Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation [1 ed.] 9780978305048, 9780798305228

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As the Chinese economy continues to grow, increased commercial engagement with Africa will offer the continent new and rewarding prospects for trade, investment and economic development. The challenge is for Africa to grasp these opportunities and take full advantage of China’s friendship and willingness to co-operate. The Forum on China-Africa Co-operation (FOCAC) provides a mechanism for all-inclusive diplomatic consultation to advance China-Africa co-operation and to effectively manage expanding economic inter-dependence. FOCAC is a political arena for developing Sino-African co-operation and problem solving. FOCAC also provides an important framework for developing a common development agenda. Given new global trends towards antiglobalisation, FOCAC’s importance is expected to increase in the years ahead. This book seeks to strengthen the China-Africa relationship and offer new suggestions for both policy makers and scholars seeking to understand and advance FOCAC for mutual benefit. FOCAC holds the key to Africa’s development and long-term prosperity. The new policy initiatives and proposals outlined in this study make a very valuable contribution to strengthening FOCAC and advancing Africa’s economic development.

About the editors Dr Funeka Yazini April works at the Human Science Research Council (HSRC) as a research specialist with expertise in industrialisation between China and South Africa, and China and Africa. Professor Garth Shelton is an Associate Professor at the University of the Witwatersrand, in Johannesburg, South Africa. Professor Chris Alden teaches International Relations at the London School of Economics and Political Science (LSE) and is a research associate with the Global Powers and Africa Programme, South African Institute of International Affairs (SAIIA). Professor Biliang Hu is Professor of Economics, Dean of Emerging Markets Institute (EMI), and Director of the Belt and Road Research Institute (BRRI) at Beijing Normal University.

AISA

Forum on China-Africa Cooperation Industrialisation and Agricultural Modernisation

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Industrialisation and Agricultural Modernisation

Forum on China-Africa Cooperation Industrialisation and Agricultural Modernisation

Forum on China-Africa Cooperation

Funeka Yazini April, Garth Shelton, Chris Alden and Biliang Hu (eds.) Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

Forum on China-Africa Cooperation Industrialisation and Agricultural Modernisation Editors:

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Dr Funeka Yazini April Professor Garth Shelton Professor Chris Alden Professor Biliang Hu

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Forum on China-Africa Cooperation Industrialisation & Agricultural Modernisation First Published in 2018 by the Africa Institute of South Africa PO Box 630 Pretoria 0001 South Africa ISBN: 978-0-7983-0522-8 © Copyright Africa Institute of South Africa 2018 No part of this publication may be reproduced, stored in a retrieval system, or transmitted by any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permission from the copyright owner. To copy any part of this publication, you may contact DALRO for information and copyright clearance. Any unauthorised copying could lead to civil liability and/or criminal sanctions.

Telephone: 086 12 DALRO (from within South Africa); +27 (0)11 712-8000 Telefax: +27 (0)11 403-9094 Postal Address: P O Box 31627, Braamfontein, 2017, South Africa www.dalro.co.za. Opinions expressed and conclusions arrived at in this book are those of the authors and should not be attributed to the Africa Institute of South Africa.

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Project Manager: Siphokazi Mdidimba Editing: Bangula Lingo Centre Proofreading: Write Skills Design and Layout: Pamset Cover Design: Dudu Coelho Printing: Oranje Print and Packaging The Africa Institute of South Africa is a think tank and research organisation, focusing on political, socio-economic, international and development issues in contemporary Africa. The Institute conducts research, publishes books, monographs, occasional papers, policy briefs and a quarterly journal – Africa Insight. The Institute holds regular seminars on issues of topical interest. It is also home to one of the best library and documentation centres world-wide, with materials on every African country. For more information, contact the Africa Institute of South Africa at PO Box 41, Pretoria 0001, South Africa; Email [email protected]; or visit our website at http://www.ai.org.za

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Table of Contents

Preface Acknowledgements

vi viii

About the contributors

ix

Abbreviations and Acronyms

xi

List of Tables

xxi

Abbreviations and Acronyms

xxiii

PART 1: Keynote Addresses

xxv

Dr Claudious Chikozho, AISA Executive Director, Human Science Research Council Ambassador Tian Xuejun, Embassy of the People’s Republic of China in South Africa Ambassador Ji Peiding, Foreign Policy Advisory Group of the Chinese Ministry

PART 2: Introduction

xxv xxvi xxvii 1

Chapter 1

Towards focac 2018: Strenghtening the focac agenda on Industrialisation and Agricultural Modernisation Yazini April, Garth Shelton and Biliang Hu 

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PART 3: China-Africa Industrial Cooperation

1 14

Chapter 2

China’s Special Economic Zones: Best Practices for Industrial Cooperation between China and Africa Tang Xiaoyang

14

Chapter 3

China’s Economic and Trade Cooperation Zones in Africa: A Viable Model of Development? Chris Alden and Ana Cristina Dias Alves 

30

Chapter 4

China and Africa’s Industrialisation: The Current Situation, Challenges, Fears and Policy Options Ukertor Gabriel Moti 

48

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Chapter 5

Africa’s Industrialisation and China’s ofdi in the Manufacturing Sector: Rationale and Practices LU Feng 

69

Chapter 6

Africa’s Mineral Resources Sector and Evolving Relations with China: Transitioning from Resources Dependency to Economic Diversification through Mineral Beneficiation Sizwe Phakathi

95

Chapter 7

The Realities of industrial 1.0 in Africa through focac Yazini April and Zukiswa Mpiyakhe

116

Chapter 8

China’s inward looking industrialisation: An Inspiration for West Africa to establish Regional Value Chains? Maxime Weigert

135

PART 4: China-Africa Agricultural Cooperation and Food Security in Africa156 Chapter 9

Food security in Africa Problems and Solutions Biliang Hu and MA Yue

156

Chapter 10

Agricultural Cooperation between China and Mozambique: The Situation and the Problems LIU Weicai 

178

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Chapter 11

Between Promise and Profit : Chinese Agro-Investment and the Challenges of Operating in South Africa Angela Harding, Chris Alden, Lu Jiang and Ward Anseeuw

192

Chapter 12

Focac, Agricultural Development and China-Africa Cooperation Garth Shelton

209

Chapter 13

The Political Economy of Industrialisation and Agricultural Development in Africa Mxolisi Notshulwana

232

Chapter 14

Africa-China Agriculture Modernisation Cooperation: Approaches, Challenges and Opportunities

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Gedion Jalata

249

PART 5: Enhancing Synergies in China-Africa Development and Cooperation 277  Chapter 15

Aligning China-Africa Cooperation with the un 2030 Agenda for Sustainable Development Zhang Chun

277

Chapter 16

The Role of China-Africa Relations in the Promotion of the Right to Development in Africa Rita Ozoemena

288

Chapter 17

Post focac vi – Synergy or Anergy in the China-Africa Cooperation Paul Tembe

303

PART 6: Conclusion

326

Chapter 18

A new focac Agenda for Agricultural Modernisation and Industrialisation 326

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Garth Shelton, Yazini April, Biliang Hu and Chris Alden

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Preface

The new comprehensive and inspiring roadmap for strengthened China-Africa co-operation was outlined at the December 2015 Forum on China-Africa Co-operation (FOCAC VI) Summit in Johannesburg. It confirmed the win-win approach of this relationship and detailed five key pillars of co-operation, along with ten specific plans to strengthen this process. This study investigates the (arguably) two most important elements of the current FOCAC agenda – industrialisation and agricultural modernisation – with a view to identifying specific policy proposals, new ideas and suggestions that could be incorporated into the evolving FOCAC agenda. Numerous studies have confirmed that successful industrialisation and agricultural modernisation are critical for poverty reduction, job creation and economic growth. The next phase of Africa’s economic development requires a shift from over-reliance on raw material and oil exports to domestic economic transformation. Through the FOCAC mechanism and related bilateral interactions, China is the ideal development partner to assist Africa in this process. Over the last two decades or so, FOCAC has strengthened and confirmed the comprehensive China-Africa co-operation strategy, with increasingly positive outcomes for both sides. Since 2000, FOCAC has become the most important multilateral mechanism that is driving, managing and facilitating this creative and mutually beneficial China-Africa interaction. FOCAC has evolved to become the ‘core platform’ of debate and diplomatic collaboration between China and Africa. To date, the FOCAC process and its outcomes have been strongly

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supported and endorsed by Africa’s leadership, confirming the mutually beneficial nature of this process. The new challenge, following the conclusion of FOCAC VI, is for China and Africa is to continue to build a sustainable, long-term relationship that produces specific and quantifiable economic development benefits for both sides. The FOCAC VI Declaration and three-year Action Plan offers a comprehensive agenda for broadening and strengthening political and commercial co-operation and outlines a long-term vision to advance a practical development partnership. Moreover, FOCAC is expected to become more important as a process for advancing global co-operation and harmony, in response to the emerging anti-globalisation forces represented by Brexit and the new administration in the USA. This study provides unique insight, policy proposals and agenda suggestions for the evolving FOCAC process. Policy practitioners, students and scholars of China’s foreign policy and China’s engagement with Africa will find this volume interesting, informative and essential reading in the quest to better understand Sino-African relations, while providing new ideas to advance the FOCAC agenda and related policy processes. The creative and innovative policy proposals and research conclusions outlined in the various chapters of this study offer new counsel and encouragement to advance and strengthen FOCAC towards a sustainable, long-term diplomatic mechanism that will advance both China-Africa relations and common vi Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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Preface

economic prosperity. This book is dedicated to strengthening the China-Africa friendship relationship and ongoing diplomatic interaction for mutually beneficial co-operation and common development. It is hoped that the ideas, suggestions and proposals contained in this study will make a positive and meaningful contribution to FOCAC, China-Africa relations and shared economic prosperity. Professor Garth Shelton

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Associate Professor, University of Witwatersrand

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Acknowledgements

The editors of this book would like to acknowledge the financial support of the China Africa Research Joint Exchange Program, which made the publication of this book possible. This book is a compilation of conference proceedings by Chinese and African scholars at the China-Africa Industrialization and Agricultural Modernization Seminar, which was held on November 9-10, 2016. Also included in the book are the keynote speeches made during this event. We also acknowledge all the authors who contributed to the success of this project. Chapter 7 is dedicated to the late Ms Zukiswa Mpiyakhe who served as a co-author, and a Research Assistant for the book production. The Editors also acknowledge Ms Siphokazi Mdidimba, AISA Publications, for managing the editorial processes of this book project. Special thanks go to the Embassy of the People’s Republic of China in South Africa, for its

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support, patience and oversight in this process.

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About the Editors

Dr Funeka Yazini April works at the Human Science Research Council as a research specialist with expertise in industrialisation between China and South Africa, and China and Africa. Dr April is a distinguished scholar with several publications, including the following 3 edited books: FOCAC 2015: A New Beginning of China-Africa Relations, Perspectives on South Africa-China Relations, and the Forum on China-Africa Cooperation: The Politics of Human Resource Development. Dr April has also published over 40 book chapters and journal articles, such as: ‘Prospective Mining Industrialisation Partnerships between South Africa and China’; ‘The United States, China and Mineral Resource Extraction: The Case of the Democratic Republic of Congo’; ‘Rethinking Africa’s Development Through Science and Technology: A Partnership Opportunity for South Africa and China’; ‘Sino-Africa Dynamics of Joint Knowledge Production: Prospects and Challenges’; ‘Understanding An Aspect of the Red Dragon’s Governance and Economic Growth, and Assessing Local Governance between South Africa and China’. She has also done government research projects, such as ‘Proposed Special Economic Zones: One-Stop Shop for South Africa’, a consultative document for the Department of Trade and Industry, and a mining research project on ‘Assessing Mineral Trade: The Case of ASA Metals in South Africa’ for the Department of International Relations and Cooperation.

Professor Garth Shelton is an Associate Professor at the University of the Witwatersrand, Copyright © 2014. Africa Institute of South Africa. All rights reserved.

in Johannesburg, South Africa. His academic and professional qualifications include: PhD, Wits University (thesis entitled ‘Nuclear Weapons, Deterrence and Non-proliferation: The Case of South Africa’); National Security Certificate, Christian Albrechts University, Kiel, Germany; MA (Distinction), Wits University (dissertation entitled ‘United States – South Africa Relations 1974-1979’). He was Visiting Bradlow Fellow at the South African Institute of International Affairs (SAIIA) in 2002. Since 2003, he has been an Associate Professor, Department of International Relations, Wits University, Johannesburg, South Africa. He has published 5 books (on China and Africa) and 57 articles and academic papers (on East Asian topics and security-related issues) in national and international journals, including journals published in the USA, the UK, China, Japan, France, Switzerland and Australia. He has presented academic papers on East Asian and security-related topics at over 40 national and international conferences.

Professor Chris Alden teaches International Relations at the London School of Economics and Political Science (LSE) and is a research associate with the Global Powers and Africa Programme, South African Institute of International Affairs (SAIIA). He is: author/co-author of numerous books, including ‘Mozambique and the Construction of the New African

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About the Editors

State’ (Palgrave 2003), ‘South Africa’s Post-Apartheid Foreign Policy’ (Adelphi Paper IISS 2003), ‘China in Africa’ (Zed 2007), ‘Land, Liberation and Compromise in Southern Africa’ (Palgrave/Macmillan 2009), ‘The South and World Politics’ (Palgrave 2010), ‘Foreign Policy Analysis – new approaches’ (Routledge 2012); and co-editor of ‘A Mamba e o Dragão: Relações Moçambique-China em perspectiva, Cidadania e Governação em Moçambiqu’, (IESE/SAIIA 2012), ‘China Returns to Africa’ (Hurst 2008). He has also written numerous articles in internationally recognised journals. Professor Alden has held fellowships at: Cambridge University, the Institute of Social Science, the University of Tokyo; Ritsumeikan University, Kyoto; Ecole Normale Superieure (Cachan), Paris; and the University of Pretoria. He has served as a consultant for the World Bank, African Development Bank, Goldman Sachs, JP Morgan, Standard Bank, CLSA and the Norwegian Ministry of Foreign Affairs, amongst others. He taught at the University of the Witwatersrand in Johannesburg from 1990 to 2000.

Biliang Hu is Professor of Economics, Dean of Emerging Markets Institute (EMI), and Director of the Belt and Road Research Institute (BRRI) at Beijing Normal University. He was the Chief China Economist of SG Securities Asia, and also worked with the World Bank as a China Economist in the 1990s. He previously taught Development Economics at the Chinese Academy of Social Sciences, where he was an economics professor of the Academy. He has published books such as ‘Informal Institutions and Rural Development in China’ (Routledge), ‘A Village Economy in Central Thailand’ (Thai Watana Panich Press), and ‘Chinese Village, Global Market’ (with Tony Saich, Palgrave). His works won the Sun Yefang Economic Prize twice (in 1994 and 2006) – the highest economic research award in China - and the Zhang Peigang Development Economics Award in 2009. He received a

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doctorate degree from Witten/Herdecke University in Germany, a master’s degree from a joint program between the University of Dortmund in Germany and the Asian Institute of Technology in Thailand, and was a post-doctorate fellow at Harvard University.

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About the Contributors Professor Tang Xiaoyang is Deputy Director at the Carnegie-Tsinghua Centre for Global Policy and an associate professor in the Department of International Relations at Tsinghua University. His research interests include political philosophy, China’s engagement in Africa and the modernisation process of developing countries. He is the author of ‘China-Africa Economic Diplomacy’ (2014) and has published extensively on Asia-Africa relations. He completed a PhD in the Philosophy Department at the New School for Social Research in New York. He earned an MA in philosophy from Freiburg University in Germany and a BA in business management from Fudan University in Shanghai. He has worked as a consultant for the World Bank, USAID and various research institutes and consulting companies. Before he came to Tsinghua, he worked at the International Food Policy Research Institute (IFPRI) in Washington DC. 

Dr Ana Alves is Assistant Professor in the Public Policy and Global Affairs Program at Nanyang Technological University, Singapore, where she lectures on China-Africa relations, Chinese foreign policy, politics in the developing world and foreign policy analysis. Prior to that she was a senior researcher at the South African Institute of International Affairs (2010-2014) in Johannesburg, where she researched China, Brazil and other emerging powers’ engagement in Africa, having conducted extensive field work in the region. Her current research focuses on China’s foreign policy on developing regions, with a particular interest in its development assistance to Africa, South America and South-east Asia. She has recently started a new research project (as Co-PI), which looks at transnational knowledge

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transfer and dynamic governance in the global south, and will be focusing on China-Africa knowledge flows, particularly in agriculture and special economic zones. Her latest publications include ‘China’s Regional Forums in the Developing World: Socialisation and the “Sinosphere”’ (co-authored with Chris Alden – 2017, Journal of Contemporary China) and ‘Continuity and Change in China’s Economic Statecraft towards Africa: From Mao to Xi’ (China’s Economic Statecraft, World Scientific Press, 2017).

Professor Ukertor Gabriel Moti holds a BSc in Political and Administrative Studies (University of Port Harcourt), a Master of Public Administration (MPA) (University of Lagos) and a Doctor of Philosophy (PhD) in Public Administration (University of Benin) - all obtained in Nigeria. Moti is Professor of Public Administration in the Department of Public Administration, University of Abuja, Nigeria, specialising in Public Sector Management and Governance. A former Deputy Dean of the Faculty of Management Sciences, he has held several administrative positions at the University. Prof. Moti is a Fellow of the Certified Public Administrators of England and Wales (FCPA), a Fellow of the Institute of Management Consultants (FIMC), and a member of the Committee for the International Conference on Management, Leadership and Governance (IMCLG), United Kingdom, in addition to holding

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About the Contributors

membership in several other professional bodies, such as the African Association for Public Administration and Management (AAPAM). He has published over 40 articles in peer-reviewed local and international academic journals. Professor Moti was among the 25 African scholars who participated in the China-Africa Research Exchange Programme (2016), where he served as leader of the African Delegation. Moti is a co-chair with Dr Steve Troupin on the AAPAM-IIAS Taskforce for Public Administration Research Capacities in Africa. Prof. Moti is a notable public policy analyst in Nigeria. His research interests include public sector management and governance, public policy analysis, and development administration. He is a regular participant at various international conferences, where he has presented papers.

Feng Lu is Professor in Economics and Director of China’s Macro-economic Research Centre at Peking University. He holds a doctoral degree in Economics from Leeds University. His research areas are macro-economics, international economics, and development economics. He has published numerous academic papers and more than a dozen books, one of which is his recent book ‘Logics of China’s Macro-economic Adjustment and Control Policy’. He was a member of the Advisory Committee of 2016 WDR Digital Dividends for the World Bank, and now serves as a member of Experts of Advisory Committee for the Ministry of Human Resources and Social Security of the People’s Republic of China. He also heads the Research Group on International Economics and G-20 for the Ministry of Finance of China. Finally he is a member of the Advisory Panel for ASEAN+3 Macro-Economic Research Office (AMRO).

Dr Sizwe Timothy Phakathi, Head of Safety and Sustainable Development at the Chamber of Mines of South Africa, obtained a PhD from the University of Oxford, England. He is a research associate at the University of Pretoria’s Gordon Institute of Business Science

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and in the Faculty of Humanities at the University of Johannesburg. He is the author of the book, ‘Production, Safety and Teamwork in a Deep-Level Mining Workplace: Perspectives from the Rock-Face’.

Ms Zukiswa Mpiyakhe, The late Miss Zukiswa Mpiyakhe was a Master’s research intern in the Sustainable Development Programme at the Human Sciences Research Council (HSRC), under the auspices of the Africa Institute of South Africa (AISA). Her work experience spanned the government and private sectors, and academia. She studied for a Master’s degree in Sociology, and an Honours degree in Community Development at the University of KwaZulu-Natal. She was a project coordinator in the Participative Development Initiative in London, and also worked on a project called Innovations and Progress in Healthcare for Women, and the Morale Trading Survey at Mnquma Municipality. Her research interests were inspired by working with community upliftment programmes that were specifically aligned to vulnerable women and children.

Maxime Weigert has a PhD in Economic Geography from the Pantheon-Sorbonne University in Paris and a Master’s degree in Geopolitics from Ecole Normale Supérieure xii Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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About the Contributors

of Paris. As a development economist specialising in the role of the private sector in industrialising and integrating Africa, he developed expertise in both the North-South and South-South patterns of the industrial, agribusiness, and tourism sectors. His experience working in international development institutions, such as the African Development Bank (AfDB) and the Organisation for Economic Co-operation and Development (OECD), focused on these developments, and specifically on the West and North Africa regions. He previously worked as a research project manager at the Paris-based Euro-Med think tank IPEMED (The Mediterranean World Economic Foresight Institute), where he analysed how the tourism and manufacturing industry value chain’s expansion drive economic transformation and regional integration in North Africa. As a consultant and researcher, he continues to author and publish numerous articles and papers in peer-reviewed journals and think tank policy series.

Yue Ma is a research assistant at the Emerging Markets Institute (EMI) at Beijing Normal University.

Professor Liu Weicai is a scholar focused on African History. He was a student at the University of Zambia and then obtained a PhD from Shanghai Normal University, China. He works at the African Studies Centre of Shanghai Normal University as Associate Professor. He has done research and field work in some Southern African countries in recent years, including Botswana, Mozambique, South Africa, Zambia and Zimbabwe. He is currently writing a book on African economic history and translating some books on African historical figures.

Ms Angela Harding completed a Master’s degree in 2013, at the University of Pretoria, Copyright © 2014. Africa Institute of South Africa. All rights reserved.

and has since been working as the data coordinator for the Land Matrix Regional Focal Point for Africa, based at the Post-graduate School of Agriculture and Rural Development, University of Pretoria. Her research interests include land deals by Chinese investors in agriculture, specifically in South Africa. She previously held a fellowship with Code for Africa.

Dr Mxolisi Notshulwana holds a Bachelor’s degree in Political Economy from the University of Pennsylvania in Philadelphia, USA, and a Master of Science Degree in International Political Economy from Bristol University in the UK. He also holds a Doctoral (PhD) degree on Regional Economic Integration (SADC) from the University of Witwatersrand. He has extensive regional integration and trade specialist skills and management experience. He has undertaken huge trade investment and regional integration projects, policy research, policy analysis, policy advisory services, development of research reports and policy papers – both in Government and at the DBSA. He was instrumental in the development of the DBSA’s Regional Integration Strategy and Scoping Study informing the Bank’s investments in the SADC region and in Africa. He currently holds the position of Senior Specialist: Infrastructure Programme in the International Financing Division (IFD) of the Development Bank of Southern Africa (DBSA). He worked as the Senior Manager and

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Head of Policy in the Presidency (GCIS). He has extensive publishing, teaching and academic experience, having previously taught and researched at the University of Fort Hare and at the Nelson Mandela University.

Mr Gedion G. Jalata, Chief Executive Officer (CEO), Center of Excellence International Consult. Gedion was previously the Program Manager of the Africa-China Dialogue Platform (ACDP) and Economic Justice (EJ) from January 2016 to January 2018. This office focused on financing for development (ffd), extractive governance, agriculture and climate justice. The office was based at Oxfam International Pan Africa in Addis Ababa, Ethiopia. He also worked with the United Nations Economic Commission for Africa (UNECA) where he served for 8 from 2008 to 2015 as a research consultant at the Capacity Development Division (CDD), Macroeconomic Policy Division (MPD), and Governance and Public Administration Division (GPAD). He focused on policy issues related to economic development and governance, capacity development, public administration, anti-corruption, and illicit financial flows and China/BRICS relations with Africa. In particular, Gedion worked on ECA’s flagship reports, namely: the African Governance Reports (AGR II, III and IV), published by Oxford University Press; the Mutual Review of Development Effectiveness (MRDE) Report; and AU and ECA High-Level Panel’s Report on Illicit Financial Flows.  Gedion has authored and co-authored numerous journal articles, research papers and book chapters. In this regard, Gedion received an award for academic excellence from the United States Africa Centre for Strategic Studies and other institutions. Gedion also worked as a lecturer in political science, international relations and social science courses at both government and private universities in Addis Ababa, Ethiopia, from 2005 to 2008. He has a Master’s Degree in International Relations (thesis entitled ‘Ethiopia and China Relations’),

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and a Bachelor of Arts in Political Science and International Relations. Currently, he is doing a PhD at the University of Pretoria and his PhD dissertation is titled, ‘An African Developmental State: Ethiopia’s Emergent Experience’.

Dr Rita N. Ozoemena is an Advocate at the Johannesburg Bar. Previously, Rita was a post-doctoral research fellow at the South African Institute for Advanced Constitutional, Human Rights, and Public Law (SAIFAC) of the University of Johannesburg. As a researcher at the Centre for Human Rights at the University of Pretoria from 2009-2013, she developed what was referred to as “the expanded justice program”, a policy plan to enable women have access to wide variety of forums to realize the enjoyment of their human rights.

In

the 4 years of the doctoral research, Rita examined gender justice in Africa and the challenges faced by women in accessing justice. Other research interests are in the area of businesss and human rights dealing with the role of multinational companies in promoting the right to development in Africa particularly the gender dimensions. Rita aslo teaches gender and development from an African perspective at the Advanced Courses on the Right to Development of the Centre for Human Rights, University of Pretoria. She co-authored a chapter on the Rights of Women in International Law, has published several articles on

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About the Contributors

gender justice, and has made podium presentations in the areas of the right to development in Africa. In 2015, Rita attended the conference on Chinese Dream – Africa Dream in Dare Salaam, Tanzania, which marked the entrance into China- Africa relations.

Professor Chun Zhang is the Director of the Institute for Foreign Policy Studies, at the Shanghai Institutes for International Studies (SIIS). His research focuses on Sino-Africa relations, African politics and security, international relations theory, development studies, etc. He obtained a doctorate (International Relations) in 2006, an MA (International Relations) in 2001, and a BA (Vietnamese) in 1995. He has published 5 monographs with ‘American Think Tank’s Influences on “One China” Policy’ (Shanghai: Shanghai People’s Publish House, 2007) rewarded with the First Class Award (the highest level) of the Ninth Excellent Philosophy and Social Science Publications Award of Shanghai in 2008, and ‘On International Contributions of China-Africa Relationship’ (Shanghai: Shanghai People’s Publish House, 2013) rewarded with the Second Class Award of the Tenth Excellent Deng Xiaoping Theoretical Publications Award in 2014. He has participated in translation three books (from English to Chinese), and published more than 60 academic papers and more than 100 op-eds, both domestically and internationally. He was a Visiting Fellow to Chatham House based in London, UK, in 2009, the South Africa Institute of International Affairs (SAIIA) based in Johannesburg in 2011, the Centre for Strategic and International Studies (CSIS) based in Washington, DC in 2011, the Foreign Service Institute (KFI) based in Nairobi, Kenya, in 2012, and the Southern African Research and Documentation Centre (SARDC) based in Harare, Zimbabwe, in 2014.

Dr Paul Zilungisele Tembe (谭哲理) is a Research Fellow at the Thabo Mbeki African Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Leadership Institute (TMALI). He completed a Master’s Degree in Kiswahili Studies at Uppsala University in Uppsala, Sweden, in 2007. In 2013, he completed a PhD in Chinese Studies at the Chinese University of Hong Kong, Hong Kong (S.A.R). He has focused on China since the year 2005, and his expertise includes: analysis of cross-cultural communications strategies: meetings and interpretations of cultural symbols; language philosophy and identity formations and performance; the rhetoric of the China-Africa relations; the foreign policy of South Africa (RSA) and China (PRC); and China-South Africa political relations. He taught ‘A Critical Cultural History of China: Early China’ at the Chinese University of Hong Kong, ‘China’s Political Relations’ at Stellenbosch University and ‘Understanding China’ at Rhodes University. His current study is on ‘The role of value systems in identity formation and governance as a tool for human rights’, where he examines the use of traditional tales in political discourse; the construction of the habitus and identities; and analysis of state rhetoric on moral and political (patriotic) education in the People’s Republic of China. He has contributed a chapter to the recently published book, ‘Africa-China and Partnerships Relations’. Dr Tembe speaks English, Kiswahili, Mandarin, Portuguese, Swedish, Sesotho, Xitsonga and IsiZulu. He has written on China’s foreign policy, China-Africa relations and Chinese language and culture. Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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Abbreviations and Acronyms

$

United States Dollar

3ADI

African Agribusiness and Agro-industries Development Initiative

AFD

Agence Française de Développement

AfDB

African Development Bank

AFRICOM

United States Africa Command

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

AGA



African Governance Architecture

AGOA

Africa Growth and Opportunity Act

AGRA

Alliance for a Green Revolution in Africa

AICD

Africa Infrastructure Country Diagnostic

AIDS

Acquired Immune Deficiency Syndrome

AMV

Africa Mining Vision

ANDA

Alfred Nzo Development Agency

APDP

Automotive Production and Development Programme

APPA

African Petroleum Producers Association

APSA

African Peace and Security Architecture

ARA

Africa Refiners Association

ASEAN

Association of Southeast Asian Nations

ATDC

South Africa China Agricultural Technology Demonstration Centre

ATH

Shanghai Yebo Africa Trading Hall

AU

African Union

AUC

African Union Commission

bbl/d

billion barrels per day

BOO

Build‐Own‐Operate

BOOT

Build‐Own‐Operate‐Transfer

BOP

Bottom of the Pyramid

BOT

Build‐Operate and Transfer

BRI

Belt and Road Initiative

BRICS

Brazil, Russia, India, China and South Africa

BTL

Build‐Transfer‐Lease

BYD

Build Your Dreams Company

CAADP

Comprehensive Africa Agricultural Development Programme

CADF

China-Africa Development Fund

CAIDCO CALIC

China Agriculture International Development Co Ltd

CBDR CCECC

China-Africa Lekki Investment Co. Ltd. Coal Bed Methane



China Civil Engineering Construction Corporation Ltd

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Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Abbreviations and Acronyms

CCS

Carbon Capture and Storage

CDB

China Development Bank

CFL

Compact Fluorescent Lamp

CIP

Competitive Industrial Performance

CNADC

China National Agricultural Development Group Corporation

CNMC

China Non-ferrous Metal Mining Group

CNMC

China Nonferrous Metal Company

CO

Carbon Oxide

COMESA

Common Market for East and Southern Africa

CPC

Communist Party of China

CRCC

China Railway Construction Company

CRI

Citrus Research International

CSR

Corporate Social Responsibility

CSSF

Conflict, Stability and Security Fund

CTC

Central Transmission Corridor

DAM

Day Ahead Market

DBSA

Development Bank of Southern Africa

DFID

Department for International Development

DHE

Dragon Head Enterprises

DOA

Department of Agriculture

DOE

Department of Energy

DRC

Democratic Republic of Congo

DTI

Department of Trade and Industry

EAC

East African Community

EBA

Everything But Arms (EU)

EC

European Commission

ECOWAS

Economic Community of West African States

ECREEE

ECOWAS Renewable Energy and Energy Efficient Centre

EDM

Electricidade de Moçambique

EE

Energy Efficiency

EECG

Energy, Environment, Computer and Geophysical Applications

EIZ

East Industrial Zone (Ethiopia)

EOI

Export-Oriented industrialisation

EPA



Economic Partnerships Agreement

EPZ

Export Processing Zone

ESI

Electricity Supply Industry

ESKOM

Electricity Supply Commission of South Africa (now Eskom as word)

ESP

Energy Sector Plan

ETCZ

Economic and Trade Cooperation Zone

ETG

Energy Thematic Group

EU

Europe Union

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Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Abbreviations and Acronyms

EUFTA

European Free Trade Association

Exim Bank

Export-Import Bank of China

FAO

Food and Agriculture Organization of the United Nations

FDI

Foreign Direct Investment

FOCAC

Forum on China-Africa Cooperation

FSDARD

Free State Department of Agriculture and Rural Development

FTZ

Free Trade Zone

GDP

Gross Domestic Product

GEF

Global Environmental Facility

GHG

Greenhouse Gas emissions

GJ

Gigajoules

GTZ

Germany Agency for Technical cooperation

GVC

Global Value Chain

GWh

Gigawatt‐hour

HIV

Human Immunodeficiency Virus

HTR

High Temperature Reactor

ICP

International Cooperating Partner

ICT

Information and Communications Technology

IDC

Industrial Development Corporation

IDZ

Industrial Development Zone

IEA

International Energy Agency

IFAD

International Fund for Agricultural Development

ILO

International Labour Organisation

IPAP

Industrial Policy Action Plan

IPCC

Intergovernmental Panel on Climate Change

IRP

Integrated Resource Plan

ISI

Import-Substitution Industrialisation

Kgoe

kilogram of oil equivalent

KZN

KwaZulu-Natal

LEAP

Long‐range Energy Alternative Planning

LEC LFTZ

Lesotho Electricity Company

LPG

Liquefied Petroleum Gas

LROT LSDPC

Lekki Free Trade Zone Lease‐Rehabilitate‐ Operate‐Transfer



Lagos State Government Development Corporation

M&E

Monitoring and Evaluation

MDG

Millennium Development Goals

MFEZ

Multi-facility Economic Zone (Zambia)

MIP

Manufacturing Investment Programme

MNC

Multinational Company

MOFCOM

(Chinese) Ministry of Commerce

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Abbreviations and Acronyms

MOU



Mineral and Petroleum Resources Development Act

MQA

Mining Qualifications Authority

MS

Member States

MW

Megawatt

NAFTA

North American Free Trade Agreement

NCCC

Nigerian-Chinese Chamber of Commerce

NDP

National Development Plan

NEPAD

New Partnership for Africa’s Development

NEPZA

Nigeria Export Processing Zones Authority

NGO

Non‐Governmental Organisation

NO

Nitrogen Oxide

OAU

Organization the African Unity

OBOR

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Memorandum of understanding

MPRDA



One Belt One Road

P&G

Petroleum and Gas

PBC

Platinum Beneficiation Committee

PBMR

Pebble Bed Modular Reactor

PCU

Power Conversion Unit

PEPFAR

U.S. President’s Emergency Plan for AIDS Relief

PGMs

Platinum Group Metals

PIDA

Programme for Infrastructure Development in Africa

PMA

Precious Metals Act

PPA

Power Purchase Agreement

PPP

Public-Private Partnership

PV

Photovoltaic

PWSA

Perfect Wines South Africa

R&D

Research and Development

RE

Renewable Energy

REASAP

SADC Regional Energy Access Study and Action Plan

REC

Regional Economic Community

REFIT

Renewable Energy Feed In Tariff

REPGA

Regional Petroleum and Gas Association

RERA

Regional Electricity Regulators Association

RESAP

Renewable Energy Strategy and Action Plan

RIDMP

Regional Infrastructure Development Master Plan

RISDP

Regional Indicative Strategic Development Plan

RPV

Reactor Pressure Vessel

RSA

Republic of South Africa

RVC

Regional Value Chain

SA

South Africa

SACU

Southern African Customs Union

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Abbreviations and Acronyms

SADC

Southern African Development Community

SAPP

Southern African Power Pool

SASOL

South African Synthetic Oil Limited

SDG

Sustainable Development Goal

SDP

Spatial Development Programme

SEDA

Small Enterprise Development Agency

SETA

Sector Education and Training Authority

SEZ

Special Economic Zone

SME

Small and Medium Enterprises

SOE

State Owned Enterprise

SPV

Special Purpose Vehicle

SSA

Sub-Saharan Africa

SSC

South-South Cooperation

SWH

Solar Water Heater

Tcf

Trillion cubic feet

TDCA



Trade, Development and Cooperation Agreement

TEDA

Tianjin Economic-Technological Development Area

TICAD

Tokyo International Conference on African Development

TISA

Trade and Investment South Africa

TISCO

Taiyuan Iron and Steel (Group) Co. Ltd.

TOR

Terms of Reference

TVE

Township and Village Enterprise

TVETs

Technical and Vocational Education Training Institution

UN

United Nations

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

UN 2030 Agenda United Nations (UN) 2030 Agenda for Sustainable Development UNDP

United Nations Development Programme

UNECA

United Nations Economic Commission for Africa

UNIDO

United Nations Industrial Development Organization

US

United States of America

USD

United States Dollar

USSR

Union of Soviet Socialist Republics

WACIP

West African Common Industrial Policy

WAPP

West Africa Power Pool

WB

World Bank

WEF

World Economic Forum

ZTE

ZhongXing Telecommunication Equipment

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List of Tables

Table 2.1: Overview of four Chinese SEZs in 2009 

16

Table 2.2: Output value of Shenzhen high-tech industries from 1991 to 2006

19

Appendix: Nineteen ETCZs approved by China’s MOFCOM

26

Table 3.1: Existing Chinese ETCZs in Africa

36

Table 3.2: Chinese ETCZs in Africa Progress (as at 2015)

39

Table 6.1: Most important mineral resources in Africa, 2005

96

Table 6.2: Summary of cross-cutting activities and interventions, and factors constraining outh Africa’s mineral beneficiation initiatives

107

Table 6.3: Chinese direct investment in South Africa’s listed mining and metals companies since 2011 Table 9.1:

Comparison of Grain Output and Import between Africa and the World



in 2013 (Unit:10 000 tons) 

109 158

Table 9.2: International Comparison of Depth of Food Deficit and Under nourishment (2014-2016)

160

Table 9.3: International Comparison of Main Food Production in 2012–2014 (Unit: Ton/hectare) 

162

Table 9.4: Effect of Fertiliser in Production

163

Table 9.5: International Comparison of Fertilisers Usage in 2012-2014 (Unit:

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Ton/thousand hectares)

195

Table 9.6: Comparison of Pesticide Application in Some Selective Countries

(Unit: ton/thousand hectares)

164

Table 9.7: International Comparison of Land Irrigation Level (Unit: thousand

hectares) 

Table 9.8:

Comparison of Infrastructure Costs between Africa and Other Developing



Regions 

Table 10.1: Number of farm households and cultivated areas in Mozambique 

165 166 179

Table 12.1: Chinese-aided agricultural technology: demonstration centres in Africa (2010) 

220

Table 12.2: Selected Chinese agricultural and agribusiness SOEs operating in Africa (2010) 

220

Table 13.1: Rural development indicators in Sub-Saharan Africa 

237

Table 13.2: Land area, arable land and area equipped for irrigation, 2012 

238

Table 13.3: Commodity Production by Value, 2013 

239

Table 13.4: Agricultural GDP/exports as a percentage of total GDP/exports

(2011) 

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List of Tables

Table 14.1: Share of agriculture expenditure (% of total expenditure) in selected

countries in Africa 

261

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Table 14.2: Institutions involved in Chinese development assistance to Africa 

253

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List of Figures

Figure 5.1: Real GDP growth in sub-Saharan Africa (1900–2014, %) 

71

Figure 5.2:  Growth rate of industrial sector and share of industrial value added in total GDP in Africa (1981–2015, %)

71

Figure 5.3:  Share of manufacturing in GDP in different income group of countries (1980–2015, %)

72

Figure 5.4: Per capita GDP and share of manufacturing among regions of Africa in

2014 (US%, %)

Figure 5.5: Steel output per capita in Africa (1960–2015, kg per person) 

72 73

Figure 5.6: Steel output per capita for China and Africa (1981–2015, kg per person) 73 Figure 5.7: Length of railway in China and Sub-Saharan Africa (1980–2015,

1000 kg)

74

Figure 5.8: Electricity consumption per capita China and Sub-Saharan Africa (1980– 2015, kWh per year)

74

Figure 5.9: Investment in Africa (% of GDP)

75

Figure 5.10: National Savings in Africa (% of GDP)

75

Figure 5.11: Fiscal Grants in Sub-Saharan Africa (2004–2014, % of GDP)

76

Figure 5.12: Net Foreign Direct Investment in Africa (2004–2014, % of GDP)

76

Figure 5.13: China’s GDP and Annual Growth Rate (trillion ¥, %; 1978–2015)

77

Figure 5.14: Decline of Rural Poverty Population in China (10 000 persons;

Copyright © 2014. Africa Institute of South Africa. All rights reserved.



1978–2015)

Figure 5.15: Development of non-farm sector and Poverty reduction(1981–2015, %)

78 79

Figure 5.16: Monthly salary and growth rate for migrated worker in China (1995–2014, ¥ ,%)

80

Figure 5.17: Exchange rate of RMB vs. USD (2005 M1 2015 M10¥/US$, 2005

M1 = 100)

79

Figure 5.18: Average price and development cost of urban construction land in China (2003–2014, ¥ ,10,000/mu,%)

81

Figure 5.19: China’s commodity housing price and growth rate (2003M1 – 2016

MO, Y/m2)

81

Figure 5.20: China annual flow of outward foreign direct investment (US$ 100 million, 2003 – 2015)

82

Figure 5.21: China stock of outward foreign direct investment (US $100 million, 2003 – 2015)

82

Figure 5.22: China annual outward HDI flow into Africa (2003 – 2015, US $100 million,)

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List of Figures

Figure 5.23: China outward HDI stock in Africa (2003 – 2015, US $100 million,)

83

Figure 5.24: Proportionof China HDI into Africa in China’s total outward FDI (2003 – 2015, %)

84

Figure 5.25: Number of China’s firms investing in Africa and its proportion in China’s

total o verseas firms (2008–2015, %)

84

Figure 5.26: Proportion of China outward FDI in the total FDI into Africa (2003–2014, %)

85

Figure 5.27: Value and share of top 5 sectors in which China’s FDI stocks in Africa are distributed (2015, US$100 million, %)

85

Figure 5.28: Interplay of OFDI with Four Resources

87

Figure 5.29: Three Types of Manufacturing OFD

90

Figure 13.1: Agriculture: Top 20 agricultural products by value, 2012

239

Figure 14.1: GDP, employment and relative productivity levels of the agriculture

sector for 11 African countries (1960, 1990 and 2010)

250

Figure 14.2: Top ten Africa trade partners (in billion $)

257

Figure 14.3: Africa’s top five exports to China (in %)

258

Figure 14.4: Composition of Outward Chinese FDI stock in Africa in 2014 (in %)

259

Figure 14.5: China’s development assistance to Ethiopia by sectors (actual 266

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

disbursement) from 2005 to 2015 (April)

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Keynote Addresses

Welcome Address by Dr Claudious Chikozho Executive Director, AISA Excellences, distinguished guests, delegates, participants, ladies and gentlemen. For the first time, AISA-HSRC with the support of the Embassy to the People’s Republic of China has come together to implement the China-Africa Research Exchange Joint Initiative at this level. The objective of this initiative is to cover critical issues of industrialisation and agricultural modernisation under the Forum for Cooperation between China and Africa (FOCAC) umbrella. It is therefore with great pleasure [that I] as the Executive Director of AISA extend a warm welcome to everyone attending this critical gathering. The fact is, poor infrastructure is a major impediment to economic development in sub-Saharan Africa. Lack of rail capacity, poor port management and clogged roads all prevent sustainable growth potential from being unlocked, thereby impacting on regional economic integration. Another glaring challenge is how Africa’s resource-rich countries can manage and transform their resources in the ground into assets that lead to strong sustainable growth, economic diversification, and industrial development. The need to transform African agriculture and achieve food security has been reaffirmed by the African Union, as exemplified by the adoption of the Comprehensive Africa Agriculture Development Programme (CAADP). It is unacceptable that Africa is still the most food insecure continent, and that many African countries have become even more dependent on food aid in order to

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

fill the food supply gap. Of significance to this conference is for us to determine how China and Africa [can] effectively break through some of the current economic predicaments. According to the Fourth China-Africa Industrial Forum (CAIF), last year China-Africa trade hit $300 billion, and has grown about ten times in the last decade. Moreover, China is currently by far the most promising source of funds for African infrastructure. As of 2005 to 2011, China’s commitments to infrastructure in Africa rose from $1 billion annually to $1.5 billion; these commitments spiralled to $7.5 billion in 2008. The 2016 FOCAC Action Plan also makes specific commitment for China to contribute an initial amount of US$10 billion for Africa’s industrialisation which will provide a potential shift to the historical trading patterns, which persist, by promoting beneficiation and value-add. Our contribution as academicians at AISA-HSRC is to analyse how best this process can unfold by not only creating a win-win situation for both regions, but also promoting the comprehensive partnership agreement between the two regions. This academic contribution will be strengthened by your participation at this conference. This conference is very timely, hence the unwavering support garnered from the various institutions. This conference will provide a platform for further dialogue and knowledge Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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PART 1: Keynote Addresses

dissemination on what it takes for the continent to become industrially viable. Preparations for the conference were a collaborative effort and I appreciate the China-Africa Joint Exchange Research Committee for giving us this opportunity to implement this process. I wish you all a wonderful and successful time at this event.

Remarks by H.E. Ambassador Tian Xuejun at the Opening Ceremony of China-Africa Industrialisation and Agricultural Modernisation Seminar It gives me great pleasure to attend the China-Africa Industrialisation and Agricultural Modernisation Seminar. On behalf of the Chinese Embassy in South Africa, I would like to extend my warmest welcome to all the participating guests, scholars, experts, entrepreneurs and friends from the media. I also wish to express my most sincere appreciation to colleagues from the HSRC for making this seminar happen. Industrialisation and agricultural modernisation, like the two wings of a bird, constitute an integral part of modernisation. They were listed as priorities both in the 2030 Agenda for Sustainable Development of the United Nations and the Agenda 2063 of the African Union. Among the ten cooperation plans announced by President Xi Jinping during the FOCAC [Johannesburg] Summit last December, industrialisation and agricultural modernisation were also identified as two key cooperation areas. To implement the outcomes of the FOCAC [Johannesburg] Summit and advance China-Africa cooperation on industrialisation and agricultural modernisation, it is necessary for us to gather the wisdom and build consensus from across society. This is why today’s seminar is as important as it is relevant. Ladies and gentlemen, With South Africa being a very influential African country and the co-chair of FOCAC,

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

China-South Africa cooperation plays an important part in China-Africa comprehensive strategic cooperative partnership. In recent years, China-South Africa cooperation on industrialisation and agricultural modernisation has displayed some new features, playing a leading role in China-Africa cooperation. The first feature is high level. South Africa boasts solid industrial and agricultural foundation, well-developed infrastructure, full-fledged financial services, comprehensive laws and regulations and adequate professionals. These are all crucial prerequisites for high-level practical cooperation between China and South Africa. Based on our respective development needs and the principle of mutual benefits, leaders of our two countries have stepped up the alignment of development strategies and identified a number of key cooperation areas and strategic projects. Take the locomotives jointly produced by China CRRC and Transnet as an example. Through technology transfer and local production, the joint venture, which is expected to become a major production base for African railway network[s], has helped Transnet upgrade products and technologies. Another example on advanced manufacturing is the plants launched by two Chinese automobile manufacturers FAW and BAIC. BAIC is going to invest 11 billion rand to open a modern plant in Coega Industrial Development Zone with an annual production of 100 000 vehicles. By combining our respective strengths, Forum onxxvi China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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PART 1: Keynote Addresses

these plants will give Chinese vehicles access to [the] African market and at the same time, consolidate South Africa’s position as the No.1 automobile manufacturing country in Africa. The second feature is high quality. Our cooperation has brought economic, social and environmental benefits to South Africa in a sustainable and inclusive manner. On economic benefits, for instance, the Chinese company Hisense last year alone produced 500 000 home appliances with total earnings of more than 2.5 billion rand, making itself a household brand in South Africa. The South African agricultural exports to China such as wine, rooibos tea and apple[s] have been rising and enjoy bright prospects. Relevant departments from both countries are also actively pushing for South African beef exports to China. On social benefits, industrialisation and agricultural modernisation projects like the Umzimvubu Water Project and the Moloto Rail Corridor have the huge potential to improve people’s livelihood. Up to now, over 140 Chinese large and medium companies have created about 20 000 jobs for local people. Most of these companies have been actively engaging in programs on charity, education and environmental protection for public good. On environmental benefits, it is important to note that all bilateral cooperation projects on production capacity fully meet South Africa’s environmental protection standards. The Chinese technologies and equipment are economical, practical and more importantly, environmental friendly. The China-built Mamba Cement plant with the capacity of one million tons per year already began to operate last year. It has adopted the most advanced technologies to reduce the negative effect on [the] environment to the minimum level. The Chinese companies have also been actively involved in the Musina special economic zone, and there is a plan to introduce to the zone a model of circular economy and build a metallurgical complex. The third feature is high technology. Over the past few years, new breakthroughs have been made in our cooperation on high-tech and high value-added industries. Just one month

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

ago, the science departments of both countries jointly held the first China-South Africa Hi-Tech Exhibition to open up a new channel for cooperation between our high-tech firms. The two countries have already signed an implementation plan on the establishment of a Science and Technology Park. Going forward, the Science and Technology Park will not only attract more Chinese high-tech companies to set up branches in South Africa, but also provide an important platform for joint research, products incubation and promotion as well as human resource development. In the Free State Province, China-South Africa Agricultural Technology Demonstration Centre (Aquaculture Fish Hatchery Project) has been operating for three years and has significantly contributed to freshwater aquaculture technologies in South Africa. In [Johannesburg], Huawei set up its first Innovation and Experience Centre on the continent a few months ago, which is set to train 1 000 local ICT talents over the next five years. Ladies and Gentlemen, looking at these remarkable results we have achieved in our cooperation on industrialisation and agricultural modernisation, I must say, these achievements couldn’t have happened without joint efforts from both China and South Africa. The reasons are three-fold.

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PART 1: Keynote Addresses

First[ly], these achievements are built on our strong political trust. Currently, [the] China-South Africa comprehensive strategic partnership is at its best period in history. Since President Xi Jinping’s second state visit to South Africa last December, the two leaders also met in [the] G20 Summit and BRICS Summit, where they had in-depth exchanges and reached important consensus. While in China, President Zuma attended the 2nd Investing in Africa Forum in Guangzhou to actively promote and deepen local government and business cooperation. With the support from our two Presidents, the economic powerhouse of China – Guangdong Province – established sister province relationship with the KwaZulu-Natal Province. And the two provinces will join hands to push forward the cooperation on blue economy. Second[ly], such achievements are built on our effective communication. Since the FOCAC [Johannesburg] Summit, China and South Africa have kept effective communication and cooperation at the working level. This past June, the Chinese Embassy in South Africa and the Department of International Relations and Cooperation of South Africa together held the FOCAC Implementation Workshop. Following that, the Director General in the Presidency, Dr Lubisi, led a delegation to China to further discuss major cooperation projects. Late July, Hon. Minister of DIRCO Mashabane visited China for the Coordinators’ Meeting on the Implementation of the Follow-up Actions of the FOCAC [Johannesburg] Summit. Later this month, the Chinese Vice President and South African Deputy President will co-chair the 6th China-South Africa Bi-National Commission Meeting. These frequent and effective contacts have helped us work out plans, roadmaps and timetables for bilateral cooperation. Although we may encounter some differences and obstacles as we proceed, what is important is that we are working towards the same goal and together figuring out the way forward. Third[ly], such achievements are built on active participation of our enterprises. We

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

always say that the government builds the stage and it is up to our companies to take part in the show. Businesses are the main players in China-South Africa practical cooperation. When I talk[] to our entrepreneurs, both Chinese and South Africans, I’m always inspired and encouraged by their strong confidence in the prospect of our practical cooperation. The high-tech exhibition I just mentioned attracted over 110 companies and many of the Chinese firms expressed with much excitement that South Africa and Africa at large hold numerous business opportunities waiting to be released and developed. Ladies and Gentlemen, Although we are in a global environment of weak economic recovery, we still strongly believe that Africa, with its unique strength in resource[s], population and market, is heading towards a future of tremendous potential. The twenty-first century is not a China century or Asia century alone. The twenty-first century is also an Africa century. The future of this great continent rests on industrialisation, agricultural modernisation and regional integration. China, as [the] world’s second largest economy and the largest developing country, has much to contribute to Africa in that regard with its experience, technologies and production capacity. Indeed, for China and South Africa, we meet each other’s development needs, enjoy [our] respective strengths and could offer each other huge opportunities to grow. xxviii Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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As an African proverb goes, ‘one single pillar is not sufficient to build a house’. ChinaAfrica cooperation can only go so far when we have the collective wisdom of all brilliant minds. I sincerely hope that in the next two days, all of the seminar participants could actively contribute forward-looking and practical suggestions and ideas on the implementation of the outcomes of FOCAC [Johannesburg] Summit and China-Africa practical cooperation. At the same time, I am also ready to join your voices in telling good and fair stories of China-Africa cooperation to help address the prejudices and misunderstandings and promote the world’s confidence in China-Africa cooperation.

A New Chapter to the Friendly Cooperation between China and Africa – A Keynote Speech at the Opening Ceremony Ambassador JI Peiding It’s a great delight for me to come back again to South Africa, the well-known rainbow nation, to attend this seminar with so many African friends and colleagues. First, please allow me, on behalf of the Foreign Policy Advisory Group of the Ministry of Foreign Affairs of China (FPAG), to extend a warm welcome to you all for attending this seminar, which is jointly held by the Chinese Embassy in South Africa, the Human Sciences Research Council of South Africa (HSRC) and FPAG. Africa is my second homeland. I have worked on this continent for nearly 18 years and have been involved with African affairs for over 40 years. I see Africa as a land of great hope. Over the last 15 years, I have tried to follow, with interest and excitement, the fast development in Africa.

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I also have an attachment to South Africa. I had the great honour to participate in the whole process of normalisation of China-South Africa foreign relations. I witnessed the historical moment when our two great nations shook hands firmly and embraced each other formally. The Chinese national flag was raised in the Chinese Embassy in South Africa. During the last 18 years, I have come to your great country many, many times. Every time I came here, I was deeply impressed by the tremendous changes that had happened. In December 2015, Johannesburg witnessed a historical event in the Sino-African relations. The Forum on China-Africa Cooperation (FOCAC) Summit was successfully held in South Africa. The summit has opened up a new era of ‘Win-Win Cooperation for Common Development’ between China and Africa. It’s a milestone in the history of China-Africa relations. Chinese President XI Jinping and African leaders agreed to upgrade our relationship to a comprehensive strategic cooperative partnership. They also proposed to implement ten cooperation plans in the coming three years. In late July this year, the Coordinators’ Meeting of the FOCAC Johannesburg Summit was successfully held in Beijing. In the year of 2000, I had the great honour to be personally involved with the formation of FOCAC. In the last 16 years, China and Africa have harvested tremendous fruits under Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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the great umbrella of FOCAC. One of the cooperation plans agreed at the Johannesburg Summit last year is about China-Africa cultural and people-to-people exchanges. This plan is to encourage the Chinese and African think-tanks and scholars to come together, compare notes and make joint study on issues regarding China-Africa cooperation. This seminar is supported by China-Africa Joint Research and Exchange Program under FOCAC, and will focus on industry connection and production capacity cooperation, and African industrialisation and agricultural modernisation. Ladies and gentlemen, Dear friends, this year marks the 60th anniversary of China-Africa diplomatic relations. We share similar historical experiences. We support each other politically and diplomatically. Unity and cooperation are the most valuable assets for China and Africa. That is also a strong driving force for the future of our relations. In the 1950s and 1960s, Chairman Mao Zedong and Premier Zhou Enlai, the first generation of New China’s leaders, together with the then African leaders, opened the road of friendship for the people of China and Africa. China stood firmly by Africa in its struggle against imperialism, colonialism and apartheid. Today, we support each other in our national development and rejuvenation. The Tanzara Railway built by the Chinese and African technicians and workers remains as a monument to China-Africa friendship. In 2014, when the Ebola epidemic broke out in West Africa, China took the lead in providing assistance materials with chartered flights for the affected countries, and sent to those countries over 1 000 medical workers and experts who fought shoulder to shoulder with the local people. Chinese people would never forget that it is with the African countries’ support that the People’s Republic of China resumed its lawful seat in the United Nations. Chinese people would never forget that it is African countries that provided valuable assis-

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tance to China in natural disasters like [the] Wenchuan and Yushu earthquakes. There are many such stories of our mutual support. Through 60 years of strenuous efforts, China-Africa relations have become closer and more solid. Our relations have the following three features: First[ly], China and Africa have always been one community of shared future. In the past decades, despite the changes of international landscape, Chinese people and African people have always been standing side by side. We not only share the common historical experiences and the same mission of development, but also share similar strategic interests and pursuits. We both treat each other with sincerity, mutual respect and equality. China is always ready to speak up for Africa at the UN and on other multilateral occasions. Africa always supports China for her efforts[,] defending her core interests. China and Africa work closely together for the common interests of developing countries. China is the largest contributor of peacekeepers to Africa among the five permanent members of the UN Security Council, and has participated in 16 UN peacekeeping missions in Africa. Today, more than 2 700 Chinese peacekeepers are deployed in seven UN operations in Africa.

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Second[ly], China and Africa have always been one community of shared interests. China-Africa cooperation serves as a successful example of developing countries for winwin development. According to statistics, China-Africa cooperation has contributed more than 20 per cent to Africa’s economic growth. During the past 15 years, our trade volume increased by 20 times. Since 2009, China has been Africa’s number one trading partner for seven continuous years. In 2014, China-Africa trade volume exceeded 220 billion US dollar. More and more Chinese enterprises come to invest in Africa. There are over 3 100 Chinese enterprises in Africa now, with a total investment of over 100 billion US dollars. In cooperation with Africa, China never considers making profits the sole target. Rather, we put a great value on justice and responsibility. China is always willing to provide support and assistance to African friends within its capability. As China’s economic strength increases, China continues to increase its assistance to Africa. By the end of 2015, China had trained 130 000 personnel for African countries, and sent 20 000 medical workers to 51 African countries. Currently, there are about 1 000 Chinese medical workers in 42 African countries. Third[ly], China and Africa have always been one community of shared development. African friends always say that ‘to walk faster, walk on your own, but to walk far, walk with others’. China is a country with the largest population in the world and Africa is a continent with the most developing countries. We both endeavour to develop our economy and improvement of people’s livelihood. In September this year, the G20 Hangzhou Summit was successfully convened. China, as the host country, invited the G20 member South Africa, and Egypt, Senegal and Chad, to attend the summit on behalf of the African continent. During [the] G20 summit, China and African countries worked together to urge the summit to put development as [a] priority

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issue. For the first time, we have devised a groundbreaking Action Plan on implementing the 2030 Agenda for Sustainable Development, and proposed the G20 Initiative on Supporting Industrialisation in Africa and LDCs, in order to create more favourable conditions for better and faster development of developing countries. Currently, the Chinese are striving to complete the building of a moderately prosperous society in all respects, and moving forward [at] full speed towards the Chinese dream of national rejuvenation. The African people are also committed to realising the African aspiration, as depicted in Agenda 2063. The Chinese dream and the African aspiration are highly compatible [with][] each other, with the common goal of achieving national prosperity, social stability and people’s happiness. Both China and Africa have the full capacity and confidence to realise our dream and aspirations as we join hands for the common development. Ladies and gentlemen, looking into the future, China-Africa relations are now at a new starting point. We have even more solid political mutual trust and synergised development strategies. Based on these advantages, we are now facing a good opportunity to redouble efforts in the promotion of China-Africa relations. We would further promote our mutual trust and achieve solidarity and cooperation. A high level of mutual trust is the foundation for China-Africa friendship. We would respect each other’s choice of development paths, Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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and show understanding and support on issues regarding core interests and concerns of both sides. China and Africa have similar concerns and interests in international affairs. We should increase our coordination and cooperation, in order to promote a fairer and more just global governance system. China will continue to support Africa in resolving the regional issues independently, and will contribute more to the peace and security of Africa. The solidarity and cooperation between China and Africa benefit not only ourselves, but also the overall peace and progress of the world. We would further synergise our development strategies and achieve [a] win-win outcome. We would fully explore the economic complementary advantages between China and Africa, in order to bring more tangible benefits for people of both countries. A famous African proverb says[,] ‘Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime’. China would like to help Africa in improving its infrastructure, building human resources and attracting foreign investment, which are the three major bottlenecks that restrain Africa’s development, and promote the industry connection and production capacity cooperation to accelerate Africa’s industrialisation and agricultural modernisation. China would make every effort to upgrade [the] China-Africa cooperation model into a more efficient, more comprehensive one with higher quality, so that African countries could reap more benefits. At the same time, we also hope African countries could provide more favourable conditions and preferential policies for Chinese enterprises and citizens who invest and live in Africa. We would further increase people-to-people exchanges and deepen mutual understanding and friendship. Countries’ relationship is based on the understanding between their peoples. People are the foundation and root of China-Africa relations. We should not only increase our trade and economic cooperation, but should also enhance the exchanges between

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the peoples. Only with the support and participation of people from both countries, could China-Africa friendship possess ever-lasting vitality and China-Africa cooperation become more solid. Currently, there are 45 Confucius Institutes and 24 Confucius classrooms in 37 African countries. In 2015, there are over 40 000 African students in China. In future, we would build more platforms for our peoples to know each other, so that China-Africa friendship could take deep roots in the heart of our peoples for generations to come. Ladies and gentlemen, dear friends, [the] China-Africa relationship is never an accomplished task but is an on-going process. All the experts and scholars present today have made long-term research on China-Africa relations. I believe you could make the best of the coming two days to share with us your thoughts and wisdom on how to further implement the follow-up actions of the Johannesburg Summit, and to promote China-Africa cooperation in industrialisation and agricultural modernisation.

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1

CHAPTER

TOWARDS FOCAC 2018

STRENGHTENING THE FOCAC AGENDA ON INDUSTRIALISATION AND AGRICULTURAL MORDERNISATION Yazini April, Garth Shelton and Biliang Hu

INTRODUCTION In 2018, China and Africa will hold the 7th Forum on China-Africa Co-operation (FOCAC) and Ministerial Conference in Beijing, China. The 2018 FOCAC will be critical, as it will provide some insight into progress made with the promotion of industrialisation and agricultural modernisation in Africa. Industrial development was a strong theme initiated at the 6th FOCAC Ministerial Conference and Summit held in Johannesburg, South Africa, on 4 and 5 December 2015. The Johannesburg FOCAC Summit unanimously agreed to elevate China-Africa relations to a “comprehensive strategic co-operative partnership”,1 with a view to building on past successes. This implies that, in the years ahead, there will be more opportunities for constructive China-Africa joint projects and effective collaboration. The Johannesburg Summit was based on the theme, “Africa-China, Progressing

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Together: Win-win Co-operation for Common Development”.2 The two key documents that emerged from the summit included the “Declaration of the Johannesburg Summit” and the “Johannesburg Action Plan (2016–18)”.3 Both documents were intended to guide China-Africa relations over the three-year period to the next FOCAC meeting in 2018. At the same time, the documents laid the foundation for long-term cooperation and continued interaction. Furthermore, the Johannesburg Summit produced 10 cooperative plans that will be used to develop the China-Africa comprehensive and strategic partnership. The 10 plans relate to the following: industrialisation, agricultural modernisation, infrastructure, finances, green development, trade and investment, poverty reduction, public health, people to people, and peace and security.4 Given the broadness of the afore-mentioned topics, this book will focus on two of the ten types of cooperation, which are China-Africa industrialisation, and agriculture modernisation. The 2016 FOCAC Action Plan that emanated from the 2015 Johannesburg Summit was implemented by the co-chairs, China and South Africa, and is expected to serve as a turning point for continental economic growth. Industrialisation just happens to be the aim of many African countries, as well as the African Union (AU). With global demand for commodities stagnant, African countries Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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that formerly relied on exporting their natural resources are looking to diversify their economies through industrialisation.5 In principle, an industrialised continent would create jobs, reduce reliance on exports, and promote value addition matters, such as mineral beneficiation. The lack of mineral beneficiation on the continent has been the bane of Africa’s reliance on raw exports. Industrialisation and agricultural modernisation, if accomplished in Africa, would present a major economic breakthrough for the continent in the global market. Industrialisation would not only break the historical trading patterns on which the continent depends, but create a win-win situation for both regions from a political and socio-economic perspective. By breaking the current export dependency, China would not only establish a stronger market to rely on for its go-global policy, but its global standing would be elevated, as it would have assisted the continent to overcome its minimal industrial development, which has been a thorny problem for decades. Implementation of the 2016 FOCAC Action Plan is feasible, as all the previous FOCAC plans have implemented timeously, with China as the key driver of the performance outcomes. Ambassador Liu Guijin argues that, in comparison with the US–Africa Forum and EU–Africa Forum, FOCAC has unique features, in that it is more practical in its approach, and its institutional goals have always been achieved beforehand.6 However, it must be stated that, unlike with previous FOCAC implementation plans, performance post FOCAC 2015 and beyond will be a challenging task, due to the uneven nature of infrastructure and economic growth on the continent. In order to deliver on the FOCAC 10-point action plan, it is critical that the continent’s leaders actively engage with China and show greater political commitment, which is usually lacking at the ground level. Unlike the previous FOCAC measures, where China was the main performance driver for implementation, the continent needs to actively engage with the process through strong state intervention. Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Financial support has also been provided: at the Johannesburg Summit, President Xi Jinping declared financial support of US$60 billion, for a three-year period, for cooperation on industrialisation and agricultural modernisation.7 In short, in order for the FOCAC 2016 Action Plan to lay a strong industrial foundation on the continent, the current African spectator approach seen at with FOCAC will have to change. South Africa and China have been taking stock of performance on the 2016 to 2018 Action Plan, as there was a coordinators’ meeting on 28 July 2016. According to the 2016 coordinators’ meeting outcomes, progress has been made, as a high-level internal African coordination mechanism has been set up between more than 30 countries to increase synergy with China. It is unclear if additional coordinators’ meetings have been hosted. The coordinators’ meetings are critical, because implementation oversight is essential for any project to succeed. While coordinators’ meetings are politically essential in keeping track of the 2015 Summit outcomes, this book provides a scientific alternative, along with propositions and suggestions that could assist with the FOCAC 2015 and 2018 implementation process. 2

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The objectives of this book are fourfold: Firstly, the book attempts to provide industrial best practices for FOCAC’s consideration under the section ‘Effective implementation of China-Africa industrial cooperation’. The chapters in this section draw lessons from China-Africa experiences over the years, such as the implementation of Special Economic Zones (SEZs), the inroads China has made through its infrastructure footprint on the continent, and mineral beneficiation. Secondly, the book examines what should be done to ensure that agricultural modernisation is achieved as a tool for poverty reduction. More importantly, the chapters in this section examine the roles that both China and Africa should play to ensure that agricultural modernisation succeeds. Thirdly, the book assesses synergies that exist between the two regions, which are critical in ensuring implementation of the FOCAC 2015 cooperative measures. Fourthly, the book provides long-term solutions for FOCAC 2018 and beyond, as the outcomes of the Johannesburg Summit will require implementation strategies that are sustainable. The discussion in this book is premised on the developmental state theory. Various theories have been posited on how industrialisation should be implemented in Africa, in order for it to strengthen its competitiveness in the international economic setting, including purposive policy intervention. The fact is that, for most African countries, the industrialisation pattern is complicated due to global economics requiring strong policy intervention. The basis of developmental state theories is the theory of state autonomy. Hirschman argues that purposive policy intervention is essential for developing countries that want to take a great leap towards development.8 Conceptually, a developmental state is defined as, “a state that has economic development as the top priority of government policy and is able to design effective instruments to promote such a goal”.9 The development state theory is also relevant to this book, given the diverse industrial

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stages seen around the globe. Countries such as Germany and China are already strategizing on how to use the fourth industrial revolution (“Industry 4.0”) to revolutionise the organisation of global chains10 – yet the second industrial revolution is still to be fully experienced by the majority of African countries. Establishing how African countries can catch up to Industry 4.0 under FOCAC and through the developmental state theory, is therefore essential.

EFFECTIVE IMPLEMENTATION OF CHINA–AFRICA INDUSTRIAL COOPERATION The lack of economic development in Africa is traceable to the low level of investment in manufacturing activity, especially in raw material processing industries. This is in addition to the fact that sub-Saharan Africa has the highest cost of doing business in the world, with the cost of infrastructure services making up a disproportionately large part of production and trade costs. Li Yong argues that Africa is by no means destined to lag behind the rest of the world economy.11 On the contrary, it could easily become a global economic powerhouse within the next decade. But in order to realise its economic

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potential, Africa must industrialise.12 In 2007, the AU produced the Action Plan for the Accelerated Industrial Development of Africa. This plan was followed by the 10th Ordinary Session Assembly on African Industrialisation in 2008. At this Session, the AU heads of state committed to the following objectives: a) Accelerate the pace of Africa’s industrial development, especially the conversion of natural resources to higher value-added products; b) Adopt policies and programs for natural resource processing and greater value addition in Africa.13 Agenda 2063 is also linked to the AU Action Plan for the Accelerated Industrial Development of Africa, which is the core of the industrialisation vision of the continent. The Agenda 2063 plan for transformation is geared towards the growth and industrialisation of African economies, based on the development of local resources.14 However, despite all the policy inroads that have been made, it is not clear whether regional coordination of the AU industrial strategy, along with initiatives such as the Program for Infrastructure Development (PIDA), will be coordinated or aligned within the FOCAC industrial framework. There are several reasons why the China-Africa industrial strategy is feasible. Firstly, China-Africa industrial cooperation is possible because of China’s established trading patterns in the mining sector. China has changed the landscape of resource governance - typically dominated by corporate social responsibility projects – through its model of mineral resources in exchange for infrastructure. Most of the resource-infrastructure projects that China has implemented over the past decade include substantial contributions to the provision of ‘hard infrastructure’ (such as roads, railways and hydropower projects), which are critical for economic growth and development on the continent. Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Mineral industrialisation through the infrastructure resource exchange approach cannot be ignored, because the African continent is home to around 30 per cent of the world’s total mineral reserves. It holds 42 per cent of the world’s bauxite, 38 per cent of the uranium, 42 per cent of the gold, 88 per cent of the diamonds, 44 per cent of the chromite, 82 per cent of the manganese, 95 per cent of the vanadium, 55 per cent of the cobalt and 73 per cent of the platinum.15 Secondly, the China-Africa industrial strategy is likely to succeed, because manufacturing has become another key focus of China’s activities in Africa. Between 2009 and 2012, direct investment in Africa’s manufacturing sector by Chinese enterprises totalled US$1.33 billion. By the end of 2012, China’s investment in Africa’s manufacturing industry had reached US$3.43 billion. Mali, Ethiopia and other resource-poor countries have also attracted a large amount of Chinese manufacturing investment. Chinese enterprises have invested in sugar refineries in Mali, set up glass, fur, medical capsule and automobile factories in Ethiopia, and invested in textile and steel pipe manufacturing projects in Uganda.16 China’s planned off-shoring of manufacturing, if implemented, could also impact on small business development, which is another driver that would facilitate 4

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industrialisation on the continent. Given the high number of informal markets and rate of small trade on the continent, industrialisation will not work if it is focused solely on huge manufacturing projects. The tragedy of Africa’s post-independence development trajectory is that most countries have failed to cultivate a capable business class that can play a meaningful role in transforming local economies. It is important to devise a strategy for manufacturing to cut across all levels horizontally, inclusive of small and medium businesses. China has pledged up to US$6 billion over three years for supporting small and medium-sized African businesses with access to finance, which could promote value addition and beneficiation. Thirdly, the FOCAC 2016 Action Plan is also considered feasible because China plans to continue supporting the development of industrial parks in Africa. Over the years, China has established an SEZ footprint on the continent through cluster industrial parks in about seven countries. Needless to say, the learning experiences acquired from the continental industrial parks that have been developed could serve as a roadmap to limit costly economic mistakes being made in the future. China plans to continue promoting industrial parks through multiple investing and financing modes, such as: building or upgrading a number of economic and trade cooperation zones; supporting the construction of infrastructure such as road, water and electricity, both inside and outside industrial parks; and assisting with the construction of public service facilities that will establish sound conditions, so as to attract considerable investors for African industrialisation.17 The SEZs could serve as a springboard to facilitate diversification in African countries that are sufficiently creative and forward-looking to welcome this investment. Fourthly, the 2016 FOCAC Action Plan is considered implementable as human resource development serves as another catalyst for industrialisation. The development of Africa’s

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human capital has been identified as a key aspect in achieving global competitiveness and industrialisation. China has already provided training in management and technician skills, and research opportunities for over 40 000 Africans – young people and women in particular - so as to arm Africa with more management and technically-skilled personnel for industrialisation and economic development.18

AGRICULTURAL MODERNISATION AS A METHOD OF POVERTY REDUCTION Africa has enough land, water and human resources to feed herself and contribute towards meeting the growing global demand for both staple food and higher value-added foods. Agriculture employs over 65 per cent of the continent’s population and, according to the World Bank, it can become a springboard for the continent’s industrial forward and backyard linkages.19 Agriculture can also provide raw materials for manufacturing through farming.20 Moreover, recent estimates suggest that Africa has the potential to increase the value of its annual agricultural output from about US$280 billion (in the late 2000s) to around US$800 billion by 2030.21 Furthermore, given the region’s current

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endowment structure and stage of development, it is evident that the agriculture sector could become a major source of continental revenue, employment and foreign exchange.22 Despite this potential, Africa is still the most food-insecure continent, and environmental sustainability is increasingly challenging. In addition, over the years, many African countries have often been dependent on food aid as a means to meet the food supply gap. Africa has not yet achieved its green revolution which promotes agricultural productivity, and is therefore experiencing a food deficit.23 In fact, the region spent more than US$30 billion to import basic grains in 2011.24 The greatest deficiency of the current growth episode is its inability to promote structural transformation of the economies of the region. Rudimentary agricultural practices and the provision of services dominate the structure of African economies. This overt dependence on traditional agriculture and the services sector can only support limited growth. Agricultural modernisation is, therefore, essential in addressing the current food insecurity situation on the continent, as it involves a transition from subsistence agriculture to commodity agriculture, and a transition from industrialised agriculture to knowledge agriculture. Within the FOCAC framework, China and Africa have worked together on a number of important agricultural projects. Following the 2006 FOCAC Summit, China provided assistance to build agriculture technology centres in 25 African countries. By introducing new planting methods and agriculture management procedures, China has helped train African farmers and boost output. Given that the majority of Africans are still involved in farming, China’s assistance has made a major contribution to the development of local economies. For example, since 2006 China’s Agriculture Ministry has dispatched 48 specialist agricultural teams to 34 African countries. These teams have played a key role in providing advice and guidance to African farmers. In addition, Chinese agriculture vocational teachers have provided assistance to over 50 000 African agricultural officials Copyright © 2014. Africa Institute of South Africa. All rights reserved.

and farmers. Section 3.1.1 of the FOCAC Action Plan states that China and Africa realise that modernizing agriculture in Africa by strengthening agricultural cooperation is an important way to contribute to food security in Africa. Section 3.1.2 further states that the two sides will continue to strengthen cooperation in the fields of agricultural policy, and support the implementation of the Comprehensive African Agriculture Development Programme (CAADP). Section 3.1.2 is critical in light of the competitive global economy and trade dynamics in the agriculture sector. In recent years, Chinese enterprises have invested in Africa in fields such as developing improved seeds, planting grain and cash crops, and processing agricultural products. Chinese enterprises that have been providing support through irrigation technologies, animal husbandry and management practices could unlock Africa’s potential to become the world’s, and not least, its own, breadbasket. Linkages are needed between agriculture and industry. The need to enhance food security implies that agricultural development should be part of Africa’s development agenda. Of significance to the Johannesburg 2015 Summit measures on agriculture, is that China will promote the development of scientific cooperation in agriculture, as 6

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agricultural technology can guarantee agricultural modernisation in Africa. In addition, 10 Chinese agricultural research institutions will be chosen to set up mutual cooperation mechanisms, and promote research exchange in areas of seed development, livestock improvement, and pest control. These scientific cooperation mechanisms will promote agricultural science and technology innovation thereby increasing agricultural production capacity in Africa.

