola and Rwanda.

Soft Power in China–Africa Relations Soft power is increasingly becoming an important element of foreign policy of great and emerging powers such as China. As China’s economy continues to grow, the sphere of its influence in Africa has increased remarkably over the last two decades. Chinese leaders have been using soft power as a means of achieving their country’s desired goals. ‘Soft power’ is being discussed in this chapter briefly because it plays an essential role in assisting China to influence states in Africa. ‘Soft power’ has been defined by Joseph Nye (1990), as a state’s capacity to make other states accept what it wants through means such as values, ideology and alluring rather than using coercion or physical means such as military force. Nye contends that other states follow countries that use soft power because of their thinking, lifestyle and magnetism of culture. Nye coined the term ‘soft power’ in the 1990s, to explain America’s Post-Cold War foreign policy that incorporated both soft power and hard power for maintaining its hegemony at regional and global level. In more recent years, Nye combined soft power and hard power calling it ‘Smart Power’; arguing that smart power is a new mechanism for states to understand how to combine soft and hard power and concurrently use

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them (Nye 2004). Nye’s definition of soft power and smart power and their importance in great power states’ foreign policy has been generally used as a source of reference to help states establish a non-coercive approach of foreign policy formulation (Nye 2004). As China began to play a more prominent role in international affairs, more recently, Chinese leaders have largely embraced Nye’s concept of soft power as an important foreign policy instrument. For example, Chinese communist party report endorsed in the 17th party convention in 2007, stressed on the importance of spreading Chinese culture as a part of China’s emerging ‘Soft power’ (Mingjiang 2008). This indicates that although China’s soft power is currently limited, it does play an important role in Beijing’s approach to Africa. However, some of the issues that limit global embrace of China’s soft power are corruption, lack of freedom and democracy and issues with support of pariah states despite their human rights abuses (McLaughlin 2005). It is increasingly becoming important in China’s policy towards Africa. China utilises ‘soft power’ to promote its development model as a source of attraction to create sphere of dominance in the African continent (Suzuki 2009). An example of China ‘soft power’ strategy is shown in Beijing’s provision of concessional loans, developmental assistance, scholarship and debt forgiveness—to facilitate investment opportunities for Chinese national oil companies (Suzuki 2009). Furthermore, China has started to teach Chinese language ‘Mandarin’ through Confucius Institute, a non-profit organisation, working to promote Chinese language and culture in Africa (Mukhtar and Adeoye 2019). Uganda and Kenya have already included Mandarin into their educational curriculum to open opportunity for the youth to obtain employment in Chinese firms (Ibid.). This is despite the fact that soft power is yet to represent a key component of China’s foreign policy and is still a weak link in China’s pursuit of power and natural resources globally. However, its use—particularly in Africa—as part of Beijing’s oil diplomacy has successfully produced important gains for Beijing, over a short period of time. Chinese policymakers often employ a range of soft power tools to establish influence, create business opportunities and, most importantly, secure investment opportunities in the energy and resource sectors of resource-rich developing countries (Taylor 2007). Unlike the United States, which projects its soft power through activities such as Hollywood movies and pop music, China exercises its soft power by providing financial and non-financial assistance. Beijing’s focus is on material power,

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which makes its model of soft power particularly tempting for the impoverished African states, which fail to meet basic IMF and World Bank loan requirements. For instance, China provided Angola with oil-backed low-interest loans of US$ 2 billion in 2005 with no strings attached (Campos and Vines 2008). This was more than the loans Angola would have received from the IMF and the World Bank, which often come with conditions such as improving transparency in the management of oil revenue. The only condition China requested was an agreement that obliges Angola to provide China with 100,000 barrels of oil every day until the loan is paid off (Tylor 2007) Such flexible loans have led many African leaders to believe that trade with China suits their country better than the development policies promoted by the World Bank and the IMF, which are perceived to have failed to assist the continent to meet its basic developmental goals. Apart from the loans, China has also granted African states more than US$ 143 billion in loans to African countries in the period between 2000–2017, with at least 80 per cent coming directly from Chinese government state institutions (John Hopkins University 2020). China provided these loans as developmental assistance and written off more than US$ 10 billion worth of debts for its major trading partners in the continent (UNCTAD 2017). Furthermore, in 2009, the PRC agreed to provide the African states with US$ 20 billion in concessional loans and established US$ 4 billion in credit facilities to assist small- and mediumsized enterprises to grow (African Development Bank 2011; FOCAC 2009). China offered scholarships and increased the number of places for African students to attend Chinese universities—student numbers grew from 5710 to 6316 with financial assistance from the Chinese government in 2010 and 2011 (King 2009). It offered training programmes for 30,000 Africans, provided 18,000 scholarships and sent 1500 medical personnel to Africa (Wenping 2007). China focusses on projects—such as building highways, schools and hospitals—that have visible results for many Africans (Ministry of Commerce, PRC 2014; Wenping 2007). At annual ministerial meeting of the Forum on China–African Cooperation in Beijing in 2018 Chinese leader Xi Jinping announced the award of 50,000 scholarships and 50,000 training opportunities to the Africans over the next three years (South China Morning Post 2019); this is 66 per cent more than the scholarships granted in 2015 and the ones provided by the Europeans and the United States. These scholarships widen the

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scope of China’s relations with Africa by creating huge opportunities and advocating for strong ties between the two nations. In addition to the use of the material soft power tools such as concessional loans and financial incentives and scholarships, China employs the rhetoric of friendship and mutual benefit, as well as playing on a shared history, to directly influence African leaders (Wenping 2007; Suzuki 2009). Chinese leaders highlight the Chinese experience of being a successful developing country and that its economic development is a model for their African counterparts and stress on the fact that the partnership between China and Africa is based on mutual benefit and non-interference in its partners’ internal affairs (China African Policy 2006). Based on the language used by the CCP’s leaders, most African governments feel that China and Africa share comparable experiences as a result of Western colonialism and that both China and Africa have undergone similar economic and political hardships due to Western policies. In particular, the achievements of political leadership in China over the last 35 years in terms of economic transformation, industrialisation, technological advancement and alleviation of poverty appeal to many governments in the African continent. This economic transformation in China has represented a source of inspiration for many African leaders and governments, giving them a sort of hope that they can advance Africa’s struggling economy by adopting China’s development model through engagement in trade partnership with China (McMillan and Naughton 1992). Drawing on Africa’s experience with the West, African leaders view China as a business-oriented country that favours assisting Africans to generate economic growth and infrastructure development using their own resources and development experience. Furthermore, Chinese leaders have made a number of high-level visits to strengthen Sino-African relations and promote friendly partnerships.

Conclusion China’s new path of relationship with Africa is cemented on its strategic objectives by forming business relationships with all states in Africa. As discussed in this chapter, China’s policy in Africa has a clear agenda; economic motives based on access to resources and exploration of new marketplaces and creating investment opportunity for its public and private companies. FOCAC has been and continues to be an important

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platform through which China conveys its message to African governments. Although Africa does not have a unified China policy, it is able to play an important role in the push for more Chinese aid to Africa. The relationship between the two parties has been rapidly growing with China’s continuous increasing loans and investments throughout the continent but the relationship is becoming more complex as China diversifies its investment in other sectors of Africa’s economy, outside resources sectors. China’s return to Africa is characterised by two waves, the first wave has experienced an increased in trade and deepening political relations, while the second wave is represented by massive increase in Chinese Greenfield investment and the expansion of Chinese companies investing in all fields including telecommunication, real estate, retail shops at city and village levels. As this chapter has demonstrated, there is no hesitation in accepting that China is in Africa to win and it is for the African leadership to recognise major development challenges in their quest for growth and development further strengthened by their interaction with China. In the next chapter, I extend this discussion by looking at China’s energy security policies in Africa.

References African Development Bank. (2011). African Development Report 2011: Private Sector Development as an Engine of Africa’s Economic Development. African Development Bank, Tunisia. African Development Bank. (2019). Africa’s Investment Report 2019. Alden, C. (2007). China in Africa. London: Zed Books. Bayo, O. A. (2011). The Chinese in Africa: New Colonialism is not a New Deal. Botswana Journal of African Studies, 25(2), 1018. Beina, et al. (2020). The Chinese Communist Party Faces a Host of Pressing Domestic and International Policy Challenges as it Transitions to a New Generation of Leaders, Council on Foreign Relations. https://www.cfr.org/backgr ounder/chinese-communist-party. Blanchard, & Shepherd. (2018, September 3). China’s Xi Offers Another $60 Billion to Africa, But Says No to ‘Vanity’ Projects. Reuters. https://www.reu ters.com/article/us-china-africa/chinas-xi-offers-another-60-billion-to-africabut-says-no-to-vanity-projects-idUSKCN1LJ0C4. Brautingam, D. (2011). China’s Special Economic Zones in Africa. China in Africa: The Real Story, Digging into the Myths and Realities. http://www. chinaafricarealstory.com/2011/.

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China African Policy. (2006). Document is available from http://www.focac. org/eng/zt/zgdfzzcwj/. Campos, I., & Vines, A. (2008). Angola and China: A Pragmatic Partnership. London: Chatham House. Dent, C. M. (2011). China and Africa Development Relations. London: Routledge. Eisenman, J., & Shinn, D. H. (2012). China and Africa: A Century of Engagement. Pennsylvania: University of Pennsylvania Press. Fifield, A. (2018). China Pledges $60 Billion in Aid and Loans to Africa, No ‘Political Conditions Attached’ Washington Post. https://www.washin gtonpost.com/world/china-pledges-60-billion-in-aid-and-loans-to-africa-nostrings-attached/2018/09/03/a446af2a-af88-11e8-a810-4d6b627c3d5d_ story.html. FOCAC. (2000). Beijing Declaration on the Forum on China-Africa Cooperation. Ministry of Foreign Affairs, The People’s Republic of China. http://www. fmprc.gov.cn/zflt/eng/zyzl/hywj/t157833.htm. FOCAC. (2009). Declaration of the Beijing Summit on the Forum on ChinaAfrica Cooperation (full text). http://www.focac.org/eng/zywx_1/zywj/t60 6841.htm. FOCAC. (2018). The 2018 Beijing Summit of the Forum on China-African Cooperation. Holds from September 3 to 4. http://focacsummit.mfa.gov.cn/ eng/. FOCAC. (2020). China, Africa Embrace New Decade of Strong Ties Through Fruitful Cooperation. http://www.focac.org/eng/. Forum on China-Africa Cooperation Beijing Action Plan. (2019–2021). Fuzhan, X. (2019). China Plays Key Role in Open Global Economy. China Daily Global. https://www.chinadaily.com.cn/a/201904/17/WS5cb67db9a3104 842260b69ea.html. John Hopkins University. (2020). China Africa Research Initiative. John Hopkins University, USA. Justina, C. (2018). Africa Needs to Know What it Wants from China, Expert Says. Here are Two Key Issues. https://www.cnbc.com/2018/04/25/africaneeds-to-know-what-it-wants-from-china-expert-says.html. King, K. (2009). China’s Aid and Soft Power in Africa: the Case of Education and Training. London: James Currey. Ministry of Commerce, PRC. (2014). 2014 Business Review XI: China-Africa Trade and Economic Cooperation Starts a New Chapter. http://english.mof com.gov.cn/article/zt_businessreview/news/201503/20150300908034. shtml. Mukhtar, I., & Adeoye, A. (2019, April). China’s Influence in Africa Grows as More Young People Learn to Speak. Mandarin. https://edition.cnn.com/tra vel/article/mandarin-language-courses-africa-intl/index.html.

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McMillan, J., & Naughton, B. (1992). How to Reform a Planned Economy: Lessons from China. Oxford Review of Economic Policy, 8(1), 130–143. Mingjiang, L. (2008). China Debates Soft Power. The Chinese Journal of International Politics, 2(2), 287–308. McLaughlin, A. (2005). A Rising China Counters US Clout in Africa. The Christian Science Monitor. http://www.csmonitor.com/2005/0330/p01s01woaf. html. Naidu, S., & Mbazima, D. (2008). China–African Relations: A New Impulse in a Changing Continental Landscape. Futures, 40(8), 748–761. Nye, J. (1990). Soft Power. Foreign Policy, 80, 153–171. Slate Group, LLC. Nye, J. (2004). Soft Power: The Means to Success in World Politics. Public Affairs, U.S. Raine, S. (2009). China’s African Challenges. New York, NY: Routledge. Wissenback, U. (2011). China-Africa relations and European Union: Ideology, Conditionality, Realpolitik and What is New in South-South Co-Operation. In C. Dent (Ed.), China and African, Development Relations (pp. 21–37). New York, NY: Routledge. Pannell, C. (2008). China’s Economic and Political Penetration in Africa. Journal of Eurasian Geography and Economics, 49(6), 706–730. Pilling, D., & Hornby, L. (2018, September). China Pledges $60bn for Africa as Xi Rejects ‘Debt Trap’ Claims. Financial Times. https://www.ft.com/con tent/e46bf2e2-af90-11e8-99ca-68cf89602132. Soule, S. (2019). How to Negotiate Infrastructure Deals with China: Four Things African Governments Need to Get Right, the Conversation. https://theconver sation.com/how-to-negotiate-infrastructure-deals-with-china-four-things-afr ican-governments-need-to-get-right-109116. South China Morning Post. (2019). Scholarship Offers Driving China’s softPower Play in Africa. https://today.line.me/hk/article/Scholarship+offers+ driving+China%E2%80%99s+soft+power+play+in+Africa-yBYO1G. Suzuki, S. (2009). Chinese Soft Power, Insecurity Studies, Myopia and Fantasy. In C. M. Dent (Ed.), China and Africa Development Relation (pp. 68–84). New York, NY: Routledge. Taylor, I. (2007). Governance in Africa and Sino-African Relations: Contradictions or Confluence? Journal of Politics, 27 (3), 139–146. UNCTAD. (2010). World Investment Report 2010, Economic Development in Africa: South-South Cooperation. Africa and New Forms of Development Partnership, United Nations Conference on Trade and Development, United Nations Press, Geneva. UNCTAD. (2017). World Investment Report: Investment and the Digital Economy, United Nations Conference on Trade and Development. New York and Geneva: United Nations.

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UNCTAD. (2019). World Investment Report: Special Economic Zones, United Nations Conference on Trade and Development. New York and Geneva: United Nations. Wenping, H. (2007). The Balancing ACT of China’s Africa Policy. China Security, 3(3), 23–40. World Bank. (2011). Angola: Country Brief . http://web.worldbank.org/WBS ITE/EXTERNAL/COUNTRIES/AFRICAEXT/ANGOLAEXTN/0,men uPK:322500~pagePK:141132~piPK:141107~theSitePK:322490,00.html. Van Dijik, M. (2009). The New Presence of China in Africa. Amsterdam: Amsterdam University Press.

CHAPTER 5

Critical Debate Surrounding Africa’s Shift Towards China: Perspectives on the Pros and Cons of Doing Business with China

Introduction China’s emergence as a global power elicits different reactions from other nations in the world (see, for example; Alden 2007, Taylor 2006; Naidu and Ampiah 2008; Wang 2007). Leading powers in the post WWII global order, view China as a challenge while the other less dominant nations view China as an opportunity. This chapter explores the existing debate relevant to China–Africa relations. The chapter focusses on perspectives on pros and cons of increasing business activities in Africa. The objective is to explore various viewpoints about China’s new investment and policy actions in resource-rich developing countries and non-resourcesrich developing countries. This helps to understand the knowledge gap that needs to be filled or discussed in various chapters of the book. Three decades after ignoring Africa, China has returned to the African continent, this time not for ideological reasons such as supporting nationalist movements but for commercial motives, as Beijing now possesses far greater levels of financial resources than it did during the 1960s (Alden et al. 2008). China’s alarming presence on the African continent has engendered debate on whether African countries are benefiting or simply being used by China for its rich resources and market potential. The new partnership between China and Africa is seen as one of the greatest in the current global market environment. It has attracted remarkable attention across the globe with a mountain of academic literature, public debates, © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 A. F. Lisimba, China’s Trade and Investment in Africa, https://doi.org/10.1007/978-981-15-9573-8_5

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discussions, media coverage talking about China as a new threat, this view in particular comes from Western media (Chen et al. 2015). However, most debates on China’s new move towards Africa revolve around the pros and cons. Debates often lead to an analysis of both challenges and opportunities for the African Continent. To this end, there is also volume of literature that links Chinese presence to resource exploitation (BBC News 2017). Former US security Advisor, John Bolton criticised China’s activities in Africa and indicated that Africa has fallen victim to Beijing’s new colonialism. ‘China uses bribes, opaque agreements, and the strategic use of debt to hold states in Africa captive to Beijing’s wishes and demands’, Bolton said (Al Jazeera News 2019). Bolton’s perception of China is perhaps shared by several traditional trading partners of Africa and those living in the Western Countries, Europe, the United States, who see China’s growing influence as a threat to their interests in the region (BBC News 2017). Maverick argues that China needs resources; therefore, it uses its old contributions and assistance to Africa as a credit to forge new partnership aimed at three major goals: (1) accessing resources for its economic growth. China is one of the major emerging economies and continuing healthy growth or interruption of its economy will have an impact on the global economy. For these goals/reasons, Chinese leaders need to access resources to maintain economy growth for the foreseeable future. (2) Political goals, with 54 countries and all members of the United Nations; Africa is an important political ally for China. Africa’s vote on issues discussed at the international forums including at the UN meeting matters and China needs Africa’s support to be able to pass some of its agenda which require majority votes. (3) Africa with over a billion population and with emerging economies and increase in the middle-class population, is an important market for China to market its manufactured products and technology. To achieve these goals, China adopted different approaches than those employed by Africa’s traditional trading partners. Alden and Large (2018) are among the scholars who have investigated and discussed China’s contemporary engagement with Africa and the latter’s shift towards the former in the first decade of the twenty-first century. Their contributions provide the most comprehensive analysis of China’s policy objectives including China’s entry into substantial economic and political engagement with Africa and its resource access politics in the African continent.

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Many scholars in their analysis agree that the relationship between China, resources-rich developing countries (RRDCs) and non-resourcesrich developing countries (non-RRDCs) is predominantly based on trade interaction, with China painstakingly focussing on African resources and markets. They claim that resources are the driving force behind renewed impetus in Sino-African relations (Goldstein and Aguilar 2009; Sanfilippo 2010; Burgos and Ear 2012; Alden 2011). Ojakorotu (2008), argues that following the end of the Cold War, China shifted its African policy from ideological South-South solidarity to commercial gains and greater diplomatic interactions. Ojakorotu further argues that economic growth in China during the last two decades has led the Communist Party of China (CPC) leadership to replace the old China–Africa policy with one that entails the pursuit of power, economic interests, and access to resources to fuel China’s economic growth. Ojakorotu asserts that China identifies the African continent as an area of significant longterm economic and strategic interest. China is actively expanding its influence in Africa in order to secure a market for its value-added products such as electronics, textiles and high-tech products, to challenge Western political and economic influence, and generally to expand its sphere of dominance in the African continent (Naidu and Ampiah 2008). Chinese Foreign Direct Investment (FDI) policy aims to encourage its commercial enterprises to ‘go out’ and compete in the international market as a part of a broader Chinese foreign policy pursuing global power (Alden 2007). This strategy, according to Kragelund and van Dijk (2009), has coincided with Africa’s desperate need for better infrastructure, transportation, and new roads and bridges, which Africa’s traditional trading partners failed to provide in any substantial quantity. This need of African continent has provided major investment opportunities for Chinese companies, which are now conducting business across the entire continent. Naughton (1993), compare China’s economy boom to the one experienced by European countries during the time of industrial revolution. During the era of industrial revolution, the Europeans turned to Africa for resources as the demand increased to sustain growth (Rodney 1972). China today replicates Europe by exploiting Africa’s resources for boosting its economic growth with very little benefit the continent. Sarah Raine (2009), argues that China finds it difficult to battle for essential resources in international markets. As a result, Chinese leadership has turned to selected resource-rich states, such as Angola, to provide

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China with an alternative avenue for gaining resources with less global competition and at affordable prices. Despite global media portrayals that often focus on Chinese growing economic influence in Africa, Outward Foreign Direct Investment (OFDI) in Africa is small in scale in comparison to China’s overall global investment activities. In this regard, Deborah Brautigam and Hwang (2019), indicates that this accounts for only three per cent and five per cent of Chinese international trade and investment volume (Brautigam and Hwang 2019), due to overall rapid increase of Chinese economic influence. However, these figures are likely to double in the coming years (Sanfilippo and Biggeri 2009; Mohan and Power 2009; Naida and Mbazima 2008). As Hanusch (2012) has stated, despite the fact that relations between China and Africa had existed almost a century ago, their strategic and commercial significance has amplified in the last 20 years. Hanusch examines China’s relationship with Africa from the perspective of increasing bilateral trade between China and the states in the African continent. However, as explained by Anshan (2007), China’s policy towards Africa after 1990s was designed with the intention of realising China’s long-term plans of diversifying commercial activities across the region. He argues that China considers Africa as being important for its economic development given its growing population and untapped resources and that Chinese leadership works closely with the African leaders to establish a foundation to promote trade, investment and political influence. There has been intense speculation as well as a threat perception especially from Western countries about the increasingly prevalent Chinese investment in the African continent as the former gradually loses it historical dominance. The analysis of the rise of China has now extended beyond RRDCs and non-RRDCs’ former colonial rulers and traditional trading partners such as Europe and the United States, and has generated serious discussions among academics and policymakers from Asia and the African continent as well (Suzuki 2009; Pak et al. 2012). There is a clear division in the literature about China’s growing profile in the global affairs. While one side lays emphasis on the positive approach through which China conducts business with selected RRDCs and non-RRDCs, such as in Africa (Taylor and Zhangxi 2017), the other side critiques the lack of consideration for human rights, lack of governance reform and employment generation, the support for pariah regimes, and destruction of Africa’s local manufacturing sectors in China’s commercial dealings

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with Africa. Brautigam (2010) refers to this uniquely Chinese miracle as ‘capitalism with Chinese characteristics’ as a part of ‘Beijing Consensus (BC)’ in which economic growth and the expansion of the Chinese private and state-owned enterprise assume a primary role in China’s trade policy towards Africa. John Daly’s study (2008) provides an example of China’s resource and market seeking approach in RRDCs and nonRRDCs in Africa and explains how it differs from approaches adopted by the Europeans and the United States. According to Daly (2008), China’s approach is based on the perception that Africa still has the potential to grow economically and is a good market for Chinese investment, despite the problems in the continent that range from political instability, civil unrest, social and ethnic conflicts and systemic corruption. He further explains that Western countries see Africa as an unrewarding place and are more cautious than the Chinese investors in doing business. Daly concludes that, despite China being a newcomer in the resource and nonresources business, its investment strategy has benefited from the decline of Western investment in Africa (Daly 2008). China has also taken advantage of the West’s negative perception of Africa (Berger 2006) and, as a result, it has easily secured investments in the resource sectors of Africa. An illustrative example of China’s growing investments in the resource sectors can be witnessed in the case of Angola and Sudan (Shichor 2008; Pham 2008; Ovadia 2012). According to Power et al. (2012) procurement of the energy resources of RRDCs is at the centre of China’s revitalised relations, especially with African oil-producing states. This view is shared by Mourdoukoutas (2019), who similarly argue that China’s fast-rising involvement with RRDCs and African states grew out of its immense and continual need for natural resources, in particular for imported oil, of which more than 30 per cent now comes from Africa. Arthur Waldron (2008) points out that China’s leadership is not especially pleased with the economic progress of her close neighbours, such as Japan, South Korea and Taiwan, and their competition for the same resources and political dominance. Nor is it friendly with emerging economies such as India and Brazil whose demand for Africa’s resources and market is also increasing. Waldron contends that Beijing sometimes creates tensions with countries with which it has territorial disputes in Southeast Asia, such as Japan, or even with the United States and Europe, whose companies still sustain a significant presence in major oil-producing countries such as Angola and Nigeria in

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Africa. However, China may closely cooperate with each of these countries based purely on economic considerations. As a single-party regime in a world where the demand for multi-party democracy by citizens is growing, the leadership in Beijing fears containment and international isolation, similar to that of 1989 following Beijing’s crackdown on the prodemocracy movement in Tiananmen Square. Waldron further believes that China needs RRDCs and non-RRDCs for political support in influential international organisations such as the United Nations to avoid global isolation that may result in the gradual disappearance of the communist regime. Just as public and media debates increased and political economists and international relations scholars had begun to study the fresh impetus in the relationship between China, RRDCs and non-RRDCs, particularly African states, Alden and Large (2018) released a book titled ‘New Direction in Africa-China Studies ’. In this work, Alden and Large contextualise China’s engagement with African states with a clearer understanding of Beijing’s new policy objectives in Africa. The book reflects on questions of how the subject has been studied and will be studies and assess the work already produced in the field of China–Africa relations. In China Returns to Africa: A Rising Power and a Continent Embrace, (Alves and Alden 2008) the authors argue that the rapid shift of Beijing’s policies towards RRDCs and non-RRDCs in Africa is a remarkable feature of its new foreign policy. They claim that China altered its Africa policy in three observable ways after the Beijing summit between Chinese and African leaders was held in 2006. The Beijing summit provided the Chinese leaders with opportunities to move their country’s investments in Africa beyond resources into other sectors, including banking, retail, construction and agriculture, throughout the African continent. They also explain that China has purchased, through the Industrial and Commercial Bank of China, 20 per cent of the shares in South Africa’s Standard Bank, one of largest banks on the continent, valued at US$ 5.4 billion. Additionally, the China Development Bank has partnered with Nigeria’s United Bank of Africa, a move indicative of the expansion of China’s investment into non-resource sectors. China’s interest in the developing country’s finance sectors is growing. This is a signal that China aspires to expand its influence by gaining control over Africa’s banking system and later maintaining the control on the continent’s financial institutions. Alves and others (2011) support this view, using China Development Bank and Chinese Export and Import Bank, Eximbank’s expanding role in

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financing a number of key development projects in Nigeria, Angola and Sudan, as evidence of China’s growing dominance in the financial sector. The authors conclude that China’s growing investment in the banking sector aims at facilitating financial support and services to Chinese oil companies operating in Africa, as well as increasing their activities in new markets and establishing joint ventures with local financial institutions. Some scholars, Raine (2009) and Taylor et al. (2011) among them, argue that China’s policy objectives in Africa are driven by three key factors closely related to each other: the importance of African resources for China’s economic growth, Africa’s support for China’s policies in global affairs, and the Chinese search for markets to expand its sales of products on the African continent. Taylor (2007), in particular asserts that China’s oil diplomacy in Africa has two major objectives. In the shortterm, the aim is to secure oil supplies to help feed growing domestic demand back in China, while in the long-term the aim is to position China as a global player in the international oil market. Similarly, Erica Downs (2007), contends that the country’s economic interests and influence on the continent, motivate China’s increasing engagement with Africa. As Downs explains, Chinese National Oil Companies (CNOCs) compete with rival oil companies from Europe and the United States to gain access to African energy resources as a part of a highly coordinated Chinese government strategy to ensure that China’s growing acquisition of RRDCs resources is achieved (Downs 2007). In other words, China uses its National Oil Companies to enter and invest in RRDC and non-RRDCs’ markets and resource sectors. The main Chinese national oil companies, namely China National Petroleum Corporation (CNPC), Petrochemical Corporation (SINOPEC) and the China National Offshore Oil Company (SNOOC), have achieved success in many projects in Africa in a relatively shorter time than other competitors. Notably, they have invested in competitive resource sectors to secure energy resources that will help to ensure economic growth back home. Unlike other local or Western companies which rely on private finances, most Chinese companies operating in Africa use Chinese state capital in relation to their investment in Africa (Taylor et al. 2011). Because they represent Chinese state policy in Africa, these companies are often been described as tools both for making profits and as spreading China’s new colonial influence in the continent (Mlambo 2019).

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Alden disagrees, arguing that China in Africa is a phenomenon still in the making and with both positive and negative aspects (Alden 2007). Alden explores China’s growing role, and claims that it could conform to any of the following: a development partner that promises to transfer its own successful development model to Africa, an economic competitor that aims to exploit Africa’s resources with no concern for local needs, or a new hegemonic presence in the African continent. According to Alden, ‘it is still too early to judge and too difficult to justify’ (Alden 2007). Alden argues that the African states need to work collectively and respond more actively to be able to determine the effects of China’s policy on African development as Chinese investments in the continent continue to increase at a rapid rate. Alden, to some extent, makes some valid arguments, as it is still too early to determine whether China represents a development model for Africa or is simply in Africa to exploit the natural resources, thus imitating the colonial practices. While there have been some remarkable improvements in Africa’s economy due to China’s procurement of resources, China does create problems for the democratic institutions that are vital to sustainable economic development and overall human development. Alden’s study fails to account for the role of country-specific policies towards China. China limits collective African responses by focussing on building bilateral relations. Although Alden’s research fails to explain how African governments should collectively respond to China, his depiction of China as a source of challenges and opportunities for African continent is quite appropriate, and also his argument about the African agency or motivation is quite crucial. In order to explore the impact of China’s trade and investment on development outcomes in RRDCs and non-RRDCs, I adopt Alden’s framework, which refers to China as posing challenges as well as being generous with opportunities for the empirical investigation in this book. Denis Tull (2006) and Schiere (2014) add that China has moved away from its early anti-Western rhetoric, and now presents itself as a key global stakeholder in Africa. This policy change, according to Tull and Schiere has enabled China to restabilise itself as a dominant player particularly in political aspects in Africa. Tull (2006), further argues that in addition to policy changes, Beijing’s use of miscellaneous political and economic incentives has made China’s gradual entry into Africa a little easier. Even if these arguments may have certain validity, in my considered opinion, there is a perceptible change in China’s approach to Africa

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as against Western approaches to Africa. China continues to use antiWestern rhetoric to secure and promote its position in Africa and among developing nations (Berger 2006). Chinese leaders use negative images of the West to boost China’s image and market its potential among African leaders. China is presented as a friendlier and a more benevolent alternative that will facilitate better bilateral economic development and more equitable resource and investment deals with the African states. According to Naidu and Kweku (2008), the Chinese state has also looked at extending soft loans or retiring foreign debt as a means to gain access to resources in Africa and its markets. It is interesting to note that a large percentage of the existing scholarly works provide a considerable amount of detail explaining China’s need for Africa’s resources, but the strategies that Chinese leaders have used to successfully acquire oil deals in Africa in such a short time has been lees analysed. This book also aims to build on Kweku and Naidu’s analysis of China’s resource-seeking strategies, such as provision of aid packages and concessional loans, and their implications for Africa’s development. These authors agree that the proof of China’s rush into Africa is the growing number of Chinese oil companies and workers in the African continent in recent years. By 2008, the number of Chinese companies in Africa had reached about 800, with South Africa attracting the largest share of Chinese investments with over 450 investment projects (Baah and Anthony 2009). China continues to intensify its investment across the continent and according to the latest data compiled by McKinsey report (2017), there were over 10,000 Chinese companies actively operating in Africa. Kweku and Naidu express concern that Chinese investments, with an emphasis on cheap Chinese products, will harm local industrial sectors irrevocably. These writers and their works provide an important framework for my investigation of the issues of China’s policy and actions, and their effects on development, particularly in Angola and Rwanda.

Disadvantages of China’s Presence in Africa While public perception of China’s presence in Africa is steadily growing both at street level and among the elites, the specificities of whether the new partnership is positive or negative for Africa’s economic growth remain largely controversial and under-researched. However, at present time, the relationship between China and Africa is being interpreted through two completely opposed perceptions.

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Within Africa itself, there are already visible signs of scepticism, potential tension and friction in what the outside world sees as a smooth alliance between China and Africa. Among the elite pessimists is the former South African President Thabo Mbeki (2006), who urged caution towards China, as he feared a Chinese form of neo-colonialism. In Mbeki’s view, China deals with most African states on barter terms to China’s advantage. According to this perspective, there is no transparency and China’s resource and market seeking policies in Africa, the Chinese business deals are materialised through opaque processes, generally secured through bribery and only focus serving the African elites rather than common people. As Nyoro (2008) puts it, except for the African states that are the leading oil and mineral producers, most states face substantial trade imbalances with China. African exports to China are dominated by low-value chains of raw materials such as crude oil, minerals and the supply of wood and timber logs, while processed African goods, especially in traditional sectors such as agriculture, encounter trade barriers that limit their entry into Chinese markets. Broadman (2007), says that the capacity of African countries to increase the value-added content of their exports to China may be put at serious risk by the potentially negative consequences of tariff escalation from the Chinese side. There are also concerns about how all of the above factors impact the lives of the ordinary citizens of Africa. Taylor (2009), contends that a lack of transparency in negotiating and implementing resource trade deals has impeded the constructive involvement of African businesses and civil society groups, and that there are constraints on the number and quality of jobs created as a result of growing Chinese investment. Taylor argues that competitive pressures from Chinese firms, including the availability of state loans and the state patronage most Chinese firms enjoy has pushed African firms out, in key sectors such as the textiles industry throughout Africa. For example, cheap Chinese products have already begun to undermine local manufacturing. Taylor has expressed serious concerns about the accusations levelled by African stakeholders at Chinese firms engaged with African countries of violating international and local environmental quality control and labour standards. Taylor contends that China’s resource-seeking strategies could encourage African economies to remain dependent on the export of raw materials. This dependence implies a high vulnerability to commodity prices and potentially a high probability of corruption. A pessimistic view

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of China can be found in the writings of Wagner (2012), who believes that China’s investments fail to benefit the ordinary population of the African continent. In line with Wagner’s contention, I would argue that in fact, the rise and economic influence of China might have more negative impacts on resource-rich developing countries and non-resources-rich developing countries than that of the West. These negative impacts occur through a lack of governance improvement, minimal creation of employment (linked to not enough employment generation) for the local population, lack of proper skills and technology transfer and promotion of extractive institutions in these RRDCs and non-RRDCs, which are largely dominated by a narrow ruling elite as opposed to inclusive institutions that are likely to achieve better economic development. At present, the ruling African elite facilitate the localisation of China’s influence at the expense of the larger population, to serve their own interests. Many academic writers have also been critical of Chinese policies for not taking into consideration the need for governance reform in these countries. Taylor (2009) and Alden (2007), in particular argue that the Chinese resourceseeking strategy, which is accompanied by a strong stance on its policy of non-interference in the internal affairs of its trading partners, is problematic in the majority of countries in Africa. Taylor (2007) states that China’s overwhelming economic interests and engagement in Africa have far-reaching consequences for economic development of the continent. Taylor and Alden have highlighted China’s lack of transparency, lack of commitment to democratic transformation, support given to hybrid regimes, disregard for human rights and disregard for financial accountability. In his case study of Angola’s credit lines and low interest loans from China, Taylor (2006), discusses the implications of these concessional loans for Angola’s long-term developmental goals. He offers a critical view of China’s policies and actions in Africa, and Angola in particular. Taylor and Alden partly support China’s development model, and its likelihood in assisting development in Africa. They are, however, critical of China’s close relationships with Africa’s autocrats, whom they perceive as the main impediment to the development and modernisation of the continent. This is evident, for example, in the state of Angola, which has already received financial assistance from China and achieved very little in terms of development, democratic transformation or human rights. While International Monetary Fund (IMF) loans require accountability and transparency on the part of its debtors, the loans and credit lines

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from China come without the need for any transparency or accountability to the public. Marcus Power and Ana Cristina Alves and Power (2012) study demonstrates that Chinese businessmen’s collaboration with Angolan government officials assists them to avoid public scrutiny and screen the finer details of deals that are signed. These Chinese businesses resort to unethical practices to secure more investments in the resource sectors. Therefore, upon receiving substantial funds from China, Angola’s government no longer needs to worry about pursuing human rights reforms or reforming its governance system, nor does it need to share power and wealth with the local people. Such a behaviour prevents Angola from addressing human rights issues and hinders the progress of the country into a democratic, equitable and law-abiding state. In terms of China’s non-interference policy and loans that come without conditions, this book argues in line with Taylor (2009) and Alden (2007), that there is no evidence that China’s policy and action will promote improvements in human rights, transparency, or democracy in Africa. A considerable volume of literature argues that China supports authoritarian regimes in Africa, with little concern about the impact of such support on the long-term development of these states. A significant observation made by Taylor and Alden is that China’s relationship with African states could collapse at any moment. They agree that China’s insistence on dealing only with African political elite and its dismissive attitude towards the opinions and aspirations of African civil society and opposition parties, who represent the public opinion of the vast majority of Africans, will be its ultimate undoing. Lucy Corkin (2008), Manuel Ferreira (2008) and Campos and Vines (2008) provide comprehensive explanations of what Campos and Vines in particular describe as the most pragmatic and strategic relationship between China and Angola. These writers’ works are among the first to explore China’s growing role in Angola with specific focus on the resource and construction sectors. Ferreira (2008), argues that China entered Angola to fill an investment vacuum left by Western investors who withdrew after perceiving Angola as a risky place for investment. This withdrawal of other contenders has served China’s interests in executing its strategic policy objectives in the country, leaving them with less competition from Western rivals. In assessing trade and investment, these authors suggest that, although China has increased its activities in Angola, its investments outside the oil sector are focussed on projects related to credit lines that benefit Chinese businesses. Predictably, China has not