OUTLINE OF THE BOOK This book is divided into five sections, which begin with keynote addresses made by government officials at the FOCAC Industrial Conference in November 2016. Section two comprises the introduction. In section three, the second chapter penned by Tang Xiaoyang, which is on China-Africa industrial cooperation, provides an overview of the evolution of SEZs in China and the policy prescriptions that led to rapid industrialisation. The chapter argues that, while the promulgation of SEZs in Africa offer an opportunity to capture Chinese financial resources and industrial experiences, there still needs to be recognition of the determining influence of business conduct, regulatory regimes and local conditions of host countries. Chapter 3, by Chris Alden and Ana Cristina Alves asserts that, in Africa, the Chinese experience of industrialisation associated with the Economic and Trade Cooperation Zone (ETCZ) is especially appealing as a means of achieving rapid growth.25 However, they argue that the true extent of the ETCZ impact on Africa’s structural economic transformation and diversification is minimal due to limited spill-over on the local economies. In essence, despite the undeniable potential, the transformative

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role of Chinese ETCZ cannot be verified on the African continent at this stage, as they are still too few in number for meaningful impact, and yet to be consolidated. More importantly, the authors argue that the majority of the problems that affect the performance of Chinese ETCZ in Africa negatively, such as institutional coordination, are not specific to the Chinese model, but are mainly of a structural nature, as these are the same challenges that have been identified as afflicting most other SEZs on the continent. In Chapter 4, Urketor Moti examines China’s contribution to Africa’s industrialisation, including the challenges and the fears expressed by some Africans. The chapter serves as a case study for industrial development between China and Nigeria and suggests policy options for deepening industrial engagement. The author flags national legal and institutional frameworks in African countries as one of the key challenges in implementing industrial development. Moti also argues that if the host government has an equity in stakes, then local ownership has to be adopted. The fact of the matter is that most FOCAC agreements, while signed at the national level, are typically implemented at the local government level. Moti states that it is crucial that the government also ‘owns’ the SEZs, believes in their potential and shows the political commitment to make them work. This requires that the zones be fully integrated into the country’s development strategy and Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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be seen as platforms for learning and technology transfer beyond their short-term impact on jobs. Moti also raises capacity challenges, such as zone management and operational know-how, which are limited on the continent. Infrastructure is another overall constraint cited by the author for all the zones. In general, power, gas, roads, ports and airports are the key constraints. These need to be addressed, in order for the zones to succeed as a test case of industrialisation. In Chapter 5 Feng Lu and Xiaoguang Liu tackle the issue of manufacturing and maintain that the lagging behind of growth in the manufacturing sector may be a major bottleneck for African long-term economic development. The authors state that it would be mutually beneficial for both China and Africa to facilitate Chinese firms transferring labour-intensive manufacturing to African countries through overseas foreign direct investment (OFDI). The chapter provides various policy options, such as the governments playing an active role in facilitating infrastructure investment and labour market flexibility, particularly since new manufacturing entrants face global competition. Sizwe Phakathi’s Chapter 6 digs into the continental challenge of mineral industrialisation, which could unlock continental growth. The author states that the Chinese approach to investing in Africa’s mineral sector has been questioned in terms of its impact on the advancement of the goals of Africa Mining Vision (AMV), especially in the area of mineral beneficiation. South Africa is used as a case study, through an assessment of its mineral beneficiation strategy with China, which has predominantly taken the form of consortiums or joint ventures with other mining companies. The author argues that, by virtue of their stake in local mining companies, the Chinese companies should advance South Africa’s mineral beneficiation programmes, as underpinned in the South African National Development Plan. In Chapter 7 Yazini April and Zukiswa Mpiyakhe examine the manufacturing subject Copyright © 2014. Africa Institute of South Africa. All rights reserved.

by assessing China’s go-out policy, which has contributed to continental economic growth and infrastructure development. The authors assert that the continent needs to align its AU Industrial Plan and Agenda 2063 with China’s go-out strategy, by incorporating a strong regional intra-trade process that will promote an effective value chain system. The chapter also examines whether or not the flying geese theory would be suitable for China to apply in the African context particularly due to the complexities of doing business in Africa. Currently, manufacturing brands that have settled on the continent have hardly sparked local industrialisation. Chapter 8, titled “China’s inward-looking industrialisation: an inspiration for West Africa to establish regional value chains”, by Maxime Weigert, attempts to elucidate patterns in the domestic market-driven industrialisation process in China since the 1970s, in view of drawing lessons for Africa in general, and West Africa in particular. The author draws a clear distinction between China and West Africa, as the characteristics differ widely, which has considerable implications in terms of political decision-making and industrial governance. Moreover, from a strictly industrial perspective, the institutional environment in China 40 years ago and that in West Africa today are incomparable in 8

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PART 2: Introduction | Chapter 1

terms of social and political organisation, resource endowment, land policy, and traditional and cultural values. The chapter discusses the Chinese experience with regional value chains (RVCs) as an alternative and complementary mode of industrialisation in the region, as they focus primarily on domestic and regional markets. This RVC approach is presented as an option for West Africans to consider. There are five chapters under the China-Africa agricultural cooperation section that attempt to determine best practices for agricultural modernisation on the continent. In Chapter 9, Biliang Hu and Yue Ma state that the issue of food security in Africa is mainly a problem of under-production, because land and other agricultural resources are not exploited fully, as African agriculture is typically a small-scale activity, with low production, and a lack of government support. The limited policy, they argue, is due to the failure of African states to manage their land effectively, which creates conditions for considerable under-utilisation of land on the continent. The authors maintain that transforming traditional agriculture will require new, modern agricultural factors, such as machinery, fertilisers and pesticides, which can help increase grain yield significantly. FOCAC is viewed as an alternative for promoting agricultural modernisation in African countries through measures such as jointly-built production bases for fertilisers and pesticides, so as to provide adequate fertilisers and pesticides for an increase in grain production. In Chapter 10, Liu Weicai presents a case study that highlights Mozambique as a unique example of China-Africa agricultural cooperation, partly due to Mozambique “having the soil of Heilongjiang, the level terrain of the Jianghan Plain, the water system of South China and the climate of Sanya”.26 The author maintains that in order for agricultural cooperation to work, China should enhance its level of agricultural aid to Mozambique, and

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guarantee primary interests, while providing Mozambique with services and considering Mozambique’s capacity and level of acceptance. Liu argues that China should not blindly provide too much material assistance or provide it unconditionally, or blindly teach the Mozambicans too much when providing technical assistance. The author insists that agricultural cooperation will work only if Mozambique establishes a clear governance plan that can be strengthened through China’s aid application. In Chapter 11, Chris Alden and Angela Harding discuss the experiences of three different Chinese agro-investment operations in South Africa. By adopting a case study approach that focuses on one target country (which serves as a baseline for comparative analysis) the authors are able assess the relative strengths of distinctive Chinese initiatives in the agricultural sector, namely government-funded aid projects, pure investments, equity investments and contract farming. Based on a comparative assessment of these projects, Alden and Harding argue that policy design, actual implementation and market factors all interact and exercise a determining influence over the success or failure of a given project. In Chapter 12, Garth Shelton demonstrates how China has increased investment in a number of African agricultural projects. By 2015, Chinese investment in African agriculture totalled more than US$700 million, i.e. almost 10 per cent of China’s international Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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investment in agriculture. At the same time, China’s importation of African agricultural produce increased from US$600 million in 2001 to over US$6 billion in 2015. China has also provided emergency food assistance to a number of African countries that have experienced difficulties. The author argues that the first step towards a strengthened agricultural component within FOCAC would be an expanded China-Africa dialogue on agriculture, which would promote productive knowledge sharing and thus improve production efficiency and efficient agricultural markets, which are dependent on the efficient flow of appropriate data.27 Shelton maintains that a partnership with China to provide mobile phones to African farmers could assist significantly with productive knowledge sharing, thereby contributing towards an increase in food production and market access. In Chapter 16, Mxolisi Notshulwana indicates how since the 1960s, many African governments have committed to supporting the agricultural sector as a key element of their economic development strategies. However, this commitment has not been supported by investment and implementation. The need to transform African agriculture and achieve food security has been reaffirmed by the African Union, as exemplified by the adoption of the Comprehensive Africa Agriculture Development Programme (CAADP). Moreover, in 2010, the Executive Council of the AU endorsed the African Agribusiness and Agro-Industries Development Initiative (3ADI), which is aimed at bringing about highly productive and profitable agricultural value chains through, among others, promoting domestic value addition to agricultural commodities, and effectively linking small and medium-sized agricultural producers to markets (AU 2010). In the Chapter 14, Gedion Jalata adopts a comprehensive approach to understanding the challenges of Africa-China agriculture modernisation cooperation. Jalata outlines the conditions that have historically constrained agricultural development on the continent and largely restricted investment in the sector. Noting that Chinese engagement in African Copyright © 2014. Africa Institute of South Africa. All rights reserved.

agriculture has three aspects – trade, investment and aid – he details how substantive increases in all three areas have produced positive impacts. Case studies on Chinese engagement in agriculture in Ethiopia, Mozambique and Ghana underscore the diversity of the approaches utilised to facilitate policy transfer and improvement in production. Issues like the use of new genetically modified seeds and the language barrier are raised as potential obstacles that need to be overcome, if China is to strengthen its position in this sector and if Africa is to fully leverage these strengths. In section five of the book, the chapters establish synergies in China-Africa development and cooperation. Zhang Chun, in Chapter 15, states that China-Africa cooperation has become a vital platform for facilitating sustainable African development. Zhang argues that continental challenges cannot be resolved only by China28 particularly given the limited infrastructure development, which hinders sustainable growth. Zhang emphasises that China-Africa cooperation needs to be coordinated with other international efforts, such as the UN 2030 Agenda, to maximise its development effectiveness and international legitimacy. The author maintains that potential partners can be achieved through the UN 2030 Agenda which has much common ground with Agenda 2063. Moreover, the UN 2030 Agenda already lays 10

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PART 2: Introduction | Chapter 1

down important basics for aligning China-Africa cooperation. The alignment of ChinaAfrica cooperation with the UN Agenda 2030 maximises development effectiveness, and international legitimacy of China-Africa cooperation thereby contributing to African sustainable development. In Chapter 16, Rita Ozoemena assesses synergies and reflects on how China-Africa relations have contributed to a new and better understanding of development through the Right to Development theory adopted by the UN General Assembly, in 1986. The chapter explores China-Africa relations against the backdrop of the Right to Development (RTD) theory, examining to what extent both processes are interrelated and how the development model supports the promotion and protection of the RTD in Africa. The author maintains that the 2015 FOCAC Summit that took place in Johannesburg, South Africa, focused on issues that are crucial to the right to development, such as food, employment, agricultural modernisation and industrialisation. The author concludes that there is a correlation between the RTD and the development approach adopted by China towards Africa, in which the economic and political agendas have been combined into one dominant approach of mutual development. In Chapter 17, Paul Tembe maintains that the model of symmetries and asymmetries in China-Africa frameworks has been ineffective, and tends to fuel the ‘China as new colonial Masters’ in Africa rhetoric.29 This chapter suggests abandoning the model that relies on teasing out symmetries and asymmetries between the two regions, as a means to enhance China-Africa frameworks synergies. The author’s suggestion is based on the rationale that synergy, by definition, presupposes the existence of differences and not symmetries between entities involved in a cooperation or partnerships. The author also suggests alternative approaches for identifying and enhancing synergies between Africa

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and China’s spheres of interest, such as examining the rationale or frames of reference that inform African and Chinese practices in China-Africa cooperation frameworks. Section six is the conclusion, titled, “China-Africa industrialisation and agricultural modernisation: FOCAC 2018 and beyond”. The concluding chapter provides an overview of the FOCAC process, emphasising the positive features of China-Africa relations and the positive impact of FOCAC on Africa’s economic development. The Johannesburg FOCAC Summit provided a clear roadmap for future China-Africa cooperation and stressed the importance of agricultural modernisation and industrialisation in Africa. It is contended that China, through FOCAC, is the ideal development partner for Africa to advance both agricultural modernisation and industrialisation. Greater synergy with the AU’s Agenda 2063 development plan is expected to strengthen and advance Africa’s economic development and job creation strides, based on a common China-Africa commitment to common development. Specific recommendations are offered in the concluding chapter and it is hoped that this study will make a positive contribution to both China-Africa relations and to enhanced economic development in Africa.

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REFERENCES 1 Forum for China-Africa Cooperation., 2016. “Chinese Follow-up Committee”. Available at http://www. focac.org/eng [Accessed 20 December 2016]. 2 Forum for China-Africa Cooperation., 2016. “Chinese Follow-up Committee”. Available at: http://www. focac.org/eng [Accessed 20 December 2016]. 3 Ibid. 4 Ibid. 5 Tiezzi, S., 2015. The New China-Africa Relations: 4 Trends to Watch. The Diplomat. Available at http:// www.thediplomat.com [Accessed 17 April 2017]. 6 Fangcan, S., 2015. Africa: Three Highlights of the Upcoming FOCAC Summit – Ambassador Liu Guijin. Available at http://All Africa.com. [Accessed 20 March 2017]. 7 ChinAfrica, 2015. President Xi Jinping FOCAC Summit Message. Available at http://www.chinafrica.cn [Accessed 2 December 2017]. 8 Hirschman, A., 1991. The Rhetoric of Reaction: Perversity, Futility, and Jeopardy. Cambridge, Massachusetts and London, England: The Belknap Press of Harvard University Press. 9 Economic Report on Africa. 2011. Governing development in Africa – the role of the state in economic transformation. Available at http://www.eca.org [Accessed 3 November 2017]. 10 Schwab, K., 2016. The Fourth Industrial Revolution. London, United Kingdom: Penguin Random House. 11 Li, Y., 2 February 2017. Africa’s Decade of Industrialisation. Project Syndicate. Available at http:www. project-syndicate.org [Accessed 1 June 2017]. 12 Li, Y., 2017. Africa’s Decade of Industrialisation. Project Syndicate. Available at http://www.projectsyndicate.org [Accessed 17 April 2017]. 13 African Union. 2008. Assembly/AU/Decl.1 (X). Decisions and Declarations of the Assembly, African Union. Available at https://www.au.int [Accessed 21 February 2017].

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14 President Buhari’s presentation at the conference on ‘Operationalization of the Agenda 2030 for Africa’s Industrialisation’, co-organized by the United Nations Industrial Development Organization, the African Union Commission, the Office of the Special Advisor on Africa, and the UN Economic Commission for Africa, which was held during the United Nations SDGs Summit (25-27 September). Available at http:// www.makingitmagazine.net [Accessed 17 April 2017]. 15 Opinion. 2013. A Chinese investment view on mining in Africa. Business Report. Available at http:// www.iol.co.za. [Accessed 30 March 2017]. 16 Gcoyi, T., 2015. China-Africa: Commitment and Opportunity. Daily Maverick. [Online] 7 December 2015. Available at http://www.dailymaverick.co.za [Accessed 30 March 2017]. 17 Mofcom., 2015. Interpretations of the Johannesburg Summit of FOCAC and the Sixth Ministerial Conference on the 10 Major China-Africa Cooperation Plans in Ministry of Commerce, Peoples Republic of China. Economic and Trade Domains. Available at http://www.mofcom.gov.cn [Accessed 15 March 2017]. 18 Ministry of Commerce, Peoples Republic of China 19 Mbae, L., 4 March 2014. Industrialisation in Africa: Can the continent make it? Available at http://www. allvoices.com [Accessed 30 March 2017]. 20 Mbae, L., 4 March 2014. 21 McKinsey Global Institute. 2010. Africa’s Path to Growth: Sector by Sector. Available at www.mckinsey. com [Accessed 25 February 2017]. 12

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PART 2: Introduction | Chapter 1 22 UNCTAD., The state of industrial development in Africa: unexploited opportunities amidst growing challenges. 2013. Fostering Industrial Development in Africa in the New Global Environment. Economic Development in Africa, 27. Available at http://www.unctad.org. [Accessed 17 April 2017]. 23 Sy, A.N.R., 2015. What do we know about the Chinese land grab in Africa? Africa in Focus. Available at http://www.brookings.edu [Accessed 10 April 2017]. 24 Sy, A.N.R., 2015 25 Knight, J., 2007. ‘China, South Africa and the Lewis Turn’, Centre for the Study of African Economies, Working Paper Series, 12, Oxford University, 2007, pp.1–3. 26 Frey, A., 2016. Mozambique president’s China visit focuses on industrial cooperation – Ambassador Su Jian. Available at http://www.clubofmozambique.com [Accessed 21 February 2017]. 27 Firrd, N., 2016. Agribusiness. African Business, August/September, p.29. 28 Jinping, X., 2015. “Open a New Era of China-Africa Win-Win Cooperation and Common Development”. Address at the Opening Ceremony of the Johannesburg Summit of the Forum on China-Africa Cooperation. Ministry of Foreign Affairs of the People’s Republic of China, 4 December 2015. Available at http://www. focac.org/chn [Accessed 10 April 2017].

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29 Lokong, A., 2014. Zimbabwe: Underway – the re-colonization of Africa. Available at http://allafrica.com [Accessed 30 March 2017].

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2

CHAPTER

CHINA’S SPECIAL ECONOMIC ZONES BEST PRACTICES FOR INDUSTRIAL COOPERATION BETWEEN CHINA AND AFRICA Tang Xiaoyang

INTRODUCTION By the beginning of the twenty-first century, the People’s Republic of China (China) had become one of the world’s most successful industrialised economies with the highest growth potential, thanks to large-scale economic development. Deng Xiaoping, the former leader, is considered the chief designer of China’s ‘reform and opening-up’ policies, which emphasised market reform and the stages of socialism. In 1978, Deng spearheaded a series of Special Economic Zones (SEZs) for foreign investment, which were relatively free of the bureaucratic regulations and interventions that hampered economic growth. Due to the SEZs, China is now the world’s biggest producer of manufactured exports. For example, China currently has the world’s largest automobile market. Moreover, Chinese steel output quadrupled between 1980 and 2000, and from 2000 to 2006 it rose from 128.5 million tons to 418.8 million tons, i.e. one-third of global production. By 2014, Copyright © 2014. Africa Institute of South Africa. All rights reserved.

China accounted for 49.4 per cent of steel production in the world.1 China’s developmental path makes an interesting case study, which can contribute towards a better understanding of economic growth and industrial development on the continent. SEZs or industrial parks can be an effective instrument to promote industrialisation, if they are implemented properly and in the right context. For the purpose of this chapter, the term “SEZ” covers a broad range of zones, such as free trade zones, export-processing zones, industrial parks, economic and technology development zones, high-tech zones, science and innovation parks, free ports, enterprise zones, and others.2 Currently, there is strong interest in many African countries to emulate the experience of China in developing SEZs as an economic policy instrument, by attracting foreign investment and enhancing the competitiveness of the manufacturing sector.3 In fact, emulation of China’s SEZs began as early as 1999, when former Egyptian president, Hosni Mubarak, invited Tianjin Economic-Technological Development Area (TEDA) to establish a cooperation zone in Egypt. The objective of this chapter is to demonstrate experiences that can be drawn from China’s SEZs, and assess the processes by which SEZs have been established on the

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PART 3: China-Africa Industrial Cooperation | Chapter 2 continent through the Chinese government, in particular the Ministry of Commerce of the People’s Republic of China (MOFCOM), or private companies. This discussion on SEZs is relevant to Africa’s industrial agenda because of the 2015 Johannesburg Summit, where President Xi Jinping declared financial support of US$60 billion for a three-year period for cooperation in terms of industrialisation and agricultural modernisation. The discussion is also significant as China is the only country in the world that has transferred and implemented its knowledge of SEZs on the continent through Economic and Trade Cooperation Zones (ETCZs). An overseas ETCZ is a type of SEZ that is defined by the World Bank as an area with a clear geographical border, which is managed by special agencies that provide preferential measures to resident companies.4 Most of the Chinese ETCZs in Africa were implemented in the spirit of bilateral cooperation and aimed to bring mutual growth and development under the Forum on China-Africa Cooperation (FOCAC).

CHINA’S INDUSTRIAL GROWTH In 1979, the central government established four SEZs, i.e. in Shenzhen, Zhuhai, Shantou and Xiamen. Subsequently, the entire Hainan Province became a special zone in 1998, and the Shanghai Pudong New Area was established in 1990, where SEZ preferential policies were implemented. In addition to these comprehensive SEZs, 14 national economic and technological development zones were established in Tianjin, Shanghai, Dalian, Guangzhou and other coastal cities, where regulations on examinations and approvals for foreign investment were similar to those implemented in SEZs. Thereafter, numerous types of SEZs were established, including high-tech industrial zones, bonded areas, and Export Processing Zones (EPZ). Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Although the success of SEZs varied, they have collectively contributed enormously in driving China’s economic growth and promoting an export-oriented economy. For example, with the first four comprehensive SEZs (see Table 2.1), in 2009, the total land of the four zones accounted for approximately 0.07 per cent of China’s territory, and the total population of the zones accounted for approximately one per cent of the national population. The total production value accounted for approximately 3.5 per cent of national gross domestic product (GDP), and total imports and exports accounted for over 16 per cent of national imports and exports. In particular, in just thirty years, Shenzhen was transformed from a barren and desolate fishing village into a modern metropolis with numerous skyscrapers and busy traffic.

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Table 2.1: Overview of four Chinese SEZs in 2009 Shenzhen

Zhuhai

Shantou

Xiamen

Area (km2)

1953

1701

2064

1565

Resident population (000)

891

148

506

249

Gross local output (RMB 100 million)

8201

1038

1036

1623

Gross imports and exports (US$100 million)

2701

374

60

433

Source: 2009 Statistical Bulletin of Shenzhen, Zhuhai, Shantou, and Xiamen

There are many reasons for China’s SEZ success. When one examines individual zones, it is evident that a considerable proportion of China’s SEZs actually did not achieve the expected outcomes. For example, in the first wave of special zones, Shantou developed much more slowly than the other three zones did. Different reasons have been advanced to explain the failed zones. These include: an inappropriate geographic location, bad management, the lack of an entrepreneurial culture and modern societal structure, and so on.5 The point to be noted is that each special zone has its unique environment and conditions. The management and operation mode of a successful zone cannot simply be replicated in other special zones – domestically or abroad. However, China’s SEZs are generally successful, in that they have served as key factors in the nation’s process of economic reform and opening-up, having a considerable impact on China’s rapid development. Although the level of development varies among the zones, the government of China has successfully established a new economic system by continually setting up

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various types of SEZs in the past few decades. To date, these zones have contributed substantially to the national economy. Moreover, parallel macro-economic and micro-economic developments from the SEZs have generated positive outcomes and driven China’s strong economic growth and development. The greatest contribution of Shenzhen’s legendary story of incredible development is not how the city grew and experienced marked changes in its landscapes, but how it inspired neighbouring areas, and even the entire nation, to embark on a process of economic liberalisation and development. Therefore, grasping the dynamics of the development of SEZs and that of the entire nation is central to understanding China’s SEZ experience. This interaction comprises the following six aspects: 1. SEZs can concentrate resources in small locations and promote infrastructure development; 2. SEZs are able to break down bottlenecks that hamper development; 3. SEZs can economically bridge the gap between domestic and international industries; 4. SEZs can develop emerging industries to enable industrial transformation; 5. SEZs can serve as new economic reform test sites; and 6. SEZs can facilitate urbanisation and construct strategic metropolises. These aforementioned measures could become instrumental in promoting industrial development under FOCAC, through continental industrial parks. 16 Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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PART 3: China-Africa Industrial Cooperation | Chapter 2

LESSONS FROM CHINA’S SEZ EXPERIENCES Governments must concentrate on small areas and initiate a positive cycle of infrastructure development When a nation has low-quality infrastructure, but cannot invest in large-scale infrastructure development, the nation can centralise its financial and material resources to improve the infrastructure of small special zones. High-quality infrastructure attracts foreign investment, enhances productivity, and serves as a necessary hardware base. Constructing new infrastructure improves the efficiency of distribution and production, further leading to enhanced effects of economic growth, which eventually prompts reinvestment in infrastructure. SEZs present an opportunity for directly transforming infrastructure investment into economic gain, thus creating a positive cycle of subsequent development. Chinese experience verifies that infrastructure development in SEZs contributed substantially to economic expansion at the early stage of economic reform. As more factories settled in the SEZs, infrastructure in the zones continued to expand and increase. In addition, because the early SEZs were established near major coastal ports, the development of these zones also prompted the construction of port facilities and connecting roads in neighbouring areas. Improving infrastructure in major ports not only benefited the zones, but also significantly enhanced the logistics and cash flow capability for Chinese companies investing domestically and abroad.

SEZs can break down bottlenecks that hamper development

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When a country’s technology and business management resources are under-developed, SEZs can serve as key economic development areas for attracting talent and resources, both domestically and internationally, thus creating an agglomeration effect. The SEZs enabled China to overcome development obstacles, such as a shortage in software and hardware, and to manage knowledge production and technology requirements that were in line with international practices. Furthermore, the SEZs and the resident companies demonstrated operation processes that are in sync with modern standards, providing a platform for host countries to experience cutting-edge technology, learn from overseas experiences, and further develop their management capacity. As Deng Xiaoping stated, ”The special zone is a window to technology, management capacity, and knowledge, as well as to foreign policies”.6 From the outset, China’s SEZs were constructed with a specific emphasis on introducing new technologies that the country needed urgently, developing high-end products, new materials and key components, as well as promoting new crafts, technologies and scientific management experiences.7 In 1994, the governments of China and Singapore jointly established the Suzhou Industrial Park, which specifically incorporated learning and implementing the Singaporean public administration management model in the cooperation project. By 2008, over 2 000 Chinese officials had received Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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training from their Singaporean partners. Moreover, each year, approximately 20 000 officials from all over China visit the industrial park to entrench industrial skills from the Suzhou model.8

SEZs economically bridge domestic and international industries Despite considerable effort to attract foreign companies to invest and establish companies locally, many SEZs around the world are effectively separated from other economic activity in their host country, forming ‘lonely islands’, such as the SEZs in Tunisia and the Dominican Republic.9 The local companies cannot produce products that satisfy the needs of foreign companies in quality, quantity, price, or delivery time. Therefore, foreign companies in EPZs are sometimes forced to seek suppliers overseas. These resident companies are connected to both industries and markets overseas, having no direct effect on industrial development outside of the processing zones.10 To address this problem, the administrative authorities in countries such as Korea and Taiwan created conditions that encouraged domestic suppliers to connect with companies in SEZs. This bolstered the positive effects of processing zones on the overall development of the national economies.11 China emulated the experiences of Korea and Taiwan when building its SEZs, stressing the development of local companies into suppliers for resident factories. Kunshan Economic and Technological Development Zone is a successful example of this strategy. The administrative committee actively held meetings between domestic companies and foreign investors in the zone, while seeking to enhance bilateral cooperation by facilitating better interpersonal communication. In addition, the committee encouraged foreign high-tech companies to invest jointly with Chinese partners to strengthen the connection

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between foreign and domestic companies. Every year, the development zone held a symposium for local suppliers, assisting them in exchanging their experiences and ideas. The zone even presented an award for the most outstanding supplier. In 2010, over 1 600 domestic suppliers supported more than 2 300 projects in the development zone.12 Another tactic adopted by Kunshan was to introduce a whole industry chain, so that production could proceed entirely in-zone or in-country. It was even reported, that an official from the administrative committee dismantled his laptop computer to check which components were not produced in Kunshan. Subsequently, he focused on finding companies that produced these components and invited them to settle in the development zone. Soon, Kunshan built the entire information technology industry chain.13 Similarly, the Tianjin Development Zone attracted many suppliers willing to invest and settle after Motorola relocated to this zone. The strategy of developing industrisal chains enabled the development zones to upgrade from assembling components to forming dynamic self-sufficient industrial systems, providing a base for China to transform into a global factory.

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PART 3: China-Africa Industrial Cooperation | Chapter 2

Develop emerging industries to enable industrial transformation Resource centralisation in special zones not only provides hardware and software bases for industrial development in less developed countries, but also enables industrialised countries to achieve industrial transformation. For instance, in the early 1970s, labourintensive industries such as textiles and plastics accounted for 40 to 50 per cent of industrial output in special zones in Korea and Taiwan. However, by the mid-1990s, that rate decreased to 10 per cent. In contrast, technology-intensive and high-value-added industries accounted for over 80 per cent of the output in the zone.14 The SEZs in China have also exhibited a similar development track. For example, in the 1980s, the Tianjin Development Zone primarily exported plastic products, clothing and household goods. In the early 1990s, exports expanded to include electronics, mechanical, chemical and pharmaceutical products. By 1996, electronic appliance exports accounted for over twothirds of total exports, and after 2000, high-tech products, including cellular phones, semi-conductors and digital cameras, gradually became one of China’s major exports. By 2007, high-tech products accounted for over 80 per cent of total exports.15 Similarly, the Shenzhen Special Zone grew from a low-end original equipment manufacturer supply base for Hong Kong factories into a new “Silicon Valley”, where international high-tech companies such as Huawei, Zhong Xing Telecommunication Equipment (ZTE), Build Your Dreams (BYD) Company and Tencent resided. Table 2.2 shows that, in addition to progressing towards high-end production, Shenzhen became a major driver in the development of high-tech industries throughout Guangdong Province.

Table 2.2: Output value of Shenzhen high-tech industries from 1991 to 2006 Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Year

Output value of high-tech industries (US$ million)

Percentage of total industrial output value of Shenzhen City

Percentage of total high-tech industrial output value of Guangdong Province

1991

335.2

7.43

27.96

1995

3 331.1

20.33

33.54

2000

15 607.8

36.08

37.39

2005

71 631.2

51.06

45.74

92 468.9

54.02

40.56

2006

Source: Yiming Yuan, Hongyi Guo, Hongfei Xu, Weiqi Li, Shanshan Luo, Haiqing Lin, Yuan Yuan, “China’s First Special Economic Zone: The Case of Shenzhen”, in Building Engines for Growth and Competitiveness in China: Experience with Special Economic Zones and Industrial Clusters, Ed. Douglas Zhihua Zeng, 2010, World Bank.

SEZs as new economic reform test sites Because special zones cover a limited area, the political, economic and social risks that can arise from policy changes are relatively small and containable. When a government cannot fully grasp the primary and secondary effects of reform measures, it should launch a pilot project first in the special zones, and then promote the measures after they have matured. Malaysia, Sri Lanka and Taiwan are examples of other countries that

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first tested import and export trading policies in selected SEZ areas before nationwide application. However, several experts from the World Bank consider that implementing small-scale test reforms in special zones can defer the execution of overall national reforms, because when sufficient foreign exchange and profits are produced in special zones, the government becomes content with the current situation and loses momentum with implementing large-scale reforms.16 The author differs with this view. It is argued here that whether or not reforms can be thoroughly executed depends on the attitude the government has towards such reforms. A country with high awareness of the urgency and importance of reform cannot settle for the achievements of small-scale pilot tests. Furthermore, it can be argued that countries that are content with a small fortune do not set ambitious goals and naturally lack the willingness to conduct drastic reforms. Under the leadership of Deng Xiaoping, China demonstrated firm determination to reform. From the outset, SEZs were tasked with the mission of systematically testing China’s economic reforms. In the words of Deng Xiaoping, the objective of the special zones was ‘to hew a path’ for establishing a market economy in China.17 During the southern tour in 1992, Deng demanded that in the SEZs, ‘the reform and opening up should be conducted with a more daring spirit that explores boldly, instead of being executed with over-prudence’.18 When the reforms tested in Shenzhen, Zhuhai and other sites achieved positive indications, the country established additional larger special zones. In addition, the government gradually disseminated nationwide the experience of activating the economy, by opening up China’s markets to foreign capital. Subsequently, several measures piloted in the SEZs, such as leasing land and establishing stock markets, became national policy. Furthermore, in the early reform period,

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numerous preferential conditions that were aimed at attracting investors were exclusive to the SEZs, before being gradually promoted in other regions.19 The SEZ experience was replicated to the extent that, by the mid-1990s, the policies and regulations implemented in most regions in China did not differ substantially from those in the SEZs. In other words, the SEZs were no longer ‘special’.20

SEZs must facilitate urbanisation while constructing strategic metropolises As the number of resident companies in a special zone increases, more workers become compelled to settle near the zone. For special zones that have been established in large cities, new residents probably do not cause noticeable changes in the surroundings. However, most special zones are constructed in suburbs or rural areas where the population is relatively low. New towns or cities are often founded near such zones. The planning of special and development zones in China has invariably involved arranging for residential areas. In addition to providing staff accommodation for resident companies, these areas attract more people to stay in the zones. As business districts and other residential support facilities are gradually completed, the investment environment

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PART 3: China-Africa Industrial Cooperation | Chapter 2 of a zone can be further enhanced, thereby attracting more manufacturing companies. Accordingly, industrialisation and urbanisation converge naturally provide mutual support to each other as the zone develops. Such new towns serve as major drivers of regional development. In China, they have attracted millions of people from all over the country, playing a key role in the country’s transformation from a rural society to an urban one. With a population of 10 million people, Shenzhen has been transformed from a small fishing village into China’s fourth-largest city. Other development zones, including Shanghai Pudong, Tianjin Binhai and Suzhou Industrial Park, have also become new cities with a scientifically planned and rational space layout, which accommodates a large population and numerous companies. As mentioned earlier, the SEZs in China are no longer ‘special’, in the sense that their policy and regulatory environment have been widely adopted to the point of ubiquitousness. Ultimately, the greatest achievement of the SEZ policy has been the initiation of universal development throughout China.

IMPLEMENTATION OF SINO-AFRICA COOPERATION ZONES Chinese company practices provided early experiences that assisted African governments in developing strategies for Economic and Trade Cooperation Zones (ETCZ). A continually growing trend of companies ‘going global’ prompted the Chinese government to formulate and promulgate policies to encourage ETCZs. In March 2006, MOFCOM published Basic Requirements and Procedures on the Application of Overseas Chinese Economic and Trade Cooperation Zones, declaring it would open bids for selecting overseas cooperation zones.

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Through two rounds of open bidding in 2006 and 2007, 19 companies were selected from 120 project applications (see Appendix). Seven of these selected projects were located in Africa: Egypt Suez ETCZ, Mauritius Tianli ETCZ (currently JinFei ETCZ), Nigeria Ogun-Guangdong Free Trade Zone (FTZ), Nigeria Lekki FTZ, Zambia-China ETCZ, Ethiopia Oriental Industrial Park, and Algeria-China Jiangling ETCZ. Selected projects are entitled to MOFCOM’s ‘development fund for overseas ETCZ’ - a subsidy of up to RMB$200 million. The fund reimburses 30 per cent of actual expenses on items such as preconstruction costs (e.g. bidding, feasibility studies and planning) and infrastructure construction costs.21 Given the high rate of financial investment involved, MOFCOM has provided various opportunities to the approved ETCZs by tracking and supporting the nineteen selected cooperation zones, constantly meeting with the managers of the various zones to obtain an update on their situations and to facilitate the exchange of experiences for learning purposes. In addition to MOFCOM, the provincial governments where the cooperation zone developers are located also provided various support measures. For example, the Tianjin City Government offered food and insurance subsidies for the Chinese employees in all cooperation zones, and provided various subsidies for resident companies according to how much they invested and the type of industry. Each project was entitled to subsidies of up to 10 million yuan per year.22 Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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CHINA’S SPECIAL ECONOMIC ZONES | Tang Xiaoyang There has been some progress made by the ETCZs selected. For example, the cooperation zone in Zambia was founded at the Chambishi Copper Mine on an 11.58 km2 land area purchased by China Nonferrous Metal Co. (CNMC), which owns the mine. By January 2012, 18 companies had settled in the zone, including CNMC affiliates such as a copper smelting company, a hydrometallurgy company, a sulphur acid plant and foundry, as well as several private Chinese and local companies that provide support services such as machine repairs and logistics. In total, this project attracted an investment fund of US$900 million and created over 7 000 local jobs.23 However, the remote location of Chambishi rendered the location unsuitable for developing other industries. To further diversify operations, the group started to build a 5.7 km2 branch in Lusaka in January 2009. Six industries were planned for development in the Lusaka zone area, namely processing and manufacturing, real estate, logistics, business services, support services and new technology.24 The zone has since attracted several agriculture product processing factories. It is crucial to note that the economic zones, whether they were developed in Africa through Chinese government support, or were solely dependent on the Chinese companies that established themselves there, have both been fraught with challenges. The Nigeria Lekki FTZ is located on the Lekki Peninsula, which is 60 kilometres east of Lagos, near the Gulf of Guinea. The FTZ, which was Chinese government led, is a joint venture of both the Chinese and Nigerian partners. The Nigerian partner accounted for 40 per cent of the equity, which was shared between the Lagos State Government and the Lekki FTZ Development Co., an affiliate company. The Chinese consortium is led by China Civil Engineering Construction Corporation (CCECC). CCECC had been contracting engineering projects in Nigeria since the 1990s. The Lekki Free Zone serves as a practical case study for industrial collaboration between China and Africa, due to the lessons that were learnt over the years. Like most Copyright © 2014. Africa Institute of South Africa. All rights reserved.

African countries, Nigeria depends on imports. It is estimated that almost 90 per cent of finished products and commodities are imported due to the lack of competitiveness of the domestic manufacturing sector arising from investment climate challenges. An effective ECTZ could potentially provide an efficient manufacturing and logistics platform for an import substitution strategy that would revitalise the Nigerian manufacturing sector, eventually paving the way for development of the export sector. However, enterprise surveys and various indicators highlight that access, quality and cost of electricity, finance and transportation are three principal investment climate impediments in Nigeria.25 The Lekki FTZ has also faced a number of challenges that the FOCAC 2016 Action Plan can draw from. These include ensuring greater clarity regarding planning and financing of critical external infrastructure, especially access to roads and power supply, robust legislative support and the capacity of the government to support and coordinate the various private investments. There is also still an inability to deliver high-quality support services to the zone.

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PART 3: China-Africa Industrial Cooperation | Chapter 2

Chinese Company Driven ECTZs There are several ETCZs on the continent that have been established through private Chinese companies, which established these overseas parks voluntarily. One of the key reasons is because large groups of businesses prefer to conduct mass production locally and introduce upstream and downstream businesses for support. Another reason is that Chinese small and medium enterprises (SMEs) which lacking international experience opt to participate as a group when conducting overseas investments, as it helps promote safety, logistics and transmit relevant information. In 2002, the Henan Guoji Group invested in converting an abandoned railway station into an industrial park in Sierra Leone, which subsequently ended up attracting building material, paint, and plastics factories to the park.26 Shandong Yahe Textile Ltd developed the 17 hectare Linyi Industrial Park in Guinea, accommodating textiles, pharmaceuticals, rubber and timber factories. In 2005, sales revenues of the Linyi Park reached US$20 million.27 The Eastern Industrial Park, located 34 kilometres from the Ethiopian capital of Addis Ababa, was funded solely by Chinese companies. The major developers were two private companies from Zhangjiagang City in Jiangsu, China – the Qiyuan Group and Yonggang Group. The Qiyuan Group is a medium-sized company that focused on steel pipe manufacturing in China. Furthermore, the company established multiple business opportunities in industries such as cement and irrigation, and was optimistic about the international economic situation. Shortly after the operation of the zone, the Huajian Shoe Factory settled down in the zone. Huajian is also the only firm in the zone that targets the international market. Since 2015, Huajian has generated an average of US$3 million foreign exchange annually for

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Ethiopia through its exports.28 By July 2016, over 20 companies in the zone were operational, providing about 8 000 jobs to locals. Finally, the cooperation zone in Mauritius was originally established by Tianli Enterprise, a private company in Shanxi Province, China, which mainly focused on trading textiles and other light industry products. As early as 2001, Tianli invested up to RMB$250 million to construct a cotton mill in Mauritius. In its original proposal, Tianli sought to utilise local natural conditions to construct the zone as a regional managerial headquarters for Chinese companies in Africa. However, because of residents needing to be relocated and the land transfer process, the construction of the cooperation zone was delayed. In February 2009, when then President Jintao Hu visited Mauritius, the project was specifically mentioned. This led to the Chinese government commissioning the Shanxi Province Government to invite two large companies, TISCO and Shanxi Coking Coal, to acquire share equity in the cooperation zone, with TISCO accounting for 50 per cent of the equity, Shanxi Coking Coal accounting for 30 per cent and Tianli Enterprise retaining the remaining 20 per cent. Therefore, the cooperation zone was renamed the Jinfei Cooperation Zone, and its orientation was reset to parallel development in the manufacturing and Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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CHINA’S SPECIAL ECONOMIC ZONES | Tang Xiaoyang services industries.29 However, the two new major shareholders were unenthusiastic about the project, which slowed progress. In October 2014, ownership of the zone was again transferred to the Shanxi Investment Group, a state-owned asset management firm. The new management decided to focus on financial business and cultural tourism.30 Other industrial parks that have been quietly established in Africa include the Anhui Foreign Economic Construction Co. Ltd, which invested in Beira, the second largest city in Mozambique, to develop the Beira ETCZ into a regional processing and trading centre for international transit in 2012.31 Then, there is China Merchants Holdings International from Hong Kong, which signed an agreement with the government of Tanzania on investing to build a port and establish a special economic zone in Bagamoyo. The total project investment may reach US$10 billion, rendering the project strategically influential to the development of Tanzania, as well as the entire region of East Africa.32

CONCLUSION In summary, the previous decade has seen the establishment of six MOFCOM-supported ETCZs and other types of China-Africa cooperation zones, all of which have progressed slowly but steadily, regardless of the difficulties encountered. With the rapid growth of China-Africa economic exchanges, these projects have attracted an increasing amount of interest. The development of these zones has involved cooperation experiments in terms of infrastructure, employment, social and policy development, as well as other aspects. The influence of cooperation zones has not been restricted solely to the projects, but extended to China’s regional and national development strategies. Due to the financial support by MOFCOM, cooperation zones in Egypt, Zambia, Nigeria and Ethiopia have

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attracted a considerable number of Chinese companies to settle and begin production. Needless to say, the combination of Chinese business interests and Chinese governmental support demonstrates the importance and multi-faceted nature of the cooperation zone projects.

Policy Recommendations In preparation for the FOCAC 2018, this chapter proposes the following recommendations for further development of Sino-African cooperation zones: ■■

Establish a clear classification system of Sino-African cooperation zones. Special economic zone is a generic term that covers a broad range of zones.33 At present, the identity and definition of Sino-African cooperation zones remain ambiguous. From the perspective of the blueprint, all seven ETCZs supported by MOFCOM in Africa have set the goal of becoming a comprehensive SEZ like Shenzhen or Pudong of China. Practically, however, those ETCZs act primarily as EPZs or industrial parks. Thus, at the 2018 FOCAC, it is necessary to establish an official classification system of

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PART 3: China-Africa Industrial Cooperation | Chapter 2

Sino-African cooperation zones that is recognised by both the African and Chinese governments. This measure will prevent the over-proliferation of cooperation zones in Africa and concentrate political resources on key projects. ■■

Facilitate the financing process for cooperation zones. The construction of cooperation zones requires highly intensive investments. At the early stage of development, the cooperation zones in Africa usually do not have enough cash flow and a solid financial foundation to meet the standard for pledge of assets. However, the overseas assets of cooperation zones cannot be effectively mortgaged by Chinese domestic banks, leading to a lack of adequate funding for the cooperation zones. To solve this problem, Chinese financial regulatory authorities may be able to properly lower the standard for the mortgage of assets for some important cooperation zones in Africa. In addition, encouraging Chinese banks to set up branches in Sino-Africa cooperation zones could be another effective measure to facilitate the financing process.

■■

Enhance the connection between the cooperation zone and the external large-scale infrastructure projects sponsored by Chinese loans. The development of SEZ relies largely on external large-scale infrastructure projects, such as freight railways, ports, highways and power stations. In recent years, a large portion of infrastructure projects in Africa has been sponsored by Chinese loans. This suggests that Chinese financiers (China Export-Import Bank, China Development Bank, other commercial banks, etc.) should consider making infrastructure a requirement during the project screening phase, before companies embark on SEZ development within the cooperation zones.

■■

Give equal treatment to the cooperation zones invested by private businesses in terms of policy support. As a result of close ties between Chinese state-owned enterprises (SOEs) and the Chinese government, the cooperation zones founded by Chinese SOEs in

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Africa enjoy a natural advantage in obtaining government loans, subsidies and other policy support. However, for the zones owned by private Chinese enterprises, that are more in need of policy support and that have a capital strength that is much weaker, the threshold of access to policy resources is much higher. The unfair policy treatment has diminished the enthusiasm of private capital to invest in the cooperation zones, making the existing privately-owned zones more vulnerable to risks. The Chinese government should appropriately relax the criteria for Chinese private enterprises to obtain loans from policy banks and other state-owned commercial banks. In addition, the establishment of specialised coordination and guidance agencies to serve oversea cooperation zones could also be a way to effectively lower the policy threshold. ■■

African countries should strengthen the protection of property rights of Chinese investors at the legislative and administrative level and strengthen the protection of the cooperation zones’ property rights. One of the major concerns of Chinese investors about the African cooperation zone is that their property rights may be violated. Some officials of African local governments may seize the property rights of the zone on the pretext of investigating smuggling, tax evasion or pollution. A special communication

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CHINA’S SPECIAL ECONOMIC ZONES | Tang Xiaoyang

mechanism should be established between the Chinese and African governments to protect Chinese and African property rights. ■■

Explore a more adaptable benefit remittance mechanism. Although many African countries have promised that the benefits obtained in the cooperation zones can be freely remitted, many enterprises in the cooperation zones have experienced difficulty in remitting their profits back to China, due to strict foreign exchange control in most African countries. On the other hand, as China’s foreign exchange reserves have continued to decline since 2014, the remittance channel from China to foreign countries has been tightened. The unstable remittance channel has affected the investment from China to cooperation zones in Africa, and also affected the operation of enterprises in the zones. Therefore, it is necessary for the governments of China and African countries to negotiate a more adaptable benefit remittance mechanism at the FOCAC 2018, to ensure the smooth flow of capital between China and Africa. This mechanism could also be a breakthrough for the internationalisation of the RMB.

■■

Strengthen the supervision system to prevent duty crimes and corruption in cooperation zones. With the deepening of anti-corruption campaigns in China, many activities related to duty crime and commercial corruption have moved to foreign countries, especially to the overseas branches of SOEs. Meanwhile, the duty crime and corruption of local officials hinder the development of cooperation zones in Africa as well. China and Africa should strengthen their cooperation in combating duty crime and corruption. An effective measure might be to set up a joint system to increase the intensity and quality of supervision.

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Appendix: Nineteen ETCZs approved by China’s MOFCOM Zone

Location Year of approvall

Major developer

Haier-Ruba Home  Appliance Industrial Zone

Pakistan

2006

Haier Group

Zambia-China ETCZ

Zambia

2006

CNMC

Thai-Chinese Rayong Industrial Zone

Thailand

2006

Holley Group

Sihanoukville Special Economic Zone (SEZ)

Cambodia

2006

Jiangsu Hongdou Group, Wuxi Guangming Group, Wuxi Yiduo Investment Development Group, and Huatai Investment Property

Ogun-Guangdong FTZ

Nigeria

2006

Zhuhai Zhongfu Enterprise and Guangdong Xinguang International Group

JinFei (Tianli) ETCZ

Mauritius

2006

Taiyuan Iron and Steel (TISCO), Shanxi Coking Coal, and Shanxi Tianli Enterprise

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PART 3: China-Africa Industrial Cooperation | Chapter 2 St. Petersburg Baltic ETCZ

Russia

2006

Shanghai Industry Group

Ussuriysk ETCZ

Russia

2006

Cornell Group, Jinxin Industry and Trade Group

Venezuela-China Science Technology Industry Zone

Venezuela

2007

Inspur Group

Lekki FTZ

Nigeria

2007

China Railway Construction Company (CRCC), China Civil Engineering Construction Corporation (CCECC), China-Africa Development Fund, and Nanjing Jiangning Development Zone

China-Vietnam (Shenzhen– Haiphong) ETCZ

Vietnam

2007

Shenzhen Shenyue Joint Investment

Longjiang Industrial Park

Vietnam

2007

Sichuan Qiansheng Mining, Zhejiang Hailiang Group, and Zhejiang Xieli Leather Joint stock

Mexico Ningbo Geely industrial ETCZ

Mexico

2007

Geely Automobile

Eastern Industrial Park

Ethiopia

2007

Jiangsu Qiyuan Group, and Jiangsu Yonggang Group

Suez Economics and Trade Cooperation Zone

Egypt

2007

TEDA, and China-Africa Development Fund

Jiangling ETCZ

Algeria

2007

Jiangling Motors, and Zhongding International Engineering

South Korea-China International Industrial Park

South Korea

2007

Dongtai Hua’an International Investment

China-Indonesia ETCZ

Indonesia

2007

Guangxi State Farms Group

China-Russia Tomsk Timber Industry and Trade Cooperation Zone

Russia

2007

National Aero-Technology Import and Export Corporation, Yantai Northwest Forestry

References 1 Heilman, S. and Melton, O., 2013. The Reinvention of Development Planning in China 1993–2013. Modern China, 39(6). 2 The World Bank, 2011. Special Economic Zones Progress, Emerging Challenges, and Future Directions. The World Bank. Available at http://www.worldbank.org [Accessed 1 November 2016]. 3 The World Bank, 2011. Chinese Investments in Special Economic Zones in Africa: Progress, Challenges and Lessons Learned. Final Report. Washington DC.

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CHINA’S SPECIAL ECONOMIC ZONES | Tang Xiaoyang 4 Akinci, G. and James, C., 2008. Special Economic Zones: Performance, Lessons Learned, and Implications for Zone Development. Washington, DC: World Bank, pp.2–3. 5 Li, E. 2011. In memory of the 30th anniversary of Shantou Special Economic Zones. China Elections and Governance. Available at www.chinaelections.org/article/134/215903.html [Accessed 10 October 2015]. 6 Deng, X., 1993. Selected Works of Deng Xiaoping, Vol. 2. Beijing: People’s Publishing House, pp.51–52. 7 Notice of Central Committee of the Communist Party of China and State Council on Approving and Forwarding. Summary of the Symposium on Several Coastal Cities. 4 May 1984. 8 Zhao, M. and Farole, T., 2011. Partnership Arrangements in the China-Singapore (Suzhou) Industrial Park: Lessons for Joint Economic Zone Development. In Farole, T. and Akinci, G. (ed.), 2011. Special Economic Zones: Progress, Emerging Challenges, and Future Directions. Washington, DC: World Bank, pp.109–110. 9 Farole, T. and Akinci, G. (ed.), 2011. Special Economic Zones: Progress, Emerging Challenges, and Future Directions. Washington, DC: World Bank, p.4. 10 Jenkins, M., Esquivel, G. and Bascuñán, F. L., 1998. Export Processing Zones in Central America. Development Discussion Paper No. 646, Harvard Institute for International Development. Cambridge, MA: Harvard University, pp.9–10; Shrank, A., 2001. Export Processing Zones: Free Market Islands or Bridges to Structural Transformation? Development Policy Review, 19(2), pp.230–33. 11 Ibid., pp.5–6. 12 Wang, J. and Hu, M., 2010. From County-level to State-level Special Economic Zone: The Case of the Kunshan Economic and Technological Development Zone. In Zeng, D. Z. (Ed.), 2010. Building Engines for Growth and Competitiveness in China: Experience with Special Economic Zones and Industrial Clusters. Washington, DC: World Bank, p.128. 13 Ibid., p.143.

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14 White, J., 2011. Fostering Innovation in Developing Economies through SEZs in Farole, T. and Akinci, G. (ed.), 2011. Special Economic Zones: Progress, Emerging Challenges, and Future Directions. Washington, DC: World Bank, pp.191–2; Omar, K. and Stoever, W. A., 2008. The role of technology and human capital in the EPZ life-cycle. Transnational Corporations, 17(1), pp.149–150. 15 Li, X., Duan, R. and Zhang, H., 2010. A Case Study of Tianjin Economic-Technological Development Area. In Zeng, D. Z. (Ed.), 2010. Building Engines for Growth and Competitiveness in China: Experience with Special Economic Zones and Industrial Clusters. Washington, DC: World Bank, p.143. 16 World Bank, 1992. Export Processing Zones. Policy and Research Series Paper No.20. Industry and Energy Department, Development, Washington, D.C, p.3. 17 Deng X., 1979. A speech at the Working Conference of the CPC Central Committee. April. 18 Deng X., 1992. Key Points of the Talks in Wuchang, Shenzhen, Zhuhai, Shanghai, and Other Places. 18 January to 21 February 1992. 19 Sen, P., 2010. Special zones remain the experimental field of reform and innovation. Xinhuanet, Available at http://politics.people.com.cn/GB/1026/12604705.html [Accessed 21 August 2015]. 20 Yeung, Y., Lee, J. and Kee, G., 2013. China’s Special Economic Zones at 30. Eurasian Geography and Economics, 50(2), p.225. 21 Qu, L., 2007. Government promotes overseas ETCZ, facilitating overseas transfer of Chinese manufacturing industry. China Business. Available at http://www.china.com.cn/economic/txt/2007-08/19/ content_8707859.htm [Accessed 18 August 2015]. 22 An overseas ETCZ China sets up in Egypt is going to unveil its plate in October. Economic Information Daily, Available at http://invest.people.com.cn/GB/75571/105500/8852019.html [Accessed 13 April 2013].

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PART 3: China-Africa Industrial Cooperation | Chapter 2 23 Commercial Office of the Chinese Embassy in Zambia, 2012. Chinese Ambassador in Zambia Zhou Yuxiao congratulates 5-year anniversary of Zambia-China ETCZ with a letter. CNMC. Available at http:// www.cnmc.com.cn/detail.jsp?article_millseconds=1329121184368&column_no=010302 [Accessed 13 February 2016]. 24 Introduction to Zambia-China ETCZ. Zhejiang Investment and Trade Symposium (ZJITS), Available at http://www.zjits.com/index.php/home/jwtz_c_detail/72.html [Accessed 12 June 2011]. 25 April, Y., February 2017. China’s Opening Up and Reform: Lessons for South Africa. Journal of West Asia and Africa, 1. 26 Liu, J., 2005. A Henan version of the Chinese development model. Jingji Shidian Bao (Economic Pilot Sites News), 1 September 2005, p.2. 27 Linyi wood industry enterprises go to Africa encountering globalization: Linyi Industrial Park in Africa. Jiuzheng Jiancai Wang (Jiuzheng Construction Materials Net). Available at: http://news.jc001.cn/ detail/283474.html [Accessed 14 November 2006]. 28 The dispatch: Knowledge at Eastern Industrial Zone in Ethiopia. Xinhuanet. Available at http://news. xinhuanet.com/world/2015–12/02/c_1117335169.htm [Accessed 2 December 2015]. 29 Brautigm, D. and Tang, X., 2011. African Shenzhen: China’s Special Economic Zones in Africa. The Journal of Modern African Studies, 49(1), pp.27–54. 30 Wang, L., 2015. Shanxi province’s “bridgehead” in Africa: The development of Mauritius Jinfei Economic Trade and Cooperation Zone. Shanxi Jingji Ribao (Shanxi Economic Daily), 11 December 2015, p.1. 31 The Bureau of Commerce of Anhui Province. Introduction to Mozambique Beira ETCZ. MOFCOM. Available at http://www.mofcom.gov.cn/aarticle/difang/anhui/201208/20120808266886.html [Accessed 20 July 2012]. 32 Zhang, H., 2015. Bagamoyo special zone: African Shenzhen is under construction. 21th Century Business Herald. Available at http://m.21jingji.com/article/20150723/8ca79085e296566420ce4542d27a81b8.html [Accessed on 23 July 2015].

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33 Zeng, Z., 2016. Global Experiences of Special Economic Zones: Focus on China and Africa. International Economic Review, 2016(5), p.124.

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3

CHAPTER

CHINA’S ECONOMIC AND TRADE COOPERATION ZONES IN AFRICA A VIABLE MODEL OF DEVELOPMENT?

Chris Alden and Ana Cristina Dias Alves

INTRODUCTION The possibility that the Chinese experience of development, as reflected in its three decades of rapid economic growth and the accompanying development achievements, can be copied by Africans, has pre-occupied scholars and policymakers since the early 2000s. The forms of technical policy transfer from China to Africa cover a diversity of topics and sectors from Special Economic Zones (SEZs) and Agricultural Technical Demonstration Centres to better management of state-owned enterprises (SOEs) and improved internal governing party discipline. In Africa, the Chinese experience of industrialisation associated with the SEZs is especially appealing as a means of achieving rapid growth through the transfer of finances, technologies and management skills. However, the optimism that these externally-generated development models can serve

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as the catalyst for accelerating African economies is brought into question when one examines the obstacles and experiences that confront policymakers and businesses alike in realising this ambition to emulate industrialisation to a set of very different contexts. Ranging from inadequate regulatory frameworks and poor infrastructure conditions in Africa, to the failure to appreciate risk and deliver on finance by the Chinese, a plethora of factors complicate the successful transfer of development policies and experiences into different contexts. Understanding how all of these aspects have impacted on the effort to conceptualise and implement the Chinese development model in Africa is crucial to assessing the viability of these transformative policies for development. This chapter will provide a critical analysis of the Chinese model of development in the context of South-South Cooperation and policy transfer, followed by a closer look at the progress of Economic and Trade Cooperation Zones (ETCZs) in Africa over the past decade, with a particular focus on the zones in Zambia, Nigeria and Ethiopia. The chapter concludes with an analysis of the applicability Chinese development model to African development and the obstacles that it faces in achieving its ambitious goals.

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PART 3: China-Africa Industrial Cooperation | Chapter 3

FROM THE CHINESE MODEL OF DEVELOPMENT TO SOUTH-SOUTH COOPERATION AND POLICY TRANSFER The debate about the Chinese model of development and its relevance to other developing countries has been raging for the last decade and a half. From the ‘Beijing Consensus’ to the ‘Chinese Dream’, the notion that there is a distinctively Chinese model of development that is transferable to other settings has inspired scholars and policymakers alike, hoping to emulate the country’s phenomenal achievements.1 However, a closer examination of the Chinese model of development illustrates the complexities inherent in replicating it. In particular, the development model was founded under the specific conditions in China that fostered its evolution into a dynamic force for change, which included the nature of the actors involved and their ability to both constructively manage the ongoing development process and derive policy lessons from that process. According to Ling Chen and Barry Naughton, five discreet phases of the Chinese model are discernible over time. These are characterised by: a sequence of ‘crisis and challenge’; ‘policy movement to economic liberalisation’; ‘movement from economics to politics’; ‘emergence of new equilibrium’ and ‘tensions and “substitution” strategy’.2 At each point, the leading political actors, embodied in the Communist Party of China (CPC), play a crucial role in motivating transformative policies, as well as in reining them in. Underlying this is an imperative on the part of the CPC to ‘maintain legitimacy that gives coherent shape both to the political response to economic developments and to the policies that shape economic growth’.3 Chen and Naughton’s assessment provides a longitudinal analysis of the Chinese model of development, as well as insight into the dynamics at play. They focused on how Chinese policymakers unleash society’s produc-

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tive forces and then scramble to capture tthese forces as the political implications for the CPC become manifest. This evolutionary interpretation of the overall Chinese model is one that emphasises adaptability and change, responsiveness to circumstances and an over-arching agenda that seeks to ultimately incorporate these changes into a manageable framework of political control. It does not, however, capture the instrumentalisation of the model as an ‘export’ to other settings outside of China and the respective dynamics involved, which is the central concern from the perspective of Africa. When the Chinese experience of industrialisation, for example, is reframed as a set of policy prescriptions for African policy makers to replicatee, this has the effect of diminishing the degree of experimentation and policy shifts that occurred at the time and, ultimately, contributed to its success. A static idea of the Chinese model emerges when one examines it from this perspective, which is less a process-oriented approach and more a blueprint for potential adherents to follow when seeking to emulate the Chinese development experience. Fitting these models of development into the wider ambit of South-South Cooperation (SSC), the ideological construct that houses developing country cooperation, introduces new

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insight into its formulation. The United Nations (UN) Office for South-South Cooperation defines SSC as: (a) broad framework for collaboration among countries of the South in the political, economic, social, cultural, environmental and technical domains. Involving two or more developing countries, it can take place on a bilateral, regional, sub-regional or interregional basis. Developing countries share knowledge, skills, expertise and resources to meet their development goals through concerted efforts. Recent developments in South-South cooperation have taken the form of increased volumes of South-South trade, South-South flows of foreign direct investment, movements towards regional integration, technology transfers, sharing of solutions and experts, and other forms of exchange.4 The ecumenical approach to SSC described above does allow for the open-ended adoption of policies and practices that, mediated by the particular conditions and constraints operating at any given time in a country, could in theory facilitate a process-oriented model being put into place. However, while the adoption of a development model may be relatively straightforward in itself (creating the requisite regulatory framework, introducing incentives for investors, providing support infrastructure, etc.), the challenges of adapting and changing the underlying practices in accordance with circumstances is much more problematic. This issue raises questions regarding the nature and conduct of implementing agents and their capacity to utilise these externally-generated frameworks in creative ways to further development. SSC is also silent as to the role and impact of political management (identified by Chen and Naughton as a cornerstone of the state-led development model) in fostering this process.

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Indeed, while proponents of the application of an experiential model approach to the fostering of development may argue for its utility as a means of transferring experiences to other countries and regions, in fact, the literature on learning and policy transfer offers cautionary insight about the inherent complexities of this process. Learning is said to be composed of four categories – instrumental, social policy, political and ‘mimicking’.5 Deriving ‘lessons’ from an analysis of past policy implementation forms a distinctive part of learning in the policy process. Moreover, transferring those lessons necessarily focuses on policymakers and implementing agents embedded within state institutions. Targeting the right individuals and departments, coupled to developing appropriate methodologies of policy transfer, is crucial to creating a conducive environment to facilitate learning, skills transfer and policy diffusion. An unmitigated faith in bureaucracies to drive the process is implicit in this approach; but whether the targeted or recipient bureaucracy is capable of handling the implementation process is a matter of debate. Commentators have pointed out that learning within organisations takes place at various levels, especially when authority is distributed across an organisation; but, broadly speaking, it follows a hierarchical top-down or bottom-up approach.6

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The Chinese Models of Development and Africa One of the ironies of the discussion of the applicability of Chinese models of development to Africa is that the Chinese have, at various times, provided African audiences with explicit warnings against adopting their approach. For instance, when asked by Ghana’s leader if the country should follow the Chinese development model, Deng Xiaoping is reported to have said: Please don’t copy our model. If there is any experience on our part, it is to formulate policies in light of one’s own national conditions.7 More recently, Premier Wen Jiabao addressed the issue at the Forum on China-Africa Cooperation (FOCAC) IV in November 2009, when he declared that neither the so-called Beijing Consensus nor the Washington Consensus allowed for the particular conditions that Africans faced and that they should rather seek to develop their own ‘African’ model of development.8 While the notion that there is a Chinese model of development whose applicability to other settings permeates these debates, in fact it is a bit of a misnomer to speak of it in singular terms as is often done in the literature. The putative Chinese model of development is in fact better understood to be constituted by a set of prescriptive experiences rooted in policy decisions and accompanying frameworks by the state and implemented largely by local level officials. As an economic development strategy, it has a two-tiered approach that focuses on macro-economic aspects and micro-economic features, while its over-arching logic is subsumed under the necessity of maintaining the legitimacy and

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authority of the CPC.9 The macro-economic dimension focuses on combining an export-oriented approach with an enabling environment for foreign direct investment (FDI) and technology transfer. For Robert Wade, the successes of the newly industrialised economies of the late twentieth century epitomised the strategic use of protection and targeted investment to ‘hot house’ industries, so that they would enhance international competitiveness and allow for local innovation to flourish.10 Justin Yifu Lin’s ‘New Structural Economics’ is an important contemporary reformulation of this experience, which suggests that the stages of development require re-tuning of hard and soft infrastructure commensurate with local conditions, and that the state takes a leading role in this process.11 Alongside these macro-economic models are a set of micro-economic and sectoral policy models that were aimed at improving specific aspects of the economy – agricultural production, industrial development and technology transfer – through the application of strategic interventions. These include the SEZs and, more recently, the creation of Agricultural Technology Demonstration Centres. Finally, the logic of state-led development (depicted in terms of vanguard leadership of the CPC in domestic Chinese renderings of the topic) as the organising principle at the centre of the development model, is maintained throughout. For Bell, Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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this is rendered in terms of the state and party apparatus as ‘democracy at the bottom, experimentation in the middle and meritocracy at the top’.12 The argument that Africa is now positioned to adopt the labour-intensive industries and technologies that fostered China’s initial stages of development is one that is articulated by Brautigaum and Lin, and others, as noted above.13 Key to this is the arrival of what development economists call ‘the Lewis Turn’, a condition within developing market economies whereby they shift from being primarily labour surplus economies to becoming labour scarce economies, and real wages then begin to rise.14 This is the driver for the physical movement of industries at the lower end of the production chain (textiles and footwear being a classic example) seeking efficiency gains outside the established production site through relocation. Taking an historical reading of the political economy of East Asia, the ‘flying geese’ theory suggests that this experience is being replicated as advanced economies move up the value chain and start ‘off-shoring’ their low-cost labour-intensive industries. Furthermore, it is worth noting that there is a correlation between improving infrastructure and lowering the transportation costs of export-oriented industries, hence creating an expressed interest for the more developed economy to engage in improving transportation networks and power generation alongside relocation of its industry.

CHINESE ETCZs IN THE WIDER CONTEXT OF AFRICAN SEZs The debate on the usefulness of economic zones as a policy instrument to promote industrialisation and integration into global trade in economies riddled by market inefficien-

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cies has been unfolding for decades, preceding and going much beyond the establishment of Chinese ETCZs in Africa. The discussion was instigated by the substantial growth in the number of economic zones worldwide since the 1980s (from 176 in 1986 to 3 500 in 2006, according to ILO’s database),15 particularly in the developing world, and the fact that success rates have varied substantially across countries and regions. Whilst the first African economic zones surfaced in the 1970s (Liberia, Mauritius, Senegal and Egypt),16 they only gained traction as an industrial policy instrument on the continent in the late 1990s and early 2000s, initially prompted by the opportunities created by the US-Africa Growth Opportunity Act (AGOA 2000) and the Everything But Arms preferential agreement with the European Union (EU).17 Lured by the facilitated access to Western markets, the number of African SEZs grew substantially from this point onwards. Although there is considerable variation in the range of activities and many zones welcome investment from multiple sectors, garments and agro-processing sectors seem to stand out in the overall picture, followed by services, mining, oil and gas,18 whereas high-end service sectors are less common (South Africa, Benin and Cote d’Ivoire).19 Despite the preferential access to developed markets and the enduring enthusiasm among African policymakers, African SEZs remain amongst the worst performers when 34 Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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compared to economic zones in other regions, namely South East Asia and Latin America.20 Whilst there are a handful of exceptions that are performing relatively well, namely in Mauritius, Kenya, Madagascar and Ghana, by and large, African SEZs have under-performed in attracting investment, fostering technology transfer, creating jobs, ensuring revenue and spillover effects on the local economies. Various studies21 have pointed out that this bleak picture is explained largely by the number of structural shortcomings and bottlenecks, namely, in the investment environment (cumbersome trade facilitation systems – particularly customs clearance; poor infrastructure – particularly power supply; land issues, etc.), regulatory and institutional frameworks, political leadership and coordination, and forward and backward linkages. Even though this state of affairs has fuelled a degree of scepticism as to the efficacy of SEZs as an industrial policy tool on the continent, many African policymakers remain enthusiasts and the number of SEZs on the continent continues to multiply. Between 2000 and 2009, 38 zones were established in 14 African countries and at least 16 more were created between 2010 and 2016.22 This trend is explained by a combination of intertwined internal and external variables. The rapid economic growth experienced by most African countries since the turn of the century made industrial policies all the more important in ensuring a much-needed structural change in African economies, in order to rescue them from volatile commodities cycles. Externally, emerging structural changes in the international markets continue to fuel African policymakers’ appetite for SEZs, namely, the relocation of China’s manufacturers, owing to rising domestic costs in production, expanding demand in Asian consumer markets and greater focus of Beijing’s investments on the continent. Being one of the leading world authorities in implementing SEZs as a successful in-

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dustrial policy tool, the announcement made by Hu Jintao during the FOCAC Summit in 2006, of the establishment of three to five ETCZs in Africa, was thus met with great enthusiasm on the African side. The roots of this initiative can, however, be traced back to independent undertakings by Chinese companies in Zambia and Nigeria, which started negotiating the establishment of SEZs with local governments in 2003/2004. As these companies were state-owned enterprises (SOE), they had to secure clearance from the State Council in order to pursue the projects, which subsequently made it into an official policy within the FOCAC platform.23 According to a high ranking FOCAC official,24 the two broad aims that sustained this initiative from the early days on the Chinese end were: ■■

to help promote Africa’s industrialisation through technology/know-how transfer and job creation;

■■

to encourage Chinese investment in Africa by providing a safer investment framework that minimises the perceived high risks and costs on the continent.

Following the official launch of the initiative in 2006, many African countries lined up and competed fiercely for this opportunity, lured by the promise of massive Chinese investment and the prospect of overcoming existing hindrances by tapping into China’s

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unparalleled SEZ expertise. In total, the creation of six official ETCZs were announced between 2006 and 2007: one in Zambia (with two sections: one in Chambishi and another in Lusaka), two in Nigeria (Lekki and Ogun), and one each in Ethiopia, Mauritius and Egypt. Algeria had secured one too, but it was cancelled soon after due to the lack of basic conditions, namely changes in investment regulations.

Table 3.1: Existing Chinese ETCZs in Africa Official Name (country) Zambia-China ETCZ

Year of tender (year of establishment) 2006 (section 1)

Location

Targeted sectors (as of 2017)

Chambishi (380 km north of Lusaka)

Copper mining and smelting, mining equipment and services, construction vehicles and materials, chemicals, logistics and banking

Lusaka (near the international airport)

Agri-processing, construction vehicles and materials, pharmaceuticals, logistics and services

Owner/ Master Developer (as of 2017) Non-Ferrous China Africa (NFCA – subsidiary of China Non-Ferrous Metals Corporation, CNMC )

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2010 (section 2)

Jinfei ETCZ (Mauritius)

2006 (2009)

Riche Terre (5km from Port Louis)

Hospitality, logistics, warehousing, banking and financial services, light industry

Shanxi Jin Fei Investment Co. Ltd*

Lekki Free Zone (Nigeria)

2006

Lekki (60 km east of Lagos)

Light manufacturing, textiles, logistics, warehousing

JV: China-Africa Lekki Investment Co** (60%) + Lagos State Government (20%) + Lekki Worldwide Investment Ltd (20%)

OgunGuangdong Free Trade Zone (Nigeria)

2006

Igbesa, Ogun State (30 km from Lagos)

Light manufacturing, logistics, pharmaceuticals, warehousing

JV: Guangdong Xin Guang International China Africa Investment Ltd*** (60%) + Ogun State Government (40%)

East Industrial Zone (Ethiopia)

2007

Dukem (35 km from Addis Ababa)

Leather and leather products, textiles and garments, construction materials

Jiangsu Qiyuan Group (private)

Suez ETCZ (Egypt)

2007 (2009)

Aiz Sokhna, Suez city (130km from Cairo)

Textile, garments, automobile assembly, electronics

Egypt-TEDA Investment Company**** 

* Consortium of three provincial companies from Shanxi province – Taiyuan Iron and Steel Company TISCO (50%) + Shanxi Coking Coal Group (30.2%) + Shanxi Tianli Enterprise Co (19.8%). This consortium took over Tianli Co, which was originally the master developer and owner of the zone. ** Consortium of Chinese companies registered in Beijing (China Railway Construction Corporation + China Civil Engineering Construction Company + Nanjing Jiangning Economic and Technology Development Company + Nanjing Investment and Development Company + China Africa Development Fund). *** Consortium between Guangdong New South Group (51%) and the Guangdong Province Government (49%). GNSG acquired the majority equity in 2016, and is currently the official master developer of the zone.25 **** Subsidiary of Tianjin Economic Development Area (TEDA).  Source: based on various ETCZ websites, MOFCOM and MOFA press releases and Peter Gakunu et al. (2015) If Africa builds nests, will the birds come? Comparative study of SEZ in Africa and China, UNDP and International Poverty Reduction Centre in China, p.13

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Owing to the significant role played by the Chinese counterparts in developing and managing these zones, and the highly successful record regarding the use of SEZ as industrial policy instruments in China, these ETCZs have, in general, raised higher expectations than other economic zones in Africa. This is so particularly with regard to their potential as a catalyst for the continent’s much-needed industrialisation, in an era in which structural transformation has become central in the African economic discourse. From China’s perspective, the significance of these ETCZs goes much beyond their potential as a privileged gate into Africa for Chinese enterprises, or as a catalyst for the continent’s long-awaited industrialisation. This is because the performance of these zones on the continent is intrinsically linked to the validation of China’s development model as a blueprint for other developing countries to follow.

What is distinctive about Chinese ETCZs in Africa? In addition to facing the same structural obstacles, Chinese ETCZs share many traits with other African SEZs. As is apparent in Table 1, they target similar sectors, such as light industry (garments, textiles, electronics …), construction materials, mining processing and equipment (Zambia-Chambishi), logistics, and services, whilst the absence of highend service sectors is also consistent with the African SEZs general pattern. Regarding the incentives offered (namely tax breaks and import-export duties), there seem to be no major discrepancies, as the African spectrum is quite varied.26 The distinctive feature of Chinese ETCZs in Africa appears to be its particular business model, featuring a high degree of involvement of Chinese authorities at various levels. In general, the overall framework agreement - covering land allocation (plot size, lease,

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etc.) and investment incentives (tax breaks, import and export duties, infrastructure) - is negotiated between the Chinese and the host governments. It is common practice that the host government is responsible for the provision of infrastructure outside the zone, whilst the master developer is to undertake the infrastructure development within the limits of the allocated land plot. The Ministry of Commerce of China (MOFCOM) is responsible for selecting (through a tender process) a Chinese enterprise or consortium to develop the project on the ground. To undertake its duties as the master developer, these companies tap into funds disbursed by national policy banks (CDB or Exim Bank), provincial governments or the China-Africa Development Fund (CAD Fund). Once the project is launched, Beijing mostly plays a follow up role through its local embassy.27 However, the role of the Chinese government does not end there. In fact, it provides continuous political support, mostly by sending high level officials to attend landmark ceremonies (i.e. laying of the first stone, the inauguration of the zone, a new stage of development, etc.), visits by top officials (i.e. President, Premier, Foreign Affairs Minister) when they undertake official visits to ETCZ host countries, or sometimes by interfering to solve bottlenecks on the Chinese side (i.e. in 2009 after a visit to Mauritius ETCZ,

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President Hu Jintao personally intervened to have the master developer replaced, as the original developer was running into financial problems).28 It should be noted that, whilst a number of these zones are fully owned and managed by Chinese SOEs, this is not always the case. The Ethiopia Eastern Industrial Zone, for instance, is run by a private Chinese company, and the Lekki Industrial Zone and the Ogun-Guangdong zone in Nigeria are joint ventures between Chinese SOE consortiums and host country provincial governments/companies. Another distinctive feature is that Chinese ETCZs in Africa, whilst open to all investors, are in most cases bound to attract primarily Chinese enterprises, as these constitute unique investment biomes that are deeply infused with the Chinese language and business culture, owing to the particular management features. Indeed, with the exception of the Egypt-Suez Zone, and the Jinfei Zone in Mauritius,29 all other ETCZs have thus far attracted mainly Chinese investors.

How have Chinese ETCZs performed in Africa? In the early years, these zones experienced slow progress, mostly owing to the same structural bottlenecks that have plagued most African SEZs for decades, namely, poor hard and soft infrastructure on the continent, as this reduced the investment attractiveness of these zones, despite the incentives conceded. Added to this were some Chinese-specific challenges, such as the cultural/business gap, language barriers (which increased miscommunication), insufficient knowledge of host context and problems within the master developer consortiums.30 In addition to the above, the 2008 global financial crisis also had a negative impact on the overall picture, as both investment capital and demand for

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consumer goods (particularly from EU and US markets) contracted substantially in the years that followed. This combination of factors explains why most of these zones struggled for many years to attract investors and become operational. 31 However, prospects for Chinese ETCZs have improved significantly in recent years. Whilst only the Egypt-Suez Zone was fully operational by 2012, and Zambia-Chambishi was partially operational, by 2016 five out of the six zones established in Africa were operating at different speeds. Of the existing zones, Egypt-Suez and Zambia-Chambishi seem to be the most consolidated.32 The Ethiopia-Eastern Industrial Zone appears to have made greater strides in recent years, followed by the Lekki and Ogun zones in Nigeria. Surprisingly the only laggard is the Jinfei Zone in Mauritius, which, ironically, has the longest and most successful record of SEZs among African countries. However, recent media reports point to a number of initiatives taken to revamp the zone, which may trigger some progress in the near future. These include the announcement of a joint venture in 2015 between the zone developer and the Mauritius government to launch a Smart City project 33 and of a new master plan for the zone in February 2017,34 with a greater focus on logistics and warehousing linked to the nearby port, banking sector and hospitality connected to the increasing influx of Chinese tourists to the island. 38 Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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Table 3.2: Chinese ETCZs in Africa Progress (as at 2015) Zone

Zambia-China ETCZ Chambishi Lusaka*

No. of companies operational (registered)

26 (45) 10

Investment by management USD million

170 15

Investment by tenants (committed) USD million 322 (1 300) 19

Jobs created

8 735* 125

Jinfei ETCZ (Mauritius)

(5)

38

-

-

Lekki Free Zone* (Nigeria)

21 (100)

265

156 (418)

551

Ogun-Guangdong Free Trade Zone (Nigeria)

19 (40)

150

58 (150)

4 250

East Industrial Zone (Ethiopia)

10 (25)

89

159 (192)

4 975

Suez ETCZ (Egypt)

38 (58)

93

358 (610)

2 000

124 (283)

820

1,072 (2,670)

20 636

Total

Source: Tang Xiaoyang (2015) How do Chinese Special Economic Zones support economic transformation in Africa? ODI-SET, UKaid, p.5; *Peter Gakunu et al. (2015) If Africa builds nests will the birds come? Comparative Study of SEZ in Africa and China, UNDP and International Poverty Reduction Centre in China, pp. 36, 38, 74.

To better comprehend and assess the achievements and challenges of these zones, it is important to briefly examine the major features of three selected cases: Zambia-China Cooperation Zone, Ethiopia EIZ and Lekki Free Trade Zone in Nigeria, which illustrate the three different stages of development of these zones. The Zambia-China Zone was the first official ETCZ established in Africa (and the first Zambian SEZ, a multi-facility economic zone, MFEZ) in 2006. It has two sections – one

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in Chambishi that focuses on copper mining processing, and one in Lusaka, close to the international airport that is earmarked for manufacturing, agribusiness and services. The zone is owned and run by China Non-Ferrous Metal Mining Group (CNMC), a central SOE and one of the largest Chinese companies in that sector. The Chambishi section is located in the Copperbelt, in Northern Zambia, close to the highway to Lusaka and a limited capacity railway link to Zambia-Tanzania Railway – in theory the easiest and fasted way to the Indian Ocean. The zone’s focus is on copper mining and smelting, mining equipment and services, construction, chemicals, logistics and banking. It did not face major hurdles in its initial development, as the CNMC had been operating there since 1998. By the end of 2014, 28 companies were established in the zone, with investments totalling US$ 1.2 billion and 8 735 jobs created. The bulk of these figures are accounted for by CNMC subsidiaries.35 Following major problems related to poor labour practices in early years, CNMC has been increasingly investing in employee training and CSR activities with local communities since 2011, including the management of the Zambia-China Friendship Hospital, which provides care services free of charge to employees and their families. Also, in the wake of a pollution scandal involving the smelter in the initial stages of its operation, Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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it has tightened up environmental standards compliance in the zone. As for the Lusaka section, it was officially established in 2010 and, by the end of 2014, ten companies were registered inside the zone, after investing a total of US$19 million and creating 125 jobs. Companies are operating in the fields of agro-processing, construction materials, pharmaceuticals, automobile repair services, housing and logistics. The main employer inside the zone is Zambia Jihai Agriculture Company, which has become Zambia’s largest mushroom producer and exporter.36 One of the biggest problems with this zone is reportedly the insufficient power supply, which has forced the zone management to turn down a few interested investors.37 The Ethiopian Eastern Industrial Zone was officially established in 2007 and is located in the town of Dukem (35 kilometres from Addis Ababa). It is fully owned and run by Jiangsu Qiyuan Group, a private Chinese enterprise (steel pipe and aluminium producer). The group was initially a minority stakeholder, but took over from the designated master developer, Jiangsu Yonggang Group (provincial SOE), which ran into financial troubles during the global economic crisis. In the early years, the zone struggled to develop, chiefly owing to infrastructure financing issues (as it had to also undertake the offsite infrastructure development), high transport costs and lengthy customs handling at Djibouti Port (which handles most of Ethiopia’s overseas trade). It slowly became operational from 2010, with activities spreading from construction materials to garment, shoes and leather processing, packaging, steel products and automobile assembling. As at April 2015, 27 companies had invested around US$205 million in the zone and created 4 500 jobs. The star in this ETCZ is Huajian shoe factory, which started operations in 2012. Huajian alone has created 3 800 permanent jobs and is widely regarded as an exemplary employer, as it provides free meals and training (language, technical and managerial

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skills, including in China) for its employees. It presently accounts for a significant part of Ethiopia’s leather exports (mostly to the EU and US).38 It is expected that the zone will rapidly expand the number of investors in coming years, owing largely to the completion of the Addis-Djibouti Port Railway line in late 2016 (by a Chinese company), as Dukem will have its own railway station, thus easing one of the main transportation bottlenecks. The Lekki Free Zone is located 60 km east of Lagos. As mentioned, the zone is owned and run by a Sino-Nigerian joint venture. Its potential to become a highly successful manufacturing hub rests on its positioning as a gateway to African markets and to the US and the EU through preferential agreements in place. In the initial years, development was plagued by financial and managerial disagreements between the partners (within the Chinese consortium and between them and the local partners), regarding the development of the zone. Only when these problems were overcome (with direct interference from Beijing to solve the issues on the Chinese side) did the zone started moving forward. As at 2015, 21 enterprises had invested US$156 million in the zone and created 551 permanent jobs. These figures are expected to rise significantly in the coming years, as there are another 79 companies registered in the zone. A major hurdle, though, seems to be poor public transportation infrastructure, which creates a problem with attracting 40 Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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employees, with some companies in the zone having to provide shuttle buses or oncampus dormitories for its employees. Although allegedly in planning, thus far there are no training opportunities available for workers. Some of the other reported bottlenecks in this zone include: limited power supply, which the developers have solved, to a large degree, by building a gas-fired power plant that has been operational since 2015; lack of coordination and rivalry between different government agencies; policy inconsistencies and bureaucratic inefficiencies in handling import/export processing; tax exemptions and repatriation of capital gains out of Nigeria; and misunderstandings and communication gaps between management partners.39

How transformative have the Chinese ETCZs been in African Economies? To better assess the role of Chinese ETCZs as a catalyst for African industrialisation, it is useful to take Farole’s taxonomy as a reference. He looks at three types of outcomes to assess the performance of African SEZs: static economic outcomes (investment, employment, exports), dynamic economic outcomes (technology transfer, integration with local economy, structural change – diversification, upgrading), and socio-economic outcomes (quality of employment created, gender issues, etc.). 40 Departing from this framework of analysis, one can distinguish some positive, or at least promising, developments in recent years pertaining to Chinese ETCZs in Africa. In terms of static economic outcomes, the six zones combined have thus far attracted a reasonable volume of investment (just above US$1 billion, and another US$2.6 billion in the pipeline, plus US$820 million in infrastructure investment), created a fair amount of jobs (over 20 000) and, in some cases, made significant contributions to host coun-

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tries’ exports (i.e. Zambia-Chambishi in processed copper exports; mushrooms in Zambia Lusaka; shoes in Ethiopia EIZ). Positive developments are also evident in terms of socio-economic outcomes. Leading companies in some ETCZs (i.e. Zambia and Ethiopia) show clear signs of a learning curve, as they are now providing training and other benefits to their workforce (health care, community support in various forms), in response to problems raised by sub-standard labour practices or structural labour constraints in the early years. This seemsto be the exception, however, rather than the norm among the various ETCZs; nonetheless, it indicates a trend for future developments if sufficient incentives are in place. With regard to dynamic economic outcomes, whilst there has been some degree of technology transfer deriving from Chinese ETCZs on the continent (mainly manufacturing – i.e. Ethiopia; and mining processing – i.e. Zambia), achievements in terms of integration with the local economy and the impact on economic diversification remain uncertain. Although there seems to be some degree of integration with the domestic economy in the three cases illustrated above, these are mostly through the local labour market and, to a smaller degree, by engaging local suppliers (i.e. Ethiopia Huajian and local leather suppliers). The intensity of these linkages seems to vary greatly between SEZs.41 The Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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main hurdle in this regard is the inability to structure a functional value chain and supplier network within the host country,42 either due to the lack of local options or Chinese companies’ preference for sourcing materials from China. The persistence of this state of affairs risks the ETCZs becoming enclaves and thus preventing their transformative effect as a catalyst for industrialisation on the continent. There are, nonetheless, a few promising developments in this regard. For example: Zambia-Chambishi management has allegedly taken steps to facilitate links between the SEZ and local companies;43 and in Ethiopia, the government put an industrial park strategy in place, in 2014, that aims at agglomerating similar types of firms to create value chains.44 The extent to which Chinese ETCZs are impacting structural change in Africa is much harder to assess at such an early stage. In Southeast Asia, where China has also established a number of ETCZs since 2006, the impact is a lot more apparent, as some of these zones have already become major manufacturing hubs (i.e. Chinese ETCZ in Haiphong, Northern Vietnam). However, some problems have surfaced regarding labour issues and the transfer of lower technology, with dire environmental consequences in some cases.45 A number of these ETCZs in Africa are undoubtedly on course to becoming nascent manufacturing hubs. Ethiopia EIZ, for instance, is said to have inspired the government’s drive to expand and consolidate an SEZ and industrial park strategy in recent years. Huajian group is allegedly playing a significant role – either by providing advice to the government or taking the lead in one of the new industrial parks that is being created on the outskirts of Addis Ababa.46 Notwithstanding the role of ETCZs in Africa’s structural transformation, meaningful diversification and upgrading of African economies is at this stage uncertain and yet to become apparent.

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Whilst Chinese ETCZs’ performance is thus far promising, in terms of static socio-economic and economic outcomes (investment, job creation, exports), they are yet to make a significant impact in regards to dynamic outcomes (structural change) as economic spillovers remain limited. This means that, despite the positive developments in recent years and the undeniable potential, the transformative role of Chinese ETCZs cannot be verified on the African continent at this stage, as they are not fully developed and they are too few in number to have a meaningful impact. Recent official statements by Chinese authorities in the context of FOCAC and the OBOR initiative indicate that, over the next few years, the continent may experience fast expansion of the number of Chinese-led economic zones. Responding to African demands, in his opening speech at the 2015 FOCAC summit in Johannesburg President Xi Jinping highlighted China’s commitment to helping to increase African productivity by nurturing the continent’s industrialisation – an endeavour that was also emphasised in the final declaration.47 Furthermore, in the latest FOCAC Action Plan (2015-2018), reference is made to US$10bn in funds to further develop ETCZs and industrial parks on the continent.48 Moreover, the creation of industrial parks and ETCZs along cross-border economic corridors appears to be a prominent feature in Xi Jiping’s Belt and Road Initiative (BRI), which 42 Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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carries the promise of a new thrust with these types of projects, particularly in Eastern Africa, which is at the other end of the Maritime Silk Road. In the face of this imminent expansion of Chinese ETCZs on the continent, it is sensible to draw a number of lessons from the experiences of the pioneer ETCZs over the first decade of their existence, which can be useful to guide future developments.

LEARNING THE LESSONS AND MOVING FORWARD With the exception of language/cultural issues that seem to impair communication to some extent, the majority of the problems that negatively affect the performance of Chinese ETCZs in Africa are not specific to the Chinese model, but are largely of a structural nature, as these are the same challenges that have been identified as afflicting most other SEZs on the continent. In general, at the macro level, these include the absence of a consolidated national industrialisation plan that builds upon the country’s specific competitive advantages and how they fit into the global value chain, and poor articulation of SEZs within this strategy. At the micro level, inefficient institutional frameworks, plagued by various issues, namely poor coordination and sometimes competition between agencies involved in the process, red tape, wavering investment incentives and regulatory frameworks, seem to be the most common. This situation is exacerbated in most cases by a lack of strong and sustained political leadership to move forward with these projects. To this, add not only limited linkages to local economies, owing to the absence of conducive policies (to foster the creation of economies of scale around the zone), but also weak capacity from local suppliers (in terms of quantity and quality of their products) and

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the low skills of the available workforce. Last but not least, inadequate infrastructure, namely power and water supply and transportation networks, poses a dual problem for investors –specifically with how to get their products out and how to source the necessary labour. All these together result in higher transaction costs for investors, which defeat the purpose of the establishment of economic zones and ultimately undermine the overall aim of fostering industrialisation. Therefore, the solution requires a structural and more inclusive approach that addresses the main points raised in this chapter and constructively engages the various stakeholders, as well as better coordination between the various players. From the picture above and drawing from China’s own experience with SEZs the recommendations seem obvious. African governments need to articulate economic zones with strategically devised national industrialisation plans reflecting a long-term vision and sustained by strong commitment from political leadership. Investing in capacity building, whilst simultaneously streamlining institutional coordination, regulatory frameworks and incentive policies, will be critical to overcoming the structural inefficiencies that currently plague the system.

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More so, the provision of necessary infrastructure is critical for the success of these zones and tends to burden developers beyond their agreed responsibilities. Other solutions should be actively pursued by host governments, namely through Public Private Partnerships (PPPs). Last, but not least, a lot more strategic planning is necessary to ensure spillovers to local economies and prevent these projects from becoming detached economic enclaves. In addition to conducive regulatory frameworks (i.e. incentivising local sourcing of materials and suppliers), capacity building outside the zones is also critical,49 namely targeting potential labour force and suppliers (to upgrade production standards) in order to build economies of scale around these zones. These may entail, for instance, working closely together with local labour unions and business associations.

CONCLUSION AND POLICY RECOMMENDATIONS The success of ETCZs in Africa does not depend on China alone. As discussed above, Chinese ETCZs generally face the same challenges that have plagued African SEZs for decades. The realisation of economic zones as an effective industrial policy instrument on the continent ultimately relies on African capacity to integrate these zones into a comprehensive national industrialisation strategy building upon its strategic placing within the international market; the capacity to sustain strong leadership to these projects in the long run; the ability to streamline procedures, investment incentives, institutional coordination and devise policies and incentives to facilitate integration with local economies; whilst at the same time facilitating solutions to put in place the necessary hard infrastructure (PPPs).

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However, compared to other external players (multilateral and bilateral) that are also part of other SEZs on the continent, China is undoubtedly in a privileged position to make a meaningful contribution towards the effective use of economic zones as industrial policy tools on the continent. Not only does the country house the largest manufacturing base in the world, which is now in the process of relocating to more cost-effective environments, it also has the financial strength, expertise and, seemingly, the necessary political will to assist Africans in this endeavour. Its biggest contribution, however, lies perhaps in a much broader and systematic approach to knowledge transfer, namely through targeted capacity and institutional building on the continent (sharing of the lessons and best practices Chinese authorities learned from its SEZs over the past decades) to enable a conducive policy transfer environment. Policy recommendations for FOCAC 2018 focus on market viability, market access and knowledge transfer, all aimed at improving the sustainability of the ETCZs in Africa, i.e.: ■■

To ensure that feasibility surveys of local markets in Africa are featured in the business plan of an ETCZs/industrial park to improve the quality of FDI and overall sustainability of SEZs.

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■■

To enforce the inclusion of explicit environmental policies in each ETCZ/industrial park to ensure sustainability and minimise negative impacts. This could entail devising environment protection departments inside each zone, which is responsible for monitoring practices by investors and reporting to host country environmental authorities.

■■

To provide better market access opportunities in China for African-produced goods, as this would help support ETCZ development success. This would entail devising a programme to facilitate such access in specific sectors in the established and newly created ETCZs/industrial parks in Africa. In other words, no SEZ should be established in Africa without a clear commitment from Beijing to facilitate access to the Chinese market in the particular sectors featuring in the African SEZ.

■■

A FOCAC “Growth and Opportunity Act”, providing privileged access in low labour cost production – especially in textiles, footwear and related products – to African or African-based producers.

■■

To provide information, targeted training and networks needed to better facilitate policy and knowledge transfer from Chinese sources to Africans, not only directly related to the establishment and management of ETCZs, but also at the level of local and national government institutions and regulatory agencies. This could include, for instance, identifying and pairing managers from established Chinese SEZs with counterparts in Africa to exchange experiences and knowledge.

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References 1 See for example, Brautigaum, D., 2008. Flying Geese or Hidden Dragon? Chinese business and African industrial development. In Alden, C., Large, D. and Soares de Oliveira, R. (ed.), 2008. China returns to Africa: a rising power and a continent embrace. London: Hurst. 2 Chen L. and Naughton, B., 2017. A Dynamic China Model: the co-evolution of economics and politics in China. Journal of Contemporary China, 26(103), pp.22–23. 3 Ibid., p.33. 4 This broad ‘catch-all’ definition is essentially drawn from the Buenos Aires Plan of Action and the Nairobi outcome document adopted by the UN High Level Conference on South-South Cooperation. “What is South-South Cooperation?”, United Nations Office for South-South Cooperation. Available at http://ssc.undp.org/content/ssc/about/what_is_ssc.html [Accessed 4 March 2018]. 5 May, P., 1992. Policy learning and failure. Journal of Public Policy, 12(4), pp.336–337. 6 Majone, G. and Wildavsky, A., 1978. Implementation as evolution. In Freeman, H. (ed.), 1978. Policy Studies Review Annual. Beverley Hills: Sage. 7 Zhang, W.W., 2006. The allure of the Chinese model. International Herald Tribune, 1 November 2006. 8 Zhao, S., 2017. Whither the China model: revisiting the debate. Journal of Contemporary China, 26(103), p.4. 9 Chen, L. and Naughton, B., 2017. A dynamic China model: the co-evolution of economics and politics in China. Journal of Contemporary China, 26(103), p.19.

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CHINA’S ECONOMIC AND TRADE COOPERATION ZONES IN AFRICA | Chris Alden and Ana Cristina Dias Alves 10 Wade, R., 1990. Japan, the World Bank and the art of paradigm maintenance: the East Asian miracle in political perspective. New Left Review, I/217, May–June, p.68. 11 Yifu Lin, J., 2010. ‘New structural economics: a framework for rethinking development’, World Bank, Washington, DC, February. 12 Bell, D. 2015. The China model: political meritocracy and the limits of democracy. Princeton: Princeton University Press, p.180. 13 Brautigaum, D., 2008. Flying Geese or Hidden Dragon? Chinese business and African industrial development. In Alden, C., Large, D. and Soares de Oliveira, R. (ed.), 2008. China returns to Africa: a rising power and a continent embrace. London: Hurst. Yifu Lin, J., 2010. ‘New structural economics: a framework for rethinking development’, World Bank, Washington, DC, February. 14 Knight, J. 2007. ‘China, South Africa and the Lewis Turn’, Centre for the Study of African Economies’, Working Paper Series, 12, Oxford University pp.1–3. 15 Cited by Farole, T. 2011. Special economic zones: performance and practice – with a focus on Sub-Saharan Africa. International Trade Department, The World Bank, p.1. Available at http://siteresources.worldbank.org/INTRANETTRADE/Resources/Pubs/SpecialEconomicZones_Sep2010.pdf [Accessed 3 March 2018]. 16 Yitao, T., Yiming, Y. and Li, M., 2016. Chinese special economic zones: lessons for Africa. Africa Economic Brief, 7(6), African Development Bank. 17 Gallezot, J. and Bureau, J.C. 2006. The Trade Effects of the EU’s Everything But Arms Initiative. Commission of the European Union – Directorate General for Trade, Brussels. Available at http://trade. ec.europa.eu/doclib/docs/2006/november/tradoc_131254.pdf [Accessed 15 March 2018], 18 Ibid., p.3. 19 Ibid., p.15.

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20 Farole, T., 2011. Special economic zones: performance and practice – with a focus on Sub-Saharan Africa. International Trade Department, The World Bank, p.1. Available at http://siteresources.worldbank.org/ INTRANETTRADE/Resources/Pubs/SpecialEconomicZones_Sep2010.pdf [Accessed 3 March 2018]. 21 Ibid., pp.3–4.; Newman, C. and Page, J., 2017. Industrial clusters: the case of Special economic Zones in Africa. United Nations University – World Institute for Development of Economics Research, p.15. Available at https://www.wider.unu.edu/publication/industrial-clusters-1; p.22–24.; Yitao, et al., 2016, p.5. [Accessed 3 March 2018]. 22 Newman and Page, 2017. 23 Personal Interview, Ministry of Foreign Affairs, FOCAC Secretariat, Beijing, 3 June 2010. 24 Personal Interview, Ministry of Foreign Affairs, FOCAC Secretariat, Beijing, 3 June 2010. 25 Esho, B., 2016. Ogun Free Trade Zone: how not to do business in Nigeria. Premium Times, Nigeria, 7 September 2016, Available at http://www.premiumtimesng.com/promoted/209975-ogun-free-tradezone-how-not-to-do-business-in-nigeria-by-bolu-olu-esho.html [Accessed 4 March 2018]. 26 According to data provided by Newman and Page, 2017. Table 1: SEZs currently in operation in SubSaharan Africa, pp.7–14. 27 Information in this paragraph according to personal interview, Ministry of Commerce, Department of Trade and Economic Relations, Beijing, 3 June 2010. 28 Alves, A., 2011. Chinese economic and trade co-operation zones in Africa: the case of Mauritius. SAIIA Occasional Paper No 47. Available at http://www.saiia.org.za/occasional-papers/chinese-economic-andtrade-co-operation-zones-in-africa-the-case-of-mauritius [Accessed 4 March 2018]. 29 Although the zone is yet to be populated, expression of interest from potential investors has largely come from local, Indian, Madagascar and South African companies. Shelby Emilien, ‘Jinfei Zone is open to

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PART 3: China-Africa Industrial Cooperation | Chapter 3 everyone, even for the Mauritians’, L’Express.mu, 25 August 2016. Available at http://www.jfjmy.5dlc. com/newsdefault/1996/18144 [Accessed 4 March 2018]. 30 Alves, 2012. 31 Ibid. 32 Xiaoyang, T., 2015. How do Chinese special economic zones support economic transformation in Africa? ODI-SET, UKaid, p.3. Available at http://set.odi.org/wp-content/uploads/2015/07/How-Chinese-SEZssupport-economic-transformation-in-Africa.pdf [Accessed 3 March 2018]. 33 Government Information Service, Prime Minister Office, ‘Finance Minister meets high level delegation from China’, Mauritius government website, 17 June 2015. Available at http://www.govmu.org/English/ News/Pages/Finance-Minister-meets-High-Level-Delegation-from-China.aspx [Accessed 3 March 2018]. 34 Hamuth, S., 2017. JinFei: Turning over a new leaf. 21 February 2017. Available at http://defimedia.info/ jin-fei-turning-over-new-leaf [Accessed 4 March 2018]. 35 Alves, 2012. 36 Unless otherwise stated, information in this paragraph is derived rom Gakunu, P., et al. 2015. If Africa builds nests will the birds come? Comparative study of SEZs in Africa and China. UNDP and International Poverty Reduction Centre in China, pp.36–39. Available at http://www.cn.undp.org/content/dam/china/docs/Publications/UNDP-CH-Comparative%20Study%20on%20SEZs%20in%20Africa%20 and%20China%20-%20ENG.pdf [Accessed 3 March 2018]. 37 Zhihua Zeng, D., 2016. Multifacility economic zones in Zambia: progress, challenges and possible interventions. Peking University – Centre for New Structural Economics, 21 April 2016. Available at http://www.nse.pku.edu.cn/en/articles/content.aspx?nodeid=107&page=ContentPage&contentid=295 [Accessed 3 March 2018]. 38 Information in this paragraph according to Gakunu, P., et al. 2015, pp.19–22. 39 Ibid., pp.25–31. 40 Farole, 2010, p.2. 41 Gakunu, et al. 2015, p.41. 42 Xiaoyang, 2015, p.6. Copyright © 2014. Africa Institute of South Africa. All rights reserved.

43 Gakunu, et al., 2015, p.41. 44 Newman and Page, 2017, pp.21–22. 45 Various personal interviews (Governmental Think Tanks, Business Community) conducted in Hanoi, Vietnam, 11–17 November 2016. 46 Gakunu, et al., 2015, p.22. 47 Ministry of Foreign Affairs. 2015. Declaration and Action Plan of the Johannesburg Summit of the Forum on China-Africa Cooperation. 7 December 2015. Available at www.tralac.org/news/article/8656declaration-and-action-plan-of-the-johannesubrg-summit-of-the-forum-on-China-Africca’cooperation. html [Accessed 3 March 2018]. 48 Ministry of Foreign Affairs. 2015. The Forum on China-Africa Cooperation – Johannesburg Action Plan (2016-2018). Available at www.fmprc.gov.cn/mfa_eng/zxxx_662805/51323159.shtml [Accessed 3 March 2018]. 49 Zhihua Zeng, 2016.

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4

CHAPTER

CHINA AND AFRICA’S INDUSTRIALISATION

THE CURRENT SITUATION, CHALLENGES, FEARS AND POLICY OPTIONS

Ukertor Gabriel Moti

INTRODUCTION China’s growing engagement in Africa opened a chapter of a new trading partnership. The past decade (2000 to 2010) was a period of strong growth in Africa, driven by the Asian1 demand for African resources. But that same boom in commodities has coincided with a relative decline in African manufacturing. While remarkable achievements have been made in the context of China’s engagement with Africa, however, “everything is not good” according to some observers.2 The relations between China and Africa are still heavily concentrated on the imports of natural resources, perpetuating the continent’s dependence on primary commodities. Trade between China and Africa increased by 700 per cent during the 1990s,3 and China is currently Africa’s largest trading partner.4 In 2010, trade between Africa and China was worth US$114 billion and in 2011, US$166.3 billion.5

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Given the high level of trade growth, in recent years, Beijing has identified the African continent as an area of significant economic and strategic interest. Vice versa, many Africans are interested in the lessons the continent can draw from the unconventional development of China and the role of the state in this process. There are many similarities between the pre-1978 China and many African countries, including large populations with insufficient food, high levels of illiteracy and agrarian communities. In three decades, China drastically reduced its poverty levels and became the second largest economy. China’s rapid economic growth began in 1978 with China’s opening to the world under the leadership of Deng Xiaoping. Starting in 1980, with the establishment of four SEZs in the south-eastern coastal region of the country, more than a hundred zones of various kinds have now been rolled out throughout the country. They have become one of the key drivers of China’s rapid economic development. There was a strong emphasis by the government in supporting learning and skills upgrading through a combination of incentives, policies and regulations and linking SEZs to domestic supply chains.6 Moreover, the SEZs were set up with clear objectives and targets for economic growth, exports, employment and investment. The large number of SEZs competed with each other for investments based on quality 48 Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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of services and infrastructure offered to investors.7 Now, China’s per capita income has increased fivefold.8 It is important to note, however, that China’s economic expansion, along with other Asian countries’, has been driven by manufacturing exports to the United States (US) in particular, and enabled through an overall constructive policy package that opened markets, implemented favourable trade and exchange rate policies, and provided a sound and stable government that inspired investment and secured property rights. The continent does not have this comparative export advantage that the Asian region had. Conversely, Africa has been unable to put the full package in place, and this has resulted in a manufacturing sector whose contribution to both Gross Domestic Product (GDP) and export shares is significantly below the continent’s developing country peers. On 4 and 5 December 2015, the 6th Forum on China-Africa Cooperation (FOCAC) Summit and Ministerial Conference was held in Johannesburg, South Africa. The Johannesburg Summit produced 10 cooperative plans that include industrialisation. The fact is, for FOCAC to succeed, the China-Africa partnership will have to promote industrial best practices to reduce poverty inequality, and raise standards of living in both regions. For African countries to maximise the potential benefits from this partnership, African governments must articulate their own comprehensive China policy, which should include strategies for engagement beyond natural resources towards industrialisation. This chapter examines challenges to Africa’s industrialisation, and China’s contribution going forward. The assessment is done by presenting the continent’s current state of industrialisation, the impact of the continent’s global competitiveness on industrialisation, and the pros and cons of economic partnership with China. The conclusion provides policy

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options and recommendations for engagement towards FOCAC 2018 and beyond.

THE STATE OF AFRICA’s INDUSTRIALISATION: CHINA’s ROLE? Industrialisation is the period of socio-economic revolution that transforms society toward a wider modernisation process, where social change and economic development are closely related to technological innovation. It is the extensive organisation of an economy for the purpose of manufacturing.9 Industrialisation has to do with production in very large numbers of products of a general nature, parts that can be used by many players, acting autonomously with their own purposes quite distinct from the purpose of the producers. Accordingly, individual manual labour is often replaced by mechanised mass production and craftsmen are replaced by assembly lines. Characteristic features of industrialisation include the application of scientific methods to solving problems, mechanisation and a factory system, the division of labour, the growth of the money economy, and the increased mobility of the labour force – both geographically and socially. The first transformation to an industrial economy, known as the Industrial Revolution, took place from the mid-eighteenth to early nineteenth century

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in certain areas in North America and Europe, starting in countries such as Great Britain, followed by Belgium, Germany and France. In Asia (apart from Japan, where industrialisation began in the late nineteenth century) a different pattern of industrialisation followed. One of the fastest rates of industrialisation occurred in the late twentieth century across four countries known as the Asian Tigers (Hong Kong, Singapore, South Korea and Taiwan), thanks to the well-structured societies, strategic locations, heavy foreign investments, a low cost skilled and motivated workforce, a competitive exchange rate and low custom duties.10 Africa’s poor state of industrialisation is well known and widely documented, as are the reasons for it. At 11.2 per cent in 2011, Sub-Saharan Africa’s (SSA) share of manufacturing value added in GDP – a commonly used measure of industrial development – is the second lowest among all regions of the world, only slightly behind the Middle East and North Africa (whose low share is due to the region’s historical dependence on oil).11 Moreover, the SSA share would be three percentage points lower if South Africa was excluded, making the region the least industrialised in the world. SSA’s export structure tells the same story: the manufacturing share of total exports (about 25 per cent in 2011) is low, because SSA produces few industrial products of export quality. More worrying, both indicators have shown a downward trend in recent years, suggesting that Africa’s timid industrialisation effort has waned. On the whole, the region (barring South Africa and a few other middle-income countries) remains globally uncompetitive. SSA ranks lowest on the United Nations Industrial Development Organisation (UNIDO) competitive industrial performance (CIP) index.

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The fear of China as one of the global actors in Africa There are three fundamental causes of shortcomings in the FOCAC 2016 Action Plan to implement industrialisation on the continent. These are: 1) the weakness of African states and their legislative, regulatory and enforcement mechanisms coupled with self-serving governments; 2) the Chinese tendency to do business irrespective of concerns related to sustainability, business dealings that are clearly incompatible with the national interests of African countries, and corrupt practices; and 3) the deflationary role of China in the democratisation process in Africa. While addressing these shortcomings would require significant reforms on both sides, such reforms, if carried out, would contribute significantly to the sustainability of the China-Africa relationship, especially in terms of Africa’s industrialisation.12

The impact of infrastructure on Africa’s industrial development Agenda 2063 identifies about three challenges regarding infrastructure development, such as the costs of transport infrastructural projects, which are very expensive, with a gap estimated at US$48.1 billion.13 The second challenge is funding and maintenance

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of infrastructure, and thirdly, efficient coordination of road and rail transport across borders, and border crossing facilities and processes that facilitate trade and regional integration, which currently pose problems.14 It takes 28 days to move a 40-foot container from the port of Shanghai, China to Mombasa, Kenya at a cost of US$600, while it takes 40 days for the same container to reach Bujumbura, Burundi from Mombasa at a cost of US$8 000.15 The other challenge with continental infrastructure is maintenance. According to Xue Xiaoming, Vice-Chairman of the Nigerian-Chinese Chamber of Commerce and Industry, “developing industries require sustained electricity supply, smooth transportation and other very basic infrastructure facilities, which at present are still not enough to ensure operations”.16 In essence, countries globally cannot establish competitive industrial sectors and promote stronger trade ties if saddled with substandard, damaged or non-existent infrastructure. China is by far the fastest growing external source of infrastructure financing for the continent. From 2005 to 2011, China’s commitments to infrastructure in Africa rose from US$1 billion annually to US$1.5 billion respectively; these commitments spiralled to US$7.5 billion in 2008.17 To date the continent has witnessed over 35 African countries being engaged with China in infrastructure financing arrangements; with Nigeria, Angola, Sudan and Ethiopia being the largest recipients of this arrangement.18 Needless to say, the emerging One Belt One Road (OBOR) Strategy proposed by China, combined with Africa’s blueprint outlined in Agenda 2063, can serve to trigger a new and enhanced framework for China-Africa Cooperation. The OBOR initiative was announced by President Xi Jinping in 2013. The OBOR is a development strategy and framework that focuses on connectivity and cooperation among countries, which consists of the landbased Silk Road Economic Belt and the Maritime Silk Road. OBOR could be linked with

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the African Union’s Programme for Infrastructure Development for Africa (PIDA), which identifies priority regional infrastructure projects to be built by 2040, designed to sync with the Regional Economic Communities (RECs) own infrastructure master plans.

China’s impact on continental commodity exports It has been argued that China has dented Africa’s efforts at industrialisation in several ways.19 Firstly, it has perpetuated Africa’s dependence on natural resources. China’s share of Africa’s fuel and mineral exports, which increased from 1.8 per cent in 2000 to 19 per cent in 2012, was a factor in deepening Africa’s concentration on natural resource extraction. The share of fuels and minerals in Africa’s exports went up from 54 per cent in 2000 to 64 per cent in 2012.20 While China’s share of Africa’s commodity exports is small relative to traditional partners, like the US and Europe, China is absorbing an increasing share of these exports. In recent years, over 60 per cent of Africa’s exports to China have consisted of oil and minerals. 21 Secondly, the influx of cheap Chinese imports into Africa has caused significant injury to local industry, with the impact varying in intensity across countries. Trade unions in

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Zambia have blamed Chinese imports for undermining the clothing and electrical sectors. In Ethiopia, while competition from Chinese shoe imports has forced the local footwear industry to innovate and upgrade, a number of producers have been squeezed out while surviving firms have contracted. Similarly, survey evidence from Mauritius shows that small- and medium-sized enterprises (SMEs) in the clothing, footwear and furniture sectors have borne the brunt of Chinese competition, being unable to match the price quality ratio offered by Chinese products. Thirdly, African exporters of manufactured and processed goods have faced stiffer competition from China in their traditional export markets. In Mauritius, Swaziland and South Africa, the clothing industry suffered major setbacks in the run-up to 1 January 2005, marking the end of the apparel quotas and the beginning of Chinese dominance of the global apparel market. Specifically, more than 25 000 jobs (or 28 per cent of employment) were lost in the Mauritian garment sector between 2001 and 2005 as foreign firms closed shop to locate elsewhere. Fourthly, China’s threat to African industry is significant, since China’s comparative advantage lies in the same low-skill, labour-intensive and low-technology sectors, such as clothing, furniture and footwear, that offer the best chances for industrialisation in Africa. Some authors22 have argued that China’s global ascendancy can permanently damage the future of manufacturing in Africa. The trade imbalance is the fifth challenge identified as a stumbling block towards continental industrialisation. In 2012, 93.5 per cent of China’s imports from Africa consisted of primary commodities, such as oil and minerals, precious stones and non-monetary gold.23 This represents an increase of more than 7 percentage points from 2002, when primary commodities constituted 86 per cent of imports.24 On the import side, Africa imports

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low technology, labour-intensive manufactured goods from the world. This is despite the existence of a large semi-skilled or unskilled labour pool in many African countries that could produce such goods. For example, more than 70 per cent of Africa’s imports of manufactures in 2012 consisted of labour-intensive and resource-based manufactures and low to medium-skill and technology manufactured goods.25 This is not in line with economic trade theory, which suggests that, given its abundant labour resources, African economies should by now have developed a robust manufacturing base and diversified away from a reliance on natural resources toward light manufacturing activity. However, despite the afore-mentioned challenges influenced by China on the continent, an important development supporting African industrialisation efforts is the Chinesefunded and constructed special economic zones (SEZs) in markets, such as Ethiopia, Mauritius, Nigeria and Zambia.26 In general, SEZs look to attract FDI based on various fiscal and other incentives and to generate foreign reserves from value-added exports. Ultimately, though, they are aimed at creating opportunities for local employment, skills and technology transfers, as well as the potential for backward linkages in host countries to pursue greater diversification of exports and domestic economic activities.

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Against this backdrop, the Chinese SEZs can be a harbinger of industrialisation in Africa – for at least two reasons. Firstly, the SEZs propose investment in a wider range of sectors, spanning agro-industry, manufacturing and services. These sectors will be new to the industrial landscape of most of the countries hosting the SEZs and will be particularly beneficial to Zambia, Nigeria and Ethiopia, which currently have very low levels of industrialisation. Secondly, the SEZs are designed to be integrated into the local African economies. The Chinese government has expressed its wish to transmit to Africa lessons from its own development experience, as well as transfer through foreign direct investment (FDI) and aid much-needed knowledge and technology. It is important to note that the Chinese are also looking to support African SMEs to develop their businesses in the zones through a US$1 billion fund announced at the 2009 FOCAC.27 The development of SMEs on the continent will lay a strong foundation for economic growth and industrial development. The SEZs, if implemented under the 2016 FOCAC Action Plan, could attract a critical mass of investors, both domestic and foreign; develop linkages with the domestic economy; stimulate higher value-added manufacturing activities and generate significant productivity spillovers.28 More importantly, these zones could be key contributors to unlock Africa’s diversification potential and movement into value-added based industries and exports. Supported by transport, power and other business infrastructure rollouts, as well as preferential tariff structures for exports into China, as well as traditional export markets (like the US and Europe), these zones, if managed effectively, could be game changers for Africa’s diversification saga.

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AFRICA’s GLOBAL COMPETITIVENESS AND INDUSTRIAL DEVELOPMENT The World Economic Forum (WEF) defines competitiveness as “the set of institutions, policies and factors that determine the level of productivity of a country”.29 The WEF uses 12 measures to determine competitiveness, such as institutions, infrastructure, health and primary education, higher education and training, goods and market efficiency, labour market efficiency, and technological readiness.30 With the advent of globalisation in the latter part of the twentieth century a country’s competitiveness in attracting investment, together with its ability to produce goods and services at globally competitive levels, has become critical for both national and local economic growth. Achieving global competitiveness remains a challenge for most African countries as they are still grappling with issues such as technological readiness, infrastructure and strong institutions. The continental focus has been on commodity exports, which have created a strong dependency on the global economy. The creation of competitive industrial capacity in African countries has been hindered by: (i) low investment; (ii) poor infrastructure services, resulting in higher production and transaction costs; (iii) high sovereign risk, poor governance and weak institutions; Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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(iv) ill-advised industrial policies; and (v) generally rigid macro-economic frameworks. Africa’s global competitiveness is accentuated by the small size and ethnic fragmentation of many countries that too often results in internal conflict, by the geographical nature of many landlocked resource-scarce states, and by the implications of letting Asia “get too far ahead”.31 In addition, there is the lack of regional integration, or the poor state of regional integration. A further challenge is that a number of African countries have overlapping membership to different regional economic communities (RECs) and this on its own creates a set of different challenges altogether. Others cautioned that improved macroeconomic policies alone may not be sufficient to boost global competitiveness and economic growth.32 Policies that target improvements in the operational efficiency of firms, coupled with macroeconomic reforms, would help firms become successful exporters and substantially improve countries’ economic performance. In general, political leadership is required to eliminate constraints on infrastructure, skills development and entrepreneurship. In China, the state itself led the industrialisation drive, that is, it took on developmental functions. Based on the global competitive index, determining what goods Africa is most suited to produce, given its resource endowments and input costs, is a difficult exercise. Export performance can indicate what products are competitive in global markets, although the level and commodity composition of exports are influenced by distorted trading regimes in many African countries, as well as import preferences offered by trading partners. Several aspects of African exports are worth highlighting, in terms of country breakdown, commodity composition, and in comparison to Asian exports. The bulk (89 per cent) of Africa’s exports to the global community, such as the US, are fuels or minerals, which account for more than 99 per cent of exports from Nigeria,

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Algeria and Angola, and about 40 per cent of exports from Egypt and South Africa.33 Without strong industries to beneficiate raw materials, African countries risk remaining industrially obsolete. For example, Nigeria, the world’s sixth-largest producer of crude oil, exports more than 80 per cent of its oil but cannot refine enough for local consumption. In 2013 it spent about US$6 billion subsidising fuel imports.34 In such apparently baffling scenarios lies one of Africa’s greatest challenges – and opportunities. The continent possesses 12 per cent of the world’s oil reserves, 40 per cent of its gold and between 80 per cent and 90 per cent of its chromium and platinum.35 Given its natural resource wealth, it is only natural that Africa exports a considerable share of its oil and mineral commodities. This is consistent with general trade theory. But most African states import many goods that require a large semi-skilled and unskilled labour base to produce. This is not so consistent with theory, as these African countries, with a large pool of unskilled labour, should be producing and exporting these goods.36 Besides minerals, the continent is also home to 60 per cent of the world’s underutilised arable land and has vast timber resources. Yet together, African countries account for just 1 per cent of global manufacturing. Imports into the US from African Growth and Opportunity Act (AGOA) countries from 2008 were some US$1,151 million with all 54 Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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but US$13 million qualifying for AGOA preferences.37 Apparel plays an important role in African manufactured exports. Textiles and clothing made up only 2 per cent of exports (about US$1 billion each from SSA and North Africa) to the US, with three quarters of this supplied by Egypt, Kenya, Mauritius and Lesotho.38 The EU was an important market for North African apparel exporters, with EU apparel imports from Tunisia totalling €219.5 million, with €111.3 million from Morocco and €52.3 million from Egypt.39 Imports from other African countries included those from South Africa (€12.4 million), Madagascar (€2.4 million) and Kenya (€1.3 million)40. Tellingly, while most African countries had tariff preferences into the EU under the old Cotonou Agreement (with these to be replaced by the Economic Partnership Agreements – EPAs), and South Africa has preferences under the Trade, Development and Cooperation Agreement (TDCA), these preferences are undermined by rules of origin constraints that are much more rigid than the AGOA rules offered by the US to African exporters.41 Europe’s imports from Lesotho, Swaziland and Mauritius were negligible, showing these countries to be entirely focused on the US market. The desirable structure of Africa’s industrial production is a matter of some controversy. It has been argued that Africa should follow a land-abundant development path similar to that followed by the United States, rather than the model followed by the land-scarce Asian economies.42 The highest priority should be to raise exports, relying on Africa’s abundant natural resources. That, even if Africa were to eliminate the policy constraints on manufactures production, so that manufactures export performance achieved its estimated potential, manufactures would still make up less than 30 per cent of total exports, marginally above Latin America’s 28 per cent but significantly below the 60 to 70 per cent levels in East and South Asia.43 African manufacturing and manufactured exports are high cost relative to the conti-

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nent’s levels of income and productivity.44 Knowledge, the availability of infrastructure, and the quality of governance together determine what countries produce and how they produce it.45 Scholars show that SSA’s productivity is lower and that labour costs are higher than in other low-income economies (and in Asia in particular), and that these factors are accentuated by over-valued exchange rates, low (FDI) levels and small firm sizes in Africa. Although there are differences among African countries, in general high indirect costs and business environment-related losses impair the productivity of African firms and global competitiveness. African gross productivity is only 40-80 per cent of China’s.46

THE CHINA AFRICA INDUSTRIAL PARTNERSHIP Chinese policy in Africa is driven by economic diplomacy and a businesslike relationship with minimal political interference, allowing the pursuit of arrangements aimed at producing mutual benefits. It would appear that the argument for a state-centric realist relationship between China and Africa stems from the apparent inadequacy of dependency

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theory to describe this relationship. Chinese outward Foreign Direct Investment (FDI) is supported by the government’s going global strategy, which assists Chinese enterprises in becoming global multinationals through providing soft loans and other assistance to foreign investment projects, in particular in emerging markets. Chinese investments in foreign countries are often driven by enterprises with majority ownership by central, provincial or municipal governments. Chinese banks have been increasingly involved in providing financial services to facilitate trade and investment projects in Africa. Most prominently, the China-Africa Development Fund (CADF) was established in 2007 by the China Development Bank (CDB) as a US$5 billion equity investment fund to assist Chinese companies in expanding into Africa.47 Beneficiaries have included Sino Steel Corporation, China National Building Material and Hainan Airlines. The CADF also supports companies in the Chinese Economic Processing Zones in Zambia and Mauritius (future zones are currently being discussed in Nigeria, Tanzania, Liberia and Cape Verde.) These investments contribute to African development while helping China to diversify its US$2 trillion external assets, currently mainly invested in foreign treasury bonds with relatively low yields.48 The expansion of Chinese commercial activities in Africa has led to a shift in public policy from a narrow focus on trade and investment relations to a broad range of development issues, especially industrialisation. China has pledged to expand its zero tariff treatment to 95 per cent of the products of African least developed countries, and to provide US$1 billion in loans to small- and medium-sized enterprises.49 At the 2009 Forum on China-Africa Cooperation (FOCAC), China pledged US$10 billion in concessional loans to Africa and emphasised the need to support Africa’s efforts to attain the Millennium Development Goals (MDGs – now Sustainable Development Goals), ad-

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dress climate change, and overcome challenges in the areas of food security, energy and industrialisation.50 China is also going through a “development cooperation” learning curve with regard to its various aid, preferential trade access, soft loans and investment instruments. The evolution of Chinese assistance will not mean simply copying the aid modalities of traditional development partners, such as untied aid, conditionality and budget support. However, it is likely that aid coordination with traditional donors will increase, and that China will pay increasing attention to the implications of its assistance for governance and the environment. It is important for Africa to engage China in its consideration of development cooperation policies, to ensure that China’s aid is effective and complements, rather than competes with, aid from traditional donors.51 This means Africa must take advantage of Chinese assistance and investment to industrialise. A closely connected element characterising the contemporary China-Africa relations is the mix of interests and concerns this is provoking among traditional donor countries. While during the Cold War China’s presence in Africa was overshadowed by the competition between the US and the Union of Soviet Socialist Republics (USSR),52 today, China is acting as a game changer arousing concerns from the West. These concerns are largely 56 Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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based on the assumption that, just as Western countries have tried to promote their models in Africa, China will also try to export its own. The literature indicate that no studies to date have, however, proved this to be the case, and greater empirical evidence is needed to fully understand the nature, scope and implications of China’s new role on the African continent.53

The Lekki Free Trade Zone, Lagos State case study The Lekki Free Trade Zone is a good example of a China-Africa industrial partnership, as it highlights the positives and challenges of the process. The Lekki Free Trade Zone (LFTZ) is located 60 km east of Lagos on a sandy peninsula, with the Atlantic Ocean to the south and Lekki Lagoon to the north. The LFTZ is part of the overall multi-use development plan for a new city on the Lekki peninsula, which includes residential, commercial, industrial, logistics and recreational development, as well as a new airport and deep water port. The illustration plan reflects a large-scale vision plan that has been completed for the entire Lekki peninsula. The development objective of the LFTZ project is to “establish a free economic zone and an international city with multi-functions of industry, commerce, trade, tourism, recreation and residence to attract foreign investment, create employment and expedite economic growth”. The zone is owned by a joint venture between a Chinese consortium – China-Africa Lekki Investment Co. Ltd (CALIC) (60 per cent), the Lagos State Government (20 per cent) and its subentity, Lekki Worldwide Investment Ltd (20 per cent). The Chinese consortium CALIC is an investment holding company registered in China solely for the purpose of investing in the Lekki FTZ. CALIC consists of CRCC (35 per cent), CADF (20 per

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cent), Nanjing Jiangying Economic and Technology Development Corporation (NJETDC, 15 per cent) Nanjing Beyond Investments Limited (NBIL, 15 per cent) and China Civil Engineering Construction Corporation Ltd (CCECC, 15 per cent). Lekki Worldwide Investments is an investment company owned largely by the Lagos State Government: 40 per cent of Lekki Worldwide Investments is owned by LSDPC, the Lagos State Government Development Corporation, with another 40 per cent owned by Ibile Holdings, the investment company of Lagos State. The Lagos State Government allocated 16 500 ha of land of which 3 000 ha has been officially transferred to the developer so far. The Lagos State Government’s equity share is in return for providing the land and the 50-year right to operate the zone to the Chinese consortium. The State Government is also contributing towards the construction costs of the zone infrastructure, together with the developer.

LFTZ Development phasing and financing According to the March 2009 Feasibility Study, Phase I of the LFTZ (the China-Nigeria Economic and Trade Cooperation Zone) consists of the development of 1 176 ha over a

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period of five years with a start-up area of 780 ha. Based on more recent information, it is understood that this plan has been scaled down considerably. The start-up phase, which is currently under construction, now consists of a total land area of 154 ha. The first stage of this development involves the construction works for the provision of necessary infrastructure facilities, including site clearance and levelling (partial), internal roads, landscaping, water supply and sewerage, power supply, telecommunications, gas supply, industrial workshops, warehousing/logistics/storage facilities, public/commercial facilities, residential buildings and environment protection facilities. This is expected to take up to five years to complete, and will encompass 109 ha. The second stage, also estimated at five years, will see the completion of construction of the remaining 45 ha of land. The total project cost is estimated at US$400-500 million, with the financing sources from the developer, Chinese government, Lagos government and private investors. The project envisages a mixed use of industrial companies, servicesector companies, commercial property, residential property, and other amenities, such as school, hospital and hotels. The developer estimates that the full development of the zone could create more than 100 000 new jobs directly and many more indirectly once the zone was fully occupied and completely operational.

LFTZ current status and infrastructure The major infrastructure needs include: a dedicated power plant for the Lekki peninsula, water and waste water treatment plant, access roads, airport and deep sea port, as well as two additional bridges to the mainland. Completed works in the start-up phase include an entry gate and associated offices, land clearing, construction of around 14 km of

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internal roads and drains, water supply from six bore wells and power supply from a 1 750 kW diesel generator. Bids have been completed on a 10 to 15 megawatt transitional power plant project, which would have been evaluated by May 2012, and construction should have been completed 12 months after that. A seven km drainage canal is under construction. A Lekki One-Stop Shop has been established at the zone and was formally launched in September 2010. A small industrial unit producing construction materials for the project is operational. A ready-built standard factory (3 500 m2) and warehouse (3 000 m2) have been completed and according to the developer, eight companies are currently operational, employing approximately 450 employees, 80 per cent of whom are Nigerians. Residential facilities for Chinese workers have also been completed and are partially occupied. The deep sea port has got a concession from an investment consortium consisting of a Singaporean investor (Eurochem), the Lagos State Government and some Chinese firms and was expected to start the construction work in June 2012. Two access roads have been built (including a toll road) and a water road is also being planned. A new airport has been planned to be built through Public Private Partnership (PPP) and would have been open for bidding in 2012. The estimated investment would be 58 Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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around US$1 billion. A potential light rail line from Lekki to the mainland is also being considered through PPP. However, much of the future viability of PPP opportunities rests on resolving the current impasse on toll collection for the completed Lekki toll road (it was said that the toll road would start to collect toll in 2012, but it is a still a big concern for the financiers). The developer indicated that several marketing and training activities have been conducted in China, and a large-scale marketing event was being planned in Nigeria (Investment Forums in Lagos and Abuja) in 2012.

Business prospects Based on the 2009 Feasibility Study, the zone is targeting four types of activities, namely: ■  Light

industry, including furniture, textile and garments, footwear and headwear,

construction and building materials, household electrical appliances and other consumer products; ■  Vehicle

assembly, including buses, trucks, tractors and motorcycles, as well as con-

struction and engineering equipment; ■

Warehousing and logistics, including for petroleum products; and

■ R eal

estate development for urban services, finance, trade, hotel, recreational and

business and residential facilities. According to the developer, 75 investors have signed Memoranda of Understanding (MOUs) to date, 64 are registered in the zone of which about 28 have signed investment agreements, and 8 are operational. Currently the eight firms employ about 450 people,

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with about 80 per cent Nigerians. The tenancy on zone lot is about a minimum of 5 years, and a maximum of 25 years, and the tenancy in factory shells is about three to five years. Lease prices for lots are US$20/m2 for manufacturing; US$50/m2 for the oil and gas sector; and US$50 to 100/m2 for real estate development. High prices are due to the high cost of sand filling in that area. Tenants would pay for utilities through the management company, so they don’t have to deal with utilities directly. The major challenges in Lekki are the legal and institutional framework and the land resettlement issues, besides infrastructure, such as ports and power plant. However, the former ones are beyond the developer’s control, and affect all the potential investors in the zone, and the legal framework is a hurdle to all the zones in Nigeria, therefore, they need to be tackled with great urgency. There are strong policy and infrastructure rationales behind establishing SEZs. International experience has shown that successful SEZs have compelling business cases, enabling legal/regulatory frameworks, effective management arrangements and enjoy strong political support at all levels of government. In addition, they are well integrated with the local economy and have clear ownership and accountability arrangements. Perhaps most importantly, the global experience of SEZs suggests that optimal results are Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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achieved when SEZs are established and operated as part of a national economic development reform strategy, and not as a ‘one-off’ venture. More specifically, good practice SEZs share the following key attributes: a) Physical planning and infrastructure;

Integrated, multi-use development;



Effective IT systems and networks;



Availability of specialised facilities and business services;



Public provision of off-site infrastructure

b) Development Approach;

Business driven (demand driven as opposed to policy driven);



Part of a national economic growth strategy;

 P ublic-private

partnerships or private developer builds/owns/operates SEZs on cost-

recovery basis c) Policy Features;

Political consensus – political ‘champions’ to support required reforms;

 Best

practice regulatory framework and stable business environment; Targeted at

multi-markets and not just for exports;

Wide range of activities permitted;



Emphasis on deregulation and de-monopolisation;



Streamlined procedures to establish and operate enterprises;



Shift towards universal tax incentives/low tax area;



Adherence to universal labour rights;



Environmental compliance;



Equal treatment of all foreign and domestic companies;

Incentives for private developers d) Institutional Framework;

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 Establishment

of a single administration to manage zone activities and high level

political support;

One-stop shop for efficient zone regime regulation;



Autonomous, flexible, well-funded regulatory authority;



MOUs with stakeholders to govern relationships;



Public-private partnership arrangements.54

Some of the challenges faced by the Leki Free Trade Zone and similar ones in Nigeria include: a)  Legal and institutional framework: This is the foremost important challenge. The current legal framework for the free zone is the Nigeria Export Processing Zones Authority (NEPZA) Act, which was enacted almost 20 years ago, and does not apply to the current free zone operations. For example, the act doesn’t allow for the products made/processed in the zones to be imported to the domestic market. Although the new regulations by NEPZA and the Ministry of Trade and Investment allow for the

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importation of such products providing that they have minimum 35 per cent value addition and the producers pay 100 per cent customs duties, however, the Customs Administration does not acknowledge these regulations. This created a big problem for all the zones in Nigeria. Many potential investors are put on hold due to this problem. b)  Resettlement issue: In several zones, state governments have promised to take care of the land acquisition and resettlement issues, however, these promises were not fulfilled, or only partially fulfilled, which hinder the further development of the zones. This is especially prominent in the zones which have advanced the furthest, such as the Ogun-Guangdong zone and the Lekki zone, though for the Lekki zone, the government has promised to settle it within three months. The KoKo zone is at the very early stage, but once it advances, the issue will be quite significant due to the KoKo town in the zone’s proximity. c)  Infrastructure: This is an overall constraint for all the zones but at different degrees. In general, power, gas, roads, ports and airports are the key constraints and all of them try to resort to the PPP approach to solve the constraints. In the Delta State, due to the rich fuel and gas resources, the power, gas and off-site infrastructure seem not a big challenge, yet they still need to build the on-site infrastructure, which requires large amount of investment. Some of them have not completed the business plan and the feasibility study yet. The Lagos State Government has gotten a concession to build a sea port near the Lekki zone and is also planning to build an airport for the planned new Lekki metropolis. Some off-site roads still need to be built. d)  Environmental impact: All the zones have committed to comply with the environmental standards and minimise the environmental impact. So far some zones have

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completed the environmental impact assessment, but some have yet to complete, such as the KoKo zone and Asaba Information and Communication Technology (ICT) Park. When the zones begin to operate, the issue of managing wastes and pollution will continue to be a challenge, especially for those zones with a high component of oil processing and petrochemical sectors, such as the KoKo zone. e)  Zone management and operational know-how and experiences: Most of the zone developers, including the relevant government agencies, do not have the zone management and operational experiences, and many zone developers are only construction companies; therefore, it’s a challenge for them to identify the right partners to provide the critical knowledge and expertise on zone management and operations. In this regard, the Lekki zone is relatively in a better position – it has a Chinese zone as its minority stakeholder and has conducted several workshops/study tours for the local partners to understand the Chinese/East Asian experiences in SEZs. f)  Host government ownership and continuity: This is especially a challenge for the Ogun zone given that the new state government doesn’t fully recognise the potentials of the economic zones and doesn’t fully acknowledge the commitments made by the previous government. Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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CONCLUSION An overall mapping of global actors in Africa is very important to correctly assess the negative and positive aspects of the China-Africa partnership in industrialisation. China is one of the many important actors in Africa’s new economic, peace and security landscape that are competing for favourable relations with and within Africa. The ChinaAfrica partnership is one of the multiple partnerships the AU has developed, including those with the EU, India, Turkey, Latin America and the US. Both the West and the East compete for Africa’s resources and markets, as well as diplomatic and security preferential spheres of influence.55 China, however, supersedes both regions due to its industrial record on the continent. The policies of African countries and the industrial capacity of local manufacturing sectors are critical factors in determining the impact of Chinese investments in an individual country. A good example of how the “new” Africa-China economic partnership is triggering structural transformation is Ethiopia. Like many other African countries, Ethiopian-China trade and investment flows have grown rapidly over the last decade. Chinese companies are now building an electrified railway for US$2.8 billion, upgrading Ethiopia’s telecommunications for US$1.3 billion and constructing hydroelectric power plants and transmission lines for US$1.2 billion. However, China’s engagement is not limited to the financing of infrastructure projects; it is also invested in the productive sector. Needless to say, some Africans understandably have concerns about the trade imbalance, the relatively poor quality of some Chinese goods and services, the application of lower standards of environmental practices, and the implications of an industrial partnership. The involvement of some Chinese companies in corrupt practices, and low

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labour and safety standards have also been sources of serious debate in many African countries and have featured on election platforms in countries like Zambia and Senegal, where a lot of urban renewal is being undertaken by China. The issue of Chinese migrants invading Africa and their impact on local labour markets has also provoked the backlash of local communities. Despite the efforts of some African countries, such as Ethiopia and Nigeria, the transfer of technology and skills from Chinese companies to Africa remains disappointing.56 China’s industrialisation efforts in Africa need to improve on this image in concrete terms.57 Moreover, China’s dealings in Africa reflect the character of the host states and governments. Chinese companies acclimatise quickly to the system of the partner state; with transparent systems Chinese companies operate in transparency. If faced by a corrupt system, they deal accordingly in a corrupt manner. Indicative of the weak legislative, regulatory and enforcement systems of African countries and their corrupt officials, Chinese and other companies exploit these weakness to their advantage. In this regard, Africans take the lion’s share of responsibility for these weaknesses. However, China also shares the blame as it has contributed, albeit to varying degrees, to these weaknesses due to a lack of normative principles and mechanisms for oversight of its dealings in Africa.58 62 Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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Africa needs to strengthen ‘the policy umbrella’ through more stable macroeconomic policies, more dependable provision of government services, and expanded infrastructure investments, including support for regional trade (e.g. improved roads and border post management), which the Chinese government is willing to offer. Regional and multilateral negotiations should address ‘tariff escalation’, whereby imports of processed goods incur higher tariffs than imports of primary commodities, and should improve the value of tariff preferences by eliminating onerous and unworkable rules of origin. There is a win-win situation as Africa needs China’s delivery of easy soft loans, quick services and cheap goods. In return, it provides China with relatively untapped markets, huge natural resources and energy security. Africa and China also need each other for mutual support in global diplomacy, including the reform of the United Nations and the United Nations Security Council. Also, such support would bring about diplomatic backing from most of the AU’s 54 member countries. China’s partnership has the potential to develop as Africans increasingly replace aid with trade and industrialisation.

Recommendations (Policy Options) Following from the above discussion, the following policy options for engagement towards FOCAC 2018 are proposed: 1)  The political and diplomatic front which is needed to strengthen the win-win relationship –

■  China’s

foreign policy on peace and security, as well as its position on African

domestic politics, needs to be revisited. It should be guided by norms jointly set by

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it and the AU together.

■  The



■  The

AU needs to initiate this discussion and FOCAC could serve as an excellent

entry point to address this normative problem in the partnership. AU should engage Chinese policymakers to consider focusing on establish-

ing political will from both sides and a stronger political stance by China on the governance track record of African governments to be included in the governing principles of FOCAC.

■  Through

FOCAC, China could continue to support the efforts of the AU techni-

cally in the implementation of the African Peace and Security Architecture (APSA) through its involvement in troop deployment in African peacekeeping and the African Governance Architecture (AGA) towards peaceful, democratic and human rights protective regimes in Africa. Using the AU as an entry point as a multilateral platform for setting common standards and normative guidelines and supervision, China would be insulated from the accusation of interference in the domestic affairs of African countries, while at the same time, this approach would also mitigate attacks on China’s reputation at the global level as a spoiler of opportunities for peace in Africa.

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CHINA AND AFRICA’S INDUSTRIALISATION | Ukertor Gabriel Moti 2) Bilateral cooperation toward development priorities and investment –

■  While

policies at the AU level will be important in setting the overall guiding

normative framework for engagement, bilateral cooperation is still needed to be governed by national policies toward development priorities and investment.

■  A frican

countries should develop strong regulatory and enforcement mechanisms,

as well as policies determining how to negotiate with China in order to benefit



more from China’s partnership. These policies should include: i)  Labour issues – there should be clear policy on the type and number of expatri-





ate and local personnel for all joint ventures. ii)  Research, development and transfer of technology – there should be 25 per cent mandatory investment in R&D and practical training aimed at transfer of technology for sustainability of projects and programmes. iii) Tax holidays







■  The

ultimate responsibility of designing the adequate legislative and regulatory

policies and building effective enforcement mechanisms rests on the Africans. They are the final beneficiaries of reform of these kinds. Overhauling the legislative, regulatory and enforcement framework of African countries could be overwhelming. Incremental reform may offer the necessary time to reflect and effect changes. 3)  Special Economic Zones (SEZs) to stimulate industrialisation – with regard to the very popular model of China’s industrialisation strategy in Africa, the SEZs, there are several measures that policymakers in host countries can take to maximise the impact of the SEZs on industrial development.

i)  Firstly,

while African governments are providing an elaborate set of incentives to

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Chinese investors in the zones, few are actually subsidising local investors, and even fewer have put in place a regulatory framework to encourage local investors to set up in the zones, or local suppliers to provide inputs and services to SEZ firms.



■  For

the zones to succeed as a test case of industrialisation, it is crucial that

the government fully ‘owns’ the SEZs, believes in their potential and shows the political commitment to make them work.



■  This

requires that the zones be fully integrated into the country’s development

strategy and be seen as platforms for learning and technology transfer beyond

their short-term impact on jobs. ii)  Secondly, local ownership will be fostered if the host country government has an





equity stake in the zones. ■  This

can be justified against the numerous concessions made to the Chinese

developers, including leases of land, provision of offsite infrastructure and offers of a whole range of alluring fiscal incentives at high opportunity cost to the host country government.

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■  The

Nigerian government successfully negotiated a stake in the two zones;

this experience should guide future zone development elsewhere in Africa. However, excessive participation by national governments – as in Egypt’s Suez zone – should be avoided, since this might lead to interference and inefficiencies in zone management. iii) Thirdly, since local participation in the zones is critical to realising productivity spillovers, African governments must set up an incentive scheme – complementary to the US$1 billion SME fund proposed by the Chinese government – to support local firms’ investment in the zones. In addition, they must play a proactive role in selecting and promoting potential “winners” as was the case in East Asia.

iv) Fourthly, the industry focus of the SEZs should be negotiated between the host country government and the Chinese stakeholders, rather than being “imposed” by the latter.





■  This

will ensure that the zones’ activities are aligned with the country’s needs

in terms of industrial development and that any resulting technology spillover is more readily absorbed. Industries that are highly capital or skill intensive might contribute little to industrial upgrading in economies that are endowed with low-skilled labour and have had little experience with industry.



■  The

systemic constraints to industrial development will take longer to tackle,

but they must not be neglected. The SEZ host countries, both existing and potential, must invest in making local firms and the economy technology ready.



■  This

calls for substantial investment in local universities and research institu-

tions and the provision of incentives for firms to train their workers, adopt best

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management practices and to restructure and innovate. v)  Finally, linkages need to be established between tariff and trade policies on the one side, and industrial policies on the other. In some cases (South Africa is the outstanding example), a combination of earlier unilateral liberalisation and bilateral, regional and multilateral agreements have limited the policy space to nurture industrial development.

In conclusion, African governments, individually and collectively, must develop supportive policy and investment guidelines. Clearly-defined rules and regulations in the legal and tax domains, contract transparency, sound communication, predictable policy environments, and currency and macroeconomic stability are essential to attract longterm investors. Moreover, incentives – such as tax rebates to multinational companies that provide skills training alongside their commercial investments – will help local economies grow and diversify. In addition, each industrial policy should be tailored to maximise a country’s comparative sector-specific advantages. African countries must pursue beneficial economic strategies with their neighbours. Regional integration would help reduce the regulatory burden facing African industries by harmonising policies and restraining

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unfavourable domestic programmes. It would boost inter and intra-African trade and accelerate industrialisation.

REFERENCES 1 Sandrey, R. and Edinger, H., 2011. China’s Manufacturing and Industrialization in Africa. African Development Bank, Working Paper 128: Tunis, Tunisia. 2 The Bridges Africa Team, International Centre for Trade and Sustainable Development, Geneva, Switzerland. Available at www.ictsd.org [Accessed 20 August 2016]. 3 Mathews, G. and Yang, Y., 2012. How Africans Pursue Low-End Globalization in Hong Kong and Mainland China. Journal of Current Chinese Affairs, 2/2012. 4 Ibid. 5 Ibid. 6 Hu, Z. and Khan, M., 1997. Why Is China Growing So Fast? Economic Issues, International Monetary Fund Services, Washington, U.S.A, 7 Zeng, D. Z., 2010. Building Engines for Growth and Competitiveness in China: Experience with Special Economic Zones and Industrial Clusters. World Bank. 8 Hu and Khan, 1997. 9 Sullivan, A. and Steven, M.S., 2003. Economics: Principles in Action. Upper Saddle River, New Jersey: Pearson Prentice Hall. 10 Rostami, R., Lamit H., Seyed, M.K. and Rasoul, R., 2013. Industrialization and Sustainable Construction: A Case of Malaysia. Asian Journal of Microbiology, Biotechnology and Environmental Science, 15(2), pp.433–440.

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

11 Ancharaz, V., 2013. Can Chinese SEZs Spur Industrial Development in Africa? Bridges Africa, 2(6), pp.4–8. 12 Kaplinsky, R., 2008. What does the Rise of China Do for Industrialisation in Sub-Saharan Africa? Review of African Political Economy, 35(115), pp.7–22. 13 Gwata, F., 2013. African Infrastructure Financing: Closing the Gap under Tight Fiscal Constraints. Consultancy Africa Intelligence. Available at http://www.consultancyafrica.com [Accessed 8 November 2017]. 14 African Union. Agenda 2063: The Africa We Want. Available at http://www.agedna2063.au.int[Accessed 8 November 2017]. 15 Lawrence, M., 2014. Industrialization in Africa: Can the Continent Make it? Available at http://www. allvoices.com/contributed-news/16646879-industrialization-in-africa [Accessed 16 September 2016]. 16 Gopaldas, R., 2014. Can the Continent Make It? Available at http://www.allafrica.com [Accessed 8 November 2017]. 17 African Union. Agenda 2063: The Africa We Want. Available at http://www.agedna2063.au.int [Accessed 8 November 2017]. 18 Ibid. 19 Ancharaz, 2013. 20 Ibid.

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PART 3: China-Africa Industrial Cooperation | Chapter 4 21 Van der Lugt, S., 2014. China-Africa: An evolving relationship but invariable principles. Great Insights, 3(4). 22 Kaplinsky, 2008. 23 Van der Lugt, 2014. 24 Ibid. 25 Obinyeluaku, M., 2017. Africa must turn resources into manufactured export products. Available at http://www.businessday.com [Accessed 8 November 2017]. 26 Edinger and Sandrey, 2011. 27 Author Unknown. 2015. Chinese lender explains win-win partnership with Africa. Business Report. Available at http://www.iol.com [Accessed 8 November 2017]. 28 Ibid. 29 World Economic Forum, 2014. 30 Ibid. 31 United Nations Economic Commission for Africa (UNECA). 2014. Economic Report on Africa 2014, United Nations: Addis Ababa, Ethiopia. Available at http://www.uneca.org/era2007/pdf [Accessed 22 August 2016]. 32 Söderbom, M. and Teal, F., 2001. Can African manufacturing firms become successful exporters? Centre for the Study of African Economies-United Nations Industrial Development Organization, Working Paper No. 4. 33 Kaplinsky, R. and Morris, M., 2006. The Asian Drivers and SSA: MFA Quota Removal and the Portents for African Industrialisation. Institute of Development Studies, Brighton. 34 Premium Times, 9 July 2015. Excess Crude used for Fuel Subsidy. Available at www.premiumtimesng. com [Accessed 15 September 2016]. 35 2013 UN Conference on Trade and Development (UNCTAD) Report.

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36 Hammouda, B.H., Karingi, S.N., Njuguna, A.E. and Sadni-Jallab, M., 2006. Diversification: Towards a New Paradigm for Africa. United Nations Economic Commission for Africa: Africa Trade Policy Centre, Working Paper Number 35. 37 Kaplinsky, and Morris, 2006. 38 Sandrey and Edinger, 2011. 39 Naumann, E., 2004. Rules of origin under EU-South African Trade, Development and Cooperation Agreement and Cotonou Agreement: the textile and clothing sectors. Commonwealth Secretariat, Economic Paper 65. 40 Ibid. 41 Ibid. 42 Wood, A. and Mayer, J., 2001. Africa’s Export Structure in a Comparative Perspective. Cambridge Journal of Economics, 25, pp.369–394. 43 Ibid. 44 Eifert, B., Gelb, A. and Ramachandran, V., 2005. Business Environment and Comparative Advantage in Africa: Evidence from the Investment Climate data. Center for Global Development, Working Paper No. 56. 45 Lederman, D. and Maloney W.F. (ed.), 2007. Natural Resources – Neither Curse nor Destiny. World Bank publications, World Bank, Washington: D.C. 46 Kaplinsky, R., McCormick, D. and Morris, M., 2008. The Impact of China on Sub-Saharan Africa. Institute of Development Studies, Working Paper No. 291.

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CHINA AND AFRICA’S INDUSTRIALISATION | Ukertor Gabriel Moti 47 Author Unknown. 2015. Chinese lender explains win-win partnership with Africa. Business Report. Available at http://www.iol.com [Accessed 8 November 2017]. 48 Sandrey and Edinger, 2011. 49 Collier, P. and Venables, A.J., 2007. Rethinking Trade Preferences: How Africa Can Diversify its Exports. The World Economy, 30, pp.1326–1345. 50 Songwe, V. and Nelipher, M., 2011. China-Africa Relations: Defining New Terms of Engagement. Africa Growth Initiative, The Brookings Institution, Washington, DC. 51 Ibid. 52 Ibid. 53 Bräutigam, D., 2009. The Dragon’s Gift: The Real Story of China in Africa. Oxford University Press: New York. 54 Draws on World Bank. 2010. Chinese Investments in Special Economic Zones in Africa: Progress, Challenges and Lessons Learned. AFTFP. 55 Kaplinsky, 2008. 56 Maru, M.T., 2013. China-Africa Relations: Democracy and Delivery. Al Jazeera Centre for Studies. Available at http://studies.aljazeera.net/en/reports [Accessed 20 November 2016]. 57 Maru, M.T., Makda, S., Abraha, W., Senai, S. P., and Gao, D., 2011. A New Imperialism? Assessing the Impact of Chinese ODI in Africa. A paper presented at a conference in October 2011, Cambridge, Massachusetts.

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58 Schiere, R. and Rugumba, A., 2013. China and Regional Integration as drivers of Structural Transformation in Africa. Bridges Africa. 2(6). Pp.12–14.

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5

CHAPTER

AFRICA’S INDUSTRIALISATION AND CHINA’S OFDI IN THE MANUFACTURING SECTOR RATIONALE AND PRACTICES1

LU Feng

INTRODUCTION In recent years, the African continent has made significant strides in economic development and registered some of the fastest growing economies in the world. The growth is, nevertheless, constrained by structural issues, such as lagging industrialisation and a weak manufacturing sector. A dynamic manufacturing sector plays a crucial role in facilitating economic development due to various effects, such as: i) serving as a major growth engine; ii) creating non-farming jobs and absorbing surplus labour on a large scale; iii) providing a major source of fiscal revenue, since most developing countries rely on indirect tax, and; iv) its role in the interplay between investment in infrastructure and the development of industrial parks. As emphasised by the Forum on China-Africa Cooperation (FOCAC) Johannesburg Action Plan (2016-2018) ‘Industrialisation is an im-

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perative to ensuring Africa’s independent and sustainable development’.2 In addressing the constraints of lagging industrialisation and the weak manufacturing sector in Africa, a large amount of literature focuses on the domestic efforts of African countries and foreign aid.3 However, insufficient research has been conducted on the China-Africa production capacity collaboration (PCC) – in particular, on how China’s outward foreign direct investment (OFDI) in manufacturing may play a positive and effective role in this context. After a high growth rate of nearly 10 per cent per year for decades, China has become the world’s largest trader, the second largest economy, and the third largest OFDI player (Liu, et al., 2015). However, China is now facing challenges of structural changes. The Chinese economy has seen hikes in factor prices, such as wages, land and the exchange rate in recent decades, which puts pressure on economic restructuring and OFDI to Africa (Shen, 2015). Similar structural change in the New Industrialised Economies (NIEs) helped China kick off economic catch-up by opening-up in the early 1980s. China’s current restructuring may provide a contributing factor for Africa to solve her own structural problems. It may be helpful to also examine the economic rationale and practices behind China’s OFDI in the manufacturing sector in Africa. Besides conditions of social stability and Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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policy environment, four groups of factors in African countries may affect decisions on OFDI: i) labour and other non-tradable factors, such as land, electricity, logistics and other infrastructures; ii) natural resources (raw materials) and energy; iii) the domestic markets of the recipient country, and; iv) foreign markets in third countries. It is argued in this chapter that the way the four resources are used shapes the rationale for the three types of proposed manufacturing OFDIs into Africa. This paper contributes to the existing literature in three ways. Firstly, the paper analyses the relationship between the new trend in Chinese manufacturing, OFDI and the new opportunities for Africa to solve the structural problems of weak manufacturing. Secondly, the paper examines the rationale and practices for three types of manufacturing OFDIs into Africa, in the context of the cooperation between Africa’s industrialisation and China’s OFDI in manufacturing. Thirdly, the paper places the Type III manufacturing OFDI within the framework of the “intra-product specialisation” and global supply chain,4 which is rooted in the new environment of economic globalisation that evolved during the last half-century or so. It is a novel phenomenon that labour-intensive manufacturing activities may be transferred from a large emerging economy like China to African developing countries. This new phenomenon has yet to be fully examined in the standard theories on FDI, such as Dunning (1981)5and Dunning (1992).6 A study on the new type of manufacturing OFDI that is emphasised in this paper may shed light on the new mechanisms and driving force behind FDI flow and South-South cooperation. Following this introduction, the rest of the paper is organised as follows: Section 2 looks at the development of African economies in recent decades and discusses how they are constrained by the structural factor of lagging industrialisation. Section 3 provides a brief overview of the achievements of the Chinese economy and the challenges that China

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is facing at present, which shapes the rationale for Chinese manufacturing OFDI and provides new opportunities for Africa to solve the structural problems of weak manufacturing. Section 4 further introduces three types of manufacturing OFDIs and discusses both the rationale and practices of the cooperation between Africa’s industrialisation and China’s OFDI in manufacturing. Section 5 concludes the paper with policy implications.

AFRICAN ECONOMIES AT A CROSSROAD The growth rate of African economies has passed through three different stages since the 1980s (see Figure 5.1). The gross domestic product (GDP) growth rate for Sub-Saharan Africa was around 2.7 per cent from 1980 to 2000, i.e. lower than the global growth rate. It picked up to 6 per cent from 2001 to 2010. However, post the 2008 global financial crisis, its growth rate dropped to about 4.8 per cent on average, still higher than the global growth rate. African economies have entered a fast-growing period in the twenty-first century.

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Figure 5.1: Real GDP growth in sub-Saharan Africa (1900–2014, %)

Data source: International Monetary Fund, World Economic Outlook Database, April 2015.

African economies have witnessed steady growth in urbanisation in recent decades. The ratio of urban residents in the total population has grown steadily from 22.6 per cent in 1981 to 37.5 per cent in 2015. The growth rate of the urban population has been remarkable, at about 4 to 5 per cent for decades. However, in contrast to persistent and impressive growth in urbanisation, African economies face relatively sluggish growth in the industrial sector (see Figure 5.2). The average growth rate of the industrial sector was only 0.9 per cent during the period from 1980 to 1999, even lower than its population growth rate over the same period. The annual growth rate of the industrial sector increased to 4.3 per cent over the period from 2001 to 2007, but it declined to 2.7 per cent during the period from 2008 to 2015 (see Figure 5.2). The ratio of industrial value added to GDP was 30 to 35 per cent in the period 1980 to 2000, but the figure declined to 24.7

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per cent in 2015.

Figure 5.2: Growth rate of industrial sector and share of industrial value added in total GDP in Africa (1981–2015, %)

Data source: World Bank, World Development Indicators database, 2016.

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Along with sluggish growth in the industrial sector, African economies show a very low ratio of manufacturing (see Figure 5.3). The share of manufacturing in African economies compares to the ratio in low-income country groups, although the per capita GDP in Africa is 2.8 times as high as in the low-income countries (US$1714 vs US$612) from 2013 to 2015. The share of manufacturing is more striking if we make a comparison between the most developed regions in Africa and the world’s middle-income group of countries, where per capita GDP was US$4761 from 2011 to 2015.7

Figure 5.3: Share of manufacturing in GDP in different income group of countries (1980–2015, %)

Data source: World Bank Database, 2016.

In Africa, a higher per capita GDP is still associated with a larger share of the manufacturing sector (see Figure 5.4). For instance, per capita GDP in Southern Africa is the

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highest among the different regions in Africa, and its share of manufacturing is also the largest. This suggests a positive link between manufacturing growth and overall economic development.

Figure 5.4: Per capita GDP and share of manufacturing among regions of Africa in 2014 (US%, %)

Data Sources: United Nations database, 2016.

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An important reason why industrialisation lags behind economic growth relates to the supply side. The steel industry provides a useful example to illustrate this point. Africa’s steel output per capita increased quickly in the period 1960 to 1980, but it declined significantly in recent decades (see Figure 5.5). As a result, there is a large gap between steel output and consumption in Africa, with steel consumption currently double the rate of steel production.

Figure 5.5: Steel output per capita in Africa (1960–2015, kg per person)

Data Sources: World Steel Association Database, 2016

It is more striking to compare per capita steel output between China and Africa. Both the average growth rate and the absolute amount of per capita steel output were comparable between China and Africa from 1960 to 1980, but the gap has widened enormously in

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recent decades (see Figure 5.6).

Figure 5.6: Steel output per capita for China and Africa (1981–2015, kg per person)

Data Sources: World Steel Association Database, 2016

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A comparison can also be made between China and Africa in respect of the length of railway and the production of electricity. The gap has widened greatly in terms of railway length (see Figure 5.7) and per capita electricity consumption (see Figure 5.8) in the past two decades because of different paths of industrialisation.

Figure 5.7: Length of railway in China and Sub-Saharan Africa (1980–2015, 1000 kg)

Data Sources: World Bank, World Development Indicators database; National Bureau Statistics of China, 2016.

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Figure 5.8: Electricity consumption per capita China and Sub-Saharan Africa (1980–2015, kWh per year)

Data Sources: World Bank, World Development Indicators database; National Bureau Statistics of China, 2016

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From a macro-economic perspective, Africa has been trapped in a state of low saving and investment (see Figures 5.9 and 5.10) and not because of a lack of funds. In fact, Africa has absorbed a significant amount of external grants and net FDI (see Figures 5.11 and 5.12), but the average investment ratio is around 20 per cent - a relatively low level. Compared to the service sector, manufacturing is more capital-intensive and investmentdriven. Boosting industrialisation in Africa faces the difficulty of raising the ratios of saving and investing.

Figure 5.9: Investment in Africa (% of GDP)

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Sources: IMF, Regional Economic Outlook, Sub-Saharan Africa: Navigating Headwinds, April 2015; IMF, African Department database, and IMF, World Economic Outlook (WEO) database, 27 March 2015.

Figure 5.10: National Savings in Africa (% of GDP)

Sources: IMF, Regional Economic Outlook, Sub-Saharan Africa: Navigating Headwinds, April 2015; IMF, African Department database, and IMF, World Economic Outlook (WEO) database, 27 March 2015.

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Figure 5.11: Fiscal Grants in Sub-Saharan Africa (2004–2014, % of GDP)

VSources: IMF, Regional Economic Outlook, Sub-Saharan Africa: Navigating Headwinds, April 2015; IMF, African Department database, and IMF, World Economic Outlook (WEO) database, 27 March 2015.

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Figure 5.12: Net Foreign Direct Investment in Africa (2004–2014, % of GDP)

Sources: IMF, Regional Economic Outlook, Sub-Saharan Africa: Navigating Headwinds, April 2015; IMF, African Department database, and IMF, World Economic Outlook (WEO) database, 27 March 2015.

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As stated in the FOCAC Johannesburg Action Plan (2016-2018), “industrialisation is an imperative to ensure Africa’s independent and sustainable development. There are mutual needs for industry partnering and industrial capacity cooperation between China and Africa”.8 While the domestic efforts of African countries will be decisive in addressing the constraints, China’s OFDI on manufacturing may also play a positive role in this context through the China-Africa production capacity collaboration (PCC).

CHINA’s ECONOMIC GROWTH AND OFDI IN AFRICA The Chinese economy grew at about 9.3 per cent per annum in the post-reform era (see Figure 5.13). China’s GDP has been over US$11 trillion for nearly four decades.9 In 2016, China was still the fastest growing economy in the world, with an annual growth rate of 6.7 per cent.* Taking into consideration the population growth, China’s per capita GDP in real terms grew at over 8 per cent per annum in the post-reform era - slightly slower than GDP growth. In 2015, per capita GDP was about US$8 000, i.e. approximately 40 times per capita GDP in 1978 when reform was initiated.10

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Figure 5.13: China’s GDP and Annual Growth Rate (trillion ¥, %; 1978–2015)

Data Sources: National Bureau Statistics of China, 2016.

*

Data sources: National Bureau Statistics of China, 2016

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China has made great achievements in poverty reduction. While China has raised official poverty lines several times in recent decades - from about 300 per capita a year in 1990 to ¥2 800 per capita a year in 2013 – the percentage of the population living in poverty has been decreasing continually (see Figure 5.14). The poverty headcount ratio at US$1.90 a day (2011 PPP) (% of population) decreased from more than 80 per cent in the early 1980s to less than 2 per cent in the 2010s. Employment has been transformed, as highlighted by continuous growth in non-farming employment within the total employment growth rate (see Figure 15.13).

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Figure 5.14: Decline of Rural Poverty Population in China (10 000 persons; 1978–2015)

Data Sources: National Bureau Statistics of China, 2016

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Figure 5.15: Development of non-farm sector and Poverty reduction (1981–2015, %)

Data Sources: World Bank, World Development Indicators database; National Bureau Statistics of China, 2016.

The Chinese economy is now facing new challenges and opportunities. Modern economic development consists of persistent structural upgrading brought about by changes in factor prices through market mechanisms and policy coordination. China’s economy has seen hikes in factor costs such as wages, land prices and the exchange rate to varying

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degrees in recent years, imposing pressure on economic activities that have characterised China’s growth. China’s current restructuring may provide a plus factor for Africa to solve its own structural problems. Firstly, China faces a surge in labour cost. For example, the monthly salary of migrant workers rose from ¥579 in 2001 (or US$70 at the then exchange rate) to 2 864 in 2014 (or US$460) (see Figure 16). Salaries have increased four to fivefold over the past 14 years. Adjusted by about 40 per cent of consumer price growth during the period, the real average annual growth rate of salaries for migrant workers is more than 10 per cent (see Figure 5.16).

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Figure 5.16: Monthly salary and growth rate for migrated worker in China (1995–2014, ¥ ,%)

Data Sources: Lu (2012); National Bureau Statistics of China, 2016.

Another factor is the appreciation of the RMB in the last decade. Despite recent depreciation pressure, the RMB has appreciated substantially against the US$ in both nominal and real terms since 2005, while the RMB effective exchange rates appreciated by even

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larger magnitudes (see Figure 5.17).

Figure 5.17: Exchange rate of RMB vs. USD (2005 M1 2015 M10, ¥/US$, 2005 M1 = 100)

Data Sources: People’s Bank of China, State Administration of Foreign Exchange, 2016.

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Along with high economic growth, the price of urban land and housing has also risen sharply (see Figures 5.18 and 5.19).

Figure 5.18: Average price and development cost of urban construction land in China (2003–2014, ¥ ,10,000/mu,%)

Data Sources: Ministry of Land and Resources of China; Ministry of Finance of China, 2016.

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Figure 5.19: China’s commodity housing price and growth rate (2003M1 – 2016 MO, Y/m2)

Data Sources: National Bureau Statistics of China, 2016.

According to data released by the United Nations Conference on Trade Development (UNCTAD), China’s annual OFDI flow increased from US$2.85 billion in 2003 to US$145.67 billion in 2015, making China the third largest OFDI player in the world for five consecutive years (see Figure 5.20). Chinese OFDI grew from US$33.2 billion to US$1.1 trillion over the same period (see Figure 5.21).

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Figure 5.20: China annual flow of outward foreign direct investment (US$100 million, 2003 – 2015)

Data sources: Statistics Bulletin of China’s Outward Foreign Direct Investment and National Bureau of Statistics of People’s Republic of China, 2016.

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Figure 5.21: China stock of outward foreign direct investment (US$100 million, 2003 – 2015)

Data sources: Statistics Bulletin of China’s Outward Foreign Direct Investment and National Bureau of Statistics of People’s Republic of China, 2016.

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China’s OFDI into Africa has also grown quickly in the last decade. China’s OFDI in Africa so far peaked in 2008, largely due to the US$5.5 billion acquisition of Standard Bank in South Africa (see Figure 5.22). Apart from that, China’s OFDI presents a growing trend. Annual OFDI increased from less than US$100 million in 2003 to about US$3 billion in recent years (see Figure 5.22). The stock of China’s OFDI increased from US$490 million in 2003 to US$34.7 billion in 2015 (see Figure 5.23).