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been involved in any other major project beyond those related to oil and the lucrative construction sectors in Angola. Campos and Vines (2008), argue that the resource sector provides jobs to only a small section of the population, as the majority of labour is imported from China. They further argue that China’s investment does not involve local Angolans as promised earlier, and that the commercial benefits remain with single-party ruling elite. This confirms that Chinese policies have little to do with meeting the domestic needs or goals of ordinary Angolans. It is important to note, however, that Corkin’s, Ferreira’s, and Campos’ and Vines’ studies do not discuss issues such as the transfer of technological skills and training of local Angolans, which are critical to Angola’s development. The studies suggest that Angola faces serious challenges from increasing Chinese investment but give no specific explanation about these challenges for the future development of Angola. Nazaneen Barma and Barama Ratner (2006), argue that Beijing’s new policies dealing with resource-rich countries are associated with ‘political illiberalism’. They use this term to describe the methods and behaviour of China’s business activities in developing countries, including Africa, which are often negotiated outside the framework of the Western liberal institutions such as the IMF and the World Bank. They contend that by not adopting the existing liberal norms and ethics of doing business, the Chinese government creates an alternative global structure anchored by ‘illiberal norms’ (Barma and Ratner 2006). In other words, China deals directly with oil-producing countries without the involvement of multilateral institutions that could otherwise restrain their business operations (see Barma and Ratner 2006). According to Barma and Ratner, these Chinese practices are more applicable in Africa than elsewhere around the world because they are ‘easily exportable and appealing to a disaffected developing world’ (Barma and Ratner 2006). Princeton Lyman (2008), raises an important point that China is a relative newcomer in RRDCs and non-RRDCs and in the African continent and is not yet powerful or influential. However, China’s current illiberal behaviour gives an indication that it certainly has the potential to pose a challenge to the continent, as its economic influence grows stronger. This view is also endorsed in the work of Ali Askouri (2008), who states that China’s interference in the domestic affairs of its partners is quite deep, and always deployed to suit Chinese interests and only to the

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benefit the ruling elite in Africa. China pays little attention to the citizenship rights of the general population and those in opposing parties. Askouri cites the example of mass displacement of the general population in Sudan as a result of China’s involvement in building projects in exchange for energy resources, mainly oil, in that country, to highlight Chinese method of overriding domestic concerns. He shows how China’s policies and actions are weakening the social and political stability of oilproducing countries such as Sudan. Askouri argues that Chinese projects that were expected to assist the local people to improve their living conditions and provide new opportunities have in fact resulted in social unrest, poverty, mass displacement, and armed conflicts. According to Askouri’s study, China’s aid has so far encouraged elitism, deepened social and class divisions, sustained dictatorships and tyranny and spread corruption. So far there has been no evidence of improvement in curbing corruption, strengthening democracy or improving human rights as can be seen in the last ten years of China’s reengagement with Sudan. Rather, Sudan has become a place where corrupt politicians flourish, where attempts for political and social reforms are often held back by China’s provision of large amounts of aid and political support to Khartoum both at regional and international levels (Large 2008). Stephanie Giry (2004) agrees, stating that China has played a big role in perpetuating and even financing the civil war in Sudan’s region of Darfur. This was managed through China’s policy of protecting its interests in oil fields by exporting weapons to Sudan, weakening the United Nations’ sanctions on the country to appease the Sudanese regime involved in the conflict. I endorse Askouri and Giry’s arguments; that the money pumped in by the Chinese investments has been used by the Sudanese government to fund its violent campaign against the nonArab population of the Darfur region (Lee et al. 2012). There is also evidence of China giving support to the regime in Khartoum, whose leaders are currently the subject of arrest warrants from the International Criminal Court (ICC) for their involvement in war crimes and crimes against humanity in the region (Lee et al. 2012). Eventually, whoever holds power in a country rich in natural resources that China needs, becomes a friend of the leaders in Beijing and this friendship lasts for as long as it guarantees the Chinese businesses unfettered access to the resources. Chinese leaders pursue policies of supplying resourcerich countries with military hardware, weapons and technology. Abraham McLaughlin (2005), further asserts that the most destructive effect of

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the renewed Chinese interest in Africa is that China is legitimising and encouraging Africa’s most repressive regimes, thereby increasing the likelihood of weak states on the continent. All these writers agree that China’s partnership with Africa is a setback for African human rights and any scope for improvement in governance

Advantages of China’s Investment In a general sense, China enjoys sizeable popularity in Africa not only among ruling elites but also at street level. There is significant volume of literature that sees China’s rising role in RRDCs and non-RRDCs as the benevolent guide to fast track the development of the African continent. President Paul Kagame of Rwanda is China optimistic, who argues that the partnership between China and Africa is ground on mutual respect and is for the benefit of both Africa and China. Deborah Brautingam (2011), represents a different picture regarding China’s involvement, arguing that China provides ample opportunities for the African continent’s economic growth and development. Her proposition is that the increased resource trade with China can be beneficial for the economies of African states and it is more welcomed, particularly in industries where African states have a strategic advantage, such as in Angola in resources such as oil and in Rwanda in construction and information technology sector. She also contends that high oil prices, partially fuelled by strong demand from China, have enabled the resource-rich states in Africa to increase their revenues significantly in the absence of Western Cash flow, by which other sectors of their economies can be developed. According to Brautingam, the income generated from oil exports enables the African states to reduce fiscal deficits and decrease inflation, as well as stabilise the exchange rate of local currencies. Brautingam and Xiaoyang (2009), in particular draws her evidence from the work China has done in improving much-needed infrastructure in Africa, and in Angola in particular. Throughout her examination, Brautingam provides an optimistic assessment of China’s engagement and its ability to do business with the African states in an approach that creates a win–win situation for both parties. Similarly, Ellen Lammers (2009), draws attention to China’s investment in the private sector, including the banking sector and argues that Chinese expansion in such areas of business creates better financial conditions and promotes the growth of African local enterprises. Lammers

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argues that China’s engagement provides the African states with better opportunities and space for their own economic growth and modernisation. Lammers may be correct in her assessment that Chinese investment benefits Africa and its population. There is however, a relatively small body of work produced that is similar to Lammers’ work which suggests that China’s engagement in Africa is constructive for Africa’s growth and long-term development. Cyril Obi and Fantu Cheru (2012), have succinctly argued that although RRDCs and non-RRDCs, particularly in Africa, enjoy enormous amounts of resources and investment opportunities, they do not have the appropriate skills, inventiveness or flexibility to enable them to make strategic choices in trade and investment policies. As a result, they cannot make informed decisions regarding their economic development and financial regulations in their resources business. Obi and Cheru contend that most African states face difficulties in translating foreign investment in liberalised resource sectors into the realisation of sustainable economic growth and poverty alleviation goals. Angola, for example, has resources, but remains one of the poorest and most corrupt countries in the world (World Bank Country Report Angola 2019). Here, the authors, Obi and Cheru suggest that African countries can learn from China’s successful experience of transforming their own economy. China was able to assist millions of Chinese nationals to increase their income and escape impoverishment in a relatively short period of time and could in turn teach African nations by establishing training and education partnerships, allowing them to learn from China’s successful development experience. Stephanie Hanson, of the US Council on Foreign Relations, cites higher economic growth rates than in previous decades in Africa, e.g. 5.8 per cent in 2007, its highest growth level in the last three decades (Hanson 2008). She claims that this is due to China’s investments in Africa’s resources. She also notes that, besides investment, China contributes a significant number of military personnel and peacekeepers to United Nations (UN) missions across the African continent, including Liberia and Darfur, helping to stabilise and rebuild post-conflict countries. Other arguments in support of China’s rising role in Africa are also expressed by the Zambian former World Bank economist, Dambisa Moyo, in her book ‘Dead Aid: Why Aid Is Not Working And How There Is Another Way For Africa’. Moyo (2009), argues that, in contrast to Western aid, which failed to serve Africa’s development goals, Chinese

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investment creates opportunities for the continent’s economic growth and market expansion. She points out that in the last four decades, no country has made such a big impact on the economic and social fabric of Africa as China has, since the turn of the millennium. Moyo supports her claims with evidence, including China’s financial contribution that has assisted Zambia and Tanzania to build a railway link connecting the two states with the rest of Africa. She considers the Tanzam railway line, constructed and funded by China, a clear indication of China’s development cooperation with Africa. Moyo also argues that, alongside China’s support for development initiatives in Africa, there are other benefits that China’s investment in resources brings to the African continent. These benefits include the creation of jobs in some countries, and the transfer of new technologies from China as well as the associated training, which according to Moyo will help stimulate the formation of capital markets and improve management expertise in Africa. Moyo concludes that a more productive way such as investment and employment generation for Africa to finance economic growth and development includes trade with China, accessing capital markets and microfinance. Although Moyo is correct in her assertion that projects such as the Tanzam Railway are a benchmark in Sino-African relations, her study fails to present some of the negative effects that accompany Chinese investment in Africa. Mary-Francoise Renard (2011), explains that China’s investment in the basic infrastructure in Africa has directly benefited over 35 countries in the continent. According to Renard, Beijing has given finance to the tune of US$ 4 billion to construct roads, railways, highways and bridges, which includes the maintenance of existing roads as well as building new ones. Resource-rich countries such as Nigeria and Gabon are the major recipients of Beijing’s infrastructure investment for its resource exchange scheme. David Shinn and Joshua Eisenman (2012), authors of China and Africa: A Century of Engagement, agree that China’s investment provides African states with both development and political options (Shinn and Eisenman 2012) They argue that, despite political instability and the underdevelopment of much of the infrastructure in most parts of the continent, Africa’s resources and growing economies make it a suitable market destination for a growing number of Chinese business elites. Eisenman and Shinn further contend that China has started to engage with African multilateral organisations, including the African Union, the

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African Development Bank and the New Partnership for African Development (NEPAD), and promotes African representation in the United Nations assembly and the Security Council. These activities depict China as a positive trading partner in the African continent. Michael Klare and Daniel Volman (2006), hold the view that China’s investment in Africa’s energy resources has created a tripartite rivalry involving China, Europe and the United States over resources, political influence and the search for new consumer markets in Africa, particularly since the continent’s population has already reached the billion mark and is predicted to double by 2050 (United Nations Population Overview 2020). This three-way competition improves Africa’s profile internationally, as most of the Western countries have already begun to attach significance to Africa states in their worldview. The authors argue that this competition between China and the West provides African governments with an opportunity to play Europe, America and China against each other. The African continent thereby regains some of the strategic importance within world politics that it had lost following the end of Cold War. Shinn and Eisenman (2011), points out that China has facilitated the entry of African products into Chinese markets, raised the level of tourism that has experienced an increase of 10.2 per cent in Africa and particularly in South Africa and Kenya, the two top distinctions for Chinese visitors. This has been done by the Chinese government encouraging China’s middle class to make Africa one of their tourist destinations, and increased cooperation in agricultural sectors, something that Europe and the United States failed to do. He further notes that while China’s desire for Africa’s resources is the single most important factor driving the new partnership, this relationship provides benefits for Africa that include increasing investment and development aid. According to He Wenping (2007), of the Chinese Academy of Social Sciences (CASS), what makes China’s engagement positive, is that while the West looks at the African continent as problematic, China sees it as a land of opportunities, providing assistance that enables Africa to ‘help itself’ and achieve its potential. Wenping further contends that China’s presence in Africa is not restricted to oil-producing countries. The majority of African states that receive Chinese aid, including debt amnesty, developmental aid, and low-tariff, low-subsidy and tariff-free trade agreements—are not resource producers but the most underdeveloped on the continent. Wenping contends that China also exempts most

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states in Africa from paying customs duty for their exports to China. This policy allows African states to export their products and compete in the Chinese local markets. According to Wenping, China often sends Chinese experts to Africa to advise African governments on agriculture, medical initiatives and to lecture at some African universities about the Chinese development experience and model. In the same work, Wenping indicates that China has also increased cooperation in education, science, technology, culture, medicine, health, and media, and offers scholarships to African students to study in Chinese Universities. As Wenping points out, China is boosting cultural exchanges to improve relations between African people and Chinese people, with a particular focus on the younger generations. Yan Hairong and Barry Sautman (2009), agree and observe that China’s new engagement policies provide better prospects for Africa’s development. They contend that, unlike the West, which hindered Africa’s economic development by imposing structural adjustment programmes through the International Monetary Fund and the World Bank in the 1980s and 1990s, China is distinctive in that it does not impose any policies and is more keen than the West to contribute to Africa’s development. The authors also argue that China provides a model for development that is grounded on fast trade activities fuelled by the huge flow of investments. Accordingly, China’s polices consistently meet the needs of African countries. The authors discussed above are among the scholars who argue that, despite the challenges China’s investment brings to RRDCs and non-RRDCs in Africa in terms of supporting authoritarian regimes accompanied by its non-interference policies, China’s investment is beneficial, as it still provides opportunities, experiences, and additional options for the Africans to work on the progress of their economies. Critical evaluation of the various scholarly works is of utmost importance because of their logical contribution to the discussion. These have helped me to look for further evidence on whether Chinese commercial activities have a negative or positive impact on its trading partners. The major arguments they raise are valid, in that RRDCs and non-RRDCs, and Africa in particular, have gained better income avenues as a result of China’s continued purchase of energy resources. However, it is important to note the negative implications China’s investments pose to Africa’s long-term economic development and political stability. Although I agree with the key points the authors make, the contention of this book is that, in general, China’s rising role

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in resources-rich developing countries and non-resources-rich developing countries in Africa will not provide a reliable base for long-term development unless Beijing stops supporting despotic regimes and elite interests, and instead works with liberal and multilateral agencies in spurring industrial development and enabling peace and prosperity along with economic development in Africa.

Conclusion In this chapter, I made an attempt to interpret and comprehend the academic debates in the field by reviewing the work of major academics in the field. I found that most scholars do not dispute that China’s partnership with Africa has serious implications for the continent, nor do they differ in opinion about the possibility of China being a model for economic development for Africa. Although the reviewed literature has reflected upon various perspectives and public perceptions, the common arguments among scholars as well as public are that China is investing in resource-rich developing countries because it wants to secure resources and a marketplace for its value-added products as well as business opportunities for its growing commercial enterprises. There is a great volume of analysis dealing with the Sino-African partnership, but there is still a need for further empirical study which this book is attempting contributes. The literature has been useful in reflecting the positive and negative arguments and various viewpoints about China’s new investment and policy actions in resource-rich developing countries and non-resourcesrich developing countries. However, despite the scholarship examining the rise of China, there are few studies on the actual impact of this investment on the economic development in terms of employment generation and the transfer of skills, possibility of Africa’s financial dependency and debt trap as the continent is highly indebted to China. This book attempts to contribute to the current debate and will go beyond what has been examined in the field so far.

References Alden, C. (2007). China in Africa. London: Zed Books. Alden, C. (2011). Changing Dynamics of China’s Engagement in Africa. Journal of African Development, 13(2), 177–195.

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PART II

The Impact of China’s Trade and Investment on Employment Generation, the Transfer of Technology, Debt Trap and the Emergence of New Form of Dependency

CHAPTER 6

China and Africa: What Trade and Investment—Commercial Interests and Two-Way Trade Between China and Resources-Rich Developing Countries (RRDCs) and Non-Resources-Rich Developing Countries (Non-RRDCs) in Africa

Introduction The fundamental issue in this chapter is to assess the extent and scope of Chinese trade and foreign direct investment (FDI) that has affected capacity building and the economic and human development potential in the African continent. Rather than contributing to capitalist development, what happens is that economic development and industrial growth in capitalist (metropolitan) nations and their international trade engagement creates ‘satellite’ underdeveloped countries that are subordinate within the capitalist economic structure (Dos Santos 1998: 251–263). Some dependency theorists Amin (2011), Dos Santos (1998), Frank (1969), Prebisch (1950) and Caporaso (1980) offer a different and more nuanced explanation; these scholars claim that the basic structure of trade between the rich states such as China and underdeveloped states such as those in Africa tend to be unequal. China favours trade in resources and agricultural products rather than manufacturing, which would enable less developed countries to develop their industrial capacity and improve their © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 A. F. Lisimba, China’s Trade and Investment in Africa, https://doi.org/10.1007/978-981-15-9573-8_6

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overall trade potential. This chapter argues that states with a high level of economic dependency are likely to experience a low rate of growth and development. The chapter further contends that the period following the FOCAC conference of 2000 was the pivotal point in the upsurge of trade relations between China and the two African states, Angola and Rwanda. Therefore, for the purpose of my analysis, the date of FOCAC’s establishment is the main benchmark in China’s commercial enterprise with the African continent. In the main section of the chapter, I contend that although figures show an increase in China’s trade and investment, this jump in figures does not imply that Africa’s economy is benefitting from the trade. China mainly focusses on importing raw materials and not diversifying trade in other areas of Africa’s economy. This type of trade and investment ignores key sectors of the economy and bypasses actual benefit which the African countries would acquire in exchange for China accessing their resources and marketplace. This in many ways results in China’s trade expansion having minimal impact on local developments which are explained in-depth in the next chapter.

Trade Data: China–Africa As highlighted in the previous chapters, in addition to Africa’s traditional trading partners, the United States of America and the European states, China has emerged as an alternative source of finance for infrastructure, bilateral trade and technology for the African countries. Indeed, the narrative of China’s economic relationship with Africa has been undergoing significant changes for the last two decades. China’s share in trade with African RRDCs and Non-RRDCs has increased tenfold (World Bank 2019a). Indeed, the volume of trade between China and Africa increased drastically. According to China’s Ministry of Commerce, in 2018, the total trade volume between China and Africa grew to $204.19 billion and in 2019, the South China Morning Post reported China–Africa trade atUS$208 (Chinese Ministry of Commerce, MOFCOM 2018; South China Morning Post 2019; Nyabiage 2019). In 2017, the volume of China–Africa trade dropped to US$148 billion from a high US$215 billion in 2014 due to ups and downs in Africa’s commodity prices. This was due the fact that 2014 was a year of high imports and exports for both China and Africa. China was importing more commodities and natural resources from Africa and exporting massive finished products to the continent, while most countries in Africa focussed on importing

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building and basic infrastructure materials and consumer commodities from China, making the trade and investment intense during 2014. Admittedly, this figure represents huge jump from US$500 million in the 1990s to US$198.49 billion in 2012. In 2012, China’s exports to the continent were estimated to be between US$80 to US$117 billion, and trade exchanges between China and African states reached around US$198.49 billion in the same year, rising from US$166 billion in 2011 (State Council: China Africa Economic Cooperation and Trade, 2019). In Comparison, in 2019 trade between Africa and 27 members of the European Union countries accounted for 31 per cent of export and 29 per cent of imports. While China alone accounted for 11 per cent of export and 16 per cent of imports, while the USA had share of 5 per cent of export and 6 per cent of import (Eurostat 2020). Eu-Africa bilateral trade of commodities amounted to US$288 billion in 2017 and US$314 billion in 2018, according to presented data a trade surplus for 27 European countries in 2017, was US$25 billion and US$8.7 billion in 2018 (Eurostat 2020). On the other hand, China Africa Research Initiative at John Hopkins University (SAIS-CARI), reported–US-Africa trade amount at much lower volume US$65 billion in 2017 and US$71 billion in 2018. Under these estimates, Africa’s trade surplus amounted to the tune of US$13 billion in 2017 and US$11 billion in 2018 (SAISCARI 2019). The trade data analysed above may not necessarily reflect the precise nature of trade activities between each African country and their trade partners including European Union, China and the United States of Africa. However, the data does highlight the nature of trade imbalances: while European Union members combined continues to be the largest trade partner, China’s trade imbalance with African states is proportionately the highest; according trade volume between the two as shown above. The above data represents s a useful background to analyse the China, Rwanda and Angola economic relationship in greater details and to assess whether this bilateral relationship may be categorised as mutually beneficial, enabling, exploitative or dependent partnership. It is obvious that today China replicates the West by providing Africa with massive interest free loans with flexible repayment period and with almost no strings attached as an incentive to access resources. China has replaced the traditional colonial powers from their dominant position in Africa by assuming the dominant position in the economic hierarchical order between itself and the African states. As above figures exceed that of trade between the United States and Africa, which stood

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at US$40.9 billion in the year 2019 (US Trade Representative Report 2020). According to trade data from the State Council of China, SinoAfrican trade amounted to US$208 billion in 2019 (Chinese Ministry of Commerce, MOFCOM 2019; South China Morning Post 2020). The year 2020 has been a difficult year not just for the trade between China and Africa trade but for the global economy as well, which has experienced a situation that has never emerged before. Coronavirus pandemic led to countries all across the globe opting for a complete lockdown, to prevent the spread of the virus (Asiedu 2020). As a result, trade between China and Africa dropped by 14 per cent to US$41 billion in the first three month of 2020 in comparison the same period in 2019, as China was under a lockdown during this period (China’s General Administration of Customs, 2020). Indeed, Chinese economic growth shrunk by 6.8 per cent in this period with major manufacturing sectors being closed, significantly reducing China’s overall output (Kuo 2020). Africa on the other hand has also experienced a reduction in its bound exports from China by 10.5 per cent (Kuo 2020). China is still the largest trading partner of Africa and in the first quarter of 2020, China’s bound export from Africa dropped by 17.5 per cent (South China Morning Post 2020). While China began to recover from the impact of coronavirus pandemic and started to slowly ease the imposed restriction, many countries in Africa started the second quarter of 2020 with complete lockdown and curfews which had enormous impact on the trade within the continent and with China. In the last quarter of 2018, China’s imports and exports stood at US$18.27 billion, up 15.5 per cent year on year and 2.1 per cent month on month. Among these, China’s exports to Africa were US$9.55 billion, up 3.9 per cent year on year and 3.0 per cent month on month; China’s imports from Africa were US$8.72 billion, up 33.7 per cent year on year and 2.2 per cent month on month; the trade surplus was US$840 million, down 68.7 per cent year on year and up 13.5 per cent month on month. Evidence suggests that the growth rate of China’s increasing trade with the countries in Africa was the highest in comparison to China’s trade with the rest of the world. This trade expansion is contributed by China’s imports from Africa, which increased from 3.76 per cent in the same period to 18.07 per cent (ibid.). On the other hand, Africa’s imports from China have also grown from 3.88 per cent to 14.11 per cent during the same period. From 2002 to 2018, the percentage of China’s trade

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with Africa increased from 2.23 per cent to 5.13 per cent as a proportion of China’s total global trade volume. Figure 6.1 shows the increasing shift of Sino-African trade between 2002 and 2018. This period marked the peak of trade between the two parties, as China exported machinery, textiles, footwear and other manufactured products in large quantities, while importing resources such as oil and mineral products which are the continent’ (United Nations Comtrade Databse 2020). Trade activities shifted drastically after 2000, as China and Africa established FOCAC, which was used as a platform to assist China in forging greater economic cooperation with the states in the African continent (FOCAC 2000). This was followed by the China–Africa summit of 2006, held in Beijing, which gathered 48 heads of state (Power et al. 2012: 58; Alden 2007). As discussed in detail in Chapter 4, FOCAC encouraged China and Africa to open their markets to each other (FOCAC 2000). The Chinese leadership in particular has encouraged Chinese private and public companies to invest in Africa, a move encouraged by the government in Beijing (Melber 2013). For the next twelve years following the establishment of FOCAC; China wrote off debts for a number of African countries, amounting to US$1.2 billion, to further promote economic partnership with Africa (see, for example, Taylor 2009). In addition to

Fig. 6.1 China–Africa Trade Volume 2002–2018 (US$) (Source Chinese State Council, China Africa Economic and Trade Cooperation [2019])

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debt forgiveness, from 2000 onwards Beijing has provided a large number of development assistance packages to African states, in particular to those rich in resources, all aimed at facilitating trade and investment with the recipient countries (Wissenback 2011; King 2009). Although China’s level of development assistance to Africa is low compared to the amount it (Africa) receives from the Organisation for Economic Cooperation and Development (OECD), it is nevertheless crucial in assisting China to achieve its investment and resources access goals in Africa (Taylor 2011). At the same time, it has been widely criticised as lacking accountability and transparency, protecting regimes with a poor human rights records and negatively impacting development outcomes in Africa (Power et al. 2012; Brautigam 2009). Table 6.1 shows China’s aid distribution in its seven top recipient countries in Africa. China also represents a new market for Africa’s exports. In the period between 2017 and 2019, as a result of combined increase in trade, aid, and development assistance, China’s trade with African states reached US$204.19 billion—up from US$198.49 billion in 2012—indicating a remarkable change in China–Africa trade activities and US$208 in 2019 (Chinese Ministry of Commerce 2020; FOCAC 2020). China’s exports to the African continent increased 12 per cent during this period, more than the exports to any other region in the world. This dramatic increase in China–Africa trade activities has been fostered by China’s crude oil imports, mainly from RRDCs such as Angola, South Sudan, and Nigeria and minerals from Zambia and South Africa (African Development Bank 2019). As a result, China accounts for 20 per cent of the continent’s overall trade (World Bank 2019b). Natural resources accounted for almost 90 percent of China’s imports from the Table 6.1 Chinese official development aid distribution in Africa by country (top 7 beneficiaries) 2017–2020

Country Cote d’Ivoire Ethiopia Zimbabwe Cameroon Ghana Tanzania Ghana

Total aid in US$ billion 4.0 3.7 3.6 3.4 3.1 3.0 2.5

Data Sources Aid/Data/at Research Lab & William and Mary, Brookings Institution (2020)

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African continent (US Energy Information Administration 2019). China imported mainly resources in exchange for concessional loans, technology, valued-added products and hard currency (IMF 2019). Table 6.2 shows China’s main imports from Africa of which oil and minerals represent more than 85 per cent of its total imports from the region. Trade exchange between Africa and its traditional trading partners, Europe and the United States, has largely revolved around Africa exporting mineral resources in exchange of finished products and hard currency (Global Trade Atlas 2016). The upsurge of investments from China to Africa has rekindled the interests of global powers in the continent and that African states have achieved a better association with global economy since the 1960s. However, the African states continue to lag far behind other developing countries in Asia and Latin America in terms of assuming significant role in the global economy. The African states are mainly operating as providers of raw material to both traditional trading partners and emerging economies such as China, India and Brazil. This over-reliance of African states on foreign finances, investments, technology, and skills establishes the continuation of the basic precepts of dependency theory and the largely unequal economic relationship. In accordance with dependency theory, this type of trade pattern has resulted in externalisation of the economic development policies of Table 6.2 Chinese imports from Africa by category, 2019 (US$) Product

Mineral fuels and oils Ores, slang and ash Cooper and articles thereof Other base materials; articles and thereof Wood and articles of wood Others Source Global Trade Atlas (2019)

US$ billion

Percentage of total

Export to China as percentage of total African exports 2001

2019

46.1 12.0 3.7 3.5

64 17 5 5

5 11 3 5

22 52 22 84

1.6 5.4

2 7

14 –

40 –

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African countries that did not suit the continent’s developmental needs (Rodney 1972). Consequently, the economies of many states in Africa, including those which are rich in resources, have remained underdeveloped since independence (Bhattacharyya 2009). This pattern of trade is reproduced by the current China–African trade exchange, which in many ways replicates colonial practices with Chinese characteristics. The role of African states, particularly resources-rich such as Angola, Zambia and Democratic Republic of Congo (DRC), in their trade relationship with China, is limited to supplying Beijing with resources and mineral products (World Bank Database 2019). The growth in trade between China and Africa shows China’s ability to exert its economic influence in the African continent and to infiltrate markets that have been under the dominance of former colonial powers for decades (Tull 2006; UNCTAD 2012). China’s trade activities overtook that of traditional trading partners in most African countries, including the resource-rich Angola and South Africa. Africa accounted for only two per cent of China’s total trade from 1995 to 2000 (UNCTAD 2010). As it can be observed, the period from 2002 to 2018, following FOCAC, saw China’s trade with African states increase drastically. China became the number three trading partner for Africa in 2009, after the dominant economies of the European Union and the United States, whose trade with Africa declined in 2009 to US$72 billion from US$104.7 billion due to the spill over effects of the global economic crisis of 2008 and 2009 (Eaton and Ferrantino 2012). The Chinese government utilised the opportunities presented by the global financial crisis and encouraged its companies to increase their trade activities and acquire larger shares in the resource sectors of the developing countries. In particular Angola-China trade increased drastically in the period between 2015 and 2019 as the country became the third largest supplier of energy resources to China globally behind only Russia and Saudi Arabia and number one supplier to China in Africa. Most Western firms, especially those operating in Africa, reduced their investments in the continent in 2008. This paved the way for Chinese firms to establish themselves on the continent with relatively lesser competition from major world’s economies. This drastic change in China–Africa economic relations has improved Africa’s position in the international economic arena and has given selected states in Africa, additional income avenues which they can use to promote economic growth and development. However; the

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growth rate in Africa dropped in 2009 due to the impact of the global economic crisis that hit the African continent, particularly the resourcesrich developing countries (RRDCs) and non-resources-rich countries (non-RRDCs) as demand from European countries and United States has declined (UNCTAD 2010). The impact was particularly severe in RRDCs as the demand for their resources was reduced in the global market. This one-off drop in growth as shown in also underlines Africa’s economic vulnerability to the fluctuation of oil demand and prices in the global market. This holds true particularly for countries with rich resources. Despite the global economic crisis, the increasing volume of trade between china and Africa indicates the important change in the pattern and scope of the economic relations between the two parties. China’s increasing trade and investment in Africa supports the notion that Africa is shifting its dependency from the West to China, as argued by various scholars, including Amin (2011) and Tull (2006). If China is investing heavily in the resources sector more than the other sectors, and exporting finished products, Africa does not benefit as much as China does and hence this can be seen as a dependent relationship. Raine (2009), further supports this view by claiming that China’s policies are likely to have implications for African development similar to that of former colonial trading partners, as the dependency of Africa’s economic growth is contingent to China’s purchase of resources, which rises and falls based on Chinese demand for these materials. It is worth mentioning Prebisch’s thesis here as his arguments remind us that the terms of trade between the exporter of raw material and importer often deteriorate for the advantage of the economy of the importing country, while the health of the economy of the periphery is affected, though creating persistent dependency (Prebisch 1950). China’s relations with RRDCs in Africa replicates a new face of dependency based on oil for infrastructure exchange, this has become a mode of almost all business deals between China and RRDCs in Africa. This new form of dependency is essentially the continuation of classical dependency of African states, their dependence has moved away from their former colonial rulers to China. It can be argued that this new form of dependency is prolongation of the classical patterns of dependency, exploiting the natural resources of the poorer countries to boost the industries of a financially stronger country. This type of new dependency arrangement distorts the local economy and results in an unbalanced development for the local communities.

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China’s Foreign Direct Investment (FDI) Foreign Direct Investment (FDI) emerged as an important component of globalisation of the world’s economy and is considered to be one of the significant catalysts for sustainable development of national economies in countries seen as underdeveloped due to the challenges they face (UNCTAD 2019). This is particularly true for some RRDCs, which, despite their resources, are unable to achieve sustainable economic development (UNCTAD 2019). Indeed, developing countries encourage FDI because of the potential it has in contributing to the growth of their economies (UNCTAD 2019). Among the underdeveloped countries, those with rich resources often attract higher levels of FDI inflows, faster than those countries with fewer or no resources because of the importance of their natural resources to developed countries’ economic growth. Added to this, the expectation of the advantage of FDI in generating employment opportunities, skills transfer and economic growth has made it an important element of the fiscal development policies of most developing countries (UNCTAD 2018). Africa is least developed and is in a desperate need for FDI. The continent once widely ignored by the developed economies, now witnesses fastest growing population and its youth population is expected to continue to grow (UN 2020) but it receives less FDI than any other region, except for Central-Asian transition economies (UNCTAD 2019). Figure 6.2 FDI Inflows, 2017–2018, depicts Africa as a region receiving least FDI, lagging behind transition economies and Latin America and Caribbean regions. Although as shown in the figure the continent has not been a favourable investment destination, it recorded higher FDI inflows in 2018 (UNCTAD 2019). As shown in Fig. 6.2; if we have to use figures or data to calculate Africa’s inward foreign direct investment per capita inflows, the continent would be the only region in the world with minimal inflows of foreign direct investment (Herrero 2019). This is to say that given Africa’s increasing population trends and current level of development, the continent clearly is in need of investment particularly ‘Greenfield’ investment in industries that generate employment and income revenue. To this sense, Africa’s lack of FDI justifies our need to develop a better understanding of China’s role as a new investor and financier in the continent (Herrero 2019). One of the first common eye catching misperceptions is the view that China is overtaking the West in Africa because China is massively investing throughout the Africa continent way ahead of United

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Fig. 6.2 Foreign direct investment inflows by region, 2017–2018. Date (Source UNCTAD [2019])

States and European Union (Herrero 2019). While most analyses, public lectures, media especially the Western media focus on China’s investment particularly in energy resources, minerals, oil and mentals, available data surprisingly suggests that China’s involvement in financing labourintensive and short-term projects in Africa is almost tenfold as large as its Greenfield investment in labour-intensive industries such as construction and agriculture (Lawther 2017). Despite China being the largest trading partner of Africa consequently for the last 10 years and Western worries that China’s will take over Africa, the data surprisingly suggests that China is not the continent’s largest investor even in terms of FDI flows. Figure 6.3 shows that China investment is still in its early stages in comparison with that of Africa are traditional trading partners. United States, France United Kingdom and the Netherlands still invest more than China, although China’s investment is gradually increasing. The data in Fig. 6.3 also shows that Chinese investment in Africa has to some extent been misleading as the reality is quite different from what has been portrayed in the media, particularly in the Western media which provides overstated data about Chinese presence in Africa. Most academics, public debates, discuss China with the fear that it is overtaking the West in Africa. However, the size of FDI flows particularly in Greenfield investment from Europe continues to maintain its influence as the largest investor in

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Fig. 6.3 Top ten major investor economies in Africa by FDI stock in (US$ billions). Date (Sources UNCTAD [2019], China Africa Research Initiative [2020])

comparison with investment from China (China Africa Research Initiative 2020). In reality, China’s actual investment in long-term labour-intensive industry such as textile is much smaller than in, infrastructure projects financed by Chinese and which are considered as projects that generate massive debts especially for non-resources-rich countries in Africa (UNCTAD 2019). Even when focussing on Chinese investment only, it is quite obvious that Chinese investment in Africa is still at an early stage from the year 2000 onwards, in comparison to that of Africa’s traditional trading partners, United States, France and the United Kingdom (UNCTAD 2019). To this end FDI flows from France and the UK into Africa are each, still bigger than the FDI flows from China. Herrero’s (2019) observation throws more light by arguing that China is currently playing the role of ‘catching up’ in building up its onward FDI into Africa to a level which corresponds to its economic needs in Africa. Moreover, long-term ties with the continent, as discussed in the previous chapters, seems to help China increase its investment portfolio in the region at rapid levels. As Shown in Fig. 6.4 Chinese Greenfield investment in heavily concentrated in three main sectors, real-estate where China builds houses and sells to growing Africa middle classes and government officials, energy is key sectors that attracts China and transport where China, build roads, bridges, rails to facilitate the transport of commodities and raw materials within and outside the continent.