Figure 5.22: China annual outward HDI flow into Africa (2003 – 2015, US $100 million, )

Data sources: Statistics Bulletin of China’s Outward Foreign Direct Investment and National Bureau of Statistics of People’s Republic of China, 2016.

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Figure 5.23: China outward HDI stock in Africa (2003 – 2015, US $100 million, )

Data sources: Statistics Bulletin of China’s Outward Foreign Direct Investment and National Bureau of Statistics of People’s Republic of China, 2016.

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China’s OFDI into Africa, as a share of China’s total OFDI, has changed considerably in recent decades. It increased from 2.6 per cent in 2003 to 9.8 per cent in 2008, but it declined to 2.0 per cent in 2015 (see Figure 5.24). The share of China’s OFDI stock in Africa, compared to its total OFDI stock, increased from 1.5 per cent in 2003 to 4.2 per cent in 2008, but declined to 3.2 per cent in 2015 (see Figure 5.24).

Figure 5.24: Proportionof China HDI into Africa in China’s total outward FDI (2003 – 2015, %)

Data sources: Statistics Bulletin of China’s Outward Foreign Direct Investment and National Bureau of Statistics of People’s Republic of China, 2016.

The number of China’s firms investing in Africa shows a similar fast-growing trend as the value of OFDI, while its proportion in China’s total overseas firms has been decreasing

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since 2008 (see Figure 5.25).

Figure 5.25: Number of China’s firms investing in Africa and its proportion in China’s total oversea firms (2008–2015, %)

Data sources: Statistics Bulletin of China’s Outward Foreign Direct Investment and National Bureau of Statistics of People’s Republic of China, 2016.

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The share of China’s OFDI stock in Africa’s total FDI stock has been rising, suggesting the growing importance of China’s OFDI for Africa. The share of China’s annual OFDI in Africa’s total FDI inflow increased from 0.4 per cent in 2003 to 5.9 per cent in 2014 (see Figure 5.26).

Figure 5.26: Proportion of China outward FDI in the total FDI into Africa (2003–2014, %)

Data sources: Statistics Bulletin of China’s Outward Foreign Direct Investment and National Bureau of Statistics of People’s Republic of China, 2016.

The top five sectors attracting Chinese OFDI into Africa in 2015 are: (i) the mining industry, 27.5 per cent, (ii) construction, 27.4 per cent, (iii) manufacturing, 13.3 per cent, (iv) finance, 9.9 per cent and (v) technology services, 4.2 per cent. These add up to 82.3 per cent (see Figure 5.27). Nearly 70 per cent of Chinese OFDI was concentrated in secondary industries, with more than 40 per cent of OFDI, and the stock of manufacturing OFDI was about $4.6 billion (see Figure 5.27). According to other studies, the share of Chinese OFDI

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in manufacturing in Africa was higher. For instance, according to Shen (2015), the share of manufacturing OFDI in China’s total OFDI in Africa was 22 percent in 2009.

Figure 5.27: Value and share of top 5 sectors in which China’s FDI stocks in Africa are distributed (2015, US$100 million, %)

Data sources: Statistics Bulletin of China’s Outward Foreign Direct Investment and National Bureau of Statistics of People’s Republic of China, 2016.

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There are significant differences between private enterprises and state-owned enterprises (SOEs) in the sectoral distribution of China’s OFDI in Africa. Chinese private enterprises are more concentrated in manufacturing OFDI (Shen, 2015).11

THREE TYPES OF MANUFACTURING OFDIs INTO AFRICA It is widely acknowledged that the lag in growth in the manufacturing sector may be a major bottleneck for Africa’s long-term economic development. While internal factors and efforts in African countries are the most important factor in breaking bottlenecks, strengthening China-African cooperation may nevertheless provide a plus factor in solving the structural challenges faced by African economic development. On the one hand, China’s on-going economic restructuring and transfer of manufacturing jobs may play a positive role in helping change the situation. In recent years, the number of China manufacturing workers declined to less than 150 million in 2015, from its peak of 153.4 million in 2012. Many labour-intensive manufacturing sectors are under pressure to restructure, in part through the channel of OFDI.12 On the other hand, many African countries have an abundance of labour together with a scarcity of capital. It would be mutually beneficial for both China and Africa if Chinese firms transferred labour-intensive manufacturing industries to African countries through OFDI. To achieve effective ‘industrial partnering and capacity cooperation’13 between China and Africa, it is useful to examine different categories of China’s OFDIs in Africa and the economic rationale behind them. According to conventional OFDI theory, the main motivations of FDI and OFDI include: getting access to natural resources in the investing

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country; obtaining advanced technology or other strategic assets from the host country; developing or maintaining overseas markets; and taking advantage of the host country’s low-cost factors, such as labour (Dunning, 1981, 1992; Buckley, et al., 2007). In line with economic logic for FDI and practical experience concerning China’s OFDI in Africa, four groups of factors are identified as crucial factors shaping the Chinese OFDI. The first is labour and other non-tradable factors such as land, electricity, logistics and related infrastructure. The second is natural resources and resource-intensive products. The third is the domestic market of the recipient country; and the fourth is foreign markets. As shown in Figure 5.28, how to utilise the four resources shapes the rationale for a proposed OFDI.

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Figure 5.28: Interplay of OFDI with Four Resources Local labor

Local market

How to utilize the resources by a proposed OFDI

Raw material

Foreign market

While all OFDI must utilize local labor and other non-tradable factors, the differences among three types of OFDI arises from their special emphasis on distinct links with other three factors. In view of the relative importance assigned to different groups of factors in the process of decision making with respect to OFDI, China’s manufacture OFDI may be divided into three categories: local market-oriented OFDI in the manufacturing sector; raw materials-based OFDI in the manufacturing sector; and overseas market-targeted

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OFDI in manufacturing.

Local market-oriented OFDI in the manufacturing sector Type I is the local market-oriented OFDI in the manufacturing sector, which is mainly driven by the motivation to serve the local markets of OFDI recipient countries. In doing so, the firms in this type of OFDI utilise local non-tradable factors such as labour, land, electricity, etc. Products that result from OFDI are expected to be sold in local markets. Type I OFDI covers diverse sectors, including clothing and shoes, automobile reassembling and repairing, etc. This type of OFDI may occur and grow in a relatively spontaneous manner without substantial policy change and intensive coordination by the government. It helps improve product quality in the host countries. It may also help to substitute local goods for imported products in the related sectors. The weakness of this type of OFDI is that its growth is constrained by the size of the local markets, which is, in turn, determined by income growth in the recipient country. It also faces competition from local firms. Many Chinese OFDI projects in African countries fall under Type I OFDI. Taking the Eastern Industrial Zone in Ethiopia as an example, several Chinese OFDI firms operating

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in this zone fall into this category. For example, an automobile assembly and sale firm (Yangfan：杨帆) was established by Chinese auto-maker, Lifan（力帆）, from Chongqing, China, with US$7.5 million and had 150 workers at the end of 2013.14 Another example is the Great Wall Packing Materials company“ (长城包装材料厂）. It produces plastic bags that are sold at local markets. US$0.54 million was invested and 150 workers were employed by the end of 2013.15 The East Cement Joint-Stock Company produces cement. US$59 million was invested producing revenue of US$51 million, and 281 local workers had been employed by the end of 2013.16 In South Africa, Chinese automobile manufacturers, FAW and BAIC, are prepared to invest R11 billion to open a modern plant in the Coega Industrial Development Zone and plan to produce 100 000 vehicles per year.17;* The project aims to help Chinese vehicles get access to the African market and consolidate South Africa’s position as the largest automobile manufacturing country in Africa.

Raw materials-based OFDI in the manufacturing sector Type II OFDI is raw materials-based OFDI in the manufacturing sector, which is mainly driven by the need to utilise the abundant local supply of raw materials and resourceintensive products. In principle, this type of OFDI covers a wide range of activities, from processing of agricultural products to extracting resources (oil, gas, minerals, and stone materials). In practice, the most relevant sectors for most African countries in this context are various light manufacturing industries that intensively use locally produced agricultural products as raw materials. Many local industries in African countries (such as coffee and fruit juice processing, cotton spinning, and tanneries) fall into this category of manufacturing.

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Many African countries enjoy a comparative advantage in producing a variety of agricultural products. In many instances, the development of various light industries that are closely related to locally-produced farming products, provides a viable opportunity to develop manufacturing capability in those countries. Although there are many successful examples of this, this strategy also faces difficulties. As observed in a report by the African Centre for Economic Transformation, ‘… processing tends to be intensive in capital and skills, so it would demand more of the factors Sub-Saharan countries lack’.18 Historically, China has made a considerable number of Type II OFDI in manufacturing sectors in Africa. As a major part of the China-African economic cooperation process in the 1960s and 1970s, China helped construct numerous light industry factories in African countries. The first was a cigarette factory constructed in the Republic of Guinea, that utilised locally-produced tobacco. At the same time, the Chinese government sponsored dozens of cotton spinning mills, tanneries, shoemakers, sugar houses, tea factories, rice

*

Remarks by H.E. Ambassador Tian Xuejun at the Opening Ceremony of China-Africa Industrialisation and Agricultural Modernisation Seminar, see http://www.chinese-embassy.org.za/eng/sgxw/t1414237. htm

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mills, corn-flour processing plants, peanut oil processing plants, etc., in numerous African countries, aimed at helping to develop the local light industry through using local raw materials. One famous example is the Tanzania-China Friendship Textile Co. Ltd.19 With more than ¥70 million in interest-free loans, China helped Tanzania construct the factory in 1968. But this factory stopped production due to heavy losses of over US$10 million in the early 1990s. It was changed into a joint venture by Tanzania and China in 1996.20 The Chinese have since injected over ¥200 million in floating capital and technological upgrades into the project to make it viable and profitable.21 The above projects show the genuine intention to achieve economic cooperation between China and Africa in the past. These projects have helped to develop industrial bases for Africa. But a more sustainable production capacity collaboration should place more emphasis on the role of market mechanisms and private entrepreneurship.

Overseas market-targeted OFDI in manufacturing Being different from the previous two types of OFDI, Type III manufacturing OFDI in African countries aims to sell the products produced to overseas markets. Underpinned by the rationale of ‘intra-product specialisation’ in the global value chain,22 it may grow quickly on a large scale. Apart from its external orientation in favour of utilising opportunities of economic globalisation, this type of OFDI presents two economic attributes that are important in facilitating the early stages of economic development in African countries. On the one hand, this type of OFDI tends to be labour intensive in nature, and it may therefore generate non-farming jobs on a large scale of and absorb abundant rural labour in the recipient countries. On the other hand, this type of OFDI usually sells their

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products to the markets in developed countries. Therefore, it generates foreign exchanges, which is a scarce resource for many African countries. Type III OFDI in the garment sector flourished in Mauritius and Madagascar in the era of the Multi-Fabre Agreement (MFA), but faced difficulties in sustaining growth due to the phasing out of MFA in 2005, and other factors. In recent years, Chinese firms have started to make this new type of OFDI in Africa. The Huajian（华坚）shoe factory in Ethiopia is a noticeable example. Headquartered at Dongguan, Guangdong, in the Southern Province of China, Huajian is one of the largest OEM and ODM shoe producers in China, with 25 000 employees, an annual output of 16 million shoes and export revenue of US$300 million in 2012.23 Huajian started investing in Addis Ababa, Ethiopia, in late 2011. The project began in January 2012 with the hiring of 600 local workers and three months later, the first container of women’s shoes produced at Huajian, Ethiopia, was shipped to the US market. By the end of 2013, Huanjian had invested US$4.9 million, realised total sales revenue of US$22.2 million, and employed 3 500 workers.24 Huajian has become the largest shoe exporting firm and one of the largest manufacturing firms in Ethiopia after being in operation for less than two years. Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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Comparison of three types of manufacturing OFDI Based on the framework provided in Figure 5.28, the three categories of China’s manufacturing OFDI in Africa can be summarised in Figure 5.29. While all OFDIs must utilise non-tradable factors such as labour, land, electricity, etc., in the recipient countries, the characteristics of the three categories of manufacturing OFDIs are indicated by their additional attributes in terms of serving the local market, using locally produced raw materials, and selling their products to a third country market. The three types of manufacturing OFDIs are indicated by the circles in Figure 5.29.

Figure 5.29: Three Types of Manufacturing OFDI

Local labor

I

China OFDI

II Raw material

Local market

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Foreign market

Several points explain the relationship between the three categories of manufacturing OFDIs presented in this preliminary typology analysis. Firstly, the three types of manufacturing OFDIs all stand on their own merit. They each play a positive role in facilitating economic growth in the OFDI recipient countries and should all be encouraged and nurtured. Secondly, different types of manufacturing do not compete, but are complementary and even overlap. For example, an OFDI project specialising in processing agricultural products may sell its products in the domestic market of the OFDI recipient country. Thirdly, different types of OFDI may produce positive spill-over effects to strengthen each other. For example, the successful growth of type II OFDI may boost income growth in the recipient countries through more productive utilisation of locally-produced raw materials and this may, in turn, expand the local market and increase the growth of type I OFDI. Continuous growth of type III OFDI may produce significant positive impacts on the economy through upgrading the infrastructure, improving labour and managerial skills,

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and enhancing competitiveness through exposure to external competition in a more open environment.

CONCLUSION AND POLICY IMPLICATIONS It has been widely acknowledged that the prospects for African economic development are dependent on persistent industrialisation, in which the dynamic growth of manufacturing features prominently. Bearing in mind that local efforts and internal factors are decisive in shaping the trajectory of African economic development in the future, OFDI in manufacturing from China and other countries may also play an important role in this context. China sees the transfer of labour-intensive manufacturing to developing countries, including Africa, as being a result of factor prices (such as labour, land, etc.) rising rapidly in recent years. China’s manufacturing OFDI has become an important channel through which China-Africa economic cooperation improves. In view of the sheer size of China’s manufacturing sector, which employs about 150 million workers, the potential of China-African cooperation in sharing manufacturing capacity cannot be over-estimated. As noted by Professor Lin, transfer of labour-intensive jobs from China to Sub-Saharan African countries will provide unprecedented opportunities for African economic development.25 Based on an overview of the current status of both economic development in African countries and economic transformation under way in China, this paper attempts a typological observation on China’s manufacturing OFDI into Africa. Four categories of economic factors in the OFDI recipient countries are identified as the basic variables shaping

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the decision of a potential OFDI project by a Chinese firm. As indicated in Chart 5.2, the four groups of variables include: i) local labour and other non-tradable factors; ii) local markets; iii) raw materials, and; iv) foreign markets. While all OFDIs must utilise local labour, differences in the three types of OFDIs arise from their special emphasis on distinct links with the other three categories of factors. As a result, the Chinese OFDI in Africa can be divided into three categories, i.e.: focus on local markets, raw materials, and foreign markets. Underpinned by the rationale of ‘intra-product specialisation’ and the global supply chain,26 the type III manufacturing OFDI or FDI is rooted in the new environment of economic globalisation, which evolved in the last half century or so. It is an even more novel phenomenon that labour-intensive manufacturing activities may be transferred from a large emerging economy like China to developing countries in Africa. This new phenomenon has yet to be fully examined in the standard theories of FDI. Study on the new type of manufacturing OFDI in this paper may help enrich the understanding of the mechanisms and driving forces behind FDI and South-South cooperation. On the other hand, nurturing this new type of manufacturing OFDI may provide an important channel through which the commitments of the FOCAC Johannesburg Action Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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Plan (2016-2018) on industrial capacity cooperation may be implemented. As stated in the FOCAC Action Plan, “The two sides are ready to combine China’s competitive industries and high-quality industrial capacity with Africa’s industrialisation and economy diversification to promote bilateral cooperation aimed at comprehensive transformation and upgrading.” As demonstrated by the case of Huajian Shoes - Type III manufacturing OFDI - employment bottlenecks and a shortage of foreign exchange in African countries may become a thing of the past. The special economic characteristics of this new type of manufacturing OFDI are particularly helpful in pushing forward the industrialisation and economic transformation badly needed in many African countries. To facilitate further growth of China’s manufacturing OFDI into Africa, especially Type III with its focus on foreign markets, African countries may wish to consider policy adjustments to maximise the impact of China-Africa cooperation in this area. Firstly, it may be necessary to give full attention to the potential role of development zones (DZs). African governments may need to design and set up DZs or industrial parks to promote industrialisation through the following effects: i) to provide a platform for policy experiment to deal with various bottlenecks faced by many African countries; ii) to attract FDI inflow, enhance productivity and industrial structural upgrading; iii) to create demonstration effects and support the new approach to reform and development. Secondly, more emphasis should be given to promoting infrastructural investment. Large-scale infrastructure investment is necessary to nurture manufacturing and spur economic growth. Because investment returns on infrastructure comes in a long run and the scale of the investment projects are sometimes huge, private firms may find it difficult to provide sufficient infrastructure investment. African governments may consider playing an active role in facilitating infrastructure investment that, in turn, provides positive

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externalities for the private sector. Finally, it may be necessary to enhance labor market flexibility. New types of manufacturing face international competition. A flexible labor market is needed to maintain cutting edge competitiveness in external markets. African governments’ policies and regulations regarding minimum wages, overtime work etc. may need to be balanced with the welfare and interests of the workers and the viability of the enterprise. In the long-run, the mutual interests of both workers and firms rest on sustainable economic growth that is pre-conditioned upon successful industrialization and dynamic growth in the manufacturing sector.

REFERENCES 1 The paper was presented at the “China-Africa Industrialization and Agricultural Modernization Seminar”, in Pretoria, South Africa on 10 November 2016. The authors thank the discussants for their helpful comments and suggestions.

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The Forum on China-Africa Cooperation Johannesburg Action Plan (2016-2018). Available at http://www. fmprc.gov.cn/mfa_eng/zxxx_662805/t1323159.shtml [Accessed 25 November 2017].

3 ACET (African Centre for Economic Transformation). 2014. African Transformation Report: Growth with Depth. 4 Lu, F., 2004, Intra-Production Specialization. China Economic Quarterly, 1(4), pp.55-82. 5 Dunning, J. H., 1981, The Eclectic Theory of the MNC, London: Allen and Unwin. 6 Dunning, J. H., 1992, Multinational Enterprises and the Global Economy, Addison-Wesley: New York. 7 Shen, X., 2015. Private Chinese Investment in Africa: Myths and Realities. Development Policy Review, 33(1), pp.83-106. 8

The Forum on China-Africa Cooperation Johannesburg Action Plan (2016-2018). Available at http://www. fmprc.gov.cn/mfa_eng/zxxx_662805/t1323159.shtml [Accessed 25 November 2017].

9 Ibid. 10 Liu, X., Gou Q., Lu, F., 2015. Remedy or Poison: Impacts of China’s Outward Direct Investment on Its Exports. China & World Economy, 23(6), pp.100-120. 11 Shen, X., 2015. Private Chinese Investment in Africa: Myths and Realities. Development Policy Review, 33(1), pp.83-106.

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12 As summarized by Huang and Wang (2012), Chinese OFDI used to be characterized by “investing overseas without moving the factories abroad”. The main purpose of Chinese enterprises’ OFDI was to get access to advanced technologies and other strategic assets to enhance the productivity of domestic firms or to obtain natural resources overseas to nurture the development of the domestic industrial sector (Huang and Wang, 2011, 2012). Therefore, the style of Chinese OFDI was described largely as domestic-oriented in the sense that it intends to enhance domestic productivity and strengthen domestic production (Wang, et al., 2014). The above pattern may reflect the reality of China’s OFDI into developed economies to some extent. Manufacturing OFDI in Africa plays an important role in SinoAfrican cooperation and provides new opportunities for Africa to solve the structural problem of weak manufacturing. 13 As committed to in The Forum on China-Africa Cooperation Johannesburg Action Plan (2016-2018), “The Chinese side is willing to give priority to Africa in industrial partnering and industrial capacity cooperation. The African side welcomes the transfer of labour-intensive competitive industrial capacities of China to Africa in an orderly way, assisting Africa to increase employment, taxation and foreign exchange, and achieving technology transfer and common development.” 14 Lu F., 2016. Africa’s industrialization and China’s OFDI on manufacturing. China-Africa Industrialization and Agricultural Modernization Seminar, in Pretoria, South Africa on 9 and 10 November 2016. 15 Ibid. 16 Ibid. 17 Remarks by H.E. Ambassador Tian Xuejun at the Opening Ceremony of China-Africa Industrialization and Agricultural Modernization Seminar. Available at http://www.chinese-embassy.org.za/eng/sgxw/ t1414237.htm [Accessed 04 August 2017]. 18 ACET (African Centre for Economic Transformation). 2014. African Transformation Report: Growth with Depth. 19 Lu, 2016. 20 Ibid. 21 Ibid. 22 Lu, 2004.

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AFRICA’S INDUSTRIALISATION AND CHINA’S OFDI IN THE MANUFACTURING SECTOR | LU Feng 23 Lu F., Jiang Z. and Zhou J., 2013. “The Huajian Phenomenon” and the Evolving Patterns of China’s Investment in Africa. International Economic Review, 5, pp.67-76. 24 Lin, Y., 2014. New Structural Economics: A Framework for Rethinking Development and Policy (enlarged edition). Beijing: Peking University Press. 25 Ibid.

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26 Lu, 2004.

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6

CHAPTER

AFRICA’S MINERAL RESOURCES SECTOR AND EVOLVING RELATIONS WITH CHINA

TRANSITIONING FROM RESOURCES DEPENDENCY TO ECONOMIC DIVERSIFICATION THROUGH MINERAL BENEFICIATION Sizwe Phakathi

INTRODUCTION In recent years, the sustainability, governance and economic competitiveness of Africa’s natural resources have been in the spotlight at national, regional and international levels. At the heart of this is the question of why the African continent has been lagging behind other continents in terms of social and economic development, despite its natural resources endowment. This chapter examines the vision of African mining, with specific focus on minerals-focused strategies that promote industrialisation and a diversified economy for the benefit of all stakeholders at local, regional and national levels. The chapter seeks to achieve this by presenting the key features of South Africa’s mineral beneficiation strategy. South Africa is used as a case study of one of the African countries that started the journey of aligning its resource-based development initiative with industrialisation strategies, seeking a diversified economy to improve the country’s

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comparative advantage and competitiveness in the global economy. The chapter goes on to examine the role of China in the context of mineral beneficiation, industrialisation and economic diversification, and the expansion of the Chinese investment in South Africa’s minerals industry. The last section provides recommendations on the role of China in the realisation of South Africa’s mineral beneficiation strategies, policies and programmes.

AFRICA’S MINING VISION AND SUSTAINABLE SOCIAL AND ECONOMIC DEVELOPMENT For many years, Africa has not fully realised the benefits of its mineral resources endowment, due to a number of logistical and structural challenges relating to: the lack of infrastructure (such as roads, rail, ports, electricity), technology, skills innovation, and research and development capacity; ineffective mineral regulations; political instability; civil war; and corruption. African countries hold 30 per cent of the world’s reserves of minerals and metals and over 10 per cent of oil reserves. Ironically, African resource-rich

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countries have performed poorly compared to less-endowed countries in advancing socioeconomic development.1 The extraction of minerals has not been effectively linked and integrated with other economic sectors to promote: ■

Upstream linkages, comprising the provision of mining equipment and local contentfocused procurement in the supply of mining equipment.

■

Downstream linkages, involving the smelting of the ore and local manufacturing of and creating the market for refined mineral products, are also important.

■

Sidestream linkages, such as financial services, power, communications, skills and technology development, which can reinforce the economic linkages in the mineral value chain.

■■ Lateral

linkages, entailing the application of mining capacity and expertise to other

sectors, where materials handling, construction equipment and process control devices utilised in mining are sold to non-mining sectors2 not involved in the local manufacturing of mining products and processing of raw materials phase rather than being shipped to developed countries in raw form. This has robbed mineral-rich African countries of meaningfully realising the socioeconomic development impact of their natural resources. It is for this reason that Africa’s mineral endowment has been described as the ‘Dutch-Disease’, as mineral endowment has ironically translated into a ‘curse’ rather than a ‘blessing’ for many of the African mining countries.3 The role of the developmental state on the continent is, therefore, critical in addressing mineral resource challenges. The most basic element of the development state is that its ‘major preoccupation is to ensure sustained economic growth and

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development on the back of high rates of accumulation, industrialisation and structural change’.4 Table 6.1 below shows some of the most important mineral resources found in Africa.5

Table 6.1: Most important mineral resources in Africa, 2005 Mineral

Production

Rank

Reserves

Rank

Platinum Group Metals (PGMs)

54%

1

60+%

1

Phosphate

27%

1

66+%

1

Gold

20%

1

42%

1

Chromium

40%

1

44%

1

Manganese

28%

2

82%

1

Vanadium

51%

1

95%

1

Cobalt

18%

1

55+%

1

Diamonds

78%

1

88%

1

Aluminium

4%

7

45%

1

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Table 6.1 also demonstrates that Africa remains at the forefront of mineral endowment in light of the fact that most of its minerals remain largely untapped. In 2008, the African leaders commissioned the African Union (AU) and the United Nations Economic Commission for Africa (UNECA) to draft the Africa Mining Vision (AMV), in preparation for approval at the First African Union Conference of Ministers Responsible for Mineral Resources Development.6 The AMV articulated the need for a “transparent, equitable and optimal exploitation of mineral resources, underpinned by broad-based sustainable growth and socio-economic development.”7 This shared vision is further outlined in the AMV document as comprising the following: a) A knowledge-driven African mining sector that catalyses and contributes to the broad-based growth and development of, and is fully integrated into, a single African market, through:

■



■  up-stream

down-stream linkages into mineral beneficiation and manufacturing;



■  side-stream

linkages into mining capital goods, consumables and services

industries; linkages into infrastructure (power, logistics, communications, wa-

ter) and skills and technology development (human resources development, and research and development);

■ mutually

beneficial partnerships between the state, the private sector, civil soci-

ety, local communities and other stakeholders;

■

comprehensive knowledge of its mineral endowment.

b) A sustainable and well-governed mining sector that effectively garners and deploys resource rents and that is safe, healthy, gender inclusive, ethnically inclusive, environ-

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

mentally friendly, socially responsible and appreciated by surrounding communities. c) A mining sector that has become a key component of a diversified, vibrant and globally competitive industrialising African economy. d) A mining sector that has helped to establish a competitive African infrastructure platform by maximising its propulsive local and regional economic linkages. e) A mining sector that optimises and husbands Africa’s finite mineral resource endowment and that is diversified and incorporates both high value metals and lower value industrial minerals, at both commercial and small-scale levels. f) A mining sector that harnesses the potential of artisanal and small-scale mining to stimulate local/national entrepreneurship, improve livelihoods and advance integrated rural social and economic development. g)

A mining sector that is a major player in vibrant and competitive national, continental and international capital and commodity markets.

At the heart of the vision for African mining is the acknowledgement that the realisation of the vision will need to be supported by a cocktail of development strategies that are aimed at unlocking the structural challenges that have stifled Africa’s industrialisation

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and socio-economic development.8 Africa’s resource-based development strategies will need to be aligned with the social and economic development needs and contexts of each mining country, rather than copying strategies of other resource-based economies.9 Many of the African mining countries have not meaningfully and strategically benefited from their mineral endowments, due to structural impediments that have stalled the industrialisation and development of African economies. The extraction of raw minerals in Africa has, to a large extent, created resource dependency that is characterised by a lack of diversified industrial development. Conversely, other resource-based economies in the developed countries (such as Sweden, Finland and the US) were long able to develop a diversified industrial sector through their mineral endowments. Similarly, in the recent past, middle income countries such as South Africa, which tried to beneficiate minerals, will be discussed later.10 Experience from Nordic countries that have successfully crafted resource-based development and industrialisation strategies has shown that such a process depends on favourable internal and external factors, including, most notably, actions from key stakeholders, especially governments, through strong state intervention. Post-war Europe ushered in the developmental state, where government intervened in the market to grow economies. Developmental states are not just limited to Africa, as a developmental state would be a state where government plays an active and significant role in the economy in support of selected, mostly private sector, industries. However, its emphasis on the role of the state in either intervening directly to stimulate economic growth, or through creating conditions that influence the nature and direction of growth, can be traced further back to the German nation-building protectionism of Friedrich List, in the nineteenth century, and the industrialisation of Asian countries in the twentieth century.11

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

The action that is needed to achieve a resource-based diversified economy is as follows: a) Ability to ‘govern’ the market, and to rally business, labour and other social partners. b) Facilitate and nurture the appropriate human capital in tandem with the development of effective social responsibility measures. c) Provide supporting infrastructure, including roads, rail ports, energy and water and telecommunications. d) Encourage the establishment of strong instruments of collaboration (industry/professional associations, Chamber of Mines, cluster councils, incubators/technology packs) and foster agglomeration effects and learning processes by establishing a critical mass of key similar, ancillary, related and associated industry players. e) Promote local beneficiation and value addition of minerals to provide manufacturing feedstock. f) Promote the development of mineral resources (especially industrial minerals) for local production of consumer and industrial goods. g) Establish an industrial base through backward and forward linkages. h) Encourage and support small and medium-scale enterprises to enter the supply chain.

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i) Improve the quality of the business environment, increase private sector confidence and participation, and reduce entry barriers and operating costs to achieve external economies of scale. j) Ensure compliance of industry players with the highest standards of corporate governance, and environmental, social and material stewardship. k) Harness the potential of mid-tier resources that may not necessarily attract major international companies, but may attract high net worth individuals, including local entrepreneurs. l) Establish the requisite enabling markets and common platforms for services (raising capital, commodity exchanges, legal and regulatory support, marketing support and know-how). m) Harness

the potential of public private partnerships (PPPs).

n) Promote regional integration and harmonisation to facilitate factor flows. What is important to harnessing Africa’s natural endowments is the creation of a government-led shared vision and collective action between stakeholders. This is the path that the Nordic countries have taken to successfully harness their mineral endowment into a diversified economy. It is argued that such a shared vision and collective action in the development of Africa’s resource-based industrialisation strategy needs to be developed at national and regional levels, taking into account the different socio-economic contexts of African countries. In order to shift away from the resource “enclave” type development12 that has characterised the African mining economy for a long time, Africa needs to create local resource-based economic linkages at national or regional levels. One example that demonstrates a shared vision between stakeholders is the up-

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grading of the Nacala Logistics Corridor in Mozambique aimed at increasing the coal transport capacity of the railway from Moatize to the port of Nacala. This development corridor illustrates the benefits of harnessing Africa’s mineral endowment through collective action between key stakeholders including government, mining companies and local enterprises. Effective coordination between departments and alignment of a set of interventions from multiple sectors is crucial to effecting a resource-based development and industrialisation strategy.13 Guinea is another illustrative case study of an African mining country that has sought to diversify and industrialise her economy away from natural resource endowments. Guinea’s Southern Growth Corridor comprises a US$20 billion investment channelled by Rio Tinto, Chinalco and International Finance Corporation in the world-class Simandou’s high-grade iron ore. Simandou is reported to have estimated reserves of 1.8 billion tonnes of iron ore, which can deliver 100 million tonnes annually for 40 years.14 To harness this significant potential, the US$20 billion investment will be used for the construction of a multi-use and multi-user railway to the Focariah terminal and a newly constructed deep-water port at Moribaya.

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The construction of the railway to Focariah and water port to Moribaya will not solely be for the transportation of minerals, but will be complemented by infrastructure, including 1 000 km of new roads, deployment of fibre optic and wireless systems and unlocking economic opportunities in other sectors such as agriculture, forestry, aquaculture and services. This Simandou corridor project is set to transform Guinea’s economy, as it is expected to create 45 000 jobs and double the country’s gross domestic product (GDP).15 South Africa is another African mining country that offers valuable lessons for the realisation of the AMV. The important point to note in the creation of a diversified industrial economy associated with and linked to mining, is that policies and vision alone will not alter structural challenges inhibiting the competitiveness of Africa’s resources sector, if they are not complemented by appropriate laws, regulations and business plans that have clear and measurable milestones, timelines and monitoring and evaluation systems.16 South Africa’s Richards Bay Harbour and Coal Rail Line is one case study that shows how this integrated approach can ensure success.17 The Richards Bay Harbour and Coal Rail Line projects demonstrate how government, through the Industrial Development Corporation (IDC), worked collaboratively with the private sector in transforming a small fishing village into a significant industrial hub in the country. The direct and indirect spin-offs of the Richards Bay Coal Terminal entailed varied forms of investment including infrastructure, logistics, power supply and skills development that enabled the development of other large-scale, capital-intensive and resource-based industries, such as Billiton Bayside and Hillside Aluminium Smelters, Indian Ocean Fertilisers, Mondi Kraft and Richards Bay Coal Terminal (one of the largest coal terminals in the world with installed export capacity of 91 million tonnes per year) and Bell Equipment.18 Moreover, one of the effects of this harbour and coal railway line

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investment is the emergence of a cluster of small and medium-scale providers of goods and services to the main industries.19 The afore-mentioned cases show the importance of collaboration between government and private sector organisations to effect mineral-based economic linkages, resource-based industrialisation and spatial development initiatives. Without this stakeholder collaboration and alignment between mineral policies and industrial and trade policies, the vision of creating a resource-based and diversified industrialised African economy is doomed to fail.20 One of the vehicles through which African mining countries could diversify and industrialise their natural resources endowment is beneficiation that is underpinned and supported by collaboration between key stakeholders and aligning the mining policy with the industrialisation strategy. South Africa has developed a comprehensive beneficiation strategy for the minerals industry that offers valuable lessons for the realisation of the objectives of AMV.

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MINERAL BENEFICIATION IN SOUTH AFRICA South Africa has a mature mining industry that has been in operation for over a century. In 2010, the country’s mineral wealth was estimated to be US$2.5 trillion.21 Much of the country’s mineral resources are still exported as raw or partially processed minerals. However, the country has made steady improvement in its ratio of beneficiated products to primary products exported since the 1970s. The ratios are low, considering the magnitude of the quality and quantity of the country’s mineral resource endowment.22 It was against this backdrop that government formulated the minerals beneficiation strategy aligned with the country’s industrialisation policy to harness the potential of the resource-based development in a manner that increases the value of exports, sources for consumption of local content and creates sustainable employment opportunities. The minerals sector is one of the strategic economic sectors through which government seeks to increase the competitiveness of the manufacturing sector for local consumption and exports. It is stated in the country’s mineral beneficiation strategy that competitive access to minerals for local beneficiation is an important requirement for a diversified industrialisation strategy.23 Through the mineral beneficiation strategy, the country seeks to gain comparative advantage from its natural resources endowments in a manner that leads to a national competitive advantage. The mineral beneficiation strategy seeks to achieve the following: a) Enhance the quantity and quality of exports; b) Promote the creation of decent employment and diversification of the economy, including promoting the green economy; and c) Contribute towards the strengthening of the knowledge economy in support of the

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overall competitiveness of the economy. The country’s mineral beneficiation strategy advances the government’s development agenda, as outlined in the National Development Plan (NDP). The developmental state agenda is currently official policy of the South African Government. In 2009, the developmental state was a focal point of the State of the Nation Address (SONA) by President Jacob Zuma, as well as of the 2009 Medium Term Strategic Framework.24 The NDP envisions mineral beneficiation through a ‘capable and developmental state’ associated with high economic growth.25 The beneficiation strategy is supported by both legislation and policies, including the following: a) Minerals and Mining Policy for South Africa (1998). b) Mineral and Petroleum Resources Development Act, 2002 (MPRDA). c) The Broad-Based Socio-Economic Empowerment Charter for the Mining Industry (as amended in 2010). d) Precious Metals Act, 2005 (PMA). e) Income Tax Act. f) Manufacturing Investment Programme (MIP). Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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Furthermore, South Africa’s mineral beneficiation strategy is supported by multi-stakeholder structures that bring about a coordinated and aligned set of interventions to achieve shared visions and to turn the objectives of the strategy to reality. Implementation of the beneficiation strategy is also underpinned by a number of international trade agreements (bi-lateral and multilateral agreements), which China is part of, as will be discussed later in the chapter. These agreements offer South Africa a range of opportunities to attract foreign direct investment (FDI) and access to global markets for the country’s beneficiated goods. The bilateral and multilateral agreements that support and promote South Africa’s mineral beneficiation strategy include the following: a) The Beijing Declaration on the Establishment of a Comprehensive Strategic Partnership between the Republic of South Africa and the People’s Republic of China. b)

The African Growth and Opportunity Act (AGOA).

c) Trade Agreement between the European Union (EU) and South Africa. d) The Southern African Development Community (SADC) Trade Agreement. e) Generalised Systems of Preferences. f) Trade Agreement between Zimbabwe and South Africa. g) Trade Agreement between Southern African Customs Union (SACU) and European Free Trade Association (EFTA) states. h) Rules of Origin Guides/Trade Agreements.

SOUTH AFRICA’S STRATEGIC MINERAL BENEFICIATION VALUE CHAINS A selected number of mineral commodities have been identified as being critical to the

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

realisation of South Africa’s mineral beneficiation strategy.

Coal Coal remains one of the mineral commodities that is used to generate electricity, not only in South Africa, but also in China and India. Coal will in future be crucial to technologies that make gas and liquid transportation fuels from coal. Further, in light of the growing environmental concerns regarding the adverse impact of emissions (carbon dioxide and other gases) from coal-generated power stations, it presents opportunities for research and development aimed at finding emission reduction measures to the benefit of South Africa complying with environmental protocols, whilst contributing to increasing the country’s energy basket. The potential interventions for optimal value creation and beneficiation of coal and of which China could be a strategic partner, include the following: a) Policy support for clean and efficient use of coal in power generation. This could encourage the take-up of existing advanced technologies for low emissions coal-fired electricity production, providing secure and cleaner energy.

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b) Policy support for technology transfer through mechanisms such as the Clean Development Mechanism, bilateral and multilateral funds (such as the Global Environmental Facility and the Prototype Carbon Fund) must be further explored. c) Investment in research, development and demonstration of new technologies, such as clean coal technologies and carbon capture and storage. d) Investment in research and development (R&D) to find innovative means for beneficiation (recycling) of gases emitted in the electricity generation process. e) Investment in technology to optimise the use of coal-bed methane (CBM) f) Investment in metallurgical research to disentangle uranium and coal in the Springbok Flats coalfield, which will increase the country’s coal and uranium reserves. g) Exploration of options for further final-stage fabrication of coal through the production of chemicals as feedstock for plastics and fertilisers.

Uranium and thorium The increasing demand for alternative sources of energy has advanced the prospect of the establishment of nuclear power plants in South Africa. Uranium is an ideal source for the production of clean mass power. This is one mineral commodity in which the country has over the years gained expertise in the beneficiation of. Thorium, on the other hand, has been subjected to innovative research as an alternative fuel to nuclear reactors. In the light of the government’s commitment to the erection of nuclear power plants, uranium and thorium are strategic minerals that can be leveraged for the purpose of achieving the goals of the country’s mineral beneficiation programme.26

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Iron and steel Iron ore, manganese and chromium are mineral commodities that are required for the production of steel and stainless steel. South Africa is a major producer of these ferrous minerals. Access to these raw materials is critical for increasing levels of local beneficiation. Steel products are crucial to labour-intensive manufacturing processes. However, the recent past saw the steel industry being under severe pressure due to increasing international competition characterised by anti-competitive steel pricing strategies.27 The following are potential multi-stakeholder interventions for iron and steel value chain development that makes possible beneficiation from iron ore, chrome, manganese, nickel and vanadium: a) Invoke regulatory provisions to ensure sustainable and developmentally priced input mineral commodities for new and existing steel manufacturers. b)

Investigate mechanisms to protect and support the competitiveness of existing intermediary plants such as ferrochrome smelters.

c) Encourage investment in the South African steel industry to break the prevailing anticompetitive behaviour of current operators. Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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Pigment and titanium metal production The creation of a value chain for titanium has been identified as a key growth area for South Africa through which beneficiation also needs to be effected. To achieve this goal, the government formed an inter-departmental task team to promote the beneficiation of titanium and the development of a titanium industry in the country.28 The following are the strategic interventions by which the government seeks to promote beneficiation from pigment and titanium production: a) The funding of fundamental research into the production of titanium from the Bushveld titano-magnetites. Such a facility would also be a major iron producer, which could facilitate the competitive pricing of steel. b)

The development of a more cost-effective and proprietary primary titanium metal production process is seen as a key enabler for the establishment of a South African titanium industry.

c) The continued development and commercialisation of technologies to compete cost effectively in the international market. d) The development of an infant titanium industry. This includes the required infrastructure to support South Africa’s entry into the titanium market, commercialisation of existing technologies and the development of human capital to sustain future largescale industry. e) The development and demonstration of an advanced investment casting capability and establishing local competence and capacity in areas like the powder metallurgy of titanium and machining. f) Commitment by the mining companies with respect to ensuring access to minerals is

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

critical for growth. Continued discussion with the major pigment producers across the globe to ensure that government knows what all of their requirements are to set up a plant in South Africa. g) Investigating the viability of establishing a new chlorine plant in conjunction with a pigment plant. A second stage would be to establish titanium metal production on the back of titanium tetrachloride for pigment production, followed by titanium metal fabrication for the aerospace, automotive, leisure and medical sectors. h) Continued R&D with respect to mineral beneficiation, the preparation of intermediate metal sites, purification and metal manufacturing.

Autocatalytic converters and diesel particulate filters South Africa is the leading producer of platinum group metals (PGMs) and possesses vast reserves of these minerals. PGMs are some of the strategic minerals through which the country seeks to harness the potential of the mineral sector for sustainable social and economic development. The demand for and consumption of PGMs have traditionally been for use as auto-catalysts or in catalytic convertors for vehicular emission control, which

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reduces the emission of carbon oxide (CO) and nitrogen oxide (NO) gases, in line with the international controls on the emission of diesel particulate matter and greenhouse gases. The increasing consumption of platinum and other precious metals promotes the development of industrial technologies in high-tech sectors of the economy,29 for example, manufacturing fuel cells. Strategic interventions that are aimed at developing beneficiation opportunities from the autocatalytic converters and diesel particulate filters include the following: a) Invoke relevant provisions of the law to ensure security of PGMs supply. The major mining companies have demonstrated their readiness to advance beneficiation in the country by initiating and participating fully in the Platinum Beneficiation Committee (PBC). b)

Develop the modalities for the development of local metal access mechanisms through an agreed approach between government and mining houses.

c)

Unlock intrinsic value within the PGM sector through research programmes. This could be done through industry sharing forums and the formation of international partnerships. In addition, technology upgrades (recapitalisation) for R&D Centres of Competence would be supported.

d) The alignment of existing initiatives on skills development, as well as the promotion of careers in related fields. e) The promotion of investment in the automotive industry and the continuation of sector incentives, such as the Automotive Production and Development Programme (APDP).

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Jewellery fabrication The creation of integrated jewellery hubs in South Africa is important for the beneficiation of gold, diamonds and the platinum group metals (PGMs). The high value and low bulk of gold and diamond jewellery is suitable for export to markets such as Japan, Europe and the United States (US). The African Growth and Opportunity Act (AGOA) facilitates access to markets in the US in a manner that provides opportunities for local beneficiators to grow their markets around the world.30 The following are the interventions aimed at supporting and promoting jewellery beneficiation: a) Consideration of the establishment of an applicable and effective metal advance scheme aimed at ensuring local metal/mineral access for local value addition. The feasibility of this mechanism has been proven internationally and it is being applied successfully (albeit on a small scale) in the PGMs sector. Government needs to investigate the reasons for less than adequate access in the South African gold sector and identify issues that should be addressed to implement the scheme successfully. b) A structured training programme, which takes into account current specific demands and the expansion of the jewellery industry, could be developed in collaboration with Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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the Mining Qualifications Authority (MQA) and other relevant Sector Education and Training Authorities (SETAs). c)

Jewellery investment promotion, including the promotion of existing incentives in the jewellery sector. An analysis of a new capital redemption legislation to encourage investment into the industry should also be conducted and instrument-specific incentives considered.

d) Interventions such as the Kgabane Jewellery Project, the Olifantsfontein Jewellery Training and Manufacturing Facility, the Small Enterprise Development Agency (SEDA) Platinum Incubator and all private sector initiatives could contribute significantly towards the achievement of this strategy in relation to diamond and jewellery manufacturing.

CONSTRAINTS TO THE REALISATION OF SOUTH AFRICA’S MINERAL BENEFICIATION STRATEGY A number of overlapping constraints to full realisation of the country’s mineral beneficiation programme have been identified.31 These include: a) Limited access to raw material for local beneficiation, which is an outcome of the structural arrangement of the mining country that is geared towards orientation of raw material with the majority of mineral producers held by long-term contracts with their international clients. The other limiting factor is international price determination for raw and intermediate materials, which does not offer discount on proximity to production. Examples are the diamonds and precious metals industries, where leg-

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

islation has been created specifically to ensure the availability of minerals for local beneficiation. b)

Infrastructure – the shortage of critically important infrastructure (such as rail, water, ports and electricity supply) is a serious impediment to the sustainable implementation of the intentions of the mineral beneficiation programmes. A constant and reliable supply of energy is crucial for the smooth execution of early-stage beneficiation programmes.

c) R&D – limited exposure of South Africa to break-through and innovative research and development programmes inhibit the prospects of creating new products for beneficiation. d) Shortage of skills for expediting beneficiation is one of the factors constraining the beneficiation initiatives, especially the skills-supply pipeline for scientists and engineers. e)

Access to international markets for beneficiated products is limited by trade barriers (both tariff and non-tariff) that prevent prospective recipients of beneficiation programmes from accessing international markets.

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Table 6.2 provides a summary of cross-cutting activities and interventions, and the identified factors that are constraining South Africa’s mineral beneficiation initiatives.32

Table 6.2: Summary of cross-cutting activities and interventions, and factors constraining South Africa’s mineral beneficiation initiatives Cross-cutting constraints Limited access to raw material for local beneficiation

Potential instruments at Government’s disposal • • • •

•

Shortage of critical infrastructure

• •

•

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

•

Action by Business

Leverage the state’s custodianship of the country’s minerals to facilitate downstream beneficiation The amended MPRDA seeks to strengthen beneficiation provisions Leverage the beneficiation offset element of the Mining Charter Strengthen provisions within existing pieces of legislation such as diamond export levy to promote reliable and competitive access to raw materials Address import-parity pricing especially of steel and heavy chemicals, including, if necessary, through export taxes, conditionalities placed on infrastructure and regulation

•

Identify specific infrastructure needs for the next 10 to 20 years Ensure existing infrastructure planning mechanisms and programmes, such as the critical infrastructure requirements for mineral beneficiation Leverage on the National Development Plan (NDP), which seeks to unlock infrastructure bottlenecks through massive expansion of transport, energy, water and communication capacity Utilise the state’s infrastructure (public good) as an effective instrument to promote local beneficiation

•

•

• •

Take advantage of the mineral value proportion to expand local demand for mineral ores Comply with legislation

Align production plans with national programmes Embrace energy efficiency Explore cogeneration prospects

Limited exposure to R&D

•

Align beneficiation R&D requirements (both current and recurrent) to the national tenyear plan for science and technology

•

Support and develop competitive technologies

Inadequate skills

•

Align the beneficiation skills pipeline to the National Skills Development Strategy and the Sector Skills Plan for required skills Promote skills development and partner with relevant sector education and training authorities (SETAs) and institutions of higher learning for training and labour development Impart labour skills

•

Invest in Human Capital Development Cooperate with government to leverage and enhance the National Skills Development Strategy and Sector Skills Plans for required skills

•

•

•

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•

•

Review existing and ensure future trade agreements support the beneficiation intent (foreign direct investment and market access) Take advantage of Comprehensive Strategic Partnership with China to support investment in beneficiation in South Africa as well as access to markets in China

•

Leverage trade agreements

THE ROLE OF CHINA IN RESOURCE-BASED DIVERSIFICATION OF SOUTH AFRICA’S ECONOMY VIA MINERAL BENEFICIATION The 2015 Johannesburg Summit of the Forum on China-Africa Cooperation (FOCAC) highlighted China’s intentions to expand its investment plans regarding Africa’s mineral resources sector. This international event augmented China’s commitment formally expressed in previous gatherings including its 2006 Africa policy and Declarations and Action Plan of FOCAC.33 China has long been an importer of certain strategic mineral commodities (including oil, copper, coal and iron ore) that drive its impressive economic development strategy. The execution of China’s economic development strategy has increased demand for mineral commodities from both the developed and developing countries. For instance, in 2004, China’s global FDI stock in the resource sector (oil, gas and minerals) was approximately US$5.94 and US$44.66 in 2010. From 2008 to 2009, China’s proposed investment in Australia’s resource sector, mineral exploration and development was estimated at US$26.4 billion.34 Africa has also been an investment destination of choice for China’s economic development trajectory insofar as the continent’s mineral resources endowments are con-

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cerned.35 Since the 1990s, there has been a visible Chinese footprint in Africa’s mineral sector in the form of various types of investments.36 In South Africa, for instance, the Chinese investment has predominantly taken the form of consortiums or joint ventures with other mining companies; in other African mining countries, Chinese investment has taken the form of large-scale infrastructure development loans and financial support backed by Chinese state diplomacy geared towards accessing Africa’s mineral deposits.37 This Chinese approach to investing in Africa’s mineral sector has been questioned, as far as its impact on the advancement of the goals of the AMV is concerned, especially in the area of mineral beneficiation.38 More important is that China is a key strategic partner to the fulfilment of the objectives of the AMV, given her potential and ability to unlock the structural bottlenecks that have hindered Africa’s capacity to transform and diversify its resource-based economies. China has a proven record of building the much needed infrastructure. A number of African countries have already made deals through bilateral and multilateral agreements with the Chinese government, which are aimed at diversifying the African economies on the basis of their mineral resource endowment.39

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What has been the form and impact of the Chinese presence in South Africa’s resource industry? For the last 16 years, China has been the leading consumer of a variety of South Africa’s raw materials, which has indeed supported the economic viability of the country’s mining industry. However, the recent years has seen China strategically pursuing direct investment deals in South Africa’s minerals industry by means of acquisitions in a number of mineral commodities in the form of 100 per cent shareholding, strategic partnerships, joint ventures with local companies and consortiums backed by Chinese and South African state-owned enterprises. Table 6.3 below shows China’s direct investment in South Africa’s listed mining and metals companies since 2011.40 It is not surprising that China is a key strategic partner in the implementation of South Africa’s mineral beneficiation programmes.41

Table 6.3: Chinese direct investment in South Africa’s listed mining and metals companies since 2011

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Year

Chinese Company

Local Company

Resource

Amount Invested

2015

Heaven-Sent Capital Management

Village Main Reef

Gold

US$55.4m for 100% stake

2015

Ankong Investment Jiabo Consulting

Central Rand Gold

Gold

Two separate expressions of interest to acquire 100% for circa US$150m

2014

Hebei Iron and Steel Group

Industrial Development Corporation (IDC)

Steel production

US$4.5bn for Greenfields joint venture, production commenced in 2016

2014

Hebei Zhongbou

Eastern Platinum

Platinum

US$225m for 100%

2012

Hebei Iron and Steel Group, Tewoo Group, General Nice Development

Palabora Mining Company

Copper

US$288m for 54.5 stake with IDC taking the balance

2012

Beijing Haohua Energy Resource Group

Coal of Africa Limited

Coal

US$100m, followed by a further US$19m equity investment

2012

Jinchuan Group and China Africa Development Fund

Wesizwe Platinum

Platinum

US$227m for a 45% interest

2012

China Development Bank

Wesizwe Platinum – Bakubung Mine

Platinum

US$650m loan

2011

Shanghai Pengxin

China Africa Precious Metals

Gold

74% stake bought out of liquidation of Pamodzi Gold for R150m; a further R600m capital injection

2011

Baiyin Non-ferrous Group, China-Africa Development Fund, Long March Capital. CITIC Kingview Capital

Gold One, carried into Sibanye Gold

Gold

US$500m

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These business deals between the Chinese firms (private and state owned) and South African private mining companies and state-owned IDC demonstrate the growing appetite for China’s direct investment in South Africa’s mineral resources sector. It is not that surprising, though, given that the South African Government identified China as a strategic partner for the realisation of the objectives of the country’s mineral beneficiation strategy, diversification of the economy, promotion of industrialisation and diversification of the economy.42 Whilst South Africa has made significant inroads in harnessing its resource-based development, it is envisaged that the increasing levels of Chinese mining investment will accelerate the country’s economic diversification and its competitiveness in the global economy by opening more markets for exports.43 South Africa is also set to gain from China’s proven experience in large-scale infrastructure projects, such as rail and ports that are imperative for an industrialised and diversified industrial economy built around mining.44 It is envisaged that the presence of Chinese in the South African minerals industry may benefit the country with specialised expertise, skills, research and development and technology transfer that are important to unlocking the bottlenecks constraining the competitiveness of the country’s minerals sector. In a nutshell, by virtue of their stake in local mining companies, Chinese companies should advance South Africa’s mineral beneficiation programmes as underpinned in the National Development Plan (NDP), the MPRDA and the Mining Charter. One of the mining deals that have been sealed in the recent past and hailed as fulfilling the country’s industrialisation dream, and its economic diversification and mineral beneficiation strategies, was the purchase of the 74.5 per cent stake in Palabora Mining Company by a consortium of three Chinese companies (Hebei Iron and Steel Group own-

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ing 35 per cent stake of the 74.5 per cent shareholding, Tewoo Group with 25 per cent stake and General Nice Development with 20 per cent stake). South Africa’s state-owned Industrial Development Corporation (IDC) owns 20 per cent of the 74.5 per cent – the remaining stake being publicly owned. Interestingly, Hebei Iron and Steel Group and Tewoo Group are Chinese state-owned companies, whereas General Nice Development is a Chinese trading company. The 35 per cent stake acquired by Hebei Iron and Steel Group indicates the seriousness and aggression of the Chinese government’s direct investment in offshore markets for strategic minerals such as copper and iron ore for the production of steel that is utilised in large-scale infrastructure projects. As China strategically positions itself for the industrialisation and diversification of African mineral economies, the acquisition of Palabora Copper Mining Company that is endowed with high volumes of magnetite used for steel production, makes sense. This will stand China in good stead in meeting the demand for steel necessary to build the much-needed infrastructure (roads, rail and ports) with a strategic aim of accessing raw materials from African countries.45 Furthermore, offshore steel investment is strategic for China. Despite being one of the major producers of steel in the world, at 43 per cent, the Chinese steel-making firms Forum on 110 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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have increasingly been under pressure due to the growing concerns of environmental pollutions.46 Similarly, through the state-owned IDC partnering with Chinese companies as shareholders of Palabora steel milling plant, the South African Government seeks to increase the competitiveness of local steel production (whilst addressing the steel pricing issue) in a manner that promotes beneficiation of local raw materials, industrialisation and diversification of the economy. However, time will tell if the Palabora Mining Project will translate into sustainable local economic development for the community of Phalaborwa, Limpopo Province and the country as a whole.

CONCLUSION AND RECOMMENDATIONS This chapter has examined the vision of African mining in light of harnessing Africa’s natural resources endowments towards a diversified economy that promotes upstream, downstream, sidestream and lateral stream economic linkages to the benefit of all stakeholders at local, national and regional levels. The chapter presented the salient features of South Africa’s mineral beneficiation strategy as a case study on African country that has started the journey of aligning its resource sector with industrialisation strategies that seek to create a competitive and diversified industrial economy. Furthermore, the chapter examined the role of China in the realisation of South Africa’s mineral beneficiation, industrialisation and economic diversification goals, in the context of the growing expansion of Chinese investment in South Africa’s minerals industry. The section that follows presents recommendations relating to the role of China in the beneficiation of South Africa’s mineral wealth.

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The way forward central to FOCAC is the role of China in harnessing South Africa’s mineral beneficiation plan, given China’s impressive transformation of its economy from the primary sector. China’s role in the enhancement of South Africa’s mining beneficiation is that minerals and metals account for approximately 70 per cent of South Africa’s exports to China.47 This chapter makes the following recommendations for policymakers: strong state intervention, bridge the gap between mining and manufacturing, develop infrastructure, research and development, skills development and training, mining regulation and policy certainty, and access to international markets. i. Strong state intervention still needs to be implemented in the mining industry. A successful South African development state requires political will, long-term vision, and determination on the part of the country’s political elite to drive mining legislation. ii. Breaking the wall between mining and manufacturing: Chinese investment in mining companies needs to help South Africa dismantle the wall between mining and manufacturing so that much of the country’s raw materials is processed locally to higher value products rather than being shipped overseas.48 The manufacturing of mining-related products (for example machinery and equipment49) will need to promote local content and the participation of local manufacturing business enterprises Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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in the mineral beneficiation value chain. Given the level of mining partnerships, China and South Africa should improve upon the implementation of mining legislation. The four-billion-rand mining beneficiation project of the manufacturing of the titanium pigment at Richards Bay industrial development zone (IDZ) is an example that China and South Africa could collaborate for mutually-benefiting investment outcomes.50 iii. Development of infrastructure: This is one of the areas that the Chinese firms’ investment in the South African mining companies could be of great benefit given the level of infrastructure development in China. China could be strategic to the further development of South Africa’s mining-related infrastructure, not only for the development of South Africa’s economic diversification and industrialisation, but also for an integrated regional economic development.51 Chinese firms should align their mining production plans with South Africa’s national developments programmes focusing on infrastructure development.52 iv. R&D: Chinese firms could play a significant role in the modernisation of South African mines through research on technology, innovation, mechanisation, automation and digitisation. In partnership with other industry stakeholders from government, business and organised labour, China can support the development of competitive technologies for a modernised mining sector in line with the objectives of Mining Phakisa and broader national development goals as outlined in the NDP. v. Skills development and training: The development of human capital is crucial to successfully beneficiate South Africa’s mining industry through mineral linkages to downstream manufacturing industries. Chinese firms should invest in developing the skills of the members of the communities in which their mining firms operate and contribute to the broader enhancement of National Skills Development Strategy. South

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Africa could harness these bilateral exchange programmes for mining beneficiation skills development and training programmes.53 China could also be a strategic partner in developing the capacity of South Africa’s technical and vocational education training institutions (TVETs) to produce the required workforce (including mining artisans and engineers) with the required set of skills and the ‘know-how’ expertise for the mining of the future.54 vi. Mining regulation and policy certainty: Providing mining policy and regulation certainty is critical in attracting and retaining Chinese investment in the South African mining industry. The finalisation of the amended MPRDA and the revised Mining Charter is crucial in this regard. Chinese companies should not be deterred from investing for ownership, extraction and transportation of minerals as they have largely been pursuing joint venture types of mining investments.55 Chinese mining investment firms can also make use of the financial incentives provided by the South African Government towards mining beneficiation.56 vii. Access to international markets: The South African Government needs to leverage South Africa’s strategic partnership with China to boost mining beneficiation

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investment to access Chinese markets. Similarly, the mining companies should leverage on China-South Africa trade agreements.57

REFERENCES 1 African Union, 2009. Africa Mining Vision. Addis Ababa, Ethiopia. Available at http://africaminingvision.org/amc_resources/AMV/Africa%20Mining%20Vision%20english.pdf [Accessed 1 March 2017]. 2 Pedro, A.M.A., 2016. The Country Mining Vision: Towards a New Deal. Mineral Economics, 29(1), pp.15-22. 3 African Union, 2009. 4 UNCTAD, 2007. Economic development in Africa: Reclaiming policy space. Domestic resource mobilisation and developmental states. Report by the United Nations Conference on Trade and Development. New York and Geneva, 26 September 2007. 5 African Union, 2009. 6 Ibid. 7 Ibid. 8 Ibid. 9 African Union Commission, 2015. Agenda 2063: The Africa We Want. Addis Ababa, Ethiopia: African Union Commission. Available at http://www.un.org/en/africa/osaa/pdf/au/agenda2063.pdf [Accessed 1 March 2017]. 10 African Union Commission, 2015. 11 Fine, B., 2010. Can South Africa be a developmental state? In Edigheji, O. (ed.), 2010. Constructing a Democratic Development State in South Africa. Pretoria: Human Sciences Research Council Press.

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12 Creamer, T., 2013. ANC MP Blames SA’s Current Mining Malaise on ‘Enclave’ Mentality. Mining Weekly, 24 January 2013. Available at http://www.miningweekly.com/article/anc-mp-blames-south-africas-currentmining-malaise-on-enclave-metality-2013-01-24 [Accessed 2 March 2017]. 13 Pedro, 2016. 14 Ibid. 15 Ibid. 16 Morris, M., Kaplinsky, R. and Kaplan, D., 2012. One Thing Leads to Another: Promoting Industrialisation by Making the Most of the Commodity Boom in Sub-Saharan Africa. Available at http://www.prism.uct. ac.za/Dowloads/MMCP%20Book.pdf [Accessed 3 March 2017]. 17 Pedro, 2016. 18 Ibid. 19 Ibid. 20 African Union, 2009. 21 Citibank Report. 2010 Available at http://www.citigroup.com [Accessed 1 March 2017]. 22 Deloitte. 2011. Positioning for Mineral Beneficiation Opportunity Knocks. Available at http://deloitteblog. co.za/wp-content/uploads/2012/08/Positioning-for-mineral-beneficiation.pdf [Accessed 1 March 2017]. 23 Department of Mineral Resources. 2011. A Beneficiation Strategy for the Minerals Industry of South Africa. Pretoria: Department of Mineral Resources, Republic of South Africa.

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AFRICA’S MINERAL RESOURCES SECTOR AND EVOLVING RELATIONS WITH CHINA | Sizwe Phakathi 24 NPC (National Planning Commission). 2012a. National Development Plan. 2012b. Diagnostic document: Economy. 25 Ibid. 26 Department of Mineral Resources. 2011. 27 Ibid. 28 Ibid. 29 Ibid. 30 Ibid. 31 Ibid. 32 Ibid. 33 Maurine, C., 2013. Strategic Partnerships and Sustainable Investments: How Can China Support the African Mining Vision? Policy Briefing, Centre for Chinese Studies, University of Stellenbosch, Stellenbosch. 34 Maurine, 2013. 35 Kaplinsky, R. and Farooki, M., 2010. Africa’s Cooperation with New and Emerging Development Partners: Options for Africa’s Development. United Nations. Available at http://www.un.org/en/africa/osaa/pdf/ pubs/2010emergingeconomies.pdf [Accessed 2 March 2017]. 36 April, Y., 2016. Will China Reforms Impact FOCAC? Policy Briefing No. 121, Africa Institute of South Africa, Human Sciences Research Council, Pretoria. 37 Harvey, R., 2014. Nationalism with Chinese Characteristics: How Does it Affect the Competitiveness of South Africa’s Mining Industry? Policy Briefing No. 93, South Africa Institute of International Affairs, Johannesburg. 38 Harvey, 2014.

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39 Yang, D., 2014. Into Sub-Saharan Africa: Spillover Effects of China’s Economic Boom through Trade. Chicago Policy Review. Available at http://chicagopolicyreview.org/2014/07/10/into-sub-saharan-africaspillover-effects-of-chinas-economic-boom-through-trade/ [Accessed 1 March 2017]. 40 Moneyweb, 2015. China’s Growing Appetite for SA Mining Assets. 12 February 2015. Available at https:// www.moneyweb.co.za/news/economy/chinas-quiet-sa-investment-2/ [Accessed 2 March 2017]. 41 Yang, 2014. [Accessed on 4 March 2017]. 42 Department of Mineral Resources. 2011. 43 Maurine, 2013. 44 Pedro, 2016. 45 Harvey, 2014. 46 Creamer, T., 2014a. Davies Confirms Plans for Chinese Steel Project in Limpopo. Mining Weekly, 12 September 2014. Available at http://www.miningweekly.com/article/davies-confirms-plans-for-chinesesteel-project-in-limpopo-2014-09-12 [Accessed 4 March 2017]. 47 Kabemba, C., 2012. Chinese Involvement in South Africa. Open Society for Southern Africa (OSISA). Available at http://www.osisa.org/books/regional/chinese-involvement-south-africa [Accessed 1 March 2017]. 48 Creamer, 2013 [Accessed 5 March 2017]. 49 Kabemba, 2012. 50 African News Agency. 2017. DTI Optimistic about the R4bn Titanium Beneficiation Project in Richards Bay IDZ. Engineering News. Available at http://www.engineeringnews.co.za/article/dti-optimistic-aboutr4bn-titanium-beneficiation-project-in-richards-bay-idz-2017-03-27 [Accessed 1 March 2017].

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PART 3: China-Africa Industrial Cooperation | Chapter 6 51 National Planning Commission. 2012. National Development Plan 2030: Our Future – Make it Work. Pretoria: Republic of South Africa. Available at http://www.nationalplanningcommission.org.za/Pages/ Downloads.aspx [Accessed 11 October 2017]. 52 Turok, B., 2012. Turok: Lack of Understanding Hampers Beneficiation. Mail &Guardian. Available at https://mg.co.za/article/2012-10-17-turok-lack-of-understanding-blocks-beneficiation [Accessed 3 March 2017]. 53 Alden, C. and Wu, Y.S., 2014. South Africa and China: The Making of a Partnership. Occasional Paper No. 199, South African Institute of International Affairs, Johannesburg. Available at http://www.saiia.org. za/occasional-papers/578-south-africa-and-china-the-making-of-a-partnership-1/file [Accessed 3 March 2017]. 54 Slater, D., 2016. New Initiatives to Take South African Mining into a Modernised Future. Mining Weekly, 7 October 2016. Available at http://www.miningweekly.com/article/new-initiative-aims-to-take-southafrican-mining-into-a-modernised-future-2016-10-07 [Accessed 10 October 2017]. 55 Kabemba, 2012. 56 Department of Trade and Industry. 2014. Industrial Policy Action Plan (IPAP): Economic Sectors and Employment Cluster, IPAP 2014/15 – 2016/17, Pretoria: Department of Trade and Industry, Republic of South Africa. Available at http://www.gov.za/sites/www.gov.za/files/IPAP2014.pdf [Accessed 2 March 2017].

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57 Kim, Y. and Tukic, N., 2015. South Africa-China Multi-lateral Co-operation: BRICS and FOCAC. Policy Briefing (August), Centre for Chinese Studies, University of Stellenbosch, Stellenbosch. Available at http://www.ccs.org.za/wp-ontent/uploads/2015/08/CCS_PB_BRICS_FOCAC_YK_NT_2015_0811.pdf [Accessed 1 March 2017].

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7

CHAPTER

THE REALITIES OF INDUSTRIAL 1.0 IN AFRICA THROUGH FOCAC Yazini April and Zukiswa Mpiyakhe

INTRODUCTION According to the African Union’s (AU) Agenda 2063, Africa is a continent that would benefit from accelerated manufacturing activity. According to the Agenda 2063 document, industrialisation would promote the growth of commodity exchanges and continental commercial giants. This should be coupled with the growth of regional manufacturing hubs for the beneficiation of Africa‘s minerals and natural resources in all corners of the continent.1 However, the manufacturing objectives included in Agenda 2063 beg the question of how the continent would achieve this immense task, given its limited industrial growth and capacity over the past 50 years; particularly since the AU 2007 Industrial Action Plan states that Africa is the least developed region of the world in terms of industrialisation. Moreover, the continent accounts for a negligible share of global industrial

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output and manufactured exports.2 There are various reasons why the continent has failed to industrialise. Some of these are: a) colonialism, which forced African nations to produce solely for the export market; b) the inability of the continent to manipulate the global economy to its advantage; and c) external actors, which have had a significant influence on policy and development path choices in the region, which has national development goals.3 Along with the afore-mentioned reasons, African leaders have also contributed to the industrial problem through lack of strong leadership, effective governance and policy failure – in terms of both design and implementation – which have resulted in poor industrial performance in African countries.4 The promotion of industrial development requires active government policies to build domestic capabilities, such as infrastructure and human capacity, direct investment, and resources to priority areas. The fact is that, without strong industries to create jobs and add value to raw materials, African countries risk remaining shackled by joblessness and poverty. A case in point is Côte d’Ivoire and Ghana producing 53 per cent of the world’s Forum on 116 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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cocoa, but where supermarket shelves in Abidjan and Accra (the respective capitals) are stacked with chocolates imported from Switzerland and the United Kingdom (UK) - countries that do not farm cocoa. This scenario is repeated throughout the continent in different contexts.5 Implementation of policies and frameworks such as industrial action plans, require strong governance measures for doing business, which are central for industrial growth to materialise. Given the aforementioned challenges with continental industrialisation, it is critical to determine whether the Chinese industrial objectives presented at the 6th Forum on China-Africa Cooperation (FOCAC) Summit and Ministerial Conference in Johannesburg, South Africa, in 2015, are feasible for the continent. At the 2015 FOCAC Summit, President Xi Jinping of China announced a “China-Africa industrialisation program”,6 the first of 10 new initiatives designed to boost China-Africa cooperation. President Xi indicated that China will support industrialisation in Africa by supporting the creation of industrial parks and “economic and trade cooperation zones”.7 Beijing also pledged to continue to build up industrial capacity by addressing the two major bottlenecks that impede development, namely, backward infrastructure and inadequate professional and skilled personnel.8 President Xi’s presentation was relevant to the 2015 FOCAC Summit, because, according to the World Bank, China is the biggest financer of infrastructure projects in Africa.9 Most of the industrial projects that China has implemented over the past decade include substantial contributions to the provision of ‘hard infrastructure’ (such as roads, railways and hydropower projects) which are critical for economic growth and development on the continent. China is also Africa’s largest trading partner and more investment opportunities are likely to grow steadily.10 Accordingly, over 3 000 Chinese companies have invested US$2.7 billion in Africa, which has created more than 600 000 jobs.11

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Moreover, of significance to the continent is China’s Go-Out policy, which has contributed to infrastructure development. The go-out policy (also referred to as the Going Global Strategy) is an effort that was initiated in 1999 by the Chinese government to promote Chinese investments abroad.12 This paper argues that the China-Africa industrialisation programme unveiled by President Xi needs to be implemented practically and strategically, in order to promote a win-win outcome between the two regions. The objectives of the paper are to unpack the practicality of implementing the FOCAC industrial program by: examining the state of manufacturing on the continent; China’s go-out policy; and the potential of China’s factory transplantation to Africa through the Flying Geese Model. The last section of the paper shares some insight on industrial strategic prospects and provides policy recommendations that could ensure: that China achieves its objectives through its go-out policy, and Africa also achieves industrial 1.0, which will promote economic diversification on the continent. Given the broadness of the industrialisation topic, for purposes of this discussion, the key area of industrial focus addressed is manufacturing.

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STATE OF MANUFACTURING IN AFRICA Economic development requires structural change, i.e. from low to high productivity activities. In essence, the industrial sector is a key engine of growth in the development process. Virtually all cases of high, rapid and sustained economic growth in modern economic development have been associated with industrialisation, particularly growth in manufacturing production.13 Africa has ample opportunities to grow its manufacturing base in a broad range of industries. Local beneficiation of resources in oil and gas is one example. Moreover, the growth of the population will provide a boost for direct consumer industries such as food, agriculture and beverage, home and personal care, apparel, and even the automotive industry. Other likely target sectors include secondary industries, such as building and infrastructure, due to further urbanisation and the need for infrastructure investment.14 For development economists, manufacturing is a panacea for unemployment, which, in turn, spurs economic growth, enhanced productivity and higher living standards. Indeed, few countries have escaped poverty without expanding their factories. Manufacturing’s share of gross domestic product (GDP) in Sub-Saharan Africa has held steady at 10 to 14 per cent in recent years.15 Industrial output on what is now the world’s fastest-growing continent is expanding as quickly as the rest of the economy. For example, H&M, a multinational Swedish retail-clothing firm, and Primark, an Irish one, source a lot of material from Ethiopia. General Electric, an American conglomerate, is building a US$250m plant in Nigeria to make electrical gear, and Mobius Motors, a Kenyan firm that was started a few years ago by Joel Jackson, a Briton, is building a cheap, durable car for use on rough roads.16

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New research by the McKinsey Global Institute (MGI) shows that spending by Africa’s consumers and businesses already totals US$4 trillion, which represents a huge opportunity for Africa’s manufacturing sector.17 By 2025, private spending could reach US$5.6 trillion – $2.1 trillion by households, and $3.5 trillion by businesses.18 The continent could almost double its manufacturing output, to nearly $1 trillion, by 2025, with about 75 per cent of that growth tied to production for local markets.19 However, the question is whether manufacturers will manage to exploit the growth potential that lies in front of them. Furthermore, despite the aforementioned manufacturing progress, the continent’s economic growth over the past ten years has not trickled down to the majority of the people, and manufacturing in Africa still lags far behind the rest of the world in development terms. Manufactured output per person in Sub-Saharan Africa (SSA) is about 30 per cent lower than in other developing regions and, although the region’s average manufacturing industry has grown year on year for much of the past two decades, its contribution to overall GDP has shrunk.20 Africa’s share of global manufacturing has fallen from about 3 per cent in 1970 to less than 2 per cent in 2013.21 In fact, several African countries have actually de-industrialised over the past decade, partly because of a flood of cheap East Forum on 118 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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Asian imports.22 It is indisputable that the rise of Asian manufacturers in the 1990s hit African firms hard, as many were wiped out. Northern Nigeria is an example: it once had a thriving garments industry, but was unable to compete with low-cost imports.23 However, it must be emphasised that despite the textiles industry, de-industrialisation was also partly the fault of African governments. Buoyed by commodity income, these governments neglected industry’s needs, especially the need for roads and electricity. Although there are some exceptions – South Africa and, to a lesser extent, apparel in Kenya, food manufacturing in Côte d’Ivoire, and agro-processing in Tanzania – a combination of poor policy and bad timing slowed the pace of industrialisation in Africa almost to a halt.24 To date, African firms have not yet proved themselves capable of meeting existing domestic demand. Africa still imports about one-third of the food, beverages and similar processed goods it consumes, whereas the Association of Southeast Asian Nations (ASEAN) imports about 20 per cent, and South America’s Mercosur trade bloc imports just 10 per cent.25 Africa even imports 15 per cent of the cement it uses, despite having abundant raw materials to make it at home.26 Needless to say, it is problematic that, although African countries contain large mineral wealth, along with 60 per cent of the world’s under-utilised arable land and vast timber resources, they remain reliant on the export of raw products and are exposed to exogenous shocks, such as falling European demand. Without strong industries in Africa to add value to raw materials, foreign buyers can dictate and manipulate the price of these materials to the disadvantage of Africa’s economies and its people.27 In a nutshell, the fundamental components of an efficient manufacturing industry, namely productive human stock, reliable electricity supply and efficient transport networks, are still lacking on the continent. As far as human capital is concerned, the continent is not benefiting from its human

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capital, despite the youth bulge, which is currently at 54 per cent and which will climb to 62 per cent by 2050.28 According to the Africa Competiveness Report, the entire region is under-performing significantly in education and public health. Africa’s under-performance in educating its workforce and upgrading skills is particularly worrying, given the shift of workers into the service sector, with its large share of value added and low labour productivity. Moreover, high unemployment rates among youth with secondary and tertiary education, even in countries that do well on educational attainment (such as Mauritius and Tunisia), indicate a mismatch between the education system and the needs of employers. The Competitiveness Report emphasises that, based on its surveys, 54 per cent of African employers state that job seekers’ skills do not match their skill needs.29 With regard to electricity, the African Development Bank (AfdB) President, Akinwumi Adesina, states that poor electricity supply is a constraint to business and the country’s economy growth, and limits Africa capacity to industrialise, as this requires efficient power generation capacity.30 Access to electricity on the continent remains a struggle. Data by the International Energy Agency’s (IEA) World Energy Outlook 2014 shows that there are 622 million people on the continent without electricity, which is close to half of Africa’s population.31 While the urban areas have a 68 per cent electrification rate, the Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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rate for rural areas is just 26 per cent.32 Electricity, which is a major outlay for manufacturers, is estimated by the AfdB to cost three times more in Africa than it does in other developing markets. In addition, the entire continent has just 64 ports serving a population of over 1bn.33 Clearly, Africa cannot become an exporting continent unless it takes advantage of its natural resources, such as the Inga Dam in the Democratic Republic of Congo (DRC), which would drastically lower energy costs. With regard to infrastructure outside South Africa, the transportation network is insufficient. The continent’s poor roads, railways and other transport networks, faulty communications, and unreliable and insufficient energy supply, result in high production and transaction costs. It takes 28 days to move a 40-foot container from the port of Shanghai, China to Mombasa, Kenya at a cost of US$600, while it takes 40 days for the same container to reach Bujumbura, Burundi, from Mombasa, at a cost of US$8 000, i.e. double the time at 13 times the cost.34 The challenge for the continent currently is to obtain investment for the establishment and maintenance of infrastructure, in order to reduce indirect costs to businesses. The AU Priority Action Plan of the Program for Infrastructure Development in Africa (PIDA) suggests an investment need of US$68 billion between 2012 and 2020.35 Currently, Africa’s stagnation with its infrastructure stands in stark contrast to other regions, such as Latin America and South East Asia, where the infrastructure gap has been reduced.36 It is critical to note that, despite the fact that the fundamental components of an efficient manufacturing industry, namely productive human stock, reliable electricity supply and efficient transport networks are insufficient, as already established, President Xi confidently presented the China-Africa industrialisation program Moreover, it is China’s tenacity to engage in Africa in areas such as industrialisation, which other global coun-

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terparts have failed to do, which has endeared the continent to Beijing. Needless to say, if Africa becomes a manufacturing hub through China’s influence, both regions would break the world record in global economic diplomacy, and fast-track South-South cooperation to another level. Promoting continental industrialisation would also ultimately break Africa’s natural resource dependence, which has dominated post-colonial trade relations for decades. However, a practical dose of reality is essential in determining whether or not China will willingly shed and give out all its low-end manufacturing jobs to Africa on a scale substantially large enough for the region take-off37 – particularly since China is still guiding a manufacturing shift from the higher-cost coastal region into the lower-cost interior parts of the country, which are not as developed. More importantly, questions arise as to whether Africa itself will be prepared to seize this industrial opportunity.38 Would the Chinese Flying Geese theory be suitable for application in the African context? And from a new structural economics perspective, would China’s go-out policy be advantageous to promoting offshoring?

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CHINA’s GO OUT POLICY The Go Out policy (go-out) is China’s current strategy to encourage its enterprises to invest overseas.39 Implementation of the go-out strategy has substantially increased China’s economic ties with Africa. This is most clearly reflected in China’s trade with Africa.40 Beginning in the mid-1990s, the theory of “utilising both domestic and international markets and resources” began to prevail in China’s foreign economic relations.41 This change led to a boom in China’s international economic cooperation and the initial introduction of the “Going Out” strategy in 1996, by then President Jiang Zemin after his trip to six African countries.42 In promoting the go-out policy, the Government, together with the China Council for the Promotion of International Trade (CCPIT), introduced several schemes to assist domestic companies in developing a global strategy to exploit opportunities in the expanding local and international markets.43 Some of the objectives of the go-out strategy include increasing Chinese foreign direct investment (FDI), and promoting brand recognition of Chinese companies globally and at a broader level, internationalisation of the Renminbi, and the One Belt One Road (OBOR) Initiative. Infrastructure development has also played a major part in China’s go global strategy in Africa. The OBOR is a development strategy and framework that focuses on connectivity and cooperation among countries, which consists of the land-based Silk Road Economic Belt and the Maritime Silk Road. For industrial purposes, OBOR could be linked with the African Union’s Programme for Infrastructure Development for Africa (PIDA), which identifies priority regional infrastructure projects to be built by 2040 and which are designed to sync with the Regional Economic Communities’ (RECs) own infrastructure master plans.

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For example, infrastructure investment currently accounts for a large share of China’s FDI and aid programs and constitutes a central component of the OBOR Initiative.44 Hongying argues that the global infrastructure gap is approaching US$1 trillion a year, dwarfing the US$40 billion of the Silk Road Fund and the US$100 billion of the Asian Infrastructure Investment Bank – both of which are designed to serve the OBOR initiative.45 However, there is a dire need for infrastructure in many countries in Africa and elsewhere. It is, therefore, not clear how effectively Chinese investment will be able to fill this gap comprehensively in a long term. The key players in the go-out strategy can be divided into various levels. The first level includes large state-owned enterprises (SOEs), and state-owned banks, mostly engaged in large-scale investments, infrastructure projects, mining projects, service contracts and loans. These SOEs are mostly motivated by commercial interests, although they proclaim that their goals are in line with Beijing’s go-out strategy.46 The second level is governments and SOEs at the provincial level and local government level, which are also increasing their footprint in Africa.47 Provincial government commerce departments have been enthusiastically organising and dispatching business promotion tours to Africa to explore commercial opportunities, especially in terms of service contracts. The third level Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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is private companies or individual businessmen, which have actually branded China’s go-out policy in a negative light. A conservative estimate claims that at least one million Chinese business nationals are operating inside Africa.48 Ozawa argues that China’s 1999 economic “going out” policy basically opened a floodgate for both human emigration and outward investment, and, as a result, the structural configuration of its FDI has been changing with China’s rapid industrial structural transformation and the most recent tweaking of China’s commercial strategy to Africa.49 The National Development and Reform Commission (NDRC) in China also plays a guiding role in ensuring that China’s international industrial cooperation process is encouraged to implement advanced capacity to go global. Essentially, this industrial process is one intended to shift China’s lower-level manufacturing offshore, while the country pushes its own industries to move towards Industry 4.0 through the Made in China 2025 Initiative, a 10-year manufacturing upgrade program.50 Made in China 2025 is an initiative to comprehensively upgrade Chinese industry. The initiative draws direct inspiration from Germany’s “Industry 4.0” plan, which was first discussed in 2011 and later adopted in 2013.51 At the heart of the Industry 4.0 idea is intelligent manufacturing, i.e. applying the tools of information technology to production.52 In the German context, this primarily means using the internet to connect small and medium-sized companies more efficiently in global production and innovation networks, so that they can engage more efficiently in mass production, but also customise products just as easily and efficiently.53 In order to conceptualise the 4.0 industry in China, it is critical to indicate how China reached this stage. In the “Go Global” era 1.0 more than 10 years ago, Chinese enterprises started setting up overseas sales networks, where most of them simply engaged in low-

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end international trade. This process was followed by the “Go Global” era 2.0, whereby many state-owned enterprises reached out to the overseas market, mainly aimed at properties such as oil and natural gases and overseas infrastructure projects. The rise of private enterprises contributed to “Go Global” era 3.0, as they invested directly in foreign markets, set up factories overseas, employed local labour, and acquired foreign companies and infrastructure. During this period, China’s manufacturing bases gradually moved outside domestic markets and “Made in China” was gradually received by overseas markets. “Go Global” era 4.0 of Chinese enterprises echoes China’s undergoing economic transformation and is a proactive part of China’s new opening-up strategy. According to Scott Kennedy, the China State Council document summarises the “Made in China 2025” approach, with clear principles, goals and tools to comprehensively upgrade the Chinese industry, making it more efficient and integrated, so that it can occupy the highest levels of global production chains. Made in China 2025 is also supposed to implement 10 priority sectors such as: new advanced information technology and modern rail transport equipment.54 The go-out strategy, along with China’s 2025 Global era plan from 1.0 to 4.0, has been influential in terms of creating an infrastructure footprint through its FDI on the Forum on 122 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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continent; according to the United Nations (UN), this rose from US$2.7 billion in 2002 to US$84.2 billion in 2012.55 Moreover, the level at which Chinese SOEs have managed to entrench themselves at resource rich locations is remarkable. Politically, the go-global process has also managed to entrench China’s economic diplomacy on the continent by delivering tangible outcomes that have won the hearts and minds of African leaders who are struggling to meet public service demands, particularly since there are not many offers on the table from the rest of the global community. However, China’s go-out, especially through the Global era plan, demonstrates the continental current disadvantages beginning with the glaring fact that the AU industrial plan does not have clear implementation steps, such as the 1.0 to 4.0 strategy. Neither has the continent prepared a strategy on how to exploit the manufacturing opportunities highlighted in China’s go-out guidelines. The issues that have been debated over the past few years are whether China’s go-out process will incorporate the flying geese approach in Africa, as part of its go-out strategy. It is also critical to note that, unlike Japan, which is known for applying the geese theory, China seems to be also applying different mechanisms in its drive for higher-value manufacturing.56 For example, unlike Japan, China has also developed its own “New Silk Road strategy”, which is a set of trade and infrastructure agreements meant to foster free trade with its neighbours and the global community.57 That said, there are debatable signs of a flying geese approach, with certain countries, such as Ethiopia, leading the pack. If China were to apply the flying geese model as part of its offshoring and go-out objectives, the question is whether the process would benefit Africa’s industrial growth.

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APPLYING THE FLYING GEESE MODEL IN AFRICA The flying geese model was developed by the Japanese economist, Akamatsu Kaname, in the 1930s. According to the flying geese model, Japan came first, and with the help of United States aid and firms, delivered unprecedented growth in the 1950s and 1960s.58 From 1950 to 1990, Japanese income grew at 5.9 per cent per year on average.59 The next in line were the Four Asian Tigers: Singapore, Hong Kong, Taiwan and South Korea. As Japan moved up the industrial value chain, the void left behind was filled by the follower nations, including China. In essence, one economy, like the first goose in a V-shaped formation, can lead other economies toward industrialisation, passing older technologies down to the followers, as its own income rises and it moves into newer technologies. The flying geese model explains that this meta-effect of consecutive growth within a region can create benefits far beyond national growth strategies. However, despite the flying geese theory espoused by various economists, it is critical to note that state intervention greatly influenced China’s economic development. Ntono argues that China’s unique communist feature is important when discussing its economic development.60 China had been closed to the world during the Cold War and only joined the liberal economic order in the 1970s, under the open door policy seen during Deng Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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Xiaoping’s regime. He encouraged foreign investment in the country, the modernisation of agriculture, as well as industrialisation for economic development.61 While the Chinese government has continued to promote export-oriented industries in recent years, providing business incentives to business men to invest in foreign countries has also been part of the go-out policy. For example, various small and medium Chinese firms have cropped up in Africa as a new form of Chinese investment in the region, and are a source of revenue and economic benefits to China.62 Justin Yifu Lin maintains that China, having been a ‘follower goose’, is on the verge of graduating from low-skilled manufacturing jobs to becoming a ‘leading dragon’. This will free up 85 million labour-intensive manufacturing jobs, compared to Japan’s 9.7 million in the 1960s and Korea’s 2.3 million in the 1980s.63 Lin argues that, for Africa, China’s graduation provides a once-in-a-generation opportunity to attract light manufacturing jobs and so jumpstart industrialisation – a prerequisite for continental development.64 Lin further proposes that, by following carefully selected lead countries, latecomers can emulate the leader-follower flying geese pattern that has served all successful catching-up economies well since the 18th century.65 There are several reasons why the flying geese model would be a success or failure. A selected few are elaborated on in this discussion. The flying geese model would be successful due to the Chinese government’s efforts, such as the NDRC-issued guideline on promoting cooperation with industrial capacity and equipment manufacturing, which emphasises that China will move its competitive production capacity to the wider world. The guideline points out China should prioritise cooperation with developing countries that have the necessary foundation for cooperation with China, while strengthening China’s presence in developed countries.66 A plan has been devised by the Chinese government to introduce new projects for joint investment.

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The cooperation would focus on Chinese investors financing projects across Africa and on strengthening cooperation in the manufacturing sector. Chinese workers would continue to deal with more sophisticated production, while basic cutting and sewing would take place in countries that offer lower wages.67 The flying geese model also stands a chance of success in Africa, based on FOCAC discussions, where it is evident that both China and Africa believe a deepening partnership between Chinese and African firms would help the continent become more self-sufficient. Moreover, according to the Johannesburg FOCAC Summit, it is estimated that China will import commodities worth US$10 trillion from Africa between 2015 and 2020. At the same time, China will actively conduct manufacturing production capacity cooperation with African countries to boost local manufacturing industry.68 However, the flying geese economic model may face challenges due to the complexities of doing business in Africa, where setting up a manufacturing industry is not enough. It is also not as if the advanced countries’ multinationals are not setting up shop in Africa. Ozawa demonstrates that many major manufacturing brands are already noticeable on the continent, e.g. H&M, Coca-Cola, GE, Pepsi, Nestle, Toyota, Ford, Mercedes Benz, and Renault, along with major IT companies like Microsoft and Google. Moreover, Forum on 124 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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the aforementioned multinational companies have not sparked local industrialisation. Instead they are focused on capturing local markets, not manufacturing for export. Basically, they promote consumerism, but not industrialism, and are basically of the market-seeking type investor.69 South Africa’s Special Economic Zones (SEZs) are a typical example of multinational companies being focused on consumerism. Hence South Africa’s SEZs are struggling to become industrial growth hubs. The level of offshoring between China and Africa could also be minimal, which also minimises the impact of the flying geese theory. Tim Leunig, economic historian at the London School of Economics, told The Financial Times: ‘Off-shoring will not happen in China very soon. 34 million urban factory workers are paid an average of $2 an hour.70 A further 65 million in town and village enterprises average 64 cents. They would be delighted to work for $2.’ Chinese wages will rise, Leunig argues, but the potential supply of low-cost Chinese labour remains elastic.71 Ozawa also maintains that China has to hold on to low-end manufacturing for a long while. Although the wage pressure is on the rise, there is still a huge reservoir of low-skill labour in China’s inland. It will, therefore, take a long, long time for China’s migrant labour - currently estimated at 245 million in the rural areas - to be fully employed in higher value-added industries.72 Therefore, China will not be able to dismantle low-wage light industry as readily, and as speedily, as Japan. Basically, to avoid Trumpism or the Brexit effect, which are primarily driven by bread-and-butter issues, more factories have to be set up in China’s interior regions, rather than abroad.73 Given the vast size of the labour reserve in its huge interior and the potential rise in agricultural productivity, even in 15 years China is not likely to completely dismantle low-end manufacturing and service as swiftly and completely to Africa as Japan and the Asian followers did previously.74

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The flying geese theory is also premised on a lead country. Ozawa rightly points out that a successful flying geese formation of tandem growth requires not just a strong lead-goose country, in this case China, but also equally strong follower-goose countries.75 This could be structurally problematic for the continent. Ethiopia seems to be topping the list of prospective geese followers and Chinese investors have constructed an industrial park in Dukem, near Addis Ababa, Ethiopia’s capital, to host 80 textile firms and factories producing leather and construction materials. The industrial parks have created 40 000 jobs, responsible for assembling cars, trucks and construction equipment.76 Huajian Shoe Factory in Ethiopia provides a convincing reason for China to consider Ethiopia as the lead goose. In 2010, China had about 19 million workers in its footwear industry, Vietnam had 1.2 million, while Ethiopia had only 8 000 workers.77 Late Prime Minister, Meles Zenawi, came to Shenzhen to invite Chinese shoe manufacturers to invest in Ethiopia in August 2011. The Chairman of the Huajian Group, a designer shoe manufacturer, Mr Huarong Zhang, visited Addis Ababa in October in 2011. He was convinced by the opportunity and established a shoe factory in the Oriental Industrial Park near Addis Ababa in January 2012, trained local workers and started exporting to the US market, all within four months. By the end of 2012, with 57 per cent of market share, Huajian had Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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more than doubled Ethiopia’s shoe exports.78 According to Ha-Joon Chang, Ethiopia’s relative success has come from its focused policy. For example, rather than electrify the whole country, Ethiopia has concentrated its efforts on providing power and transport links to its industrial parks. Ethiopia also considered the value chain link by bringing in firms with links to industries that already exist there. Justin Li attributes Huajian’s success in Ethiopia’s Oriental Industrial Zone to strong support and commitment by Ethiopia’s top leadership to enhance investor confidence in the government’s willingness to help reduce transactions and joint development of the park. Another snag with the flying geese model is that the lead country as defined by Ozawa creates a slipstream for others to follow, which happened when Japan moved labourintensive manufacturing to Taiwan and South Korea. The question is whether African countries can apply the slipstream process with their sister countries. Particularly since the slipstream requires a value chain process. Moreover, African producers do not have regional value chain systems, which are necessary for the slipstream process. Instead, there is evidence of persistent limited intra-industry trade in the region, which points to the low level of integration with international production networks - be they regional or global.79 It is actually sad that currently African producers are more connected to global value chains, as suppliers of raw materials or other low-end products, than they are to their sub-regions, which would promote local content. There is also the matter of the AU and the lack of a value chain framework in their AU industrial plan or Agenda 2063, which would be key in promoting the slipstream that is essential in the region. Finally, it is important to emphasise that the slipstream process is based on Asian culture, which is not necessarily practiced in Africa. Moreover, along with the culture, there is a high level of regional intra-trade in the region.

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Ethiopia, as the African lead goose, raises doubts as to whether it would be successful like Japan, as it is not strongly linked to a sub-regional group. Of all the sub-regions on the continent, one region – the East African Economic Community (EAC) – does have the potential for developing strong value chain links, due to its strong intra-regional trade. However, Ethiopia is not part of the EAC. Other countries that have been touted as prospective lead goose countries, i.e. Tanzania and Egypt, Rwanda and South Africa. Tanzania, it could be argued, given its history of placing continental interests above its own during colonial times under the late President Julius Nyerere, may be a better lead goose in terms of implementing the slipstream approach. In Tanzania, manufacturing output grew by 7.5 per cent annually from 1997 to 2012, and it is wooing Chinese and Singaporean clothing firms and has started building its first megaport and industrial park. 80 Egypt would be a problematic FOCAC slipstream, as the key beneficiaries would be North African and not necessarily Sub-Saharan countries. Rwanda is a potential country, due to its strong leadership and policy implementation. However, due to its size, the controversies regarding the Eastern DRC natural resources, and perceived political interference by Burundi, one doubts if it could serve as a slipstream country without Forum on 126 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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engaging in political mischief. South Africa would be a very good prospect, given the right ingredients, such as infrastructure and high trade volumes on the continent. Over the years, South Africa has also been pushing the continental infrastructure and industrial plan strongly. However, the country is currently plagued by populist politics, which impact negatively on the implementation of critical policies that are designed to promote public services, such as basic education and health. South Africa also has an unusually high manufacturing wage level - US$1 200 per month - compared to China’s $560 and Ethiopia’s $30 a month, placing the country in the middle-income trap.81 Finally, it is critical to note that Chinese companies’ investments alone cannot create a flying geese formation for Africa. Coordination should include the participation of other international countries. After all, China’s own initial FDI-driven growth in low-skill manufacturing was itself made possible by the massive inflows of FDI and outsourcing operations from advanced countries, notably the Asian countries that concentrate on labour-intensive production, i.e. Japan, the US and Europe.82 Justin Lin and Andrea Goldstein argue that Italy is in a strong position to support China’s efforts in Africa. Italy is currently Europe’s second-largest manufacturing powerhouse, and is home to numerous companies that lead global value chains, particularly in light manufacturing and agri-food.83 These firms have the power to boost international consumer confidence with products made in Africa and, eventually, in African brands.84 Chinese companies are also increasingly investing in Italian SMEs to accumulate skills, acquire brands and access new markets. These links provide an ideal foundation for joint penetration of African markets and joint exploration of the continent’s potential as a global manufactur-

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ing hub.85

CONCLUSION There is general agreement that industrial growth is vital to economic development in African countries and that it has the potential to contribute significantly to poverty reduction. This has been endorsed by most development forums that focus on development in Africa. African Heads of States and Governments through the AU Industrial Plan, and AU Agenda 2063 agree that African countries must urgently diversify their economies away from their dependence on primary production and a narrow export base.86 It is urged that both regions take the following measures into account for FOCAC 2018: Both regions need to determine practical steps to be taken if the flying geese model is implemented and adapt it to the continental environment; China’s go-out strategy is to the continent’s benefit. The African side needs to work hard at implementing the 1.0 industrial plan and use the collaboration with China as an opportunity to utilise its go-global era 4.0. Finally, the continent needs to work out its global competitiveness hurdle. Although China’s go-out policy is designed to specifically promote China’s economic growth through various trade institutions and FDI, there are many synergies between

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the two regions that can be enhanced in this process. The continent needs to align its AU Industrial Plan and Agenda 2063 with China’s go out strategy, by incorporating a strong regional intra-trade process that will promote an effective value chain system. The intratrade system could be called go-regional Africa 1.0, which would feed into the “made in Africa” objectives outlined in Agenda 2063. Through FOCAC, go-regional Africa 1.0 could link with China’s go-global era 4.0, in order to tap into China’s efforts to optimise Chinese industrialisation, promote manufacturing, and facilitate industry upgrades through technology. Go-regional Africa 1.0 would also have to incorporate between the two regions how to grow domestic content of core components and materials in both regions. Special Economic Zones (SEZs) could also serve as a focal point for both China and Africa in promoting the regional go-global. The AU should also consider positioning the SEZs in their industrial plan. Given the SEZs that China has established, it is critical that they are utilised to set up value chains and complementary businesses that would make the process more sustainable. It is also critical that Beijing produce a systematic, long-term strategic plan to coordinate economic cooperation among, and within different industries and countries in going global, to pre-empt negative fall-out due to truant Chinese individual companies or unexpected political bottlenecks.87 This coordination is essential, as it would help minimise some of the socio-political risks that have emerged over the years. An agreed upon strategic rule book would minimise negative noise from the international civil societies, which would provide more focus on sustainable matters, such as industrialisation. In order for the East Asian flying geese model to work, it has to be adapted to suit the continental climate. The flying geese catch-up process of industrialisation, suggests that emerging economies should start from labour-intensive sectors and upgrade to medium

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and high-technology sectors. However, since, African countries are at different levels of industrial development, some will have to start with labour-intensive sectors, while others upgrade, which should be factored into the China-Africa industrialisation plan.88 Another option for FOCAC would be for the Chinese government to implement manufacturing plans with a select number of African countries, such as Ethiopia or Rwanda, that have established the political will to implement industrialisation and which would serve as a pilot project. If the AU, or sub-regions, or individual countries, then decide that they want to take part, based on the outcomes, they can then become proactive participants. In other words, the flying geese strategy could be implemented from a criteria perspective with the slipstream process developing if more countries decide to participate with demonstrated political will. Competitiveness is essential for industrial growth. As already established, the fundamental components of an efficient manufacturing industry - a productive labour force, reliable electricity supply and efficient transport networks - are still lacking across much of the continent. Moreover, the continent faces tough competition from established manufacturing locales such as India, Vietnam and Bangladesh, which are actually more convenient locations for China to off-shore most of its manufacturing. These aforementioned Forum on 128 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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countries have already started branding themselves effectively as the new manufacturing capitals. For example, a review of various Vietnam websites details how they are positioned to take over China’s off-shoring. Moreover, many foreign investors with existing China operations have started moving to Vietnam. As a result, Vietnam’s manufacturing sector grew at a compound annual growth rate of more than 9 per cent between 2005 and 2010 and currently accounts for roughly a quarter of its GDP.89 African countries have not started branding themselves effectively. Neither is there a branding strategy in the AU industrial plan. Furthermore, with regard to FOCAC, there has been no pro-active initiative by the African side to prepare a strategy for possible off-shoring by China. The continent needs to recognise that relocating a factory to a foreign country is not a simple task and it has a high risk, therefore a long-term commitment from the host country – through competitive standards implemented in countries such as Vietnam and India – are more profitable.90

POLICY RECOMMENDATIONS FOR FOCAC 2018 As already discussed, industrialisation cannot succeed without the development of the ‘basics’, i.e. infrastructure and human capital. But these building blocks, while necessary, are not enough.91 To industrialise successfully, Africa will need to revisit the policy orthodoxy and break new ground. Needless to say, the investment climate reforms of the World Bank, supported by some bilateral donors, have not and will not bring industry to Africa on their own. Neither can China wave a magic industrial wand by serving as an infrastructure department for the continent, or through the FOCAC umbrella. Political

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commitment and leadership is essential for industry growth to succeed. The continent needs to strategically take advantage of the manufacturing opportunities with China with zeal and commitment to implementation, in order to avoid a potential “China fatigue syndrome with Africa’s lip service”. Other issues that need to be addressed are: whether manufacturing investments have occurred substantially enough to trigger a continental local industrial take-off; and how to deal with the global community stance to not even consider moving to Africa at the rate they are currently moving to places such as Vietnam. The flying geese theory, if implemented, needs to be designed with an understanding that there is no one-size-fits-all strategy for doing business in Africa. The following recommendations are therefore proposed: a) China’s go-out policy has been a successful win-win policy, as it has expanded the influence of China’s companies while promoting FDI on the continent. However, the process needs to advance to another stage, where companies go beyond setting up manufacturing plants and job growth to promoting local value chains, which would, in turn, produce a sustainable China-Africa industrial program, as envisioned by President Xi Jinping.

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b) The continent needs to change its image, which has impacted on its global competitiveness. Despite talks of China off-shoring to Africa, most international companies leaving China currently are moving to Vietnam. Africa needs to not only rebrand itself assertively, but also become more proactive, instead of waiting for China or the West to make its countries conducive for doing business. c) The continent needs to urgently upgrade its industrial plan 1.0 and align it with China’s 4.0 level plan, so that it can take part in some of its objectives, such as the modern rail transport equipment, new-energy vehicles and equipment, power equipment and agricultural equipment. d) The level of ambition for FOCAC and the AU should be elevated; in particular, greater attention should be given to the development of regional value chains, which are largely untapped on the continent. Value chains are an important feature in today’s global economy and African countries seeking to develop exports and grow their economies also need to take these into account in their national and sub-regional economies. e)

Potential political, social and economic risks should be dealt with up-front by both regions, noting that, in the end, due diligence could very well determine the success or failure of the manufacturing endeavours under FOCAC.92

f) Given the skills deficit on the continent, training and exchanges should be re-aligned to promote and facilitate the FOCAC objectives in both regions. Human resource training and development should be structured to become impact based. For example: instead of having skills training take place in China, some of the training programs should be implemented in Africa, which would ensure that they reach a larger audi-

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ence; and they should be tailored to suit the continent.

REFERENCES 1 African Union., 2014. Agenda 2063: The Africa We Want. Available at http://www.au.int.org [Accessed 11 March 2017]. 2 African Union., 2007. Action Plan for the Accelerated Industrial Development of Africa. AU Conference of Ministers of Industry. 1st Extraordinary Session. Midrand, South Africa. Available at: http://www.au.org [Accessed 20 February 2017]. 3 UNCTAD, 2013. The state of industrial development in Africa: unexploited opportunities amidst growing challenges: Fostering Industrial Development in Africa in the New Global Environment. Economic Development in Africa. No. 27. Available at http://www.unctad.org [Accessed 1 March 2017]. 4 UNCTAD, 2013. 5 Mbae, L., 2014. Industrialization in Africa: Can the continent make it? All Voices. Available at http:// www.allvoices.com [Accessed 20 February 2017]. 6 Tiezzi, S. 2015. The New China-Africa Relations: 4 Trends to Watch. The Diplomat. Online Available at: http://www.thediplomat.com [Accessed on February 20, 2017] 7 Ibid.

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PART 3: China-Africa Industrial Cooperation | Chapter 7 8 Ibid. 9 World Bank. 2008. New Financiers are Narrowing Africa’s Infrastructure. Available at http://www. worldbank.org [Accessed 1 March 2017]. 10 Atanasov, M., 2016. China outsourcing manufacturing lines to Africa. Available at http:www.cctv.com [Accessed 5 March 2017]. 11 Atanasov, 2016. 12 Wang, S. and Lin, W., 2016. Hunger for foreign know-how propels surge in Chinese ODI. Asia Times. Available at: http://www.atimes.com [Accessed 5 March 2017]. 13 UNCTAD. 2013. The state of industrial development in Africa: unexploited opportunities amidst growing challenges: Fostering Industrial Development in Africa in the New Global Environment. Economic Development in Africa. No. 27. Available at: http://www.unctad.org [Accessed 1 March 2017]. 14 Aurik, J., 2016. How can African manufacturing achieve its full potential? World Economic Forum. Available at http://www.weforum.org [Accessed 10 January 2017]. 15 LexAfrica, 2015. What China’s Economic Shift Means for Africa. Lawyers for Africa. Available at http:// www.lexafrica.com [Accessed 12 March 2017]. 16 The Economist,2014. An awakening giant. Available at http:www.economist.com [Accessed 15 January 2017]. 17 Kaberuka, D. and Leke, A., 2016. Africa Still Rising. Mckinsey Global Institute. Available at http://www. mckinsey.com [Accessed 12 March 2017]. 18 Kaberuka, D. and Leke, A., 2016 19 Ibid. 20 Economic Intelligence Unit, 2016. Manufacturing in Africa: still struggling with the basics. Available at http://www.eiu.com [Accessed 20 February 2017]. 21 Newman, C. and Page, J., 2016. Made in Africa: The future of production on the continent. World Economic Forum. Available at http://www.weforum.org [Accessed 20 February 2017].

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22 Newman, C and Page, J. 2016. Manufacturing in Africa: still struggling with the basics. The Economist Intelligence Unit. Available at http://www.weforum.org [Accessed 20 February 2017]. 23 The Economist, 2014. An awakening giant. Available at http:www.economist.com [Accessed 15 January 2017]. 24 Ibid. 25 Kaberuka D. and Leke, A., 2016. This is why, despite challenges, Africa can still rise. World Economic Forum. Available at http://www.weforum.org [Accessed 1 March 2017]. 26 Ibid. 27 Mbae, L., 2014. Industrialization in Africa: Can the continent make it? All Voices. Available at http:// www.allvoices.com [Accessed 20 February 2017]. 28 African Development Bank. (n.d) The Africa Competitive Report 2015. Available at http://www.afdb.org. [Accessed 15 January 2017]. 29 Ibid. 30 Ejoh, E., 2016. Why Africa’s power problems persist. Institution. (Online 14 June 2016) Available at: http://www.vanguardngr.com [Accessed 1 March 2017]. 31 Shurufu, O. 2015. Ejoh, E, 2016. Quartz. Available at http://www.quartz.com [Accessed on March 1, 2017] 32 Ibid.

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THE REALITIES OF INDUSTRIAL 1.0 IN AFRICA THROUGH FOCAC | Yazini April and Zukiswa Mpiyakhe 33 Economic Intelligence Unit, 2016. Manufacturing in Africa: still struggling with the basics. Available at http://www.eiu.com [Accessed 20 February 2017]. 34 Mbae, L. 2014. Industrialization in Africa: Can the continent make it? All Voices. Available at http:// www.allvoices.com [Accessed on 20 February, 2017] 35 African Union. 2016. PIDA: A Strategic Continental Initiative for Africa’s Integration. Available at www. au.int.org [Accessed on 16 March 2016]. 36 African Development Bank. (n.d) The Africa Competitive Report 2015. Available at http://www.afdb.org [Accessed 15 January 2017]. 37 Ozawa, T. and Ballack, C., 2015. Next Great Industrial Transmigration: Relocating China’s Factories to Sub-Saharan Africa, Flying-Geese Style? Columbia University Discussion Paper No. 78. Available at http://www.8.gsb.columbia.edu [Accessed 30 January 2017]. 38 Ibid. 39 Wang and Lin, 2016. 40 Sun, Y., 2014. Africa in China’s Foreign Policy. Brookings Institute. Available at http://www.brookingsinstitute.edu [Accessed 5 March 2017]. 41 Chen, Y., 2008. The Creation of Jiang Zemin’s ‘Going Out’ Strategy and Its Importance. Min Wang. Available at http://financepeople.com.cn [Accessed 10 March 2017]. 42 Ibid. 43 Chen, J., 2008. China’s ‘Go Out’ Policy A One-Way Street. Forbes magazine. Available at http: www. forbes.com [Accessed 30 January 2017]. 44 Wang, H., 2016. A Deeper Look at China’s Going Out Policy. Center for International Governance and Innovation. Available at http://www.cigionline.org [Accessed 30 January 2017]. 45 Wang, H., 2016 46 Sun, 2014. 47 Ibid. 48 Ibid.

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49 Ozawa, and Ballack, 2015. 50 Wade, G., 2015. China to move production capacity offshore. Available at www.aph.gov.au [Accessed 15 February 2017]. 51 Wade, 2015. 52 Kennedy, S., 2015. Made in China 2025. Institution. (Online 1 June 2015) Available at: http://www. [Accessed 1 March 2017]. 53 Ibid. 54 Ibid. 55 Author unknown, 2014. China’s Going Out Strategy Increasing Overseas Expansion. Market and Economic Risk. Available at www.pinkerton.com [Accessed 30 January 2017]. 56 Lin, J., 2012. The Quest for Prosperity: How Developing Economies Can Take Off. Princeton, NJ: Princeton University Press, p.15–16. 57 Lennane, A., 2016. The End of Made in China? The Load Star. Available at http:www.loadstar.co.uk [Accessed 15 January 2017]. 58 Weil, D., 2009. Economic Growth. 2nd ed. Boston, MA: Pearson Education Inc. 59 Ibid.

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PART 3: China-Africa Industrial Cooperation | Chapter 7 60 Ntono, D., 2012. Learning, Adopting and Modifying: Ingredients for Africa’s Future Growth and Development Lessons from China. The African Executive. Available at http://www.africanexecutive.com [Accessed 10 February 2017]. 61 Ibid. 62 Ibid. 63 Lin, J., 2011. Flying Geese, Leading dragons and Africa’s potential. World Bank. Available at http://blogs.worldbank. org [Accessed 1 March 2017]. 64 Ibid. 65 Ibid. 66 Yelery, A., 2014. China’s ‘Going Out’ Policy: Sub-National Economic Trajectories. Institute of Chinese Studies: Delhi. Analysis. No.24. Available at http://www.icsin.org [Accessed 30 January 2017]. 67 Atanasov, M., 2016. China outsourcing manufacturing lines to Africa. Available at http:www.englishcctv.com [Accessed 5 March 2017]. 68 Ministry of Foreign Affairs of the People’s Republic of China. 2015. Written Interview by Ambassador Tian Xuejun on the FOCAC Summit. Ministry of Foreign Affairs of the People’s Republic of China. Available at http://www.fmprc.gov.cn [Accessed 1 March 2017]. 69 Ozawa and Ballack, 2015. 70 Leunig, T., 2011. ‘Reshoring’ jobs from China won’t happen. The Financial Times. Available at http:// www.ft.com [Accessed 15 February 2017]. 71 The Boston Consulting Group. 2011. Made in America, Again: Why manufacturing will return to the US. Available at http://www.bcg.com [Accessed 30 January 2017]. 72 World Bank, 2015. Migration and Development. Available at http://www.siteresources.worldbank.org [Accessed 10 March 2017]. 73 Ozawa Ballack, 2015. 74 Ibid.

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75 Ibid. 76 Hamlin, K., Gridneff, I. and Davison, W., 2014. Ethiopia becomes China’s China in Search for Cheap Labor. Bloomberg. Available at http://www.bloomberg.com [Accessed 10 March 2017]. 77 Hamlin, et al. 2014. 78 Bräutigam, D. and Tang, X., 2012. Economic Statecraft in China’s New Overseas Special Economic Zones: Soft Power, Business or Resource Security? International Affairs, 88(4), pp.799–816. 79 United Nations Economic Commission for Africa. Industrializing Through Trade. Economic Report for Africa 2015. 80 The Economist. 2015. Industrialization in Africa: More a Marathon that a Sprint. Economist. Available at http://www.economist.com [Accessed 1 March 2017]. 81 Ozawa and Ballack,2015. 82 Ibid. 83 Lin, J. and Goldstein, A., 2017. Achieving an African Industrial Revolution. Project Syndicate. (Online 20 February 2017) Available at http://project-syndicate.org [Accessed 1 March 2017]. 84 Ibid. 85 Ibid. 86 UNIDO. 2004. Industrial Development Report, 2004. Available at http://www.unido.org [Accessed 5 March 2017].

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THE REALITIES OF INDUSTRIAL 1.0 IN AFRICA THROUGH FOCAC | Yazini April and Zukiswa Mpiyakhe 87 Zhang, H., 2012. The Development Environment of Sino-African Relations and Its Development Path. Annual Report on Development in Africa 2011-2012. China Academy of Social Sciences. Available at http://www.gov.cn [Accessed 10 February 2017]. 88 Economic Report for Africa, 2015. Industrializing Through Trade. United Nations Economic Commission for Africa. Available at http://www.uneca.org [Accessed 17 January 2017]. 89 Shira, D., 2015. The China Plus One Model and the Competitive Advantages of Manufacturing in Vietnam. Emerging Strategy. Available at http://www.emerging-strategy.com [Accessed 1 March 2017]. 90 Glans, N., 2014. Chinese OFDI and Private Companies in Ethiopia – Industrialization and Employment Opportunities. Lund University Libraries. Available at http://www.lup.lub.lu.se [Accessed 1 March 2017]. 91 Newman, C. and Page, J., 2017. Made in Africa: The future of production on the continent. World Economic Forum. Available at http://www.weforum.org [Accessed 20 February 2017].

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92 Newman, C. and Page, J., 2017

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8

CHAPTER

China’s inward looking industrialisation

an inspiration for West Africa to establish regional value chains? Maxime Weigert

INTRODUCTION Sustainable Development Goal 9 (SDG 9) hails manufacturing as a foundation for economic development, employment and social stability.1 While this industry-focused objective is relevant for any country, regardless of its level of development, it is especially important for countries in Africa, which is home to most of the least developed countries, and whose manufacturing sector is, overall, in a dismal state.2 When discussed, the challenge of industrialising Africa almost mechanically evokes Asia’s industrialisation experience, where, in the last decades, countries have achieved remarkable manufacturing-led industrial transitions, from labour-intensive to more capital-intensive production, and, more recently, to human capital-intensive activities. This is reflected in many institutional and academic studies that focus on Africa’s

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industrialisation, and which refer to Asian experiences, including the Chinese success story, on a comparative and lessons-learned basis.3 An argument increasingly put forward is that China is declining in attractiveness, due to rising wages, and is losing ground for labour-intensive manufacturing investment, to the advantage of other locations, including Africa.4 This comparison approach is relevant, as seen with the rising success of countries like Ethiopia, in linking into global value chains (GVC). It is true, also, that China’s success in carving the course of its history, thanks to a tenacious industrial strategy, is a key lesson for Africa. However, it does not take into account the whole story of China’s industrialisation. Even though China delivered remarkable export-led industrial growth in the last four decades, this model has not emerged out of the blue. It was built on a preexisting industrial base that was originally focused on import-substitution industrialisation (ISI) that was designed to fulfil domestic needs for basic products. The shift to the export-oriented industrialisation (EOI) model came later, and gradually, and its rise cast a shadow on the concurrent inward-looking industrialisation process, with which it was intrinsically interwoven.5 Whereas the success of China in becoming the “workshop of the world” has drawn considerable attention,6 less is known about the domestic industries Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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that have provided food, clothing and transport to the more or less one billion Chinese each year since 1978. The lack of knowledge about the Chinese domestic market-driven industrialisation process, particularly at the micro-economic level, is a regrettable gap when it comes to seeking out sources of inspiration for Africa’s development. While poorly or sometimes indirectly documented, this aspect of China’s experience contains key lessons on how a developing country can reduce external dependency, gain self-sufficiency for basic products (including food) and prepare for global competitiveness, by first addressing its own needs, at its own pace, and according to its own capacity. Such outcomes are fundamental challenges to African countries’ prosperity, and the way they were achieved elsewhere deserves at least the same attention as the strategic drivers that are promoted to help Africa break into the highly competitive GVCs. This chapter is an attempt to elucidate the patterns of the domestic market-driven industrialisation process in China since the 1970s, with a view to drawing lessons for Africa in general, and for West Africa in particular.7 This is part of a research work on regional value chains (RVCs) as an alternative and complementary mode of industrialisation in the region, which differs from the GVCs strategies, as the former focuses primarily on domestic and regional markets. Despite the numerous institutional, governance, cultural, and structural disparities between West Africa today and China when it started to industrialise, this paper assumes, in theory, that China’s experience embodies some of the challenges that are similar to those faced by RVCs in West Africa, particularly from a micro-economic and institutional perspective that emphasises economic actors and market conditions. This is the subject of section 1, which introduces the concept of RVCs and the related challenges and explains the reasons for its relevance in the developing

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country context. The rest of the chapter is organised into two sections. Section 2 analyses the role of the domestic market in China’s industrialisation evolution since 1978, including the theoretical and methodological challenges related to this issue. It unveils some of the policy and market-based innovations that drove inward-looking industrialisation in the country, while identifying a research gap about this dimension. The concluding section 3 focuses on RVC opportunities in West Africa, and puts them into perspective in terms of the Chinese experience in addressing domestic industrial needs, in an effort to link the two models, despite their contextual differences. In the concluding section, recommendations based on the previous findings are put forth to highlight the possible assistance that China could provide in establishing competitive and profitable RVCs in West Africa.

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REGIONALISATION OF INDUSTRIALISATION IN DEVELOPING REGIONS: ARGUMENTS AND CONCEPTS The concept of GVCs is understood as the international defragmentation of production processes that occurred during the 1960s, when multinational companies’ (MNCs) adopted efficiency-seeking strategies and deployed different production stages in search of a location advantage. More detailed observations, however, show that GVC patterns are more regional than global, notably within the framework of North-South production blocs, such as the Association of Southeast Asian Nations plus three (ASEAN+3), the North American Free Trade Agreement (NAFTA) and the Euro-Med regions. This reflects MNCs’ efforts to address spatial constraints by valuing proximity over other location advantages, in order to ensure greater flexibility and responsiveness to market changes.8 This trend in global industrialisation, which is guided by geographic constraints and private operational strategies, must be considered by those trying to industrialise, including West African countries. In particular, they have to consider how they will articulate both global-oriented and regional and domestic-oriented industrial strategies, in other words, both outward and inward-looking strategies. This section presents the arguments for West Africa to prudently embrace GVC strategies, and defends the RVC option through an economic geography approach.

The limits of Global Value Chain strategies Increased linkages into GVCs are extensively promoted for developing countries wishing to industrialise, including in Africa.9 This strategy, which consists of participating in the

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global defragmented production system, is depicted as a driver for private sector development and modernisation, productivity gains, job creation, economic diversification, and eventually more sustainable growth.10 It is also seen as a transmission channel to diffuse innovation and higher added-value activities in developing countries, as companies that integrate GVCs might enjoy the learning process and facilitated access to finance and technology, and eventually climb up the value chain.11 However, those who advocate that developing countries integrate GVCs also recognise that this strategy has certain fundamental requirements for success. Firstly, there is a need to implement comprehensive pro-business policies that are aligned with global governance standards, in order to convince lead MNCs to outsource activities in the country. For least developed countries, implementing such policies requires considerable effort, which must be contemplated considering other downside risks. The fragmentation of potential participant countries into GVCs exposes them to the opportunism of MNCs in terms of location choice. This may, therefore, ignite competition between countries, which is likely to spark a “race-to-the-bottom” in terms of social and labour regulation. In some cases, such competition could obstruct the promised upgrading process, and

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hold countries in low value-added stages of production, as happened, for example, with Mauritius12 and Lesotho.13 A second requirement lies in the quality parameters needed to integrate GVCs, which remain an important operational obstacle for many African countries. In GVCs, inter-firm linkages are governed by product and process standards that have parameters that are shaped both publicly and privately, but mostly in developed countries. Standards are highly demanding, due to the strict national regulations regarding labour and environmental issues. In addition, many MNCs comply with additional market-driven standards and enforce private standards throughout the whole production network, in order to mitigate risks related to safety and health and food security.14 Although this provides an incentive to upgrade to suppliers already engaged in GVCs, such a requirement is a barrier to entry for indigenous firms located in countries with infrastructure gaps and high levels of informality, especially for small firms.15 Current industrialisation trends also present potential difficulties regarding integration with GVCs. Unlike when countries like China started to industrialise in the 1970s, the industrial outlook nowadays is characterised by major uncertainty related to the In the medium-term, automation could lead at the disappearance of many manufacturing jobs, particularly low-skill ones. This could be detrimental to countries attempting to attract labour-intensive activities, possibly resulting in a “premature deindustrialisation” in emerging economies that are just now engaging in industrialisation.16 Though hypothetical for now, this possibility must be considered by African countries, and those who advise them in designing industrial policies. These issues show that a number of development prerequisites are required to participate in GVCs. In view of these constraints, there is a growing interest in promoting

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smaller scale, regional or domestic industrialisation in developing countries, which is reflected in the growing emphasis on RVCs. The concept is the same as GVCs, but with the fundamental distinction that RVCs are primarily operated within a particular region, by regional actors, or for regional markets.17 When applied to the developing country context, the idea is to shape regional production chains around the specificities of local demand and consumption practices, thereby avoiding the norms required by GVCs. While less dynamic than linkages to GVCs, due to the smaller size of the end-market, RVCs could trigger industrialisation by providing economies of scale to regional producers, while enhancing integration, productivity and division of labour in the region. Once the RVCs are established, the end products can also be exported globally, particularly to other developing markets. This then lays the foundation for consolidating and upgrading the RVCs, and perhaps eventually linking them to GVCs.18

Understanding the relevance of regional value chains RVCs are an inward-looking path to industrialisation, somewhat comparable, in principle, to ISI strategies implemented by most developing countries from the 1960s. The growth

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in domestic consumption currently seen in these countries, spurred by rising household incomes, may stimulate a domestic or regional consumption-driven industrialisation period for Africa, as suggested by Ogunleyhe.19 The author identifies five growth poles (South Africa, Botswana, Kenya, Nigeria and Angola) that are likely to drive regional development on the continent, which are characterised by intense trade activity (export and import) and a large market and population size, and which attract capital flows, migrants, and technology. RVCs, however, differ from previous ISI experiences (most of which have failed) due to both supply and demand-side factors. The supply-side factors can be highlighted through an institutional economic geography approach, which posits that institutions determine the conditions of production faced by local producers. This approach treats institutions as constraints or relational contracts that guide human activities and structure human interaction, including economic production.20 Institutions consist of formal constraints (rules, laws, constitutions, property rights) and informal constraints (norms of behaviour, customs, traditions, codes of conduct) that are built up endogenously over time.21 Naturally, they vary greatly across time and space, which is reflected, for example, in the institutional gap between developed and developing countries. A key distinction between them is the predominance of formal institutions in the former and informal institutions in the latter.22 For firms that operate in developing markets, this has significant implications in terms of mode of production, since different institutional contexts require different models to deal with labour force management and conflict resolution, technological appropriation,23 and relationships with social, economic and political structures. While the local context creates specific conditions of production, the multilateral community yearns to annihilate these differentiations by promoting a mainstream concept of

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“good governance” that is modelled on developed countries’ regulations,24 especially when it comes to market norms – as epitomised by the Doing Business measures. Empirical evidence, however, reveals a critical trend when it comes to developing countries’ markets. Firstly, while MNCs that lead GVCs operate primarily in developed countries’ markets, most fail to operate in developing and emerging markets because of their inability to deal with the local context – an infrastructure gap, low purchasing power, an institutional void, and specific consumers’ expectations in terms of affordability and taste.25 Secondly, local firms operating in their home market have a competitive advantage in their ability to navigate the institutional environment in which they are embedded, sometimes facing down large multinationals.26 The reasons for their success lie in several competitive advantages, including mastery of the industrial environment (logistics, suppliers) and flexibility, particularly in terms of standards adaptation.27 This means that in developing markets, the inherent advantage of domestic firms, which is a better understanding of local conditions, matters more than the traditional competitive advantage of global MNCs, such as firm size and economies of scale, marketing and technological skills, or easier access to financial capital.28

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On the demand side, the success of developing countries’ companies in their home markets has to do with both the social and cultural dimension of consumption. The appropriation of material goods, far from being a worldwide uniform act of purchase, significantly differs between different social and cultural groups in different places, depending on the predominant cultural or religious norms, the needs created by the environment, the level of income and the distribution channels.29 The ability to meet these specific needs, by producing adapted and affordable goods, therefore provides significant added value in terms of market capture. As a result of these demand-side factors, firms in developing countries have several advantages over foreign companies, including: their focus on the local market, where they concentrate their development and branding strategies; and their knowledge of the expectations and behaviour of consumers, thanks to the data they have gathered since they were established.30 Global-looking companies, for their part, struggle to tailor their business models to local needs while maintaining consistent global processes.31 The supply and demand factors are also important for those at the bottom of the pyramid (BOP) and when using constraint-based innovation. The BOP is the lowest tier of a pyramid that categorises global consumers into five tiers, based on their purchasing power. The bottom tier includes customers with annual purchasing power parity of US$1 500 or less, which represented 4 billion people at the time the concept was coined by Prahalad and Hart.32 Based on successful and innovative experiences of businesses tapping into developing markets, these authors suggested that the multitude of the poor, who constitute the base of the pyramid, represent an aggregated market that could be a key engine for business growth, provided that market-specific solutions are found to serve them and unlock their purchasing power in a fashion that meets their consumption

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behaviour and capacity. Constraint-based innovation, which encompasses multiple types of innovations,33 refers to these solutions as a business model designed to use limited resources to create and distribute low-cost products.34 This involves creating capacity for BOP to consume by promoting three principles: affordability of the products, without sacrificing their quality or efficacy; accessibility of the products in markets characterised by fragmentation and urban and rural constrained mobility; and availability, through efficient supply and distribution chains.35 Additional proposed principles are: acceptability, meaning that products must be adapted to the unique needs of both customers and distributors; and awareness, which refers to marketing in a constrained communication context.36 Constraint-based innovation has received increasing attention in recent years in both the academic and practitioner literature, most often through case studies on local firms that succeed in using innovation to enter developing markets. A few global firm successes are also highlighted, however, it is widely recognised that MNCs struggle to penetrate BOP markets. Their inability to do so speaks to the relevance of RVCs operated by local enterprises in developing markets, as seen in West Africa.

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This also marks a key difference between RVCs and ISI models. Unlike with ISI policies, RVCs do not necessarily require tariff measures to protect national infant manufacturers from foreign companies, since, theoretically, RVCs’ strategic targeting of low-income markets leaves an opportunity for the development of the local private sector. For example, in Nigeria, a ban on importing packaged sugar in 2013 benefited the national group Dangote Sugar, but it was already a dominant player in the market and the new tariff regime was designed to attract foreign investment to the refinery sector, not to protect local producers.37 In fact, the success of Dangote Sugar reflects, above all, its mastery of the Nigerian production conditions.38 Other successes occurred in relatively open markets, such as in Senegal, where the Patisen Group, a local food-processing company, faced down locally established MNCs in the production and distribution of bouillon cubes and chocolate.39 In West Africa, as elsewhere, protectionism can support domestic and regional champions, but it cannot be seen as a primary factor of competitiveness, as constraint-based industrialisation most often stems from a bottom-up, market-driven dynamic.40

China’s inward-looking industrialisation The inward-looking industrialisation approach has drawn little attention from scholars,41 to the extent that it can be considered the hidden part of China’s manufacturing story, as opposed to its best known outward, export-oriented industrial success. Yet, since the 1950s, China has given priority to ISI strategies, in order to attain autonomy and selfsufficiency of its economy, with EOI strategies conceived as a means to reach this goal. Related to the abovementioned concepts of BOP and constraint-based innovation, China’s

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experience contains market-based innovations that remain insufficiently documented.

Import-substitution vs. export-led industrialisation in China While thousand-year-old traces of industrial processes are found in China, it is usually agreed that the industrialisation of the People’s Republic of China commenced in the 1950s, with Mao Zedong’s first Five-Year Plan (1950 to 1955) and the Great Leap Forward campaign, where the objective was to transform the Chinese agrarian economy through ISI. This approach failed to yield the expected returns, notably due to the untenable isolation of the Chinese economy in the considered period, which deprived China of importing the needed inputs and technologies.42 Thus the strategy was re-thought at the time of the open-door policy that was introduced in 1978. This initiated a shift from a centrally planned socialist economy to a new model of pursuing economic reform and opening up to international economic ties, in order to foster technology transfers in the country, for example. This period coincides with the emergence of the Chinese EOI model, but it did not translate into the abandonment of the import-substitution strategy. On the contrary, export promotion was conceived as a means to boost the ISI from the beginning, with

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exporting allowing them to earn the needed foreign exchange and know-how to accelerate the modernisation of the domestic light industry.43 An indication that confirms this theory is that the reforms implemented from 1978 were not centred on encouraging exporting, but aimed at gradually liberalising the entire non-state sector into a more market-oriented scheme.44 The reform agenda led to the implementation of new governance systems that favoured rural and urban industrialisation. Rural areas saw the introduction of “responsible farming”, which marked the end of the full collectivisation of agriculture. Output. the quota of production to be fulfilled by farmers to the State at fixed prices was progressively reduced. This offered farmers the opportunity to devote a growing share of their production to market-oriented operations. This paved the way for rural industry development. This model was consolidated in 1984 with the creation of the village and township enterprises (TVEs), which gather both individual rural enterprises and farm cooperatives, and benefit from governmental incentives such as low-cost loans, tax reduction or exemption and technical assistance.45 In the urban areas, the main reform used to foster entrepreneurship and productivity was the “factory responsibility system”. This new system provided more autonomy to enterprise managers, enlarging their powers vis-à-vis the government entities in terms of staffing, decision-making, and results-based management.46 All these reforms created a hybrid economic model that combined planning and liberal elements, with state-owned enterprises (SOE) still dominating heavy industry, and other business entities increasingly operating under the market system.47 These reforms targeted all sectors of the economy, regardless of whether the business was oriented toward export or domestic markets. Export promotion policies came as a supplement to the general reforms. This included measures to attract foreign investments for labour-intensive

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activities, such as lower tax and rental rates to foreign investors and the establishment of Special Economic Zones (SEZs) in the coastal regions of the country. It also included efforts to support Chinese exporters, with the creation of specialised banks to provide loans, several tax exemptions and other incentives. The combination of these reforms contributed to expanding the successful export-oriented industrialisation approach and led to the remarkable export performance of China in the last few decades. The considerable effort made to boost exports was not made to the detriment of import-substitution promotion, however. On the contrary, the authorities concurrently took important measures to develop light industries focused on fulfilling domestic needs. To stimulate internal demand for consumer goods, the coupon system was abandoned in 1983. This reform lifted out all rationings on food, meat, textiles and other consumer goods, which drove the expansion of local producers for these products.48 In the following decade, the authorities maintained restrictive barriers to entry in several sectors, including infant light industries typically oriented towards domestic consumption, namely textiles, tobacco processing and food production.49 The authorities also endeavoured to limit foreign access to the domestic markets by restricting licenses to produce in China. An example of this, the “Industrial Policy for the Automobile Industry”, Forum on 142 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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was adopted in 1990 to promote automobile import-substitution by protecting Chinese car manufacturers from competition from the global American, Japanese and European leaders.50 The Chinese industrial policy, was therefore focused on both inward and outwardlooking industrialisation and laid the foundation for the expansion of specialised export and domestic Chinese enterprises. One qualitative trend is that a dual structure appeared based on capabilities: the most capable firms successfully moved toward global frontiers and GVCs, and weaker units focused on catering to domestic markets for inferior goods.51 The distribution of inward and outward-looking companies is, however, difficult to assess quantitatively, due to the lack of data detailing the share of export versus domestic market-oriented industrial output, the size and spatial fragmentation of Chinese enterprises, and their rapidly changing nature. In this regard, clusters constitute a practical lens to evaluate the complex intertwining of the two models, as they offer a magnifying glass on the complex quantitative and qualitative evolution of Chinese industrialisation. The Zhili cluster, in northern Zhejiang Province, provides a pertinent example. Previously specialised in bedding products, some manufacturers in this town shifted their production towards children’s garments, which was in short supply at this time in China. Zhili’s production progressively became specialised in garments through the establishment of commercial networks with markets across China, wholesale companies and incremental agglomeration effects.52 This clustering led to competitive gains and modernisation of local value chains, and allowed enterprises to increasingly export. While initially focused on the domestic market exclusively, in the late 2010s the share of domestic sales was only 21 per cent, the rest of the output being directed to international markets.53 There are many other examples of clusters serving

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both the export and domestic markets.54

The research gap on constraint-based industrialisation in China and the example of transformation in the agro-processing industry Despite a lack of statistics and scattered sources, the above research findings trace inward-looking industrialisation in China as both a policy and market-driven process. Less well explained, however, is how the various agents involved operated this model from both a micro-economic and management perspective. There is a lack of information regarding the constraint-based innovation adopted in China in the last few decades. In fact, few case studies have been carried out on the Chinese BOP market, particularly at the earliest stages of China’s industrialisation, except in an anecdotal fashion. Two hypothetical reasons may explain this research gap. Firstly, as already mentioned, China’s export-led industrialisation has been captured because of its remarkable performance, with less attention focused on other facets of this experience. Secondly, the BOP and constraint-based concepts emerged in the early 2000s, at a time when China had already

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well advanced in its industrial transition.55 Prior to that, these issues were naturally not a research concern. While the topic now attracts increasing attention due to a growing number of Chinese who have risen to the upper tiers of the pyramid, which translates into an increased demand for a more diversified basket of consumption goods and services,56 little is known about the domestic market-oriented production of subsistence and basic goods that started in the 1970s. This gap is regrettable when it comes to studying the Chinese industrialisation model as an inspiration for other developing countries, since the recent evolution of domestic market-driven industrialisation, towards more value-added products, is a direct result of the previous stages of learning process, small business development, institutions transformation and overcoming of pre-industrialisation constraints. In this chapter, which aims to draw practical lessons from the Chinese experience for West Africa, a key concern is the way China triggered its transition out of an agrarian economy and shifted from traditional food production to agro-processing industrialisation, which is a key challenge faced by West Africa today. Research resources on this evolution are scarce, but a case study of interest was carried out by Linghor-Wolf,57 which features the institutional, organisational and operational changes that drove agriculture transformation in China. China’s agro-economy underwent a major transformation, backed by the introduction of reforms, in 1978. This has translated into a twofold transformation of both the agriculture sector, through increased productivity, mechanisation and output diversification, and the agro-processing sector, reflecting diversification from agriculture to non-farm activities through the development of rural enterprises. While the former has remarkably resulted in agriculture self-sufficiency, the latter is the most significant evolution in

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terms of development dynamism, particularly for the wealth creation it entailed. This is indicated in the growing gap between farm and non-farm household incomes. Between 1978 and 2002, non-farm wages in rural enterprises grew by 6 and 36 per cent on average. Whereas they represented 2.9 times farmers’ household income in 1990, the gap was more than six-fold in 2002. This transformation was stimulated by a mix of “push” and “pull” incentives to move famers out of the agriculture sector, which reflected government’s policy choices. The “push” incentives were actually disincentives to stay in the agriculture sector, such as poor agricultural conditions, the end of the risk pooling system of the pre-reform collectivisation period, and high taxation of agriculture output. The “pull” incentives were mainly concentrated in the already-mentioned “responsible farming” policy, which lured farmers to higher returns activities, but also accounted the attractiveness of occupational benefits provided by rural enterprises, such as social services for employees. A key component of agriculture diversification towards non-farm activities has been the introduction of new organisational developments in the rural economy, which provided a framework for the shift from agriculture to agro-processing, transportation, and marketing activities. While many forms of sector organisations have emerged, including Forum on 144 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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cooperatives and rural associations, a pivotal one is dragon head enterprises (DHE). This model, which appeared in the early 1990s, refers to enterprises that aggregate small-scale and scattered farmers into a production base and support them in accessing new skills, materials, finance, marketing, technology and information about the market. In other words, DHEs corporatise and integrate several fragmented and non-standardised actors vertically within a unique value chain that connects rural farmers to the domestic urban markets of China, and ultimately to the export market. These chains have been consolidated through contracts as the main linkage mechanism between buyers and suppliers, which ensured smooth transition from informal to formal exchanges. In addition, DHEs have been granted special status from central and local governments, notably the Ministry of Agriculture. This made of them an interface between the latter and the scattered rural households, as well as a public policy instrument. In particular, they channelled public support, such as secured procurement, and facilitated access to raw material and new equipment. The mechanisms behind the concept of DHE and other organisational forms have been illustrated through the case of the sweet potato sub-sector in Sichuan province, the first sweet-potato producing region in China. This example is of interest for the demonstration, since sweet potato production in China, the largest producer in the world (about 85 per cent of the world production), has always been predominantly directed at the domestic market, with an insignificant part of output being exported. While sweet potato production had decreased as from 1978, due to a decline in sales price and greater government support of grains such as rice, the sub-sector has been revived from the 1990s as it underwent structural change towards processing activities. This was driven by the increasing use of sweet potato, which was traditionally an

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on-farm product (direct consumption and animal feed), for indirect consumption as a raw material of food processed goods sold on the domestic market – sweet potato-based products include chips, crackers, noodles, alcohol and starch, as well as several chemicals. The sectoral change was fostered by a mix of central and local government policies, rural household’s individual strategies and enterprise development. From 1985, the Sichuan government introduced measures to support sweet potato processing, as a way to diversify the provincial economy. This included assistance in the dissemination of processing technologies among rural townships and promotion of marketing activities by the establishment of local sweet potato markets. In the meantime, rural households were incentivised to move to storage, processing, transportation, and wholesale and marketing activities, boosted by the above-mentioned push and pull factors introduced by the reforms. Witnessing the change at work, the Sichuan government decided to scale it up by encouraging the development of provincial DHEs. Policies were implemented accordingly, in order to support large-scale enterprises with incentives such as tax exemptions, favourable loans, project subsidies, as well as preferential assistance in terms of government-funded technical advice.

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As a consequence, emerging DHEs rapidly became the organisers of local sweet potato value chains and operationalised both upstream and downstream activities. In the rural areas, they have accompanied households in developing primary processing of fresh sweet potatoes, so as to facilitate product storage. They have organised the collection and transportation of the intermediary products to more centralised areas where final processing was undertaken, ending in various sweet potato-based products. Gradually, they have developed diversified and higher quality products and acquired a brand name, seeking new markets regionally and nationally, and marketing the products in restaurants and supermarkets in national urban centres. This whole system was stirred by a network of flexible contracts that arranged exchange terms between the various actors and groups of actors. In doing so, DHEs have been a key driver of rural development, transforming local farmers into raw material suppliers of an agro-industrial value chain. In many respects, their success can be regarded as a key element of a constraint-based organisational innovation, since they managed to overcome barriers associated with the low level of rural development, such as remoteness, informality, and lack of skills and technology. They did so thanks to their mastery of the geographic and institutional environment, which allowed them to transfer knowledge and technology to rural areas and to deal with a wide range of actors and interests, including with informal verbal contracts.

Linking two incomparable models: how can the Chinese experience inform West Africa RVCs? Comparing the Chinese and West African models of industrialisation is an awkward exercise, given the numerous differences between them and between West African countries

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themselves, especially as the comparison covers different time periods. Firstly, when starting to industrialise, China had to deal with fundamentally different geo-economic, industrial and technological challenges compared to those seen in West Africa today. Next, even if it is a region-sized economy, China is a centralised state, whereas West Africa is a region with several countries that have widely differing characteristics, which has considerable implications in terms of political decision-making and industrial governance. Thirdly, from a strictly industrial perspective, the institutional environment in China 40 years ago and in West Africa today is incomparable, in terms of social and political organisation, resource endowment, land policy, traditional and cultural values, etc. However, the present comparison does not aim at promoting duplication of the Chinese model in West Africa, but at identifying some of its salient features that could inspire countries of the region in implementing RVCs in a constraint-based context. A comparison basis is the way the Chinese government and private sector gradually overcame constraints associated with low levels of development through an inward-looking industrialisation focused on fulfilling domestic consumption’s needs, both in parallel and in synergy with the best known EOI model.

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RVC opportunities in West Africa Industrialising is a significant challenge for West Africa. The production base of West African countries is globally weak and characterised by obsolete capital and facilities, and the region is one of the least integrated into GVCs, particularly for processing. With Nigeria, where recent gross domestic product (GDP) rebasing led manufacturing to increase sharply as share of GDP, from 2.4 per cent in 2008 to 9 per cent in 2015; the share of the manufacturing industry in the regional GDP increased from 5.9 per cent in 2005 to nearly 9 per cent in 2015.58 However, when excluding Nigeria, that share decreased from 11.2 per cent to 8.5 per cent over the same period. In other words, the rest of the region is experiencing an industrial decline. In 2010, the Economic Community of West African States (ECOWAS), the West African regional economic community (REC), adopted the West African Common Industrial Policy (WACIP)1. This policy set the objective of increasing the manufacturing industry’s contribution to the regional GDP to an average of over 20 per cent in 2030. To achieve this, it provides a number of measures and actions that are focused on matters such as: harmonising national regulations and standards; supporting competitiveness through private sector development; increasing production capacity through infrastructure development; and promoting private investment in key sectors. The WACIP also recognised the need to facilitate intra-regional trade and reduce regional disparities, so as to better harness regional complementarities. Four priority sectors were defined in 2015, with the adoption of the WACIP implementation strategy for 2015 to 2020: the agro-industry and agribusiness, the pharmaceutical industry, the construction industry, and the automotive and machinery industries.

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The WACIP has a strong outward-looking focus on strengthening the presence of West Africa on the global stage, aiming at increasing the region’s share on the global market of finished and semi-finished products from 0.1 per cent in 2010 to 1 per cent in 2030. In contrast, the policy has a relatively light focus on inward-looking strategies, not mentioning import-substitution opportunities and barely mentioning the ones offered by the increasing regional demand. Yet, the level of development and the institutional context are key justifications for West Africa to develop RVCs focused on the regional markets before implementing GVCs strategies. Indeed, 72 per cent of West African goods for further exportation are directed to Europe and North America, where non-tariff restrictions, including highly demanding norms to be complied with, undermine their access to the market. As a result, the scope for competing, upgrading and climbing up the value chain is restricted for West African firms that are linked, for example, to a Europe-headquartered GVC. Conversely, regional developments, particularly in terms of household consumption, provide clear RVC opportunities. For now, Nigeria is one of the most typical African growth poles, accounting for 79 per cent of household consumption. West Africa is, however, host to two other promising growth poles, namely Ghana and Côte d’Ivoire, which have recorded impressive annual Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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GDP growth rates in recent years and account for almost half of West African household consumption, excluding Nigeria (Chart 8.1). It was recently estimated that household consumption would grow by 22 per cent in Nigeria by 2025 and by 77 per cent in the Francophone countries of Central and West Africa, reaching about US$450 billion and US$230 billion, respectively.59 This dynamic, which reflects both the region’s growing population and rising household incomes, can provide economies of scale to producers focusing on these local markets.

Chart 8.1: Share of household consumption in West Africa, by country

Côte d’Ivoire Ghana Nigeria Other West African Countries

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Source: World Bank

Whilst several sectoral examples illustrate the relevance of meeting the distinctive needs of West African consumers through RVCs,60 the food sector best exemplifies this model, since nutrition-related behaviours are determined by cultural habits. In West Africa, dietary patterns are evolving with income growth and urban lifestyles. One major change is the increasing demand for processed products and convenience food, which account for 39 per cent of household food consumption in the region on average – and remarkably for 36 per cent in the poorest households.61 This also implies growing demand for food processing, packaging, logistics and innovative marketing. While this changing demand comes with the expansion of global products, including Asian instant noodles, cultural habits remain, with the preference being for traditional products such as tropical tubers (yam, cassava) and local fish and meat, which are increasingly converted into higher value-added processed products (attieke, garri, smoked or dried fish/meat, etc.). This evolution justifies the development of food and beverage value chains specialising in West Africans’ needs, but this requires many constraints to be overcome. These include, spatial scattering of potential farmers/suppliers, under-developed transport

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infrastructure and logistics interruptions (particularly in transnational conveyances), erratic electricity and water supply, weak processing and storage capacity, unstructured distribution channels, institution informality, and limited trust among actors.62 This calls for constraint-based innovation solutions in order to efficiently structure and coordinate value chains designed to deliver tailored products to the regional markets.

HOW CAN CHINA ASSIST WEST AFRICA IN ESTABLIHING RVCs? Since 1978, China has been overcoming the constraints inherent to domestic marketdriven industrialisation, as shown with the example of the sweet potato sub-sector. This case study provides insight on the kind of assistance China could render to West Africa in addressing such challenges. Many lessons can be drawn from this part of China’s industrial experience in terms of organisational, operational and governance innovation, and lead to critical knowledge and technology transfers. In one respect, China benefits from about 20 years of hindsight, compared to West Africa, as the region now reports the level of household consumption expenses that China reached in 1999 (Chart 8.2).

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Chart 8.2: Household final consumption expenditure in China and West Africa (current US$)

Source: World Bank

Most of the 15 West African member countries of ECOWAS have had a relationship with China since their independence, and all have been engaged in different co-operation and investment projects with different Chinese partners, including the government, stateowned enterprises, private investors and multilateral assistance programmes involving China.63 While bilateral ties are well-established, economic cooperation between China

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and ECOWAS has developed more slowly than the one with other African RECs, such as the Southern African Development Community (SADC). Attempts to enhance this cooperation have been made after the FOCAC Summit of 2006, with the establishment of an ECOWAS-China Business Forum in 2008, but discussions have been stumbling over trade issues, stemming from the reluctance of ECOWAS to eliminate trade barriers on Chinese products. Since then, cooperation efforts have shifted towards investment-focused diplomatic engagement, with an emphasis on mining, infrastructure, agriculture and pharmaceuticals.64 This new approach refocuses the expected outcomes of China-ECOWAS cooperation on attracting Chinese private investment into strategic sectors of the West African economy. As such, it complements the existing cooperation agreements at the bilateral level.65 Returning to the case of agro-industry value chains, for instance, China could advise West African countries on promoting enterprises tantamount to DHEs but tailored to their specific institutional context. This assistance could also materialise into Chinese DHEs investing in West Africa, as the domestic agribusiness New Hope Group, a holding of multiple DHEs which already operates in South Africa, is already doing. Another potentially instructive experience is that one of the Agricultural Development Bank of China and its role in financing rural industrialisation as the main lender to domestic agribusinesses. Chinese constraint-based innovation goes beyond the agri-food sector. Other experiences could be highlighted in the textile, pharmaceutical, furniture and other light manufacturing industries focused on domestic consumption. Their specific features, and more broadly the ones of ISI in China, constitute a tank of ideas to be transferred in West Africa, but first they need to be identified and informed. Indeed, whilst numerous studies

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address the considered aspect and period of China’s industrialisation, few of them adopt the constraint-based innovation lens, which emerged later. As a result, it would be highly desirable to fill this knowledge gap with a view to showcasing the cooperation opportunities between China and West Africa in this field. It would require the implementation of action research programmes that are focused on inward-looking industrialisation and constraints overcoming technologies in China, by reappraising this part of the story in light of the various constraint-based industrialisation-related concepts. Information about the personal trajectories of rural and urban households that moved up the domestic value chain, the role played by access to finance and technology adoption, individual and collective risk strategies, trust building mechanisms in the informal context - all are issues from which much could be learned in terms of unlocking entrepreneurship under developing countries’ institutional circumstances. This could provide valuable indications on suitable skills, technologies, business organisational models, and specific policies to be promoted, in order to foster RVCs in West Africa.

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CONCLUSION The 2016 FOCAC Action Plan made a specific commitment for China to contribute an initial amount of US$10 billion for Africa’s industrialisation. Besides this valuable financial cooperation, the FOCAC Action Plan aims to strengthen cooperation in the fields of industrial and agricultural policy consultation, planning and design. As part of this arrangement, China and Africa could implement a knowledge-based cooperation for industrial and agricultural development, within a broader framework of South-South partnership focused on experience sharing. From both the industrialisation and agro-industrialisation challenge perspective, African countries are closer to China than to the former colonisers, as their constraints are closer. A deeper understanding of this closeness informs results-based, efficient and innovative cooperation, focused on non-traditional knowledge and technology transfers. In order to promote such knowledge-based transfers and advance industrialisation and agriculture modernisation in West Africa, the following recommendations are proposed: ■■

Set-up a China-West Africa joint working group that is focused on constraint-based innovation. As explained in this chapter, there is an important knowledge gap regarding the inward-looking industrial strategy deployed by China as from 1978. The working group should commission a research campaign on constraint-based innovation carried out by business entities’ experts and research centre members from China and West Africa. This campaign would be aimed at highlighting specific industrial technology, financing solutions and organisational systems that have proved efficient in supporting China’s inward-looking industrialisation, and that could be fully or partially duplicated in West African regional value chains.

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■■

Refocus China-West Africa agricultural cooperation on constraint-based innovation and inward-looking agro-industrialisation. Given the potential for agriculture transformation and the rise of the food economy in West Africa, the Chinese experience in this area should inform some of the Chinese actions defined in the 2016 FOCAC Action Plan, such as carrying out agricultural demonstration projects and sending teams of experts and teachers to provide vocational education to African countries. To achieve this, the working group should identify key actors in domestic-driven industrialisation in China, who could join the expert teams that China committed to send to African countries to provide advice and assistance on industrialisation layout, policy planning, operation and management.

■■

Promote the involvement of Chinese enterprises focusing on their domestic markets in Africa-China cooperation. Consistently with investment-oriented patterns of ChinaECOWAS’ cooperation, major Chinese companies that emerged from constraint-based environments, particularly DHEs, should be enticed to participate in the establishment of regional value chains in West Africa. Beyond their identification by the working group, this requires fostering various forms of market-based cooperation, including foreign direct investments, joint ventures, government-funded prospecting missions

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to West Africa, training missions for West African entrepreneurs in China, financial assistance, etc.

REFERENCES 1 United Nations, (n/d) Goal 2, Sustainable Development Knowledge Platform. Available at https://sustainabledevelopment.un.org/sdg9 [Accessed 8 October 2017]. 2 UNECA, 2015. Economic Report on Africa 2015: Industrializing Through Trade. United Nations, Addis Ababa. 3 Chisanga, E., 2017. African Manufacturing: What Can the Continent Learn from Asia? Bridges Africa, 6(1).; Diop, M., 2015. Lessons for Africa from China’s Growth. World Bank Speeches and Transcripts. Jan 13.; Newman, C., Page, J., Rand, J., Shimeles, A., Söderbom, M. and Tarp, F. (ed.), 2016. Manufacturing Transformation: Comparative Studies of Industrial Development in Africa and Emerging Asia. Oxford: Oxford University Press.; AfDB, OECD, UNDP and UNECA, 2014. African Economic Outlook: Global Value Chains and Africa’s Industrialisation. Paris: OECD Publishing. 4 Yifu Lin, J., 2012. New Structural Economics A Framework for Rethinking Development and Policy. The World Bank, Washington DC. 5 Li, L. and Vinten, G., 1997. An Overview of the Experiences of Chinese Industrialization Strategies and Development. Managerial Auditing Journal 12(4/5), pp.183–191. 6 Gao, Y., 2012. China as the Workshop of the World: An Analysis at the National and Industry Level of China in the International Division of Labor. London: Routledge.

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7 In this paper, West Africa is defined as the area corresponding to the member states of the Economic Community of West African States (ECOWAS), namely Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo. 8 World Bank, 2016. Factory Southern Africa? SACU in Global Value Chains Summary Report, World Bank. Washington DC. 9 Kowalski, P., Javier Lopez Gonzalez, J., Ragoussis, A. and Ugarte, C., 2015. Participation of Developing Countries in Global Value Chains: Implications for Trade and Trade-Related Policies. OECD Trade Policy Papers, No. 179, OECD Publishing: Paris.; Newman et al., 2016. 10 Allard, C., Canales-Kriljenko, J., Chen, W., Gonzalez-Garcia, J., Kitsios, E. and Treviño, J., 2016. Integration and global value chains in Sub-Saharan Africa: in pursuit of the missing link. International Monetary Fund, Washington, DC. 11 Pietrobelli, C., 2008. Global value chains in the least developed countries of the world: threats and opportunities for local producers. International Journal of Technological Learning, Innovation and Development, 1(4), pp.459–481. 12 Gereffi, G. and Memedovic, O., 2003. The Global Apparel Value Chain: What Prospects for Upgrading by Developing Countries? UNIDO, Vienna. 13 Kao, M., 2016. Lesotho’s participation in apparel value chains: An opportunity for sustainable development? Bridges Africa, 5(9). 14 Humphrey, J. and Schmitz, H., 2001. Governance in Global Value Chains. Institute of Development Studies, 32(3), pp.19–29.

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PART 3: China-Africa Industrial Cooperation | Chapter 8 15 Lee, J., Gereffi, G. and Beauvais, J., 2010. Global value chains and agrifood standards: Challenges and possibilities for smallholders in developing countries. PNAS 2012, 109(31). 16 Frey, C., Osborne, M. and Holmes, C., 2016. Technology at work v2.0, the future is not what it used to be. Citi GPS: Global Perspectives & Solutions. 17 World Bank, 2016. 18 Weigert, M., 2016. Regional before global: A value chain approach to industrialisation in West Africa. Bridges Africa, 5(9). 19 Ogunleyhe, E.K., 2011. Structural Transformation in Sub-Saharan Africa: The Regional Growth Poles Strategy. 25–28 October 2011. Paper presented at the 2011 African Economic Conference, Addis Ababa. 20 North, D.C., 1990. Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press. 21 Sindzingre, A. and Stein, H., 2002. Institutions, development and global integration: a theoretical contribution. Mimeo, CNRS. 22 Ibid. 23 Bell, M. and Pavitt, K., 1993. Technological accumulation and industrial growth: contrasts between developed and developing countries. Industrial Corporate Change, 2(2), pp.157–210. 24 Sindzingre, A. and Stein, H., 2002. 25 Anderson, J. and Billou, N., 2007. Serving the world’s poor: innovation at the base of the economic pyramid. Journal of Business Strategy, 28(2), pp.14–24. 26 UNECA, 2015. 27 Dupoux, P., Ivers, L., Abouzied, A.,  Chraïti, A., Dia, F., Maher, H. and Niavas, S., 2015. Dueling with Lions: Playing the New Game of Business Success in Africa. Boston Consulting Group. 28 Dunning, J., 1988. The eclectic paradigm of international production: a restatement and possible extensions. Journal of International Business Studies. Spring. 29 Martin, R. and Sunley, P., 2006. The Rise of Cultural Economic Geography. In Martin, R.L. and Sunley, P., (ed.), Critical Concepts in Economic Geography: Volume IV, Cultural Economy. London: Routledge.

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30 McKinsey Global Institute, 2016. Lions on the Move II: Realizing the Potential of Africa’s Economy. McKinsey & Co; Dupoux et al., 2015. 31 Dewhurst, M., Harris J. and Heywood, S., 2012. The global company’s challenge. McKinsey Quarterly. 32 Prahalad, C.K. and Hart, S.L., 2002. The Fortune at the Bottom of the Pyramid. Strategy + Business, 26 (first quarter). 33 Some scholars distinguish between cost, good-enough and frugal innovation as three different types of resource-constrained innovation. Cost innovations are solutions that offer similar functionalities to Western products at lower costs for resource-constrained customers. Good-enough innovations are solutions that include functionalities and features designed to meet a range of resource constraints beyond capital constraints. Frugal innovations are not re-engineered solutions, but originally developed products or services for very specific applications in resource-constrained environments. See Zeschky, B., Winterhalter, S. and Gassmann, O., 2014. From Cost to Frugal and Reverse Innovation: Mapping the Field and Implications for Global Competitiveness. Research-Technology Management, 57. 34 Mahmood, P. and Kondis, A., 2014. Frugal innovation: Creating and capturing value in emerging markets. Insights@IMD, (39). International Institute for Management Development. 35 Prahalad, C.K., 2006. The Fortune at the Bottom of the Pyramid. Upper Saddle River: Pearson Prentice Hall. 36 Anderson and Billou, 2007.

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China’s inward looking industrialisation | Maxime Weigert 37 Olaito, P. and Nzeka, U., 2013. Nigeria Intensifies Protection to Grow its Sugar Sector. GAIN Report, USDA Foreign Agricultural Service. 38 Le Bec, C. and Ballong, S., 2016. Stratégie : comment les entreprises africaines montent en puissance face aux multinationales. Jeune Afrique, 12 Jan. Available at http://www.jeuneafrique.com/mag/289659/ economie/strategie-entreprises-africaines-montent-puissance-face-aux-multinationales/ [Accessed 20 January 2017]. 39 Weigert, M., 2016. 40 Agarwal, N., Grottke, M., Mishra, S. and Brem, A., 2017. A Systematic Literature Review of ConstraintBased Innovations: State of the Art and Future Perspectives. IEEE Transactions on Engineering Management, 64(1), pp.3–15. 41 The author indicates that not being able to read Chinese, Chinese-written works were excluded from the research review. 42 Zhu, T., 2006. Rethinking Import-substituting Industrialization Development Strategies and Institutions in Taiwan and China. WIDER Working Paper 76/2006. UNU-WIDER. 43 Gautam, S., 2001. Post-reform China and the International Economy: Economic Change and Liberalisation under Sovereign Control. London: The Global Site. 44 Brandt, L., Debin Ma, D. and Rawski, T., 2016. Industrialization in China. IZA Discussion Paper 10096, Forschungsinstitut zur Zukunft der Arbeit. 45 Harvie, C., 1999. China’s township and village enterprises and their evolving business alliances and organisational change. Working Paper 99–6, Department of Economics, University of Wollongong. 46 Li L, and Vinten, G., 1997. 47 Brandt, L. et al., 2016. 48 Qiu, L.D., 2005. China’s automotive industry. Working Paper. 49 Li, L. and An, T., 2004. Chinese Industrial Policy and the Reduction of State-owned Shares in China’s Listed Companies. Pacific Economic Review, 9(4). 50 He, J. and Yang, Y., 1999. The political economy of trade liberalization in China. Working Paper 99–1, Asia Pacific School of Economics and Management. Copyright © 2014. Africa Institute of South Africa. All rights reserved.

51 Brandt, L. et al., 2016. 52 Fleisher, B., Hu, D., McGuire, W. and Zhang, X., 2009. The Evolution of an Industrial Cluster in China. IFPRI Discussion Paper 00896. 53 Jankowiak, A. H., 2012. The specificity of clusters in the Asian economies. Ekonomia Economics, 3(20), Wrocław University of Economics. 54 Wang, J. and Mei, L., 2009. Dynamics of labour-intensive clusters in China: Relying on low labour costs or cultivating innovation? Discussion Paper Series, International Office for Labour Studies/International Labour Organization, Geneve. 55 London, T. and Hart, S., 2004. Reinventing strategies for emerging markets: beyond the transnational model. Journal of International Business Studies, 35(5), pp.350–370. 56 Woetzel, J., Li, X.L. and Cheng, W., 2012. What’s next for China? McKinsey Insights China. McKinsey & Co. 57 Linghor-Wolf, S., 2011. Industrialisation and rural livelihoods in China: agricultural processing in Sichuan. Routledge contemporary China series, 53. London; New York, NY: Routledge. The end of this section is mostly based on this research. 58 Weigert, M., 2016. Industrialisation in West Africa (1): The current state of affairs. Blog post. Measuring the pulse of economic transformation in West Africa. African Development Bank. Available at https://

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PART 3: China-Africa Industrial Cooperation | Chapter 8 www.afdb.org/en/blogs/measuring-the-pulse-of-economic-transformation-in-west-africa/post/industrialisation-in-west-africa-1-the-current-state-of-affairs-15806/ [Accessed 7 October 2017]. 59 McKinsey Global Institute, 2016. 60 Weigert, M., 2016. 61 Allen, T. and Heinrigs, P., 2016. Emerging Opportunities in the West African Food Economy. West African Papers, 1, SWAC-OECD. 62 Staatz, J. and Hollinger, F., 2016. West African Food Systems and Changing Consumers Demands. West African Papers, 4, OECD Publishing. 63 China intervenes in West Africa through various multilateral assistance programs, including the Strategic Alliance under the framework of the Food and Agriculture Organisation’s national and regional programs for food security, which have a strong focus on Africa, and the ‘Green Super Rice’ initiative of the Bill and Melinda Gates Foundation. Also, China is an active member of multilateral development banks such as the African Development Bank, the International Fund for Agricultural Development and the World Bank, which all have sizable programs to support agricultural development in the region. For a detailed analysis of Chinese interventions in West Africa’s agriculture sector, see: Santi, E. and Weigert, M., 2015. China-Africa cooperation beyond extractive industries: the case of Chinese agricultural assistance in West Africa. SAIIA Policy briefings, South African Institute of International Affairs. 64 Benazeraf, D. and Terrefe, B., 2015. China and the African Regional Economic Communities: Transforming Multilateral Cooperation. Policy Briefing. Centre for Chinese Studies. Stellenbosch.