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Fig. 6.4 China’s investment in Africa by Sector 2015–2020 in US$ (Sources World Bank Database [2020], IMF [2020])

China’s image in the continent has rather been clearly that of project financier and acquirer of assets, while that of the Western countries including the United States, the European Union as being vulnerable with some large divestments from 2016 to 2018. Table 6.3 shows that China is the largest acquirer of assets (M&A) while EU and USA’s FDI has been more volatile, with some large disinvestments from 2016 to 2018 Chinese investments and contracts in sub-Saharan Africa amounted US$299 billion from 2005 to 2018 and US$305.95 billion, an increase of nearly 7 billion in one year (China’s Global Investment Tracker 2020). Further to this, Chinese president Xi Jinping vowed to invest a further Table 6.3 M&A and Greenfield FDI inflows into Africa 2016–2018 M&A (Millions US$)

United States China European Union

Greenfield FDI inflow (Million US$) 2016

2017

2018

2016

2017

2018

−3085 2,932 1016

5,674 1248 −7227

−1405 554 1483

3640 36,144 11,864

3347 8705 21,674

10,275 11,930 25,462

Source Author’s calculation from UNCTAD (2018), World Bank (2019b)

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US$60 billion into African nations at annual meeting of Forum of China– Africa Cooperation held in Beijing in 2018 (FOCAC 2018). This is no doubt good news for Africa if its leadership can successfully deal with problems raised by Chinese neo-colonial objectives—such as the fear of ‘debt trap’ diplomacy, as the continent is already in debts amounting to US$130 billion, money that it owes specifically to China. Although we cannot deny the fact that Chinese investment in Africa creates jobs for locals and provides them with training in labour-intensive short-term projects like construction, jobs generated in the sector are unstable, low paying, short-term, and are mostly for uneducated people— this is discussed further in the following chapters. Furthermore, these jobs rarely come with adequate job security or training that can be used as an advantage and/or as extra experience to apply for more stable and permanent jobs in other firms. Other significant feature of China’s investment in Africa is its sectoral distribution. China has relatively small portion in Greenfield investment such as in manufacturing, the vast majority of Chinese investment is directed towards project financing to achieve its strategic objectives, namely accessing energy resources and using China’s excess capacity in construction and transportation. Based on this, employment generation through Chinese limited Greenfield investment is lower, on average (only 1.78 individual for every US$1 million investment), than that of China’s Greenfield investment into other regions of the world (2.24 people for every US$1 million investment). This is one major problem that China is facing in Africa, as its investment does not generate enough employment, an issue underlined by the main argument of this book. This is not the reason I argue that Chinese investment falls short of the expectation as it does not creates sufficient jobs nor results in the transfer of skills and technology as is evident in the case-study countries of Angola and Rwanda in Chapters 9 and 10. Instead, China in RRDCs and non-RRDCs in Africa follows and plays by the rules of dependency theory and economic nationalist’s perspectives; its trade and investment is focussed on the extraction of resources and the search for investment opportunities while its contribution to the development of RRDCs and non-RRDCs is limited (Manji and Marks 2008). In this view, the rise of China in Africa generates a new form of dependency in which Chinese state controls major trade and investment projects in Africa in the form of state-invested enterprise or through private companies loyal to Beijing’s broad objectives of gaining access to resources and creating

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markets (Taylor 2007; Power et al. 2012; Dent 2011). This problem of China contributing to underdevelopment of Africa was acknowledged by Beruret who commented: Things have fallen nicely into place. A quarter- century ago, China was Africa’s 83rd largest trading partner; today, it is number one. Over the same period, a million, perhaps even two million Chinese have established themselves south of the Sahara. Yet Africa’s insertion into the world economy has not changed fundamentally: China Afrique replicates the elite connivance, the unequal exchange and the corruption of Franco-African commensalism, only on a much larger scale; at the same time, it is an arrangement with no colonial echoes and no ‘civilisation mission’. (Beruret 2009, cited in Howard French 2014, in Smith’s London Review of Books)

Beruret supports the view that China needs Africa’s resources and that China’s trade and investment relations with Africa results in the same dependency practice which existed in the days of colonisation and which continues to influence Africa’s post-independence economic relations with the West. Factual evidence of China reinforcing dependent relations with Africa is strengthened by the fact that after over a decade of intense economic exchanges with the continent, Africa’s economic situation has experienced little positive change. There is no doubt, however, that the recent increase in trade between China and Africa has augmented Africa’s terms of trade in comparison to the years before 2000 (UNCTAD 2007); contradicting one of the seminal dependency hypotheses outlined by Prebisch who argued that trade between centre and periphery results in the decline of net barter terms of trade (Prebisch 1950). In other words, it results in periphery states exporting cheap raw materials and importing expensive finished products from the centre or industrialised countries (Prebisch 1950). As mentioned in the previous chapters, the value of trade between China and RRDC has increased to a staggering amount over the last 15 years, jumping from US$90 billion in the 2000s and reaching US$208 billion in 2019 (South China Morning Post 2019; Chinese Ministry of Commerce, MOFCOM 2019). On the same line, Virtanen and Motolani (2017) note that African countries export mainly raw materials, oil and minerals and primary products to China, while China exports valued-added manufactured commodities to Africa (Le Pere and Qobo 2018). In this sense,

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current trade interaction between China and RRDCs in Africa, resembles in some way the centre–periphery type of relationship, a pattern of trade outlined by Prebisch (1968). In particular Angola’s 95 per cent of exports to China are raw materials and oil in exchange of basic infrastructure development (Clodnitchi et al. 2018). However, and despite these centre–periphery relations, it is worth mentioning that in general sense Africa’s terms of trade with China are enhancing with both rapid demand of resources and increase of prices and this has resulted in growth, particularly infrastructure development. Angola for instance has registered steady GDP growth for some years (World Bank 2019b). In this sense, China has become a focal point of trade for the continent. Prebisch’s thesis discusses both deteriorating and improving terms of trade in North-South economic relations (Prebisch 1968). Prebisch explains that deteriorating terms of trade happens when the price of a country’s exports falls in comparison to the price of imported value-added products which are made from resources of periphery by centre and sells back to the periphery (Prebisch 1968). To this end, the income elasticity of demand for goods is low; demand for goods of this type does not keep pace with the income and therefore periphery has to produce more raw material products to be able to purchase finished consumer products from the centre made from its own resources (Prebisch 1968). I elaborate Prebisch’s thesis in the context of South-South relations and in particular China–Africa relations. While another interesting aspect of the debate over the terms of trade is an improvement in the terms of trade, which Africa has experienced for short term in its trade relation with China. This in general means that improvement in the terms of trade happens when export commodity prices increases at a faster rate due to the high demand by the centre state. However; I discussed in the introductory chapter, the reason behind improvement in terms of trade, is the result of an increase in China’s demand for Africa’s resources to boost growth back home (Chen et al. 2015). Nevertheless, there is another problem that affects Africa’s terms of trade with China—mainly the flood of cheap Chinese products that destroy local manufacturing in both Angola and Rwanda and massive loans and credit lines that China offer to governments in Africa and of which some may not be able to payback. If we combine these factors with short-term increase in oil prices, we can conclude that China’s trade activities in Africa contribute to improving the terms of trade. Yet, improving terms of trade between China and Africa does not disprove the relevance of Prebisch’s core-dependency assumption because

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the terms of trade have the potential of pushing RRDCs in Africa back to old dependency pattern. For instance in the case of Angola, the country’s GDP grew at an average of six per cent when its terms of trade were good with China, but its GDP growth plunged to only one per cent in 2019 and registered negative GDP growth in the first half of 2020, due to decline in demand from China and the impact of coronavirus pandemic which pushed Angola’s economy back to where it was in during the civil war in 1990s, the underdevelopment position (World Bank Database 2019). Even if we consider arguments of China positivists and among them of Moyo (2009) who argues that China is the best opportunity that has ever happened to Africa and accepts that Africa’s situation is generally improving because of trade with China, nothing ensures that China’s trade with RRDCs is simply transforming these countries with real development and industrialisation. This is why I argue throughout this chapter that dependency theory is still important in assessing structural imbalances and causes of underdevelopment in the context of South-South economic relations. However, comparing China’s economic links with Africa against the most cited centre–periphery (dominant-dependent) features of the dependency theory and world system theory, it can be argued that there is evidence which suggests a lack of substantial change in the overall import and export trade patterns between China and Africa from the ones established by Africa’s traditional trading partners, thus reiterating the existence of dependent relationships (FOCAC 2019). This is also reinforced by the Chinese leadership’s provision of financial incentives including concessional loans with flexible conditions that results in African leaders having even more loans in exchange for their resources, political support and allowing investment by Chinese firms. Al madi (2012) and Adibe (1994), argue that the new form of dependency fostered by the increasing process of globalisation focusses on internal factors, for instance, class-conflicts and the role of the elite that may possibly hinder development in the periphery. In essence this chapter identifies that China loads African governments and elites with enormous flexible concessional loans to create an intricate and complex system of domination. However, arrangements for the repayment of the compounding interest from these loans prevent African governments from investing their resources and revenues into their own economies and in sectors that generate more stable employment. This creates a new form of financial dependency which exacerbates underdevelopment, inequality

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and poverty in many African countries, including the case study countries of Angola and Rwanda. I further explore financial dependency in the case studies. China’s FDI in RRDCs and non-RRDCs in recent years is regarded as a hallmark of the twenty-first century in the international economic field (McNally 2012). China itself was once one of the largest FDI hosts and is now investing billions of dollars in low-income non-RRDCs and RRDCs such as Angola and Rwanda (Goldestein and Aguilar 2009). This is no surprise, as China’s successful economic growth over the last three decades has assisted in generating a surplus to invest in foreign countries’ resources and other sectors of the economy. Beijing’s encouragement of companies under its ‘go out’ policies has resulted in the rapid expansion of Chinese FDI in developing countries that have been experiencing a decline in Western investors, particularly in Africa (Wagner 2012; Hairong and Sautman 2009). China’s ‘Outgoing’ policy is a Chinese government initiative that encourages Chinese companies to expand interests outside of China. This policy has been particularly successful in Africa. However, it is important to note that although Chinese FDI in Africa has developed rapidly over the last decade, its proportion is still small in comparison to its investment in the rest of the world as shown in Fig. 6.2. However, as indicated in the first chapter, Chinese FDI in RRDCs and non-RRDCs is primarily attached to trade, aid, and concessional loans. The value of China’s FDI, particularly in Africa, is not easy to assess due to conflicting figures and statements from Chinese officials. For instance, in 2009, the Chinese Minister of Commerce, Chen Deming, stated that Chinese investment in Africa ‘exceeded US$14.7 billion, a 60 per cent increase from 2009’, while around the same period the Chinese ambassador to South Africa, Tian Xyeuyn, indicated that ‘China’s [sic] outward FDI of various kinds exceeds US$40 billion’ (Shinn and Eisenman 2012). These two different statements from Chinese officials make it difficult to calculate the definite value of China’s investment in RRDCs and nonRRDCs, particularly in Africa and until 2020 the figure of the Chinese investment is still conflicting and this is due to the Chinese authority censoring the exact investment data. Despite conflicting figures, China’s outward FDI flow, particularly in Sub-Saharan Africa, is small in volume but has recently increased and over taken that of the United States and the European Union as well as other emerging economies such as India, Russia, Brazil and Turkey which have also started to explore investment opportunities in the continent. However, although, China’s trade with

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Africa has increased over the last ten years as discussed above those trade activities are focussed around import and export and not on foreign direct investments. As a result, China’s trade with Africa, despite its rapid increase in volume (amount of money) does not result in the expected economic development of Africa to help the continent to reduce its dependency on single commodities export. This is demonstrated particularly in the case of Angola, which is often cited as an oil-rich poor country (UN World Food Program 2020). Chinese FDI in Africa represents only 4 percent of its total global investment with half or more focussed on construction sectors and projects that are related to oil deals. Moreover, Chinese investment in these sectors is short-term and restricted to Chinese companies, which rarely establish joint ventures with local companies. They make a very limited contribution to the local economy of the host countries in Africa. This is evidenced by China’s increasing investment in Angola and the presence of its companies, a pattern that has been repeated in Rwanda in more recent years (Alves and Power 2012).

Special Economic Zones (SEZs) China’s assistance to reforms and economic incentives focussed on establishing Special Economic Zones (SEZ’s) in the major cities such as Ogun State in Nigeria and Chambishi in Zambia, allowing Chinese and African investors to receive special support from the Chinese government (Pilling and Feng 2019). The newly created SEZs across the continent will lead to an increasing participation of the private sectors in business activities within Africa and will open Africa’s economy to the outside world. However, the dark side of the SEZs are that they are mainly dominated by small Chinese investments and provide very little benefit to local investors and the employees and traders in the SEZs are mostly the Chinese who live in enclaves. Consequently, money generated from the SEZs is circulating within the Chinese community, Chinese banks as well as transferred back to China, thus providing little benefit to the local economy (Pilling and Feng 2019). Chinese investments, with an emphasis on cheap Chinese products, harm local industrial sectors irrevocably. Moreover, the flood of cheap Chinese products has been instrumental in increasing unemployment, particularly in Angola (Naidu and Ampiah 2008). Local manufacturers and retailers have been displaced and consequently their very survival is in jeopardy. Furthermore, China’s

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practices have led to increasing criticisms of poor working conditions in Chinese sites throughout the continent, leading to confrontation between the local workers with their Chinese bosses, encouraging some African officials to take action against these Chinese firms. Among these, the authority who spoke against the Chinese businesses, is Lamido Sanusi, president of Nigerian Central Bank, who argued that “Africa is now willingly opening itself up to a new form of colonialism”…we must see China for what it is: a competitor. However, Beijing categorically rejects being compared to a colonial power and says it has a reason to deny such accusations because it is not interfering in Africa’s domestic politics as colonial rulers did during colonisation and continue to interfere even today. Moreover, as colonialism was primarily about importing African resources at cheap prices, Beijing argues that it pays market value prices for African resources, a statement widely criticised by those who closely monitor China’s engagements in Africa. In this regard, Elusoji theorises that Beijing’s master plan in Africa is primarily focussed on accessing natural resources and marketplace for Chinese finished products. To accomplish this goal, the leadership in Beijing loads countries in Africa with massive loans and credit lines but when these states find it hard to repay the given loans, China resorts to controlling the resources with cheap prices as security for the debts. This means that China has gains more from Africa, which in many ways widens the development gap between the two and this pushes Africa towards further underdevelopment while China’s economy develops at the expense of Africa. The fact that Africa’s economy after almost two decades of intense trade exchange with China is still struggling with rising unemployment on daily basis suggests that the continent’s shift to the East is a move to a new form of exploitative dependency. China has gained experience from the Western countries’ trade association with Africa, their failed economic development programmes such as SAP’s and conditions under which the West provided loans to Africa. As China’s engagement policy is a repetition of history, it is not clear whether the SEZs will represent a potential model for development in Africa. Sam Moyo is optimistic that African countries can now use this opportunity to reduce dependency on Western countries by using China as an alternative development financer with flexible conditions compared to the West (Moyo 2016). Conversely, when it comes to whether China is a challenge or an opportunity for Africa’s future, Moyo (2009), have taken an optimistic view to argue that China’s engagement with African states is increasingly

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changing Africa’s position in the global economy from being marginalised and aid dependent to gaining an opportunity to engage in trade as well as feature in the global economy. However, I would argue that Moyo’s optimism without clear developmental results on ground, does not reflect the fact that, even though the volume of trade and investment has increased to staggering amounts in recent past years. Africa’s economy is developing faster, rather, there are considerable trade imbalances with most countries in the continent experiencing substantial trade deficits with China, which manifests in the existence of Neo-Colonial trade pattern-most gains from trade activities seem to foster China’s economic growth. Interrogating evidence suggests that while on the one hand, the inflow of Chinese finances and expertise has increased the volume of the economic activities in Africa, on the other, it has decreased the opportunities for indigenous production, manufacturing, good governance and service industries. Today China replicates the West by providing Africa with massive interest free loans with flexible repayment period and with almost no strings attached as incentive to access resources. It would not be an overstatement to argue that dependency in the context of China’s engagement with Africa is now formally institutionalised in the form of Chinese low interest loans-credit lines and diplomatic support for pariah states. China has replaced the traditional colonial powers from their dominant position in Africa by assuming the dominant position in the economic hierarchical order between itself and the African states. Africa may have availed a different source of capital and technical assistance but the fundamental nature of a dependent relation with a dominant economic power has not changed for the African states; thus validating some Neo-Colonial tendencies (Mlambo 2019). This is evident in the fact that poverty, unemployment and impoverishment continue to persist even in the most resource-rich developing countries in the African continent. For instance, in oil-rich Angola, one of China’s top trading partners, 70 per cent of the population lives below the poverty line and faces food shortages, despite rich resources and an increasing GDP growth rate, partly instigated by the increasing share of trade with China (World Bank 2020).

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Conclusion This chapter has discussed China’s increasing trade and investment in Africa. It attempted to investigate whether the African countries register observable economic growth and development while trading with China. The presented data demonstrated a dramatic increase in Africa’s trade with China over the last 20 years, particularly of resources-rich countries. There is no doubt that these countries have benefitted from the rise of China and its increased demand for natural resources, which Angola has in large quantities. The chapter has also examined the GDP growth rate and GNI for countries with heavy Chinese investment as well as analysed the data on Chinese imports and exports in and out of Africa. The growth percentage in these countries after the launch of FOCAC has been steady and there has also been an increase in GNI. Dependency theory employed in this book has been debated, stressing its relevance in explaining China’s new economic partnership with RRDCs and non-RRDCs. The implication of this chapter’s findings is that the growing trade between China, non-RRDCs and RRDCs, in particular, is concentrated on China’s import of resources and exports of finished products. The deepening of economic relations is facilitated by concessional loans and credit lines from Beijing as part of China’s access to resources and marketplace strategy as highlighted elsewhere in the previous chapters. There is limited investment in sectors that provide jobs and increase productivity, and this does not facilitate development in Africa. In the following chapters, China’s investment and the way financial inflow from China impacts RRDCs and non-RRDCs drawing on the case-study countries of Angola and Rwanda, has been examined.

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CHAPTER 7

China’s Energy Security: How Much Africa Matters to China

Introduction Energy resources insecurity in China has long been associated with its renewed partnership with Africa. To this end, China has been expanding its trade and investment in Africa for the last two decades focussing on resources sector, oil in particular. Every year high-level ministerial delegates from Africa and China meet at the Annual Forum on China–Africa Cooperation, to renew and review issues at hand (FOCAC 2020). China’s current involvement with increasing investment in resources-rich countries in Africa makes it the largest investor in the resources sectors. Despite the fact that Chinese investments are across a diverse array of new markets and sectors, the major goal that attracts China to Africa is a desire to secure energy resources to boost its rapidly growing economy (Chen et al. 2018). Energy resources are important for China and China’s energy security is characterised by the importance of the safety of steady energy supply either from international markets or oil-producing countries to consumer country-China (Taylor and Kopinski 2011). To sustain its meteoric economic rise means that China has to ensure a continuing and sustainable supply of a wide range of natural resources, chief among them being oil. This chapter discusses key factors driving China expansion in Africa’s resources sectors and focusses on China’s critical needs for overseas energy resources especially iron ore, coal and oil because they are the most important resources which China imports from Africa. The chapter © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 A. F. Lisimba, China’s Trade and Investment in Africa, https://doi.org/10.1007/978-981-15-9573-8_7

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discusses China’s resources politics in Africa and different approaches that Beijing applies to guarantee the supply of resources to ‘mainland’ China. The first section discusses China’s industrial growth and energy resources, defines energy security and China’s energy consumption and demand for resources. The section focusses on the geopolitics of China’s approaches to energy security and the role of Chinese National Oil Companies in securing energy (NOCs). The second section explores Africa in China’s energy supply calculation. In the final section, I shed light on China’s military build-up and Western worries through the lens of political realism. The chapter argues that China’s need for Africa energy resources is a key portion of its relationship with states in Africa. To be obvious, Africa itself does not represent the only source for China’s oil imports but it plays an important role in Beijing calculation of its need for resources. When you look at a one percentage delta in terms of Chinese GDP growth rate in either direction, that one per cent change in their GDP growth rate can translate into the energy consumption of a large country like Brazil. – Sarah Ladislaw (China Power 2020b)

Energy Security Energy security is commonly defined as an easy access to an adequate energy at all times at a reasonable and affordable price (International Energy Agency 2020). The idea of the importance of securing energy resources was first introduced in 1970s, during the first global oil crisis; however; the concept is fairly new in China; it only became an important issue within Chinese political discourse after 1993, when China became net oil importer dependent on overseas oil to boost growth back home (Downs 2004). It was not until 2003 when energy security became a focus of political discourse as sustainability of China’ economic development became dependent on imported energy and natural resources (Downs 2004). For China, energy security is characterised by the importance of the safety of steady energy supply either from international markets or oilproducing countries to consumer country. However, a rise in energy prices or disruption in supply will result in significant effects on China’s economic growth, although this depends on how much China relies on imported oil. For more information on China and energy read Eisenman, Heginbotham and Mitchell (2007) Although, China’s investment in

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Africa has been extending throughout every market industry, mining and oil remain a primary focus of Chinese trade and investment, especially in the resources-rich countries in Africa (Alden 2005). The large consumption of energy in China and the lack of enough local production to meet such needs have made energy security an issue driving China’s foreign policy in resources-rich developing countries including the states in Africa (IEA 2020). As noted elsewhere in the preceding chapters, China had largely abandoned Africa during the 1980s to focus on its internal issues and growth (De Oliveira et al. 2008). Conversely, it had begun to return to Africa in mid-1990s after it discovered the need for the abandoned continent, simply for accessing resources which China needs for achieving its goals of economic growth and to possibly reinstate itself as a great power state. In this respect, China’s renewed interest for re-establishing relations with Africa is driven by its energy demand and Africa’s untapped resources have motivated China to come back to the continent with new engagement strategy that includes provision of low-interest loans and resources for infrastructure agreement with countries with rich resources such as Angola and Nigeria (Taylor et al. 2011). Given China’s growing need for energy, analysts (Meidan 2019), in the field have even gone far to argue that due to the failure to meet the minimum supply of needed resources such as oil, coal and ore, China’s growth may cause problems that will slowly lead to the collapse of China’s economy, something that worries community leaders in Beijing.

Industrial Growth and Energy Resources China’s swift economic growth over the last four decades has significantly increased its need for energy resources. China is now the world’s largest consumer of energy, the largest producer and consumer of coal, and the largest emitter of carbon dioxide (China Power 2020a). Over the last four decades China’s large industry-based economy has largely been dependent on energy resources such as oil and coal. In the period between, 1993 to 2017, coal consumption in China had increased from 1.05 billion tons to 3.97 billion tons (China Power 2020a). In 2015, the demand for most of the energy consumption, especially coal came from the manufacturing sector, with 67.9 per cent of the country’s energy use and 54.2 per cent of its coal use due to massive increase in productionlines, agriculture and construction (International Energy Agency, I EA 2020 and China Power 2020a). This is in addition to 41.8 per cent of

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China’s coal consumption which came from power production activities (China Power 2020a). In 2017, coal accounted for 62 per cent of energy use in the China, making the country the largest consumer of coal in the world (China Power 2020a). In particular the growth in the industrial sector has enabled China to elevate its status from being one of the poorest countries before 1978, to one of the leading economies with a GDP per capita of US$ 16,944.102 in 2018 (World Bank Data 2019). More importantly, economic growth in China has assisted around 500 million Chinese to rise from poverty and more than 100 million people to move up into middle class within a relatively short period of time (World Bank 2020). The improvement in living standards in China is remarkable, seen through an increase in private property and automobile ownership in urban and rural areas, particularly among the growing middle-class population during the last four decades). Statistical evidence released by the Ministry of Public Security, suggests that in 2019, China had registered a total of 240 million vehicles in four categories: motorcycles, tractors, trucks and passenger automobiles (China’s Bureau of Statistics 2020). This shows that the production and the number of vehicles in China has drastically been increasing in the last ten years and this number is predicted to increase to 245 million by 2020 because of rapid urbanisation and increase in Chinese middle-class population (China Association of Automobile Manufacturers, CAAM 2019). As recorded by the Chinese Ministry of Public Security, between 2012 and 2019 China registered an average growth of up 8.83 per cent year on year, including 207 million new vehicles per year (China Daily 2019). In the period between January and August of 2019, some 20.83 million new cars hit the country’s busy roads. Of these new vehicles, 90.45 per cent were passenger and transport vehicles travelling between cities and suburbs (China Daily 2019). This is in addition to the fact that China is the largest automobile manufacturer in the world. In 2018, alone car manufacturing accounted for 30 per cent of global vehicle production which exceeds that of the European Union, the United States and Japan combined (Wong 2020). What do all these changes in industrial sector, productions and an increase in the number of automobiles, population, urbanisation, consumerism and continuing economic growth mean for energy resources in China? It is obvious that these changes occurred due to rapid economic growth resulting in a vast consumption of natural resources, most notably oil and minerals such as copper, iron ore, coal and aluminium (Meidan 2019). These mineral resources are of particular concern to the leadership in Beijing and Africa’s

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position to provide some of these resources makes the continent an indispensable trading partner for China. On the top of these developments, China is already a nuclear country which uses a vast amount of energy resources and relies on the use of fossil fuel which comprises coal, oil, petroleum and natural gas products (World Bank Database 2020). This is all related to the growth in China’s modern sectors—industry, motorised transport, urbanisation and introduction of electricity access to residents in rural areas (World Bank Database 2020). In 2018, China activated 41 nuclear power reactors resulting in the generation of around 38,419 MW of needed energy (China Power Project 2020). The country has a plan to operate additional reactors by 2020 but in spite of this, China still relies on overseas energy resources for which Africa is an important destination. The on-going increase of people who now own vehicles in China adds to the use of energy in the transport and industrial sectors (China Daily 2019). Furthermore, China has seen an increase in population, as of January 2020, the population of China was estimated to be 1,408,526,449 people (National Bureau of Statistic of China 2020). This growth in population causes an increase in electricity usage for heating and cooling in homes and public places such as markets, offices and entertainment sites, further amplifying the importance of energy resources in China. The problem associated with China’s over-reliance on imported energy sources may lead to the slowdown of the economic growth, but more importantly it may eventually lead to decline in efficiency of the People’s Liberation Army (PLA) (Downs 2007). This situation in many respects may hamper China’s ability to contain potential trouble spots such as the Taiwanese challenge for independence from the ‘mainland’ through the use of military force (Leung 2011; Cao et al. 2013). The recent popular protests in semi-self-rule region of Hong Kong makes it evident that Beijing is likely to encounter more challenges in the future as China’s semi-self-rule regions may opt for independence to avoid communism (BBC News 2019). As the world move towards democracy, events like the one which happened in Hong Kong in 2019 are likely to happen in other places as well like Taiwan and Mecca, which may put China’s territorial integrity at risk and in such a situation the availability of resources becomes critical to contain and keep the economy growing. Additionally, an oil shortage would also limit China’s ability to militarily defend its territorial integrity from neighbouring countries such as Japan, which is already engaged in a dispute with China over the uninhabited Senkaku and Diaoyu islands (South China Morning Post 2019).

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As a result, energy security has become an issue of national security and national interest, which has influenced Chinese leaders to invest heavily in resource-rich developing countries, particularly in Africa.

China’s Energy Consumption and Demand for Resources Local Production China requires energy resources such as oil, minerals and other natural resources from international markets to maintain production, sustain its continuous economic growth and for maintaining its political stability (De Oliveira et al. 2008). According to the US Energy Information Administration (EIA 2020), China is a top energy resource consumer as well as a large oil producer. It owns around 20.4 billion barrels of established oil reserves, with a 4-million-barrel increase during 2018–2019 (Energy Information Agency 2020b). In 2018–2019, China produced about 4.9 million barrels of raw petroleum per a day, of which 95 per cent was unprocessed oil (Energy Information Agency 2020a). This level of production was enough to meet the Chinese local needs three decades ago (Forbes 2020). This production was predicted to increase by extra 290 thousand barrels per day to more than 4.5 million barrels per day in 2020. Additionally, local ‘resources development’ was deemed unsuccessful due to the fact that China only processes two per cent of proven reserves which is not enough to meet the country’s growing energy needs (International Energy Agency 2020). A white paper on defense released by the Chinese government indicates leadership in Beijing has encouraged energy conservation and development using advanced technology with detailed plans on the use of energy in the main sectors that include industry, transportation and construction but these policies have little impact in terms of reducing the energy consumption in these energy intensive sectors (Defense White Paper 2019). The failure to increase local production to match the growing needs prompted the CPC leadership to look for an alternative source and reach a conclusion that its local resources particularly oil could no longer meet its growing demand (Energy Information Agency 2020b). However, because of its fast-economic makeover, China came to a point where its local resource production, particularly oil, could no longer meet its growing demand due to strong and sustained growth (Zweig and Jianhai 2005). In 1993, China shifted its status from oil exporter to net crude oil importer, the second-largest oil consumer after the United

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States in 2009 (Dannreuther 2003). In 2019, China consumed around 9.8 million barrels per day, more than 50 per cent of its local production, and imported around 4.8 million barrels of oil per day in the same year. It is predicted that China will import about 65 per cent of its crude oil by the end of 2020 as its industry-led economy expands (Meidan 2019). China’s oil consumption increased by 13.57 million barrels per day between 2018 and 2019, around 14 per cent of the expected world oil demand growth during this period (International Energy Agency 2020; U.S. Energy Information Administration 2020). However, the consumption of oil is projected to reach 53 per cent by 2025 and may further increase to over 80 per cent by 2030 if China’s energy needs continue to rise at the same rate Michael Klare and Daniel Volman 2006). In 2017, China exceeded the United States in annual growth of crude oil imports by importing 8.4 million barrels per day (b/d) in comparison to 7.9 million (b/d) of United States crude oil import from overseas. China had become the largest crude oil importer in the world in the period between 2013-2019 (International Energy Agency 2020). Factors behind this massive increase in China’s energy consumption included massive decline in local production, strategic inventory stockpiling and new refinery in addition to local demand as mentioned the previous section. These elements have contributed to the recent increase in China’s crude oil imports as well. More than 50 per cent of predicted increase in the global energy consumption has taken place in emerging economies in Asia. China and India are so far the largest consumers of energy (US Energy Information Agency 2020). To this end, energy need in Asia was more than any other region in 2018 and it is projected to double between the period 2018 to 2050, making it both the largest and fastest growing region in the world for energy consumption (International Energy Agency 2020). China has been among the world’s fastest growing economy during the past four decades and remains a primary industrial hub and contributor to future growth in the global energy demand (IMF 2019). Crude oil imports into ‘mainland’ China in 2018, alone were valued at US$ 239.2 billion, an increase of 4.8 per cent since 2014 and increase of 46 per cent from 2017 to 2018 (World’s top Exports 2020; US Energy Information Administration 2020). Total of 45 countries supplied crude petroleum to China in 2018 and these countries are likely to continue to supply oil to China as they have been locked into bilateral agreements and long-term supply contracts with China (Alden 2018). An estimated 44.1 per cent of

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China’s imports of crude oil comes from nine oil-rich states in the Middle East ranging from US$ 748.8 million from Gulf state of Qatar up to US$ 29.7 million for Saudi Arabia (World’s top Exports 2020) (Table 7.1). The International Energy Agency’s (IEA) energy forecast projects that China will be the largest oil importer in the world, surpassing the United States any time now. (World Energy Outlook 2020). This projection was based on the fact that in 2019 alone, China imported around five million barrels of crude oil per day. This number is predicted to reach 13 million by 2030. Besides oil, China is also the world’s largest consumer of energyrelated products such as minerals, with coal accounting for around 70 per cent of China’s energy resource mix (EIA 2020). China consumes nearly 50 per cent of the world’s coal production (Energy Information Agency 2020b). The lack of available resources to boost local production and the growing need prompted China to search for an alternative source of supply from resource-rich countries. Table 7.1 Top 15 crude oil suppliers of China: These countries alone supplied 90. 6% of the crude petroleum to China during the year 2018–2019

Country

Value in US$

Percentage %

Russia Saudi Arabia Angola Iraq Oman Brazil Iran Kuwait Venezuela United States United Arab Emirates Congo Colombia Malaysia Libya

37.9 billion 29.7 billion 24.9 billion 22.4 billion 17.3 billion 16.2 billion 15 billion 11.9 billion 7 billion 6.8 billion 6.7 billion 6.4 billion 5 billion 4.8 billion 4.7 billion

15.8 12.4 10.4 9.4 7.2 6.8 6.3 5 2.9 2.8 2.8 2.7 2.1 2 2

The 5 top crude oil providores include Russia, Saudi Arabia, Angola, Iraq and Oman. Together these countries represent over, 55.2 per cent of overall China’s crude oil imports during 2019 (Sources: World’s top Exports 2019; US Energy Information Administration 2020)

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Geopolitics of China’s Approaches to Energy Security As discussed in the preceding section, energy security has recently become a strategic foreign policy objective of China due to the role energy resources play in the growth of the economy, continuity of the path of industrialisation and maintaining national security and territorial integrity (China Daily 2019). Since China turned into net oil importer in 1993, securing energy resources became one of the top priorities of the leadership in Beijing. Chinese leadership adopted new approach to energy security in 1999 to promote its investments overseas and continue to aggressively secure oversea oil and gas. History shows that, states that are reliant on foreign resources, of which oil is the most important, encounter a wide range of implications for their economic growth and national security (Taylor 2007). Further to this, states security of survival becomes heavily associated with economic tenets that include access to markets, resources and modern technology, which are all necessary for the pursuit of power especially for the emerging economies such as China. As Chinese dependence on foreign resources increased, securing energy supply created debates among energy stakeholders on which approaches China should adopt as the best way of securing a steady supply of energy resources to the ‘mainland’, particularly oil from overseas (Downs 2007). These debates have pushed energy stakeholders to adopt multiple approaches to secure energy resources that include: the support of Chinese National Oil Companies (NOCs) for investment in overseas oil fields, market participation and building bilateral relationship with oil-producing countries, purchase shares from established oil companies and accessing equity (Kevin Gray and Barry K. Gills 2016). These approaches, together, have traditionally been the main considerations when the Chinese leadership formulates its energy security policies. In practice there is no exclusive approach to energy security since no country relies on a single approach to secure the supply of resources; however, most countries employ a combination of approaches concurrently to formulate their resources security policies. China is not an exception, as the leadership in Beijing has been generally adopting more than one approach, with perhaps the neorealist approach being given the main consideration as a strategic approach, based on the calculation that resources such as oil, have a strategic importance to Chinese economic

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growth and its national security (Downs 2007). The significance of oil for the well-being of the Chinese state is the main factor why the communist party does not follow a single approach to secure energy supply. However, Beijing’s approach particularly in the African continent focusses on establishing direct influence on African oil reserves at its source to guarantee delivery without delay and avoid sudden rise in prices (Taylor 2007; Zhao 2011). This approach is cemented on ‘strategic’ approach which attempts to avoid reliance on international oil markets controlled by the West, in particular the United States and Europe, the world‘s largest oil consumers and which compete with China for the same resources in African countries and other places such as the Middle East and Latin America (Meidan 2019). Theoretically, Chinese approach to energy security, like that of other great and emerging powers, is represented by a dichotomy between the need to employ a more liberal framework that encourages cooperation and participation in global energy markets, or a realist strategy that focusses on the theory of zero-sum game and relative gains. Within this realist concept, one country’s gain of a single barrel of crude oil is another country’s loss. A scramble for resources is often seen as a source of conflict and competition between energy dependent countries because of the importance of energy resources, particularly oil in states‘ economic growth and national security, both during war and peace times. Accordingly, China’s economic growth and its demand for resources especially oil has drawn attention of policymakers in Beijing in recent years to follow a more realist behaviour in accessing resources) (Downs 2007). For instance, financial assistance and political support which China provides to resources-rich countries in Africa to secure investments falls within concept of zero-sum game because it ‘locks up’ investment opportunities for states such as the United States, which unlike China hesitates to do business with pariah states because of fears of backlash from rights activists, and institutional accountability, something China does not worry about when doing business with resources-rich countries in Africa. However, the question that arises is whether China will pursue a more hard-line approach and consider the use of military force when necessary to secure energy resources in the future. It is clear that China like other great powers such as the United States which uses military means including coercive force to secure resources for the purpose of maintaining its hegemonic position, is likely to adopt the same behaviour if it desires to secure energy resources for economic growth and build its military power important for its rise to the level of a hegemonic power

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(Muller and Moynihan 2019). The scramble for resources is often a source of competition between countries that import resources and China may, sometime in the future, clash with the major Western investors in Africa and this may put China’s military power to test in the continent. However, it is unlikely that this will happen any time soon. Beijing builds relationships with oil-producing states even though most of these states are pariah states. China has adopted a neorealist approach by building its first overseas military base in Djibouti primarily because of the strategic position of the region, to protect its investments and Chinese nationals as volume of Chinese investment and Chinese labour migration continue to increase in the region (Downs and Becker 2018). Chinese military expansion in Africa in the recent years, has two main goals: to spread China’s sphere of dominance in the absence of Western rivalry and to encounter possible attacks from non-state armed groups like Al Shabab in Somali that have been operating for two decades and continue to attack civilians and Western firms, especially in Western Kenya (Downs and Becker 2018). These developments in East Africa and the GLR demonstrate that China’s economic and military footprints are expanding in the region.

Role of Chinese National Oil Companies (NOCs) in Securing China’s Energy Supply In implementing market and strategic approaches, China uses its stateowned National Oil Companies (NOCs) to secure investment in resources sectors in places such as the Middle East, Latin America and Africa (Taylor 2007). Although these NOCs are still subject to accountability and control by the CPC, they operate more independently now than before due to China’s oil demands through overseas channels, augmenting the significance of NOCs to the CPC leadership (Downs 2007). This is because these NOCs are assisting in diversifying energy sources through investments; even though they place their interests over that of the state, but their overall activities increase energy supplies for Chinese manufacturing sectors (Downs 2007). Among the NOCs are three powerful state-owned National Oil Companies (NOCs). China National Petroleum Corporation, China National Offshore Oil Corporation and China Petroleum & Chemical Corporation are the first Chinese companies to enter international markets and invest in resources-rich countries around the world. However, it is important to note that China’s economic growth and increasing energy consumption coincided with a

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time when most world oil reserves were ‘locked up’ by oil companies from the United States and Europe (Klare and Volman 2006). Consequently, not many regions with rich natural energy resources remained for emerging economies such as China for basic oil investments. Asia, as a region which also includes China, only possesses four per cent of the world’s resources, particularly oil and given that the region has a number of emerging economies in need of resources, China searches for resources beyond the Asian region. Although energy industry is the key strategic sector for the economy, there has been no single institution in charge of formulating energy security policies in China. Erica Downs, among other energy security analysts, notes that energy security policies in China are represented by the strong interest groups such as ministries, corporate actors and incompetent institutions which are dominated by conflicting interests of various actors. Chinese state-owned National Oil Companies (NOCs) act as private enterprises, work under market principles and exercise a strong influence on the state-energy security policies as most of them as led senior members of community party of China. For this reason, the NOCs enjoy enormous political, financial and human resources capital (Meidan and Downs 2011). These NOCs also have influence within the inner circle of the government and Communist Party of China (CPC). They are managed by the senior CPC managers who also hold senior positions within the party (Meidan and Downs 2011). Therefore, energy security policies change from time to time and are often shaped by the vested interests of the people involved often leading to the formulation of rules and regulations that are in their favour. Moreover, corruption, poor management and conflicting objectives have hindered the development energy security policies in the PRC. It is was not until 2009, that the former Premier Wen Jiabao, established the Energy Leading Group (ELG), to oversee the supply and demand issue but the ELGs mission is directed by these powerful interest groups and members of the CPC who are the shareholders. However, it is important to note that despite divergent interests, the importance of energy supply has been recognised as a top priority by all stakeholders, as each of these actors’ interests are largely connected to the secure supply of energy resources. This is indicative of the fact that all actors including the CPC leadership, acknowledge the importance of energy in underpinning the planned economic growth and thus the security of its supply becomes a priority. Consequently, energy security policies are formulated in a piecemeal manner and often influenced by powerful profit-making interest groups and firms owned

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by senior members of the CPC. Apart from profit-making, the SOEs represent and implement Chinese state-energy security policies and are fiercely protected from being influenced by other foreign companies, Even joint ventures with overseas organisations having local presence is not encouraged, in order to protect themselves from an eventual policy or an administrative takeover. This undermines the original concept.

Africa in China’s Energy Supply Calculation The limited availability of primary resources in China and also in the neighbouring Asian region has forced the leadership in Beijing to recognise resource-rich developing countries in the African continent such as Angola, as a strategic supplier of energy (Jiang 2009). Therefore, taking into account the growing global demand for energy resources such as oil and minerals, China’s own role in generating that demand, and Angola’s position in supplying some of that demand adds to the increasing importance of RRDCs for China (Corkin 2013). Consequently, China’s foreign policy towards Africa has changed over the last two decades from purely political and ideological objectives to increasing diplomatic and economic goals that ensure China access to energy resources, other raw materials, and a marketplace, all of which are crucial for China’s economic growth and political stability (Corkin 2013). According to the International Energy Agency’s (IEA), Africa Energy Outlook (2019), Africa is perhaps the only continent with huge quantities of untapped resources that will last far longer than the present known reserves in other regions, such as the Middle East. This prediction, in part, pushes China to expand its investment in oil-producing states in Africa, particularly in their resource sectors (Alden 2007; Brautigam 2009; Kaplinsky and Messnerm 2008). To secure the supply of energy resources from Africa, the Chinese government opened the doors for its National Oil Companies (NOCs), which are also regarded as StateOwned Enterprises (SOEs), so that they could expand their business operations and invest in resource-rich states in the African continent with full economic and political support of the government in Beijing (Taylor 2007). The Middle East is a major source of oil for China with Saudi Arabia and Iran being the two most important suppliers of crude oil to China since the country started importing oil from overseas (Alden 2007).

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Research firm Wood Mackenzie estimates that China will import 9.1 million barrels per day of crude in 2020, with some 3.5 million barrels, or 38 per cent, of that total coming from the Middle East (Wood Mackenzie 2020 and Nicolas and O’keefe 2020). However, constant conflict and political instability in oil-producing states in the Middle East prompted China to become more dependent on Africa as an essential alternative source of its energy supply. However and while China has been long dependent on importing oil from the Middle East, the recent attack on Saudi Arabia’s oil reserves on September 2019 by the Yemen’s Houthi rebels has raised concerns in Beijing about the stability of supply from the region, although Saudi Aramco, the giant company that manages Saudi oil facilities has assured China, giving a guarantee that supply will continue (Meidan 2019). Another problem is that US sanctions on two of the subsidiaries of China’s largest shipping company could cause a more significant disruption in China’s oil trading activities (Meidan 2019). Obtaining oil from Africa was one way to reduce China’s dependence on Middle Eastern oil (Smith 2004; Downs 2004). Other emerging powers source most of their energy resources from the Middle East, where the possibility of conflicts between the West and emerging economies such as China over resources is much higher than in Africa (Meidan 2019). China further increased its investments in Africa when the United States Department of Energy reported that, while oil reserves in most countries are projected to decline, Africa has the potential to produce more oil by 2025. Africa’s oil is lighter and of better quality compared to the oil from the Middle East and other places (Klare and Volman 2006). Currently, African states contribute to 30 per cent of China’s imports, and it is predicted that this contribution will increase because of China’s signing of more deals for extraction activities from the untapped resources that Africa owns (MOFCOM 2016). However, China–Africa trade plunged 14 (%) per cent in the first three months of 2020 in comparison to the same period in 2019, due to the Corona Virus pandemic (Asiedu 2020). As the entire country was lockdown, factories were closed and manufacturing output decreased significantly, China’s oil imports from Africa dropped to its lowest level (Nyabiage 2020). Non availability of resources such as oil in Asia is further complicated by the fact that most Asian countries are emerging economies and oil import dependent, just as China. The limited primary resources in the PRC and in Asian region, force the CPC leadership to recognise Africa as a strategic source of energy supply. The key factors for Africa being China’s chosen

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destination are primarily Africa’s untapped resources, China’s good relationship with Africa, that Africa is a place that has been abandoned by the Western investors, that the African is a continent where development and investment is needed and a continent where there is less great power competition because the West does not see potential in Africa (Yachyshen 2020). It is believed that Africa is perhaps the only continent with huge untapped resources that will last far longer than predicted, when compared to the present reserves in other regions such as the Middle East (African Development Bank 2019)

Revisiting Political Realism: China’s Military Build up and Western Fear In predicting China’s rise John Mearsheimer, a well-known offensive realist argues that China like other great powers such as the United States which uses offensive means including coercive force to maintain its hegemonic position, is likely to adopt the same behaviour if it desires to rise to the point of hegemony (Wang 2019). This view is shared by Wong Harper (2020), who writes that China’s rapid naval power build-up is comparable to what the United States did in the nineteenth century and that all of China‘s moves and ambitious strategies are indicative of its preparation for a great power status (Harper 2020). He further asserts that as China’s economic growth is heavily reliant on overseas oil imports, China is expanding its offensive capabilities to vigorously balance the power of its close neighbours and to secure its supply of resources. A country’s power can be measured through its ability to leverage its resources towards political and economic benefits (China Power 2020a). However, much reliance on overseas energy resources may also restrict policy options, therefore decreasing chances through which a country can cultivate its power whether economic or political. Continuing shifts in the international energy markets and political instability in RRDCs can also make access to resources difficult or result in a drastic increase in import prices, further making it complicated for countries such as China to pursue its developmental objectives (IEA, China Energy Report 2017). To this end, China’s strategy is to progress its economy, and then build its military capabilities, position itself as regional hegemon and then resist the dominance of other great powers in its close geographical region and then struggle for global dominance. China’s economic growth and its demand for resources security, especially oil, has forced policymakers in

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Beijing to adopt a more realist behaviour. This is done by Chinese leaders pushing the country to become a revisionist state in the pursuit of power and national interests with an aim of becoming a hegemonic state in the region (Wilson 2020). In this sense, China’s recent military modernisation and efforts to upgrade technology for the purpose of advancing the capabilities of the People’s Liberation Army (PLA) validates arguments that China will not ascend peacefully if Beijing encounters challenges and confrontation from rival powers. Although China is militarily far behind the United States, it is slowly developing its maritime power and it has deployed its military forces and naval power in the South China Sea to challenge the US led alliance forces deployed in a potential conflict zone in South East Asia (Global Times 2020). In particular, the heavy military presence of rival powers such as the United States, Japan and India along the Malacca Strait, is considered as a great threat to China’s energy supply from the Middle East and Africa (Global Times 2020). South China Sea is strategically important for China as it serves to extend China’s reach further into Southeast Asia, the Pacific and the Indian Ocean (Prétat 2020). The United Nations Conference on Trade and Development (UNCTAD) estimates that around ‘80 percent of global trade in volume and 70 per cent in value’ passes through South China Sea (UNCTAD 2015). In this sense, China as the second largest economy after the United States, with over 60 per cent of its trade activity dependent on travel by sea, China’s economic well-being is closely attached to South China Sea (Global Times 2020) For this reason, it is highly predictable that in the event of sea-lane blockage by any of the stationed forces in the area, Beijing may opt to use military means to secure these communication lanes as China has no other ways of transporting oil from overseas (Prétat 2020). To this end, dependence on oil imports to boost the economy created ‘The Malacca Dilemma’ a term coined in 2003 by the China’s former president Hu Jintao to describe a possible supply disruption in an event of war as both South China Sea and Malacca can easily be blocked by rival nation, thus cutting off China from the most important resources it need to keep the economy growing (Berkeley Political Review 2020). The perceived use of force in the region by China may be driven more by the rigid definition of sovereignty than by its need for resources and economic considerations, especially that China considers the deployment of foreign forces at its backyard as an issue of national security, given that the zone is of vital national interest to China.

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In an attempt to link energy security to the traditional security dilemma, it is fair to argue that states that are reliant on foreign resources, of which oil is the most important, encounter a wide range of implications for their economic growth, national security and foreign policy objectives. Power and security have also become heavily associated with economic tenets that include access to markets, resources and modern technology which are all necessary for the pursuit of power. Ken Waltz, in an interview conducted by Fred Halliday and Justin Rosenberg, stresses on the importance of economic power, arguing that states that favour military power over economic well-being risk themselves becoming small and thus their likelihood of survival becomes less Oil in particular is a vital resource for any state to strengthen both economic and military capabilities (Jianxin 2010). Furthermore, resource especially oil has become an important security issue since the Middle East oil shortages of 1973 when the world encountered supply disruption. Today, access to resource is a strategic objective for states that desire to rise to power and develop strong economy. Economic nationalism stresses that states have at least four main interests, which they articulate in their foreign investment policies, including political power, aggregate national income, economic growth and social stability Krasner (2009). Some of the interpretations raised by economic nationalism have some relevance to China’s policy and actions particularly with regard to its energy security policies and pursuit of markets and political influence in Africa. China’s growing economic relations with African states can be seen as a way of accomplishing these four goals in line with an economic nationalism perspective. Africa has in recent past become an important supplier of resources to China and while at present time, China’s behaviour can be interpreted using the lens of defensive realism because Beijing engages in defensive behaviour in dealing with Africa such as soft power. It is likely that China will follow offensive means and use military forces if necessary to access resources in Africa similar to what other great powers such as the United States pursue in the Middle East and other places with rich resources (Taylor 2007). The importance of oil had led the United States to invade Iraq in 2003 to make sure that it had better access to oil reserves in that country (Downs 2007). China’s current behaviour suggests that realist paradigms dominate its energy security policies, including the ones formulated for Africa (Taylor 2007). Additionally, China’s expansion in Africa is a part of its grand strategy which goes beyond just securing the supply of oil by establishing a sphere of dominance in the oil and other sectors

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and perhaps challenge the role of the continent‘s traditional trade partners who enjoy the lion’s share in the sector (Downs et al. 2020). It is worth mentioning here the use of force is something that has been long practiced by great power states and that China is no exception, as a rising great power state. What defines Feigenbaum‘s logic is the fact that China’s principle of foreign policy does not take into consideration the global norms and ethics such as human rights which makes China more likely to use force more often in the pursuit of power and national interests. Whether China’s behaviour is guided by the current structure of international order or self-security concept of the communist party leaders, traditional power and prestige considerations of China‘s national interests underpin nearly all analyses of its strategic behaviour when it engages with other states including Africa.

Conclusion China’s list of achievements over the last four decades has been quite impressive. Continuous double digit GDP growth rate, reduction of poverty, industrial development, growth of middleclass population and urbanisation are some of the important markers that help us develop a deeper understanding of China’s geopolitical and economic strengths that underline the dynamics of its engagement with the current world order. The Chinese community Party has been able to maintain authoritarian capitalism with pragmatic foreign policies that have strengthened China’s negotiating power when dealing with other states. To maintain its place in the world order and ensure that the pace of economic growth is steady and fast progressing, China has to keep the engines of its manufacturing and industrial sector on and continue running as a manufacturing powerhouse. Consequently, Beijing’s foreign policy towards Africa is driven by the need for access to raw materials and other resources to keep its economic growing. China has turned to Africa, a continent with vast land and natural resources. However and as discussed in the previous chapters it turns out that Africa is in desperate need of alternative development finance and it has found a reliable partner in China, also a country that has experienced similar development challenges. The need for strategic resources that will aid infrastructure development is still the most important agenda that determines China’s foreign policy toward the continent. This chapter examined China’s resources needs and its expansion in Africa because of its dependence on peripheral resources-rich countries for its

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own economic growth. China’s approaches to energy security is discussed. The approaches China uses to secure resources, are not the only means of securing resources from overseas, nor are they strictly mutually exclusive, but they explain the spread of policy option available to China to access resources globally and in Africa. The question of how Beijing‘s pursuit of energy security shapes its bilateral and mutual relations with resources-rich countries in Africa, has been addressed.

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CHAPTER 8

Comparison of China’s Trade and Investment in Angola and Rwanda

Introduction The objective of this chapter is to evaluate the impact of China’s political and economic engagements with Africa, on its growth and development with specific focus on Angola and Rwanda as case studies. The first section of this chapter examines the historical background of the relationship between China, Angola and Rwanda and the growing trade between the three parties. The background to the selection of Angola and Rwanda as specific cases has been discussed in the introductory chapter. These two countries, out of the others, have been selected for this cross-national comparison due to the recent escalation in their bilateral economic relations with China. These countries share certain differences as well as several similarities with respect to their political and economic institutions, size of their economies, their trade and FDI volume with China, and their GDP growth per capita, all of which are useful for a comparative examination in this chapter. The first section of this chapter explores China’s trade and investment in these two countries, and further seeks to answer whether this trade and investment contributes to the overall economic development in these two African states. In the main parts of the chapter, I argue that, although some countries, in particular resource-rich Angola and non-resources-rich Rwanda, have recorded a positive economic growth during the last ten years, this growth cannot be solely attributed to their engagement with China as other economies © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 A. F. Lisimba, China’s Trade and Investment in Africa, https://doi.org/10.1007/978-981-15-9573-8_8

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have equally been doing business with these countries. Additional factors, such as an increase in the trade of these countries with other developed countries and the emerging economies, including India, Brazil as well as established economies in the European Union and the United States have contributed to their positive economic progress (Garcia 2016). The second section of this chapter examines the aggregate economic growth and development in these two countries by analysing the gross domestic product (GDP) and the gross national income (GNI) indicators prior to 2002, when China was not yet a major trading partner in either of these countries. These parameters are widely used to compare growth rates all over the world. The purpose is to compare the pre-eminence of China in economic growth rates as a proxy for economic development outcomes in Angola and Rwanda. The section then examines economic growth and development in Angola and Rwanda from 2002 to 2019, a period during which China emerged as a major financer, trading partner and an investor particularly in Angola. To investigate whether China’s trade and investment in the two case-study countries benefits all sides or only serves China’s interests, the following dependency assumptions will be tested thoroughly in this chapter: 1. Countries with a high level of dependency on their major trading partners are likely to register economic growth rates without development, experience a negative balance of trade and fail to achieve long-term inclusive and sustainable development (Snyder 1980; Grosfoguel 2000). 2. The export of resources and raw materials from underdeveloped to developed countries ultimately benefits the latter, as they utilise the primary resources to manufacture products, which are sold back to the former at higher prices (Amin 2011). 3. The pattern of trade between dominant states and underdeveloped states is unevenly balanced because it favours trade in resources and agricultural products and not manufacturing, which would enable the less developed countries to develop their industrial capacity and improve the terms of trade (Smith 1979). 4. Africa’s necessity of Chinese finances and technology highlights the new form of dependency of African states on China, which suggests that the effects of the new form of dependency on periphery is represented by the lack of necessary finances for basic development

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projects, technology for industrial development and over-reliance on foreign assistance (Ferraro 2008). By examining these premises, this chapter identifies whether China is sustaining Africa’s subordinate position that makes it dependent on China or is it mutually beneficial and leading to strong economic relations. The analysis covers the period from the year 2002 onwards, as this was the year when China started to invest heavily, especially in Angola. It is also the year in which the internecine civil war ended in Angola (Malaquias, cited in Alves and Power 2012). A comparison is also made of trade exports and imports between China and the two African states from 2000 to 2019, when China was not their major trading partner. Although China established contacts with Angola and Rwanda decades ago, a new dynamic commercial interaction began after the establishment of the Forum on China African Cooperation (FOCAC) in 2000, seen as a new vehicle through which China and Africa would be able to discuss their economic relations and review business agreements. Prior to 2000, the two African countries were beset by conflict as well as political and social instability. Rwanda was recovering from the genocide of 1994 (Stanton 2004) and Angola was in the middle of a destructive civil conflict (Alves and Power 2012). Moreover, both countries had embarked on state building after the end of violent conflicts. China was already a minor player in the two countries’ economic affairs when, in 2002, it started to boost trade activities, particularly with Angola (Taylor 2006). With these issues in line for discussion, this chapter aims to investigate the developmental impacts of China’s trade and investment on growth and development in Angola and Rwanda.

China, Angola and Rwanda: Historical Overview of Bilateral Relations China–Angola As discussed in Chapter 7, the debate about China–Africa economic aspects tend to overshadow the other avenues of interactions between the two sides. China’s insatiable hunger for natural resources, dominance and its quest for new markets are the three most cited reasons for its deepening engagements across the African continent. This storyline assumes an African state must possess large volumes of natural

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resources, vast tracts of arable lands, significant population and strategically significant geography. Angola meets all three element of interest to Beijing. The strategic relationship between China and Angola is based on China’s need for resources and marketplace and Angola’s need for post-war reconstruction (Clodnitchi et al. 2018). Both parties have selfinterest commitment in sustaining and advancing the partnership through growth and development of major sectors including infrastructure development, urban construction, energy and mineral resources exploitation (Mo 2012). Despite the fact that Angola is the largest oil producer, this does not mean that Angola’s population is as rich as their country with resources. Angola’s GDP growth per capita remains one of the lowest in sub-Saharan Africa (World Bank 2020). Almost 85–90 per cent of the Angolans still practice traditional farming which is regarded as the most important sector of the economy due to the lack of diversification, despite the billions of dollars the country receives from the sales of its resources (Africa Development Bank–Angola Economic Outlook 2019). Since the over economy in the country is heavily reliant on oil exports and the fluctuations in global oil prices, dependency on single export of oil has a massive impact on the expenditure in the country given that the country is involved in massive post-war reconstruction (World Bank: Creating Markets in Angola 2019). In this respect, the significance of the strategic partnership between China and Angola becomes even more importance especially for Angola because China provides credit lines, hard currency for the development of and expenditure in the services sectors. Formal diplomatic relations between China and the Republic of Angola were established in 1983, and their first trade agreement was signed in the following year (Ferreira 2008). By 1988, a joint Economic and Trade Commission had been established to oversee trade activities between Angola and China. Although the agreement came later in their history, the links between the two states go back to the early days of Angola’s anticolonisation movements in the 1960s and 1970s (Taylor 2006). China supported the three Angolan nationalist movements: the Popular Movement for the Liberation of Angola (Movimento Popular de Libertação de Angola [MPLA]); the National Union for the Total Independence of Angola (União Nacional para a Independência Total de Angola [UNITA]) and the National Front for the Liberation of Angola (Frente Nacional para a Libertação de Angola [FENLA]) during their struggle for independence from Portugal and during Angola’s prolonged civil conflict (Taylor 2006). The MPLA was particularly dependent on

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China’s political and military support until Angola’s declaration of independence from Portugal in 1975 (Guimaraes 1998). The relationship between Beijing and Luanda, Angola’s capital and seat of government, reached its lowest point during the 1980s and 1990s due to changes in China’s foreign policy towards the African continent. China’s relations with African states reached its lowest level in during 1980s and 1990s as China was more focussed on building a relationship with the West to gain technology and skills necessary for development. For discussion on this point, read Raine (2009). Stronger relations between the two states were forged towards the end of the 1990s, with the People’s Republic of China selling arms to the Angolan government (De Oliveira et al. 2008). Following the death of Uniao Nacional Pela Independencia Total de Angola, UNITA’s leader, Jonas Savimbi, and the end of the civil war in Angola in 2002, Sino–Angolan relations shifted rapidly from military cooperation to extensive trade partnership. China began to invest heavily in Angola’s oil sectors and the construction sector (Clodnitchi et al. 2018). Alden (2008), observes that the PRC’s investment is profitable to African economies, particularly in the face of declining investments from Europe and the United States (Alden 2008). He emphasises that there is ample opportunity for Africa to benefit from these investments, particularly if the terms of investment involve the transfer of skills and modern technology to the continent. As noted by Alden, the PRC’s technologies—particularly in the field of agriculture—has increased productivity on the continent, decrease poverty and create more jobs in the sector. The issue of Chinese technology transfer to developing countries including Africa was mentioned in China’s eight principles for Economic Aid and technical assistance to developing countries. However, whether China upholds its commitment to transfer technology to Africa as promised will be discussed in chapters nine and ten. China–Rwanda Unlike Angola, Rwanda features very low among the aspirants seeking Chinese investment based on these criteria. It is landlocked country and has relatively small population of around 12.5 million in about 26,000 sq. km of area, owns no significant volume of mineral or petroleum resources, and has ‘an exceptionally unfavourable person-land ratio it continues to be extremely poor in per capita income and human-development terms’

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(Kelsall 2013). However, Rwanda established a relationship with China in 1971 (Eisenman et al. 2007). China has emerged as one of the significant donors cum source of foreign direct investments into Rwanda since 2006. In this sense, China and Rwanda shares a number of characteristics in political and economic systems; virtually, since the end of genocide, Rwanda has been ruled by a one-party system, led President Paul Kagame, who as has scrapped the term limits on his tenure making himself president for life. Rwanda has introduced central economic planning and has adopted developmental patrimonialism as the ruling and development strategy. Under this ideology the ruling elite acquires complete monopoly on ‘managing economic affairs in a centralized way with a view to improving their own and others’ income in the long run rather than maximising them in the short run’ (Booth and Golooba-Mutebi 2012). The operative part of this ideology requires a quid-pro-quo agreement between the Rwandan government elites and the people; whereby the elites ‘are gambling on the “expensive” option of building support on a broad base by demonstrating an ability to provide more and better public goods’ (Booth and Golooba-Mutebi 2012). Under Paul Kagame’s regime, Rwanda has enjoyed relatively much higher levels of domestic and international stability, less corruption in comparison to other countries in the region (Grimm and Hackenesch 2019). However, with a scarcity of natural resources, and a small size of population and domestic market Rwanda is heavily reliant on foreign aid and foreign investments to manage its economy. China’s recent engagement with Rwanda is a clear sign of Beijing’s interest in seeking to influence the development debate in East Africa and the Great Lakes Region (GLR) (Xia 2019). China provided minor technical support in the areas of military hardware and training during the country’s struggle for independence from Belgium. Formal commercial relations between China and Rwanda were established in 2006, with China mainly interested in importing coffee, tea and animal hides from Rwanda and exporting finished products in return (FOCAC 2000; UNCTAD 2010). China gave Rwanda around US$100 million in 2019 in private investment, mainly in infrastructure, health, agriculture, information and communication technology and road construction (Nkurunziza 2019). In the first half of 2017, two-way trade between them stood at US$240 million, an almost 50 per cent increase from 2016 (Indeed, trade between Rwanda and China has been growing at a faster rate as compared to

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China’s trade with other partners in East Africa) (Nanda 2012). For instance, in the first half of 2017, two-way trade between them stood at US$240 million, an almost 50 per cent increase from 2016. However, and despite China’s growing influence, Western donors run development projects in Rwanda, with aid commitments of US$1208.5 million in 2018, with top donor been the International development Association (US$247.7 million) followed by the United States (173.7 million, OCED 2020). As this aid amount is more than Rwanda’s own gross national income, it makes Rwanda extremely dependent on foreign aid mainly from the former colonial rulers and their institutions, the World Bank and IMF (Rwanda Country Report 2018). However, China’s interest in building a trade partnership with Rwanda has given the Rwandan government a new avenue of income, which it can use as surplus to boost its economic growth and development (Kagame 2009). China provided the Rwandan government with US$200 million (Reuters 2018) as low in 2018 interest loans and credit lines and an other US$214 million in 2020 to further promote trade between Beijing and Kigali in exchange for access to Rwandan markets and as an incentive for influencing Rwandan government to slowly shift towards one China Policy. This is indicative of China utilising a similar engagement policy in the continent to extend its sphere of influence in the region. Previously, in 2013, the Rwandan government acquired a low-interest loan of US$35 million from China, motivated by the fear that Western aid would be reduced due to Rwanda’s support to rebels in the neighbouring Democratic Republic of Congo (DRC) (Kanyesigye 2012). This aid reduction threat from the West made the Rwandan government turn to China as an alternative source of trade and income. In Rwanda, however, Chinese credit lines and loans are designed to facilitate investment opportunities for Chinese firms and market entry for Chinese products in the country and generate employment for Chinese expatriates (National Bank of Rwanda 2011). Rwanda also represents an opportunity for Chinese companies to participate in the implementation of some of the projects funded by Western donors. In many ways, Rwanda represents a different landscape for China as Beijing uses Rwanda as an example to defuse international criticisms that China targets only resource-rich developing countries and by doing this it is simply replicating the colonial practices which contradicts China’s trademark rhetoric that its growing relations with Africa is based on a win-win situation. To deepen its influence, the Chinese government gave Rwanda grants during and after the global financial crisis (GFC), when

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countries, such as the United States and traditional trading partners, were unable to provide loans to marginal economies such as Rwanda. This situation prompted the Rwandan government to acknowledge China as an emerging economic power worthy of special consideration. Unlike in Angola, where China plays a major role in the economy, it plays only a peripheral role in Rwanda. Rwanda is not a resource-rich country and therefore its engagement with China is marginal in comparison to Angola. As already noted, Rwanda is not resource-rich and has a smaller population, and therefore is not seen as a potential market or trading partner for China. However, it is important to note that the major trading partners of China in Africa are countries with rich resources and potential market spaces because of China’s increasing demand for resources to maintain the path of economic growth and market to sell its finished products. In comparison, Angola is heavily dependent on China as its main trading partner (Clodnitchi et al. 2018). There are similarities in the way these two governments are involved in dealing with China, as China’s economic relations with the two countries are state-led and bilateral in nature. Chinese government officials have visited both Angola and Rwanda over the last decade with Angola receiving higher level visits from China due to its importance to China’s own economic development (Grimm and Hackenesch 2019). Although differing narratives exist about China’s relations with Rwanda, the trajectory of expanding Chinese influence in post-genocidal, small and non-coastal Rwanda is worth studying (Nanda 2012). China ignored Rwanda during the 1994 genocide and until recent past Beijing did not play any major role in the country and as a result Rwanda did not feature in the narrative of China’s emerging role in Africa. In contrast, Western countries played a crucial role in formulating the negotiated agreement that brought the 1994 genocide to an end and providing financial benefit to help the country address post-genocide development challenges and transitional justice problems. Rwanda has often been described as being adored by the West or its favourite child and remains one of the most aid-dependent economies in East African region and the GLR (Arieff and Terrell 2018). However, the country has recently become an interesting investment terminus for Beijing, prompting Chinese government officials to visit the country several times over the last few years as part of the Chinese expansion in East Africa and the Great Lakes Region (GLR) (Xinhua 2019).

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In 2018 China’s President Xi Jinping visited Rwanda to further strengthen Beijing’s role in the country (China Daily 2018). The two heads of states inked a number of bilateral agreements, making Beijing, Rwanda’s largest trading partner and contractor, ahead of traditional trading partners and emerging economic such as India, which is also seeking to boost investment and trade opportunities with Rwanda (China Daily 2018). Xi Jinping expressed to president Kagame, China’s interest in furthering its economic pursuits in Rwanda, immediately granting a loan of US$126 million to Rwanda’s loading it with extra financial dependency (China Daily 2018). The two leaders signed some 15 agreements in Kigali worth millions of dollars on trade, infrastructure, investment, e-commerce, human resource, culture, science and technology, aviation, mining, law enforcement, visa exemption for diplomatic and service passport holders, among others (Justina 2018). The agreements come at a time when China is supporting a number of public projects in Rwanda in addition to mega investments by individual private Chinese companies. Moreover, Chinese military has recently been involved in training 2000 Rwandan military personals, an indication of Beijing’s motives of extending its sphere of dominance beyond markets and investment (The South China Morning 2019). These recent developments demonstrate that China’s economic and military footprints are expanding in Rwanda. Bilateral trade between Rwanda and China has been growing at a faster rate in comparison to other states in the East African region (China Daily 2018). In 2014, an estimate valued the China–Rwanda bilateral trade at $367 million, in which Rwanda’s export totalled $62 million, resulting in a trade deficit of $302 million (Ntambara 2015). United Nations Comtrade database has data until 2016, and as per their statistics, Rwanda has been running a huge trade deficit with China for many years. According to available data in 2014 Rwanda’s imports from China amounted to US$365.5 million, while exports were valued at little over US$8 million. In 2015 the Chinese imports were placed at $358.5 million while the exports amounted to $13.4 million. Unexpectedly, the 2017 data showed imports of $378 million while the exports amount to $4 million (UN Comtrade). Rwanda sustained a substantial trade deficit to China, US$357.5 million in 2014, US$345.1 million in 2015 and US$373 million in 2016 (UN Comtrade). Clearly, the share of trade deficit in China–Rwanda trade activities to the total trade volume is extremely high in favour of China. These trade imbalances directly relate to the structure of this bilateral trade which is heavily framed in

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favour of China. Rwanda exports mainly raw materials, tea, coffee, agricultural products, minerals, hides and skins and some handicrafts minerals (Byumvuhore 2019). The imports from China include mainly finished products, capital goods, machinery and electricals, consumer goods and accessories in vehicles and transport industry. Clearly, in this relationship, Rwanda Rwanda’s main exports to China are small quantity of raw minerals, tea and coffee beans while China exports to Rwanda consumer goods, finished value-added products and advanced technology (Lawther 2017). Based on this two-way trade that involves exchange of raw minerals with manufactured goods, it could be argued that China’s trade partnership with Rwanda in some ways, is similar to centre–periphery type of relations. However, and despite this resemblance, it is significant not to forget that Rwanda still benefits from China as evident by the projection of Rwanda’s annual GDP growth (World Bank 2020). However, the (IMF 2019) the World Bank’s latest report (2019) indicates that Rwanda is over its increasing debt–GDP ratio, which had amounted to 53 per cent of its total income which indicates that the growth may be unsustainable (World Bank 2019). In essence, I contend that although dependency theory is mostly regarded as disappearing from global development discourse, the theory is still relevant in explaining relationship such as this, as China occupies the status of a core nation in relation to the periphery Rwanda. Another reason for dependency is that despite the fact that Rwanda is considered to be one of the fastest growing economies in Africa in terms of the GDP as mentioned above and has low inflation compared to other countries in the region; the country has achieved limited economic transformation with growth limited in specific sectors of the economy mainly construction, hotels, and communication sectors in which China has invested heavily. This means that Rwanda faces diversification problem similar to ‘Dutch disease’ which most resources-rich countries in Africa find themselves in, because they are dependent on the export of single commodity and ignore the development of other sectors of their economies. Even if we say that Rwanda is not resources-rich country and therefore some dependency assumption is hard to apply to its situation, it is also hard to disprove the theory, because China’s engagement does not help Rwanda to industrialise, it rather leads to structural trade imbalances as Rwanda imports more than it exports to China. Since 2000, Angola has been of interest to policymakers and researchers, especially those who closely observe China’s movement in RRDCs and non-RRDCs to tap their resources and create new markets

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for growing Chinese industries (see Alden 2007; Taylor 2006; Corkin 2011; Vines et al. 2009; Alves and Power 2012). Much of the interest in Angola and Rwanda focusses on providing an opportunity to further examine China’s growing economic and political influence in RRDCs and non-RRDCs (Ovadia 2013). China has been the most important player in Angola’s post-war reconstruction projects (Pushak et al. 2009). In 2005, amid negotiations between the IMF and the Angolan government to improve transparency and accountability before the sanction of loans, China stepped in and provided the Angolan government with a US$2 billion oil-backed developmental assistance package (Taylor 2006; Alden 2007). Consequently, the Angolan government declined the IMF loans that came with strict conditions and staff monitored programs (SMP), which compelled Angola to improve transparency, accountability and the governance of oil revenues (IMF Country Report Angola 2003). The loan provided through China’s Eximbank to the Angolan government was to be reimbursed through oil production; a strategy which is now often referred to as the ‘Angola mode’ or an oil-for-infrastructure deal (see Chen and Orr 2009; Naidu et al. 2009). Beijing increased this grant with two further loans of US$2 billion (Corkin 2012; Ovadia 2013) and concessional loan of US$5 billion (Naidu and Davies 2010). These loans assisted China in securing contracts and exploration rights in Angola’s extractive sector, of which oil is the most important resource for the growth of the country’s economy. In fact, a report published by Global Witness, a London based anti-corruption watchdog agency, states that China has provided concealed loans to the Angolan government worth around US$14 billion in total since 2002, and that half of the loans were deposited in various offshore bank accounts of Angola’s state oil company, Sonangol (Global Witness 2009). These low-interest loans are aimed at facilitating permission for Chinese firms to penetrate Angola’s resource sectors and markets. New dependency theorists contend that periphery countries such as these in Africa are overloaded by enormous amount of loans which prevent them from being economically independent (Amadi 2012; Giles and Power 2008). This indicates that large loans and credit lines which the Chinese government provides to African countries do not help to either reduce poverty or implement projects that contribute to the development of the local economies. Rather, these loans increase the reliance of African states on China generating a new form of dependency. Angola exports around 60 per cent of its crude oil to China, representing 9 per cent of China’s total oil imports from Africa (see Katsoulas 2019;

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Workman 2020). More importantly, since 2002 Angola has boosted its crude oil sales to China sevenfold, which is double the increase of its oil sales to the United States during the same period (see Workman 2020). In 2019 alone, Angola’s crude oil export to China was recorded as over US$22 billion and was predicted to increase in 2020 and 2021 as exports and imports were further boosted between the two countries (Katsoulas 2019). However, the breakout coronavirus pandemic has caused a major disruption in China oil imports globally and from Angola; the pandemic has also resulted in the largest drop in crude oil prices (Nyabiage 2020). This level of increase in trade makes Angola one of the most crucial sources of energy resources for Beijing and its largest commercial partner in the sub-Saharan African region. Angolan President Eduardo dos Santos in 2006, while addressing a Chinese delegation visiting Angola, headed by former Premier Wen Jiabao, stated that ‘China needs natural resources, and Angola wants development’(Hanson 2008). De Santos repeated the same statement when he visited China a year later, in 2007 (Campos and Vines 2008). During this visit, De Santos made it clear that the trade relationship between his country and China is based on oil in exchange for hard currency and credit lines. Trade cooperation started with China mainly investing in Angola’s post-war infrastructure projects, which were significant points of entry to resources and more specifically to oil (Alden 2007). The growth of trade and investment between China and Angola can be observed from recurrent business exchange visits, diverse trade agreements and Angola’s active participation in not only FOCAC meetings but also in an economic cooperation platform between China and Portuguese-speaking countries including Angola (Woods et al. 2009). This increase in trade and investment activities has also coincided with China’s search for potential trading partners within the sub-Saharan African region. This new partnership between China and Angola has increased the stability of trade at a bilateral level (Alden 2007). Angola’s volume of trade with China continued to surge during the decade leading up to 2020. Trade values between China and Angola in 2019 reached US$120 billion, up from US$25.3 billion in 2008 to US$1 billion in 2002 (MOFCOM 2010). These figures show a remarkable increase in trade of goods over the last ten years given that the trade between the two countries had netted only US$1.8 Billion in 2000 (Campos and Vines 2008). According to the Chinese Ministry of Commerce (2010), trade value between Angola and China in 2008 reached $25.3 billion dollars, up from US$1 billion in 2002, and in 2010 surpassed US$12

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billion (MOFCOM, 2010). China imports mainly oil, whereas Angola’s main imports from China are finished products including textiles, furniture, leather products, machinery, footwear, technology and general electronics (Kaplinsky and Messnerm 2008; Campos and Vines 2008). China’s imports from Angola are driven by its continuous GDP growth— at an average of 11 per cent per year over the last three decades led by the industrial sectors, which consume resources such as oil and mineral products to maintain production (Tisdell 2009; IMF 2017). In 2018, China–Angola trade surpassed US$28.05 billion, a tenfold increase from previous years and representing share of 60.28% of Angola’s total trade (China Daily 2019). The global economic crisis of 2008, which had a negative impact on the economies of Europe and the United States, worked in China’s favour compared to other developed economies trading with Angola and Rwanda. China was able to purchase resources and provide no-stringsattached loans and credit lines to Angola (Carmody 2013). This growing trade activity attracted Angola more than its traditional trading partners whose economies were hit by the global economic crisis. This crisis was a major factor in hindering them from competing with an emerging China. Angola, for example, is now the primary supplier of oil in Africa to China and globally behind Saudi Arabia and Russia, overtaking Saudi Arabia and Russia, the world’s two largest crude oil producers (Workman 2020). Currently, China has more than 100 oil-related businesses in Angola, and 27,222, Chinese citizens worked in the country in 2018, according to the data compiled by China–Africa Research Initiative of John Hopkins University (SAIS-CARI 2020). Non-resources-rich development countries are equally important for China as they provide trade and investment opportunities for China and Chinese companies. Furthermore, China’s interest in non-RRDCs suggests that it is not in Africa just to hunt for resources but also for other reasons including seeking a market, as well as political support to counter the West. As discussed in the introduction, Rwanda is a good example of China’s interest in establishing good relations and investing in both RRDCs and the non-RRDCs. However, it is important to note that major trading partners of China in Africa are the RRDCs. Therefore, unlike Angola, which is a major trading partner of China because of its rich resources; Rwanda is a non-resources-rich country and therefore, is not a major trading partner of China. Rwanda trades more with the European Union, the United States and its East African neighbours such as Kenya, Uganda

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and Ethiopia (United Nations Statistics Division 2012; African Development Bank 2014). However, there has been a remarkable increase in economic cooperation between China and Rwanda. During the last five years, trade between Rwanda and China has been growing at a faster rate as compared to China’s trade with other trading partners in the African continent (FOCAC 2019). While Angola exports resources, mainly oil, Rwanda’s main exports to China include tea, coffee, coltan, cassiterite, iron ore, tin and animal hides (UNCTAD 2017; World Bank 2019). China’s main exports to Rwanda are machinery and equipment, steel, cement, construction materials, petroleum products, telecommunication equipment, electronics and different kinds of foodstuff. Trade data published by the Organisation of Economic Cooperation (OEC) in 2020 shows that the largest percentage of Rwanda’s exports are destined for United Arab Emirates (UEA) with the value amounted to US$638 million, representing some 15.7 per cent of total exports Organisation of Economic Cooperation: Rwanda Country Report (2020). In comparison, United States occupies second export destination with the purchase amount of ($66.4 million, Thailand ($42.9 million), Pakistan ($42.2 M) and China ($39.8 million) (OEC: Country Report Rwanda 2020). As of 2020, the total income from these exports was not enough for the country to carry out any development projects or to expand trade activities. Therefore, Rwanda borrows more money than its own national income mainly from China. The top five countries from which Rwanda received imports in 2020 were Tanzania ($667 million), Uganda ($197 million), Kenya ($176 million), China ($165 million) and India ($132 million) (OEC: Country Report Rwanda 2020). As shown in the above data, Rwanda’s main trading partners are member states of the European Union, the United States, China, India and other states within Africa (OEC: Country Report Rwanda 2020) (Table 8.1). China’s growing influence in Rwanda represents a landmark in Beijing’s strategic ambition of extending its economic dominance and political influence in Africa and especially Rwanda.