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65 For example, China and Nigeria signed in 2006 a memorandum of understanding on strategic investments partnership focusing on the petroleum, power, telecommunications and manufacturing sectors. Egbula, M. and Zheng, Q., 2011. China and Nigeria: A powerful south-south alliance. West African Challenges, 5, pp.1–20.

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9

CHAPTER

FOOD SECURITY IN AFRICA PROBLEMS AND SOLUTIONS

Biliang Hu and MA Yue

INTRODUCTION Africa’s annual grain production is a bit more than 400 million tons, while the current total demand is more than 500 million tons. What this illustrates, therefore, is that food security in Africa is problematic. Considering its natural resources, Africa is suitable for crop growing. There are two main problems: one is that the ratio of utilised agricultural land is too low (only about 30 per cent), which leaves a large proportion of the agricultural land in an idle state. Another reason is that the yield of the utilised agricultural land is low, with the grain yield per hectare representing only 40 per cent of the world average and less than 30 per cent of that of China.1 This chapter argues that the fundamental solutions to these problems are as follows: a) further reform and improvement of the agricultural land system;

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b) increasing the input of modern factors, including chemical fertilisers, pesticides and agricultural machinery; c)

improving varieties and the corresponding investment in modern agriculture knowledge;

d) strengthening farmland irrigation, agricultural transportation and other infrastructure construction, and; e) deepening cooperation with the world, particularly cooperation with China, in terms of agricultural trade and investment. What’s more China and Africa can build up some fertilisers, pesticides and agricultural machinery production enterprises jointly. Promoting Africa’s development is beset with many challenges; the most important and fundamental one is to ensure food security in Africa. It is necessary to solve food security, because it is the only foundation for African countries to achieve industrialisation and economic take-off, but also the basis of political stability, social development and guaranteeing human rights. Therefore, the research and discussion of this issue are of great significance.

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 9

Africa is the second largest continent in the world, with a total land area of more than 30 million square kilometres, which accounts for 20 per cent of the world’s total land area.2 As for natural resources, Africa has every reason to be the world’s “granary”. Firstly, Africa has vast agricultural land, with a total land area of 11.3 million square kilometres (1.13 billion hectares), which is 23 per cent of that of the world.3 In terms of arable land, Africa currently has 234 million hectares, accounting for 16.5 per cent 4 of the world’s total. In addition to arable land, Africa’s grassland and pasture areas are very broad, with more than 900 million hectares, accounting for nearly 30 per cent of the world’s total.5 Secondly, in terms of water resources, the African continent has about 5.4 trillion cubic meters of surface water, accounting for 40 per cent of the world’s total.6 The area of the nine basins formed by the nine rivers and their overlay areas covers about half of the African continent;7 and the annual precipitation in the equatorial region is as high as 1 500 to 2 000 mm3 (the world’s average is only 834 mm3) and the agricultural water is abundant. Thirdly, in terms of sunshine, Africa is the only continent that the equator runs across, therefore the intensity of sunlight is very high, with more than an average of 10 hours of sunshine, which is very suitable for crop growth. Finally, in terms of labour resources, Africa’s agricultural population accounts for 60 per cent of its total population, and its agricultural labour resources are also very rich. But on a continent with great advantage in agricultural land, water resources, sunshine and labour, there are still over 70 per cent of the countries with the problem of food shortages.8 As such, questions arise – what is the reason for the current situation, and what should the continent do to get out of the current dilemma? This chapter concerns itself with these two questions, which will form an integral part of the discussions that

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will ensue after this introduction.

THE CURRENT SITUATION WITH FOOD SECURITY IN AFRICA In general, Africa cannot be said to be self-sufficient in terms of either grain production or meat production and the continent needs to import from the international market. For example, in 2013, Africa’s grain production (including cereals, beans and potatoes) totalled 457 million tons, net imports of grain (more than 95 per cent was cereals) totalled 70 million tons, and net imports accounted for nearly 15 per cent of the grain production (see Table 9.1). In 2013, the total meat production of pigs, cattle, sheep and poultry in Africa was 18.09 million tons,9 and more than two million tons were imported in the same year. In 2013, the total import volume exceeded 10 per cent. Moreover, in 2012, Africa’s total grain output was 442 million tons, and the net imports of grain were 72 million tons, which accounted for 16 per cent of the total grain production. The total meat production of pigs, cattle, sheep and poultry in 2012 was 17.34 million tons, when imports were over 200 million tons.10 In 2011, Africa’s total grain

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output was 428 million tons, compared with 67 million tons in net imports, which accounted for 16 per cent of the total grain production. In 2011, the total meat production of pigs, cattle, sheep and poultry was 16.79 million tons, when imports were over 2 million tons.11 Thus, in general, Africa cannot be said to be self-sufficient in terms of grain and meat production.

Table 9.1: Comparison of Grain Output and Import between Africa and the World in 2013 (Unit: 10 000 tons) Grains Region

Potatoes

Legumes

Total Output

Total Net Import

----

365802

----

1977

43

45733

7010

Output

Net Import

Output

Net import

Output

Net import

World

276330

----

81711

----

7761

Africa

17528

6950

26228

17

East

5478

969

6024

5

894

-55

12395

919

Central

938

389

4602

2

144

8

5683

399

North

4649

3964

1303

-1

113

79

6065

4042

South

1449

61

290

7

11

9

1749

77

West

5014

1567

14009

3

816

1

19840

1571

Source: FAO database, http://www.fao.org/faostat/en/#data/QC (Accessed 9 January 2017).

Since basic food security cannot be guaranteed, two closely related problems arise: firstly, the imbalance in people’s diets; and secondly, the common insufficiency of energy supply.

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The imbalance of dietary structure Insufficient basic food supply leads to low proportion of the conversion of grain to animal feed, so meat production is relatively low, and people’s meat consumption is relatively small. Throughout Africa, the energy provided by plant foods such as cereals, pulses, roots and tubers accounts for 60 per cent of the total energy, and the proportion of high quality protein derived from animal foods is only 20 per cent of the total protein. Compared with Japan’s balanced dietary structure, where the energy provided by plant foods takes up only 41 per cent and 55 per cent of protein comes from animal foods, the difference is obvious. The ‘nutrient deficient’ dietary structure, which is dominated by plant foods, is a common problem in the majority of African countries.12 Its basic characteristic is that the proportion of high quality protein is relatively low, and the nutritional quality of diets is poor. Even if the intake of calories barely meets the standard, malnutrition, anaemia and other diseases will occur. Poor dietary quality of nutrition is more pronounced in the eastern and western regions, where only about 20 per cent of the protein comes from animal foods. Forum on 158 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 9

Insufficiency of nutritional energy supply In 2001, the United Nations (UN), Food and Agriculture Organisation (FAO), the World Health Organisation (WHO) and the United Nations University (UNU) jointly issued a survey on human energy needs. The report provides detailed estimates of the energy requirements of people of different genders and ages. For example, the daily energy requirement of a male adult (BMI 18.5-25.0) is around 3 047 kCal. FAO calculates the food shortage in Africa, based on this energy demand criterion, with reference to the age and sex distribution of African populations. In 2015, the average level of food deficit in Africa was 151 kCal per person per day, and the most problematic region is Central Africa, with 380 kCal per person per day, which is 2.51 times the average in Africa; followed by Eastern Africa for 230 kCal per person per day. The nutritional levels in western, southern and northern Africa are relatively high, averaging a deficit of less than 60 kCal per person per day (Table 9.2). The widespread food shortage poses the problem of imbalanced dietary structure, which brings about inadequate energy supply and then causes under-nourishment. About 230 million people in Africa are currently undernourished, accounting for 19.8 per cent of the total population of Africa, which is twice as high as the world average (10.8 per cent, 9.3 per cent in China, less than 5 per cent in the United States, Germany, Australia and other countries).13 The problem of under-nourishment is more severe in Central, Western and Eastern Africa. In the 15 years from 2000 to 2015: the world’s total number of under-nourished people dropped from 924 million to 792 million - a decrease of 14.29 per cent; China dropped from 213 million to 134 million - a decrease of 37.08 per cent.14 However, the number of under-nourished people in Africa has risen, as the problem of food shortages

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occurring in Africa has not changed. Of the 15 countries with more than 500 000 square kilometres of land and more than 15 million people in Africa, including Zambia, Madagascar, Tanzania, Ethiopia, Mozambique, Kenya, Congo, Angola, South Africa, Mali, Nigeria, Niger, Algeria, Egypt and Sudan, there are only four countries with relatively good nutritional status and these are: South Africa, Mali, Algeria and Egypt. The prevalence of under-nourishment in these four countries is less than 5 per cent. The four countries with the worst ratios are: Zambia with 47.8 per cent, Madagascar with 33 per cent, Tanzania with 32.1 per cent, followed by Ethiopia with 32 per cent.15

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Table 9.2: International Comparison of Depth of Food Deficit and Under-nourishment (2014-2016) Countries & Regions

Depth of Food Deficit

Prevalence of Under-nourishment

Under-nourished Population

(kCal/person/day)

(%)

(Million)

World

81

10.9

794.6

China

74

9.3

133.8

Africa

151

19.8

232.5

East

230

31.5

124.2

Central

380

41.3

58.9

North

17

[Accessed 8 August 2016]. 20 Jikun and Jun, (n.d) 21 Ibid. 22 Ministry of Agriculture of Mozambique, 2012. Mozambique National Agricultural Investment Plan 20142018. [e-paper] Ministry of Agriculture of Mozambique. Available at: < http://www.resakss.org/sites/ default/files/pdfs/Final%20PNISA%20Revised%20Version_0.pdf> p.6. [Accessed 8 April 2017]. 23 Ministry of Agriculture of Mozambique, 2012. Mozambique National Agricultural Investment Plan 20142018. [e-paper] Ministry of Agriculture of Mozambique. Available at : < http://www.resakss.org/sites/ default/files/pdfs/Final%20PNISA%20Revised%20Version_0.pdf> p.93. [Accessed 8 April 2017].

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 10 24 Jikun and Jun, (n.d)

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25 Sérgio Chichava, 2014. Chinese Agricultural Investment in Mozambique: the Case of Wanbao Rice Farm. China Africa Research Initiative. Available at:  [Accessed 15 April 2017].

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11 CHAPTER

BETWEEN PROMISE AND PROFIT CHINESE AGRO-INVESTMENT AND THE CHALLENGES OF OPERATING IN SOUTH AFRICA

Angela Harding, Chris Alden, Lu Jiang and Ward Anseeuw

INTRODUCTION The past decade has witnessed a new wave of agricultural investments being made, particularly in Africa.1 This expansion reflects a reach into lands that previously seemed of little interest.2 South Africa is part of this trend, and is experiencing a new wave of agricultural investments, with new actors playing an important role. This should not be a surprise in a country like South Africa, which has liberalised its economy since 1994, thus allowing for inward and outward economic exchange.3 That being said, except for the establishment of several investment funds that engage mainly in equity forms of agro-investment aimed at domestic as well as international investments,4 South Africa was left largely untouched by foreign agricultural investments until recently.

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The country has recently experienced a sudden increase in agro-investment by Chinese investors. Chinese investor interest in South Africa has grown in recent years, encouraged by amongst other factors, Zuma’s foreign policy strategy.5 South Africa is relevant here, because, despite being a top investment partner of China,6 it was not a key destination of Chinese agro-investment until recently. South Africa also provides an interesting case study, as the opportunities for investment from foreign entities are seen as limited, due to the relative maturity of the industry.7 Coupled to this, the regulatory environment is arguably more complex than in other African states. China is largely considered to be a pillar of African development.8 This engagement began in the 1960s, with the acquisition of previously state-owned farms, followed by a push to set up demonstration farms and provide extension support. Over the years, the focus shifted to making economic relations more sustainable and mutually beneficial, which led to a substantial change in aid policy in 1995, with a bigger focus on aid that would generate mutual benefit. However, by the twenty-first century, Chinese investors are subjected to significant backlash as land acquisition is perceived as a land grab intended to produce crops for export back to China.9

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 11

Given the high number of memoranda of understanding (MOU) signed between Chinese investors and African states, and the long interval between negotiation and implementation,10 a question arises: Why are these projects not working and what can be improved to ensure effective implementation? Field work on foreign direct investment in agriculture has been conducted, but has mainly focused on the general status of land deals in Africa or by specific actors, like Chinese investors.11 Few researchers have gone into the field to examine the projects in depth, or the challenges experienced during the negotiation and implementation stages.12 As such, this chapter focuses on actual as well as failed projects, in order to portray an accurate picture of what is happening on the ground. Chinese agro-investment projects in South Africa prove to be a good study case for various reasons. Firstly, the chapter focuses on one target country, thus enabling a comparison between the projects within the same, relatively stable, regulatory environment.13 Secondly, each project is based on a distinct investment mechanism, e.g. governmentdriven aid project (demonstration centre), pure investment project (dairy farm), equity investment (Val de Vie) and contract farming (pomelo project). Thirdly, the projects were all initiated fairly recently, which provides a good baseline to determine how the current market and policy interact with these projects and contribute to either the success or the failure of the project. As such, the aim of this chapter is to provide a background on the identified Chinese agro-investments in South Africa, and to assess the projects, in order to provide brief policy and other recommendations on how to better support these projects. Three research methods were applied to all the projects studied. Firstly, primary data was collected, using a semi-structured questionnaire-based survey. Interviews took place between April 2013 and February 2015 and included project managers, employees, ben-

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eficiaries and external stakeholders. In total, 29 interviews were conducted.14 Secondary data was collected, including documentation on plans, project structure and project governance. Lastly, observational data was obtained through site visits, which provides perspective on the physical setting. The next section provides a brief overview as well as an assessment of the lessons learnt from the four Chinese agro-investment projects in South Africa. Finally, the chapter provides brief recommendations for future projects, based on the main reasons for failure or success in these projects.

CHINESE AGRO-INVESTMENTS IN SOUTH AFRICA The Chinese agro-investment projects vary in terms of the form they take, the actors they engage, as well as their objectives. While some projects are recognised as having failed, they were included in the study, as they show intent to invest in South Africa (with significant effort being made on the ground to get the projects implemented); thus, there is value in the lessons these cases provide. Indeed, the saliency of ‘trial and error’

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and ‘failure’ to the policy learning process is well understood as contributing to changes in policy approaches that lead to improvements.15According to Zhao, the Chinese development approach is ‘pragmatic and experimental’, and draws lessons from the policy implementation scenarios, in order to improve on the outcomes.16This is reinforced by a form of ‘selective learning’, which aims to adapt the conventions of Western development precepts to Chinese conditions. China’s approach to African development continues in this manner, with a focus on practical projects and deriving sometimes difficult lessons from their experiences on the continent.

Agricultural Technology Demonstration Centre, Free State

Background The South Africa-China Agricultural Technology Demonstration Centre (ATDC) is located on 47 hectares in the Free State Province. The ATDC project was an outcome of the 3rd FOCAC Summit held in Beijing in 2006.17 At that stage, the Chinese government agreed to build 10 ATDCs in various African countries, but that number later expanded.18 The aim of the centre is to provide training, demonstration and research on freshwater aquaculture. The centre also produces fish for commercial purposes and has the capacity to breed 20 million species per annum.19 The output market for the overflow product produced has yet to be finalised; the product is currently supplying community fish ponds and Chinese restaurants and communities in Johannesburg and Bloemfontein. There is an option for produce to be exported to China and the Chinese experts have done some exploration work into the mechanics behind exportation.20

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The China National Agricultural Development Group Corporation (CNADC) is the managing agent, on behalf of the Chinese government. The CNADC is a subsidiary of the state-owned Assets Supervision and Administration Commission and is China’s largest state-owned agricultural enterprise.21 The CNADC appointed a subsidiary, China Agriculture International Development Co. Ltd (CAIDCO), as the contracting agent. On the South African side, the Free State Department of Agriculture and Rural Development takes charge of the project (FSDARD). A project steering committee, comprising participants from FSDARD and Chinese project staff, oversees the project.22 In addition, a project management committee has been established to discuss the practical issues that arise during the operation of the facility. The committee organises the implementation of the project, carries out inspections, assesses the effectiveness of the project and the feasibility of future expansion.23 A feasibility study was completed in 2007, while construction of the centre was completed in 2011. Final project inspection was done in February 2013, signifying the end of the project construction stage, which cost 30 million RMB,24 funded by the Chinese government.25 The final exchange letter was signed in October 2013 and the technical cooperation stage commenced in February 2014. The Chinese staff effectively manage Forum on 194 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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and have control over the facility and finances during the technical cooperation stage, with their South African counterparts playing a (limited) supportive administrative role. This is in line with the typical managerial and financial structure design of these centres. Four main tasks are performed during the technical cooperation stage: agro-technology research, demonstration, training and display.26 The courses incorporate theory and practical sessions on freshwater fish biological features, financial management and policy development. The Chinese staff based at the centre provide training, with the use of a translator and the courses are adjusted, in terms of content and complexity, based on course participants.27 Trainees include smallholder farmers, technicians/extension officers and government officials. Nine sessions were held during the first year of the technical cooperation stage, with 165 trainees attending the courses. Most of the attendees were smallholder farmers.28 As also observed in Zambia,29 the smallholders or local extension workers had no input into the content of the training; rather, this was designed by the Chinese staff. That being said, the mandate of the centre is changing. In an attempt to make these projects more sustainable, a commercial element will be introduced once the technical cooperation stage ends. This will be most prominently manifested through building up business platforms for increased investment by Chinese agro-companies in aid-recipient countries.30 This will happen in one of two ways.31 Firstly, the implementing agent makes a start at market-oriented production, through the establishment of a separate agribusiness, based on the production of the centre. Secondly, an information platform on the investment environment is provided, thus facilitating subsequent investment. Although CNADC has not established a separate agribusiness to date, it has initiated the establishment of a platform to collect information on South Africa’s investment environment,

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while keeping its headquarters in Beijing informed.32 This could not only change the objective of the initial investment, but also the outcome of this centre.

Assessment The extent of the effective planning undertaken before the project was constructed is highly questionable. This is stated for various reasons. There was a lengthy delay between the start of the technical cooperation phase and the end of the construction phase. There are a few reasons that were advanced for this delay. Delay in the following occurred: finalisation of the exchange letter;33 administrative issues (mainly the delay in contracting employees); and, finally, the completion of an independent risk assessment for the breeding of alien species and the resulting recommended technology installation. These issues suggest that perhaps the eagerness of the governments to cooperate was not met with equal eagerness to undertake day-to-day planning. Similarly, other significant operating conditions were not considered during the negotiation and construction phase. Such considerations include the output quantities and output markets, where only loose plans were in place for output markets (despite the

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project already having been in operation for more than a year). The centre has found an intermediary market, i.e. supplying fish to the community and Chinese restaurants and communities. There is a similar situation in Senegal, where the memorandum of understanding for the demonstration centre has no set plans on how the output of the centre will be managed.34 The result is that, firstly, the local appointed government workers and Chinese experts were left to sort these issues out amongst themselves at ground level. In fact, once the farm had been operational for a short period, the Chinese staff abandoned their objective of training and started commercial production and selling the output to local markets.35 Related to this, it may not be surprising then that a feasibility study on market demand for freshwater fish in South Africa was not undertaken before construction began.36 In South Africa, there is low market demand for freshwater fish, except for trout. While one of the aims of the centre is undeniably to increase freshwater aquaculture uptake, there is a wider need to ensure that a viable and sustainable market exists. Initiatives that achieve this goal need to occur in conjunction with the centre’s activities. If this does not happen, there is a risk that training and demonstration will not go beyond the classroom and will not impact on a wider audience. At the time of the research, no such initiatives were being conducted and, as such, smallholders who attended training and manage community fish farms were struggling to sell their output. These issues all allude to the fact that more groundwork was required before the actors physically broke ground for construction, and that there is a need to streamline the planning process for future projects.37 The centre has also been very poorly marketed (no web presence, no advertising) and, as a result, has low visibility. Not surprisingly, very few citizens know about the centre

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and the assistance it can provide. Increasing visibility could result in a wider and more suitable choice of training participants, as well as lead to an increase in the provision of technical services to various government and private entities. Training and other related activities have commenced, mainly with smallholder farmers. Several challenges have been encountered, thus reducing the effectiveness. There are three main reasons for the reduced success.38 Firstly, the training is poorly linked to the extension system in the country, reducing the dissemination effect of the course. Secondly, several smallholders cannot implement techniques as they do not have access to similar technology. Finally, with regard to the knowledge and language barrier, while the trainers have aimed to make the course easier to grasp by reducing the scientific content, smallholders still struggle with the content due to language barriers, even though a translator is employed. The majority of the smallholders also lack previous knowledge of aquaculture. Coupled to these issues is the difference in farming practices between African smallholders and Chinese trainers (who are used to intensive cultivation and technically more demanding practices). On the other hand, we interviewed one group of smallholder farmers39 who have received training and their response was very positive. They stated that they have learnt Forum on 196 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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several new techniques and would be implementing them once the equipment at their own farm (state initiative) had been fixed.40 This shows that, if the correct trainee is engaged, the training can have a definite positive impact. Another positive aspect is the willingness of the Chinese staff at the centre to implement their mandate. They are very enthusiastic and eager to impart their knowledge. Ultimately, the Chinese company has provided the knowledge base, expertise and personnel for the training centre, and with better planning there could be a higher success rate. The final concern is the exclusive nature of the governance structure. In South Africa, the Chinese staff occupy all the high-level management positions, with the few South African staff filling the lower management positions. The authors noted that, in practice, the South African counterparts were not playing an effective supportive role. There were only five South Africans employed at the centre and two were involved in the research conducted. None were involved in training or demonstration.41 A similar trend was identified at the demonstration centre established in Senegal.42 The study found that the Chinese and Senegalese separated themselves spatially, with each party working on separate fields, with separate labour and separate revenue streams. In Uganda, even though the centre has officially been handed over to the government, the local staff do not feel welcome and utilize their original offices and maintain their own activities.43 A similar situation was also observed in the ATDC in Mozambique, where the Chinese technicians occupied the key management positions while dozens of local employees were hired, mostly to work in the fields.44 While the current governance structure is undeniably required in the initial phases of the project (Chinese staff take the lead), it should be phased out over time and local staff should increasingly manage the activities at the centre. This could assist in ensuring that

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the aid is sustained once the Chinese partners have pulled out of the project, specifically after the three-year technical cooperation stage. Once the three-year technical cooperation stage ends, the next stage is the business operation stage, when the centre is either transferred to the host country, or the Chinese contracting agent continues to manage it.45 As far as the South African centre is concerned, it is envisaged that the South African staff will run the centre independently.46 Therefore, the centre runs the risk of collapsing once the handover has taken place, as the local staff have not yet been effectively involved in the activities of the centre.

Pomelo project, Eastern Cape

Background This project is still in the negotiation phase.47 It will involve the production of pomelo grapefruit. In contrast to the previous case study, this is a commercial, mainly export– oriented, project. Production will be done by smallholders, and acquired by a Chinese buyer, Shanghai Yebo Africa Trading Hall (ATH).

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A pilot area of 500 hectares has been identified at Bizana, Eastern Cape. If the pilot project is successful, the area can be expanded to 10 000 hectares. The identified land is owned communally and used for subsistence farming.48 Pomelo will be grown organically, so that resource-poor farmers can participate with limited inputs. The cultivation area will be established near an existing village, with each smallholder having his/her own plot; however, the cultivation will be organised as a cooperative group. In addition, a packing shed and a nursery will be erected. The shed will be established by ATH, also on communal land. A nursery was to be established in Bizana to establish the stock; however, South Africa’s agricultural restrictions prevented this from occurring, thus limiting the availability of planting material. This has delayed the project and it now sits in limbo as a result – with the South African counterparts working to find a solution to the agricultural protocol problem. A new cultivar of pomelo has been developed by a university in China, which is to be the cultivar used for this project. The new cultivar fetches a higher price and has a niche market. The South African output will serve a niche market, as harvesting will take place ‘out of season’ (in March and April), therefore, a higher price can be obtained. Tissue culture is going to be brought into South Africa for this specific cultivar. This will first be quarantined for three years and tests conducted on this material for diseases, e.g. green cancer. Once released from quarantine, the plant material will go to Citrus Research International (CRI) in Uitenhage to be propagated, in order to obtain the mother stock. This process will take one year and, once the trees are produced, the yield will be 50 000 trees per year, keeping in mind that 500 000 trees will be required per year to plant 500 hectares. This entire process will take up to 14 years to complete. In order to overcome these challenges, the Chinese partners offered to propagate in China, at facili-

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ties which produce 3 million trees per year. However, this solution is not acceptable in terms of South Africa’s agricultural protocols. If these challenges are overcome, the first phase would be to supply the pomelo to the domestic market in China, without processing. Two technical experts from China, employed by ATH, will come in for the first phase. Their role will be to work with extension officers, in order to build pomelo production skills of the extension officers. The farmers will manage their output with assistance from the extension officers and the Chinese experts. The second phase will be to add value, through export to China, by producing pomelo juice, rind for cooking and tea, and oil from leaves for essential oils. The main role players are the smallholders, together with Alfred Nzo Development Agency (ANDA) and ATH. ATH is a private company incorporated in China. ATH will contract the smallholders and provide input such as technical expertise, the cultivar and funding for the processing plant. As such, ATH, although engaged in the value-chain, will only engage indirectly in the agricultural production sector. ANDA acts as a facilitator. The agency is responsible for getting the cultivar into South Africa, ensuring that there are smallholders willing to participate and providing extension workers. ANDA is a municipal entity of the state-owned Alfred Nzo District Municipality.49 Forum on 198 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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Cooperation between ANDA and ATH commenced in 2009, at a point when ANDA was encouraging businesses to develop the region. At the same time, ATH was looking to extend its trade links, particularly through contract farming.50 The two parties signed a memorandum of understanding at the 5th BRICS Summit in 2013 and an initial take-off agreement was signed to supply the output for 10 years.51 Despite the very real intentions and expressions of interest, it is uncertain when and if the project will go ahead, due to a number of challenges encountered –the main obstacle being the timeframe for propagation.52

Assessment ATH is interested in establishing out-grower schemes as a feasible investment model. Linked to this, contract farmers willing to participate in the project, as they recognise the financial and educational benefits. The project will be feasible when operations have commenced for two reasons. Firstly, the climate, soil and other environmental factors of the chosen pilot site are similar to the conditions experienced in China where pomelo is grown, thus the yield is expected to be high. Secondly, the pomelo will fetch a higher price, as it is seen as ‘out of season’. That being said, there are concerns regarding the extent of thorough initial planning and the consequent delay in the implementation phase. The issue of bringing the cultivar into South Africa points to this. The project was already under negotiation for several years before discussions on cultivar handling took place and the resultant timeframe established. This points to the need to understand the investment countries’ agricultural and environmental regulations at the start of the project, as these may slow down any

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progress made. As a result of the issues experienced with importing the cultivar, there is increased reluctance from local partners to continue with the project, knowing that it will be at least four years before the pilot phase can commence. In this respect, staff at ANDA have tried to engage with government entities (such as the Agricultural Research Council) and government officials to see if there is a way to expedite the process. To date, there has been very little interest in the project and the issues arising from government. While we recognise the need for agricultural protocols and restrictions to be in place, they can serve as vehicles for dis-investment in certain instances.

BEK-PengxinAgritech dairy farm, KwaZulu-Natal

Background Pengxin was initially interested in the establishment of agri-parks, but shifted its focus to dairy farming. However, this project has failed.53 In pursuit of this project, twenty sites were identified, totalling around 20 242 hectares, in the Umzimkhulu area, KwaZulu-Natal

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(KZN). These sites were to form the ‘core estate’, with possible expansion to neighbouring farms. The land identified is communal, used for subsistence farming and administrated through Ingonyama Trust.54 The aim was to produce up to 1 million litres of milk per day, equivalent to about one-third of the present daily milk production in KZN.55 According to Pengxin’s investment plan and discussions with the local implementing agent, all product was to be processed into infant milk powder and exported to China.56 Various parties would have been involved in the project. The Malenge community would have become shareholders. The land lease would have been between the local community, in this case the Malenge community, and the Ingonyama Trust.57 The Malenge community and Pengxin Group would have formed a joint venture in production activities, with the community owning 26 per cent and Pengxin Group owning 74 per cent. In addition, the community would have had an 11 per cent stake in the processing plant, with Pengxin owning 89 per cent.58 The community were consulted (‘sensitised’) about the project and thus are disappointed to find out that the project is not going ahead, despite the expectations that have been created. In addition to consulting the community, the KZN Department of Agriculture (DOA) identified the sites in the Umzimkhulu area and was expected to pay for land preparation. The KZN Department of Water Affairs would have secured a water source.59 The Pengxin Group, incorporated in China, was expected to provide the capital and expertise. BEK Holdings (Pty) Ltd (BEK) would have been the local implementing agent. BEK is registered in South Africa and is mainly involved in the mining sector. This agro-investment would have represented the implementation of a diversification strategy. The agro-investment project was first proposed at the 5th BRICS Summit held in 2013. A memorandum of understanding for agro-cooperation was signed between Pengxin

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Group, BEK and the Economic Development and Tourism Ministry of South Africa.60 It took a-year-and-a-half for Pengxin Group to investigate the feasibility of the project. The last interaction between the two sides was in June 2014, when the third delegation, including an international consulting group, was assigned to South Africa. The Chinese partner has subsequently abandoned its agribusiness plan61 and has shifted its investment interests back to New Zealand, where it has acquired a number of dairy farms.62 There are three main reasons for the abandonment of the investment plans: 1) the South African government could not provide sufficient tax incentives, whereas by investing in New Zealand, the investor is 22 per cent better off from a taxation point of view; 2) high costs required for initial infrastructure; and 3) working in a joint venture with the local community was seen as a less attractive business model.63

Assessment Throughout the negotiation phase, there was a general lack of transparency and effective communication between all the project partners (specifically Pengxin Group). These aspects played a significant role in the failure of the project. There are several areas

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where transparency was required, in the attempt to make the project sustainable. Firstly, Pengxin Group should have informed the local partners that it was considering investment in other countries, like New Zealand. Secondly, the Chinese counterparts should have specified from the beginning that they were not looking to form a joint venture with the local community, but instead wanted to purchase/lease land directly themselves. Lastly, the investor should have been more transparent about the reasons for abandonment in South Africa. A detailed account of these reasons can ensure that local partners are better informed about what (Chinese) investors are looking for and how they can better serve these expectations. Transparency and effective communication could have helped to overcome some of these issues and may have resulted in investment rather than dis-investment. The manner in which Pengxin Group handled the entire negotiation phase and the subsequent abandonment, after the substantial amount of groundwork, has left a sour taste in the local partner’s mouth. It is very likely that the partner will be reluctant to work with Chinese investors again or to put as much initial effort into a project, if there is a risk that it will fail.

Val de Vie Wine Farm, Western Cape

Background The deal came about during the financial crisis in 2007 and 2008, when South Africa reoriented its exports. In 2011, a joint venture was established, Perfect Wines of South Africa (PWSA), between Leopard’s Leap and Perfect China. Leopard’s Leap Farm Pty (Ltd)

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is a private company incorporated in South Africa, and holds a 49 per cent share in the partnership. Perfect China has a 51 per cent shareholding.64 Perfect China was incorporated in 1994, as a subsidiary of Perfect Resources (M) Sdn Bhd.65 This project marks the first Chinese investment in the South African wine industry. Perfect China purchased the L’Huguenot Farm vineyards, within the Val de Vie estate, in 2013. L’Huguenot Farm has a size of 25 hectares: 17 hectares of vineyards, three hectares of citrus, a manor house and a cellar. The farm was used under the Val de Vie brand (South African brand) prior to the acquisition66 and is currently operating under the L’Huguenot brand. Perfect China provided all the finance to purchase and upgrade the farm, amounting to over R50 million. The main purpose of the L’Huguenot Farm is to provide a business address for Perfect China in South Africa.67 The farm will also be used as a demonstration facility for select sales persons from Perfect China.68 The L’Huguenot brand was created for the joint venture, and is only distributed by Perfect China. Export began in 2011, and in 2014, 2.7 million bottles were exported.69 Presently the entire production of the brand is exported.70 The production volumes are met by making use of the L’Huguenot cellar and other companies’ vineyards and cellars (such as KWV). Perfect China issues a contract to PWSA stating the volume required. The Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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production and logistics (including export) are sub-contracted to Historic Wines of the Cape, a South African logistics company.71 The farm is owned by Perfect China, while PWSA owns the L’Huguenot brand. That being said, Perfect China is the majority shareholder and therefore has control over PWSA, and thus makes all strategic, financial, marketing, distribution and sales volume related decisions.

Assessment Chinese investors recognise that Leopard’s Leap (a South African owned and based company) has the skills base and resources for wine-making and can achieve the volumes required. This could be due to the long-standing produce tie of wine-making in South Africa. From a socio-economic perspective, this project has a minor impact, as it is a takeover of an established business. The outcomes lie more in the ownership structure, which has consequences for the activities (grape varieties altered to pair with Chinese cuisine and increase in production level to meet export volumes) and strategies (markets focussed on export rather than the domestic market). As such, this project illustrates how foreign control over production and the value chain is amending the objectives and strategies of the enterprise, as it focuses fully on re-orienting production towards the Chinese markets.

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In this chapter, an effort was made to investigate and provide an assessment of China’s participation in the agricultural sector in South Africa. The four projects included in the study differed in terms of investment modality and implementation status. While these projects adhere to the Chinese agricultural foreign investment policy in terms of objectives, investment fields, investment value chain, modalities and entities,72 in practice, we see that the projects are not performing optimally. Several issues were encountered during the planning and implementation phases of these projects; some more critical than others. We saw the lack of a thorough initial planning/feasibility study within all of the projects, e.g. pomelo project delayed due to the cultivar or delay in implementation of ADTC due to environmental and other considerations. Communication was also lacking between project partners during the planning phases. These factors contributed towards a delay in the implementation phase or contributed towards project failure. These delays are partly due to the stronger controls and legislation in South Africa, which require a resilient approach to project planning. To attract (and keep) these investments in the future, a more structured approach should be taken to address the lack of coordination between the investor, the land owner and stakeholders.

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In order to address some of these issues, policy should provide a framework that will guide the process and so ensure effective planning and implementation (similar to the FAO Guidelines for the design of agricultural investment projects).73 This framework could require certain documentation and studies to be performed before further steps can be taken. The framework could entail, for example, consulting labour policies, market studies, project infrastructure design, water usage rights, environmental regulations and impact assessment and in-depth feasibility studies - all of which should be undertaken before any substantial negotiations have taken place or any sizeable project funding is allocated. These reports would also be necessary during the negotiation phase. One central agency could be responsible for guiding investors in this regard, such as Trade and Investment South Africa (TISA), with support from various state-owned entities. This institution would also be responsible for keeping the documentation pack up to date. In conjunction with the policy framework, a FOCAC ‘one-stop shop’ could be established, in order to assist in increasing coordination between the partners. Numerous African countries have established a similar investment institution, which assists in a number of ways: relaying investment opportunities; relaying the environmental and agricultural regulations of the country; providing contact details of relevant contact persons at state entities. The institution could be based on this principle, and indeed similar to the Invest SA One-Stop Shop launched under the Department of Trade and Industry in September 2017, but specifically tasked with increasing Chinese investment in agriculture within the country. In effect, the institution would be responsible for developing and distributing a framework and a call for Sino-South African relations in the agricultural sector and running with the projects once the project proponents, investors and stakeholders have been iden-

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tified and they are satisfied with the projects in principle. The ‘one-stop shop’ could act as a cost-effective agency that presents a unified call to Chinese investors.74 Initially, the Policy Framework for Investment in Agriculture could be utilized and adapted to develop a unique investment strategy for Chinese investors in South Africa.75 Advocacy, image building, investor servicing and investment generation activities would be included.76 The framework developed should include these roles while clearly indicating the ‘onestop shop’ as being the point of contact for all enquiries and engagements. It should also encourage interested persons/communities to register. These individuals could then be matched to projects as and when they become available. Thus, the ‘one-stop shop’ will not only assist once the project has been initiated, but will also actively search out investors and project partners. This framework would be communicated widely to all relevant departments and officials, as well as within the public domain (both in China and in South Africa). The institution could guide the project proponents through the various (countryspecific) requirements throughout the planning and implementation phase (based heavily on the documentation pack provided by TISA). This could assist in reducing unnecessary delays in the projects and limiting communication issues, as project partners would Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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work out several details (where feasible) upfront. The institution would be a long-term partner, providing advice and other services throughout the life of the project (e.g. legal services and loans at preferential rates secured particularly through the ‘China-Africa Joint Business Council’). In addition, the ‘one-stop shop’ could introduce a formal review mechanism for the projects. The feedback could then filter back to decision makers, based on data collected from the ground, with additional recommendations and suggestions. The advanced aquaculture technologies used at the demonstration centre illustrate China’s ability to modernise the agricultural sector in South Africa and elsewhere in Africa, while applying the foreign investment policy objective of expanding markets for Chinese agro-technologies.77 The ‘one-stop shop’ could also become a source of knowledge, where case studies can be produced and wide dissemination ensured, should the new technologies and methods increase yields. These dissemination activities could encourage community members and farmers to incorporate improved techniques into their current farming practice. Lack of effective communication between partners in several of the projects led to (amongst other issues) a lack of transparency. This is most noticeable in the dairy project, where the local implementing partner did not have regular contact with its Chinese counterparts and the reasons for moving the project to New Zealand were not fully explained. This lack of contact might have played a role in the failure of the project, as, had the Chinese counterparts been open with the local partners and Department of Agriculture, a more suitable deal could have been structured. In an attempt to overcome these issues, policy could require that the project proponents hold regular meetings (i.e. bi-monthly meetings). In addition, the ‘one-stop shop’ could initially conduct the meetings, while providing training to all stakeholders on how to conduct meetings, in order to achieve

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effective communication and value through the interaction. The communication barrier could be addressed by providing independent translation services, from Mandarin (or other accepted dialects) into English (as would be the case in South Africa). Also related to communication, the ‘one-stop shop’ could provide literature on Chinese and South African traditions and customs, thereby sensitising stakeholders to differing cultures. Also related to communication, the ATDC suffers from a lack of visibility and marketing. The ATDC has little visibility on the ground, which reduces the effectiveness of the training and demonstration. Although it is the Chinese experts’ mandate to increase the visibility of the centre, the staff based at the ATDC lack the capacity to implement this mandate, principally because they are not clear which marketing methods are allowed and encouraged. Policy relating to the demonstration centres78 should dictate the type of marketing that can be implemented and should provide examples of ‘approved’ marketing strategies. There are also several issues with the implementation and sustainability of the projects. Again, the most noticeable example is the ATDC. We picked up several issues relating to the training model. The ATDC policy79 needs to be revised, based on ‘on the ground’ experience, in order to ensure improved implementation of the training and demonstration Forum on 204 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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mandate. There are also several issues with the current governance structure employed at the centre (including the limited number of local staff employed). Policy needs to take the unintended consequences of the current governance structure into account and effect revisions, in order to ensure that local staff are able to run the centre effectively once the Chinese experts have left. In response to these issues, the ‘one-stop shop’ and TISA could formulate labour requirements for these projects, which are based on the size of the project and the amount invested. TISA could then conduct regular field visits to ensure that the requirements are being upheld. The ‘one-stop shop’ and project proponents could also identify downstream activities for community involvement, thereby further increasing local employment and business start-ups. With regard to human resource development, the Chinese investors in these case studies were hesitant to partner with the local community (keeping them at arm’s length, while refusing to partner at all in other cases). Here, the ‘one-stop shop’ can assist in sensitising Chinese partners, thereby encouraging them to partner with the local community. Benefits for partnering must also be more widely advertised (e.g. leasing fees are significantly lower when the lease is between the community and Ingonyama Trust, rather than the company and the Trust directly). Also, it is important to keep in mind that community expectations must be managed and matched to what can realistically be provided. Chinese agro-investment has taken place in Africa for decades;80 however, there has been a marked increase in Chinese agricultural investment on the continent in the last couple of years, specifically in South Africa. This reflects a significant evolution of what has been emphasised by Deininger and Byerlee, i.e. that foreign investors in agriculture are seeking insecure land and weak state systems.81 This is evident by the selection of

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South Africa as an investment destination, a reorientation towards a more secure environment, which has a significant track record in doing business. While these projects are based in South Africa, the recommendations could also be widely applied to other Chinese investments in Africa, ultimately easing the process and ensuring continued and sustained investment on the continent, in line with the FOCAC agenda to promote the common development of China and Africa in various fields, including agriculture.

REFERENCES 1

Anseeuw, W., et al., 2012. Transnational land deals for agriculture in the Global South. Analytical Report based on the Land Matrix Database. Research report, p.64.Centre for Development and Environment (CDE), Centre de Coopèration Internationale en Recherche Agronomique (CIRAD), German Institute of Global Areas Studies (GIGA): Bern, Montpellier, Hamburg.

2 Cotula, L. and Vermeulen, S., 2009. Deal or no deal: the outlook for agricultural land investment in Africa. International Affairs, 85(6), pp.1233–1247.

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BETWEEN PROMISE AND PROFIT| Angela Harding, Chris Alden, Lu Jiang and Ward Anseeuw 3 Vink, N. and Kirsten, J., 2003.Agriculture in the national ecnomy.In Nieuwoudt, L. and Groenewald, J.(ed.), 2003.The challenge of change: agriculture, land and the South African economy.Pietermaritzburg: University of KwaZulu-Natal Press. 4 Anseeuw, W. and Ducastel, A., 2013. ‘Production Grabbing’: new investors and investment models in agriculture. QA –Rivistadell’Associazione Rossi-Doria, 2, pp.37–55. 5 Alden, C. and Wu, Y., 2014. South Africa and China: the making of a partnership.Occasional paper 199. South African Institute of International Affairs, August, p.20. 6 Ibid., p.18. 7 Ibid., p.18. 8 Large, D., 2013. China, Africa and beyond. The Journal of Modern African Studies, 51(4), pp.707–714. 9 Brautigam, D. and Tang, X., 2009. China’s Engagement in African Agriculture: ‘Down to the countryside’. The China Quarterly, 199, pp.686–706; Gabas, J.J., 2014. Is China making a land grab in Africa? Taking fresh stock of a vexed question. Futuribles, 398, pp.25–36. 10 Ibid. 11 Numerous studies, including: Cotula, L., Vermeulen, S., Leonard, R. & Keeley, J., 2009. Land Grab or Development Opportunity? Agricultural Investment and International Land Deals in Africa. London/ Rome: IIED/FAO/IFAD; Brautigam and Tang, 2009; German, L., Schoneveld, G. & Mwangi, E., 2011. Contemporary Processes of Large-scale Land Acquisition by Investors: Case Studies from Sub-Saharan Africa. Occasional paper 68. Bogor, Indonesia: CIFOR. 12 Brautigam, D., 2015. Will Africa Feed China? London: Oxford University Press; Buckley, L., 2011. Eating Bitter to Taste Sweet: An Ethnographic Sketch of a Chinese Agriculture Project in Senegal. In International Conference on Global Land Grabbing. Sussex, 2011. 13 Ibid., p.18. 14 We had hoped to interview the Chinese investors directly involved in all projects; however, this was not possible in terms of the dairy farm project and the pomelo project.

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15 Marc, S., Trevinyo-Rodiguez, R.N. and Velamuri,R., 2010. Business Model Innovation through Trial-andError Learning: the Naturehouse case.Long Range Planning, 43(2–3);Peter,M., 1992. Policy Learning and Failure, Journal of Public Policy, 12(4). 16 Zhao, S., 2010.The China Model: can it replace the Western model of modernization? Journal of Contemporary China, 19(65). 17 Forum on China-Africa Cooperation, 2006.FOCAC Beijing Action Plan 2007–2009. Available at: http:// www.focac.org/eng/ [Accessed 21 May 2016]. 18 Ibid.; Forum on China-Africa Cooperation, 2009.FOCAC Sharmel-Sheikh Action Plan 2010–2012. Available at: http://www.focac.org/eng/ [Accessed 21 May 2016]. 19 Chris, L.,15 April 2013. Personal interview. 20 Fraser, A., 2013. New and Interrelated Facets of Land Acquisition: The Case of Chinese Investments in South Africa. Unpublished Master’s thesis, University of Pretoria. 21 Song, E.,09 September 2013. Personal interview. 22 Song, E., 2013: Proposed Operational Plan of the Agricultural Demonstration Centre. Bloemfontein: South Africa China Agricultural Technology Demonstration Centre. 23 Zhao, H.,09 September 2013. Personal interview. 24 R47 801 746.88 (South African Rand) as at 29 July 2013. 25 Zhao, H., 04 April 2013. Personal interview. 26 Ibid.

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 11 27 Song, E., 29 January 2015. Personal interview. 28 Ibid. 29 Curtis, M., 2016. Chinese, Brazilian and Indian Investments in African Agriculture: Impacts, Opportunities and Concerns. ACORD, the Agency for Cooperation and Research in Development. 30 MOC and MOA (China), 2011. “Guanyucujinyuanfeinongyejishushifanzhongxinxiangmukechixufazhan de zhidaoyijian” (Guidance on Promoting the Sustainable Development of the Agriculture Technology Demonstration Centre Project in Africa). Beijing: MOC and MOA; authors’ fieldwork. 31 Jiang, L., Harding, A., Alden, C. &Anseeuw, W., 2016. Chinese agriculture technology demonstration centres in Southern Africa: the new business of development. The Public Sphere, LSE Africa Summit Edition 2016, Challenging Conventions. 32 Song, E., 29 January 2015. Personal interview. 33 The exchange letter contains details ofthe duties and responsibilities of both parties, as well as the cost involved. 34 Buckley, 2011. 35 Ibid. 36 Jankielsohn, R., 10 July 2013. Personal interview. 37 Ibid. 38 Jiang et al., 2016. 39 Note that these smallholder farmers have a fish farm and are implementing what they weretaught. 40 Van der Linde, K., 28 January 2015. Personal interview. 41 Koen, V., 07 July 2013. Personal interview. 42 Buckley, 2011. 43 Masaba, A., 02 April 2016. Personal interview. 44 Chichava, S., 14 November 2013. Personal interview. 45 Jiang et al., 2016.

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46 Song, E., 29 January 2015. Personal interview. 47 Although this project is still in the negotiation phase after several years, there is a definite attempt to invest by the Chinese investor, beyond the signing of a symbolic MOU. Extensive ground-work has been carried out. 48 Bam, N., 06 June 2013. Personal interview. 49 Ibid. 50 Mahomed, J., 30 January 2015. Personal interview. 51 Ibid. 52 Salla, T., 03 February 2015. Personal interview. 53 Govender, R.,05 February 2015. Personal interview. 54 Ibid. 55 Hohls, E., 04 February 2015. Personal interview. 56 The domestic infant milk powder industry has been affected by, amongst other factors, the melamine scandal (South China Morning Post, 2016).As a result, domestic milk powder sales have dropped and there is competition from foreign brands;Li, J., 2016. Regulation intensifies competition on China’s babymilk powder market. South China Morning Post [online], 13 May 2016. Available at http://www.scmp. com/business/companies/article/1944569/regulation-intensifies-competition-chinas-baby-milk-powdermarket [Accessed 07 December 2016].

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BETWEEN PROMISE AND PROFIT| Angela Harding, Chris Alden, Lu Jiang and Ward Anseeuw 57 Hoosen, M., 02 February 2015. Personal interview. 58 Govender, R., 05 February 2015. Personal interview. 59 Hoosen, M., 02 February 2015. Personal interview. 60 Govender, R.,05 February 2015. Personal interview. 61 Ibid. 62 Govender, R., 08 May 2016. e-Mail interview. 63 Govender, R., 05 February 2015. Personal interview. 64 Neethling, K., 19 September 2014. e-Mail interview. 65 Koegelenberg, H., 19 September 2014. Personal interview. 66 Neethling, R., 16 September 2014. Personal interview. 67 Imports into China are made easier, once acompany has a business address in the country from which the goods are shipped. 68 Neethling, K., 17 September 2014. Personal interview. 69 Koegelenberg, H., 19 September 2014. Personal interview. 70 Ibid. 71 Neethling, K., 19 September 2014. e-Mail interview. 72 Jiang, L., 2015. Chinese Agricultural Investment in Africa: Motives, Actors and Modalities. Occasional paper 223. South African Institute of International Affairs, October, p.5. 73 FAO, 1995. Guidelines for the design of agricultural investment projects. FAO Investment Centre, Technical Paper 7. 74 OECD, 2011. Investment Promotion and Facilitation. In Policy Framework for Investment User’s Toolkit, OECD Publishing. 75 OECD, 2014. Policy Framework for Investment in Agriculture, OECD Publishing. 76 Ibid; OECD, 2010. One-stop shops: An overview of best practices related to three key issues. MENA-OECD training workshop, Beirut.

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77 Jiang, 2015. 78 E.g. MOC and MOA (China), 2011. “Guanyucujinyuanfeinongyejishushifanzhongxinxiangmuke chixufazhan de zhidaoyijian” (Guidance on Promoting the Sustainable Development of the Agriculture Technology Demonstration Centre Project in Africa). Beijing: MOC and MOA. 79 Ibid. 80 Alden, C., Large, D. and Oliveira, R., 2008. China returns to Africa: anatomy of an expansive engagement. Working Paper 51/2008, Real Instituto Eleano. 81 Deininger, K.W. and Byerlee, D., 2011. Rising global interest in farmland: can it yield sustainable and equitable benefits? Washington DC: World Bank Publications.

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12 CHAPTER

FOCAC, AGRICULTURAL DEVELOPMENT AND CHINAAFRICA COOPERATION Garth Shelton

INTRODUCTION - FOCAC AND AGRICULTURAL COOPERATION The FOCAC VI (Forum on China-Africa Cooperation) Summit and Ministerial Conference was held in Johannesburg during December 2015. African and Chinese leaders assembled at the Sandton Convention Centre to discuss the theme ‘Africa-China Progressing Together: Win-Win Cooperation for Common Development.’ The outcome of the deliberations produced a detailed ten-point plan aimed at broadening and strengthening China-Africa cooperation. The plan laid the foundation for the development of comprehensive China-Africa economic and political cooperation for mutual long-term benefit. The ten specific areas of cooperation agreed to include the following: industrialisation, agricultural modernisation, infrastructure development, project financing, green energy development, poverty reduction, trade and investment, public health, peace and security

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cooperation, and people-to-people exchanges. FOCAC is an ideal multi-level governance structure and a diplomatic dialogue platform for advancing South-South cooperation. South-South solidarity offers the promise of countering the increasingly negative consequences of globalisation, which is essentially driven by the vested interests of the wealthy industrialised nations. China’s contribution to Africa has not only been limited to the liberation of the continent, but also to the promotion of economic development and poverty reduction. The Chinese’s understanding of Africa’s economic dilemma and their empathy for existing developmental challenges lies at the root of Sino-African solidarity and serves as a strong foundation for cordial relations. In this context, the real value of the Sino-African relationship, especially with China’s willingness to set a common agenda for interaction, lies in Africa’s opportunity to work with China in managing globalisation better for mutual benefit. A successful outcome for South-South cooperation should be based on unity and solidarity among countries of the South, with the long-term objective being creating a more just and equitable international order within which accelerated development for poorer countries is possible.

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President Xi Jinping has suggested that China and Africa now have a ‘community of shared destinies’, based on similar historical experiences, common development tasks and shared long-term strategic interests.1 A common destiny grounded in a collective desire to overcome poverty now unites both China and Africa, while increased commercial interaction, based on equality and mutual respect, is seen as the mechanism for promoting common economic growth and long-term prosperity. The China-Africa ‘common destiny’ has become more evident over the last ten years, as increased trade with China has transformed Africa into the last great frontier for economic development. Both the World Bank (WB) and the International Monetary Fund (IMF) have acknowledged that China-Africa trade has been decisive in promoting growth in Africa and helping to combat poverty.2 Chinese exports to the continent have brought low-cost consumer products into many African homes for the first time, China’s aid and investment have boosted growth, and strengthened sovereignty and self-confidence, while offering African countries new options for trade and political partnerships. Africans who have undergone technical training in China have returned to the continent and added skills and knowledge to local development. A further expansion in Sino-African cooperation can only be an advantage and a positive opportunity for accelerated growth in Africa. An increase in exports of African agricultural products to China and to global markets could serve as the key to expanding African economies. The African Union’s (AU) Agenda 2063 calls for the modernisation of Africa’s agriculture to ensure food security and provide a foundation for industrialisation. China is already contributing to this process. Chinese agricultural teams are active across the continent, helping to increase the output of Africa’s farmers. China itself has significantly increased food production, providing the foundation for an improved quality of

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life. Further cooperation to boost Africa’s agricultural output would be a major positive development. Africa remains the least food secure region in the world and food production in Africa has not increased as fast as other parts of the world.3 Currently, China is contributing to increased agricultural production through a range of projects in 14 African countries. An expanded Chinese assistance programme, with Africa’s full support and direct participation, could be instrumental in addressing the problem of food security across the continent.4 The world’s population is expected to grow from approximately seven billion today to over nine billion by 2050. Agricultural output needs to be boosted by approximately 70 per cent to meet the demands of a growing global population. To reach new food production targets and ensure food security, a global investment of approximately US$80 billion is required in agriculture annually.5 Over 60 per cent of the world’s arable land is in Africa and while current output is far below potential, there is significant opportunity for increased output.6 Efforts to help Africa increase food production, which help address poverty and hunger in African communities, must be stepped up.7 It is widely accepted that modernising agriculture is the key to economic growth and poverty reduction. China’s recent economic reform experience tends to confirm this perspective. Increased Forum on 210 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 12

cooperation in agriculture is thus a key element of China-Africa cooperation.8 There are no examples of a country industrialising without first modernising and advancing agriculture. An agricultural revolution in Africa is the first step towards industrialisation and economic prosperity. This chapter investigates China’s success in modernising agriculture and how this can serve as a model and inspiration to Africa. China’s agricultural assistance to Africa is discussed in the context of South-South solidarity and the FOCAC process. Examples of China’s agricultural assistance to Africa are outlined, demonstrating China’s significant contribution to improving yields in many African countries. Africa’s agricultural challenges are considered and opportunities for accelerated development assessed. Given China’s own recent experiences, it is well positioned to help Africa advance agricultural development towards food security. Specific policy recommendations for inclusion in the FOCAC process, which is intended to enhance China-Africa agricultural cooperation, are provided. It is argued that FOCAC is an ideal mechanism to promote a broadening of China-Africa agricultural cooperation for mutual benefit.

CHINA’S SUCCESS IN AGRICULTURE REFORM After a long period of experimentation, China has found a successful economic development model, identified as ‘Socialism with Chinese characteristics’, which has enabled it to record annual growth of over ten per cent for an extended period of time. This has resulted in a thirty-fold increase in the income of the Chinese people and more than seventy per cent of global poverty alleviation over the last three decades. Because of

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economic reform and opening, China was the first developing country to meet the United Nations (UN) Millennium Development Goals’ (MDGs) target of halving the proportion of people living in poverty by 2015. China reached this MDG target in 2010, when the number of Chinese living in extreme poverty fell from 836 million in 1987 to 156 million. Moreover, the World Bank has confirmed that over 700 million Chinese have been lifted out of poverty over the last 30 years.9 China plans to eradicate poverty completely by 2020 and to achieve the goal of a moderately prosperous society by that date. The success of the reform and opening process has brought China ever closer to national renewal and rejuvenation, which is encapsulated in the idea of the ‘China Dream’. The core of the China Dream is national prosperity and rejuvenation, coupled with a better standard of living for the Chinese people. Following 30 years of continuous growth, China has overcome the difficulties of the past and opened a new chapter in its history. Industrialisation has brought China closer to national renewal and revival. The specific targets for China’s national dream are to double annual per capita income within 10 years and to create a prosperous middle-income country by 2050. The end-point for the dream will be the elimination of poverty, the upliftment of the Chinese people and a good standard of living for all citizens.10 Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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China’s exceptional poverty-reduction achievements are based on the very successful economic reform and opening programme that has characterised China over the last thirty years. From 1978 to 2007, China’s gross domestic product grew annually at approximately 10 per cent, while the per capita annual income of farmers increased from RMB 134 to RMB 4,140; thus rural residents living in poverty was reduced from 30.7 per cent to only 1.6 per cent.11 Early in China’s reform period, people’s communes were replaced by the household contract responsibility system, which ignited farmers’ enthusiasm to increase production and better use available land. Based on market prices, agricultural production increased significantly, and rural communities saw significant increases in income. Along with facilitating market-orientated reform in rural areas, China invested in major infrastructure development programmes that supported advanced economic development. China’s agriculture and rural development strategies provided the foundation for unprecedented poverty reduction and rapid economic growth over the last thirty years. China’s growth in agricultural output is estimated to have contributed four times more to poverty reduction than both increases in manufacturing and the service economy. Thus, China’s economic miracle is firmly based on agricultural reform and increased agricultural output. Over the past approximately 30 years, China’s agricultural yields have increased by close to 70 per cent, while the population has increased by only 37 per cent. The significant increase in agricultural production has underpinned China’s remarkable economic success. Land, labour, capital, quality seeds, irrigation, fertilisers, education and market access are considered to be the key inputs for success in agricultural production.12 At the same time, given the limited amount of arable land in China, reforms in agriculture were not sufficient on their own to address the challenge of poverty. Basically, rural to urban

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migration through industrial plants underpins China’s success in overcoming poverty. In China’s case, the last three decades have seen agricultural improvement in the following areas: ■■

Land – China has made maximum use of all its available arable land.

■■

Labour – rural labour has been mobilised and offered a range of incentives to increase productivity.

■■

Capital – Chinese banks have become active in financing farms and agricultural production.

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Quality seeds – extensive research has led to the production of new seeds with higher yields. (The use of hybrid seeds has contributed to approximately 50 per cent increased productivity.)

■■

Irrigation – the use of irrigation is now widespread and has increased output significantly.

■■

Fertilisers – perhaps the most important factor has been the use of new fertilisers, which has increased output dramatically. (Fertiliser use in China is more than 10 times higher than in Africa.)

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■■

Education – providing information and education to farmers on the best way to increase production has been important in driving increased yields.

■■

Market access – as a consequence of China’s massive road and rail building programmes, Chinese farmers now have easy access to markets and consumers.13

The successful integration of the above factors produced a significant increase in China’s food production and has moved China towards a position of food security. In addition, China implemented an agricultural reform programme based on four key elements: institutional innovation; technological modernisation; market development; and improvement of rural infrastructure. These reforms were based on a gradual and learning-based policymaking system, which was built on experimentation and careful planning. The process also advanced synergies between the state, market and farmers, thus contributing to the economic growth of the country. Overall, the modernisation process was driven by a dynamic and pragmatic leadership, creative experimentation and a committed and energetic bureaucracy. Early in China’s reform period, grain production increased significantly, encouraged by the application of advanced technologies, market liberalisation and new irrigation systems. Despite land constraints, Chinese farmers were able to increase yields significantly. Overall increases in yields ensured the basic food needs of the Chinese people and provided the foundation for industrialisation and modernisation. In addition, agricultural production in China has witnessed change and diversification over time, in response to market demands. Farmers have shifted from low-value cereal cultivation to higher-value activities, such as fishing, livestock and poultry, as well as vegetable and fruit production. The output of vegetables, sugar and tobacco has expanded rapidly over time, and

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has replaced lower value grain production. A key factor in China’s agricultural modernisation relates to farm size and production input. Despite the large number of small farms, productivity increased steadily with a moderate input increase of water and fertiliser. Thus, small farmers increased yields with only minor input modifications, thereby expanding their income and reducing poverty. The China experience suggests that small farms are not an impediment to a production increase and comprehensive poverty elimination programmes.14 Urbanisation in China now accounts for approximately 50 per cent of the total population, which is a significant increase on the 18 per cent of the population living in cities at the start of China’s economic reform programme in 1978. Nevertheless, 720 million Chinese still live and work in rural areas. Along with urbanisation, industrialisation has become the key driver for job creation and economic growth. Agriculture employed more than 80 per cent of Chinese in 1970, but today the number is less than 50 per cent. Agricultural modernisation facilitated increased food production, which in turn allowed for rural labour to move into urban manufacturing employment.15

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Currently, China produces 50 per cent of the world’s vegetables, 29 per cent of the world’s meat and 18 per cent of the world’s cereals. China is now also the world’s biggest producer of pork, wheat, tea, cotton, fish and rice, making it the biggest agricultural economy in the world by far.16 As a consequence of China’s rapid economic development, consumers are no longer satisfied with having enough to eat and are looking for something new and interesting to include in their diet. Chinese farmers are diversifying production to supplement the traditional wheat and rice staples. As part of China’s current supply side reform programme, a reduction in corn growing areas is under consideration, while the pricing system of corn and rice is to be reconsidered. The over-supply of corn in recent years is encouraging farmers to consider other crops for cultivation. Thus, the outstanding success of China’s agricultural reform is now encouraging a slow-down in corn production due to over-supply. Other priorities for agricultural supply side reforms include stabilising the pig and dairy industries, protecting aquatic resources and increasing the income of fishermen, developing and branding specific agricultural products, and accelerating business start-ups and innovation in farming regions.17

AFRICA’S FOOD SECURITY CHALLENGES Food insecurity is now an urgent problem facing many African countries to varying degrees. Moreover, most African citizens are still engaged in farming and live in rural areas. Over the last twenty years, many African countries have sought to transform and modernise agriculture, but the impact has been limited. Africa’s persistent poverty is directly related to the continent’s untapped agricultural potential. Population growth and

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rapid urbanisation is creating a bigger demand for food imports, which are expected to increase from approximately US$35 billion annually to over US$100 billion by 2025. UN studies suggest that African states should not rely on commodity sales, but should rather mobilise agriculture as the driver to overcome poverty.18 Although African economies face a range of challenges and difficulties, there is significant opportunity for rapid development in many parts of the continent. Working with China to promote mutual economic prosperity is expected to produce a positive win-win outcome. In advancing the China Dream in cooperation with Africa, both sides should focus on mutually beneficial outcomes to strengthen the existing interdependent relationship. Realisation of the Chinese Dream and a moderately prosperous Chinese society requires increased and broadened cooperation with Africa. Constructive dialogue and friendly consultation will open the way for increased and constructive commercial interaction. According to the IMF, Sub-Saharan Africa (SSA) has the potential to see economic growth of above four per cent for the next five to ten years.19 Growth at this level would make Africa one of the fastest growing regions in the world. At the same time, much work needs to be done in terms of providing the foundation for accelerated inward FDI, Forum on 214 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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to support industrialisation and job creation. The modernisation of agriculture is the foundation for economic development and growth in other sectors. As soon as food security is assured, other sectors of the economy could be mobilised and advanced. Agroprocessing could have a significant positive impact on food distribution and economic growth. Increased agricultural production leads to lower food costs, which in turn gives consumers more money to buy other items, thus stimulating demand for manufactured products. Slow growth in the past was partly caused by ineffective leadership, or unfocussed economic policies. African populations are now demanding better performance and are insisting on new, more creative, economic policies to tackle poverty and unemployment. Along with changes in African political and economic thinking, new entrepreneurs are beginning to emerge across the continent, offering the necessary creative impulse for new development and expansion of commercial activities. The focus is now on manufacturing, information and communications technology (ICT), agribusiness, aviation and services. Despite the overall positive trends, most Sub-Saharan African countries are seriously food insecure, with yields only sufficient to meet approximately 50 per cent of their needs. Africa has significant arable land, almost 25 per cent of the world’s total, but it is not being used to its full potential. Annual yields are approximately one-third of those achieved in Latin America and Asia. The agriculture productivity gap between Africa and Asia is mainly a result of increased irrigation across Asian countries. Over 40 per cent of farm land in Asia is irrigated, compared to only four per cent in Africa. During the last 10 years, the extent of African land under irrigation has not increased significantly. Overall, Africa produces just 10 per cent of the world’s food output, thus it must rely on imports to feed a growing population. Most African farmers still rely on traditional

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methods, which limit output. In 2013, for example, Africa imported close to US$95 billion in agricultural products, while exporting only US$60 billion. In contrast, China has been able to feed its population and export food at the same time.20 The key to Africa’s economic future depends largely on mobilising available arable land for sustained and increased food production. Given China’s success in advancing food production, an expanding development partnership with Africa could play a key role in assisting the continent’s agricultural progress. The UN’s Food and Agriculture Organisation’s (FAO) research suggests that, globally, the highest level of under-nourishment is found in Sub-Saharan Africa, with a total of approximately 30 per cent of the population considered to be under-nourished. Africa continues to import food, despite the wide availability of arable land and agriculturebased economies. On average, over 60 per cent of Africans are living in rural areas, while over 50 per cent are employed in agriculture. But grain production in Africa has decreased over the last 30 years, from a high of 176 kilograms per capita in 1976 to approximately 140 kilograms in recent years. Low productivity and the lack of clear policy direction have been partly responsible for this outcome. African governments have not invested in irrigation, fertilisers and technical modernisation, which are all essential to increase Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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agricultural yields. Irrigation levels of approximately five per cent are too low to increase production, while poor road systems prevent outputs from reaching the market. Instead, most African governments have relied on the sale of oil and raw materials to global markets, while agriculture has been neglected. The legacy of colonisation in Africa has created a cash-crop orientated system, with most quality land being allocated to the production of coffee, cocoa, tea, cotton, tobacco, groundnuts and cashew nuts. These products are traditionally sold to developed countries, while grain production for domestic consumption has been neglected. However, agricultural products for export are vulnerable to international markets and food production for local consumption is neglected. In addition, it creates a demand for food imports, as arable land is not being used to ensure food security. Without a stable domestic food market, social stability and progress towards industrialisation are major challenges. African farmers are not moving up the value chain towards more high-value products, while yields have not increased significantly over time. Overall, the slow development of agriculture in Africa, along with the focus on export crops, has undermined poverty alleviation and economic development. Reports by the AU have suggested that climate change and extreme weather events could increasingly impact negatively on African agriculture and food security prospects. Smallholder farmers could be the most severely affected by accelerating climate change and weather pattern anomalies. Africa’s eco-systems are under increasing pressure as a result of climate change and related unpredictable weather systems. Many of Africa’s farmers rely on rain-fed land and are thus extremely vulnerable to drought and floods. Another factor undermining increased agricultural output in Africa is the lack of access to fertilisers. Without sufficient financing for fertilisers and more widespread use of fer-

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tilisers, agricultural output is unlikely to increase significantly. This is compounded by a lack of modern farming machinery and the absence of irrigation systems. Without the key inputs for food production, results will always be disappointing. With the slowdown in oil and raw material exports from Africa, concerted government action is urgently required to grow the agriculture sector. Agribusiness exports could make up for losses in commodity sales, while new jobs could also be created. PWC’s Africa Agribusiness Insights Survey 2016, based on interviews with the chief executives of agribusinesses in 15 African countries, identifies the following obstacles to increased agricultural output:21 ■■

political instability;

■■

barriers to cross-border trade;

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lack of modern technology;

■■

lack of employee training and

■■

more foreign investment is required to expand existing operations.

Besides the PWC Report, other studies identify African food security challenges in terms of the following: Forum on 216 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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■■

Africa imports approximately US$35 billion worth of food annually (despite the fact that Africa has potentially more arable land than any other continent).

■■

Almost 75 per cent of Africa’s cultivated soil is degraded (fertilisers are urgently needed to upgrade arable land).

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Approximately five per cent of Africa’s farms are irrigated. Irrigation alone could increase Africa’s agricultural output by up to 50 per cent.

■■

African farmers use on average 22 kilograms of fertiliser per hectare, while in Asia the average is 145 kilograms.

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The number of tractors currently being used in Africa is insufficient, as the figure for Asia is three times greater and eight times greater for South America. .

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Just over 15 per cent of Sub-Saharan roads are paved, making it extremely difficult for farmers to transport crops to markets.

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Sub-Saharan Africa’s share of world agricultural exports declined from close to 10 per cent in 1970 to just two per cent in 2000, while agricultural exports from Asia increased dramatically over the same period.

■■

Agriculture is the most important economic sector in most African countries, averaging around 25 per cent of GDP. Agri-processing and marketing adds another 20 per cent to Africa’s GDP.

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Africa has long been dependent on imported food and food aid, thus breaking away from this pattern would be difficult.

■■

Almost 70 per cent of Africans are involved in agriculture - by far the biggest economic sector on the continent.22

Africa needs to address the challenges outlined above to advance agricultural output, job

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creation and food security. The transformation of agriculture starts with higher productivity and more efficient methods of production. A bigger output would provide enough food for farming households and a surplus to sell on local or international markets.23 The Comprehensive African Agriculture Development Programme (CAADP), formulated in 2003, continues to provide useful guidelines for the improvement of Africa’s agriculture. The CAADP was designed to develop African agriculture towards feeding 1,5 billion people by 2030 and 2 billion people by 2050.24 The CAADP identifies four main priority areas:25 ■■

Expand land under cultivation – some studies indicate that 60 per cent of Africa’s arable land is not under production. This suggests that there is significant space for increased land use and increased yields.

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Build the value chain by linking farmers to markets – the majority of African farmers produce for subsistence, but there is significant potential to expand production for domestic and international distribution.

■■

Increasing the yield of staple foods is a priority, given the high population growth, low employment rates and high cost of food. Techniques for increasing yields, such as irrigation and fertilisers, need to be applied urgently.

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■■

An improvement in agriculture research and agricultural technology is essential for the transformation and modernisation of Africa’s farms. Research and technological innovation need more resources to produce positive results.

Fantu Cheru and Renu Modi suggest that the CAADP should include three additional elements:26 ■■

Increase the availability of financial services in rural areas to provide loans to farmers. Further liberalising the banking and financial sectors across Africa would promote finance access to rural communities.

■■

Given the growing negative impact of climate change across Africa, investing in climate change mitigation is becoming more urgent. Climate change is expected to alter rainfall patterns and reduce arable land in Africa.

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Africa’s agricultural sector should be used as a foundation for industrialisation and economic growth. Agri-processing has the potential to uplift rural communities and create jobs for Africa’s growing populations.

The overall success of the CAADP process ultimately depends on African governments being able to finance agricultural transformation. Alternatively, FDI in Africa’s agriculture could play a major positive role. Private capital transfers to Africa would promote economic growth, job creation and revitalise the agricultural sector. Efforts to attract FDI through pro-business policies and improved economic management would go a long way to providing the foundation for agricultural modernisation. Singapore, Taiwan, Malaysia and China have all benefited significantly from FDI directed at the agricultural sector.27 A comprehensive and ambitious approach is needed to transform Africa’s agricultural

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sector towards higher yields and increased food security. The immediate requirements are an improvement in skills, the application of modern technology, expansion of appropriate infrastructure, and improvement in the investment climate to attract appropriate agriculture-targeted FDI. Studies done by the African Development Bank (AfDB) support the CAADF objectives, identifying a number of key factors essential for the modernisation of agriculture in Africa, including increased productivity together with improved distribution systems; strengthening agricultural markets; increased investments in agriculture-related infrastructure; appropriate agriculture-supportive policies and increased lending to farmers.28 Agricultural yields in Africa need to increase by over 60 per cent in the next 15 to 20 years to feed an ever growing population. Transformation of Africa’s agriculture could contribute significantly to an improved quality of life. Partnerships with other countries, especially China, could be the key to positive transformation towards increased yields and long-term food security.

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CHINA’S AGRICULTURAL ASSISTANCE TO AFRICA It is widely acknowledged that agricultural modernisation is the first step towards poverty alleviation and industrialisation. China’s own recent history confirms this, while China’s increasing engagement with Africa’s agriculture holds the promise of a development partnership which will transform Africa’s agricultural landscape.29 For China, agricultural assistance to Africa has long been a key priority in both bilateral and multilateral engagements. China has become an agriculture development partner for Africa, helping to increase yields and reduce rural poverty.30 China has provided agricultural assistance to more than 40 African countries, covering over 200 specific projects. More than 10 000 Chinese agricultural specialists have worked in Africa, helping to assist local farmers. China’s focus has been on land management, increasing yields, planting of rice and agricultural processing. Currently, there are 20 Chinese-supported agricultural centres in Africa, which mainly promote rice-based farming systems. Besides official engagements, Chinese private companies have become actively involved in Africa’s agriculture sector. China also supports African agriculture through the South-South Co-operation Initiative under the management of the FAO’s Special Programme for Food Security. In support of this programme, China has sent more than 850 agricultural experts and technicians to 20 developing countries - mostly African countries.31 Overall, China has focussed on the transfer of agricultural training and technology to Africa through demonstration centres, while agriculture has also been a key element in China’s efforts to build strategic partnerships with African countries.. Some of China’s earliest agricultural assistance programmes in Africa were carried out in Tanzania during the 1960s.32 China has since stepped up its agricultural coopera-

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tion with Africa. By the end of the 1980s, almost one quarter of China’s total aid in Africa focussed on agricultural support in 40 countries. In recent years, China has provided support to African agriculture through the FOCAC process, based on funding from the ChinaAfrica Development Fund (CADFund), which is managed by China Development Bank. By the end of 2012, following the implementation of eight new measures to strengthen cooperation with Africa, China had built seven new agricultural technology demonstration centres in Africa. This increased the number of such centres on the continent to 22. By that time, China had also sent 50 agricultural technology teams to African countries. These teams trained more than 5 000 local technical personnel. China has also engaged in a wide range of agricultural projects in many African countries. (See Tables 12.1 and 12.2 below). Most of China’s agricultural projects in Africa are implemented by state-owned farming concerns. China State Farm and Agribusiness Corporation (CSFAC) established its first farm in Africa in 1994, and now operates seven farms in different African countries. Hubei SFAC manages a farm in Mozambique, while Jiangsu SFAC and Shaanxi SFAC run farms in Cameroon. The China National Agricultural Development Group Corporation runs seven farms in Africa, while Chinese companies run 15 separate farms in Zambia.

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Table 12.1: Chinese-aided agricultural technology: demonstration centres in Africa (2010) Country

Major focus of the centre

Benin

Crop cultivation demonstration and farming technology training

Liberia

Rice and corn cultivation technology transfer, training, development of plant varieties

Uganda

Agriculture technology demonstration, technology transfer and training

Tanzania

Crop cultivation demonstration, development of improved plant varieties, training

Sudan

Crop cultivation and irrigation technology, demonstration and training

Mozambique

Soya bean and corn cultivation and processing, demonstration and training

Ethiopia

Horticultural plant cultivation and livestock farming technology, demonstration and training

Rwanda

Rice, juncao, mulberry cultivation, soil and water conservation, technology demonstration and training

Zambia

Agriculture technology demonstration and training

Zimbabwe

Corn cultivation technology transfer and training

South Africa

Research, technology demonstration and training on freshwater aquaculture

Togo

Research and training on agricultural technology

Cameroon

Research, technology demonstration and training on agricultural technology

Republic of Congo

220Crop cultivation demonstration and training

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Source: MOFCOM 2010:16

Table 12.2: Selected Chinese agricultural and agribusiness SOEs operating in Africa (2010) Company

Country

Core operations

Da Ping Fishery Group

Angola

Fishing, aquatic product processing and sale of fish meal

Sichuan Sanhetian Bio-Tech

Ghana

Planting, processing and trade of medicinal plants

Shandong Xinwei Grain and Oil

Mozambique

Planting, processing and sale of sesame, cashew and peanuts

CGC Overseas Construction

Nigeria

Agricultural trade, grain cultivation and processing, and livestock

Huaqiao Phoenix Group

South Africa

Forestry, poultry and livestock

Hainan Qilin Tech

Tanzania

Sisal research and development, cultivation, processing and sale

China-Africa Agriculture Investment Corporation Limited

Zambia

Production and sale of agricultural and livestock products

Qindao Textile Union

Zambia

Planting, processing and trade of cotton

An Hui China State Farms Group

Zimbabwe

Agricultural trade and investment (including livestock and aquatic products) Source: MOFCOM 2010

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Through FOCAC and a range of bilateral undertakings, China is building dams and irrigation systems in Africa, along with agricultural training and assistance.33 China’s assistance constitutes a significant contribution to strengthening Africa’s food security. China has strengthened Africa’s self-reliance on food production by building agriculture demonstration centres, as well as sending agricultural specialists to train and advise African farmers. Chinese agriculture demonstration centres in Malawi, Zimbabwe and Rwanda have shown significant progress in helping to boost farm output.34 In late 2016, China provided a US$30 million agriculture research centre to Kenya’s Jomo Kenyatta University of Agriculture and Technology.35 China’s agricultural assistance to Uganda has provided guidance to 4 000 farmers and has helped boost agricultural output. Given that half of Uganda’s total exports are agricultural products, China has made a significant contribution to addressing poverty in that country.36 China has also provided extensive agricultural assistance to Mozambique, helping to boost agricultural yields, especially rice.37 In 2016, China provided a US$5 billion rescue package to Zimbabwe to fund agriculture and housing projects.38 At the 2015 Johannesburg FOCAC Summit, Chinese Foreign Minister, Wang Yi, pointed out that China has worked closely with Africa on agriculture and related activities for many years. In this context, he promised China’s support to help Africa achieve increased and sustainable agricultural outputs. Since FOCAC’s establishment in 2000, China has been helping Africa across a broad spectrum of activities to advance economic and social development. FOCAC has produced regular, focussed and pragmatic action plans that have advanced China-Africa cooperation and produced specific positive results for African countries. Through high-level multilateral dialogue and consultation, FOCAC has provided a platform to advance China-Africa agriculture, along with numerous other ar-

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eas of mutually beneficial engagement.39 Within the FOCAC framework, China and Africa have worked together on a number of important agricultural projects. Following the 2006 FOCAC Summit, China has provided assistance with building agriculture technology centres in African countries. By introducing new planting methods and agriculture management procedures, China has helped train African farmers and boost output. Given that the majority of Africans are still involved in farming, China’s assistance has made a major contribution to the development of local economies. Since 2006, China’s Agriculture Ministry has dispatched 48 agricultural specialist teams to 34 African countries. These teams have played a key role in providing advice and guidance to African farmers. In addition, Chinese agriculture vocational teachers have provided assistance to over 50 000 African agricultural officials and farmers. Along with training assistance, China has increased investment in a number of African agricultural projects. By 2015, Chinese investment in African agriculture totalled over US$700 million, making up almost 10 per cent of China’s international investment in agriculture. At the same time, Chinese imports of African agricultural produce increased from US$600 million in 2001 to over US$6 billion by 2015.40 China has also provided Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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emergency food assistance to a number of African countries that experienced difficulties. China’s overall FOCAC agricultural engagement has sought to boost Africa’s food security through training, direct assistance and investment. During 2016, China dispatched 72 agricultural experts to five African countries, namely Burundi, Djibouti, Ethiopia, Mozambique and Zimbabwe. The agricultural experts were able to boost production and introduced innovative products in their agricultural demonstration centres. New successful projects include boosted rice production in Burundi, mushroom cultivation in Ethiopia, hybrid rice in Zimbabwe and fish farming in Djibouti. The Chinese experts trained more than 6 000 local officials and farm technicians, while transferring knowledge and skills to Africa. In addition, Chinese experts have contributed to the writing of farming manuals and information sources to transfer knowledge to a wider audience. For over ten years, China’s Ministry of Agriculture’s (MOA) Centre of International Cooperation Services (CICOS) has been selecting and dispatching agricultural experts to foreign countries. Since 2006, 189 agricultural experts have been sent to 34 African countries, along with 184 vocational teachers. Over time, China’s assistance programmes have become more focussed and effective. The MOA has a database of 800 Chinese agricultural experts who can be sent to assist African farmers.41 China’s strategy is to support and promote increased agricultural production for local markets, rather than for export to China, or to global markets. China is thus committed to advancing Africa’s food security, rather than promoting food exports. Given the potential for a significant improvement in Africa’s agricultural output, Chinese officials are optimistic about an expansion of agricultural cooperation.42 Chinese farming techniques and management processes are appropriate for Africa, suggesting that both sides can benefit significantly from increased cooperation. A process of common

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agricultural development is unfolding as China and Africa broaden and deepen efforts to increase food production towards achieving food security.43 Given the current challenges in the global economy, increased China-Africa agricultural cooperation can play an important role in strengthening the respective economies and broadening areas of mutual benefit. China is specifically committed to promoting equal engagement that is focussed on a win-win outcome. China has also confirmed its commitment to assist Africa to improve its agricultural development, with a view to building a sustainable food supply and eventual food security. Combining China’s agricultural experience with Africa’s human resource potential and abundant arable land is expected to produce positive results. Chinese officials have emphasised that Africa has significant potential for agricultural development and modernisation, while there are numerous areas for expanded agricultural cooperation. Following the Johannesburg FOCAC Summit, China’s Minister of Agriculture Han Chanfu confirmed that China is willing to strengthen agricultural cooperation with Africa and to help African countries improve yields towards greater food security. Encouraged by China’s own experience in agricultural reform, Africa has an opportunity to increase yields, create jobs and move towards food security.44 Transforming Forum on 222 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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agriculture can also fast track continental growth towards industrialisation and economic modernisation.45 China’s agricultural modernisation programme can serve as a guide and inspiration for Africa’s own agricultural transformation. Low yields in Africa have for too long undermined food security and hampered the economic emancipation of the continent.46 A stronger agricultural partnership with China could boost Africa’s agriculture sector towards modernisation and rapid growth.