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Table 8.1 China’s imports and exports from Rwanda

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Major exports to China

Major imports from China

• • • • • • • • • •

• • • • • •

Tea Coffee Coltan Cassiterite Iron ore Tin Animal hides Salt Sulphur Earths and stones

Machinery Equipment Steel Cement Construction materials Petroleum products, food stuff • Textiles and clothing • Technology • Consumer goods

Sources UNCTAD (2017), Economic Watch (2019), World Bank (2018)

Comparison of Chinese Investment in Angola and Rwanda In Angola, Chinese national oil companies (NOCs) invested heavily in the resource sectors during the period from 2002 to 2019. The Chinese government appealed to its NOCs, which are also regarded as stateowned enterprises (SOEs), to go out and invest in both Angola and Rwanda, with the full economic and political support of the Chinese government (Rwanda Development Board 2019). Chinese investment in Angola focusses on the extraction sector, comprising oil, gas, mining and metals (Zhao 2011; Zafar 2007). These are scarce commodities and seen by the leadership in Beijing, as the most important resources, directly contributing to the economic growth and industrial development of China. China is investing in Angola through its NOCs (Cristina and Alves 2013). So far, the Chinese state-owned oil company, China National Petroleum Corporation (SINOPEC) is the largest single investor (Zhao 2011; Vines and Weimer, cited in Alves and Power 2012). The success of these Chinese NOCs’ influence on increasing investment is evident in their access to resources in Angola in recent years. For example, the major Chinese state-owned oil company, China Petrochemical Corporation (SINOPEC), bought 50 per cent stake of Shell’s Block 18 which was expected to produce around 200,000 barrels of crude oil per day (Taylor 2007; US Energy Information Agency 2019). This block was jointly operated by Shell and the Angolan state-owned company Sonangol, the

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field concessionaire. Shell, which previously held 50 per cent of shares in the block, negotiated a deal with the international petroleum company of India, ONGC Videsh Limited (Corkin 2011). Sonangol rejected the purchase deal with the Indian company and the final deal went to the Chinese company, SINOPEC instead. One-party system and the political structure in Angola which concentrates power in the hands of few, allows Sonangol, a company administered by an inner circle of ruling elites as the only government body with an authority to sell concessions and shares in oil Blocks for other oil companies wanting to invest in Angola’s resources sector (Sonangol 2020). The entry of SINOPEC into the sector coincided with the provision of China’s Export and Import Bank’s (Eximbank) concessional loans and credit lines as discussed previously. In late 2005, Sonangol announced concessions for sale in Blocks 3 and 80, concessions which had been held by the French oil company Total, including the rights to 3100 square miles of abandoned portions of Blocks 17 and 18 as well as other established oil fields. This resulted in SINOPEC gaining 75 per cent of the concessions, while Sonangol retained the balance. This has facilitated SINOPEC’s acquisition of 27.5, 40 and 20 per cent stakes in offshore blocks 15, 17 and 18, respectively. These three Blocks of oil combined provide 3.2 billion barrels of crude oil per day. In 2008, SINOPEC relinquished some of its shares in these blocks to a new joint venture, China Sonangol Holding, a private Chinese multi-billion-dollar oil company (Corkin 2011). China Sonangol Holding later obtained more shares and exploration rights in new blocks 3 and 80, with full control of operations and rights to sell equity to other investors in the international market. The company has also secured stakes in 4 of 11 pre-salt layer Angolan oilfields, recently licensed for exploration. Initially, this block required investment of some US$1.32 billion, and China was willing to buy the majority of stakes (Macauhub 2007; World Bank 2009). In July 2009, SINOPEC and China National Offshore Oil Company (CNOOC) formed a crucial partnership with an American oil exploration company, Marathon Oil Corporation. SINOPEC and CNOOC acquired 20 per cent of Marathon’s stake in block 32 at the cost of US$1.8 billion. Chinese National Oil Companies and other privately owned joint ventures with Sonangol have had recent success in acquiring large oil equity in Angola through new ventures and the purchasing of shares from established companies (Goldstein and Aguilar 2009). Rwanda started to open its market and offer investment opportunities to the outside world, including China. Rwanda’s first post-genocide

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era president, Paul Kagame, leader of the Rwandan Patriot Front (RPF), was elected in 2003 (Reyntkens 2004). Rwandan economy collapsed and the country experienced a decline in the flow of FDI from developed countries due to political instability, the lack of freight transportation and communications and other risks associated with the violent conflict of 1994 (Lopez and Wodon 2005). More humanitarian aid than FDI was poured into the landlocked Rwanda because of the genocide. As a result, the country has been dependent on foreign aid and loans from financial institutions such as the World Bank and the IMF (Lopez and Wodon 2005). As a part of its post-genocide economic development policy, Kagame released Rwanda’s Development Vision 2020 as a strategy designed to assist the country’s transformation from an aid dependent country into a regional and international trading and investing hub as outlined in the policy white paper, ‘Rwanda Vision 2020’ (Campioni and Noack 2012). Kagme’s regime focusses on the growth of local economy through manufacturing, information and communications technology (ICT), and tourism. Although China established contact with Rwanda early on, it was not until 2006 that China was interested in investing in Rwanda’s infrastructure, similar to Angola, as a part of its market expansion and global resource diplomacy to meet its growing energy demands. China’s entry was also seen by the Rwandan leadership as having the potential to assist the country to achieve its goal of economic reform and transformation (see the remarks by Louise Mushikiwabo, Rwandan Minister for Foreign Affairs 2011). Compared to Angola, Chinese investment in Rwanda is relatively new, having started in 2006 but continue to grow and China is now one of the country’s largest trading partners.

Comparison of GDP Growth and Economic Development in Angola and Rwanda Angola and Rwanda are regarded as landlocked developing countries with low-level human and economic development. Rwanda engages in more open trade and exports to international markets than Angola. Despite remarkable improvement in their economic growth rates over the last ten years, both countries, particularly Angola, continue to experience structural development challenges (Barma et al. 2012). These include a lack of progressive development policies, inclusive economic institutions that promote class equality and development and the inability to access international markets (Acemoglu and Robinson 2002). Acemoglu and

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Robinson (2002), have argued that inclusive democratic institutions are likely to support inclusive economic development and equal distribution of resources to the betterment of the common good. The opposite are extractive institutions, which unlike the inclusive institutions are designed to concentrate power in the hands of few and therefore in the case of resources-rich countries with undemocratic rule, inclusive institutions help elites, for instance in Angola to control the resource revenues of a country for the advantage of a few ruling elites at the expense of the larger population (Acemoglu and Robinson 2002). Economic development under extractive institutions is unsustainable and not exclusive. These challenges have obstructed economic growth and development since each country gained independence. Consequently, Angola in particular often falls far behind in terms of economic growth and development performance due to factors such as high dependency on oil export, lower export earnings from the oil sector as well as pressure on the exchange rate and inflation continues (African Development Bank 2020). Poor leadership is also a major problem in Angola, as a single party has been in power for more than four decades. Unlike Rwanda, Angola continues to face massive development challenges, which include reducing its dependency on oil and diversifying the economy; rebuilding its infrastructure and improving institutional capacity, governance, public financial management systems, human development indicators and the living conditions of the population (World Bank 2020). Nevertheless, it is illuminating to examine their economic performance before and after Chinese investment and the emergence of China to see whether they have achieved better economic growth. As mentioned elsewhere in the previous chapters in order to measure the level of economic growth and development in these two countries, this chapter employs Gross Domestic Product (GDP) and Gross National Income (GNI), as the major indicators. Of the two countries, Rwanda’s economic growth before 1995 was the most volatile due to the 1994 genocide that destroyed the economy (World Economic Forum 2016). Prior to 2000, the growth performance was not very commendable. It ranked in the bottom 50 of 186 countries worldwide. After 2002, however, economic growth in the two countries started to improve. In Angola, it was largely due to the emergence of China as a new financer, trader, investor and main buyer of its resources following the end of long devastating violent conflict in that country. Growth in Rwanda could be attributed to an increase in intra-regional trade and an increase in donor projects while China’s contribution to growth in

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Fig. 8.1 Angola, Rwanda GDP growth and GDP growth of sub-Saharan Africa 2000–2018 (US$ million) (Data Sources World Trade Organisation [2019], African Economic Outlook [2019], Global Finance [2020], United Nations Development Program [UNDP] Database [2018], World Bank Database [2020])

Rwanda was minimal. This same period has also experienced emergence of economies such as India and Brazil which also engaged in trade with Angola and Rwanda. Figure 8.1 shows GDP growth rates for Angola and Rwanda, and their economic performance before and after engaging with China. The figures also show the general growth level in sub-Saharan Africa of which the two countries are part of. Both countries attained a steady growth rate at an average of 5 per cent. Angola had a higher average increase of two points over Rwanda from 2000 to 2008 (see Fig. 8.1). The graph shows that real GPD growth in the two countries tripled after China’s trade was established. After China increased its economic activities, Angola in particular registered an average growth of 8 per cent per annum due to the increasing export of resources (World Bank 2013). However, in last three years Angola’s economy started to reverse the growth of recent years due to the decline in demand of its oil in particular from the United States as well as to the significant drop in oil prices and reduction in oil production (Regional Economic Outlook Sub-Saharan Africa 2019). Unstable prices of oil have also caused major economic crisis in Angola and as a result since 2016 the country has been experiencing negative economic growth rate (US-International Trade Administration 2020). The crisis has also worsened social problems and aggravated the country’s existing economic vulnerability (Regional Economic Outlook Sub-Saharan Africa 2019). As can be seen from the Fig. 8.1, between

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2014 and 2018 Rwanda experienced periods of both decline and growth due to the fact that Rwanda as a small landlocked country, was dependent on international trade and intra-African trade and because its key African trading partners were also experiencing similar crisis caused by factors including decline of FDI inflow in particular from United States and Europe. In this sense, Rwanda’s economic performance is conditioned by the stability and growth of its neighbouring countries and inflow of international trade and investment. Rwanda and Angola’s’ GNI also increased dramatically after 2002, particularly Angola (see Fig. 8.2). As presented in Fig. 8.2 the GNI of these countries increased dramatically after China started investing in the country’s resources sector, particularly in Angola from 2002 (World Bank 2013). Because of the increase in their GNI, Angola grew at an average of approximately 6 per cent from 2000 to 2014, with the exception of 2008 and 2009, due to the fall-off in resource demand and prices from other developed economies during the global economic crisis (The World Investment Report 2011; UNCTAD 2011). Nevertheless, China continued to acquire resources, particularly from Angola, as its economy was less affected by the global economic crisis. China’s economy grew rapidly at an average of 11 per cent per year during the same years, which resulted in high demand of energy resources. Figure 8.3 shows Chinese economic growth between 2000 and 2019. As can be observed from the Fig. 8.3 China experienced high growth from 2002 to 2012, Angola and Rwanda have also registered high growth in the same years, which suggests that their

Fig. 8.2 GNI of Angola and Rwanda 2000–2018 in US$ millions (Data Source World Bank Development Indicator Database [2019])

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Fig. 8.3 China’s GDP and real GDP growth (2000–2020) (Data Source Chinese Ministry of Commerce [2020])

economic growth is contingent to Chinese economic performance. For instance, high performance of China’s economy means that China is able to purchase resources from Angola and invest more in Rwanda, while low performance impacts on the growth of their economies. Although Angola and Rwanda achieved better economic growth after engaging with China between 2002 and 2013, in that same period other developed countries such as the United States, Europe and other new emerging economies such as the BRICS countries also increased their economic engagements with Angola and Rwanda (UNCTAD 2019; Guseh and Oritsejafor 2009). Figure 8.4 shows that, India, the United States, European Union, Uruguay, Spain and other economies have also imported commodities from Angola in 2018–2019, but China was still the main importer of Angola’s resources. As demonstrated in Fig. 8.5, Angola has been importing more than china, from its from Spain, India, UAE and South Africa in more recent years, 2018, and 2019, Chinese exports to Angola overtook that of the rest of Angola’s trading partners. Similarly, as shown in Fig. 8.6 Rwanda’s main export market in 2018–2019 has been China, Uganda, Kenya and India followed by United Arab Emirates, UAE. However, China’s imports surpassed that of other countries, thus suggesting an increase in Chinese economic influence in that country. In terms of Rwanda’s imports, Congo Democratic Republic, Kenya and United Arab Emirates have been the major import trading partners shown in Fig. 8.7. Rwanda imports local

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Fig. 8.4 Comparison of China and other countries imports from Angola, 2018– 2019 (Data Sources African Development Bank [2019] and World Bank Database [2020])

Fig. 8.5 Comparison of China and other countries exports to Angola 2018– 2019 (Data Sources African Development Bank [2019] and World Bank Database [2020])

made cheap consumer product such as Sugar, vegetables, cooking oil and locally made furniture. In 2019 Rwanda’s imports from China worth US$378 million, with a partner share of 21.24 per cent, making China leading import country

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Fig. 8.6 Comparison of China and other countries imports from Rwanda, 2018–2019 (Data Source African Development Bank [2020])

Fig. 8.7 Comparison of China and other countries exports to Rwanda, 2019– 2020 (Data Source African Development Bank [2020)

for Rwanda, however, and as intra-African trade expanded, Rwanda, refocussed on trade with its neighbouring countries and in 2018–2019, Kenya and Congo Democratic Republic (CDR), became main export countries to Rwanda (World Bank 2020). However China is still a main investor in

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the country as shown in the previous chapters. It is worth mentioning here that China is still the major financier for infrastructure projects in Rwanda which means that the country is heavily indebted to China (Paduano 2019). Figures 8.4, 8.5 and 8.6 show that Chinese investment has been far more substantial and grows at a faster rate than that of Western and other BRICs countries. This creates a strong foundation for the influence and power of Chinese investment in the two countries. This supports the argument I made earlier that countries such as the United States, India and other emerging economies have also contributed to the growth, particularly in Rwanda where China plays only a minor role. Therefore, it is difficult to attribute all positive growth rates to China, because other trading partners also influenced economic growth and development policies in the two countries. Although the finding indicates that the two countries have experienced an increase in their GNI and GDP, the growth did not translate in overall economic development particularly in Angola. The main argument this chapter attempts to establish that a resource-rich poor country, Angola’s economic development did not keep pace with volume of investment it received from China. China is mainly extracting resources with minimal impact on the development of the local economy. In Rwanda, economic development is relatively better in comparison to Angola. However, Chinese trade and investment is not solely responsible for the little progress Rwanda achieved during the last ten years as explained above. Whether such an increase in GNI and real GDP growth resulted in positive or negative development outcomes and capacity building for the population in the two countries will be further discussed in detail in chapters nine and ten. One of the main explanations provided by the advocates of dependency theory is that economic interactions between two types of states, dominant and dependent, or periphery and satellite, creates a situation in which the latter is unable to achieve economic growth and development due to the external policies of the former. The growth figure in Angola and Rwanda to some extent contradicts the basic arguments put forward by dependency theory. Dependency theory asserts that trade and FDI weakens import substitution strategies and the ability of the host government to record growth and development (Cardoso 1977). Dependency theory is still relevant here.

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Conclusion This chapter analysed China’s increasing trade and investment in Angola and Rwanda. It focusses on the larger question of whether the two case-study countries, Angola and Rwanda registered observable economic growth and development while trading with China. The data demonstrates a dramatic increase in trade with China over the last 20 years, particularly in Angola because of its resources export to China. There is no doubt that these countries have benefited from the China’s growing economic and political might and its increased demand for natural resources, which Angola produces in large quantities. The chapter also examined the GDP growth rate and GNI for Angola and Rwanda. The growth percentage in these countries after the launch of FOCAC has been steady, and they have registered an increase in GNI. As shown in the discussion both Angola and Rwanda have experience a periods of an extraordinary GDP growth and development in some sectors of their economies, this shift may produce long-term implications for longterm growth and sustainable development, Angola is in particular at risk because of its over dependency on the export of primary product to China unless it takes this opportunity to engage China other sectors of its economy. The next chapter examines the actual impact of China’s trade and investment presence on employment generation and the transfer of skills and technology in Angola and Rwanda.

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CHAPTER 9

What Investments, Employment Generation and the Transfer of Skills and Technology: Comparative Analysis of China Angola Rwanda

Introduction This chapter examines the impact of the increase of Chinese trade and investments, focussing on employment generation, skill development and modern technology transfer in Angola and Rwanda. China has expanded its trade and investment, largely in the resource, construction and telecommunication sectors in both Rwanda and Angola. The objective of this chapter’s assessment is to compare the scope and extent to which Angola and Rwanda’s growing trade and investment activities with China, determine their economic growth, development outcomes and capacity building. It will add to the growing academic discourse on the effect of China’s increasing presence in Angola and Rwanda and its desire to create employment and develop local skills and technology, which are important for achieving sustainable growth and development. This chapter is divided into three sections. The first section will explore the current labour and employment trends in Angola and Rwanda to shed light on the current unemployment problems, lack of skills and the types of jobs involved. Section two will look at employment generation, assessing the extent to which Chinese trade and investment has increased the availability of employment and the impact these jobs have on overall employment in Angola and Rwanda. The impact of Chinese trade and © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 A. F. Lisimba, China’s Trade and Investment in Africa, https://doi.org/10.1007/978-981-15-9573-8_9

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investment on youth employment in the two African states has also been considered. Section three will explore any evidence of technology and skills being passed on to the locals in the two countries at the project level and by sectors. For the sake of brevity, this chapter will only focus on the energy, telecommunication and construction sectors, as they currently constitute the majority of China’s trade and investments in Angola and Rwanda. I argue throughout the chapter that China’s presence in the two countries fosters and re-uploads dependency, as trade between the three parties continues to rise. Dependency situation is evident as Chinese FDI in both countries is owned by China’s multinational companies which import their own labour thus limiting the scope of employment generation for the locals and restricting the transfer of technology to locally owned firms due to lack of venture with local companies. Loan given in the form of credit lines and hard currency makes the two countries forge dependent relationship with China to avoid Western loans and credit which come with conditions.

Impact of FDI in Host Country According to the Organisation for Economic Cooperation and Development (OECD, Foreign Direct Investment for Development Report 2008), the impact of foreign direct investment on host countries’ economic development can be evaluated through a number of methods that include the transfer of modern technology, employment generation, transfer of skills, contribution to local industrialisation and/or industrial development (OECD 2008). Over the past three decades, FDI has become the leading source of cash flow especially for developing countries. Its ability to assist countries to deal with issues such as shortages of cash and advanced technology and skills has made FDI the vital focus for policymakers willing to develop their countries (Habyaimana and Wu 2017). However, FDI can also have a negative impact on the development of the local economy by failing to deliver these development necessities outlined by the OECD (2008). China as a rising economic power in Africa, its investments in Angola and Rwanda has a minimal impact on each of the four mechanisms which make China’s trade and investment less beneficial to the local population in two countries. Table 9.1 shows a summary of these instruments explaining the impact and contribution expected (negative or minimal) from Chinese trade and investment in Angola and Rwanda.

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Table 9.1 Contribution of China’s trade and investment on economic development in Angola and Rwanda X symbolises negative and—minimal. Contribution

Country

Angola

Rwanda

Skill Transfer

X

X

Local IndustrialisaƟon

X

X

Transfer of Technology

X

X

Employment GeneraƟon

–

–

It is obvious that the impact of Chinese trade and investment on economic development in Angola and Rwanda has been overall negative. As is shown above, both countries experienced minimal impact from Chinese investment on employment generation. In the case of transfer of technology, the impact is negative in both case-study countries. Since China’s investment in both countries is owned by Chinese companies, the technology transferred is concentrated in Chinese firms and very limited technology is transferred to the local companies. The impact of China’s investment reveals that it has made a miniscule contribution to the local industrial development in Angola and Rwanda. I shall explore this negative impact in more detail in the following sections of this chapter.

Labour Force Trends, Unemployment Patterns and Challenges Overview of Labour Force: Case of Angola In terms of the parameters set by the World Bank (WB) and the International Labour Organisation (ILO), a country’s labour force includes people aged 15 years and older who meet the definition of ‘economically active’, meaning they are able to actively participate in production and services within a limited time frame (OCED Database 2020). In Angola, there has been minimal change in the overall structure of the labour force

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since the country gained independence in 1975 (Collelo 1991). In the pre-independence period, the skilled labour force in Angola was mainly colonial Portuguese, while Angolan nationals generally remained in the unskilled labour sector, doing informal and causal short-term jobs that did not require training or experience (Collelo 1991). This was a part of a colonial policy that excluded the locals from acquiring skills so as to maintain Portuguese superiority over Angolans, thus maintaining a dependency relationship that allowed the continued exploitation of Angola’s resources (Collelo 1991). With the departure of the Portuguese in 1975, Angola experienced a shortage of skilled labour, as most skilled Portuguese had left (Renard 2011). Not long after independence, Angola was embroiled in a civil war that lasted for more than 20 years (UNDP 2005). However, it began to build up its labour force after the end of the civil war in 2002, and from 2009 to 2019, the labour force quickly grew to 13,164,510.000 out of a total estimated population of 32,827,401 million in 2020 (World Population Review Database 2019, 2020). Of these, 90 per cent of workers aged between 15 and 19 are considered unskilled workers, along with 74 per cent between 20 and 25, and 68 per cent of those aged between 25 and 29 years (OECD and AFDB 2019). The labour force in Angola is by large characterised by the proportion of high urban unemployment rate especially in cities including joblessness among those discouraged from looking for jobs due to a lack of job opportunities (Oya and Wanda 2019). And because job seeker often spends time searching for jobs with no outcome, most of them have ceased making efforts of searching employment. Furthermore, high levels of casualness in labour relations, underemployment in rural areas where unemployment is not an option for poor people is a major prevailing problem (Oya and Wanda 2019). Oya for instance, observes that even though the main problem for labour market characteristics is the limited demand for skilled labour, there is still a shortage of skilled and trained labour forces in Angola (Oya and Wanda 2019). The main reason is due to poor schooling and lack of vocational training given the income per capita of the country. The post-war reconstruction in Angola which began in 2002, permitted for the employment of an expat labour force in order to fill the gap of semi-skilled and skilled construction workers in a wide range of public works projects (IDCEA Survey 2017). An up to date data from fieldwork survey conducted by IDCEA from 2016 to 2017, on workforce localisation and real use of Angolan workers in China dominant construction and

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general building industry indicates that localisation rate was lower in Chinese companies representing (74 per cent) in both road building and manufacturing sectors (IDCEA Survey 2017). Non-Chinese companies, similarly, employ imported workers for some skilled, technical and managerial positions. However, the localisation rate in Angola differs from those found in other African countries where China is heavily involved in infrastructure projects (IDCEA Survey 2017). For instance, in Ethiopia, where Chinese companies are busy building roads and infrastructure projects, the average localisation or actual Ethiopian workers is close to 90 per cent and also there is less employment for expat workers or for low skilled and semi-skilled labour opposite to Angola. The localisation in Angola has actually increased over the last ten years when the localisation rate was around 50 per cent in the early days when China started engaging in the infrastructure projects to the current rate of 74 per cent which is still considered to be low in comparison to other African countries (IDCEA Survey 2017). Three major factors explain the increase of Angolans in Chinese firms. (1) Chinese firms employ migrant workforce from the Centre-South region of Angola, with mostly lowskilled workers with low level of schooling and from relatively poorer socio-economic backgrounds, strongly concentrated in Chinese companies, both in construction and in building materials factories in Luanda (IDCEA Survey 2017). (2) The hiring of Chinese labour has increased significantly due to wage growth and logistical costs and the Chinese firms employ locals at cheap wages, for causal and short-term work. (3) Introduction of new requirements from the Angolan government, or better enforcement of old requirements, for companies to hire more local labour (IDCEA Survey 2017). Table 9.2 shows workforce localisation in Angola. The unemployment rate at the national level in Angola has risen to 71 per cent of the working population (over 3 quarter of the potential labour force) since 2019 and remains unchanged at the time of writing this chapter. This was shared by Manuel Jesus Moreira Angola’s Secretary Table 9.2 Workforce localisation rates in Angola Average sample localisation rates (%) Construction Manufacturing Total Source IDCEA Survey (2017)

Not Chinese

Chinese

Total

No of firms

86 92 88

71 78 74

79 84 81

16 15 34

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of State for Labour and Social Security at the 14th regional meeting of the International Labour Organisation (ILO) in Abidjan, Cote d’Ivoire (Macauhub 2019). Furthermore, figures released by the National Statistics Institute (INE) indicated that between May 2018 and February 2019, the unemployment rate was around 28.8% of the population aged 15–64 (National Statistics Institute 2018). This is an indication of a mismatch between employment creation, GDP growth and changes in the country’s labour force. Angola’s continual level of unemployment is severe despite its abundant resources, with the country ranked poorly for generating employment, the lowest in sub-Saharan Africa (Africa Development Bank 2019). Unemployment is prevalent among the general population, while the number of unemployed young people (age 16–24) and university graduates is growing because of the lack of suitable jobs (OECD 2019). This was due to a lack of employment and a significant mismatch between skills gained at training centres and those required by employers, as well as scarcity of employment in the country (United Nations Development Program, UNDP, 2020). Further to this, there are limited jobs for youth and weak link between EVET system and labour Market in Angola (UNDP 2020). As already noted, Angola has the dubious distinction of heading joblessness among women and people under 25 years of age. Women especially are the main victims of the decades of long-civil unrest and, until recently, their status in the Angolan community has been symbolised by inequality, poverty and lack of education (World Bank 2019). This puts them at a distinct disadvantage when competing with men in employment in both the formal and informal sectors of the economy (United Nations Report on the Situation of Angolan Women 2014). This indicates that stable jobs and skill development are needed to enable employment or at least partially resolve the graduate (un)employment problem, a crucial part of long-term economic development (ILO 2020). Although the Chinese cannot be fully blamed for pursuing their interests, they can be partially held responsible because of the large volume of their investment that benefits only Chinese workers and the ruling elites in Angola and not the general population. In addition, Chinese firms are less concerned about corporate social responsibility such as establishing graduate employment and training programmes at the sites of Chinese firms. Generally, Chinese investments are confined to benefit only the Chinese business and workers and Angolan elites who control the country’s resources. Women are the most disadvantaged with

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88 per cent lacking basic skills and facing an inability to secure employment (OECD and AFDB 2019). Lack of progress in employment creation suggests that Angola, despite achieving a strong GDP growth over the decade, has made limited progress in human development. Basic human development indicators in Angola have not maintained pace with GDP progress (UNCTAD 2019a). Data from the International Momentary Fund (IMF 2017; UNCTAD 2019b) suggests that 60–70 per cent of people in Angola are in the informal employment sector, including selfemployed road-side vendors and traders, who constitute one-third of the total employed workforce in the country (IMF 2020; UNCTAD 2019b). As such, the unemployment rate is approximately around 30 per cent at national level if informal employment is not considered a measurable form of employment (World Bank 2019).

Labour Force Trends, Unemployment Patterns and Challenges Overview of Labour Force: Case of Rwanda At the other end of the spectrum, in terms of its economy, is Rwanda. It is a country that has also emerged from a period of violent conflict and political instability and is still recovering from the genocide of 1994 (Dallaire and Sarty 2004). It has a much smaller population of 12,374,397 million (National Institute of Statistics of Rwanda 2020), with a labour force of 7,320,999 in 2019 compared to Angola’s 13,164,510 (World Bank Labour Force Database 2019; World Population Review Database 2020). Unlike Angola, the unemployed population is relatively small, and the unemployment rate at a national level has declined by 0.7 per cent from 16.7 in February 2017 to 16.0 per cent in February 2019, an indication of progress in both human development and employment creation (National Institute of Statistics of Rwanda 2020). However, it is important to note that the unemployment rate in Rwanda is low because 71 per cent of the Rwandans work in informal sectors, mainly farms in rural areas. Despite the fact that the total unemployment rate is low in comparison to many countries in the region, employment in formal wage paying sectors is remarkably low. According to a survey census conducted by the National Institute of Statistics of Rwanda in 2019, most economic activities in the country are concentrated in informal sectors and rural areas,

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which represent 71 per cent of total employment in the country (National Institute of Statistics of Rwanda 2020). Although Rwanda has a low unemployment rate, as indicated in Fig. 9.1, the unemployment rate among young Rwandans and university graduates is particularly high compared to other age groups. According to a study by the United Nations Conference on Trade and Development, UNCTAD on ‘Youth and Women’s’ employment in Rwanda, around 70 per cent of young people in Rwanda are unemployed (UNCTAD 2017b; Trading Economics, Rwanda Unemployment Rate 2019). Furthermore, the number of young people in the population in the age group of 15– 27 years has grown from 2.99 million to 3.18 million, a 6.5 per cent increase in the period between 2007 and 2018 (National Institute of Statistics: Rwanda 2019). This number is predicted to double in the next few years, contributing to the need for more job creation (National Institute of Statistics: Rwanda 2019). Young Rwandans are unable to secure employment due to mismatch of skills and lack of suitable employment opportunities (African Development Bank 2019a, b). This is a similar issue that Angola faces, as there are youth unemployment problems due to Angola, 1,13,164,510

Rwanda

Angola

Rwanda, 1,7,320,999

Fig. 9.1 Total labour force in Angola and Rwanda, 2019 (Data Source World Bank [2019])

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the lack of jobs and a poor education system, which fails to produce standardised courses and the training sought by employers (African Economic Outlook 2019). In 2019, the unemployment rate among females was 72 and 76 per cent for males in Rwanda (NISR 2019). In the past, 90 per cent of the population worked in the agricultural sector, but the sector has declined over the last ten years, forcing more Rwandans to migrate to major cities to look for jobs (World Bank 2019). This is particularly true among young people and university graduates who are eager to move away from inherited farms and the positions this inheritance entails. There is also a shortage of skilled labour in the two countries, as most of their potential skilled labour force is young and consists mainly of university graduates who are yet to enter the job market. Employment and economic growth are closely interrelated, as the former is important in boosting productivity and growth. Furthermore, the availability of employment contributes to poverty reduction by adding value and income for both the state and individuals (UNCTAD 2019b). This shows that the creation of employment is vital in enabling these groups to contribute actively towards reduction of poverty through economic development. While Rwanda continues to achieve reasonable growth in comparison to other states in the region, it is important that economic growth occurs in sectors such as services sector that have the potential to create and absorb more stable and long-term employment at a large scale. However, this seems not to be the case in the country. In the past, China’s own development programme was focussed on fighting poverty, creation of employment and acquiring skills and technology from the West by attracting FDI (Shenggen et al. 2004). It is through the examination of the data on Chinese investment and employment generation and unemployment challenges in Angola and Rwanda, such as those I have outlined, that one can understand whether China replicates or passes its own development experience to Angola and Rwanda, and determines whether China’s investment has a negative impact on their respective economies. China’s contribution to employment creation, skill development and technology transfer are therefore under scrutiny, as they are vital to enhancing growth and productivity, which could lead to inclusive economic development outcomes and local capacity building. In contemporary times, China has become an increasingly influential player in the two countries under discussion and the developmental impact of its increasing trade and investment can be measured by its ability to contribute to employment and to the much-needed skill and technology transfer in Angola and Rwanda.

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Measuring Employment Generated by Chinese Trade and Investment in Projects Supported by the Energy, Construction and Transportation Sectors Resources Sector Projects Case of Angola China’s presence in RRDCs and non-RRDCs has been increasing rapidly over the last two decades (World Bank 2013a). It is an undeniable fact that China’s trade and investment has helped its major trading partners to escape global recession and to achieve high growth rates over the last decades (African Economic Outlook 2020). A large portion of the accumulated share of Chinese investment in RRDCs, particularly in Africa, has focussed on extractive industries such as minerals, oil and gas sectors (Broadman 2007; Economic Commission of Africa 2012; Raine 2009). Since resource sectors are capital-intensive as opposed to being labour intensive, they have not generated sufficient employment or skill and technology transfer in countries with rich resources in the African continent (Draper and Le Pere 2007). In Angola, for example, the resource sector hosts China’s largest foreign direct investment (FDI). In 2019 alone, China’s resources import value from Angola amounted to US$22.7 billion and with year after year increase (Workman 2020). However, the sector has generated limited employment opportunities for the local people, especially in the form of stable and well-paying jobs for ordinary Angolans (African Economic Outlook 2019). This is despite the fact that Beijing has continued to make major investments in the country since the launch of the new economic relations between Angola and China in 2002 (see Power and Mohan 2010). According to the data compiled by the African Research Initiative of John Hopkins University, Angola is the top recipient of Chinese concessional loans, with $42.8 billion disbursed over 17 years (China Africa Research Initiative 2018). The loans are given in the form of credit lines in exchange for oil production. The Angolan government used these loans to fund post-war reconstruction projects that included bridges, highways and hospitals with the pre-agreement that work in any project funded by Chinese credit lines would be awarded to Chinese companies (Vines and Marku 2012; Ministry of Commerce of the People’s Republic of China, MOFCOM 2010). The loans are recurrently provided by the Chinese government in order to facilitate access

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to resources and investment in the country. However, to date there have been only minimal effects from the loans on the development of the local economy and employment generation. Chinese nationals fill most of the jobs generated by Chinese investment, as China often imports its own skilled and unskilled labour. Even though there is no data that shows the exact number of jobs generated by Chinese investment in these sectors, it can be argued that most technical positions are filled by Chinese nationals, as the employment of Chinese labour in oil blocks operated by Chinese firms has become a prerequisite for receiving Chinese aid, investment and political support (Clodnitchi et al. 2018). The Chinese labour requirement is an agreement which China prescribed to Angola as a part of conditions for receiving Chinese loans and credit lines, allowing projects funded by the Chinese government to employ up to 70 per cent Chinese nationals in the workforce of any of its investment sites in Angola, including the high-paying resource sector (Alves 2013). Consequently, the resource sector has generated very few jobs for local Angolan workers. Considering that the level of unemployment in Angola is high, the generated jobs have had no visible effect on current unemployment situation in Angola. Although at the time of writing this chapter, no substantial and/or detailed statistical data was available on the unemployment rate in Angola before Chinese engagement; most sources indicate that the unemployment rate has remained at 26 per cent since the end of the civil war. This indicates that employment in Angola remains steady and neither the Chinese nor investment from other developed countries brought significant changes to the unemployment situation in the country. This suggests that the contribution of China’s FDI in the resource sector to the local economy and employment creation is not significant (De Comarmond 2011). Further, this implies that the resource sector has little impact on employment generation in a country with more than half of its younger population lacking employment. The minimal effects of Chinese investment in the resource sector can be observed from the following: Local participation by companies and services limited to 30 per cent of the contracts funded by Chinese credit lines has thus raised concern with regard to the potential national benefit in terms of added value and employment generation. (Santos and Amalia, cited in Alves and Marcus 2012)

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This quotation denotes that local Angolan firms do not benefit much from Angola’s resources boom. In reality, however, far less than 30 per cent of loan projects are given to Angolan companies. The absence of local firms in the implementation of projects or creating joint ventures with Chinese firms implies that there are very few employment opportunities for local population as Chinese firms bring their own labour from China. This practice enables Chinese firms to repatriate massive volume of the profits generated from these sectors back to China through the means of employing Chinese labour and importing materials and other products from China. This clearly points to the negative effects of Chinese investment on job creation in Angola. The majority of the workforce is employed in the traditional agricultural sector, which contributes only 11 per cent of Angola’s GDP, while the oil sector contributes more than 85 per cent to the GDP. In fact, the resource sector provides jobs to only 1 per cent of the population in a country with an average unemployment rate of 26 per cent (World Bank 2018). The Economist has published comments stating that Angola is ‘still much too oily’ (Economist, April 12, 2014). Nevertheless, oil-based companies generate very few jobs for ordinary Angolans. From the perspective of some Angolan government officials, dependency on oil has caused the failure of their efforts to develop other sectors of the economy, which have more potential to generate employment. The focus of Chinese investments in energy sectors, particularly in Angola, is accessing energy supplies rather than becoming a model for economic development (African Economic Outlook 2020). China attaches significant importance to oil and mineral resources for sustaining Chinese economic growth and national security, and Chinese leaders often consider energy supply issues to be their topmost national priority. Consequently, Chinese leaders formulate an approach, such as the provision of concessional loans, to immediately please the Angolan elite, but fail to address perennial problems such as unemployment and skills shortages, which are detrimental to Angola’s economic growth (African Economic Outlook 2019). China is in Africa for its own interest and not to provide Africa with sustainable and long-term development alternatives, thus repeating similar trade patterns practiced by Africa’s traditional trading partners or colonial rulers. Ironically Angola is the second largest oil-producing country in subSaharan Africa (after Nigeria), poverty and inequality has increased significantly during China’s investment in the sector (UNDP 2013). For

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instance, a 2018 United Nations report on poverty has noted that, while overall poverty had declined, the gap between rich and poor had increased considerably (World Bank 2019; UNFP 2019). However, both the wealth gap and poverty have been on the rise due to systemic corruption in the country. In addition, despite a healthy growth, partly fostered by the increasing Chinese investment in the resource sector, unemployment skyrocketed (World Bank 2019). Youth unemployment, including university graduates, hovered around 15 per cent (African Development Bank 2017). This suggests that the resource sector has not contributed to employment generation for the local population in a significant manner. Chinese economic activities can be seen as essentially resource seeking and do not contribute to changes in Angola’s economic development nor do they contribute to alleviating the living standard of ordinary people. This implies that Africa is in a situation where its participation in its relationship with China is through providing mineral resources to China, while China floods the markets of Africa with cheap products, resulting in the former becoming richer and the latter staying poor and dependent on the former. As such a new form of dependency is fostered by emerging economies, such as China, which have emerged as a massive re-distributive instrument in the international economic system. These emerging economies play a significant role in continuing and increasing the domestic gap between the rich and poor in periphery countries as compared to the rich countries. In Angola, for instance, the Chinese focus on extracting resources from Angola and not generating durable employment for locals in return creates a new form of dependency. This Chinese practice also exemplifies how Angola’s economic dependency on China can undermine its domestic development initiatives in favour of Chinese interests. Therefore, Chinese presence in the African States is less about Africa’s development and more about China’s economic and political interests served through this unequal arrangement. Most of the jobs generated in Angola and Rwanda have been distributed among Chinese labour, which is imposed almost as a prerequisite of Chinese investment, and a narrow elite group that supports inner circle of ruling elites and their President his families. Ordinary Angolans benefit very little from the generated jobs, and hence turn to informal sector employment (World Bank 2011). Angola’s labour laws require foreign companies, including Chinese firms, to provide jobs to a minimum number of Angolan employees, but because of the high level of corruption in Angolan bureaucracy and the clout of Chinese government

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in the management of joint ventures, Chinese firms often contravene local labour laws and instead abide by Chinese laws and investment policy. It can be argued that Chinese policies are designed to gain access to overseas resources and also the overseas job opportunities for Chinese labour to reduce unemployment back in China (Ovadia 2012; Global Witness 2011). Consequently, Chinese investment has very little impact on employment generation in a country that has witnessed a continual rise in unemployment and poverty. Case of Rwanda In contrast to Angola, Rwanda is a country less endowed with natural resources, and Chinese investment is focussed mainly on infrastructure and telecommunication projects where Chinese companies find themselves with a distinct comparative advantage. However, the entry of China in Rwanda as donor and investor has jeopardised Rwanda’s long-term development objectives. Chinese investment and development assistance to non-resources-rich Rwanda are linked to the interests of Chinese firms; these Chinese firms are looking for better investment opportunities and employment opportunities for Chinese labour. The employment generated by these Chinese investments is handed over to the imported labour from China instead of hiring local Rwandan people; thereby limiting employment generation and the transfer of technology to Rwandan people, thus inflicting the overall negative or minimal impact of Chinese investment on economic development in Rwanda. Despite the massive inflow of Chinese capital in the period between 2013 and 2018, the number of youths directly employed by Chinese firms remained relatively low in sectors in which the Chinese firms invested heavily. Chinese financial assistance, credit lines, aid or other forms of foreign direct investments (FDI) employs a different approach and pursue different outcomes from other similar aid donors/assistance providers to Rwanda. China has tied its financial investments to the construction of visible and durable infrastructure in the form of roads, bridges, office building complex, hotels, multi-thousand capacity stadiums, residential housing complex and hospitals. The Chinese focus is not on building infrastructure alone, but also on building prominent and iconic structures that deliver a message. China spent $27 million to construct Administrative Office Complex in Kigali, described as yet ‘another indicator of the growing relationship between China and Rwanda’ by the Prime Minister, Édouard Ngirente (Paduano 2019; Tasamba 2019). Another prominently visible project

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is the construction of the ‘Vision City’, 4500 residences in a housing complex in Kigali, branded as Rwanda’s largest real-estate development to date (Qing and Xuan 2017). On an average, the small to medium size project is expected to create between 200 and 1000 job opportunities, and the construction of the Administrative Office Complex generated around 260 jobs for locals, who were also provided with skills training (Xinhua 2019). However, while construction projects are labour intensive, jobs generated in the sector are unstable, low paying, short term, and are mostly for uneducated people. Furthermore, these jobs rarely come with adequate job security or training that can be used to advantage and as a new experience to apply for more stable and permanent jobs in other firms. The number of jobs available for local Rwandan people is quite limited as most of the Chinese firms prefer to import labour from China. The immigrant labour not only takes the jobs away from the locals, but they rarely mix with local communities in Rwanda. Chinese workers live either on the sites where they work or in exclusive enclaves that are built by the Chinese government for Chinese nationals (Mohan and Lampert 2013). Thus, the Chinese investments do not necessarily have an enabling effect on the local economy, leading to sustainable developmental outcomes and the transfer of technology and expertise. Hence, the data above supports the above mentioned statement that Beijing has increased its presence in Rwanda significantly and has generated some employment for locals; the overall economic scenario of the country, in terms of employment generation for youth employment (including university graduates) remains grim. For example, although Chinese firms have generated some jobs, these jobs have contributed very little towards reducing youth unemployment in the country as unemployment rate remains at 15.5 per cent (Rwanda National Institute of Statistics 2019).

Construction and Telecommunications Sectors In addition to the resource sector, the construction and the telecommunication sectors have been key areas where Chinese enterprises have established a strong presence in resources-rich Angola and non-resources-rich Rwanda, working on projects (UNCTAD 2013). In Angola, for instance, China has become a major financier for post-civil war construction projects (Campos et al. 2009). In 2019, Chinese investment in Angola exceeded US$20 billion (Ferreira 2019) and the accumulated value

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in construction contracts awarded to Chinese companies at one-time exceeded US$6 billion, thus overtaking Angola’s traditional trading partners such as Portuguese and Brazilian construction companies (Ferreira 2019). Based on the available data on Chinese projects in Angola, the average project costs between US$ 6 million and US$ 11 million, and is estimated to generate around 900–2000 jobs per project (World Bank 2019). However, there are remarkable differences in project size, cost and the number of jobs generated depending on whether the project is small and short term, medium, or large and long term, which also relates to the different sectors in which Chinese firms invest (UNCTAD 2017a). As noted, in contrast to Angola, Rwanda has minimal resources, hence Chinese trade and investment is small scale, at less than 1 per cent of China’s total FDI in the African continent (African Centre for Economic Transformation 2019). That investment is largely concentrated in areas of construction, real estate, hotels and information and communication technology (Rwanda Development Board 2019; National Bank of Rwanda 2020). The average project cost in these sectors is estimated at between US$2 million and US$5 million, and a project would be expected to create somewhere between 300 and 1000 job opportunities (National Bank of Rwanda 2018). Most projects executed by Chinese firms, particularly in resource-rich Angola, are repaid through oil production (Vines and Weimer 2012). In many ways, Rwanda, as a non-resource-rich developing country, represents a different landscape for China. Beijing uses Rwanda as an example to defuse international criticisms that China targets only resource-rich developing countries (Ministry of Foreign Affairs of People’s Republic of China 2019). Conversely, the discussion on China’s increasing investment in RRDCs and non-RRDCs, and in Africa in particular, occupies a distinct place in the field of international relations and the study of the contemporary international political economy (Large 2008). Beijing prefers accessing resources, particularly oil from Africa, through state-invested oil companies that work in the best interests of the Chinese state. This strategy shows that the perspective of economic nationalism plays a central role in China’s investment policies in Africa (Zhang, cited in Dent 2011). This is supported by the factual evidence which indicates that China’s investment in Africa is state-led and it focusses on securing resources and a marketplace to support its own economic growth (Goldstein et al. 2006). Data and evidence show that China’s trade and investment in RRDCs and non-RRDCs in Africa is coordinated at a

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high state-level, involving Chinese officials who negotiate business deals and provide concessional loans to host countries to facilitate investment opportunities for Chinese companies in Africa. Most Chinese companies that have invested in Africa are wholly state-owned; only a small percentage of these firms are private, but also working within the guidelines of the Chinese government. This is despite the existence of little competition among all these companies to make profits. The characteristics of Chinese investment in Angola in the resource and construction sectors suggests that economic nationalists’ thought forms a key part of Chinese investment policy in Africa (Brautigam and Gaye 2007). In short, one of the main arguments of economic nationalism is that economic activities should be subordinated to national politics. This subordination allows nationalist states to focus on four main interests, which they articulate in their foreign investment policies. These interests are political power, aggregate national income, economic growth and social stability (Krasner 1976). It can be argued that the Chinese leaders decided to commit to Africa in a major way as the continent’s abundant resources and growing population represents a path for China to achieve increased growth and development, as well as pursue its ambitious goals of leveraging power in the region and globally. The findings of this chapter are so far consistent with the economic nationalist’s position regarding the self-serving motives of Beijing’s increasing investment in African RRDCs and non-RRDCs (Helleiner and Wang 2018). This increase can be seen as a way to accomplish the four state-centric interests, as articulated by Krasner (1976). The preceding discussion on Chinese investment in the resource, construction and telecommunications sectors enables us to comprehend how Beijing is comprehensively increasing its presence in Angola and Rwanda. However, the effects of Chinese investment in these sectors demonstrate that China is becoming increasingly influential, and although its role is perhaps irreplaceable, it is also detrimental to the overall performance in economic growth of the two countries. It also supports the views which see Chinese presence in RRDCs and non-RRDCs as detrimental and having a negative impact on its trading partners, especially that they do not represent mutual partnerships, as Beijing often claims. To further demonstrate the extent to which China’s involvement is increasing in the construction, telecommunication and resources sectors of Angola and Rwanda, Table 9.3 contains more information concerning some of the major Chinese contracts in these sectors in the period between 2010

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Table 9.3 Some Chinese projects in construction and telecommunications, 2010–2019 Country

Sector

Company

US$

Area of impact

Angola

Construction

CRBC

30 million

China International Fund Ltd. COVEC

300 million

10 million

Telecommunications

Huawei

400 million

Oil and gas

Sinpec

2400 million

Construction

(BCEG)

300 million

CRBC

12 million

CGEC

$10 million

Top International Engineering Corp

27 million

China Star

1.2 million

New Century Development Limited

60 million

BCEG

10 million

Acquisition of materials from China Maintenance of Benguela Railway line Building of Luanda General Hospital Fixing mobile network and lines Buying of shares in blocks 15, 17 and 18 Building of Kigali Convention Centre Construction of Kabuga-Masaka Highway in Kigali Construction of a regional polytechnic centre in Musanze District, Northern Province Construction of administrative office complex of Rwanda Reconstruction of Kigali International airport Joint venture project to construct Marriot Hotel Repair of roads and bridge

Rwanda

ICT

(continued)

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Table 9.3 (continued) Country

Sector

Company

US$

Area of impact

Huawei Technologies Rwanda

1.2 million

Building of mobile network and technology

The Author generated this table calculating and using data from the World Bank (2012), United Nations Conference on Trade and Development, UNCTAD (2012, 2013), Ministry of Commerce of the People’s Republic of China (MOFOCM) (2014, Kigali City Council Database (2015), Chinese Embassy in Rwanda (2020), Bräutigam (2011), China Daily (2019)

and 2019, this was a period when China continued to expand at a rapid clip in Africa and in which China has overtaken Europe as the continent’s largest trading partner (World Bank 2019). Chinese Eximbank and Chinese private companies funded most of the projects. In all projects, Chinese Eximbank provides credit line amenities for the completion of the projects and the project contracts were all granted to Chinese companies.

Data Analysis As shown in Table 9.4 jobs have been generated both in the energy sector and in non-energy projects such as construction, infrastructure and telecommunications, in which Chinese companies have also made largescale investments (UNCTAD 2013). The creation of a number of jobs in all sectors hosting Chinese investment indicates that there are some jobs generated from Chinese investment (Bräutigam 2011). However, despite the fact that certain numbers of jobs are generated, there are also negative effects on the overall economic development that need consideration. Negative effect and impact in this analysis implies that China’s trade and investment do not result in a proportionate reduction of unemployment in Angola and Rwanda. For example, the jobs generated by Chinese investment in these sectors do not provide adequate and sustainable employment to the local population, as lack of long-term employment thwarts any attempts for sustainable economic development (Lee 2009). We cannot deny the reality that jobs generated in these sectors since the end of civil war in 2002 has resulted in the enhancement in the situation and expansion in the pool of workers with relevant skills and training (Oya and Wanda 2019). However, this growth in employment

2 6

2008–2009 2012–2019

2010–2011 2007–2009 2009–2013

2011–2012

Time frame

240 million 4 million 4 billion 170 million 4 million 33 million

Value US$

600 6000

1400 700* 3400

7700

Total generated jobs.

Jobs Created

350 3100

500 No data 1800

3700

Local employees

250 1900

900 No data 1600

4000

Chinese employees

150 400

200 No data 300

500

Estimates of long-term quality jobs

Note ‘Companies’ indicates the number of Chinese companies operating in each sector ‘Timeline’ indicates timelines of projects * Estimated Data sources Author’s calculations using data from the Work Bank Database (2013b), UNCTAD (2012), African Development Bank, ADB (2012), OCED (2012), Brautigam (2009), Taylor (2009); and the Ministry of Finance of the Republic of Angola (2013), China Daily (2019), China’s Investment in Rwanda (2020)

ICT Construction

2 2 3

Telecommunication Resources Construction

Rwanda

4

Construction

Angola

Companies

Sector

Country

Table 9.4 Estimate of jobs generated by Chinese investment in Angola and Rwanda, during the period of growth 2007–2019: sector wise

230 A. F. LISIMBA

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has not been enough to meet the need for semi-trained and skilled workforce such as electricians, welders, carpenters, heavy machinery operators and this is basically because of two things, first, most jobs are created by China and China uses its own skilled labour and second, the jobs themselves are not enough for locals. In Angola, for instance, four major Chinese state-owned construction companies, including China Roads and Bridges Corporation and Sinohydro China, invested US$240 million in 2011–2012 (as shown in Table 5.3), which generated around 7700 net jobs in total, of which 4000 were distributed among Chinese expatriate labour and 3700 to the local labour. This also indicates that Chinese construction firms, built infrastructure projects in Angola using their own imported workers from China. There is lack of adequate data that shows the exact number of long-term jobs created since China’s emergence as a major economic player in these two countries. However, as most of the locals employed in the Chinese firms are absorbed in casual positions, the approximate figure of permanent jobs is estimated to be minimal out of the total jobs generated. In the period between 2010 and 2019, the telecommunication sector in Angola received investments of US$ 4 million and generated around 1400 jobs, but only an estimated 500 positions were given to Angolans, as Chinese employees took the majority, which were often long-term positions. This analysis is also confirmed by Zafar (2007), who postulates that the negative impact of Chinese investment in Angola is obvious because all projects funded by Eximbank provide little employment to the locals. As Zafar notes, Eximbank, which finances the projects, is obliged to provide only 30 per cent portion of the entire project to local firms. However, due to corruption in local Angolan bureaucracy and the influence of China on these projects, even that regulatory obligation is not fulfilled, leaving most of the projects to be implemented by Chinese companies who bring their own workers from China. Chinese funds for construction projects in Angola are linked to oil deals. Therefore, Angola’s leverage to negotiate the impact of such investment on employment creation is finite (Brautingam 2011; China Eximbank Annual Report 2009; China Eximbank 2011). This, in part, also indicates that the Angolan government has not yet designed a long-term policy with respect to the mobilisation and utilisation of Chinese investment and credit lines and their impact on Angola’s economic development. In Angola, there has been a rapid increase in Chinese labour migrants into the country since 2002, when China reengaged with Angola and Chinese firms began to invest in the country

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(China Africa Research Initiative at John Hopkins University 2018). Since then thousands of Chinese construction workers, engineers, doctors, cooks and petroleum engineers have migrated to Angola looking for better life opportunity. In 2018, the number of Chinese nationals working in construction projects throughout Angola was 250,000, the vast majority on working visa (China Africa Research Initiative 2018). In the period between 2004 and 2018, more than Chinese nationals entered the country on working visas.

Conclusion This chapter examined the impact of China’s trade and investment in resources-rich developing countries (RRDCs) and non-resource-rich countries (non-RRDCs), with a particular focus on Angola and Rwanda. It appears from the discussion throughout this chapter that China is a multifaceted actor in countries with complex developmental issues. This chapter has used data from credible sources such as the World Bank and United Nations Conference on Trade and Development, as well as data from the case-study countries to examine commercial activities of Chinese firms in the areas of construction, mining and telecommunications. It has been observed that the increase in Chinese investment, particularly in Angola, has coincided with its need for basic infrastructure critical for its economic development, creating a seemingly win-win situation in this context. However, it is not actually a win-win outcome due to the employment issues and the lack of transfer of skills and technology essential for increasing productivity and achieving long term, sustainable development. Although Chinese firms have generated some employment, this job creation has not resulted in widespread employment opportunities, as most of the well-paid jobs are distributed among Chinese labour while handing over low-paid and casual jobs to the local Angolan or Rwandan people, thereby, limiting the overall impact of Chinese firms on employment creation in the two countries. The previous chapter demonstrated an increasing Chinese economic influence in Africa and in particular in the two case-study countries. In this chapter I have examined some areas of the economy with heavy Chinese investment with an assessment of their impact on the development of the host country. In this sense, Chinese firms have failed to generate productive and stable jobs in both the countries. In Angola in particular, a certain percentage of the population is getting rich especially those who are loyal to the

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government as they benefit the most from Chinese investment. While in Rwanda the picture is slightly different, the result or the paradox of Chinese investment contributes to the growth in the GDP. However, as empirical data has demonstrated, China does not create many jobs for the locals. In Angola, Chinese investment leads to social inequalities as ordinary people living in the country are still experiencing massive challenges in terms of securing employment and improving their standards of living.

Notes 1. African Economic Outlook publication is annual report jointly arranged and published by African Development Bank, Organisation for Economic Cooperation and Development and the United National Development Program. The African Economic Outlook report provides a comprehensive and comparable data and analysis of the 54 states in Africa. 2. Data from the National Institute of Statistics of Rwanda (NISR) is used because the NISR is credible and has available reports and data in relation to investment and employment figures. Data from NISR is also widely used by the most respected institutions such as the World Bank, IMF, OECD, African Development Bank and African Economic Outlook. In comparison to other sources in Rwanda, NISR publications, reports and Statistical Yearbooks are the most reliable. 3. Sonangol stands for Sociedade Nacional de Combustiveis de Angola. The company is state-owned and is the main regulator of oil and gas industries in the country. More information about Sonangol is available from the Sonangol website at http://www.sonangol.co.ao/English/Pages/Home.aspx [Viewed 23 June 2020].

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CHAPTER 10

Observations: Has the Arrival of Chinese Labour Resulted in Local Jobs Being Taken?

Introduction The broad spectrum of studies undertaken on China–Africa relations presents a range of analysis; at one end depicting China as a neocoloniser of African continent while on the other presenting China as the most generous partner of the African people (Lumumba-Kasongo 2011; Mawdsley 2007; Alden 2007). This chapter focusses on analysing the contribution of China’s trade and investment on local development and capacity building in Angola and Rwanda. I will contend that although Chinese trade and investment in Angola and Rwanda is a good thing to happen and much welcomed in the absence of investment from the traditional trading partners. However, and despite its necessity, China’s economic activities are yet to produce a tangible change in the day to day living conditions in the two countries. I extend the line of this inquiry by using dependency theory to test and analyse the pursuit of China’s growing influence in the two countries and to what extent it helps these countries to advance their economic in the ways that results in the wellbeing of their citizens. First, I explore the impact of Chinese labour migration as the starting point for my analysis. I argue that China’s presence in the two countries produces different variations of impacts which poses the question of who benefits from Beijing’s rising economic influence in Africa and in the two countries, in particular. I then examine the issue of employment generation for youth to capture the impact of © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 A. F. Lisimba, China’s Trade and Investment in Africa, https://doi.org/10.1007/978-981-15-9573-8_10

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China’s trade and investment, across the population by age and gender to see whether young people are benefitting, or does the benefit only go to those in power who help China to further its investment goals it seeks to achieve. In the following section I discuss the issue of skills mismatch and the transfer of technology, followed by language barrier as an excuse used by some Chinese companies not employ locals. In the final section, I explore the impact of cheap value-added Chinese Products that flooded towns and villages in Africa and their impacts on local manufacturing and import substitution.

The Impact of Chinese Labour A data compiled by China–Africa Research Initiative of John Hopkins University indicates that there were 201,057, Chinese working in Africa by the end of 2018, same number reported by the Chinese National Bureau of Statistics (China Africa Research Initiative 2018; National Bureau of Statistics of China 2000). The number of Chinese nationals in Angola for the last 15 years is estimated to be 250,000 (Tkachenko 2018). A study of Chinese migrants in Ghana classifies Chinese into four categories: (1) retailers and business people, this category tends to be rich and they own businesses that employ both the Chinese and the locals, (2) professionals including technicians, engineers, aid workers, teachers and healthcare workers, this groups is well educated and they often have high positions in Chinese firms and closely work with Chinese embassies, (3)labour contracted to private enterprises or state-owned Chinese firms, this is the largest group of Chinese and they tend to have an idea of longterm settlement in a country where they work (4) old Chinee migrants who moved to Africa before Chinese economic boom, this group is small and mostly living in Africa as normal citizens, for instance, South Africa has Chinese-South Africans who hold South African Citizenship. Since China is viewed as an alternate source of investment in Africa, the immigration of Chinese people to Africa is likely to continue in the foreseeable future. Mass migration is the reason why employment rate of local people in Africa and in particular in Angola and Rwanda is low. This mass migration validates detailed discussion into labour migration in Africa to help in raising awareness among policymakers in Africa about the future consequences of such migration that is attached to Chinese investment The population of Chinese expatriate workers in Angola is one of the largest in Africa after Algeria and largest in sub-Saharan Africa and is

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expected to increase in the future. In practice, local Angolans took less than 30 per cent of the generated jobs, as most were allocated to the Chinese nationals. This is despite the fact that the Angolan Agency for Private Investment (ANIP) requires all foreign firms, including Chinese, to abide by local private investment law Clause 54/1, which indicates that foreign companies should employ at least 70 per cent local labourers (Tang 2010). However, any project financed by Chinese Eximbank as a part of credit line contracts, and projects funded through bilateral agreements between the two countries, are not subject to the 70 per cent local employment rule. As shown in Chapter 9 Table 9.4 the presence of Chinese labour can be witnessed in all three major sectors, taking more than 50 per cent of the generated jobs at the expense of local employees (Brautigam 2009). In this sense, it is worth arguing that Chinese construction firms undertake Angola infrastructure projects using their own imported workers from China, given the increasing number of Chinese in Angola mentioned above. To this end and although Chinese firms created temporary jobs, these jobs were not created for the Angolans. The reasons for using Chinese labour were primarily language barrier, unskilled labour and the long time it required to train local Angolans to do the job. In comparison, foreign firms from nations other than China operating in Angola, such as Chevron, employ local labour (Ngoasong 2014; Ovadia 2012). Heavy construction, telecommunications and resourcerelated jobs are engaging more Chinese employees who are willing to work for long hours at smaller wages than the local employees (Santos and Quintao 2012, cited in Power and Alves 2008). As indicated in Chapter 9 Table 9.4. There are far fewer Angolans than Chinese workers in the telecommunications sector, suggesting that investment in the sector has had a limited effect on job creation, as the Chinese expatriates take up most jobs. For instance, in 2012, overall 9 Chinese firms in the three sectors (construction, telecommunications and resource) had generated an average of 12,500 jobs, of which 6500, were absorbed by Chinese labour (Santos and Quintao 2012, cited in Power and Alves 2008). In 2019, Rwandan government signed a deal with Chinese garment company, Pink Mango C&D, to establish clothe factory in Kigali (Bizimungu 2019). The company is expected to generate around 7500 jobs but not clear how many of these jobs will go to locals. Although Chinese firms have generated jobs, their contribution to the total available jobs in the country is minimal, because these generated jobs

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are confined only to construction sectors. Therefore, Chinese investment does not provide a solution to the unemployment problem in Angola. Data from Global Construction Review, GCR, (2018) indicated that, Angolan government had requested around US$ 15.5 billion in construction and infrastructure projects in Angola (GCR 2018). Chinese sources argued that these projects will make positive contributions to Angola’s economic and social development, including employment generation (GCR 2018). However, my research findings portray a different picture. Although Chinese investment has contributed in terms of infrastructure building, it is questionable whether that investment is changing the life of Angolans for the better. Figure 10.1 below compares unemployment data in Angola from 2000 to 2019, before and after China’s re-engagement. As can be seen from the figure, there has been no significant change in the unemployment rate in Angola since 2000. In fact, the unemployment rate increased in the years 2017, 2018, and 2019, despite the fact Chinese investment increased during these years in Angola. Data in the figure also indicates that there is no change in youth and female unemployment rates before and after Chinese engagement. The effect of China’s trade on youth employment is discussed in more detail in the following section. When comparing the number of jobs generated by Chinese investment with the number of Chinese labourers working for Chinese firms

Fig. 10.1 Unemployment rates (As per cent of labour force in Angola, 2000– 2019) (Source World Bank [2019])

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in Angola, it is fair to argue that China’s trade and investment only has a marginal effect on the employment generation and, therefore, its contribution to the local economy is limited. Local workers do not have access to decent employment opportunities with the Chinese companies and those who obtain jobs are on short-term contracts (Marques de Morais 2011). Many scholars have argued that one of the major impacts of China’s FDI is that Chinese firms bring their own workers, both skilled and unskilled, which makes them less reliant on local labour (Sautman and Hairong 2008; Broadman 2007). In 2011, Professor Deborah Brautigam presented evidence to the United States Congress subcommittee on the number of Chinese construction contracts in Africa. In 2008, Chinese firms held nearly 3000 projects, with a value estimated at US$40 billion. Brautigam argued that in 2009, there were 187,396 Chinese expatriate labourers who were officially working for Chinese companies in Africa, mostly on construction projects in Angola. Other issue is that China’s investment in Angola does not contribute to local development in the way that benefits ordinary Angolans. A number of studies, have found the lack of willingness to help change lives of locals in accordance with their needs. For instance, the high rise ‘ghost towns’ constructed with Chinese funding as residential zones with luxury facilities and commercial sites including modern schools, hospitals and other facilities and institutions built for modern life style, access to life necessities including clean drinking water and health and education services are much better than other place. For instance, newly Chinese built city of Kilamba located in close proximity to Luanda is not affordable for locals, only a small percentage of ordinary people can afford to buy property in Kilamba at the price range between US$ 70,000–US$ 190,000, particularly since the majority of Angolans live below the poverty line US$ 1.25 per day. These Chinese built towns only benefit the elites and those who are loyal to the government and are able to obtain subsides. From an economic perspective, and in order to reduce perpetual poverty in Angola, the money the Angolan government pays to Chinese workers would have the potential to make a huge difference to poverty-stricken Angolans. Throughout Africa, it is normal for an extended family to rely on a single income. Consequently, with the paucity of job opportunities, any job that is lost directly contributes to the level of poverty. Chinese policies have little to do with providing for the needs of ordinary Angolans. Professional jobs have not been created for locals because all Chinese projects in Angola rely on imported labour, both skilled and unskilled, with only

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limited unskilled jobs for Angolans. Although the infrastructure projects have turned Angola into a new hub of causal employment for some citizens in big cities such as Luanda, they have had significant consequences for the general population who struggle to compete with imported labour from China. In Rwanda, three Chinese construction companies had invested US$ 13 million in the period between 2006 and 2019, generating 3000 jobs, of which 2100 were taken by locals and 900 by Chinese expatriate workers. The number of casual jobs generated in Rwanda was also confirmed in a study conducted by the World Bank which revealed that around 3000 jobs were generated in Rwanda through Chinese investment, though most of them were casual and short term (World Bank 2019). The telecommunications sector had received investments of US$ 4 million and has generated 600 jobs, the majority of which were taken by Chinese labour (National Bank of Rwanda, Annual Report 2011). Although there is no data on the specific number of Chinese nationals in Rwanda, in 2010 the Chinese Confucius Institute based at the Kigali Institute of Education estimated the number of Chinese nationals living in Rwanda at 500 (ACET 2016). Due to the increase in Chinese investment during the last ten years, and according to the author’s calculations from different sources, the number could now be estimated between 2500 and 3000 Chinese working and living in the country. These figures are also supported by the Rwandan trade union movement, which has protested several times against the impact of Chinese investment on local job generation due to the presence of Chinese national workers. In contrast to Angola, Chinese investment in the construction and telecommunications sectors in Rwanda has generated 3600 jobs in total (see Table 9.4 in Chapter 9). According to the National Bank of Rwanda (2011), most of the jobs generated by Chinese projects are casual and the number of stable wage paying jobs is very small. Rwandan workers accounted for more than 60 per cent of the total casual employment generated by Chinese enterprises, with Chinese and other nationals providing the remaining 40 per cent. This data analysis is also confirmed by Shen (2013) and Byusa (2010a), who argue that the major negative effect of Chinese investment is that it does not generate jobs in any significant numbers for locals. As can be noted from Table 9.4. Chapter 9 Chinese nationals occupy the majority of all jobs generated in the telecommunications sector. Major Chinese companies, such as ZTE, which is a leading investor in Africa, employ more than 60,000 staff in 54 African states with a staff of more

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than 70 per cent Chinese nationals (Byusa 2010a). For this reason, the impact of the sector on employment generation is somewhat less significant than the construction sector, but still important in terms of providing stable jobs. In comparison to those in Angola, Rwandan workers have been able to secure some of the managerial positions with the Chinese firms working in Rwanda, representing 30 per cent of managerial positions in most projects implemented by Chinese firms (African Center for Economic Transformation, ACET 2016). Some of these positions are filled by younger workers, both male and female (ACET 2016). In Angola, jobs generated through Chinese firms in construction projects tend to benefit male employees disproportionally, raising the issues of gender disparity. Although this chapter is not on gender, it is interesting to examine here, in brief, the gender employment gap. Angola has one of the most skewed male-female employment ratios among the countries in the sub-Saharan Africa. Despite the AfDB, OECD, UNDP (2018) report that gender disparities in Angola are improving and that the number of women in parliament has increased from 16 per cent to 30 per cent from 2012 to 2020, women often face challenges regarding their participation in the labour force. However, it is important to note that the challenges Angolan women face today are the outcomes of the legacy of decade long violent conflict, customary practices and cultural traditions that sometimes disadvantage women (ILO report 2020; UN-Women 2020). Empirical evidence shows that unemployment negatively affects more women than men. According to World Bank records (2019), employment at national level in Rwanda has neither decreased nor significantly increased (World Bank records, 2019). At the same time, overall unemployment in Rwanda has not been very high in comparison to other states on the African continent, including Angola. Figure 10.2 below shows the unemployment rate in Rwanda at the national level from 2000 to 2019. As demonstrated in the figure below, the total unemployment rate in Rwanda has been steady. Absence of any noticeable change in the unemployment rate illustrates that Chinese investment has made a limited contribution to the employment generation in the country. An important point this Chapter/book is attempting to make is that Chinese investment in both Angola and Rwanda have had a negative effect on employment generation. This is despite the fact that the figures discussed above show that employment has increased marginally in both countries. However, it is important to note that generated jobs are all

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Fig. 10.2 Unemployment rates (as a per cent of the labour force) in Rwanda, 2000–2019 (Source World Bank [2020])

in the construction projects and are casual and temporary. Most locals in the two case-studies countries are unskilled and are employed for only specific tasks to speed-up the completion of project. Upon the completion of the project, these local workers lose their jobs. The reason is that employment in the Chinese companies is often for 2–3 months and the workers are often told not to come back to work the next day when the period of their employment draws closer to three months to avoid clashes with the Angolan labour laws which states that after 6 months of work, a casual worker should be hired permanently. Furthermore, Chinese companies neither pay social security nor grant annual leave to their workers. Only workers who are entitled to annual leave and social security are those employed on permanent basis and are mostly Chinese (Corkin 2008). As argued by Power and Alves (2008), the Angolans work in Chinese firms when they are in desperate need of money to cover basic living expenses while always searching for a more permanent and stable positions with either local or foreign companies. This indicates that even the locals know that causal employment in Chinese firms is not sustainable. Although it is difficult to speculate what the unemployment situation in Angola and Rwanda would be without Chinese investment, it can be noted based that Chinese investment in Angola has neither resulted in a significant change in the existing structure of unemployment nor contributed towards addressing the problem of shortage of skill

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in Angola, as discussed in Sect. “The Impact of Chinese Labour” above. Rather, it has benefited only a certain section comprising of local elites, resulting in the same dependency scenario as seen during the colonial rule. The negative impact of Chinese labour migration on employment is not only seen when they take jobs from locals, but also in the fact that expatriates rarely mix with local communities in Angola and Rwanda. Chinese workers live either on the sites where they work or in special enclaves that are built by the Chinese government for Chinese nationals (Mohan and Power 2009). They generally establish their own Chinese restaurants and import their food and other consumer goods from China. This shows that these Chinese workers do not spend money in Angola and Rwanda. Therefore, apart from taking jobs from locals, they also do not provide income opportunities for local shopkeepers and suppliers. This practice creates a snowball effect on unemployment as a result of Chinese investment. It is manifestly evident that Chinese expatriates hardly contribute toward local economy and employment generation.