POLICY RECOMMENDATIONS Numerous studies confirm that countries that overcome poverty are those that initially increase agricultural output as a foundation for industrialisation and broad-based economic development.47 The challenge for Africa is to escape poverty, by empowering farmers and increasing agricultural production. African governments have traditionally under-invested in agricultural modernisation and development. An increased investment of public resources in agriculture remains a major priority for Africa. Modernising agriculture is the first step towards sustainable economic growth and poverty relief in Africa. Food security is the first step towards Africa’s long-term industrialisation. Africa has vast untapped potential, which China can help to mobilise. China is Africa’s ideal partner in this process, as China has recently travelled this road with great success and has overcome many of the challenges of poverty and agricultural transformation. Sufficient agricultural production lowers the cost of food, stabilises society and provides the foundation for industrialisation and modernisation. Increasing agricultural productivity requires a range of new policies and institutions, as well as partnerships with strategic allies, such

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as China, to advance development and prosperity. The modernisation of Africa’s agricultural sector is a key challenge that will shape the continent’s development for the next 20 to 30 years. Increased food security could open the way for accelerated industrialisation and job creation. China’s experience following the initiation of Deng Xiaoping’s reform and opening programme offers guidance and inspiration for African policymakers and agricultural practitioners. China has contributed to Africa’s agricultural modernisation through a range of technical programmes and initiatives. China has played a significant role in boosting African agricultural yields through technology transfers, capacity building, building of roads and irrigation systems and training agricultural specialists. China has laid the foundation for the acceleration of agricultural modernisation in Africa and, through FOCAC, offers the possibility of ongoing cooperation and collaboration. Agricultural reform could open the way for Africa to become a major food exporter of high-value agri-products to the world. At the same time, China’s assistance offers Africa an opportunity to reduce its dependence on the West and enables African leaders to design and implement new independent development policies. Encouraged by China’s agricultural development and modernisation, Africa could also become a major supplier Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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of food and agricultural commodities to world markets. Harnessing the China-Africa agriculture cooperation process could transform Africa’s economic development. Prof. Deborah Brautigam’s most recent book asks if Africa will feed China, but perhaps the key question is, ’When will Africa feed the world’?48 Africa has sufficient unused arable land to make a real impact on global food production.49 Almost half of the world’s uncultivated land is in Africa. The African continent has the potential to become the breadbasket of the world. According to the World Bank, agriculture in Africa is expected to become a US$1 trillion market within the next 15 years. The key is to mobilise farmers and make use of all available land.50 The transformation of Africa’s agriculture can be made possible through a stronger agriculture-focussed, comprehensive development partnership with China. China has the technology, experience and capacity to transfer knowledge and skills to Africa to bring about positive and sustainable agricultural transformation. China’s own experience in overcoming similar challenges in its recent history offers invaluable insights and an unparalleled inspiration to African farmers. At the same time, it is widely acknowledged that Africa should play a bigger role in crafting the FOCAC agenda towards strengthening the win-win China-Africa relationship. The AU’s Agenda 2063 focuses on peace and security, beneficiation, investment in human capital, youth and women development, improved governance, increased project financing, accelerated regional integration, enhanced export trade and industrialisation. Specific policy suggestions within the FOCAC framework, which are in line with AU 2063 agricultural development plan and the China-Africa cooperation initiative, include the following: ■■

Expand irrigation and water management techniques – China’s experience in the building of dams and providing irrigation for farmers offers a unique opportunity

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for augmenting Africa’s irrigation programmes. Many parts of Africa receive enough rainfall to provide for extensive irrigation systems. Increasing irrigation to just 10 per cent of Africa’s arable land could have a dramatical positive impact on increasing food production. ■■

Improved seeds – the Alliance for a Green Revolution in Africa (AGRA) has provided close to 20 million African farmers with improved seeds since 2007. Some studies suggest that, within the next five years, Africa can achieve 90 per cent rice production self-sufficiency through improved seeds and agricultural financing. This would be a major step towards food security for many countries in Africa. Currently, Africa consumes far more than the 14 million tons of rice that it produces annually. Given China’s experience in increasing rice production, this could be a focus area for the next FOCAC.

■■

Increased use of fertilisers – China has in the past provided credit facilities to a few African countries to import fertilisers. In this context, China’s assistance has made a major contribution to boosting output.51 The low yield from African farms make them uncompetitive in global markets and prevent growth in food exports. Africa has the arable land to make a major difference in food production. The food production could

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be achieved through more use of fertilisers, with China’s financial assistance, could be the key to boosting output. ■■

The use of modern and innovative technology in farming could result in a significant increase in output over the longer term, and good progress towards greater food security. Rice production in a number of African countries has been improved by new innovation platforms that bring value chain participants together for knowledge sharing and support. Transferring China’s advanced farming technology to Africa could lay the foundation for an agricultural revolution on the continent, leading to major production increases. China’s advanced farming technologies would be enormously beneficial to African agriculture.

■■

Capacity building – At the 2015 High-level Roundtable on South-South Cooperation at the UN, President Xi Jinping offered 120 000 opportunities for citizens from developing counties to receive short-term training in China and 150 000 opportunities for degree education. If the focus of these education opportunities was on African agriculture, the impact could be significant. Over the last 30 years, China has trained more than 10 000 African farmers on a range of programmes, thereby making a major contribution to Africa’s agricultural development.52 Increased support for capacity building in African agriculture could yield significant results.

■■

Access to land – The Chinese Ministry of Agriculture is encouraging Chinese companies to invest in Africa and to experiment with high-quality, high-yield crops to advance modernisation and food security. Chinese companies are also being encouraged to develop agricultural processing, storage and logistics. Private companies in China are willing to invest in African agriculture, but require guaranteed long-term access to farmland. Access to Africa’s arable land for Chinese farmers is a sensitive issue,

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but it could hold the key to a significant increase in food production. Externalisation of food production may be China’s answer to its own food security challenges. Joint land-lease ventures could make a difference in encouraging greater Chinese interest in African agriculture. ■■

Responding to climate change – Africa should pay attention to strengthening early warning and response institutions which can address environmental challenges. According to the World Food Programme (WFP), climate change will have a greater impact on Africa than on any other continent. An expected significant decrease in rainfall will adversely impact yields across Africa.53 Over the next 10 years, climate change is expected to adversely affect the agricultural output of many African countries. Currently, climate change constitutes a major obstacle to Africa’s long-term agricultural transformation. New ’climate smart farming techniques’ (CSA – climate smart agriculture) are required to increase production under the current challenge of climate change. China could assist with new farming techniques, while a climate risk insurance scheme, supported by China’s development banks, could be helpful in countering new threats to production.

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■■

Agricultural research and development towards the growth of new and appropriate crop varieties is a priority for Africa. China has been very successful in developing new seeds and new farming techniques to suit local conditions. A comprehensive China-Africa partnership to advance agricultural research and development could have a major positive impact on food production. In this context, more active use of biotechnology to increase crop yields is becoming increasingly important. New soil and crop management techniques that are based on China’s agricultural experience would be very useful to African farmers.

■■

Affordable financing – The African Enterprise Challenge Fund - supported by the UK Department for International Development (DFID), Australian Aid, the Swedish International Development Cooperation Agency (SIDA), Danish International Development Agency (DANIDA), The Netherlands, IFAQ and C-GAP - has facilitated the creation of 9 000 new agri-businesses in Africa. Grow Africa invested US$500 million in African agriculture in 2015. Because of financial constraints, African farmers seldom get an opportunity to travel to other countries to access new technologies and knowledge. An ongoing and comprehensive agricultural knowledge exchange programme with China would be extremely helpful to African farmers. According to the FAO, Africa needs approximately US$400 billion in food production investment over the next ten years to address current challenges.54 Affordable financing from China’s development banks could make a big difference to Africa’s agriculture.

■■

Agricultural insurance for small-scale farming – In Kenya for example, insurance is automatically provided via a small surcharge (usually less than five per cent) added to the cost of fertiliser and seeds. Farmers receive a payout if extreme weather conditions undermine production. Insurance helps improve farmer’s resilience and capac-

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ity to overcome production challenges. The Kenya National Agriculture Insurance Programme is supported by the World Bank and the Kenyan government. Chinese insurance companies and banks could play a direct role in supporting small scale farmers in Africa. ■■

Productive knowledge sharing is required to improve production efficiency and mitigate risks. Dr Calesstous Juma of Harvard University has suggested that efficient agricultural markets are dependent on the efficient flow of appropriate data. In this context, new companies such as Gro Intelligence are effective in providing information which helps increase productivity and market output.55 In many cases, farmers are using mobile phones to access information. However, in Ethiopia, for example, only 34 per cent of farmers have access to mobile phones. A partnership with China to provide mobile phones to African farmers could assist significantly with production increase and market access.

■■

Support youth in agriculture – FOCAC could devise a plan to empower youth participation in Africa’s agriculture. According to the 2015 Africa Agriculture Status Report, there is significant potential for youth employment in agriculture projects across the continent.56 Youth under the age of 25 constitute over 65 per cent of Africa’s

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population and they suffer from high unemployment levels. Mobilising the youth to participate in agriculture could be the key to job-creation in Africa and increased social stability. China’s experience in modernising agriculture could show the way for success in Africa. ■■

Strengthen agriculture demonstration centres – For many years, China has been engaged in agriculture technology centres across Africa. In 2015, President Xi Jinping promised 100 agricultural cooperation projects with Africa. Previous projects produced positive results, thus future projects are expected to produce the same. The strengthening and expansion of these centres could make a major contribution to advancing agricultural transformation and modernisation.

■■

Post-harvest crop management – Transport costs for African farmers are a major impediment to market access. Improvements in road and rail transport would add significant value for agro-dealers in getting products to market. World Bank studies show that transport costs for agricultural products are a major impediment to reducing the poverty of farmers. The provision of enabling hard infrastructure to connect farmers with downstream distributors would be a positive development. China’s contribution to Africa’s road and rail transport system is broad and significant, thus modifications to this system that are focussed on assisting farmers, could play a major positive role in boosting African agriculture.57

■■

Special Agricultural Development Zones – China is in the process of developing a number of Special Economic Zones (SEZs) in Africa, inspired by the remarkable success of SEZs in China itself. China’s SEZs were the key to launching China’s economic modernisation and played a crucial role in attracting foreign direct investment (FDI).58 The establishment of Special Agricultural Development Zones (SADZs) could unlock

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Africa’s agricultural potential. Such zones would promote Chinese direct investment in African agriculture. The zones could be supported by new Chinese-built road and rail systems to facilitate the transportation of produce to appropriate markets. ■■

Market access – Africa needs to develop sustainable farming techniques and sustainable markets, which includes open access to the Chinese market for African agricultural exports.59 Many studies suggest that China will not be able to ensure low-cost food for its increasingly wealthy and demanding population. Currently, China provides food to Africa as emergency relief, while food exports to China are very limited.60 Over time, agricultural surpluses could be exported to the Chinese market. It would be helpful for China to support African access to its markets through lower tariff barriers.

CONCLUSION – AGRICULTURAL COOPERATION THROUGH FOCAC China’s ongoing engagement with Africa is now widely regarded as a major success story and it constitutes a constructive and positive example of complex, co-operative interdependence in the current international system. The Forum on China-Africa Cooperation

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provides a comprehensive consultation and dialogue mechanism to advance China-Africa cooperation and manage mutually beneficial economic cooperation. Based on equality and non-interference, China and Africa have developed a friendly and constructive process of state-to-state interaction, which promotes new opportunities for engagement, while at the same time offering a diplomatic system for congenial problem solving. The FOCAC process is a model of South-South cooperation and is uplifting Africa, providing urgently needed infrastructure, while advancing the continent’s development agenda. China is set to become Africa’s key development partner and is providing the infrastructure foundation for the continent’s longer-term growth, while Chinese loans and aid programmes are providing new opportunities for overcoming poverty and promoting prosperity. The various FOCAC declarations and undertakings provide policy frameworks for building Sino-African relations and set the agenda for future constructive interaction. Africa has gained significantly from this and stands to gain further through ongoing interaction and diplomatic exchange. The regular and structured diplomatic interaction provides a mechanism to identify and develop new opportunities. FOCAC reflects the form and content of Sino-African relations, while mapping a future for both sides to achieve common prosperity. Implementation of the suggested policy proposals outlined above could dramatically increase agricultural output across Africa, which would, in turn, reduce poverty levels and provide the foundation for rapid, sustainable economic growth. The next FOCAC meeting could focus on advancing a “comprehensive China-Africa agriculture partnership”, which would enhance the modernisation of Africa’s rural sector. As the first step towards a strengthened agricultural component within FOCAC, an expanded and focussed China-Africa dialogue on agriculture would be helpful. Moreover, a closer FOCAC alignment with the AU’s Agenda 2063 could be the key to advancing a

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long-term and sustainable China-Africa relationship. The FOCAC process could contribute specific support for some elements of the AU’s development agenda, thereby providing a major impetus to Africa’s economic development. Arguably, the main emphasis of FOCAC should be on ensuring a synergy between FOCAC actions plans and the AU’s Agenda 2063. The AU’s Agenda provides consensus on Africa’s future development path and offers hope for a significant reduction in poverty. China’s direct and active support of the AU Agenda would significantly strengthen FOCAC and lay the foundation for a longterm China-Africa development partnership. A stronger synergy between FOCAC and the Agenda 2063, would transform FOCAC into an effective driver and enabler of Africa’s long-term economic development.

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REFERENCES 1 Quoted in He, W., 2013. Sharing the Same Dream, Chinafrica, Available at https://www.chinafrica.cn. [Accessed on 5 May 2017] 2 World Bank (WB). 2016. Agriculture in Africa: Telling Facts from Myths. World Bank. Available at www. worldbank.or/eng/programs/africa-myths-and [Accessed 23 February 2017]. 3 Ahlers, T.H., Kohli, H.S, Sood, A. and Madavo, C, 2015. Africa 2050 - Realizing the Continent’s Full Potential. New Delhi: Oxford University Press, p.273. 4 Pienaar, H., 2007. China Here to Stay, Says Top Banker. IOL, 31 October 2007. Available at https://www. iol.za [Accessed 24 February 2017]. 5 In Brief. 2014. The Global Struggle for Food Security. Finweek, December, p.9. 6 Editorial. 2015. Agricultural Experts Optimistic About Growth. Finweek, April, p.21. 7 Lei Sun, H., 2011. Understanding China’s Agricultural Investments in Africa. SAIIA Occasional Paper, November 2011. 8 Editorial. 2015. Agricultural Experts Optimistic About Growth. Finweek, April, p.21. 9 Kang, H. and Birchenall, J., 2013. Agricultural productivity, structural change and economic growth in post-reform China, Journal of Development Economics, 104, p.165. 10 See Ren, X., 2013. The Chinese Dream. Beijing: New World Press. See also Huang, H. and Luan, J., 2013, The Roadmap of the 18th CPC National Congress. Beijing: Foreign Language Press and Hou, R., 2014. Chinese Dream, a Dream Influencing the World. China Today, January, pp.18–21. 11 Hou, R., 2016. China’s Poverty Relief Efforts, China Today, 65(11), p.2. 12 Zhang, L.X., 2015. Agricultural and Rural Development in China. Centre for Chinese Agriculture Policy. Chinese Academy of Sciences, p.4. 13 Yu, X., 2009. Chinese Agricultural Development in Thirty Years. Courant Research Center. University of Gottingen, Germany, p.5.

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14 Noki, B., 2016. Will big agriculture mergers impact smallholder farmers? Devex News. Available at https://www.devex.com/news/will-big-agriculture-mergers-impact-88820 [Accessed 29 January 2017]. 15 Yu, X. and Zhao, G., 2009. Chinese Agricultural Development in 30 Years. Frontiers of Economics in China, 4(4), p.637. 16 Carter, C., 2016. China’s Agriculture: Achievements and Challenges. ARE Update, University of California, 14(5), p.6. 17 Ni, Y., 2017. Less is More – China’s Supply-side Agricultural Reform. Chinafrica, February, p.17. 18 Imara Africa Securities Team. 2012. Agriculture – the most important sector of the African economy. Imara. Available at https://www.howwemadeitinafrica.com/agriculture [Accessed 27 March 2017]. 19 Leke, A. and Chironga, M., 2010. Africa’s Growth Story. In Games, D., 2010. Business in Africa. Johannesburg: Penguin Books, p.29. 20 Muthethya, E., 2016. Call to Nurture Shoots of Africa’s Agriculture. China Daily, September 2–8, p.27. 21 PWC. 2016. AgTech – don’t wait for the future, create it. Agribusiness. Available at [Accessed 25 January 2017]. 22 Infographic. 2016. Africa’s Agri-business Potential. African Business, August/September, p.19. 23 Diop, M., 2016. Foresight Africa 2016: Banking on agriculture for Africa’s future. Brookings Institute. Available at [Accessed 4 March 2017].

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FOCAC, AGRICULTURAL DEVELOPMENT AND CHINA-AFRICA COOPERATION | Garth Shelton 24 NEPAD. 2013. Agriculture in Africa. NEPAD. Available at www.un/org/en/africalosaa/pdf/pwos/2013 [Accessed 26 February 2017]. 25 Oakland Institute. 2011. Land Investment Deals in Africa. Oakland Institute. Available at http://www. oaklandinstitute.org [Accessed 26 January 2017]. 26 Cheru, F. and Modi, R., 2013. Agricultural Development and Food Security in Africa. London: Zed Books, p.212. 27 Cheru and Modi, 2013, p.25. 28 African Development Bank (ADB). 2016. Feed Africa – Strategy for Agricultural Transformation in Africa, 2016-2025. ADB. Available at https//www.afdb.org/Feed-Africa-Strategy-En.pdf [Accessed 3 March 2017]. 29 Jayne, T.S. and Ameyaw, D., 2016. Africa’s Emerging Agricultural Transformation: Evidence, Opportunities and Challenges. Africa Agriculture Status Report. Available at [Accessed 4 March 2017]. 30 Xinhua. 2016. China is a key partner in Africa’s agricultural development. Xinhua. Available at http:// www.coastweek.com/3939-agriculturs-04.htm [Accessed 23 January 2017]. 31 Brautigam, D., 2015. Chinese Investment in Africa. Foreign Policy. Available at: http://foreignpolicy. com/2015/12/04/5-myths-about-chinese-investment-in-africa [Accessed 12 December 2016]. 32 Baregu, M., 2008. The Three Faces of the Dragon, Tanzania-China Relations in Historical Perspective. In Ampiah, K. and Naidu, S., 2008. Crouching Tiger, Hidden Dragon? Scottsville: University of KwaZuluNatal Press, p.155. 33 Brautigam, D., 2010. China, Africa and the International Aid Architecture. Available at http://www. rev-working-paper-china-cud-architecture-august-2010 [Accessed 20 January 2017]. 34 Okore, G., 2014. Africa’s Agricultural Ally. Chinafrica, November, p.32. 35 Wambui, M., 2016. China builds research centre at Kenyan university. University World News. Available at http://www.universityworldnews.com/article.php [Accessed 21 January 2017]. 36 Olukya, G., 2016. The Growth Factor – Ugandan Farmers Benefit from Chinese Agricultural Skills. Chinafrica, May, p.34.

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37 Brautigam, D. and Ekman, S., 2012. Rumours and Realities of Chinese Agricultural Engagement in Mozambique. African Affairs, May, p.2. 38 Gagare, O., 2016. China shells out US$5 bn for Zimbabwe. The Independent. Available at https://www. theindepedent.co.zw/2016/09/16/china-shells-us5bn-zim/ [Accessed 24 January 2017]. 39 Wang, Y., 2015 Building on Past Achievements for a Bright Future. Chinafrica, December, p.8. 40 Fabricius, P., 2016. As China and Japan scramble for Africa, Africa’s challenge is to maximize investment. Mail and Guardian Africa. Available at http://mgafrica.com/article/2016-09-02-as-china-andjapan-scramble-for-africa [Accessed 8 December 2016.] 41 Li, X., 2017. Keeping It Constant – Chinese Agricultural Programmes in Africa. Chinafrica, February, p.26. 42 Rubinstein, C., 2009. China’s Eye on Africa’s Agriculture. Asia Times, 2 October. 43 Changfu, H., 2014. Advancing Agricultural Cooperation. Chinafrica, December, p.10. 44 Dollar, D., 2008. Lessons from China for Africa. Policy Research Working Paper No. 4531, World Bank, Washington DC. 45 McIntire, J.M., 2014. Transforming African Agriculture. In Ahlers, et al., p.267. 46 Versi, A., 2016. The Civilising Surplus. African Business, February, p.82. 47 Mulangu, F., 2016. Productivity is the Key. African Business, February, p.80. 48 Thomas, D., 2016. China-Africa 2.0? African Business, February, p.14.

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 12 49 Brautigam, D., 2016. International Development, Governance and China. Available at http://deborabrautigam.com/books/will-africa-feed-china/ [Accessed 9 December 2016]. 50 Sullivan, J., 2016. Africa could become the ‘New China’. Available at http://www.cbn.co.za/component/ kq/africa [Accessed 23 January 2017]. 51 Sachikonye, L., 2008. Crouching Tiger, Hidden Agenda? Zimbabwe-China Relations. In Ampiah and Naidu, 2008, p.129. 52 Scoones, J.E., 2015. Why Chinese agriculture engagement in Africa is not what it seems. China Africa Project. Available at: http://www.chinaafricaproject.com/podcast-china-agriculture[Accessed 10 December 2016]. 53 Ford, N., 2016. Coping with Climate Change. African Business, August/September, p.23. 54 Maiga, A., 2016. China Key Partner in Africa’s Agriculture Development, Coastweek, 9 October. Available at http://www.coastweek.com/3039-agriculture-04-htm [Accessed 12 December 2016]. 55 Firrd, N., 2016. Agribusiness. African Business, August/September, p.29. 56 Bafana, B., 2016. African Rice Bowl. Chinafrica, April, p.38. 57 Monson, J., 2016. Orient Express: Chinese Infrastructure Engagement in Africa. Chinafrica. Available at http://www.chinaafricarealstory [Accessed 13 December 2016]. 58 Brautigam, D. and Xiaoyang, T., 2103. Going Global in Groups: Structural Transformation and China’s Special Economic Zones Overseas. World Development, XX, p.32. 59 Ge, L., 2016. The Age of E-Agriculture. Chinafrica, June, p.44.

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60 Zhang, Y., 2016. More Chinese rice to arrive in drought-hit Africa. Xinhua. Available at http://www.news. xinhuanet.com/english/2016-09/29/ [Accessed 28 January 2017].

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13 CHAPTER

THE POLITICAL ECONOMY OF INDUSTRIALISATION AND AGRICULTURAL DEVELOPMENT IN AFRICA Mxolisi Notshulwana

INTRODUCTION The discursive link between agriculture and industrial development in Africa began with the failure of the Import Substitution Industrialisation (ISI) policies that were adopted in the 1950s through to the 1970s.1 This process was further spawned by the reaction of the International Financial Institutions (IFIs) to the alleged failure of ISIs in Africa. In the 1980s, the World Bank and the International Monetary Fund (IMF) began to advocate policy liberalisation through structural adjustment and economic stabilisation programmes (SAP). This neo-liberal policy advocacy was further continued into the 1990s with the advent of the so-called Washington Consensus.2 For nearly a quarter of a century, Africa’s attempts at policy liberalisation programmes with an outward oriented industrialisation development strategy, have yielded lower re-

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sults than anticipated.3 Furthermore, studies that criticised the ISIs policies in Africa concluded that ‘to expand exports of manufactured goods, imports should be liberalised and overvalued exchange rates should be corrected’.4 These studies acknowledged the importance of government in correcting market failure, the promotion of infant industries, and the need for selectivity in the choice of investment. This chapter examines the role of the agricultural sector in industrial development in Africa. The strategic importance of the agricultural sector lies in its forward and backward integration with the rest of the economy, the establishment and maintenance of food security, the welfare of the rural areas and foreign exchange earnings.5 Agricultural development plays an important role in economic development and the alleviation of poverty. Agriculture also plays a vital role in supporting rural areas in maintaining infrastructure, housing and other services.6 The chapter also looks at the experience of China in its agricultural and industrial development trajectory. China’s distinguished experience of ‘combining fast and slow reforms is that … its success stands in marked contrast with the “shock therapy” of the Soviet Union’ and the 1980s SAPs of the World Bank and the International Monetary Fund (IMF) in Africa.7

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 13

AGRICULTURE AND INDUSTRIAL DEVELOPMENT IN AFRICA Many western economists viewed agriculture as a relatively unimportant contributor to economic growth.8 The propensity of development economists and policymakers to pay limited attention to agriculture’s potentially positive role in stimulating overall economic growth was based on the empirical observation that agriculture’s relative share of the gross domestic product (GDP) inevitably declines during the course of economic development.9 As a result, the resources and policies in many countries were focused on the promotion of industrial development, resulting in the neglect of agriculture. In many cases, this had a detrimental effect on overall economic growth, with both industrial and economic growth being stifled, mainly as a result of insufficient supplies of food and raw materials at affordable prices.10 Agriculture in Africa faces a host of challenges. The soils of the continent’s vast land surface are old and leached: 16 per cent of the land is classified as very low in nutrients compared to just 4 per cent in Asia. African soils are estimated to be losing nutrients worth US$4 billion per annum,11 yet farmers use fertiliser at a rate of 8kg/ha, and far less than that in smallholder farming, compared to a target of 50kg/ha.12 This may not be surprising, given the price that Sub-Saharan African farmers must pay for fertiliser, which is up to three times that paid by their counterparts in Brazil, India or Thailand. Rainfall is often unreliable and the effects of drought are aggravated by fragile soils with a low water holding capacity. Water and soil conservation measures, often based on indigenous knowledge, have been identified, but the investment required to put these into effect over large areas has been lacking.13 A secure water supply for growth and socio-economic development is a significant

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challenge for Africa. The fact that the frequency and severity of droughts and floods have increased demonstrates increasing climate variability, and therefore, greater vulnerability. Weak regional cooperation regarding trans-boundary rivers and lake basins has limited the benefits of shared water resources and reduced the effectiveness of water governance, which is necessary for development.14 In Africa, high rainfall variability and a lack of infrastructure for water storage have seriously undermined growth and perpetuated poverty in many African countries. Potential GDP growth rates may be reduced by over a third as a result. Even a single drought can cut growth potential by 10 per cent over an extended period.15 For example: the drought in Zimbabwe in the early 1990s was associated with an 11 per cent decline in GDP; and the floods in Mozambique led to a 23 per cent reduction in GDP. Poor infrastructure, especially with rural and trunk roads, constitutes another significant challenge to agriculture in Africa. One half of the rural population of South Asia lives within one hour’s journey of a market,16 whereas nearly 50 per cent of African farmers still live 5 hours or more from a market. Not only are there few rural roads, but transport costs in Africa are among the highest in the world, reaching as much as 77 per cent of the value of exports. The commodity market structure is characterised by a lack of Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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THE POLITICAL ECONOMY OF INDUSTRIALISATION AND AGRICULTURAL DEVELOPMENT IN AFRICA | Mxolisi Notshulwana market linkages. This means limited opportunities for adding value through post-harvest processing and high post-harvest losses, which are estimated at: 30 per cent for grains; and 50 per cent for other, more rapidly perishable, products.17 Access to market information is lacking. Where opportunities exist, farmers can rarely take advantage of them, because they are not empowered or sufficiently informed. Extension systems are in a crisis, with aging staff with limited mobility, few incentives or modern technological knowledge and acumen.18 African governments generally lack the capacity to redress these issues. A major problem in Africa remains the level of food insecurity and malnutrition. Africa’s vulnerability with regard to food provision is emphasised by the fact that a large number of people are suffering from malnutrition and many are facing starvation. An estimated 70 per cent of the population depends on agriculture for full-time employment and many others rely on agriculture for part of their household income. 250 million Africans live with food insecurity. At current rates, it is estimated that Africa will be able to feed less than half of its population in 2018.19 The underlying causes of malnutrition are due to the lack of availability of, access to and control of resources in society, which are determined by ecological, technical, economic, social, political and ideological conditions. Causes at this level are referred to as basic causes. Resources are of three main types: human capabilities (people, their knowledge, skills and time); economic resources (assets, land and income); and organisational resources (formal and non-formal institutions, extended family and child care organisations). Poverty, which is understood to be a lack of resources and opportunities, and the structural factors that give rise to it, are thus basic causes of malnutrition.20 Since the 1960s, African governments have committed themselves to supporting the agricultural sector as a key element of their economic development strategies.21

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However, this commitment has not been supported by investments and implementable programmes.22 As a critical component of industrial development (as the Chinese experience shows), agriculture could make an important contribution to the structural transformation of economies in Africa. In 2003, the New Partnership for Africa’s Development (NEPAD) and its Comprehensive Africa Agriculture Development Programme (CAADP) were launched to accelerate agricultural growth in the region.23 African governments also signed the Maputo Declaration, committing themselves to a minimum allocation of 10 per cent of their national annual budgets for agriculture.24 Recent political forums confirmed the urgent need to secure and increase basic food staples. These forums include the Sirte Conference on Water for Agriculture and Energy (December 2008), the Food and Agricultural Organisation (FAO) Summit of 2008 and the African Union (AU) Summit on investing in Agriculture for Economic Growth and Food Security (July 2009). In July 2009, the G8 pledged to provide US$20 billion over the next three years to increase food production on the continent.25

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 13

LESSONS FROM CHINA’S AGRICULTURAL MODERNISATION The importance of agriculture in industrial development in Africa and in developing countries in general cannot be over-emphasised.26 Agriculture releases excess labour to the non-agricultural sector that promotes industrial development. Similarly, an increase in agricultural productivity will release labour for industrial employment. Although agriculture is, as a rule, not the leading sector in employment-creating economic development, it must be borne in mind that, in absolute terms, the agricultural sector was and always will be an important source of employment. It remains important because of the large number of dependants who benefit from each farm worker.27 Industrialisation and agricultural modernisation have been the primary focus across Africa for the past few years. Yet the continent’s share of the manufacturing sector into the continent’s economic growth has declined from 12 per cent in 1980 to 11 per cent in 2013.28 The Economist Intelligence Unit, a British business research group, posits that Africa accounted for more than three per cent of global manufacturing in 1970, but this percentage has since declined. Africa’s recent rapid economic growth has been fuelled by China’s insatiable appetite for natural resources. This boom came on the back of rising commodity prices in the 1990s and did not usher in any meaningful development. China’s industrial development experience is raised in many reports about development in Africa. Beijing’s economic and industrial development has been embedded in its Five-Year Plans. China’s industrial policy plans distinguished themselves for being comprehensive to include agricultural development and the rural hinterland. China is a large agricultural country, with rural residents accounting for about 62 per cent of its total population.29 For nearly 30 years after the founding of the People’s Republic of China,

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in 1949, ‘the grassroots organisations in rural China were the township based collective economic organisations combined with the grassroots organs of state power’.30 Like in China, most people in Africa live in rural areas and agriculture plays an important role in the increase of food supply and raw materials for domestic consumption. This is important in a macro and regional context, but especially so at household level.31 The cost of industrialisation depends substantially upon relatively low-priced food and raw materials. Since industrial real wages are dependent upon food prices, stable food prices are imperative for achieving economic growth in most less developed countries.32 Exporting agricultural products can help a country earn valuable foreign exchange. Agriculture is a net earner of foreign exchange. Export earnings by the sector have increased at a faster rate than import expenditure. A country’s exports can play one of three possible roles in economic development, that is: a leading role, an equilibrating role or a retarding role. The rate of capital formation could be considerably improved by the agricultural sector. Income generated by the agricultural sector would increase the demand for domestically manufactured goods and increase savings, which would, in turn, increase capital investment in the industrial sector.33

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THE POLITICAL ECONOMY OF INDUSTRIALISATION AND AGRICULTURAL DEVELOPMENT IN AFRICA | Mxolisi Notshulwana Agriculture plays a vital role in expanding the size of the domestic market. This can be achieved by enlarging the demand for industrial products and thus act as a stimulus for industrial development.34 The Chinese experience shows that the true value of the agricultural sector’s contribution to the local economy and industrial development lies in its backward and forward linkages with the other sectors. In terms of its forward linkages, agriculture supplies raw materials as inputs for other primary and secondary sectors.35 A large number of factories in Africa are dependent upon agriculture for raw materials.36 Agriculture also creates demand for goods and services through its backward linkages. Expenditure on intermediate goods and services is one of the major linkages between the agricultural sector and other sectors of the economy, including include the mining and energy, manufacturing and chemical industries.37 The development of rural infrastructure in China served as the springboard for the overall economic and social purposes by, for instance, creating an array of livelihood choices to commercial and small-scale farming.38 Similarly, the important role that rural development could play in economic growth and industrial development in Africa should be emphasised. Increased public investment in economic infrastructure in rural areas is justifiable, not only on social grounds, but also on economic grounds. The provision of infrastructure is necessary for growth and development.39 Rural infrastructure, in particular, serves many social and economic purposes. For agriculture to remain competitive in the international market requires the development of innovative technology, enhanced labour management systems, and competent and productive manpower and partnerships with the right people.40 It is crucial for agriculture to accept and adopt new technology, in order for it to remain competitive in the market. Institutional infrastructure should be expanded and maintained. Agriculture could, therefore, contribute significantly to the

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

pace of economic growth and industrial development, given the various linkages between agriculture and the rest of the economy.41

RURAL INDUSTRIAL DEVELOPMENT IN AFRICA: LESSONS FROM CHINA? Africa has enormous potential, not only to feed itself and eliminate hunger and food insecurity, but also to be a major player in global food markets. This potential lies in its land, water and oceans, its human resources, its knowledge and its huge markets. Recognising this opportunity 10 years ago, the AU chose to make agriculture one of the pillars of NEPAD. Agriculture forms a significant portion of the economies of all African countries.42 As a sector, it can, therefore, contribute towards major continental priorities, such as eradicating poverty and hunger, boosting intra-Africa trade and investments, rapid industrialisation and economic diversification, sustainable resource and environmental management, and creating jobs, human security and shared prosperity.43 Africa’s population, according to the World Bank, was estimated at 1.1 billion in 2013, and it is expected to have a population of two billion people by 2050, the majority of

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 13

which will be women and youth.44 This prediction alone summarises the scale of the agricultural challenges it faces: to feed Africans and to create wealth for them, and to conserve resources for future generations. The majority of Sub-Saharan Africa’s population, i.e. 62.7 per cent, lives in rural areas, where poverty and deprivation are most severe (see Table 13.1). Since almost all rural households depend directly or indirectly on agriculture, and given the large contribution of the sector to the overall economy, one might expect agriculture to be a key component of growth and development.45 However, whereas agriculture-led growth played an important role in slashing poverty and transforming the economy in China, the same has not occurred in Africa. Most of the agricultural growth in Africa stems from an increase in the land area rather than increased productivity.

Table 13.1: Rural development indicators in Sub-Saharan Africa Population (‘000)

2004

Africa46

1 103 966

Production

 

 

Sub-Saharan Africa

 

Metric tons

Cereals Production

2010

123 058

Cereals Exports

2009

2 544

Cereals Imports Agricultural

2009  

28 745 $ millions

Exports

2009

26 440

Imports

2009

31 202

Food

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

2013

888 305

 

 

Exports

2009

16 849

Imports

2009

25 748

 

 

Sub-Saharan Africa

 

 

Rural population density*

Rural population

1990

273.2

 

2009

352.4

Share of total population

1190

71.9

 

2010

62.7

Annual growth

1990

2.2

 

2010

1.7

* rural population per km² Source: World Bank Development Indicators, 2014

Table 13.2 presents the land potential of selected Sub-Saharan African countries. More than 4.6 million hectares are irrigable. Many African countries were considered selfsufficient in terms of food crop production and there seemed little need to pay attention to the food sector or change established methods of food production.47 However, the situation has changed dramatically over the last three decades. Expansion of arable land has

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THE POLITICAL ECONOMY OF INDUSTRIALISATION AND AGRICULTURAL DEVELOPMENT IN AFRICA | Mxolisi Notshulwana stagnated in recent years, indicating that land frontiers have been reached. The result is mounting population pressure and declining farm sizes. The land constraint is particularly serious in countries such as Ethiopia and Rwanda.48

Table 13.2: Land area, arable land and area equipped for irrigation, 2012 Country  

Land area km²

Agricultural land as a % of the land area

Arable land as a % of the land area

Area equipped for irrigation 000 ha

2014

2012

2012

2012

1 246 700

47.5

3.9

86

566 730

45.7

0.5

2

2 267 050

11.5

3.1

11

341 500

31.0

1.6

2

1 000 000

36.5

15.3

290

Ghana

227 540

69.0

20.7

34

Kenya

569 140

48.2

9.8

103

Madagascar

581 795

71.2

6.0

1086

2 030

42.9

37.4

19

Mozambique

786 380

63.5

7.2

118

Namibia

823 290

47.1

1.0

8

Nigeria

910 770

79.1

38.4

293

Rwanda

24 670

75.3

47.9

10

Swaziland

17 200

71.0

10.2

50

Tanzania

885 800

45.9

16.4

184

Zambia

743 390

32.1

5.1

156

Zimbabwe

386 850

41.9

10.3

174

23 617 646

44.1

9.1

4638

  Angola Botswana Congo, Dem. Rep. Congo, Rep. Ethiopia

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Mauritius

Sub-Saharan Africa

Source: World Bank Indicators, 2013

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 13

Figure 13.1: Agriculture: Top 20 agricultural products by value, 2012

Source: World Bank Indicators 2013

Table 13.3: Commodity Production by Value, 2013

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Rank

Commodity

Production (Int $1000)

Flag

Production (MT)

Flag

1

Cassava

15553269

*

149403415

A

2

Meat indigenous, cattle

14413336

*

5335553

A

3

Yams

11789547

*

57286311

A

4

Milk, whole fresh cow

10372954

*

34306439

A

5

Rice, paddy

7034898

*

28282813

A

6

Tomatoes

6629178

*

17937834

A

7

Maize

6610467

*

70076591

A

8

Meat , chicken

6583229

*

4621733

A

9

Plantains

4996030

*

26545032

A

10

Meat sheep

4665727

*

1713578

A

11

Groundnuts, with shell

4619197

*

10790180

A

12

Bananas

4467532

*

15863068

A

13

Mangoes, mangosteens, guavas

4275373

*

7135528

A

14

Potatoes

4256053

*

29253748

A

15

Vegetables, freshness

3446935

*

18291850

A

16

Cocoa, beans

3415786

*

3289192

A

17

Sorghum

3228533

*

23350064

A

18

Meat , goat

3121900

*

1302915

A

19

Sugar cane

3040208

*

94611511

A

20

Beans, dry

2838619

*

5036829

A Source: World Bank Indicators, 2013

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THE POLITICAL ECONOMY OF INDUSTRIALISATION AND AGRICULTURAL DEVELOPMENT IN AFRICA | Mxolisi Notshulwana The perception is often that the performance of agriculture in Sub-Saharan Africa has not been up to expectations and has been characterised over the decades by ups and downs. But in recent years, annual growth has averaged 3.9 per cent.49 The improved performance of the agricultural sector in Africa south of the Sahara during the most recent decade (2000 to 2010) has raised questions about the drivers behind the growth.50 Sceptics argue that rising commodity prices, as world markets experience a commodity boom, are the main cause of the agricultural growth. Others point to improvements in the policy environment and increased investment in agriculture at a time when African governments and donors have been rallying to increase their support for agriculture. Productivity growth in Africa is a result of countries recovering from the poor performance of the 1980s and 1990s, together with favourable domestic prices. A key challenge for African countries in the years to come is to transform the current windfall gains from favourable high commodity prices and the one-time effects of policy reforms into sustainable growth based on technical change.51 Contrary to the widespread perception that agriculture actually performed worse after the implementation of structural adjustment programmes, evidence from the Food and Agriculture Organisation of the United Nations (FAO), the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP) shows that Sub-Saharan Africa’s agriculture has grown more than 1 per cent faster since the mideighties. The fact remains, however, that it has been possible, during the last decade, to lift agricultural growth to a level above the rate of the population growth in the region as a whole, and well above that in a few countries.52 In many African countries, especially south of the Sahara, large fractions of the workforce are employed in agriculture, that is, 60 per cent for Sub-Saharan Africa in the aggre-

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gate, and in some countries almost 70 to 80 per cent. The agricultural sector appears to have low productivity, relative to non-agricultural sectors. GDP shares are systematically far lower than employment shares. Table 13.4 presents agricultural GDP and agricultural exports as a percentage of total GDP and exports, respectively.

Table 13.4: Agricultural GDP/exports as a percentage of total GDP/exports (2011) Country  Namibia

GDP (2011)

Agric. GDP as a

Total exports

Agric. exports as a

$ ‘000 000

% of total GDP

$ ‘000 000

% of total exports

12 412

8.9%

4 407

3.6%

Botswana

15 365

2.8%

5 882

2.0%

Zimbabwe

10 956

13.2%

3 512

31.4%

Mozambique

13 245

30.0%

3 604

14.7%

Mauritius

11, 252

3.6%

2 565

14.7%

Swaziland

4 146

7.5%

1 910

14.2%

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 13 Angola

104 116

9.3%

67 310

0.02%

Zambia

23 732

10.2%

9 001

7.7%

Tanzania

23 874

27.7%

Madagascar

9 893

28.4%

1 590

22.4%

DRC

25 835

22.0%

6 600

0.9%

Republic of Congo

14 426

3.4%

11 600

0.2%

Rwanda

6 407

32.3%

464

31.1%

Ethiopia

31 953

44.7%

2 875

60.4%

Kenya

41 955

29.3%

5 756

30.3%

Nigeria

411 744

22.3%

114 000

1.3%

Ghana

39 565

25.3%

12 785

23.0%

Lesotho

2 487

8.2%

1 172

0.2%

Seychelles

1 060

2.2%

483

0.8%

Malawi

5 628

29.9%

1 425

78.0%

Burundi

2 356

40.3%

123

65.4%

Uganda

15 493

24.7%

2 159

44.8% Source: World Bank Indicators, 2012 (as adapted)

In-depth case studies that examined agriculture, industrial development, and poverty dynamics in Ethiopia, Ghana, Rwanda, Uganda and Zambia, found that despite having different initial conditions, broad-based agricultural growth, particularly in conjunction with growth in the non-agricultural sector, can contribute significantly to growth and poverty reduction.53 Furthermore, within agriculture, it is growth in the food staples subsector that generates the greatest reduction in poverty, particularly in a country’s poorest

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sub regions.54 These trends, however, hide some tangible successes in some regions of Africa and in a few individual countries. For example, food security and farm income has increased markedly in West Africa, while the use of smart subsidies for key inputs in countries such as Malawi has greatly impacted yields, showing that smallholder farming can respond to properly targeted economic policy interventions.55 The crop yields of cereals and root crops have also increased significantly in some farming systems in Western and Eastern Africa. The increases in cassava production in Nigeria and maize hybrids in East Africa and Southern Africa are further evidence of growth in the sector in recent years.56 This is encouraging for the future, as it shows that agriculture can be successful in Sub- Saharan Africa. The production of cassava, exporting of fruit and vegetables, tea production and export, and fishing stand out as sub-sectors where success cannot be denied. Moreover, in terms of growth, agriculture has performed relatively better, on average, than the rest of the economy of Sub-Saharan Africa.57 This trend reflects disappointing growth in the sectors of the industry and the services in Sub-Saharan Africa. It suggests that these sectors (except the mining sector) may well offer economic prospects

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THE POLITICAL ECONOMY OF INDUSTRIALISATION AND AGRICULTURAL DEVELOPMENT IN AFRICA | Mxolisi Notshulwana that are, globally, relatively modest, hence it may be risky to base economic development exclusively on them.58

OPPORTUNITIES WITHIN THE AFRICAN AGRICULTURE SECTOR The potential role for agriculture in development is to reduce poverty and drive growth for countries whose economies are agriculture based. This potential has been underexploited in Africa because of policy bias against agriculture, which has resulted in under-investment in Africa’s agriculture sector. New opportunities for realising Africa’s agriculture potential include the pursuit of approaches that are small-holder driven, so as to increase agricultural growth.59 The World Bank Development Report of 2008 indicates that growth based in agriculture is at least twice as effective, 3.5 times more effective for China and Latin America, and also 2.7 times more effective at reducing poverty than growth based on other sectors.60 High food prices since 2008 has led the G8 to pledge US$20 billion over the next three years to increase food production. China pledged US$10 billion for public-private partnerships (PPP) in the African agricultural sector to help attain the CAADP objectives.61 The CAADP framework, which is already being implemented in most countries, will enable more efficient investment in the agriculture sector. High food prices have spurred foreign large-scale private sector investment in farming, which offers the potential for growth in rental income and out-grower schemes, as well as improved marketing and input/output supply chains.62 Improved moisture and soil fertility management could raise production, despite the

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general reliance on rain-fed agriculture. A broad set of technologies, many of which draw from indigenous knowledge, has been developed. Better accessibility to markets will spur more investment in agricultural production. Investment in transport infrastructure (roads) will reduce the development costs of irrigation, and facilitate input provision, service provision and marketing.63 Basic level infrastructure will boost tourism and other off-farm income opportunities to emerge along with prospects of generating added income. In Ethiopia, access to all-weather roads decreased poverty by 6.9 per cent and increased food consumption by nearly 17 per cent. Mobile phones and information and communications technology (ICT) have reduced the cost of information provision on markets and prices. Technology holds the future to African agricultural advancement. Improved traditional crops, such as cassava, rice and maize, are increasingly available as farmers have been involved at all stages of development, which has proven more effective than previous academic approaches.64 Where they do not compete with food crops, water or other development on marginal land, new crops (such as biofuels) and new processing (such as ethanol from sugar-cane) create more opportunities.65 Financing requirements for African agriculture remain substantial. Foresight estimates by FAO suggested that global food production needs to grow by 70 per cent to feed Forum on 242 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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9.1 billion people in 2050.66 This expansion of agricultural output will require average annual net investments of US$83 billion (in 2009 US$) by developing countries. Of the total, US$11 billion would be needed in Sub-Saharan Africa, where farmers are predominantly smallholders – estimated at close to 50 million farms and representing 80 per cent of all farms in the region.67 The projected investment needs US$20 billion going to crop production and US$13 billion going to livestock production. A further US$50 billion would be needed for downstream services to help achieve a global figure of 70 per cent expansion in agricultural production by 2050. Some studies estimate that about US$450 billion is required to finance productive market-oriented smallholder farming.68 Given these huge financing requirements for smallholder agriculture, it is unlikely that African countries will be able to raise the needed funds through traditional sources, which often tend to be limited and volatile during times of global crisis.69

CONCLUSION AND RECOMMENDATIONS This chapter has argued that the discourse on industrialisation and agricultural modernisation policies are not new. Countries have historically relied upon such policies and will continue to do so to promote structural transformation for industrial development and agricultural modernisation. The chapter has shown that, although the process of industrial development is not new, the global economic situation has changed, and therefore the structure and objectives of industrial policies have also changed. The evolution of international markets and technologies and the emergence of global value chains (GVCs) have demanded more creative and organic ways of resolving development challenges. It is

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in this regard that the Chinese situation offers important lessons for Africa. The chapter posits that any successful industrial policy in Africa is contingent on the structure and form of the economies of Africa. The Chinese experience located industrial development and economic growth on the domestic strengths and capabilities of the country and its people – the ‘Chinese characteristics’. This chapter does not advocate that Africa should blindly mimic China or project any discourse suggestive of some delusion of comparability between Africa and China.70 This chapter posits that, whilst industrial policy previously focused on market restrictive measures to develop domestic competitiveness, the new industrial policies tend to ensure the facilitation and development of international competitiveness to benefit local industries. China’s experience provides an important lesson for Africa, in that policy flexibility that is available in government is critical. Thus, the need to explore, change and experiment with different things and strategies is important. The systemic changes in the global economy require that African policymakers consider a broad number of variables relevant to industrial development and agricultural modernisation. It is thus important to prioritise such variables to give greatest attention to their policy effect. Like China, Africa needs to develop systems-oriented changes Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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THE POLITICAL ECONOMY OF INDUSTRIALISATION AND AGRICULTURAL DEVELOPMENT IN AFRICA | Mxolisi Notshulwana that facilitate the operations of enterprises and industries. Industrial policy development includes both successes and failures. A flexible system that monitors and adapts as is required is appropriate. If the market is seen as not responding to the flexibility, support or incentives provided by industrial policy, then there will be a need to change and review the reasons for this lack of response and to adapt policy accordingly. Industrial policy development and agricultural modernisation have become significant for Africa. However, Africa’s industrialisation solutions have to take into account the multilateral trade obligations, and regional or bilateral trade and investment agreements with developed and other developing countries. These endeavours require understanding of the complex firm-level and industrial organisation, often involving cross-border value chain linkages. It also requires a keen understanding of the economic linkages and relationships, including the importance of infrastructure and services for competitiveness in agriculture as well as for industry. The most important lesson for Africa from the Chinese experience is that the quality and form of government, its administration and its development finance institutions (DFIs), are essential ingredients in pursuit of its overall economic diplomacy.

RECOMMENDATIONS The paper posits that Africa needs to adopt an approach to industrialisation that allows for experimentation and flexibility, with successes scaled up and failures quickly abandoned. The key policy issue drawn from the Chinese experience is that Africa’s industrial policy and agricultural modernisation policy need not be one of fast or slow

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industrialisation processes. It should rather be one of priorities and correct sequencing of such programmes, given the continent’s capacity for implementation, and the countries’ capability to assimilate information about the successes and failures of each policy, and to quickly adapt the policies. A number of key areas of policy work that need serious attention in Africa for industrial development are: ■■

Prioritise the agricultural sector – to connect the rural hinterland through the development of infrastructure and financial markets, in order for local and rural economies and industries to thrive.

■■

Financial sector reforms – to allow for more open and seamless systems of financial transacting with liberalised forms of market rates and services.

■■

Infrastructure development – China’s experience has demonstrated that an aggressive infrastructure investment strategy will drive fundamental economic transformation in both rural and urban settings in Africa.

■■

Policy reforms – the most critical part of the development of Africa’s industrialisation and agricultural modernisation policy is for governments to provide an effective and predictable policy environment.

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■■

State institutional coordination – China’s experience amply demonstrates the power and utility of state-owned institutions (SOEs) in driving the economic diplomacy of the state. Africa’s SOEs need to be aligned and coordinated to effectively implement and pursue the development agenda of the African Union (AU) and its implementation agents, NEPAD and the Africa Union Commission (AUC).

■■

Right policy balance – Africa needs to strike an appropriate balance between policies that enhance static efficiencies and policies that offer dynamic gains to achieve industrialisation and agricultural modernisation.

Given the above, the Africa ‘rising’ narrative of the past few years has to deal with the challenges of infrastructure funding, industrialisation, agricultural development and modernisation, development of special economic zones, development of durable partnership within FOCAC, Brazil, Russia, India, China and South Africa (BRICS) and other forums in the rest of the world. The paper provides these policy recommendations, while being conscious of the fluid and changing context in Africa and in the world. In this regard, the models and themes on industrialisation and agricultural modernisation in Africa need to focus on: ■■

How to develop industrialisation policies that will be administered by governments with particular competencies;

■■

Considering industrialisation policies that offer solutions to 54 different states (not a basket case) that are mired in debt, conflict and some recovering from failure or in post-conflict reconstruction and development; and

■■

Ensuring that industrialisation policies are attentive to the structure of African

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economies, especially the capacity or lack of capacity to produce. The chapter concludes and recommends that the China-Africa cooperation through the FOCAC platform will assist in illustrating the mutual causality between industrial development and economic transformation. This will have to be undertaken through constant development of capabilities and knowledge through learning. The knowledge sharing and learning opportunities offered through the FOCAC academic and other arrangements will go a long way in assisting Africa to develop.

REFERENCES 1 Ake, C., 1981. The Political Economy of Africa. London: Longman. 2 Samuelson, P., 1996. Welfare Economies and International Trade. American Economic Review, pp.261–266. 3 Rodrick, D., 1997. Trade Policy and Economic Performance in Sub-Saharan Africa. Paper presented for the Swedish Ministry for Foreign Affairs. Sweden.

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THE POLITICAL ECONOMY OF INDUSTRIALISATION AND AGRICULTURAL DEVELOPMENT IN AFRICA | Mxolisi Notshulwana 4 Acemoglu, D.S. and Johnson, J., 2001. The Colonial Origins of Comparative Development: An Empirical Investigation. American Economic Review, 91(95), pp.1369–1401. 5 Noman, A. and Stiglitz, J., 2003. Industrial Policy in Africa. New York: Columbia University Press. 6 Ha-Joo, C., 2003. Is Industrial Policy Necessary and Feasible in Africa? Theoretical Considerations and Historical Lessons. In Noman and Stiglitz, 2003. 7 Stiglitz, J., 1999. Quis Custodiet Issus Custodes? Corporate Governance Failures in the Transition. Challenge, 42(6), pp.26–67. 8 Balassa, B., 1980. The Process of Industrial Development and Alternative Development Strategies. World Bank Staff Working Paper No. 438. Washington DC. The World Bank. 9 Ibid. 10 Lindert, P.H. and Kindleberger, C.P., 1982. International Economics. Homewood: Irwin Publishing. 11 Hosono, A., 2013. Industrial Strategy and Economic Transformation: Lessons from Five Outstanding Cases. In Noman and Stiglitz, 2003. 12 Asfatha, T.A. and Jooste, A., 2006. The Agricultural Input Elasticity of Rural Urban Migration in South Africa. Agrekon, 45(1), pp.89–105. 13 Stiglitz, J., 1969. Rural-Urban Migration, Surplus of Labour and the Relationship between Urban and Rural Wages. Eastern Africa Economic Review, 2, pp.1–28. Michigan: University of Michigan Press. 14 Ibid. 15 Ibid. 16 Stiglitz, J., 1969. 17 Ibid 18 Notshulwana, M., 2011. State Fragility in Africa: Methods Chasing Problems and Problems Chasing Methods in Political Discourse? African Renaissance Studies, 6(2), pp.81–99. 19 Ibid. 20 Hosono, A., 2013.

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21 African Union. 2003. African Union Summit Communique. Ethiopia, Addis Ababa. 22 Johnston, B.F. and Mellor, J.W., 1961. The Role of Agriculture in Economic Development. American Economic Review, 51(4), pp.567–593. 23 Todaro, M., 1997. Urbanisation, Unemployment and Migration in Africa: Theory and Policy. Paper Prepared for Reviewing Social and Economic Progress in Africa. No. 104. Macmillan. 24 Kesell-Burns, J., 1998. Restructuring the Electricity Distribution Sector: Implications for Local Government. Development Southern Africa, 15(5), Development Bank of Southern Africa, Midrand. 25 Van Rooyen, C.J., Carstens, J. and Nortje, A., 1996. The Role of Agriculture in South African Economy: A Research and Technology Challenge. Annual Report of the Agricultural Research Council (ARC), Pretoria. 26 Noman, A., and Stiglitz, J. 2003. 27 Gollin, D., 2013. The Role of Agriculture in African Development. Department of International Development. Oxford: Oxford University Press. 28 Breitenbach, M.C., 1992. A Micro-Economic Analysis of Consumer Patterns and Consumer Behaviour in Angola. Unpublished M Com Dissertation. Vista University, Pretoria. 29 Zhongoing, Y., 2010. China’s Political System. Beijing: China Intercontinental Press. 30 Ibid. 31 Ibid.

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 13 32 FAO, 2003. World Agriculture towards 2015/2030 [online]. Available at http://www.fao.org [Accessed 7 April 2017]. 33 Stilwell, T. and Atkinson, D., 1998. The Economic Rationale and Modalities for Rural Infrastructure Development. DBSA, Midrand. 34 Ibid. 35 Agri Review, 1998. Agriculture as an Import and Export Sector. Standard Bank Information Services, Agricultural Division. Johannesburg. 36 Ibid. 37 Ibid. 38 Zhongoing, Y., 2010. 39 Pinstrup-Anderson, P. and Pandaya-Lorch, R., 1997. Food Security: A Global Perspective. Paper Read at the International Conference of Agricultural Economists (IAAE), Sacramento, California. 40 New Partnership for Africa’s Development (NEPAD). 1988. Annual Report, Midrand, South Africa. 41 Stilwell, T. and Atkinson, D., 1998. 42 New Partnership for Africa’s Development (NEPAD), 1988. 43 Meyer, N.G, Jooste, A., Breitenbach, M.C. and Fenyés, T.I., 2009. The Economic Rationale for Agricultural Regeneration and Rural Infrastructure Investment in Africa. Journal of Development Perspectives, 3. 44 World Bank Economic Indicators. 2012. Economic Publications Section. Washington DC, United States. 45 Ibid. 46 Stilwell, T. and Atkinson, D., 1998. 47 Diao, X., Hazell P., Resnick, D. and Thurlow, J., 2007. The Role of Agriculture in Development. Implications for Sub-Saharan Africa. Research Report 153. Addis Ababa. IFPRI. 48 Noman, A. and Stiglitz, J., 2003. 49 Food and Agriculture Organisation of the UN, 2012. Food Security and Agricultural Development in SubSaharan Africa. Building a Case for more Public Support. Policy Brief No. 1, New York. United Nations Publications. Copyright © 2014. Africa Institute of South Africa. All rights reserved.

50 Stiglitz, J., 1969. 51 Harris, J.R. and Todaro, M.P., 1970. Migration, Unemployment and Development: A Two-Sector Analysis. American Economic Review, 60(1), pp.126–138. 52 Asfatha, T.A., and Jooste, A., 2006. 53 Noman, A. and Stiglitz, J., 2003. 54 Hosono, A., 2013. 55 Ibid. 56 Notshulwana, M., 2011. 57 Hosono, A., 2013. 58 Stiglitz, J., 1969. 59 Harris, J.R. and Todaro, M.P., 1970. 60 Stiglitz, J., 1969. 61 Ibid. 62 Hosono, A., 2013. 63 Stiglitz, J., 1969. 64 Fields, G.S., 1975. Rural-Urban Migration, Urban Unemployment and Underemployment, and Job-Search Activity in LDCs. Journal of Development Economics, 2(2), pp.165–187.

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THE POLITICAL ECONOMY OF INDUSTRIALISATION AND AGRICULTURAL DEVELOPMENT IN AFRICA | Mxolisi Notshulwana 65 Food and Agriculture Organisation of the UN, 2012. 66 Notshulwana, M., 2011. 67 Food and Agriculture Organisation of the UN, 2012. 68 Ibid. 69 Stilwell, T., and Atkinson, D. 1998

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70 Notshulwana, M. 2011.

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14 CHAPTER

AFRICA-CHINA AGRICULTURE MODERNISATION COOPERATION APPROACHES, CHALLENGES AND OPPORTUNITIES Gedion Jalata

INTRODUCTION The African continent has demonstrated impressive growth rates over the last 10 years due to the growing natural resource trade with China. In 2003, the continent adopted the Maputo Declaration on Comprehensive African Agriculture Development Programme (CAADP) in order to spur agricultural development and boost economic growth. The continent is also receiving development assistance in the different sectors of the economy, including agriculture, and, not only from traditional donors, but also from emerging economies, namely; China, India, Brazil, Turkey and South Korea. The aim of the chapter is to provide an in-depth analysis of China-Africa agriculture modernisation cooperation on the agriculture sector. The chapter also seeks to examine the approaches, challenges and opportunities in relation to Africa-China agricultural modernisation cooperation. The chapter posits that Chinese agricultural development assistance to Africa is mar-

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ginal, albeit on the increase, compared to assistance provided to other sectors of the economy. The trend is an indication of deepening relations between China and Africa. However, developing the sluggish agriculture sector in Africa primarily is the responsibility of Africans. The role of emerging powers, including China and others, in agriculture development in Africa must be strategically well thought out and aligned with the specific context in the continent and each country. It is also important that Chinese support to the agricultural sector focuses on sector development in terms of foreign exchange earnings, export diversification, employment generation and linkage effects. In this regard, China must scale up its agriculture development assistance to Africa, in particular by promoting agro-processing industrial parks for supporting the agricultural value chain in Africa.

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AGRICULTURAL DEVELOPMENT IN AFRICA: DEFICIT IN THE NARRATIVE Trends in agriculture development in Africa Africa is endowed with abundant natural resources. The continent has about 12 per cent of the world’s arable land, of which 60 per cent is uncultivated. Moreover, only 7 per cent of the arable land is irrigated, compared to 40 per cent in Asia. In 2013, 183 million hectares of land was under cultivation in Sub-Saharan Africa (SSA), and approximately 452 million hectares of additional suitable land was not cultivated. Smallholder farmers account for most of the cultivated land and a sizable share of agriculture production. For instance, more than 75 per cent of the total agriculture output in Kenya, Tanzania, Ethiopia and Uganda is produced by smallholder farmers with an average farm size of about 2.5 ha.1 As SSA countries are heavily dependent on agriculture, the sector has a positive relationship to national gross domestic product (GDP). The contribution of agriculture to GDP in SSA, however, varies widely. Agriculture accounts for an average of 30 per cent of Africa’s total GDP, while agriculture contributes less than 8 per cent in Southern African countries. Moreover, on average about 65 to 70 per cent of Africa’s labour force is employed in the agriculture sector. Figure 14.1 below shows GDP, employment and the relative productivity level of the agriculture sector for 11 African countries (1960, 1990 and 2010). The countries included in this survey are Botswana, Ethiopia, Ghana, Kenya, Malawi, Mauritius, Nigeria, Senegal, South Africa, Tanzania and Zambia.

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Figure 14.1: GDP, employment and relative productivity levels of the agriculture sector for 11 African countries (1960, 1990 and 2010)

Source: De Vries, Gaaitzen, Timmer and De Vries. 2003. Structural Transformation in Africa: Static Gains, Dynamic losses, p.6, 11.

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As Figure 14.1 indicates, the agriculture sector’s contribution to the 11 African countries surveyed declined over the period (– 37.6 per cent, 24.9 per cent and 22.4 per cent in 1960, 1990 and 2010 respectively), while the productivity of the sector declined from 0.5 in 1960 to 0.4 in 2010. The sector also lost labour incrementally from 72.7 per cent, to 61.6 per cent and then 49.8 per cent in 1960, 1990 and 2010, respectively. However, agriculture still has the potential to contribute greatly to economic growth and transformation in Africa. It remains the key sector for food security, employment, growth and development in most African countries. Agriculture can increase incomes in rural areas, increase exports and the foreign exchange needed to import machinery and inputs for industry as well, by releasing labour from agriculture to the manufacturing and other sectors. It can also expand the markets for inputs and consumption goods and services for other sectors of the economy.2 Agriculture-led growth has the largest impact on reducing the depth and breadth of poverty. Growth in food staples is considered generally as pro-poor, as export crops may have higher value and growth potential. Africa’s big development agenda is to achieve an agriculture sector annual growth rate of at least six per cent and meet the time-bound targets set in the Millennium Development Goals,3 the current Sustainable Development Goals (SDGs) and the Agenda 2063 ten-year plan. However, only 8 African countries are able to achieve the 6 per cent agriculture sector annual growth rate. These are Angola, Ethiopia, Burkina Faso, The Republic of the Congo, The Gambia, Guinea-Bissau, Nigeria, Senegal and Tanzania. The impressive economic growth and rapid improvement in rural poverty in Ethiopia, Rwanda and Ghana have been fuelled by growth in the agriculture sector. However, productivity in the sector is low in Africa and lags behind that of other continents. Africa’s rural population seems unable to transform its productivity

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rate significantly, which means the rural population continue to live in poverty. This is a major barrier to development on the continent.4 Rapid agricultural transformation through increased productivity, income growth and competitiveness, with good natural environmental stewardship for sustainable development, is needed to actualise this economic growth agenda.

Budget allocation to the agriculture sector An overview of the general nature of agriculture finance in Africa indicates that there have been five important time periods and trends. The first was the 1950s to the 1970s. This period was characterised by the financing of farmers through interventions such as input credit, which was delivered through cooperatives and obtained from development assistance, government allocations and central banks. Agricultural banks were established during this time period as well. However, the attempts were not successful because of financial constraints and the lack of profitability of agricultural banks. The second period was the 1980s. This period was characterised by structural adjustment programme (SAP) policies. One of the

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elements of the SAP was removal of the government from the agriculture markets, and elimination of subsidies and the abolition of sectoral lending quotas in bank lending to agriculture. Consequently, the policy had positive results for farmers selling traditional export crops, such as coffee and cocoa. However, the programmes had an adverse effect on smallholder farmers producing staple foods for domestic markets. Since then, poverty reduction has been an important development agenda items on the continent.5 The third period was the 1990s. During this period, microfinance emerged as a potential panacea to the failure of the agricultural banks and financial liberalisation. Microfinance proved to be more effective at targeting the poor, in both rural and urban areas, with market-determined interest rates and better loan repayment conditions for poor households. Critics, however, argue that the agriculture sector did not benefit much from the supply of microfinance.6 The fourth period was ushered in by 2003, through the CAADP declaration. Since CAADP African countries committed to allocating 10 per cent of their budget to the agriculture sector, there have been some improvements observed since the introduction of CAADP on the continent. The number of countries spending more than 10 per cent of their national budget on agriculture increased from 11 per cent in 2003 to 22 per cent in 2006. Moreover, 50 per cent of the countries spent 4.6 per cent of their national expenditure on agriculture development, showing a decrease from 57 per cent in 2003.7 Amongst the countries that allocate 10 per cent of their budget to the agriculture sector, no country has consistently allocated 10 per cent of its national budget to agriculture since 2003, except Niger. Ethiopia and Mali have been able to allocate 10 per cent or more of their budget to the agricultural sector since 2004, while Malawi and Zambia have been able to achieve this since 2005 and 2007, respectively. See Table 14.1 below on the share of agriculture

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expenditure (% of total expenditure) in selected countries in Africa. Finally, recent global concerns for food, industry and fuel have also triggered a surge in agriculture investments in Africa. This is mainly because the rising global population is expected to reach 9 billion by 2050 and this may result in rising incomes, higher expenditures on foodstuffs. Biofuel initiatives, which resulted in a rash of investments in developing countries and the rapid rise in food prices, have bred investors in agriculture.8 However, the latest data on access to finance for the agriculture sector indicates that “few producers have access to credit, and high risk levels, combined with the absence of effective public-private risk hedging systems remain, a barrier to investment” in Africa.9

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25.0

10.4

3.2

6.8

-

8.8

8.9

-

-

1.6

-

-

-

-

2.6

8.6

Ethiopia

Ghana

Kenya

Liberia

Malawi

Mali

Mozambique

Niger

Nigeria

Rwanda

Sierra Leone

South Sudan

Tanzania

Uganda

Zambia

2000

Burkina Faso

Country

6.2

1.6

-

-

2.4

6.2

6.0

15.8

-

12.8

4.9

-

6.6

4.7

4.0

18.o

2001

5.2

2.6

4.5

-

2.3

8.6

3.5

16.6

-

8.9

8.7

-

5.4

6.9

5.6

23.o

2002

6.1

2.3

6.8

-

3.1

3.9

1.9

16.4

-

9.6

6.6

-

4.1

5.8

8.4

33.0

2003

6.1

2.1

5.7

-

3.0

4.0

3.1

19.5

6.2

11.4

7.0

-

5.1

8.8

13.6

20.0

2004

7.2

2.0

4.7

-

2.3

3.4

3.4

14.5

4.4

15.5

11.1

-

6.6

9.8

16.5

12.0

2005

9.3

3.9

5.8

-

2.9

3.3

4.1

15.1

3.4

10.6

11

4.0

5.9

10.3

17.5

20.0

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13.2

3.0

5.7

-

2.5

5.5

4.4

15.4

3.9

11.0

13.2

5.5

4.4

9.9

14.6

16.0

2007

12.5

3.2

2.5

1.4

2.2

5.6

4.6

12.2

5.4

12.7

31.6

8.6

4.8

10.2

11.7

14.0

2008

9.3

4.5

6.7

1.9

2.0

6.4

5.3

13.9

5.8

16.9

24.7

2.3

3.9

9.0

17.5

9.0

2009

10.2

3.8

6.8

1.4

1.7

6.6

5.7

12.7

5.5

13.9

28.9

2.9

4.6

9.1

21.2

11.0

2010

-

3.1

6.8

1.9

0.2

-

-

-

-

23.9

-

-

8.7

-

-

-

2011

-

4.5

-

-

-

-

-

-

-

-

-

-

6.8

-

-

-

2012

Source: Regional Strategic Analysis and Knowledge Support System (ReSAKSS, 2015). Available at: http://www.resakss.org. [Accessed 07September 2015]

2006

Year

Table 14.1: Share of agriculture expenditure (% of total expenditure) in selected countries in Africa

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What are the challenges of agricultural development in Africa? Agriculture is the mainstay of most economies in Africa, accounting for more than 30 per cent of GDP. Nonetheless, the sector has not witnessed impressive growth, due to a combination of factors, such as: weak political will to support the sector; price risk and non-conducive policies; and little attention from international development partners. Moreover, increase in soil degradation; salinisation of irrigated areas; migration of youth to urban areas; climate changes; infrastructure challenges and market access are adversely affecting the productivity of the sector in many African countries. Internal seed regulatory policies in many Africa countries are weak, which undermines the functioning of the entire seed value chain. As measured by cereal productivity, growth remains low, averaging 1 metric ton per hectare. This is one-fourth of the global average. Per capita food production has been declining even though aggregate production has been increasing through the expansion of the cultivated area. This, coupled with the recent food crisis, has resulted in Africa being a net food-importing region (except for South Africa). Africa’s cereal imports increased dramatically from less than 5 million metric tons a year in the early 1960s to more than 50 million metric tons per year by the mid-2000s. This is the direct antithesis of the situation in Asia, where per capita food production almost doubled between the early 1960s and the mid-2000s.10 This happened as a result of the rapid uptake of high-yielding wheat and rice varieties and the use of fertilisers and irrigation, combined with subsidies. This, in turn, reduced the unit cost of production inputs and raised land and labour productivity. Evidence from research suggests that ‘a 10 per cent drop in transport cost as a result

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of improved road infrastructure is likely to generate a 25 per cent increase in trade and drive down distribution margins to the benefit of producers and consumers’.11 Sufficient infrastructure, including rural access roads, irrigation, and rural road networks, can contribute to lowering food distribution costs, to the benefit of producers and consumers.12 Low human skills development, land management capabilities and limited institutions to support the use of technology are important factors in explaining the relatively sluggish progress of the agriculture sector that is reflected in some African countries. These are Sierra Leone, Liberia, Niger, Mali and Burkina Faso, among others. This problem is amplified by the common lack of capital and available funds to finance additional capital acquisition. Insufficient financing continues to manifest in several ways, often equating to a lack of dependable farm inputs, such as high-yielding varieties of seed, appropriate fertilisers, or cheap credit.13 There is also a low level of agricultural research and development in SSA. SSA has nearly 50 per cent more agricultural scientists than India and about a third more than the United States (US), but all of SSA spends only about half of what India spends and less than a quarter of what the US spends on agriculture research and development (R&D). Only five African countries are paying the recurrent budget of their national agricultural Forum on 254 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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research system from national resources. These are Nigeria, South Africa, Botswana, Ethiopia and Mauritius.14 For instance, only Kenya and Uganda consistently spend more than 1 per cent of their GDP on agricultural research and development. Increasing the budget allocation to (R&D) by each country to attain at least 1 per cent of agricultural GDP is recommended.15 Another major challenge to agricultural development in Africa is that financing requirements for African agriculture remain considerable. As noted above, agriculture accounts for more than 30 per cent of the GDP of most countries, yet government expenditure on agriculture is less than a third of that. Despite their commitments to the CAADP agricultural priorities, national governments have also not increased their funding for agricultural research significantly (in general).16 The expansion of agriculture output will require an average annual net investment of US$11 billion needed in SSA, where farmers are predominantly smallholders. Given the huge financing requirements for smallholder agriculture, it is unlikely that African countries will be able to raise the needed funds.17 The challenge of illicit financial flows also depletes the resources available for development in Africa. The Economic Commission for Africa (ECA) and AU report on Illicit Financial Flows (IFFs), 2015c, indicated that through trade mispricing alone Africa is losing $50 billion per year.18 In the years from 1970 to 2008, the continent lost around $854 billion in IFFs. The total outflows from 2000 to 2010 were equivalent to nearly all the official development assistance (ODA) received by the continent.19 This is a great financial haemorrhage from the continent that could have been used to finance development. Due to several reasons, including the one mentioned above, the agriculture sector in Africa continues to be given low priority for investment. The total foreign direct investment (FDI) inflows in Africa in 2000 was US$9.6 billion, which was significantly in-

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creased to US$46 billion in 2009.20 While in the same years FDI inflows in Latin America was US$79.7 and US$78.4 billion respectively. In summary, although agriculture is vital for Africa, it is ‘under-valued, under-resourced and under-provided’.21

Regional and sub-regional agriculture initiatives in Africa Despite the challenges facing Sub-Saharan African countries with respect to agriculture productivity, recent success recorded reflected that it is possible to achieve sustained agricultural growth in Sub-Saharan Africa. The most notable cited economies in this regard are Kenya, Malawi, Zambia, Uganda, Tanzania, Ethiopia, Mali and Burkina Faso. This growth is attributed to several factors. These are: i) price incentives for producers have improved, as a result of unified exchange rates, lower industrial protection, and sharply reduced export taxation; ii) higher international commodity prices are creating growing opportunities for import substitution and regional agriculture trade; and iii) African governments, the regional institutions, and development partners are showing strong commitment to agricultural and rural development.

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African countries are giving greater priority to agricultural development. The African Union (AU) is providing leadership and support via NEPAD’s CAADP. The CAADP was launched in 2003, in Maputo, Mozambique, by the African heads of state and government. The objective of CAADP is to eliminate hunger and reduce poverty through agriculture. To do this, African governments committed to spending at least 10 per cent of their annual national budgets from the then typical level of about 4 to 5 per cent, and agreed to raise agricultural productivity by at least six per cent. As noted above, some African countries have achieved the CAADP target, while others have experienced growth rates higher than the target. Those that have experienced growth rates higher than the target are Niger, Ethiopia, Mali, Malawi and Zambia. African countries also committed to increasing agricultural trade within Africa, and harmonising fertiliser policies to reduce procurement costs. After the Maputo declaration, some notable progress in promoting the continent’s agriculture sector has been made. In 2009, the AU recognised the CAADP as the overarching framework for agricultural development and investment. Some of the accomplishments include the mobilisation of a huge amount of finance for selected CAADP programmes. These are making markets work for the poor (US$3.8 million was mobilised for this programme). African efforts aimed at supporting sustainable land and water management received US$1 billion. African fertiliser financing mechanisms received US$35 million. Regional enhanced livelihoods for pastoral areas received US$19.8 million. The regional food security and risk management programme for Eastern and Southern Africa received €10 million.22 The AU also designated 2014 as the year of agriculture and food security in Africa. Furthermore, the Maputo Declaration was reaffirmed in the 2014 Malabo Declaration on

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Accelerated Agricultural Growth and Transformation for shared prosperity and improved livelihoods. African governments also further committed to ensuring at least double the current agricultural productivity levels by 2025 and to mobilising private and public investments. The AU Commission (AUC) and the NEPAD Planning and Coordinating Agency (NPCA) have been tasked to develop a roadmap for agricultural growth and transformation, and to review progress using the CAADP Result Framework. There are also other emerging regional agricultural strategies in Africa. Agenda 2063 has a vision for the agricultural sector to be productive and resilient. The Common African Position (CAP) on post-MDGs also reflects that improved agricultural productivity is vital for a successful economic transformation in Africa. The document further indicats that a modernised and diversified agricultural sector increases agricultural productivity and sustains the agro-processing value chain by ensuring a predictable supply of raw materials. Sustainable agriculture reduces food loss shortages and leads to food self-sufficiency and adequate nutrition, which in turn improves the health and productivity of labour. This will ultimately lead to structural transformation and inclusive and people-centred development. The document also calls for multilateral partnerships for sustainable agriculture, food self-sufficiency and nutrition.23 Forum on 256 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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Despite all these attempts to enhance the productivity of the agriculture sector in Africa, agriculture remains neglected in government budgets and falls well short of the Maputo commitments in most African countries. Among the 37 countries that signed CAADP, have half reached 5 per cent, with a continental average of four per cent, while only five African countries were able to achieve 10 per cent and above, as noted above consistently. Regulatory and tariff barriers to trade have also limited regional trade in cereals to less than 5 per cent of Africa’s total imports. This has adverse effects on the food security agenda of the continent.24

CHINA-AFRICA COLLABORATION ON AGRICULTURAL DEVELOPMENT Snapshot of China-Africa relations China-Africa relations have three important features, namely trade, foreign direct investment and development assistance. The trade relationship between China and Africa has increased dramatically over time. For instance, trade between China and Africa was US$1 billion in 1980, and US$11 billion in 2000, after which it surged to US$225 billion in 2013, and dropped to US$188 billion in 2015. The fall in trade is mainly because of the falling price of commodities (oil) – Africa’s – main export to China. Nevertheless, China is still the largest trading partner to African countries with US$188 billion, which is more than triple that of Africa’s next-biggest trading partner, India, with US$59 billion in 2015 (see Figure 14.2 below on Africa’s top ten major trading partners).