The Issue of Employment Generation for the Youth Despite the massive inflow of Chinese capital in the period between 2002 and 2019, the number of youth directly employed by Chinese firms remained relatively low in the two case-study countries. Nonetheless, it cannot be denied that Chinese investment in the construction, telecommunications and resource sectors in Angola has generated some employment. However, in the overall economic scenario of the African states, this employment generation for youth employment (including university graduates) had minimal impact on total unemployment. In Angola, for example, although Chinese firms have generated some jobs, these jobs have contributed very little towards reducing youth unemployment in the country (ADB and OCED 2019). In Rwanda the impact has been somewhat different, as young people in particular have benefited slightly more from employment opportunities generated in the telecommunication sector. As Rwanda is a non-resources-rich developing country, its government has prioritised the growth of the ‘Information and Communications Technology’ (ICT) sector as a part Rwanda’s 2020 Vision, which aims to make the country the ICT hub of central and eastern Africa (Rwanda Vision 2020). Rwanda’s ‘Vision 2020’ and then ‘Vision 2050’ (World Bank 2009), is an economic plan designed to transform Rwanda’s

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economy by the year 2020–2050 from an agriculture-based economy to an economy based on knowledge and foreign investment (World Bank 2009). China has cheap technology in comparison to Western countries and it has invested heavily in the ICT sector in Rwanda. Therefore, the ICT sector at its current establishment path offers some employment to young Rwandans. However, the type of employment in the ICT sector is short-term and causal, similar to the construction sector. Once the ICT sector in the country is well established, these casual jobs will cease. The sector will then require specialised skills, however, in the absence of proper training for young Rwandans by the Chinese experts, it is likely that the sector will generate fewer jobs for locals, as they will struggle to compete with the imported skilled labour from China. Consequently, the sector’s overall contribution to employment generation is bound to remain limited in the future. As shown in Fig. 10.3, Angola has a higher level of unemployment among youth (including university graduates) than Rwanda. As recorded by the World Bank (2019) in the period between 2018 and 2019, the unemployment rate among youth (aged 15 to 24) in Angola was 7.9 per cent for females and 6.89 per cent for males. Rwanda, on the other hand, in the same period had a lower rate of youth unemployment, 0.99 per cent

Fig. 10.3 Unemployment among youth in the urban areas in Angola and Rwanda, aged 15–24 (in %), 2019 (Data Sources World Bank Database 2019; National Institute of Statistics of Rwanda 2019; United Nations Conference on Trade and Development UNCTAD 2019)

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for female and 5.1 for males (National Institute of Statistics of Rwanda 2018). As can be observed in the above 10.3 Figure, the unemployment level among females is higher than males in Angola, which suggests the existence of gender disparity. In Rwanda, the most recent data indicates that unemployment among young females is higher than males, particularly in urban areas. In the past few years, overall unemployment among both young females and males was similar, particularly in rural areas, which indicates a higher level of gender equality in the labour market. However, the data in Fig. 10.3 is based on urban areas, which indicates that the unemployment rate has increased among young people in urban areas in Rwanda due to their continuing emigration from rural areas to urban (National Institute of Statistics of Rwanda 2018). According to most recent data from the National Institute of Statistics of Rwanda (2020) the total unemployment rate at the national level in Rwanda is 3.4. (National Institute of Statistics of Rwanda 2020). However, due to rapid urbanisation and urban generation, unemployment in urban areas is at 7.7 per cent, much higher than at the national level. As recorded by UNCTAD (2020), unemployment in the Rwandan capital Kigali is as high as 9.4 per cent among youth (15 per cent among high school graduates and 6 per cent among university graduates). While unemployment in rural Rwanda is as low as 2.6 per cent as most people work in an informal sectors such street vendors. This is because youth, both females and males, work on farms, making unemployment in the country mostly concentrated in cities (National Institute of Statistics of Rwanda 2019). As discussed above Angolans graduate from vocational training and university every three to four years. However, a lack of employment has forced more than 80 per cent of these graduates to remain unemployed for an extended period of time (World Bank 2014). As a result, most Angolan youth (including university graduates) are discouraged from looking for formal employment as they spend years looking for decent jobs that suit their qualifications but with little success. A similar situation exists in Rwanda where youth and university graduates also continue to experience difficulties in securing employment. However, due to the lack of data on Chinese investment and youth employment generation in Angola, there is no statistical data that shows how many young people are employed within the total number of jobs generated through Chinese investment outlined in Table 9.4 in Chapter 9. However, because the unemployment rate among youth has not decreased during the years in which China increased its investment in the country, it can be assumed

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with confidence that Chinese investment has minimal impact on youth employment in Angola as well as in Rwanda. However, the input is not significant in relation to the size and value of the investment from China (World Bank 2009; Africa Development Bank 2019). Rwanda paints a different picture, as Chinese investment is not as significant as that in Angola. Youth unemployment from 2018 to 2019 was registered at 0.99 per cent for females and 1.64 for males, as demonstrated in Fig. 10.3 above. This analysis is also consistent with data from Regional Economic Outlook Sub-Saharan Africa (2020) which confirms that the same youth employment rate in Rwanda. Although China is not a major investor, it can be argued from the employment data in Fig. 10.3, that Chinese investment has generated some employment in Rwanda but has made only a marginal contribution towards youth employment. However, it is worth mentioning here that, according to the World Bank data, the overall youth unemployment rate at a national level in Rwanda is 1 per cent. However, the World Bank data is not the most recent and includes the unemployment rate of rural areas, which is very low. The data I have used above is the most recent and are confined to urban areas which are experiencing a high level of unemployment among young people. Urban areas are also where Chinese investment is concentrated in both Angola and Rwanda. In Angola, a number of factors stand in the way of youth and university graduates obtaining employment in Chinese firms. One major factor is that the types of jobs generated by Chinese investment are mainly in the construction sector. These jobs are more about ‘quantity’ than ‘quality’, which are more suitable for older employees and those without formal qualifications rather than young people, particularly university graduates (UNCTAD 2012; International Labour Office 2012). The problem associated with the construction sector is that high-paying positions are given to Chinese workers, as previously discussed, while most local employees are often given manual, low-paid, temporary or casual employment, with no job security. The fear of losing work and the risk of poverty is especially acute in Angola where the rule of law is weak. It is commonplace that young, educated Angolans search for salaried jobs that are more profitable and secure in term of sustainability, social security and high status in the community. Few of the jobs generated through Chinese investment, however, qualify as high-status jobs for university graduates. One could argue that the pathway to improve job opportunities for the youth and university graduates is to address the country’s major

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economic challenges. Developing policies that can improve the output of employment in labour-intensive sectors such as manufacturing, banking and promotion of both private sector and the public sector is critical. However, with the end of the civil war in Angola the Western powers were advising the Angolan government to adopt a more liberal economic system that encouraged diversification of economic sectors and generated larger number of employment opportunities. This effort towards adopting a more liberal economic system was challenged by the sudden inflow of capital and credit lines from Beijing. While financial support and investment from China is good news for Angola, its impact on youth employment is that it focusses on resources and the implementation of contracts and projects related to oil deals. A more broad-based investment profile in other sectors may have offered more inclusive employment opportunities to the local population. There is also a skills and qualifications disparity between what university graduates learn in their courses and what employers require. Most university graduates in Angola and Rwanda study for degrees in the social sciences such as arts, journalism and education, as well as economics and engineering. The graduates of these degrees often require further training to prepare them for potential jobs, as they do not have the skills required by the current labour market (OECD 2012). As mentioned earlier in this chapter, the two countries share comparable problems of skills and qualifications variance due to their histories of being post-conflict economies, resulting in shortage of skilled labour. Although there is evidence to suggest that Angola and Rwanda did organise programs to address their youth employment issues, the lack of jobs for youth means these programs have had little impact on youth employment problems (African Development Bank 2012).

Skills Mismatch The skills mismatch can be a temporary situation, which can be resolved through programs such as work-related professional development and training. However, because Chinese firms import a large pool of highly skilled labour from China, there is not enough employment for the local youth as an entry point for skill development, particularly in Chinese firms. In Angola, for example, Chinese firms provide jobs to less than 2 per cent of young people, including university graduates (Brautigam 2009), which does not make any significant contribution in absorbing local unemployed youth into the productive work force. In 2013 and

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2011, in the Gallup survey on African opinions on Chinese foreign direct investment on employment creation, one respondent commented that ‘Chinese investments create very few local jobs’, while another criticised Chinese businesses for ‘exploiting the local labour force but creating unhealthy work environments with unacceptable wages’. I argue that the impact of Chinese trade and investment is limited in terms of its contribution to creating employment for youth and university graduates in Africa, including Angola and Rwanda. Consequently, the impact of Chinese investment on youth employment is quite limited and it has failed to make any significant difference to the patterns of unemployment in both countries.

The Issue of Technology and Skills Transfer Human capital development such as education and skills transfer, plays an important role in economic growth and development in less developed countries. Sustainable economic growth and development can be attained when there is considerable investment in knowledge, human capital and modern technology. As pointed out by the OECD Secretariat (2002), the main positive side of any investment is the transfer of skills, modern technology and ‘know how’. As such, any foreign direct investment that does not deliver the skills or technology to enhance local employment and productivity has limited positive effects on the economic development outcomes of the host country, although the contribution of technology is subject to the productivity gap between the host and home country (UNCTAD 2012). Alden (2008) observed that China’s investment is profitable to African economies, particularly in the face of declining investments from Europe and the United States. He emphasises that there is a great opportunity for Africa to benefit from these investments, particularly if the terms of investment involve the transfer of skills and modern technology to the continent. Alden is right, to an extent; there is an opportunity that China’s technologies, particularly in the field of agriculture, will increase productivity on the continent, decrease poverty and create more jobs in the sector. However, as the case of Angola demonstrates, Chinese investments have failed to establish positive relations between FDI and technology transfer. For now, Alden’s assumptions do not match the current context of China’s economic relations with resources-rich Angola and non resources-rich Rwanda.

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As shown in this chapter and previous chapters as well, China is regarded as a major source of cheap technology, in developing countries. Although the findings of this Chapter indicate that there is limited transfer of technology between China and Africa, the Chinese state-owned enterprises could act as potential suppliers of advanced and cheap technology to Africa. This necessity of technology highlights the new dependency of African states on China. China has emerged as an alternative source of technology to RRDCs and non-RRDCs in Africa; however this relationship follows the pattern of centre–periphery type of association. African states continue to be solely dependent on new technology and skills, on a technologically advanced and more developed economy. Scholars such as Large (2008) and Raine (2009), have argued that technological equipment such as machinery that African states import from China in exchange of raw materials and employment opportunities can build a new form of dependency among African states. As shown in Fig. 10.3 above, although it can be admitted that Chinese enterprises in the two countries have generated some employment, neither of the two countries received substantial skills or technology transfer from the Chinese businesses. In Rwanda, for instance, development is especially unstable given that there are limited local entrepreneurs who can attract the acquisition of technology that may be obtained from involvement with foreign investors through joint ventures (Behuria 2017). Chinese companies are taking over local companies in Rwanda and for this reason; any technology that is transferred from China to Rwanda ends up in Chinese firms. As discussed earlier in the review of literature, Wenping (2007), of the Chinese Academy of Social Sciences (CASS), notes the early commitment by the Chinese Government in 2007 to grant scholarships to 15,000 Africans to study in Chinese universities and to provide training to 1500 school teachers and 1000 medical doctors, nurses and health workers. The commitment to skill and knowledge cooperation between China and states in Africa is also emphasised in the China–Africa Policy 2006 (Ministry of Foreign Affairs of the People’s Republic of China 2006) but the reality is that these students and graduates after completion of courses in China failed to secure employment back homes as China employed its own imported skilled labour. However, the extent to which Chinese firms are operating in Africa (and in Rwanda and Angola in particular) means that the skill and technology transfers at its current level is disproportionately low. Scholars in

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the field agree that, despite China’s rhetoric that its relationship with RRDCs and non-RRDCs is mutual, this relationship is being debated at a strategic and bilateral level to facilitate access to resources and markets for Chinese products, and it has not translated into grassroots societal levels of employment in a way that facilitates the smooth transfer of knowledge and skills to local employees (Jackson, 2014; Brautigam 2011). As indicated in Fig. 10.3, with regard to skills and technology transfer, Chinese investment is perceived as having a negative impact in the two case-study countries as there is no evidence of skills and technology transfer. A field study conducted by Shen (2013) in five African countries (Rwanda, Liberia, Ethiopia, Nigeria and Zamiba) found that the issue of most concern is skills and technology transfer. In Rwanda, evidence suggests that, although Chinese investment has generated some employment opportunities, it falls short of the expectation to train local Rwandans and also to pass on to Rwandans the very same technology and knowledge, which China had listed as a prerequisite for Western companies wishing to invest in China (Byusa 2010a). In Rwanda, Chinese firms have so far failed to provide training to the Rwandans. An example of this failure is evident in the case of the Amahoro Stadium, which was built by the Chinese and had to be repaired by them after it collapsed, as they had not passed any skills on to the local workers during its construction (Byusa 2010b).

Language Barriers Language is one of the major barriers hindering skill and technology transfer from Chinese commercial enterprises into the two countries. In Angola, Chinese employees, including managers, find it difficult to communicate with local Angolans either in Portuguese, English, or any of the local languages (Yan and Sautman 2013). The same problem of communication is also reflected in Chinese firms in Rwanda (Corkin 2008; Baah and Anthony 2009). This is perhaps the most challenging issue to be addressed at a local employment level to allow the smooth transfer of skills and technology. In contrast, Chinese executives argue that it is economically more viable and technically more effective to employ Chinese nationals (including skilled and unskilled labour) as they are more familiar with Chinese technology and find it less challenging to communicate in the workplace. While this practice is more advantageous for the Chinese, the practice of employing Chinese labour is not contributing

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enough to local economies and employment or the transfer of skills, as discussed previously. As a result, this approach by the typical Chinese firm does not assist in transferring skills and technology to locals as a strategy to build local capacity. This lack of proper training and adequate skill transfer fits well into the core tenets of dependency theory, as the policy of Chinese firms does not facilitate knowledge acquisition and skills development of the local employees. This means that Angola and Rwanda will continue to experience local skills shortage in foreseeable future, and this shortage of employable skills will compel them to depend on expertise and trained labour from China; the same country which, in some ways, directs its development policies and controls a large portion of its resources (Anshan 2011). Moreover, Terence Jackson (2014) observes that the ‘lack of knowledge and skills transfer in local African workers with the bulk of Chinese-financed projects implemented by Chinese teams and making little use of the domestic workforce… could have serious implications for the infrastructure China has built, which will deteriorate quickly once the Chinese have left’. (Jackson 2014). The lack of skills and technology transfer from the Chinese side will threaten the sustainability of the construction projects, particularly given that Chinese constructions are not regarded as that of a superior quality and may require regular maintenance which may further require local expertise (Global Times 2010). The collapse of a Chinese built hospital in Luanda less than three years after completion may be considered as an example of quality of project delivered from Chinese collaboration. In case the local skills are not improved through investment, particularly Chinese investment, Angola and Rwanda will be much more dependent on China and will not acquire enough skills to achieve self-reliance. Evidence suggests that a lack of interest from the Chinese in training Angolans and Rwandans is the main factor hampering skills transfer, perhaps due to a belief that training locals may reduce job opportunities for Chinese expatriates who are continuously migrating to the two countries particularly Angola with significant Chinese investment. As discussed, Angola’s labour, particularly skilled labour, during colonisation was mainly drawn from the Portuguese. However, after almost four decades, the Chinese practices in contemporary times seem to adopt the same colonial pattern, as most skilled workers in Angola and Rwanda are Chinese.

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The Issue of Cheap-Value-Added Chinese Products One of the most debated issues concerning China’s relationships with RRDCs and non-RRDCs is over the export of cheap Chinese value-added products, which have resulted in the decline of manufacturing, particularly in Angola. Among the factors that make Chinese products cheaper in comparison to those from industrialised countries is that China has undervalued its currency, the Yuan, making the cost of its products cheaper. The problem is the quality of goods from China is often inferior than the ones made elsewhere. Kaplinsky and Morris (2009), argue that Chinese trade and investment presence, particularly in Africa, has a negative impact on the continent’s labour market and employment growth (Kaplinsky and Morris 2009). According to their interpretation in the period between 2002 and 2010, Chinese imports displaced many jobs in Angola, mainly in the manufacturing sector. Jobs in other labour-intensive sectors, such as retail, have also been lost or displaced by the increasing Chinese labour migration in the two countries. The negative impacts of the increasing import of cheap Chinese products are not limited to Angola. There has also been a similar negative impact from Chinese goods on Rwanda’s market. In sectors that are labour intensive and in which China has the comparative advantage of producing goods, the local workforce is more vulnerable to import competition from China (Brautigam 2011). Therefore, local sectors are exposed to greater volume and cheaper priced imports from China, and these African firms cannot compete and face either closure or capacity reduction that results in drastic reduction of the labour force leading to greater local unemployment in the sectors crowded out by Chinese investments (Jenkins and Edwards 2006; Farooki 2011, cited in Dent 2011). In sectors that are labour intensive and in which China has the comparative advantage of producing goods, the local workforce is more vulnerable to import competition from China (Behuria 2019). Chinese firms maintain a strong presence where jobs have been lost in sectors such as textiles, because most textile and footwear manufacturers were unable to compete with cheap imports from China following the renewal of the economic relations between the two countries (Behuria 2019). For instance, a Rwandan leading home brand Textile factory, L’Usine Textile du Rwanda (UTEXRWA) struggled to survive with cheap Chinese imports and also lost existing contracts to supply Rwandan military and police force with uniforms, because both the military and police

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opted for the cheaper option of importing uniforms from China (Behuria 2019). In 2016, UTEXRWA was unable to sustain its operations due to high costs and low demands. The company closed its doors and had leased out its warehouses to private businesses (Behuria 2019). The Rwandan government has given the contract to Chinese investor—C&H Garments—that signed a Memorandum of Understanding (MoU) with the Rwandan government, agreeing to invest six million dollars to begin garment production in Rwanda. C&H now produces uniforms for the Rwandan military, police, immigration department and schools and safety clothes, all clients of the collapsed factory- UTEXRWA. C &G employs over 1200 Rwandans but operates the factory as it is owned by the Chinese (Behuria 2019). Although the C&H has created employment for the locals, my theory is that Chinese businesses are growing at the expense of local businesses which are beneficial for Rwanda in short term but will have serious ramifications for long term sustainable development (Behuria 2019). Although, the degree of Rwandan state intervention in economic development is significant, this state intervention is taking the form of selecting foreign investor over locals because of the country’s reliance on foreign capital. This clearly indicates that development in Rwanda is happening while depending on foreign investors—mainly Chinese. Dependency theorist, Prebisch (1968) has outlined the importance of industrial sector advancement if the periphery desires to achieve better standards of local development; in particular that industrial sector in comparison to traditional agricultural sector adds more to manufactured good products thus creating more advanced economy and stable employment. The imports of cheap Chinese products in addition to acquisition by Chinese firms of local Rwanda manufacturing sector as discussed indicates that Rwanda will hardly develop its own national brand of manufactured goods and will often be dependent on China to meet its own national needs. China has also started cooperation in the area of agriculture in an attempt to expand investment in the sector (Behuria 2019). A field study conducted by Lawther (2017) on China’s cooperation in agriculture with Rwanda and Uganda suggested that although China provides relatively cheap agriculture technology in comparison to technology from the West, one of the major results of the study indicates that most Chinese agricultural equipment technician work in secrecy not passing technical information to their African peers (Behuria 2019). In Rwanda in particular, Chinese technicians were hesitant to teach Rwandan

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Agriculture Board (RAB) employees or people who participated in trainings at the centre, skills of how to make mushroom spawn, which is an integral part of mushroom seed production (Lawther 2017). RAB is responsible for implementing agricultural initiatives and therefore its employee were scheduled to attend training by Chinese technicians as a part of China-Rwanda joint agricultural initiative (Lawther 2017). While the loss of jobs both in Angola and Rwanda can be blamed on cheap products from China, I would argue that Angola in particular shares some of this responsibility of increased unemployment. Angola did not make appropriate investment in non-resource labour-intensive sectors and did not improve its own industrial sectors to compete with China locally and at a regional level. Most governments in Africa focus on the resource sector, in their trade with China, but it benefits only a small group of powerful elites who control the sector for their own gains (Mills 2012). Oil revenue, for instance, which could be used to improve the living standards of the general population, is squandered in the absence of proper management and accountability. Raphael and Ajakaiye (2009), suggest that with Chinese renewed engagement, the African continent continuously experiences decline in manufacturing sectors. The expansion of China’s exports across the African continent over past few decades has fostered a new form of dependency, as Africa has become a new hub for cheap and low-quality value-added products from China. In this context, China poses challenges to growth and development of Africa’s local manufacturing sector. The lack of local industrial base in Africa prevents further integration of African economy into the global economic cycle. Across Africa there is a problem with the sectors in which China is active because local firms cannot compete.

Conclusion Although Chinese firms have generated some employment, this job creation has not resulted in widespread employment opportunities, as most of the well-paid jobs are distributed among Chinese labour while handing over low-paid and casual jobs to the local Angolan or Rwandan people, thereby, limiting the overall impact of Chinese firms on employment creation in the two countries. Furthermore, Chinese firms have failed to generate productive and stable jobs in both the countries. The few permanent and high-level positions that are generated through

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Chinese investment are given to Chinese nationals, while only jobs that do not require skills are awarded to locals, particularly in Angola. The findings of this study indicate that Angola in particular lags behind in comparison to Rwanda in generating employment from Chinese investment, even though Angola has abundant resources and has increased its level of GDP growth over the last ten years. While the country’s economy grew at an average five per cent per annum in 2020, most of the growth is attributed to oil export, mainly destined for China. Growth, particularly in employment, has not maintained pace with the increase in the country’s labour force. This resulted in a rapid rise in unemployment rate in the country. With respect to the transfer of skills and technology, the impacts are different. In Angola, FDI flow from China has not resulted in the transfer of skills and technology to enhance productivity and development in the country. The impact in Rwanda is somewhat different, as the country has benefited more than Angola, which has to do with the political system in the country. The lack of skill and technology transfer through FDI pathways is constrained by three main factors: lack of joint ventures, language and cultural barriers and the nature of business deals from government to government that widen opportunities for corruption. In Rwanda, with the exception of technology transfer, Chinese FDI appears to have had a negative impact on skills transfer and employment generation because most jobs that were generated were absorbed by Chinese labour, forcing most Angolans and Rwandans to turn to informal sector not for employment but for mere survival. The next chapter discusses the findings of this book and sheds lights on its contribution, policy implication and recommendation. The chapter also identifies areas for further research.

Notes 1. Data from the National Institute of Statistics of Rwanda (NISR) is used because the NISR is credible and has available reports and data in relation to investment and employment figures. Data from NISR is also widely used by the most respected institutions such as the World Bank, IMF, OECD, African Development Bank and African Economic Outlook. In comparison to other sources in Rwanda, NISR publications, reports and Statistical Yearbooks are the most reliable. 2. Please note that, according to the World Bank data, the overall youth unemployment rate at a national level in Rwanda is 1 per cent. However,

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the World Bank data is not the most recent and includes the unemployment rate of rural areas, which is very low. The data I used above is the most recent and are confined to urban areas which are experiencing a high level of unemployment among young people. Urban areas are also where Chinese investment is concentrated in both Angola and Rwanda.

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CHAPTER 11

Conclusions: Discussion on Empirical Findings and the Way Forward: Who Benefits from the China–Africa Boom?

Introduction African countries consider China as an alternative financier to former colonial rulers, as acceptance of China’s position as that of a successful industrialised country. In terms of its complex economic relationship with the continent, China deals directly with selected ruling elites, leaders of pariah countries and focuses on extracting resources. In this book I have sought to develop a sense of how this complex interaction works precisely focussing on China’s trade and investment in order to contribute to a better, more holistic understanding of the bigger picture of the impact on local development in Africa. In this book I have explored China’s growing relations with resourcerich development countries (RRDCs) and non-resource-rich developing countries (Non RRDCs) in Africa. The effect and impact of China’s trade and investment on employment generation and the transfer of skills and technology, which are significant for the local capacity building, necessary for both short-term and long-term economic growth as well as sustainable development has been analysed using the dependency lens. This chapter brings together the empirical results and findings discussed throughout in all chapters of this book. Although, the rise of China and its relationship with Africa has been discussed and analysed throughout this book, this study’s primary focus was on China’s trade and investment activities in resources-rich Angola © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 A. F. Lisimba, China’s Trade and Investment in Africa, https://doi.org/10.1007/978-981-15-9573-8_11

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and non-resources-rich Rwanda. As explained in the introductory chapter and chapter two, Angola and Rwanda were selected as case-study countries because of the differing levels of their economic development, availability of natural resources, extent of Chinese influence, their growing economic relations with China and the development problems these two countries face. The differential, in the above-mentioned parameters, has made Angola and Rwanda very interesting case studies for examining the impact of China’s investment and political influence in Africa. It can be argued that the analysis and outcomes discussed in this book shall offer a deeper understanding of the challenges and opportunities China poses in this changing international order with respect to the African continent. Throughout the ten chapters, I have made an attempt to answer the bold questions such as who benefits from China’s raising role in Africa and what is the impact on local development. Chapter four discussed dependency theory, which guided the investigation into China’s presence and the practices of its commercial enterprises in Africa. I employed dependency theory to analyse deeply the impact of China in the two countries and confirm whether China replicates colonial policies of exploitation or is simply a new actor in the region that brings a new form of dependency with Chinese characteristics. To do this, the study was built on critical analysis of relevant primary and secondary sources. The data and information gathered to address the research questions of this book were selected from multiple sources. Chapter Seven presented an analysis of Chinese trade and investment flow into Africa with particular focus on Angola and Rwanda. This chapter evaluated the volume of Chinese investments in the two countries and in the specific sectors of their economy. Chapter eight focussed on the comparative analysis of the actual impacts and effects of Chinese trade and investment on economic development outcomes and capacity building in Angola and Rwanda. This final chapter highlights China’s involvement in African states; specific contributions made by this book to the field of study, the limitations of the study, the implications of the research for policy makers in African states and explores the areas for further research.

Africa’s Share of Responsibility Despite the fact that China has been criticised for not creating jobs and most of its investment lacks adaptability to the local needs, it is important not to forget that African leaders and government have their share

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of responsibility as well. Most governments in the continent now host Chinese investment, and thus, they can ask China to diversify its investment to include sectors that are important for Africa’s development and that generate long-term and stable employment. But it seems that African leaders always blame the West and now China for their own failure to free the continent from poverty and underdevelopment. African governments especially those with rich resources are also responsible in the manner in which they spend the revenue obtained from Chinese investment, particularly in Angola which receives billions of US dollars as the largest oil exporter to China but most of its population live under poverty line. This brings up the question of who benefits from Chinese investment. The clear answer to this question in the absence of responsible leadership is that the benefits go to a small selected elite circle that rules the country. History proves that Chinese leaders prefer doing business with pariah states in exchange for improved access to resources and support for its stance on issues debated at international institutions such as the United Nations. Most sadly, rhetoric, shared history, experience, development challenges which help the communist leadership to maintain friendship with African leaders in power, is simply encouraging dishonesty and mismanagement in Africa for the benefit of Beijing. My theory is that as Beijing matures its strategy to engage with Africa, Africa’s leaders too need to develop a strategy to deal with China.

Revisiting the Objectives and Overall Arguments of the Book China’s growing economic influence is witnessed across developing as well as developed countries alike. In Africa, China’s financial flow has already begun to shape the development agendas of several countries in the region, providing both challenges and opportunities for their economic development (Goldstein et al. 2006). In this book, I have examined trade and investment links between China and Africa, investigating how the financial aid and investment from China impacts the development outcomes of the recipient countries. The research in this book began with a discussion on Africa’s historical development challenges, the impact of colonial legacy and the overview of Sino-African relations from the 1950s through to the present day (Gordon and Gordon 2001; Gailey 1983). The main focus of this book, however, has been to assess the impact of

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Chinese trade and investment on employment generation and the transfer of skills and technology in the African continent. A number of questions have been formulated in the introductory chapter in a way that enabled the investigation and assessment of the main argument, which is that the dominant presence of China as a major Foreign Direct Investment (FDI) source has had a negative impact on the economic growth, development and employment generation outcomes of Angola and Rwanda. All questions as outlined in the introductory chapter were answered, leading to the anticipated findings which fill the gaps identified in the literature and which this book has attempted to address. However, while answering these questions, several important questions have emerged, including whether China’s approach to Africa differs from the way the other powers were involved with China or whether China follows the same path of Africa’s former colonial rulers, i.e. Europe and the United States? What is the role of African leadership in managing relations with China? Does African leadership or do African governments who chose to engage in trade and investment with China play any significant role in this relationship? What is Africa’s agenda? How much bargaining power does Africa have over business deals with China? What is and where is African agency? Another most important question has been who benefits from the new partnership between China and Africa? An attempt to answer the above questions has been made throughout the chapters of this book by examining data and evidence relevant to the subject of the investigation. However, questions on the role of African states in terms of their participation in decision making in relation to the increasing Chinese economic influence on the African continent needs to be further investigated. Unavailability of data and the scope of the study that focusses specifically on employment generation and the transfer of skills and technology were some of the challenges that limited my ability to answer the questions which emerged during the research. Answering these questions would have vastly broadened the research focus of the book. The main focus of the book was to conduct an in-depth investigation and analysis of Chinese investment and its impact, as mentioned above. In addition, some of the methodological challenges faced during this research were based on difficulties encountered in terms of gathering case-study country data. These challenges are further discussed in the final section of this chapter. Despite these challenges, I was able to gather enough data about China’s trade and investment in Africa, from both the case-study countries to enable the examination of the topic based on gathered empirical data and evidences.

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Discussion on the Empirical Findings of the Study The drastic changes that were brought to China after the death of Chairman Mao have altered China’s policies in Africa from that of supporting nationalist movements for independence to focussing more on commercial interests to meet its domestic development needs (Tisdell 2009; Yu 1975; Dent 2011). It should be noted that China’s remarkable economic growth over the past three decades has been the driving force behind its increasing involvement in the African continent. Furthermore, the migration of Chinese nationals to Africa in search of jobs and business opportunities outside China has come at high price to the hundreds of thousands of jobless Africans (Brautigam 2009). As explored in chapter three and six, China’s involvement in Africa was driven by its need to access natural resources, gain access to the potential African market, the importance of African support for China’s growing influence on the international stage, and the search for investment opportunities for growing Chinese companies (Taylor 2007a; Obi and Cheru 2012). This is despite the fact that investment opportunities in China and elsewhere are more competitive than in Africa, which struggles to attract foreign direct investment (FDI) in large volumes (Kragelund 2009; Alden and Davies 2006). The factors that contributed to the spectacular failure of African states to attract FDI were also discussed in the introductory chapter. The empirical analysis presented in this book underlined that Africa continues to experience development challenges despite its abundant resources and increasing Chinese investment (UNCTAD 2010). This makes dependency theory relevant to the continent’s economic situation within the presence of China. The development challenges are not due to one single factor but rather it consists of several social, economic and political factors. The causes of Africa’s failure to develop its economy include marginalisation, legacy of colonisation, lack of investment, education, technology, skills, civil war, corruption and political instability (Gordon and Gordon 2001). Other factors such as lack of responsible leadership, development institutions and corrupt nature of governments also hinder development of the continent. Despite the passage of 50 years or more since most countries in Africa gained independence, the continent remains largely underdeveloped and dependent on foreign aid (Ibid). This book has argued that Africa’s isolation and lack of integration into the global economy, combined with pressure from financial institutions such as the World Bank (WB) and the

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International Monetary Fund (IMF), and other donor countries, made the continent susceptible to accepting loans with strict conditions and policies that do not meet the development needs of the continent. The loans from developed Europe and the United States with their restrictive regulations led Africa to a catastrophic economic and social crisis and poverty, resulting in civil war and internal political divisions. International Monetary Fund (IMF) and World Bank’s Structural Adjustment Programs (SAPs) imposed on African countries from 1980s to 1990s had severe economic consequences (Harrison 2004). The findings of this book reveal that the SAPs have destroyed existing plans for indigenous development by introducing new policies, which further hindered growth and development in countries that adopted the new SAPs development policies. SAPs have generated more poverty, unemployment and underdevelopment, adding more problems to the already struggling economy. Consequently, Africa’s growth performance dropped to its lowest level, as indicated by basic human development, during the SAPs. This demonstrated that most countries with SAPs were overburdened with unnecessary debts and were beset with extreme poverty and disease. In the social sectors these policies have caused major difficulties as most of the educational institutions and health services were closed due to the lack of funding (Baah and Anthony 2009). China’s return to Africa was particularly important for Angola following the collapse of loan negotiations between the IMF, the WB and the Angolan government (Sun 2014; Alden 2008). Angola, in particular, welcomed China because of its position as an alternative source of finance and the level of competition it created in the international economy (Alden and Davies 2010). In this book, I contend that the emergence of China as a lender has offered an alternative funding channel for Africa and other developing regions for the first time in history. It has also unfettered African countries from IMF and World Bank’s conditionality regime that governed the continent for more than two decades with minimal impact on growth and development. The lack of sufficient funds drove Angolan government to a crisis situation, the loan offered from China were so critical for survival of the Angolan economy that the Angolan government could not afford to refuse (Corkin 2011; Alves and Power 2012). In addition, the easy repayments of Chinese concessional loans have also motivated many African governments, including Angola, to refuse loans from the WB and the IMF, favouring China to secure ‘no-strings-attached’ loans, credit lines and resources supported deals.

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One of the main issues which this book highlights with respect to China, particularly in resource-rich Angola, is that Chinese contracts and loans are all based on business and are not contingent on any conditions such as accountability, political and institutional reforms that strengthen more inclusive development and financial accountability. As discussed in chapters one and three, it was generally accepted that China is more flexible and generous with regard to the provision of loans and credit lines than the West, the IMF or the World Bank. Therefore, most African countries, including Angola and Rwanda, are drawn to the flexible mode of repayment of Chinese loans and credit lines. However, whether the flexibility in loan conditions is good or bad for Africa’s governance reform, and lead to improvements in the rule of law and systemic corruption, is a subject for further in-depth discussion. This book has concentrated only on employment generation and the transfer of skills and technology. The dependency theory explains the operation of China’s trade and investment in RRDCs and non-RRDCs African countries. On the one hand the inflow of Chinese finances and expertise has increased the volume of the economic activities in Africa while on the other it has decreased the opportunities for indigenous production, manufacturing and service industries. China has replaced the traditional colonial powers from their dominant position in Africa by assuming the dominant position in the economic hierarchical order between itself and the African states. Africa may have availed a different source of capital and technical assistance but the fundamental nature of a dependent relation with a dominant economic power has not changed for the African states. The increased Chinese investments have led to greater inequality and poverty in many countries, including the case-study countries of Angola and Rwanda. China’s economic relations with Angola and Rwanda demonstrate the essential features of a new dependent economic association, which has been explained using the dependency theory model throughout this book. The dependency theory forms the basis of this book’s arguments since China’s trade and investment in RRDCs and non-RRDCs African countries has enormous impact upon local employment generation, and the transfer of technology and skills. China, as an emerging industrialised country, and as a top emerging investor in Africa’s resource and nonresource sectors, plays a pivotal role in shaping development outcomes in Africa. More importantly, China is considered as a major source of finance, technical expertise and tools and machinery in the global South.

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Particularly in the case of Africa, the Chinese state-owned enterprises act as the most important suppliers of advanced technology, concessional loans, credit lines, regular flow of capital and investments. This necessity of Chinese finances and technology highlights the new dependency of African states on China. There are however some scholars such as Moyo (2009), who argue that China’s relations with RRDCs and nonRRDCs allow Africa to decrease its dependency on Western sources. The overarching reliance of African states on China’s financial resources, technology and expertise is generating new form of dependency in Africa. It can be argued that the trade exchanges between China and Africa have created some new avenues of income and infrastructure in some African states. However, the increased Chinese investments have led to greater inequality and poverty in many countries, including the case-study countries of Angola and Rwanda. As outlined in chapter four, the Global Financial Crisis (GFC) of 2008– 2009 resulted in the decline of Western developmental aid, particularly in Rwanda, making China an alternative lender, since the Chinese economy was less affected by the global economic meltdown due to the high demand for Chinese products worldwide as well as injection of a stimulus package valued at 4 trillion yuan (around US$ 570 billion) to rescue Chinese economy (Xinhua, September 2008; Overholt 2010). At the time, Angola had emerged from an over two-decades-long civil war that destroyed its infrastructure, while Rwanda is still recovering from genocide that took place in 1994. Rwanda became a recipient of humanitarian aid with little investment from the West, while Angola struggled to secure funding for post-war reconstruction and nation building in 2002 after the end of the Civil War due to its bad governance system credit records. Unlike Angola, which sees China as an alternative financier and development partner, Rwanda has embraced Chinese trade and investment, not as an alternative to the West, but as an ancillary to its involvement with other economies. This has limited Chinese influence in Rwanda to some extent while Chinese influence in Angola is much greater. This differential in Chinese influence in the two countries is driven by two main factors. First, Rwanda is still heavily dependent on Western developmental aid as a major income avenue for the government, and since it lacks natural resources, it is marginal in China’s policy towards Africa. It was not until 2015 when the Western powers cut down their support to the country accusing the leadership in Rwanda of supporting the rebels in Congo.

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The findings also indicate that most countries in Africa shifted towards doing business with China with an understanding that, given its own history of struggle against colonial powers, it is more likely to be a fair partner in the development of African states. This perception does not exist in Africa’s relationship with the West due to a history of colonisation and Western negligence of Africa for decades (Gordon and Gordon 2001). Furthermore, the perception that the West is an impediment to Africa’s economic growth and development has generated new optimism and encouragement for Africa towards dealing with China and other emerging economies such as India and Brazil. The main reason is that China’s rhetoric of mutually beneficial development or creating winwin situations is more welcomed across the continent than the Western model, which contains less rhetoric but includes large contingents of institutional reforms that compel the recipient countries to share wealth, provide more equal distribution of resources and adopt a more democratic approach to power. These prerequisites are less prevalent in China’s development model. The findings indicate that China’s model of development, including its loans, is calculated on short-term gains, benefiting mostly the ruling elite in Africa, while Western loans with their strict conditions have some potential to improve governance institutions in some recipient countries which is likely to produce more sustainable development and encourage participation from grass roots than the former. However, the findings of this book also indicate that most African countries are ruled by either the authoritarian regimes such as that in Sudan or a one-party system such as in Angola and Rwanda. They normally refuse any reforms and would rather deal with China than the West to ensure they remain in power as long as they desire. The Chinese approach of non- interference in the domestic arena of African states indicates that business deals, whether provision of loans or infrastructure contracts, are not subject to any prerequisites such as governance reforms or adherence to specific conditions (Tull 2006; Taylor 2006; Alden and Large 2011). This means that unlike the Western countries that are reluctant to do business in countries with appalling human rights records, China does not attach the same significance to these issues or the type of political systems or institutions it deals with, as long as it can get access to resources or can do business in other sectors (Alden 2007: 5–7; Meidan 2006). This has made some African states embrace China more readily than they would accept the West, especially countries with authoritarian regimes. In this regard, China–African economic

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relations have inspired intense discussions among academic communities, policy makers and the media in Africa and around the globe about the intentions behind China’s new ventures into Africa (See for example, the Introductory Chapter). Scholars in the field of international affairs have different views on this issue with some, such as Taylor (2009), arguing that China poses significant challenges and implications to African development, governance reform and financial accountability. Other scholars such as Moyo (2009) took a more affirmative position by contending that China is an opportunity rather than a threat for African states given their history with the West, which exploited the African continent for its rich natural resources. The activities of Chinese firms have been analysed in response to a number of concerns about the potential outcomes of such relations in Africa through assessing the impact of China on employment creation and the transfer of skills and technology in resources-rich Angola and non-resources-rich Rwanda. The presence of Chinese expatriates in large numbers in Africa should not come as a surprise as they are part of the Chinese conditions attached to its aid and investment, similar to a particular Chinese policy used for receiving Chinese aid and development assistance through the 1970s– 1990s (Brautigam 2011). As the Chinese economy developed, it was incumbent upon Beijing to secure markets in Africa for its products and companies to stay ahead of other emerging competitors (MOFCOM 2012). In this respect, the findings indicate that Africa’s isolation and retreat of Western powers made it an easy investment opportunity for China to assist its growing companies establish businesses in Africa. China was simply filling the vacuum left by Western Powers (Sautman and Hairong 2008: 87). China continues to sell large volumes of finished products to Angola and Rwanda including textiles, telecommunication equipment, electronics and other consumer goods (UNCTAD 2012). It is important to note that, although China imports massive quantities of natural resources from Africa and exports large amounts of goods across the region, the volume of Chinese foreign investment (FDI) in Africa, particularly sub-Saharan Africa, is marginal in comparison to the combined investment of the West (African Development Bank 2012). However, China’s volume of trade has overtaken individual countries such as France, Britain and even the United States. This book has shown that the increase of trade volume between China and Africa is largely driven by China’s imports, mainly

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oil and mineral products from the continent. Despite the fact that the majority of Chinese investment is in resource-rich countries and capitalintensive sectors, in recent years it has been observed that China has been diversifying its investment portfolio and now Chinese companies invest in other sectors such as telecommunication, transportation, infrastructure and construction. China is also investing heavily in non-resources-rich development to generate business opportunities for its companies and jobs to Chinese national due to rising unemployment rate back in China. It has been noted that investments particularly in RRDCs are tied to resources deals. As mentioned above, China’s investment is marginal in comparison to Africa’s traditional trading partners (see chapter four). Even in Angola, China’s second largest trading partner, China’s FDI is small scale, and the lack of FDI from China indicates that China has invested very little in sectors such as manufacturing that contribute to local economy, employment generation and the transfer of skills and technology. The overall analysis indicates that natural resources remained the key component of Sino- African relations, as the largest share of China’s investments in Africa are directed towards the oil and gas exploration and mining industries, which thus dominated all features of the China’s engagement with resource-rich developing countries in the region. It has been discussed that China has heavily invested in Angola’s extractive industry by entering into joint ventures with Angola’s state-owned oil company Sonangol, by purchasing shares from established foreign companies which were later transferred to Chinese ownership. In more recent years, China also started to invest in Rwanda, focussing on construction, telecommunications and transportation (African Centre for Economic Transformation 2009).

Employment Generation and the Transfer of Skills and Technology Revisited The main feature of this book’s analysis is that China’s trade and investment has had a negative impact on economic development outcomes and capacity building in Africa. The study was conducted through an in-depth analysis of Chinese trade and investment and the impact it has had on local economic development in Africa. This study aimed to assess whether China, as a new player with substantial financial weight in Africa, offers the African continent better opportunities for development than Africa’s

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traditional trading partners, Europe and the United States, or is simply repeating the history of resource exploitation by taking resources from RRDCs and seeking market opportunities in non-RRDCs. The findings are that China’s trade and investment with all its concessional loans do not facilitate any real change in overall economic development of the local population in resources-rich Angola as well as in non-resources-rich Rwanda. A comparative case-study and a cross national analysis is presented in chapters four and five in order to gain an understanding of the impact of China on Africa’s economic development. Using Angola and Rwanda as case studies, I examined China’s trade and investment volume, focussing on construction, telecommunication and resources using factual evidence from credible sources such as the WB, the IMF, United Nations Conference on Trade and Development and data from Angola and Rwanda governmental and non-governmental sources and data from Ministry of Commerce of the People’s Republic of China. As discussed in chapter one, literature on China–African relations is divided into one that views China’s trade and investment as positive and another that sees it as negative. Although there are analysts who argue that Chinese investment in Africa has had positive outcome, I argue that it has had an overall negative impact and that the new partnership between the two is unlikely to make substantial changes in Africa’s economic situation. Tull (2006), Shen (2013) and Taylor (2009), argued that China has failed to deliver even modest technology gains or generate jobs that correspond to the volume of its investment in Africa. Also, despite China’s contribution to the much-needed infrastructure development in Africa and other opportunities that China’s investment brings to the two case-study countries, the negative impacts particularly with regards to employment generation and the transfer of skills outweigh the short-term cost benefits of engagement with China. The Chinese government considers its economic relations with Africa as a win-win situation. However, with all its negatives impacts, as the finding of this book shows, the win-win is more of rhetoric. Several factors have hindered the transfer of skills and employment generation for local population, namely the lack of investment in labour intensive sectors outside extractive sectors, limited acquisitions and mergers, lack of joint ventures with local firms, language and cultural barriers and lack of interest on the part of the Chinese in sharing their knowledge with the locals. The Chinese labour that accompanied its investments

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was the major obstacle to employment generation and the transfer of skills. The findings of this book indicate that Chinese investment has generated some temporary and low-paid jobs, but, those who benefited the most from the generated jobs were Chinese origin migrant labour (Brautigam 2009). In order to ensure that the local people benefit in the long run from increased Chinese engagement, the governments in Angola and Rwanda need to consider addressing these issues in the way that meets the needs of their own economies. This book has also revealed that Chinese trade and investment does not afford sufficient opportunities for Angolans and Rwandans to follow China’s example of successful development to improve their own economic development framework. This is evident because despite the fact that Angola in particular has received major Chinese loans, credit lines and investments; the country remains one of poorest, most underdeveloped and least skilled in sub-Saharan Africa. The argument that China has had a negative impact on economic development outcomes and capacity building is confirmed more in the Angolan case, as despite its rich resources, the Angolan economy is disadvantaged by this engagement. This has created anxiety among locals about the contribution of Chinese investment in relation to job creation and to the development of the local economy. The data examined in this book suggests that powerful interest groups in the Angolan government manage and dominate China’s engagement in the way that does not serve the interests of the public. These findings also suggest that Chinese investment has not widened opportunities for ordinary people to gain better employment even during this resource boom. Therefore, taking the interests of the Angolan people into consideration, the Angolan government needs to bear some of the responsibility and adopt a firm policy without influence from China. This book has reinforced the notion that trade and investment flow from China has had a negative impact on the economic development of Angola. This is evident from the fact that China’s investment in the country has generated minimal employment which reflects that China’s trade and investment in RRDCs has minimal contribution to their efforts to generate employment, increase productivity and achieve better economic development and reduce poverty. In Rwanda China is not a major player and therefore its trade and investment are small-scale and it is mainly focussed on implementing small-scale construction and telecommunication projects. Here, the findings indicate that the impact

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of Chinese trade and investment is somewhat different and that the locals were able to secure more jobs from Chinese firms. However, the overall impact is limited because these jobs were causal, short term and their contribution to overall economic development was minimal. Some factors that made the contribution of Chinese investment in Rwanda different from Angola is that Angola signed an agreement with China which allows Chinese firms to employ up to 70 per cent of Chinese nationals in projects funded by Chinese government as part of the loan deal. This also limits the ability of Angolans to obtain more employment from Chinese firms. Such an agreement does not exist between China and Rwanda and as result Chinese firms generated more jobs for locals in Rwanda compared to locals in Angola, although as mentioned above their contribution to Rwanda’s overall economy is marginal. Furthermore, there are less Chinese migrants in Rwanda in comparison to hundreds of thousands of Chinese in Angola All the above-mentioned factors make the outcome of Chinese trade and investment different in the two countries. However, it is important to note that low rate of unemployment in Rwanda cannot solely be attributed to China because other economies are also investing in Rwanda in sectors such as hotels, manufacturing and service sectors which generate more permanent and stable employment compared to jobs generated in sectors such as construction and telecommunication that are dominated by Chinese firms. The comparative study on RRDCs and nonRRDCs has revealed that the impact of China’s trade and investment is similar in RRDCs such as Angola than in non-RRDCs such as Rwanda. This book has employed dependency theory and economic nationalism whose explanations lead to relevant findings. A vast amount of literature, mainly coming from the West, sees China’s presence in Africa as being motivated by the exploitation of African resources. This relationship sees China as the dominant country, thus repeating the history of colonisation, which positioned Africa as a supplier of natural resources. To understand better whether the interaction between China and Africa is mutually beneficial or is tilted in the favour of China I focus in the resources rich- developing countries’ (RRDCs) economic activities with and measure their local development to see if china is different from their traditional trading partners. This is because the RRDCs are able to repay the host countries for their projects through oil and other resources. This the reason why China heavily invests in Angola in resources and nonresources sectors as it possesses enough that enables it to easily repay loans to China. China’s trade and investment in non-RRDCs is marginal due

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to lack of guarantees for repayment, such as resources. For this reason, China’s trade and investment in non-RRDCs such as Rwanda is marginal and the focus in on implementing donor projects and small projects that Rwanda would be able to repay. One reason for investing in non-RRDCs is that it generates jobs for Chinese labour and seeks investment for Chinese firms.. Refer to chapter five for a discussion on Chinese labour migrants in Angola and Rwanda. The underdevelopment theory of dependency has been discussed with reference to trade and investment relations. Insights from economic nationalism has also been employed to explain the nature of China’s approach in Africa from a theoretical perspective. Economic nationalism assisted the examination of Chinese policies and business practices in Africa, ranging from signing of contracts to high-level exchange visits to encourage its various companies to invest in Africa. These Chinese policies reflect the core contention of economic nationalists’ theories that advocate the role of the state in securing investment opportunities, particularly in resource sectors. Economic nationalists argue that states formulate policies for their own interests based on the zero-sum game, specifically to ensure access to resources. However, while the findings in this study were consistent with most of the arguments of economic nationalists and dependency theorists, two arguments regarding the purchase of shares from established Western oil companies in Angola and the Chinese government’s commitment to some of the liberal market rules were less consistent or less applicable to the situation of China–African economic relations. This is because China is quite vigilant to avoid any direct confrontation with other Western powers in their African investments. However, it was revealed that the importance of oil to China, as well as Angola’s heavy dependency on income from oil, meant that the two countries’ approach to business took on an economic nationalist perspective. This is also evident in the heavy involvement of two states in facilitating oil deals and partnerships to preserve their interests. By using a dependency perspective, it was possible to show how China established dependent relations with the selected case-countries, dominated by the export of raw materials in exchange of cheap products from China. This theoretical perspective also demonstrated how China reinforces its development policies in underdeveloped regions, particularly in Angola. Although the dependency theory has undergone some changes, which make it less relevant in today’s economic interactions, some of its assumptions successfully explain China’s increasing importance

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in Africa as discussed in this book. China–Africa relations, which have been explored through the perspectives of three theories, have had a negative impact on economic development outcomes and capacity building in both Angola and Rwanda. This is given the fact that the two countries are at different levels of economic development and Chinese influence. One main factor that made Chinese investment produce similar outcome in two different countries is that China utilises similar investment policies that focus on promoting Chinese interests across Africa including Angola and Rwanda. China is a major investor in Angola; however, economic development in Angola is much less and unemployment rate in the country has remained unchanged over the last ten year and during its engagement with China. Research findings suggest that China replicated some of the Western practices in Africa as there is marginal difference between Chinese policies and those of West when it comes to resource security and markets. The only difference, as mentioned in chapter three, is that China offers its trading partners in Africa, additional opportunities for easy access to finance and does not mix business with politics nor does it worry about the human rights record of its partner countries. This is demonstrated in the case of Angola, where China provided massive loans and credit lines that would normally have been provided by the WB but with much more restrictive conditions. This contributes to the ongoing debate, as China may indeed be the last chance for Africa. If Africa wants to develop along with the rest of the developing world, it is important that African leaders endeavour to find a way to negotiate in ways that compels China to invest for creating more jobs, skills and transferred technology that will increase productivity and generate income for ordinary Africans. It is not the intention of this study to hold China and its firms responsible for African development, but the assessment of this book does show that China has indeed had a negative impact. Findings from the two case studies suggest that China has had a negative effect in the areas investigated, but the role of the government, particularly in Angola, is equally negative. In Rwanda, the government plays a more positive role which had made the impact from China’s trade and investment different from that or Angola.

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Implications and Recommendations What Has Been Learnt? In spite of the fact that there were difficulties in the collection of data, as well as the fact that this book does not encompass all the aspects of China–Africa relations, there are plentiful implications for the case-study countries as well as other African countries with similar Chinese trade and investment. Based on the findings, the book has a number of recommendations. Given that many countries in Africa, Angola and Rwanda in particular, have emerged from violent conflict and have experienced a decline of investment from the West, China’s investment in the two countries is of utmost necessity. This book does not recommend that African states reduce trade and investment links with China; however, it encourages that engagement with China be more accountable in ways that would be more beneficial to Africa’s economy. Such an investment, as it stands now, has limited scope for local employment, but African governments need to encourage the Chinese to keep investing, as potential economic benefits can be derived from greater investments. However, to put the promise of potential benefits into practice, African governments must ensure that generation of employment and the transfer of skills and technology to local population is a fundamental requirement for any Chinese investment into these countries. More attention needs to be given to the processes that aid the absorption of the local populace into high-level skilled and managerial positions into both Chinese firms and joint ventures to facilitate the smooth transfer of knowledge and skills. Since in Africa, China is viewed as an alternative partner to the West, economic growth and development, in both the countries, is very much tied to China’s trade and investment. Therefore, it is important that Angola and Rwanda develop their own China engagement policy to counter the current China–Africa policy to ensure that Chinese investment contributes to the growth of the local economy and generates more job opportunities. Given that China is in Africa for business, the benefit from Chinese investment will depend on how African governments regulate Chinese investment and formulate conditions for Chinese businesses in Africa to invest in human capital development at the local level. It is equally important that African government engage civil society organisations in potential development projects that will be funded or implemented by Chinese companies. Involvement of nongovernmental organisations (NGO’s) will ensure more accountability as

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well as encourage participation of local communities, and push both Chinese and African governments to reduce bureaucratic hurdles for the facilitation of community development projects. Based on these observations, it is important that African countries, particularly Angola and Rwanda, develop appropriate development policies to ensure that the FDI is receptive to the needs of local labour market in order to maximise benefits from backward and forward linkages established by the inflow of trade and investment from China. To address the negative impact from China, resource-rich development countries and non-resources-rich developing countries, which are the main target of Chinese interest, should formulate development plans and special legal frameworks to address problems relating to Chinese investment and employment practices. It is also important that China works together with other developed countries, local African institutions such as the African Union and civil society organisations to promote and address African development issues. Furthermore, joint ventures, acquisitions and partnerships with local African firms that have more potential to generate employment and better chances of skills exchange should be encouraged in Angola and Rwanda. These recommendations, if taken into consideration by potential researchers and/or policy makers in both China and Africa, would be in the best interest of African countries as well as China because it will make their business activities more responsible and answerable to African needs. This book, thus, has made a number of contributions to the growing literature of China–Africa relations. As discussed in the literature review, most of the studies conducted in the past, on China and Africa, offer limited examination of the impact of Chinese trade and investment on economic development outcomes and capacity building. In particular, investigation into the impact of China on employment generation and the transfer of skills and technology is almost entirely absent from current literature. Consequently, there is a gap in the present knowledge, which this book has attempted to fill, by providing specific analysis about Chinese investments in African countries and its economic and social costs on the local population. The findings of this book will hopefully be a valuable contribution to the IR and IPE literature explaining the impact of Chinese trade and investment on Africa and both long-term and short-term development challenges faced by weaker states despite increased economic collaboration with powerful states.

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Revisiting Limitations of the Book Given that this is one of the rare studies comprehensively comparing the involvement of China in Angola and Rwanda, the research has its limitations. Africa is not just one big country; there are fifty-four countries that make up Africa, and within each of these countries there are differences in culture and composition of the economies. The difference between African countries and China’s relations with each of them, is often based on the bilateral deals indicating that the impact of China’s involvement in trade and business could be different, country to country.

Concluding Remarks This book has demonstrated that China’s trade and investment plays a limited role in the economic development of Angola and Rwanda. Employment generation and transfer of skills and technology are some areas that are negatively impacted by Chinese investment and labour migration. As discussed in chapter four, China is not the only source of trade in Africa. Africa and the two case-study countries still enjoy a large portion of trade with their traditional trading partners and the new emerging economies such as India and Brazil. In fact, China’s FDI in Angola and Rwanda is marginal in comparison to FDI from the United States and states in the European Union. These countries also work on a number of projects in Africa and in Angola and Rwanda. It is generally viewed that China’s growing investment has a negative impact on human rights, governance reforms and local industrial development (Tull 2006; Yin and Vaschetto 2011). As the findings of this book indicate, Chinese investment in Africa is focussed on oil producing countries and countries that are ruled by authoritarian regimes, for example, Angola, Sudan and Zimbabwe. These countries are well known for their poor human rights record, poor governance and the misuse of public finance for the ruling elites. The findings also indicate that economic development under these regimes is unlikely to occur due to the lack of accountability and their refusal to work closely or in partnership with international development agencies that have potential to promote equal and even development that would benefit the wider population. However, Chinese leaders have made it clear that they are in Africa for business and that China’s engagement policy is based on noninterference. This policy allows oil revenue from Chinese investment to

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go into private pockets rather than be used for the public interest and inclusive development, just as it exists in Angola, where, despite abundant resources, the majority of the population lives below the poverty line. This is a potential area where future researchers could study the impact of Chinese investment on governance reform, accountability and even development. China is going to be in Africa perhaps longer than the early colonisers and will continue to have a massive economic influence. Research in this area may need to be based on fieldwork and interviews with locals to clarify their perspective on China’s growing influence in Africa and its relationship with local communities. The research could address the question: What is the impact of China’s trade and investment on urban development and regeneration? Research in this area could also investigate Chinese scholarships for African students and government officials who travel to study in China. The focus here could be on how these Chinese scholarships are distributed among recipients, the selection process and whether the selection is fair or biased towards Chinese interests or require loyalty to the African regimes. China and Africa established the Forum on China–Africa Cooperation (FOCAC) in 2000 as a platform to facilitate economic cooperation between Africa and China. FOCAC represents a benchmark in contemporary China–African relations. However, there is a concern about how the management FOCAC is structured, which raises the question of whether the organisation is created to promote mutual cooperation or to promote China’s economic interests in the continent. At present, FOCAC is focussed on facilitating business deals for Chinese firms in Africa and promoting bilateral relations but is yet to discuss other important social issues affecting Africa’s future. The findings also indicate that Africa’s role in the management of the organisation is marginal. As much as FOCAC promotes Chinese interests in Africa, it is equally important that it also promotes Africa’s interest in China or within Chinese investment in Africa. This book contributes to the current literature and knowledge on Chinese investment and the impact it has primarily on employment generation and the transfer of skills in Africa. The findings are valuable for further discussion of the subject. ‘What is Africa’s agenda?’ or ‘How much bargaining power does Africa have over business deals with China?’ and ‘What is the impact of China’s flexible loans and credit lines on long-term economic development governance reform in Africa?’ are some questions that mandate further investigations.

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Index

A Acemoglu, J., 57 Addis Ababa, 11, 86 AFDB, 247 Africa China’s involvement in, 81 Chinese state policy in, 105 contemporary relation between China, 81 economic growth, 135 engagement with China, 8, 81 immigration of Chinese people, 242 leadership, responsibility, corruptions, lack of, 8 African Continental Free Trade Area (AfCFTA), 63 African Economic Outlook (2020), 220, 222 African government, 60 African Research Initiative, 220 African students, 93 African Union (AU), 66 Africa Policy (2006), 91 Agricultural sector, 222

Aid donors, 224 Aid mismanagement, 7 Alden, C., 109 Al Shabab, 165 Amahoro Stadium, 256 Amin, S., 25 Ana Cristina Alves’ (2012) study, 110 Angola, 9 Chinese nationals in, 242 Angolan Agency for Private Investment (ANIP), 243 Angolan civil conflict, 66 Angolan nationalist movements, 182 Angola’s declaration of independence, 183 Anticolonisation, 182 Anti-corruption, 189 Arable lands, 182 Argentinian, 24 Arguments, 6, 114, 117 Asia, 133 Asian Tigers, 33 Assistance, 7 Attainment motivation, lack of, 23

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020 A. F. Lisimba, China’s Trade and Investment in Africa, https://doi.org/10.1007/978-981-15-9573-8

331

332

INDEX

Aviation, 187 B Bandung Conference, 68 Beijing, 10 Beijing Consensus (BC), 5, 6 Beijing’s master plan, 146 Beijing’s oil diplomacy, 92 Belgium, 184 Berlin Conference, 56 Bilateral trade, 128 Bolton, John, 100 Bonhomie, 8 Brautigam, Deborah, 245 Brazil, 8 Bretton Woods Project, 6 Brevity, 212 BRICs, 41 Britain, 55 British colonial administration, 56 British colonial rulers, 56 C Capitalism, 26 Caribbean regions, 136 Casual employment, 252 Casual jobs, 260 Chambishi, 145 Chen Deming, 144 China, 3, 7 alternative source of finance, 128 anti-Western rhetoric, 107 as a powerful global actor, 3 as benign benefactor of Africa, 14 automobile ownership, 158 bribes and opaque agreements, use of, 100 coffee, tea, import of, 184 communist rule in, 50 contemporary relation between Africa, 81

continent loans and credit lines, 82 diplomatic links with Africa, 5 economic, political, military and cultural links with Africa, 5 economic relationship with Africa, narrative of, 128 energy consumption, 157 energy supply calculation, 156 exports, 130 financial flow, 269 geopolitics of, 156 global norms and ethics, 172 imports, 130 Industrial and Commercial Bank, 104 international oil market, 105 investment in Angola, 145 investment in energy resources, 137 machinery export, 131 multinational companies, 212 natural resources, search for, 89 oil consumption, increase in, 161 opportunities for Africa, 14 policy objectives, 100 political and military support, 183 primary resources, limited availability of, 167 railroads, shipping and banks, 50 trademark rhetoric, 185 volume of investment, 5 China’ Action Plan (2019–2021), 91 China–Africa Consultative Forum (CACF), 84 China–Africa, context of, 9 China Africa Research Initiative, 129 China–Africa summit, 131 China National Offshore Oil Company (CNOOC), 105, 194 China National Petroleum Corporation (CNPC), 105 Chinese expatriate workers, 242

INDEX

labour contracted to private enterprises, 242 old Chinee migrants, 242 retailers and business people, 242 technicians, engineers, aid workers, teachers and healthcare workers, 242 value-added products, 258 Chinese Academy of Social Sciences (CASS), 116 Chinese businesses, 89 Chinese characteristics, 134 Chinese Confucius Institute, 246 Chinese embassies, 242 Chinese firms, 242 Chinese government, 93 Chinese investment, 224 pre-requisite of, 223 Chinese migrants, 242 Chinese National Bureau of Statistics, 242 Chinese National Oil Companies (NOCs), 89 Chinese political discourse, 156 Chinese universities, 93 Civil unrests, 7 Civil Wars, 7 Class-conflicts, 143 Colonial dependency, 25 Colonialism, 6 dark side of, 8 Colonial masters, 37 Colonial mindset, 35 Colonial policies, extractive, 7 Colonial Portuguese, 214 Colonial powers, 56 Colonial territories, 56 Colonial trap, 4 Colonisation, legacy of, 56 Communism collapse of, 21 Communist Party of China (CCP), 50

Comparative advantage, 23 Concessional loans, 11 Confucius Institute, 92 Construction sector, 247 Core-dependency assumption, 142 Coronavirus pandemic, 130 Corruption, 57 Cross-national comparison, 179 Cultural exchanges, 14 Cultural revolution, 50 Culture, 117 Currency, 34 D Debates, 5 Debt forgiveness, 132 Decolonisation, 34 Delinking, 26 Democratic Republic of Congo (DRC), 134, 185 Democratic stability, 23 Deng Xiaoping, 50, 71 Dependencia, 24 Dependency, 26, 29 Dependency assumptions, 180 Dependency pattern, 143 Dependency theory, 9, 22 Dependent state, 26 Determination, 26 Development, 7 Development agendas, 269 Developmental goals, 33 Development challenges, 269 Diaoyu islands, 159 Diversification, 182 ‘Divide and Rule’, 56 Djibouti, 82 Doctrine, 23 Dominance, 49 Dominant state, 26 Donors, 64 ‘Dutch Disease’, 65

333

334

INDEX

E E-commerce, 187 Economic affairs, managing, 184 Economic and Trade Commission, 182 Economic crisis, 10 Economic growth rate, 3 Economic nationalism, 171 Economic performance, 63 Economic powers, emergence of, 3 Economic reforms, 51 Economic vulnerability, 197 Egypt, 68 Eighth National Congress, 70 Eisenman, Joshua, 115 Elasticity, 142 Emerging alliance, 4 Employable skills, shortage of, 257 Employment, 9, 217 Employment generation, 245 Energy conservation, 160 Energy Information Administration (EIA), US, 160 Energy security, 156 Enigma, 5 Entrepreneurs, local, 255 Equality, 29 Eritrea, 59 Ethiopia, 59 Europe, 5 European colonial powers, 7 Europeans, 8 European Union (EU), 8 Evolutionary process, 23 Exim bank, 90, 231 Existing literature, 15 Exploitation, 30 Exploitative dependency, 146 Externalisation, 133 Extractive institutions, 196

F Fair trade, 29 Felipe, J., 23 Financial dependency, 143 Financial-industry dependency, 25 Financial system, 6 Fiscal development policies, 136 Food products, 24 Food shortages, 147 Foreign aid, 7 Foreign direct investment (FDI), 9, 63, 136 minimal inflows of, 136 Foreign policy formulation, 92 Formal sector, 216 Former colonial powers, dominance of, 134 Forum on China–Africa Cooperation (FOCAC), 84 France, 137 Frank, Andre Gunder, 24, 26 Frente Nacional para a Libertação de Angola (FENLA), 182 Fundamental assumptions, 23

G Gambling, 184 General Administration of Customs, China, 130 Geographical-continental boundaries, 12 Geopolitical implications, 4 Geo-strategic objectives, 4 Ghana, 68, 242 Ghost towns, 245 Girvan, C., 25 Global Construction Review (GCR), 244 Global economic activities, 81 Global economic cycle, 260 Global Financial Crisis (GFC), 54

INDEX

Globalisation, 136 Global order, 5 Global powers, 5 Global South (GS), 35 Global Witness, 189 Governance, 9 Government, 6 Great Lakes Region (GLR), 36 Great Leap Forward, 50 Greenfield investment, 136, 137 Gross Domestic Product (GDP), 196 Gross National Income (GNI), 196 H Haq, Mahbub ul, 28 HIV/AIDS, 62 Hong Kong, 52 Hu Jintao (President), 53 Human development, 9, 217 Human development indicators, 217 Humanitarian assistance, 64 Humanitarian purposes, 7 Human rights, 109 Humiliation, 69 I Imperialistic power, 14 Import substitution, 29 India, 3, 7 Indigenous capitalist, 37 Industrialisation, 15 Industrial revolution, 101 Inequality, 10, 26 roots of, 29 Informal sector, 216 Information and communications technology (ICT), 195, 226, 250 Infrastructural capacities, 7 Infrastructure, 37 Institutional reforms, 273 Institutions, 6, 33

335

Interdependency, 9 Internal conflicts, 49 International affairs, 276 International community, 4 International economic arena, 134 International financial institutions (IMF) Washington-based, 6 Internationalisation, 38 International Labour Organisation (ILO), 213 International Monetary Fund (IMF), 25, 33 International political economy (IPE), 4, 284 International Relations (IR), 4, 284 Investment destination, 136 Investment portfolio, 277

J Jackson, Terence, 257 Japan, 33 Jiang Zemin (President), 53 Job security, 140 John Hopkins University (SAIS-CARI), 129 Joint ventures, lack of, 278

K Kagame, Paul (President), 187 Kenya, 82, 92 Kigalai, 11 Kigali Institute of Education, 246 Kilamba (Chinese city), 245 Korea, 32 Kuomintang, 50

L Labour force, 214 Language barrier, 243

336

INDEX

Latin America, 24, 26, 133 Latin American, 24 structuralist, 25 Leadership, 7, 160 Legacy, 7 Liberation, 7 Loan negotiations, collapse of, 272 Long-term effects, on growth and development, 4 Long-term settlement, 242 Low-interest loans, 189 Low-paid jobs, 260 Luanda, 245 M Maddison, Angus, 49 Mainland China, 52 Malacca Dilemma, The, 170 Malacca Strait, 170 Malaria, 64 Mandarin, 92 Mao Zedong (Chairman), 6, 50, 70 Marcus Power, 110 Marginalisation, 62, 63 Market economy, 50 Marketplace, 38 Marxist, 29, 33 Marxist thinkers, 25 Mass migration, 242 Mbeki, M., 59 Mbeki, Thabo (President), 108 Mearsheimer, John, 169 Mecca, 159 Metropolis, 35 Metropolitan nations, 26 Middle-class population, 100 Middle East, 162 Minerals, 4 Ming Dynasty, 67, 81 Ministry of Commerce of the People’s Republic of China (MOFCOM), 168, 220

Ministry of Public Security, 158 Modernisation theories, 21–23 ‘outdated’, 21 Modern world system, 31 Morocco, 66 Movimento Popular de Libertação de Angola (MPLA), 182 Moyo, D., 115 Mugabe, Robert, 9 Mushikiwabo, Louise, 195 N Nasser, Gamal Abdul, 68 National Bank of Rwanda, 246 Nationalism, 281 National Oil Companies (NOCs), 165, 167 National security, 163 National Statistics Institute (INE), 216 Natural resources, 3, 132 importance of, 136 Neocolonial power, 14 Neocolonisation, 56 Neoliberal economic thought, 6 Netherlands, 137 New Partnership for African Development (NEPAD), 67 Ngirente, Édouard, 224 Nigeria, 88 Nkrumah, Kwame (President), 58 Non-Alignment Movement (NAM), 69 Non-resources-rich developing countries (non-RRDCs), 9 North American(s), 23 Nye, Joseph, 91 O Obligation, 231 O’Brien, Robert, 23

INDEX

OECD, 247 OECD countries, 62 Office building complex, 224 Official Development Assistance (ODA), 62 Ogun State, 145 Oil-producing countries, 116 Oil revenue, 260 One-party system, 275 Opportunity, equality of, 28 Organisation of African Unity (OAU), 66 ‘Outgoing’ policy, China, 144 Outward Foreign Direct Investment (OFDI), 102 Overpopulation, 23

P Partnership, 9 Patrimonialism, 184 Patrimonial states, 65 People’s Liberation Army (PLA), 170 Periphery goods, 24 Petrochemical Corporation (SINOPEC), 105 Philosophical convergence, 37 Policies, 6 Policymakers, 242 Political goals, 100 Political illiberalism, 111 Political influence, 4, 7 Political instability, 7 Political integration, 4 Political stability, 160 Political system, 32 Political turbulence, 34, 55 Political upheavals, 7 Population, 7, 8, 218 Post-Cold War, 61 Postcolonial Africa, 7 Postcolonial era, 8

337

Post-war era, 21 Post-Washington Consensus, 6 Potential researchers, 284 Poverty, 10, 25, 28, 144 Poverty curtain, 28 Powerhouse, 5 PRC, 88 Prebisch, Raúl, 24, 29, 142 Prebisch’s thesis, 135 Primary goods, 24 Privatisation, 60 Prosperity, 118 Proxy wars, 66 Public goods, 184

Q Qatar, 162

R Raine, Sarah, 38 Raw materials, 29 Recommendations, 86 Reform policies, 50 Resources, 4 Resource sector, 221 Resources-rich developing countries (RRDCs), 9 Rival oil companies, 105 Robinson, J.A., 57 Russia, 3, 134 Rwanda, 9 economic performance, 198 Vision 2050, 249 ‘Youth and Women’s’ employment in, 218 Rwandan people, 224 Rwandan trade union movement, 246

S Santos, Theotonio Dos, 26

338

INDEX

Saudi Arabia, 134 Savimbi, Jonas, 183 Scholars, 26 Scholarships, 93 Science and technology, 187 Self-employment, 217 Semi-periphery, 31 Senkaku islands, 159 Shanghai, 51 Shenzhen, 51 Shopkeepers, 249 Sierra Leone, 59 Singapore, 32, 33 Singer, Hans, 24 Sino-optimism, 14 SINOPEC, 194 Sino-pessimism, 14 Skills lack of, 211 mismatch, 253 transfer of, 9 Smart Power, 91 Smith, Adam, 32 Snowball effect, 249 Socialist, 50 Social problems, 197 Social security, 248 Socio-economic disaster, 50 Soft power, 91 Somali, 8 Sonangol Group, 194 Sontas, Theotonio Dos, 24 South Africa, 14 South China Sea, 170 Southeast Asia, 103 South Korea, 3, 8, 33, 103 South–North, 5, 28 South–South, 4 South Sudan, 59 Soviet Union, collapse of, 62 Spain, 199

Special Economic Zones (SEZs), 51, 145 Spectrum, 23 State-Owned Enterprises (SOEs), 90 Statistical evidence, 158 Structural Adjustment Programs (SAPs), 60 Structuralist, 24 Sub-Saharan, 63 Sudan, 8, 59 Sustainability, 156 T Taiwan, 32, 103, 159 Tanzam Railway project, 71 Tanzania, 14, 71, 82 Taylor, I., 109 Technological-industrial dependency, 25 Technology(ies), 4, 10 Telecommunication, 12, 212 Temporary employment, 252 Temporary jobs, 243 Territorial integrity, 159 Theoretical framework, 32 Third World countries, 7, 29 Tiananmen Square, 72 Tian Xyeuyn, 144 Trade expansion, 130 Trade volume, 128 Traditional culture, 23 Traditional security dilemma, 171 Traditional trading partners, 4 Transitional justice, 186 Transparency, 6 Transportation, 160 Turkey, 8 U Underdevelopment, 8, 26, 143 Underemployment, 214

INDEX

UNDP, 247 Unemployment, 215 Unemployment rate, 10 Unequal trade notion of, 25 UN General Assembly, 69 United Arab Emirates (UAE), 199 United Bank of Africa, Nigeria, 104 United Kingdom, 137 United National Security Council (UNSC), 53 United Nations, 24 United Nations Conference on Trade and Development (UNCTAD), 63 United Nations Economic Commission for Africa (UNECA), 6 United Nations Economic Commission for Latin America (UNECLA), 29 United States, 5, 51, 62 University graduates, 252 Urbanisation, 159 US Council on Foreign Relations, 114 USSR, 38 UTEXRWA, 259

V Vernengo, M., 23 Vision 2020, Rwanda, 249

Vocational training, 251 Volume, of work, 25 W Wallerstein, Immanuel, 31 Washington Consensus (WC), 5 Weak states, 113 Western companies, 89 Western development policies, 82 Western hegemony, 70 Western investments, 65 Western media, 100 Western powers, 69 Williams, Marc, 23 Win-win situation, 10 Workforce localisation, 214 World Bank (WB), 6, 25, 213 World economic system, 32 World System theory, 9, 31, 143 World War II, 23 Y Youth unemployment, 218 Z Zambia, 14, 71, 82 Zero-sum game, 22, 164 Zhou Enlai (Foreign Minister), 68 Zimbabwe, 88 ZTE, 246

339