The Netherlands

29

UK

29

South Africa

Countries

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Figure 14.2: Top ten Africa trade partners (in billion $)

32 42

Italy Spain

45

Germany

46 53

USA

57

France

59

India

188

China 0

20

40

60

80

100

120

140

160

180

200

Total trade volume Source: McKinsey Global Institute, 2017

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China has been the largest trading partner to the continent for successive years, but Africa is only 5 per cent of China’s global trade, while China provides about 16 per cent of Africa’s global trade. China’s total trade is three times bigger than Africa’s total trade with China. Over the past three years China has run a modest trade deficit. There is, however, huge disparity in bilateral trade. Some 15 African mineral exporting countries have large surpluse, while more than 30 countries have major deficits. Mineral-rich African countries are among the top ten exporters to China. These are Angola (16 per cent), South Africa (5.8 per cent), Sudan (3.1 per cent), DRC (2.7 per cent), Congo (2.6 per cent), Zambia (1.8 per cent), Ghana (1.3 per cent), Nigeria (1.2 per cent), Equatorial Guinea (1.2 per cent) and Gabon (1.1 per cent). The top ten importers from China are: South Africa (15.9 per cent), Nigeria (13.7 per cent), Egypt (12 per cent), Algeria (7.6 per cent), Kenya (5 per cent), Ghana (5.3 per cent), Tanzania (4.3 per cent), Angola (3.7 per cent), Ethiopia (3.5 per cent) and Benin (3 per cent).25 The main exports to China from the top five African countries are mineral products (55 per cent), base metals (4 per cent), precious stones and metals (3 per cent), textiles and clothing (1 per cent), and other unclassified goods (26 per cent). Moreover, China is trying to increase imports from the least-developed African countries, by allowing agricultural products enter its market duty free. Accordingly, African agricultural product export to China is increasing from time to time, albeit marginal in the current trade relationship. See Figure 14.3 on Africa’s main exports to China. Chinese exports to Africa are high-value manufactured goods, transportation equipment, machinery and electronic products, which account for half of exports. Other export products are textiles and clothing, footwear and plastic products.

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Figure 14.3: Africa’s top five exports to China (in %)

Source: World Trade Atlas. Accessed 02September 2015.

Chinese foreign direct investment in Africa has also increased and shows an annual growth rate of 40 per cent. According to the latest study on Chinese investment in Africa, done in June 2017, there are more than 10 000 Chinese-owned companies operating in

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Africa. Close to 90 per cent of these companies are owned by private firms, while the remaining 10 per cent are state-owned enterprises (SOEs). Though a small percentage, SOEs tend to be bigger, mainly in the energy and infrastructure sectors.26 Chinese FDI stock rose from US$22 billion in 2012 to US$35 billion in 2015.27 In 2015 the principal target of Chinese FDI in Africa was the mining sector (28 per cent), followed by construction (27 per cent), manufacturing (13 per cent), financial services (10 per cent), scientific research and technology services (4 per cent) and other sectors (18 per cent) active in more than one sector of the economy.28 Agriculture constitutes a very minimal percentage, i.e. 3.1 per cent of Chinese foreign direct investment stock in Africa. China also built seven economic and trade cooperation zones in Africa; two in Zambia, two in Nigeria, and one each in Mauritius, Egypt and Ethiopia. Chinese investment in African countries is backed by the China-Africa Development Fund, which invested more than US$3 billion, and special loans for the development of African small and medium enterprises (SMEs) funded by the China Development Bank. As indicated by Li Keqiang, Chinese Premier, ‘China expects to achieve $400 billion in trade volumes with Africa and raises its direct investment in the continent to $100 billion soon, i.e. 2020’.29 The top recipients of China’s FDI in Africa as of 2015, in descending order, are South Africa, DRC, Algeria, Nigeria, Zambia, Sudan, Zimbabwe, Ghana, Angola, Tanzania, Ethiopia, Mauritius and Kenya. Nonetheless, Chinese FDI in Africa decreased from four per cent in 2014 to 3.2 per cent in 2015.30 Chinese FDI is growing faster than Western FDI. Nonetheless, Chinese FDI to Africa is a small percentage of its global FDI, i.e. only about 4 percent. Of China’s FDI in Africa 58 per cent is directed to South Africa, Zambia, Nigeria, Algeria, Angola and Sudan. Much of it initially went into the construction, transport and storage, manufacturing and mining

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sectors. See Figure 14.4 below on the composition of outward Chinese FDI stock in Africa (2014).

Figure 14.4: Composition of Outward Chinese FDI stock in Africa in 2014 (in %)

Source: Statistical Bulletin of China’s Outward Foreign Direct Investment, 2014.

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Chinese development assistance to Africa is another important feature of China-Africa relations. China is providing development assistance in different sectors of the African economy. The most notable are infrastructure, telecommunication, energy generation and supply, manufacturing and industry, as well as the agriculture sector. The development assistance of China, however, has its own specific development cooperation dimension that combines monetary and non-monetary forms of aid. It also typically combines aid with investment and trade and enhanced market access opportunities known as the ‘Asian Mode of Development Assistance’. This type of development assistance attaches no political strings, but ties aid to labour and/or material inputs from the donor, and relies on projects that programme aid and target different sectors of the economy, known as development investment, in contrast to the development assistance of the West.31 Such development cooperation is based on requests from the recipient country and has a long-term horizon and a profit orientation. Aid, in this sense, is geared to promote trade and investment, and serves as market entry for companies by providing the necessary infrastructure to reduce operational cost. This approach to aid was used by Japan in the 1970s and 1980s. The Japanese offered a line of credit to secure needed raw materials, imports, promote its exports, strengthen its business sector and ensure friendly relations with countries whose products and markets were potentially important to the Japanese economy. China and India are also using similar types of deals in their development cooperation assistance to Africa.32 China’s development assistance is guided by Premier Zhou Enlai’s eight principles of development assistance (1963/1964) and by Zhao Zhiyang’s four principles regarding China-Africa economic cooperation (1982). These principles emphasise some of the same ideals enshrined in the Paris declaration. Theoretically, Chinese aid to African countries

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is based on “win-win” principles, where cooperation is mutually beneficial. The terms are negotiated bilaterally, and draw from the FOCAC and other important documents, such as China’s Africa policy. In particular, FOCAC has become the main institutional vehicle for shaping and managing China’s cooperation framework with Africa across a range of technical, economic and political platforms. The Forum was established by China in 2000 and is held every three years in China and Africa, alternatively, to strengthen its economic ties with African states. Five highly successful forums were convened, first in 2000 (China), then in 2003 (Africa-Addis Ababa, Ethiopia), in 2006 (China), in 2009 (Africa-Sharma el-sheik, Egypt), in 2012 (China), in 2015 in Africa (South Africa) and in 2018 in Beijing (China). The Forum is the main institutional mechanism for Chinese development assistance to Africa. In the Forum, China pledged to increase assistance to Africa, as indicated in the successive Forums.

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ii. Institutions involved and types of Chinese development assistance to Africa Unlike traditional official development assistance, China doesn’t have a central aid agency and a number of government bodies are responsible. See Table 14.2 below on institutions involved in Chinese development assistance to Africa.

Table 14.2: Institutions involved in Chinese development assistance to Africa

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No.

Institutions Involved

Function/s

1

The State Council

The highest decision-making body with regard to Chinese development assistance, as well as the highest organ of state administration.

2

Ministry of Finance

In charge of the budget, as well as multilateral aid

3

Ministry of Commerce (MOFCOM)

Administrative wing and plays a crucial role by coordinating different ministries of government, such as the ministry of agriculture, ministry of science and technology for agriculture programmes; implements by state-owned and private firms through competitive bidding process

4

China Development Bank

It is an independent commercial funder and extends credit on commercial loans and administers China Africa Development Fund (CADFund). CADFund has a strategic agreement with China State Farm Agribusiness Corporation to establish a joint company to make agriculture investments.

5

EXIM Bank

Financing for the implementation of agriculture development assistance, partly through concessional loans, export credits and export buyer’s credit

6

Commercial Banks, such as China Construction Bank, Industrial and Commercial Bank of China (ICBC), Bank of China

Have also set up offices in Africa to support Chinese companies’ business.

7

Other ministries, such as Health, Education and Agriculture

They are involved in Chinese development assistance, especially on technical assistance in their respective areas. The Ministry of Agriculture, for instance, co-sponsors seminars on agribusiness opportunities in Africa for Chinese companies. It also identifies the preferred projects for Chinese companies investing overseas.

8

Ministry of Foreign Affairs

Has advisory role on aid and economic cooperation, and in charge of diplomatic contacts

9

Embassies and Commercial Counsellors

Monitor the implementation of projects and report on their progress to the Chinese Government Source: Compiled by the author using various sources

Financial resources provided by China to foreign countries mainly fall into three categories. The first is grant aid, or aid gratis, provided for social projects: health, education and housing, and humanitarian aid. This type of aid is given in kind. The second is interest free or zero interest loans given to help recipient countries to construct public facilities

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and launch projects to improve people’s lives, which the West neglects. This type of aid is often converted into debt cancellations. The aforementioned two types of aids, aimed at broad diplomacy and development, are given by MOFCOM. The third is concessional loans (CLs), given by EXIM Bank at a fixed, or low annual interest rate between two per cent and three per cent, with 15 to 20 years of repayment. As such financial assistance often comes tied to the procurement of goods and participation in contracts from China, and are sometimes secured by natural resources, a formula that came to be known as ‘the Angola mode’ is used. It mixes diplomacy, development and business objectives.33 China pledged US$10 billion in concessional loans to be committed up until 2012 and US$20 billion at the 2012 FOCAC. In general, these loans qualified as ODA. For Chinese, concessional loans refer to loans made by a government at an interest rate below the market rate, as an indirect method of providing a subsidy; however, most Chinese finance in Africa is not concessional. Hence, other financial flows (OFF) (loans) to Africa that don’t qualify as ODA take the form of export buyer’s credits, including preferential buyer’s credit, loans at commercial rates, export commodity secured and strategic lines of credit for Chinese companies. These types of loans are given by China Development Bank and China EXIM Bank. Unlike the West, Chinese OFF is greater than ODA.34 This brought a new aid philosophy of the ‘ASIAN MODE’ of development assistance, as noted above, followed by India and Japan in the 1970s and 1980s. As indicated in China’s White Paper on Foreign Aid (2011), China offers foreign aid in eight forms: complete projects, goods and materials, technical cooperation, human resource development, medical teams sent abroad, emergency humanitarian aid, volunteer programs and debt relief.35 Moreover, at the 2015 FOCAC held in South Africa, China pledged to give US$60 billion as a development fund (in various kind of support) to African countries, i.e. loans,

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preferential loans, export credits, concessional foreign aid loans (US$35 billion); ChinaAfrica Development Fund, (CADFund for equity investment, US$5 billion); small and medium enterprise (SME) credit line (US$5 billion); grants and zero interest loans (US$5 billion); and a new China-Africa Cooperation Fund with $10 billion to African countries. The trends in past six FOCACs meetings since 2000 reflect a huge financial commitments to Africa by China. Furthermore, China provided US$3 billion to the South-South Climate Change Cooperation Fund and an additional US$2 billion to aid developing countries to implement SDGs.

Pattern and financing conditions of Chinese loans Exim Bank loans account for the vast majority of China’s loans to Africa. In this regard, the Exim Bank provides three types of credit. The first is export credits aimed at supporting national exports in their competition for overseas sales for Chinese firms, i.e. export seller’s credits. This type of loan sometimes extends to the third country’s buyers, i.e. export buyer’s credits. The export credit of China is higher than that of Organisation of European Cooperation and Development (OECD) donors’. The second loan from the EXIM

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Bank is a natural resource-backed line of credit called the Angola Mode. Consistent with the rationale of promoting trade, the financial support is typically tied to the participation of Chinese companies. The Exim Bank, for most of infrastructure loans, such as hydropower, telecoms and rural electrification projects, uses this mode, in which repayment is made in natural resources. This arrangement basically functions for countries unable to provide adequate financial guarantees to back their loan commitments. This mode has been applied in countries such as Angola, the Republic of Congo, Gabon, Ghana, Guinea, Niger and Ethiopia and backed by resources such as oil, iron, bauxite, cocoa and sesame.36 The Angola Mode, however, is not unique to China, since other Western countries and institutions employed similar lending practices in the past in Angola and elsewhere. The third type of credit is ‘mixed credits’. It is another package of financing that combines lines of export buyer’s credit, export seller’s credits and concessional loans, and is generally issued for a specific project. The EXIM Bank had such kinds of deals with some African countries.37 The China Exim Bank’s terms and conditions are agreed on a bilateral basis, with the degree of concession depending on the nature of the project. On average, the Chinese loans offer an interest rate of 3.1 per cent, a grace period of four years, and a maturity period of 13 years. However, there is significant variation in all these parameters across countries, with interest rates ranging from two to 10 years, and maturities ranging from five to 25 years. Africa is the largest recipient of Chinese aid, receiving 44 per cent of annual aid flows. However, there is a heavy geographic concentration of finance (loans) in four countries, namely Nigeria, Angola, Ethiopia and Sudan. Together they account for nearly 70 per cent of Chinese finance in Africa.38

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China-Africa collaboration on agricultural development At policy level, the Chinese Government attaches great importance to the agriculture cooperation with African countries. As indicated in the 2013 White Paper on China-Africa Economic and Trade Cooperation, ‘the Chinese Government attaches great importance to its mutually beneficial agricultural cooperation with Africa, and works hard to help African countries turn resource advantages into developmental ones and sustainably develop their agricultural capacities’.39 It is important to note that China has been involved in African agriculture for almost half a century. Nonetheless, it was only thirteen years ago (i.e. after the zero-tariff policy that the Chinese government adopted in 2005 for the least-developed African countries and some products from Africa) that agriculture export from Africa to China increased from US$1.16 billion in 2009 to US$2.86 billion in 2012 an increase of 146 per cent. At the same time, China’s agriculture exports to Africa grew from US$1.58 billion to US$2.49 billion. This represents a 57.6 per cent increase. The most notable agricultural exports from Africa to China are non-food items such as cotton, hemp, silk and oilseeds. Especially after the introduction of this policy sesame imports in China grew from US$97 million in 2005 to US$441 million in 2011. This trend showed Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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an annual increase of 28.7 per cent, which is higher than the average growth rate of all products imported from Africa during the same period.40 China’s direct investment in African agriculture is also increasing fast. For instance, it grew from US$30 million in 2009 to US$82.47 million in 2012. This is as a result of Chinese enterprise investment in Africa, inter alia in breeding improved seeds, planting grain and cash crops, and processing agricultural products.41 Chinese agriculture support to Africa comes in both monetary and in-kind forms to support food production, breeding, storage and transport, infrastructure development, training, constructing agricultural technology demonstration centres, and sending senior agricultural experts and technicians. Financing services for the agriculture sector come from Chinese banks. Since 2006, China has built more than 40 agricultural demonstration centres in Rwanda, the Republic of Congo, Mozambique, Ethiopia and some other countries. The country has also sent 50 agricultural technology teams to African countries to provide policy consulting, teach practical techniques and train local staff. Chad is one of the beneficiaries of this aid. The country benefited from China’s agriculture development assistance on a project to breed high-yield and quality crop varieties, and several thousand farmers were trained as well. Consequently, the countries reaped over 25 per cent of crop yield.42 At the 2015 FOCAC Ministerial Conference, China made the following pledges in relation to agricultural cooperation with Africa: Expanding cooperation on investment and financing to support sustainable development in Africa: To meet this goal, China will provide African countries with a credit line to be spent on developing infrastructure, agriculture, manufacturing and small and

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medium-sized enterprises. ■■

Continuing to scale up its assistance to Africa so as to benefit more African people: As part of expanding its aid to Africa, the Chinese government will build more agricultural technology demonstration centres, as necessary, to help African countries increase their production capacities.

■■

Support the Comprehensive Africa Agriculture Development Programme (CADP) for a growth-oriented agricultural agenda for Africa by assisting to build agriculture technology, demonstration centres, sending professionals to support technical cooperation, and training agricultural technicians.

■■

Send teams to train African agriculture technicians.

■■

Support agriculture vocational education system and send teachers.

■■

Provide technical support for grain planting, storage, processing and circulation.

■■

Encourage Chinese financial institutions to support corporate cooperation in planting, processing, animal husbandry, fisheries and aquaculture.

■■

Support UNFAO “Special Programme for Food Security”, and explore prospects for working with other institutions and countries to realise further agricultural cooperation with Africa.

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■■

Facilitate access for African agricultural products to the Chinese market.

■■

Publish and translate agricultural technology materials and provide joint participation in book fairs in China and Africa.

■■

The Chinese side will encourage and support Chinese enterprises to invest in agriculture in Africa; implement cooperation projects focusing on technical support in grain planting, storage, sanitary and phytosanitary requirements, animal husbandry, agro-processing capacity, forestry, and fisheries to create a favourable environment for African countries to realise long-term food security supported by national agricultural production and processing.

Agriculture played a central role in China’s own economic development and sharing these experiences has been a consistent priority in China’s engagement in Africa. Chinese cooperation for the sector in Africa focused on technocratic and capacity building interventions, as well as providing hybrid seed. It is also influenced by China’s own domestic development experience. For instance, since 2012 China has provided training opportunities for more than 20 000 Africans. The country also provided scholarships to more than 14 000 African students in the years 2012 and 2013 alone. China and African countries also collaborated to launch 30 agricultural technology cooperation projects. In addition, China has sent more than 500 agricultural experts and technicians.43

Country case studies: Ethiopia, Mozambique and Ghana

A review of China’s agriculture development assistance to Ethiopia

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China’s ties with Ethiopia are historic, as both countries are the oldest nations in the world. Yet Sino-Ethiopian economic cooperation, including aid, officially began in the early 1970s and remained low until 1995. Sino-Ethiopian economic cooperation was restored with the Ethiopian People’s Revolutionary Democratic Front (EPRDF), the incumbent ruling party, coming to power in Ethiopia in 1991. Especially after 1995, the bilateral economic cooperation witnessed marked progress and rapid development in different areas. During the late Prime Minister, Meles Zenawi’s, visit to China in 1995, the two countries signed economic and technical cooperation agreements. Meles also reached a good understanding with prominent Chinese enterprises and corporations. On the other hand, when the Chinese President, Jiang Zemin, made an official visit to Ethiopia in 1997, the two countries signed agreements on trade, investment and joint commercial ventures, and science and technology.44 In Ethiopia about 92 per cent of Chinese development assistance goes to two sectors, namely energy generation and supply (65 per cent), and transport and storage (27 per cent) while the remaining goes to industry (three per cent), agriculture (3 per cent) and education (2 per cent). Accordingly, the agriculture sector constitutes only 3 per cent of the total Chinese development assistance to Ethiopia. This was since 2008, when China Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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started to support the agriculture sector in Ethiopia. In this regard, in the years from 2008 to 2015 China disbursed concessional loans to the agriculture sector in Ethiopia equivalent to US$11 million (11 374 700 is the precise figure). Furthermore, China disbursed grants worth US$97 355 to the agriculture projects in 2013 and 2014. Sino-Ethiopia agricultural cooperation does have two principal features, which the abovementioned loans and grants were disbursed for. The first feature is establishing agricultural technology demonstration centres. The second feature is dispatching agricultural technologists to work in agricultural technology demonstration centres and to teach at agricultural technical vocational education and training (ATVET) in Ethiopia. See Figure 14.5 below on China’s development assistance to Ethiopia by sector (actual disbursement) from 2005 to 2015 (April):

Figure 14.5: China’s development assistance to Ethiopia by sectors (actual disbursement) from 2005 to 2015 (April)

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Source: Ministry of Finance and Economic Development of Ethiopia (MOFED), 2015

The Ethiopian government is promoting investment in the country by offering diverse incentives for public and private investors. China’s agriculture sector FDI to Ethiopia, however, like development assistance, is minimal. Chinese total investment in Ethiopia was equivalent to US$16 billion in 2015, while the actual investment is equivalent to over US$2 billion, of which agriculture constitutes 0.024 per cent. The largest Chinese foreign direct investments in Ethiopia are in transport, energy, technology, real state and agriculture (China Global Investment Tracker, 2015). The total number of registered investments in the agriculture sector by China since 2008 is over 32. Of these 18 are in vegetable farming; four are in edible oil production and processing, including a major investment in palm oil plantations; three companies are licenced for sugar cane production and processing; and three have received permits to operate in pig farming and processing. Another two companies have permits for poultry farming, one for mushroom farming, and one for a rubber plantation. Although Chinese investment in agriculture is smaller in Ethiopia, it has been growing incrementally, since a decade ago Chinese when investment in the sector was almost nil.

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Ethiopia also adopted some lessons from emerging economies, such as India (restructuring the agricultural research system), Brazil (promotion of a bio-energy strategy), and South Korea (group action approaches for organising farmers). Ethiopia also took some agricultural policy lessons and measures from China: i) The introduction of agricultural technical and vocational schools (TVET); ii) The introduction of agro-industry zones near major towns; and iii) Adaptation of group action approaches for organising farmers.45

A review of China’s agriculture development assistance to Mozambique Investment by Chinese enterprises in Mozambique has been increasing rapidly. For instance, China invested around US$200 million, while other sources reflected US$95 million in investment in Regadio do Baixo Limpopo, otherwise known as the Xai-Xai irrigation scheme. The project aimed to increase rice production through an irrigation scheme and transfer rice production technology to local farmers. As a result, local farmers see their paddy fields yield five tons per hectare, two tons more than previous yields. Critics, however, argue that technology transfer has failed, as Mozambican farmers lack commitment to agriculture. The investment is also regarded as ‘land grabbing’ and it has been reported that several local people were displaced from their land. Critics further argue that there was no local consultation when the project was implemented.46 The Chinese government, however, indicated that the agricultural investment happened at the request of the Mozambican Government and with the aim of increasing the country’s rice production from 100 000 to 500 000 tons. Chinese enterprises and the China-Africa Development Fund also jointly invested in a cotton planting and processing

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project modelled on having enterprises work with farming households in Mozambique. The project was able to involve tens of thousands of local growers, effectively enhancing local capabilities in cotton processing. This project is also extended to Malawi and Zambia.47

A review of China’s agriculture development assistance to Ghana China and Ghana established diplomatic relations in 1960. Since then, Ghana has provided diplomatic support to China as a quid pro quo for China providing material support, loans and grants to Ghana. For instance, Ghana gave diplomatic support to China in its attempt to obtain a permanent seat at the UN and for its policy on One China, which notes that Taiwan is an integral part of China. During Wen Jiabao’s visit to Ghana in 2007 the two countries signed agreements on different areas of economic cooperation. The principal China-Africa cooperation areas include infrastructure, energy, communications, agriculture, trade, education and training. In this context, China gave Ghana a US$66 million as a loan to upgrade the telecommunications network and a US$6 billion concessionary loan from Exim Bank for Ghana’s rail network. It also wrote off US$25

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in debt for Ghana, among others. China also extended development cooperation for a hydro-electric dam and road construction. Chinese-funded training courses in trading, communication, energy, auditing, agriculture and fisheries operation were given to 700 Ghanaians. Within the context of the oil industry, Chinese development cooperation to Ghana has been ever increasing. Very recently, Ghana signed for a US$13 billion loan with the Chinese Exim Bank.48 In the agriculture sector, China provided support for fishing and rice projects US$99 million in interest-free loans. Exchanges have been facilitated in the areas of irrigation, agro-processing, agricultural technology and infrastructure development. Volunteers sponsored by the Chinese Government have been teaching agriculture at the University of Ghana. China also established the West African regional office of the China-Africa Development Fund (CADFund) in Accra to facilitate Chinese investment in the sub-region. Chinese investment in the agricultural sector, however, is very small – it constitutes only 4 per cent of total investment in Ghana – of which the largest agriculture investment is in irrigation projects. A project known as the Afife or Weta project occupies an area of 880 acres and is the largest rice-growing irrigation project in Ghana. There are also other Chinese company investments in fertiliser plants and in agrochemicals. This may be developed in relation to emerging petroleum resources in Ghana.49

Deepening the partnership on agriculture development

Challenges in agriculture cooperation Despite all these attempts to promote China-Africa collaboration in agricultural develop-

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ment, it is clear that the collaboration on the agriculture sector is lower. Critics argue that Chinese development assistance and foreign direct investment may cause potential food security conflict between China and African countries. This argument is further strengthened by noting that Chinese agriculture support, in particular in rice production for a few African countries such as Mozambique, is clearly destined for export to the Chinese market. However, to a great extent, Chinese farms in Africa produce solely for local markets. In the future, however, China may run out of farmland, as a result of its population growth, will have an adverse effect on its food security, and it will have to opt for producing greater quantities of food abroad, as is the case with Japan and Korea.50 As reflected above, Chinese agricultural investment in Africa focuses on agricultural technology and seed cultivations through agricultural technology demonstration parks. The underlying aim is to make foreign aid sustainable by linking it with commercial opportunities for Chinese companies. The production of hybrid rice is one central technology being disseminated in these parks. Such rice is stronger and more productive than their parent stock, yet they have limitations, i.e. they have to be purchased again and again, as they do not reproduce the genetic traits of their parents. They are also controlled by multinational seed companies. This may create challenges for African farmers as they Forum on 268 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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no longer have the traditional seeds. The Chinese experts are also coming for short-term contracts – two-year contracts, unless extended. This may adversely affect sustainable profitability as an objective in the agricultural sector.51 Chinese agriculture support also ‘focused on technical transfer by demonstrating, teaching and repairing, but did not investigate the economic dynamics such as markets, transportation or distribution, or the institutional chain required for the support of hybrid rice. They hoped to inspire local villagers by their working spirit and personal practice’.52 Another challenge is that the cultural difference between China and Africa creates barriers. For instance, not all experts coming from China speak English very well, which creates a communication challenge for Chinese experts and their African counterparts. Moreover, there is a huge gap in the agricultural practices of China and Africa. Chinese farmers use intensive agriculture, while African farmers use the shifting cultivation method that depends on fallow systems, which may create misunderstanding between the two. This phenomenon leads to the conclusion that Africa does not understand China and vice versa. This is further fuelled by the Chinese tendency to segregate themselves from the local population when implementing development assistance projects.53

Leveraging China-Africa cooperation for agriculture development in Africa Notwithstanding the above arguments on the challenges of agricultural development in current China-Africa relations, agriculture is an emerging area for China’s engagement in Africa. Agricultural engagement in Africa today is framed as ‘South-South Cooperation’,

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which emphasises a reciprocal relationship of mutual benefit. It seems that there is a bright prospect for the sector for the following reasons. Firstly, as Africa needs China, China also needs Africa because Africa’s resources, including its land, low-cost resources, labour and market connections, are vital to agri-business and trade plans. Africa’s large uncultivated arable land is also critical for longer-term global food security, particularly for the populous countries of Asia, including China. Secondly, the China-Africa relationship is deepening over time, which has a positive implication for future agricultural cooperation between the two. This is reflected in the 2013 Chinese White Paper on Economic and Trade Cooperation. As noted in the document, China plans to enhance its agricultural collaboration with Africa in the future in many ways: In the future, China will advance agricultural cooperation with Africa in all respects while ensuring that this cooperation puts both parties on an equal footing, is mutually beneficial, and advances common development. It will work to establish and improve a mechanism for bilateral agricultural cooperation, and strengthen Sino-African cooperation in the sharing of agricultural technologies, Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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resource varieties and agricultural information, the processing and trade of agricultural products, agricultural infrastructure construction, and human resource training. China will continue to encourage and support investment by established Chinese enterprises to put money into agriculture or technological cooperation in Africa. It will arrange and launch an appropriate number of agricultural demonstration centers in African countries, depending on their actual needs. China will also work to deepen Sino-African cooperation within the frameworks of the United Nations Food and Agriculture Organisation (UNFAO) and the International Fund for Agricultural Development.54 Thirdly, there is an improved political commitment from African countries on agricultural development. This is demonstrated in rising African countries commitments to coming up with appropriate policy and budget allocation for the agriculture sector. As noted above, Chinese development assistance is demand-based, thus emerging issues in Africa may encourage China to enhance its focus on the agriculture sector in its engagement in Africa. Specifically, African countries can share the experience gained from the Chinese smallholder agricultural policy and institutional capacity through development cooperation efforts. Chinese agricultural cooperation in the future also may be extended to building irrigation systems and dams, and the supply of farm machinery, inputs and agrochemicals rather than the current assistance on farm management, seeds and inputs.55 Fourthly, agricultural development assistance is considered as complementary to growing Chinese interest in energy and mineral projects. This is based on the Chinese global principles of diplomacy known as ‘getting’ and ‘giving’. As the director of China Farm Agribusiness Corporation commented: ‘China’s growing interest in energy and

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mineral projects in Africa is likely to trigger some negative reactions’.56 In this regard, he suggested ‘China should offer to combine exploitation of other countries’ resources with help for their agriculture’.57 Consequently, it has been seen that China has increased its agriculture assistance to Africa from time to time at multilateral FOCAC, UNFAO and bilateral forums for African countries. Last but not least, there are other emerging powers that are engaged in agriculture development in Africa. The most notable is Brazil. Both China and Brazil achieved impressive results in their agriculture sectors. Both countries also have an interest in supporting the agriculture sector in Africa. The competition between China and Brazil in Africa is seen in their involvement in the agriculture sector in Ghana and Mozambique. This may influence China to enhance its agriculture sector support to Africa. Thus, African countries need to leverage this advantage to the utmost as the two emerging powers are competing to support the agriculture sector in Africa. Furthermore, it is important to note that the emerging economies do have a different focus and achievement in their agriculture support to African countries. For instance, China focuses on intensive smallscale agriculture and has achieved great success in this area. Brazil, on the other hand,

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transformed the Cerrado (savannah) into one of the top grain and beef-producing, and diary cattle, regions with the help of technology.58

CONCLUSION African agriculture is at a turning point with a growing momentum to transform its current state of modernisation. Bringing agricultural transformation and scaling up agricultural productivity are the sole responsibility of Africans. To bring development to the continent requires consistent and broad-based growth spearheaded by the agriculture sector and accompanied by dramatic improvements in infrastructure, governance and other social indicators. Political will, determination and commitments are, thus, timely and pertinent to developing and using the agricultural sector as an engine for economic transformation in Africa. This, however, does not mean that Africa does not need a hand of solidarity to address its poverty and to develop its own potential for agricultural productivity and transformation, as well as feeding its ever-increasing population. Africa needs to draw pertinent lessons on agricultural development from the emerging economies of China, India and Brazil by investing more of its own resources into agricultural science, agricultural education and research, as well as technology. It is important to recognise that the agriculture sector in China was not developed through development assistance, but rather through a combination of market reforms, trade and foreign direct investment. Various kinds of development assistance, likewise, did not significantly help African countries to transform their agricultural sector.

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As rightly indicated by Deng Xiaoping, the Chinese foremost reformist leader, agriculture development relies on policy first and on science and technology second. Accordingly, agricultural productivity enablers for smallholder’s farmers, such as technology adoption, input-output markets, access to finance, policy environment, and institutional and human capacity building, must be provided by the government. Public investment, (including in irrigation, rural infrastructure and research and development) to accelerate agricultural productivity is badly needed and special attention must be paid to smallholders and women. Strengthening national, sub-regional and continental capacity to generate and manage knowledge that supports evidence-based planning and evaluation of CAADP, is crucial. In this regard, each African country must recognise the importance of the agricultural sector for economic development and develop sound agricultural sector policy and strategy, i.e. a pro-poor, pro-rural and consistent policy that focuses on productivitybased staple crop-led agricultural development, as well as a policy that links the effect of agriculture with industrialisation, and request China and other emerging powers to support its policy.

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There is a debate as to whether the Chinese agriculture model can be replicated in Africa or not. It is important to note that success in agriculture crucially depends on indigenous scientific capacity to generate new technology that suits the specific context, both on the continent and in each African country. It is important, for instance, to recognise that neither rice nor wheat, which spearheaded the green revolution in Asia, is of importance to Africa. This is mainly for the reason that the continent’s output for each crop is only 2 per cent of world production. Rather, the major crops in Africa must be given priority, both in the African green revolution, but also in Chinese agricultural development assistance to Africa.59 These crops include: millet and sorghum, which constitute 40 per cent and 18 per cent of world production; and yam, plantain and cassava, which represent 95 per cent, 70 per cent and 44 per cent of world production. This suggests that ensuring a food secure and prosperous Africa in a sustainable way requires a unique green revolution. This can be done by increasing agricultural productivity through investments in research and technology, and infrastructure, as well as providing the enabling environment for the private sector, including farmers in promoting agribusiness. It will also require rethinking agriculture to involve a value chain approach from the supply or production side, to demand or the consumption side. There are huge financial gaps in the ability to transform the agriculture sector in Africa, as noted above. In this regard, diverse actors in the agriculture sector in Africa must be encouraged to be involved. Indeed, the green revolution in Asia was state driven, market mediated and used small-farmer-based strategy. To fill the financing gap for the agriculture sector in Africa, foreign direct investment inflows through foreign private companies are seen as an important resource. Furthermore, employing different innovative financing approaches for agricultural development in Africa is also vital. Financial

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gaps can be removed by using private and public-sector investments, as well as through public-private partnership. It is also important to understand the nature of Chinese development cooperation to Africa, i.e. strategic, planned and focused on long-term goals. In this regard, China is benefiting from the agriculture support it provides to African countries. First of all, Chinese technicians are gaining tremendous know-how on the nature of African agriculture and will be able to influence subsequent developments on the continent. Secondly, through its investment, Chinese companies derive revenues from the agriculture infrastructure support to African countries. Chinese development cooperation is based on requests from the recipient country following its strategic policy priorities, and the recipient country requires strong bureaucracy to execute policies, as well as pledges made at FOCAC every three years. Following the FOCAC pledge, individual African countries are expected to negotiate further to get their portions from the pledge. The ‘One China’ policy, which required countries to recognise Taiwan as part of mainland China, is still a requirement for African countries to get development assistance from China. African countries, therefore, need to develop their agriculture sector policy and strategy accordingly and leverage Chinese engagement in Forum on 272 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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the agriculture sector. African countries are also expected to strengthen their bureaucratic capacity to implement policies successfully. African countries may also draw lessons from China’s history, as the country had similar difficulties in transforming the agricultural sector. Indeed, agricultural sector reforms are still ongoing in China. As noted above, there is a huge systemic difference between Chinese and African agriculture practice. In this regard, the Chinese government must do a lot in supporting its companies and agricultural experts to develop a deeper understanding of African rural culture, society and history. Furthermore, to support the lack of research and agricultural development in Africa, Chinese development assistance in agricultural research and development through demonstration centres across Africa is highly encouraged and appreciated. Nonetheless, this must be done with active participation from the locals, particularly on agriculture project design and implementation. Finally, this chapter recommends that Chinese support in the agriculture sector should focus on how the agricultural sector may have rapid development in terms of foreign exchange earnings, export diversification, employment generation, and linkage effects. In this regard, China must scale up its agriculture development assistance to Africa, in particular by promoting agro-processing industrial parks, meat processing, value addition on agricultural products, and leather and leather products, as well as supporting agricultural value chains in Africa.

REFERENCES

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1 ECA Report. 2014. Frontier Markets in Africa – Misperception in a Sea of Opportunities. Addis Ababa, Ethiopia, p.14. 2 Henley, D., 2012. The Agrarian Roots of Industrial Growth: Rural development in South-East Asia and Sub-Saharan Africa. Development Policy Review, 30(1), pp.25–47; African Centre for Economic Transformation. 2014. Growth with Depth. Available at www.acetforafrica.org p.107 [Accessed on 13 April 2015]. 3 ECA and OECD. 2014. The Mutual Review of Development Effectiveness in Africa: Promises and Performance. A joint report by the Economic Commission for Africa and the Organisation for Economic Co-operation and Development. 4 ECA, AU, AfDB and UNDP. 2014. MDG 2014 Report: Assessing Progress in Africa toward the Millennium Development Goals: Analysis of the Common African Position on the Post-2015 Development Agenda, p.13–17. 5

Xiayun, L., Tang, L., Xu, X., Qi, G. and Wang, H., 2013. What Can Africa Learn from China’s Experience in Agriculture Development? IDS Bulletin, 44(4), pp.31–34; Amanor, K.S., 2013a. South-South Cooperation in Africa: Historically, Geopolitical and Political Economy Dimensions of International Development. IDS Bulletin, 44(4), pp.80–90. Oxford: John Wiley & Sons Ltd.

6 African Centre for Economic Transformation. 2014, p.72; Xiayun et al., 2013, p.35. 7 ECA and OECD, 2014, p.15. 8 Amanor, 2013a.

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AFRICA-CHINA AGRICULTURE MODERNISATION COOPERATION | Gedion Jalata 9 ECA and OECD, 2014, p.14. 10 ECA and AU. 2007. Economic Report on Africa. Addis Ababa: ECA Printing Press, p.48; Brautigam, D.A. and Tang, X., 2009. China’s Engagement in African Agriculture: Down to the Countryside. China Quarterly, 199, pp.686–706. 11 Alliance for a Green Revolution in Africa (AGRA). 2013. Africa Agriculture Status Report: Focus on Staple Crops. Kenya: Smart Printers, p.86. 12 Ibid., p.108. 13 Binswanger-Mkhize, H.P., 2009. Challenges and Opportunities for African Agriculture and Food Security: High Food Process, Climate Change, Population Growth, and HIV and AIDS. FAO Expert meeting on How to feed the World in 2050, 24–26 June 2009. 14 Ibid. 15 AGRA, 2013, p.25. 16 ECA and OECD, 2014. 17 AGRA, 2013, p.23. 18 ECA and OECD, 2014. 19 Ibid. 20 ECA, AU, AfDB and UNDP, 2014. 21 Binswanger-Mkhize, H.P., 2009, p.46. 22 NEPAD. 2015. Available at http:www.nepad.org/foodsecurity/agriculture/about [Accessed 15 May 2016] 23 CAP. 2014. Common African Position on the Post-2015 Development Agenda. Addis Ababa: African Union, pp.10, 12. 24 ECA and OECD, 2014. 25 Eom, J. Hwang, J., Atkins, L., Chen, Y., and Zhou, S., 2017. The United States and China in Africa: What does the data say? Policy brief No. 18, p.7.

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26 Mckinsey Global Institute. 2017. Dance of the Lions and Dragons: How are Africa and China Engaging, and How will the Partnership Evolve? p.10, 32. 27 See Official China White Paper indicated cumulative FDI in Africa at end of 2012; Mckinsey Global Institute, 2017. 28 See Ministry of Commerce of the People’s Republic of China. 2015 Statistical Bulletin of China’s Outward Foreign Direct Investment. 29 Quoted from Li Keqiang, Chinese Premier, visit’s speech to the African Union, 06 May, 2014. Available at http://www.fmprc.gov.cn/mfa_eng/topics_665678/lkqzlcfasebyfmnrlyaglkny/ [Accessed 4 April 2016]. 30 Ministry of Commerce of the People’s Republic of China. 2015 Statistical Bulletin of China’s Outward Foreign Direct Investment. P. 139–140; Ministry of Commerce of the People’s Republic of China. 2014 Statistical Bulletin of China’s Outward Foreign Direct Investment. 31 Jalata, G.G., 2014. Development Assistance from the South: The Case of China and India to Ethiopia, Journal of Chinese Studies, 3(1); Brautigam, D., 2011. Chinese development Finance in Africa. In Perspectives on Emerging Powers in Africa: Analysis and Commentary from Fahamu’s Emerging Powers in Africa Initiative, Issue 16 December. 32 Ibid. 33 Brautigam, D., 2010. China, Africa and the International Aid Architecture, African Development Bank Group Working Paper Series No. 107, April. 34 Jalata, G., 2014; Brautigam, D., 2010.

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PART 4: China-Africa Agricultural Cooperation and Food Security in Africa | Chapter 14 35 Ibid. 36 Foster, V. Butterfield, W., Chen, C., and Pushak, N.,, et al., 2008. China’s emerging role in Africa: part of the changing landscape infrastructure finance. GRID LINES, Note No. 42; SAIIA. 2009. The ChinaAfrica Toolkit: A Resource for African policymakers. China in Africa Project South African Institute of International Affairs (SAIIA), September. 37 Brautigam, D., 2012. Ethiopia’s partnership with China: China sees Ethiopia as a land of business opportunities, but the African country remains in charge of any deals. Available at http://w.w.w.guardian. co.uk/global-development/poverty-matters/2012/; Jalata, 2014 [Accessed 23 March 2015]. 38 Ibid. 39 Information Office of the State Council, The People’s Republic of China. 2013. White Paper on ChinaAfrica Economic and Trade Cooperation. Available at http://www.safpi.org/sites/default/files/publications/China-AfricaEconomicandTradeCooperation.pdf [Accessed 12 June 2016]. 40 White Paper, 2013; Buckley, L., 2013. Chinese Agriculture Development Cooperation in Africa: Narratives and Politics. IDS Bulletin, 44(4), pp.42–52. 41 Ibid. 42 Ibid. 43 China-Africa. 2015. A Good Story to Tell: China-South Africa Relations Reach Strategic Milestone. Chinafrica, 7, p.19; Buckley, 2013. 44 Jalata, G.G. and Venkataraman, M., 2009. An Analysis of Ethio-China Relations during the Cold War. Journal of China Issues, 45(1); Alemu, D. and Scoones, I., 2013. Negotiating new relationships: How the Ethiopian State is Involving China and Brazil in Agriculture and Rural development. IDS Bulletin, 44(4), pp.91-100. 45 CAADP, n.d. Can China and Brazil help Africa feed itself? CAADP Policy Brief, Future Agricultures. Available at: www.future-agriculturs.org [Accessed 25 June 2016].

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46 Anesi, C. and Fama, A., 2013. China Accused of Stealth Land Grab Over Mozambique’s Great Rice Project. Available at http://www.theecologist.org/News/news_analysis/2177709/china_accused_of_stealth_land _grab_over_mozambiques_great_rice_project.html [Accessed 2 February 2016]. 47 Gabas, J. and Goulet, F., 2013. South-South cooperation and new agricultural development aid actors in western and southern Africa. China and Brazil-Case Studies. Working Paper, May. No. 134. 48 Strange, A., Parks, B.C., Tierney, M.J., Fuchs, A., Dreher, A. and Ramachandran, V., 2013. China’s Development Finance to Africa: A Media-Based Approach to Data Collection. CGD Working Paper 323. Washington DC: Center for Global Development. Available at: http://aiddatachina.org/projects/120; Amanor, 2013. 49 Amanor, 2013. 50 Scoones, I., Cabral, L. and Tugendhat, H., 2013. New Development Encounters: China and Brazil in African Agriculture. IDS Bulletin. 44(4), pp.1–18; Buckley, 2013. 51 Chichava, S., Duran, J., Cabral, L., Shankland, A., Bubkley, L., Lixia, T. and Yue, Z., 2013. Brazil and China in Mozambican Agriculture: Emerging Insights from the Field. IDS Bulletin. 44(4), pp.101–115; Brautigam and Tang, 2009. 52 Brautigam and Tang, 2009. 53 Chichava et al., 2013; Buckley, 2013. 54 Information Office of the State Council, The People’s Republic of China. 2013. White Paper on ChinaAfrica Economic and Trade Cooperation. Available at http://www.safpi.org/sites/default/files/publications/China-AfricaEconomicandTradeCooperation.pdf [Accessed 13 February 2015].

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AFRICA-CHINA AGRICULTURE MODERNISATION COOPERATION | Gedion Jalata 55 Amanor, K.S., 2014. South-South Cooperation in African Agriculture: China, Brazil and International Agribusiness. In ecdpm. Available at http://ecdpm.org/great-insif=ghts/emergin [Accessed 5 May 2016]. 56 Brautigam and Tang, 2009. 57 Ibid. 58 Amanor, 2014; Amanor, K.S., 2013b. Expanding Agri-business: China and Brazil in Ghanaian Agriculture. IDS Bulletin, 44(4).

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59 AGRA. 2013.

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15 CHAPTER

ALIGNING CHINA-AFRICA COOPERATION WITH THE UN 2030 AGENDA FOR SUSTAINABLE DEVELOPMENT Zhang Chun

INTRODUCTION The rapid development of China-Africa cooperation, since the establishment of the Forum on China-Africa Cooperation (FOCAC) in 2000, has contributed significantly to African sustainable development. Given the circumstances of the anti-globalisation movement – represented by Brexit, the victory of Donald Trump in the 2016 American presidential election, the sluggish recovery of the world economy since the financial crisis in 2008, and ‘the new normal’ of China and emerging countries – China-Africa cooperation is considered one of the core platforms to support African development.1 However, it is important to note that, with increasing austerity and the complexity of the global development environment, China-African cooperation itself cannot fully meet the African need for achieving sustainable development; in fact, both China and

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Africa should be aware of the potential negative effects of this deteriorating environment. Therefore, it is necessary to think of a potential way for maximising the contributions of this bilateral cooperation to African sustainable development. This chapter proposes that efforts to coordinate China-African cooperation with other international cooperation efforts should be prioritised and aligned with the United Nations (UN) 2030 Agenda for Sustainable Development (UN 2030 Agenda). This alignment would contribute to relieving various pressures on China-Africa cooperation and to maximising opportunities to realise the African development vision.

URGENCY OF ALIGNING CHINA-AFRICA COOPERATION WITH UN 2030 AGENDA Released in December 2015, the second version of China’s Africa Policy mentioned the UN 2030 Agenda three times and committed to promoting its full implementation with Africa.2 There are two key factors pushing China to adopt such a policy position: the UN 2030 Agenda provides strategic guidance for global sustainable development and international development cooperation over the next 15 years; China-Africa cooperation

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has to align with the UN 2030 Agenda, otherwise its potential effects will be offset by the lack of Western support due to anti-globalisation, limited industrial development, the state of the global economy, and anti-terrorism, among others. Some scholars believe that ‘Brexit can be regarded as the first wave of anti-globalisation, which has shown the current of populism is getting stronger around the world, especially in the developed countries’.3 Similarly, in the 8 November US presidential election, the Republican nominee, Donald Trump, won the election, and analysis shows that the Trump phenomenon is a political reflection of the economic and social consequences of capital-led globalisation since the 1980s. In general, anti-globalisation takes on two forms, namely inward populism and outward nationalism, behind which are the anger and fear of the masses.4 It should be noted that this wave of anti-globalisation is being fostered or spread in many Eurasia countries by, for instance, the rise of the right-wing populist parties within the Europe Union (EU), represented by the National Front in France and the Five Star Movement in Italy. The rise of the Alterative for Germany party is also impressive, while the Law and Justice party in Poland and the Hungarian Civic Alliance have both already come into power. Another similar example is that of Rodrigo Duterte, who has a similar temperament to that of Donald Trump, and who was elected president of the Philippines in May 2016. Reduced economic support from Europe and America, due to anti-globalisation, could have a significant impact on African sustainable development. For example, among the policy toolkits of America for Africa, the ‘Africa Growth and Opportunity Act’ (AGOA), US foreign aid, especially public health assistance, including the US President’s Emergency Plan for AIDS Relief (PEPFAR), and the investment in Africa, especially ‘Power Africa’, put

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forward by president Barack Obama, are of high importance. However, President Donald Trump is probably opposed to ‘any trade agreement unfair to America’. The US has instead pursued a more bilateral approach. This partly highlights the US quest to demand greater accountability from its partners, and avoids potential financial loss by going through the UN.5 Trump also refuses to offer more foreign aid to developing countries; instead, he wants to focus on domestic infrastructure development. President Trump has also proposed cutting 29 per cent of the economic and development aid to countries of the greatest strategic importance in his 2018 budget proposal.6 Therefore, under the Trump administration, US-Africa trade, foreign assistance and investment are going to be subject to certain negative effects. Any further development in regard to US-Africa trade, aid and investment will prove to be a daydreaming exercise, which will impose new restrictions on African development resources that are already scarce. Secondly, industrial development has been widening in recent years, which cannot be fully met by China-African cooperation. In December 2015 at the FOCAC Johannesburg Summit, Chinese President Xi Jinping committed to building a comprehensive strategic and cooperative China-Africa partnership. China will implement ten cooperation plans with Africa in the next three years (2016 to 2018). Guided by the principles of government Forum on 278 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 15 guidance, businesses being the major actors, market operation and win-win cooperation, these plans aim at addressing three bottleneck issues holding back Africa’s development, namely, inadequate infrastructure, lack of professional and skilled personnel, and funding shortage, accelerating Africa’s industrialisation and agricultural modernisation, and achieving sustainable self-development. But the three bottleneck issues cannot be resolved only by China or even China-Africa cooperation.7 According to the reports of the McKinsey Global Institute, for instance, Africa is rising indeed, with historic opportunities that could double its manufacturing output growth rate and the total industry output in the next ten years (2015 to 2025). However, the serious problem is the lagging development of infrastructure. Although the spending on infrastructure has increased from an average of US$36 billion per year from 2001 to 2006, to US$80 billion in 2016, this did not fully meet the needs for Africa’s sustainable development. It is estimated that by 2025, the investment on African infrastructure will cost US$150 billion a year, of which two-thirds will be spent on electricity and traffic.8 The infrastructure costs portray an uphill battle, as it is not clear whether the continent has the ability to raise the funds necessary. Along with infrastructure, the continent’s economic growth has also been on the decline. According to the latest version of the Least Developed Countries Report, published by the United Nations Conference on Trade and Development (UNCTAD), the ‘rise of Africa’ in the first decade of the twenty-first century was striking, we have witnessed a significant decline in African economic growth since the global financial crisis of 2008, and especially since 2014. From 2002 to 2008, the average annual economic growth of the least developed countries in Africa was 7.9 per cent, in 2012 declining to 7.4 per cent and thereafter going down in successive years to 2016 with 3.7 per cent.9 Despite the strong

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momentum in China-Africa cooperation during this period, the ‘rise of Africa’ is gradually ‘fading’, and it is questionable if China-Africa cooperation will be able to support sustainable development. Thirdly, the state of the global economy is bound to have an impact on financial initiatives towards the continent. Although China has made a solemn commitment to African sustainable development, the investment of China’s resources in Africa will be totally limited with its economy entering the ‘new normal’ phase. Economically, China achieved remarkable progress just after the breakout of the 2008 global financial crisis, then turned into a ‘new normal’ phase since 2013. For example, in 2016, China’s economic growth rate was 6.7 per cent, going backwards compared to 6.9 per cent in 2015; if compared with the 14 per cent in 2007, ten years ago, the growth rate has declined by half.10 Although it is a natural phenomenon of China’s economic transformation and upgrading process, there will be some substantial constraints to the resources needed for supporting African sustainable development. Moreover, other emerging powers reflect a similar trajectory with regard to their economic development and cooperation with Africa. India, Brazil, Turkey, South Africa and others not only face various problems with their own

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economies, but also face economic difficulties in building cooperation mechanisms with Africa. Fourthly, while there was weakening momentum for cooperation between emerging powers and Africa in recent years, there has been growing cooperation between the developed world, especially Europe and the US, and Africa, which has contributed to escalating competition, especially in the peace and security field. While European countries and the US have not surpassed the emerging countries a lot in the economic and trade cooperation with Africa, they have advanced considerably in conflict resolution due to the rising of terrorism, migrant crises, piracy, and other transnational insecurity challenges that potentially threaten the geopolitical interests of the traditional powers in Africa. For instance, France had the clout in its former colonies, and had continued to play a leading role in the conflict management efforts of Mali and the Central African Republic; in the Leaders’ Summit on UN Peacekeeping in 2015, France had not only committed itself to supporting the peace and security structure of regional and sub-regional institutions, but to training 80 000 peacekeepers for Africa. And Britain had tried to develop a ‘4Ds’ approach (Defense, Development, Diplomacy and Domestic) since the ‘Arab Spring’ to promote its overseas interests in Africa. On 1 April 2015, the British government launched the Conflict, Stability and Security Fund (CSSF), formally replacing the previous Conflict Pool to achieve a single policy process, a single strategic process and a single resource process for the fund stabilisation overseas. The new CSSF amounts to ￡1 billion, nearly 100 times the previous Conflict Pool.11 The US is undoubtedly the most influential actor in respect of peace and security in Africa. Although President Donald Trump may not be interested in economic cooperation with Africa, he will probably attach great importance to global anti-terrorism, which

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will enable him to inherit the legacy of previous presidents, such as George W. Bush and Barack Obama. Thus, the United States Africa Command (AFRICOM) will play an important role in the policy-making of the Trump administration.

POSSIBILITIES OF ALIGNING CHINA-AFRICA COOPERATION WITH THE UN 2030 AGENDA Given the above unfavourable factors, especially challenges from strong anti-globalisation movement and fierce competition in Africa among global powers, one has to think seriously about how to maximise the development effectiveness and international legitimacy of China-Africa cooperation. The best answer or option for this question is to align China-Africa cooperation with the UN 2030 Agenda. Firstly, the UN 2030 Agenda is the strategic guideline for global sustainable development. It sets out a sound path for global development cooperation from 2016 to 2030. Aligning China-Africa cooperation with the UN 2030 Agenda could increase the

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 15 international popularity of the cooperation effort, and mitigate potential competition between China and other international efforts with regard to cooperation with Africa. On 25 September 2015, the United Nations Development Summit, held at the United Nations Headquarters in New York, approved the UN 2030 Agenda for Sustainable Development, drawing up an ambitious blueprint for the next 15 years of international development cooperation and sustainable development. The UN 2030 Agenda has a total of 17 goals, with 169 specific targets and 231 corresponding indicators (by the end of March 2016). These 17 goals are also known as the ‘sustainable development goals’ (SDGs), which can be divided into four groups: ■■

Goals 1 to 7 focus on the elimination of poverty and hunger, protection of the right to education, promotion of gender equality, availability of water, sanitation and modern energy services, which mainly reflect the basic needs of protecting their own development, especially the basic rights of vulnerable groups.

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Goals 8 to 11 are concerned with sustained economic growth and employment, sustainable industrialisation and innovation, reduction of inequality, sustainable urban and human settlements and sustainable consumption and production patterns, while concentrating on the promotion of sustained economic growth and an inclusive society environment.

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Goals 13 to 15 relate to addressing climate change, protecting marine resources and the terrestrial ecosystems, and emphasising environmental sustainability;

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Goals 16 to 17 aim to build inclusive institutions, strengthen the means of implementation (MOIs) and revitalise the global partnership. These are intended to enhance the

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implementation of these goals through international cooperation. The UN 2030 Agenda seeks to build on the UN Millennium Development Goals (MDGs) and to complete those that were not achieved in the past 15 years. They are integrated and indivisible, and aim to balance the three dimensions of sustainable development: the economic, social and environmental.12 With respect to the linkage between the UN 2030 Agenda and MDGs, the goals of the UN 2030 Agenda can be categorised into three types: the first is to go on completing what was not achieved under the MDGs, such as eradicating poverty, and promoting education and sanitation. The UN 2030 Agenda has apparently ungraded these goals and raised the benchmarks. The second is a number of additional goals for sustainable development. And the third is the associated targets related to MOIs and the global partnership, totally 62 targets. One thing to note is that the SDG goals and targets are integrated and indivisible, global in nature and universally applicable, taking into account different national realities, capacities and levels of development and respecting national policies and priorities. Targets are defined as aspirational and global, with each government setting its own national targets guided by the global level of ambition, but taking into account national circumstances. Each government will also decide how these aspirational and Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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global targets should be incorporated into the national planning process, policies and strategies.13 It is the universality and diversity of the UN 2030 Agenda that makes the alignment between China-Africa cooperation and the UN 2030 Agenda possible, with the potential of maximising its international legitimacy. Moreover, as mentioned above, the UN 2030 Agenda needs to be incorporated into national development strategies. The African Agenda 2063 and individual African national development strategies reflect considerable overlap with the UN 2030 Agenda and set out important basic requirements for aligning China-Africa cooperation with the UN 2030 Agenda. The African Agenda 2063 is a strategic framework for socio-economic transformation of the continent over the next 50 years (up to 2063). It builds on African initiatives and agendas proposed since the establishment of the Organisation of African Unity (OAU) in 1963 – especially the Lagos Plan of Action, the New Partnership for Africa’s Development (NEPAD), and the Comprehensive Africa Agricultural Development Programme (CAADP) – to promote inclusive economic growth and sustained development at national, regional and continental levels. The African Agenda 2063 has put forward seven African Aspirations and seventeen speed-up actions.14 To achieve this long-term vision, the African Union (AU) has decided to carry on five successive ten-year implementation plans to transform the aspirations into policy actions, and the First Ten-Year Implementation Plan of the African Agenda 2063 had been adopted by the AU in mid-2015. It is worthy to note that the African Agenda 2063 has much common ground with the 2030 Agenda. During the African Agenda 2063 formulation, the AU launched the work ‘Common African Position on the Post-2015 Development Agenda’ to align with the UN 2030 Agenda. Released in early 2014, the Common African Position on the Post2015 Development Agenda has established six pillars for Africa’s development vision

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to 2030: structural economic transformation and inclusive growth; science, technology and innovation; people-centred development; environmental sustainability and natural resources management, and disaster risk management; peace and security; finance and partnerships.15 Comparing African Agenda 2063 and its First Ten-Year Implementation Plan, the Common African Position on the Post-2015 Development Agenda and the UN 2030 Agenda, we recognise that there is significant consensus between the African development vision and the UN global development agenda. First of all, both have a high degree of consensus regarding finalisation of unfinished projects relating to the UN MDGs. Secondly, there is much common ground regarding the basic needs for living, apart from the UN MDGs. And thirdly, they make joint efforts and keep up with each other in terms of the implementation of the UN 2030 Agenda.16 Therefore, the overlap that the African Agenda 2063 shares with the UN 2030 Agenda lays an important basis for aligning China-Africa cooperation with the UN 2030 Agenda. On the one hand, the African Agenda 2063 and its First Ten-Year Implementation Plan have set clear goals for the short, mid and long term, presenting a proper reference for the long-term planning and short-term implementation of China-Africa cooperation. On the Forum on 282 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 15 other hand, the UN 2030 Agenda has integrated goals and targets and indicator systems that provide proper measuring tools for China and Africa to effectively implement the African development visions. China is determined to lead the global actions of implementing the UN 2030 Agenda and has already taken many practical steps, making sure that the alignment of ChinaAfrica cooperation with the UN 2030 Agenda will be realised. China has participated actively in the decision-making process of the UN 2030 Agenda and has played an important role in supporting developing countries, especially Africa, in the global development process.17 On 26 September 2015, President Xi Jinping attended the United Nations Development Summit and delivered a speech entitled ‘Seek Common and Sustainable Development and Forge a Partnership of Win-win Cooperation’. He emphasised that the international community should jointly work out a course of equitable, open, all-round and innovationdriven development in the interest of the common development of all countries, and, therefore, we should build up the development capabilities of all nations and help developing countries strengthen capability-building. The international community should improve the international environment for development, optimise the partnership for development, and improve the coordination mechanisms for development. President Xi Jinping announced that China had made a solemn commitment and shouldered the responsibility for implementing the UN 2030 Agenda, and that it sought solidarity and cooperation to constantly push the cause of global development.18 Based on these solemn promises, the Chinese Government had set up a trans-agency mechanism, consisting of 43 ministries, in early 2016 and released its third position paper on the UN 2030 Agenda on 19 April – China’s Position Paper on the Implementation

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of the 2030 Agenda for Sustainable Development. In September 2016, Premier Li Keqiang attended the seventy-first session of the UN General Assembly debate and delivered an important speech on implementing the 2030 Agenda. The G20 Hangzhou Summit took place in the same month and also placed the issue of implementing the UN 2030 Agenda in Africa in a prominent position for discussion. In October, the Chinese Government was the first of the big powers to release a national plan – China’s National Plan on Implementation of the 2030 Agenda for Sustainable Development.19 This plan attaches considerable importance to international cooperation, emphasising ‘acknowledging diversities in nature, culture and national conditions, working toward a more equitable and balanced global partnership for development, deeper involvement in South-South cooperation and prudently promoting triangular cooperation’.20 Therefore, it is precisely because China has taken a step forward in aligning with the UN 2030 Agenda that it provides strong support for aligning China-Africa cooperation effectively with the UN 2030 Agenda.

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CONCLUSION AND POLICY RECOMMENDATIONS FOR ALIGNING CHINA-AFRICA COOPERATION WITH THE UN 2030 AGENDA Aligning China-Africa cooperation with the UN 2030 Agenda will not only maximise development effectiveness and the international legitimacy of China-Africa cooperation, but also facilitate the realisation of African development visions and its alignment with the UN 2030 Agenda. Therefore, China and Africa should build strategic consensus, coordinate strategic actions and build up strategic safeguards so as to achieve the perfect alignment between China-Africa cooperation and the UN 2030 Agenda. Firstly, China and Africa should emphasise the strategic focus on the UN 2030 Agenda, the African Agenda 2063, the triple networks and industrialisation strategy of ChinaAfrica cooperation, and the ten cooperation plans of the FOCAC Johannesburg Summit. On the one hand, both sides need more joint research to identify the intersections among these agendas. Both sides need to build up their short-term policy priorities then pool resources to speed-up the implementation for realising early harvest and setting up the best practices of the UN 2030 Agenda. The main areas of joint effort include Africa’s high-speed railway network, power resource development, agricultural modernisation, manufacturing-based industrialisation, finance, taxation, domestic resource mobilisation capability-building, and human resources (especially technical personnel training). On the other hand, both parties need to identify the intersections among the UN 2030 Agenda, the African Agenda 2063 and China’s economic transformation, and establish phased plans of action and policy priorities for China-Africa cooperation until 2030. By doing so, China-Africa cooperation can be more closely integrated with the UN

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2030 Agenda. Facilitating its upgrading process highlights their contribution to the implementation of the UN 2030 Agenda. This intersection focus will contribute to African ‘soft’ infrastructure building as well, including, for example, domestic resource mobilisation, human resource training, national strategic planning capability, statistic capacity improvement and peaceful and stable society building. Secondly, China and Africa should focus on follow-up processes, making sure that Africa serves as a best practice case on the implementation of the UN 2030 Agenda. To build Africa as a best practice case, both parties should put more energy into the following: ■■

Continuously strengthening international consensus established at the Hangzhou Summit; facilitating the implementation of the UN 2030 Agenda and coordinating with G20 Summit Presidents in the next years, especially 2017 in Germany, 2018 in Argentina and 2019 in India. By doing so, it can be guaranteed that G20 summits will put the implementation of the UN 2030 Agenda at the core, with the key focus on optimising Africa.

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Proposing a G20-Africa Development Summit and establishing a working group on promoting African development, coordinating G20 members’ ongoing initiatives and

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 15 projects for supporting African sustainable development, and encouraging G20 as a group to submit its annual review on Goal 17 of the UN 2030 Agenda to UN High-Level Political Forum (HLPF) on Sustainable Development voluntarily. ■■

Developing a comprehensive indicator system for measuring China-Africa cooperation, and creating synergies with the indicator system of the UN 2030 Agenda. Taking the UN HLPF’s review plan, China and Africa should issue its own review reports based on the above indicator system and jointly publish with the AU or UN Economic Commission for Africa. All these measures will substantially contribute to the international legitimacy of China-Africa cooperation and the correcting of false criticism, and will encourage other partners to fulfil their commitments to Africa.

Thirdly, China and Africa should work together on trilateral cooperation for facilitating the new global partnership for sustainable development. The policy priority should be the following: ■■

In respect to the implementation of the UN 2030 Agenda in Africa and strengthening South-South cooperation, both parties need to strengthen the coordination and cooperation between FOCAC and continental and regional economic communities (RECs) in Africa.

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Push forward South-South cooperation, as both China and Africa need to enhance the strategic communication with the Group of 77, the Non-aligned Movement and other emerging countries’ cooperation mechanisms with Africa. China and Africa should regard the G20 as the core platform and promote the transformation of North-South cooperation, making the best use of the implementation of the UN 2030 Agenda.

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Both parties should take the opportunity for the transition of the G20 from ‘inward

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looking’ to ‘global concerns’ for bringing altruism into full play and providing public goods. From this perspective, China and Africa can jointly upgrade the principle of ‘common but differentiated responsibilities (CBDR)’ to version 2.0. The CBDR2.0 should include three pillars: a) developed countries should meet the target of 0.7 per cent of ODA/GNI; b) emerging development partners should put forward their Intended Nationally Determined Contributions (INDCs) for supporting sustainable development globally; and c) recipients should set reasonable goals for mobilising domestic resources so as to get rid of aid dependence as soon as possible.21 ■■

China should optimise its trilateral cooperation policy system during the process of implementing the UN 2030 Agenda on the African continent, identifying potential partners and policy areas under the guidance of the principles ‘Economy First, Urgency First, and South First’, and prioritising trilateral economic cooperation with emerging powers and international governmental organisations.

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China should adhere to ‘Africa-proposed, Africa-agreed, Africa-led’ principles to guide trilateral cooperation efforts. The ‘Africa-proposed’ principle is aimed at guiding the project selection process. The ‘Africa-agreed’ principle guides the project planning process. The ‘Africa-led’ principle guides the implementation process.22

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China and Africa should share development experiences mutually, especially regarding national alignment strategies, domestic resource mobilisation, development policy coherence – both horizontal and vertical – and partnership building and best practices.

Fourthly, China and Africa should attach importance to policy coherence and put forward comprehensive policy systems. Both parties should build internal strategic consensus and empower authoritative governmental agencies to play a coordination role, which will make the alignment between China-Africa cooperation and the UN 2030 Agenda happen. On the China side, a high-level full-time coordinator under the Chinese Foreign Ministry or the Committee for the follow-up of the FOCAC should be appointed to take care of the coordination of implementation of the UN 2030 Agenda of both China and Africa. Besides the governmental efforts, intellectual support is very important for this alignment effort. Think tanks from China and Africa should be united as a team to conduct comprehensive research, especially with regard to designing the review indicator system. Chinese think tanks should play a leading role in networking with African and international think tanks for promoting intellectual trilateral cooperation with China-African cooperation at the core. Private actors should be taken into account as well. Business should play a leading role due to its investment potential. China should help its entrepreneurs to improve their risk adaptation and self-regulation capacity, by encouraging them to find potential business opportunities arising from and to align their business plans with African efforts to implement the UN 2030 Agenda.

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REFERENCES 1 Zhang, C., 2016. The Change of Great Powers’ Situation in Africa. In Zhang, H.M. and Li, Z.B. (ed.), 2016. African Development Report No.18, (2015–2016): Chinese Enterprises in Africa: Effects, Problems and Approaches. Beijing: Social Sciences Academic Press, pp.207–224. 2 MOFA China. 2015. China’s Second Africa Policy Paper. Xinhua News Agency, [online] 4 December 2015. Available at: http://news.xinhuanet.com/english/2015–12/04/c_134886545.htm [Accessed 29 March 2017]. 3 He, Y.F., 2016. The Brexit: The First Step to Anti-globalization. China-US Focus website. Available at http://cn.chinausfocus.com/m/6320.html [Accessed 28 March 2017]. 4 Zheng, Y.N., and Mo, D.M., 2016. How to avoid the ‘Trump Phenomenon’ spreading in China. Ifeng website. Available at http://pit.ifeng.com/a/20161126/50320854_0.shtml [Accessed 24 February 2017]. 5 Ndubuisi, A. and Omar, S., 2017. What Trump’s Stance for Africa means for Continental Security Issues. Available at http:www.dailymaverick.org [Accessed 7 November 2017]. 6 Kim, S. and Lu, D., 2017. What Trump Cut in His Budget? Washington Post. Available at https:// w w w.washingtonpost.com/graphics/politics/trump-presidential-budget-2018-proposal/?utm_ term=.8644b5a42c16 [Accessed 18 March 2017]. 7 Xin, J.P., 2015. The Johannesburg Summit of the Forum on China-Africa Cooperation. Open a New Era of China-Africa Win-Win Cooperation and Common Development. Johannesburg.

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 15 8 McKinsey Global Institute. 2016. Lions on the Move II: Realizing the Potential of Africa’s Economies. Available at http://www.mckinsey.com/global-themes/middle-east-and-africa/lions-on-the-move-realizing-the-potential-of-africas-economies [Accessed 14 March 2017]. 9

UNCTAD. 2016. The Least Developed Countries Report 2016: The Path to Graduation and Beyond: Making the Most of the Process. New York and Geneva: UN, p.3.

10 National Bureau of Statistics of China. 2017. A Good Start to Achieve the 13th Five-Year Plan in 2016. Available at http://www.focac.org/chn/ltda/dwjbzzjh_1/hywj/t1321590.htm [Accessed 1 March 2017]. 11 Zapach, M., 2014. Analysis, Planning, and Monitoring and Evaluation (M&E) Issue Note. London: Stabilisation Unit, p.3. Available at http://sclr.stabilisationunit.gov.uk/publications/issues-note-series. [Accessed 20 March 2017]. 12 The UN General Assembly. 2015. Transforming Our World: The 2030 Agenda for Sustainable Development. [e-book]. New York: UN. Available at http://www.un.org/ga/search/view_doc.asp?symbol=A/ RES/70/1&Lang=E [Accessed 22 February 2017]. 13 Ibid., p.13. 14 African Union. 2015. Agenda 2063: The Africa We Want, Popular Version. [e-book]. Addis Ababa, Ethiopia, Available at http://archive.au.int/assets/images/agenda2063.pdf [Accessed 19 January 2017]. 15 African Union. 2014. Common Africa Position (CAP) on the Post-2015 Development Agenda. [e-book]. Addis Ababa, Ethiopia, pp.7–21. Available at http://www.uneca.org/sites/default/files/uploaded-documents/Macroeconomy/post2015/cap-post2015_en.pdf [Accessed 2 March 2017]. 16 African Union. 2016. Agenda 2063 Linkages with the Sustainable Development Goals. Addis Ababa, Ethiopia. Available at https://www.au.int/web/sites/default/files/pressreleases/27511-pr-pr_114_-_joint_ ministerial_au-uneca_conference_concludes_with_an_urgent_call_for_the_domestication_of_agenda_2063_at_continental_level_aligned_to_the_un_agen.pdf [Accessed 28 March 2017]. 17 Zhang, C., 2015. Common but Differentiated Commitments: China’s Engagement with the 2030 Agenda Global Partnership. China Quarterly of International Strategic Studies, 1(3), 2015, pp.373–395.

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18 Xi, J.P., 2016. The UN Sustainable Development Summit. Seek Common and Sustainable Development and Forge a Partnership of Win-win Cooperation. 12 October 2016, New York. 19 MOFA China. 2016. China Releases National Plan on Implementation of the 2030 Agenda for Sustainable Development. Beijing. Available at http://www.fmprc.gov.cn/web/ziliao_674904/zt_674979/dnzt_674981/ lzlzt/lkqcxd71lhghy_687690/zxxx_687692/t1405173.shtml [Accessed 12 December 2016]. 20 MOFA China. 2016. China’s National Plan on Implementation of the 2030 Agenda for Sustainable Development. Beijing. Available at http://www.fmprc.gov.cn/web/ziliao_674904/zt_674979/dnzt_674981/ lzlzt/lkqcxd71lhghy_687690/zxxx_687692/W020161012709956344295.pdf [Accessed 11 January 2017]. 21 Zhang, C., 2016. The G20’s Role in Fulfilling the UN 2030 Agenda. China Quarterly of International Strategic Studies, 2(3), 2016, p.324. 22 On trilateral cooperation in Africa, see Zhang, C., 2012. China-Africa Relationship: Coping with the Pressure and Challenges among International Cooperation in Africa. Foreign Affairs Review, 3, pp.33–42.

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16 CHAPTER

THE ROLE OF CHINA-AFRICA RELATIONS IN THE PROMOTION OF THE RIGHT TO DEVELOPMENT IN AFRICA Rita Ozoemena

INTRODUCTION In terms of the relationship between the People’s Republic of China and Africa, 2006 marked a significant shift in the nature and extent of the engagement between the continent and the People’s Republic of China. In the first place, the year marked the ‘Africa Year in China’, which brought about 40 African heads of state to Beijing and resulted in a white paper on China’s Africa policy. The year was also pivotal for China, as high-level official visits were made by President Hu Jintao, Premier Wen Jiabao and various cabinet ministers in the Chinese government, to several African countries, such as South Africa, Tanzania, Uganda, Nigeria and Kenya. The year also marked the commencement of the First China-Africa Summit of the Forum for China-Africa Cooperation (FOCAC). Through FOCAC, the relationship has grown and remained very strong in many re-

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spects, with investments in construction, infrastructure, aviation, mining and energy, trade and industry, and education. In just over a decade, there has been rapid development, leading to remarkable progress with infrastructure development in many African countries, because of their engagement with China. The model of China’s development engagement with Africa is premised on the centrality of the human person. The Right to Development (RTD) equally places strong emphasis on the human person as the beneficiary of the RTD, hence the importance of the human person who through skill and knowledge drives economic growth and development. And so, the RTD seeks to ensure the wellbeing of people in every aspect: socially, economically, politically and culturally. This is a process of development that China seems to understand as critical to national economic growth. This chapter examines China’s engagement with Africa and the correlation of such cooperation to the Right to Development (RTD) as pivotal to the national development agenda. The RTD has gained traction as a right in Africa, but unfortunately states in Africa are yet to critically engage with the notion of development as a right. Generally, the process of development considers two critical aspects of RTD, which are that people as central subjects of development and that the state is the entity that has the obligation Forum on 288 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 16 to ensure that the necessary conditions are set for development to occur. The chapter begins by locating RTD within the context of China-Africa cooperation. It then examines how RTD influences China-Africa relations; and, finally, the chapter reflects on the role of China in promoting Africa’s development agenda 2063.

CONTEXTUALISING THE RTD IN CHINA-AFRICA RELATIONS Chinese investments in Africa have highlighted what can be generally referred to as state-sponsored model of development where the state plays a key role in securing the economic growth of the country. Development has previously been defined as an ‘increase in output of gross national product (GNP)’, where the per capita increase allows for economic growth merely as an objective of development. Today, it is not that these terms are no longer applicable, but rather that they have been refined and further developed to include terms such as equality among nations, gender justice and participatory development, as well as a rights-based approach to development. Development in the twentyfirst century requires states to actively formulate strategies that will ensure equity and justice for individuals. The preamble to the United Nations (UN) Declaration on the Right to Development, states that ‘development is a comprehensive economic, social, cultural, and political process, which aims at the constant improvement of the well-being of the entire population and of all individuals on the basis of their active, free and meaningful participation in development and in the fair distribution of benefits therefrom’. In effect, the main objective of development is to take a critical look at human beings and to create an enabling environment to ensure constant improvement in their well-

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being. Consequently, the most plausible development agenda is one that ensures human development, thereby putting people at the centre of development effort - and the state has the duty and right to formulate national development policies to this effect. In most African countries, it is a well-known fact that development occurs as a political trade-off between politicians, who play on the vulnerabilities of the electorate, who vote for the team they perceive as having the power to advance their well-being. Often, people rarely have a say in formulating their own development agenda. Notwithstanding the fact that the United Nations Declaration on the Right to Development (UNDRD) adopted in 1986 by the UN General Assembly provides in article 2 that ‘the human person is the central subject of development and should be the active participant and beneficiary of the right to development’ (Art 2 of UNDRD). In other words, the top-down model of participation mainly adopted by African governments erodes the capacity of individuals, whereas participation is foundational to development. China-Africa relations have very strong relevance to RTD. In the first instance, two pillars define China’s policy in Africa: peaceful (people) development and development cooperation. One of the dominant factors in China’s approach is guided by developmental peace where there is stability for investment, and equally involve efforts at humanitarian Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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THE ROLE OF CHINA-AFRICA RELATIONS IN THE PROMOTION OF THE RIGHT TO DEVELOPMENT IN AFRICA | Rita Ozoemena interventions and conflict resolution. In many ways, China has contributed immensely to seeking stable African countries that are open to development. For example, China has invested hugely in areas such as Sudan, Democratic Republic of Congo (DRC), Burundi, Tanzania, Kenya and Uganda.1 By working closely with the United Nations, China has accepted global norms and practices towards strengthening global peace. So far, China has contributed about 17 390 officers for over 19 UN peace missions from 1989 to 2010. Through these efforts, it has equally contributed to peace and security in Africa, notably through contributions to the Africa Mission in Sudan (AMIS) of US$I.8m by 2008; US$700 000 to the Africa Mission in Somalia (AMISOM) in 2009 and the African Union Continental Peacekeeping activities received a boost of US$400 000 in 2006.2 The other factor in China’s policy on Africa revolves around a people to people agenda in which skilled and professional personnel are vital to any development agenda. Clearly, eliminating poverty and under-development of the people remain at the root of the China African development agenda and this focus seems to traverse much of the continent. For example, in South Africa, the agreement and mutual cooperation stressed at the second FOCAC meeting (that took place in Johannesburg, South Africa) focused on things that are crucial to the community, such as food, employment, agricultural modernisation and industrialisation3. For many on the continent, industrialisation means that critical infrastructure necessary for development exist to drive their socio-economic development and wellbeing. In its preamble, the Declaration on the Right to Development recognises that: Development is a comprehensive economic, social, cultural, and political process, which aims at the constant improvement of the well-being of the entire population

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and of all individuals on the basis of their active, free and meaningful participation in development and in the fair distribution of benefits resulting therefrom. Implicit in achieving this development objective and reaping the benefit that accrues therefrom is an enabling environment in which two critical needs must be met – participation and mutual cooperation.

Participation RTD has participation as a core component for its realisation. This is a value so deeply embedded in the knowledge that development, as a process, has two dimensions: one that puts people at its centre; and another that affords them the opportunity to take charge of their potential and growth. Article 1 of the Declaration on the Right to Development gave insight into what participation entails, by providing that: The right to development is an inalienable human right by virtue of which every human person and all peoples [sic] are entitled to participate in, contribute to, and

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 16 enjoy economic, social, cultural and political development, in which all human rights and fundamental freedoms can be fully realised. (Author’s emphasis) In view of the above, participation in development is a right, not a privilege. Unfortunately, for the most part, this has been a problematic aspect of the realisation of this right. When a village in Africa wakes up to the rolling sound of tractors on their ancestral land, without any knowledge of what is being done, it is a typical example of how participation works in practice. In other words, those kinds of development are not people-centred. This was what prompted the African Commission on Human and Peoples’ Rights to reiterate the pivotal role of participation in development, when it decided in favour of the Endorois people of the Rift Valley in Kenya. In their findings, the African Commission not only put to rest the debate regarding the violation of the right to development in terms of article 22 of the African Charter, but also firmly defined participation, non-discrimination and choice as the content of the right. In the matter of The Centre for Minority Rights Development (Kenya) and Minority Rights Group International on behalf of the Endorois Welfare Council v The Republic of Kenya (‘Endorois case’) the ancestral home of the people living on the banks of Lake Bogoria was to be used for a development project without their consultation. The kind of development envisaged for them failed to consider the ancestral relevance of the land, the source of livelihood of the people and, above all, their lack of choice in charting their own development process. The approach of China regarding development in Africa, on the other hand, depicts a strong grasp of the relevance of participation as being core to an appropriate development process. This is evident in the push for professional skill development, which was identi-

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fied as one of the major challenges constraining Africa’s development.4 It may be argued that professional skill is not a requisite for consultation or participation at a basic level, but, in my view, the capacity to engage with any process is a first step towards participation in that specific development process. Also, intrinsic to participation is the sense of equality in the pursuit and realisation of the process of development.

Mutual cooperation Since 2000, the relationship between China and Africa has been underlined by a desire for mutual cooperation that results in a win-win benefit for both of them. Political and economic cooperation are intricately woven into this relationship, which is aimed at ensuring that the bottleneck that inhibits Africa’s development is eliminated. It is noteworthy that the People’s Republic of China (PRC), the biggest developing nation in the world, seeks to ensure the development of an entire continent through mostly direct engagement with the various governments on the continent. By having interests in the infrastructure development in Africa, as well as mining, power plants, airports and manufacturing, China increases the value chain that promotes local management capacity and skills

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THE ROLE OF CHINA-AFRICA RELATIONS IN THE PROMOTION OF THE RIGHT TO DEVELOPMENT IN AFRICA | Rita Ozoemena transfer.5 In other words, China has a very deep understanding of what is needed to move Africa’s development agenda forward and it is prepared to provide the sustained funding for industrialisation in Africa. This singular proposition has made China the preferred development partner. The RTD also makes provision for how development can be realised. In the first place, the state has the primary duty to promote, protect and realise the right to development. In the Declaration on the Right to Development, article 3 (1) provides that: States have the primary responsibility for the creation of national and international conditions favourable to the realisation of the right to development. So, in the first instance, there must be an enabling environment that is conducive to development, which includes functional and democratic institutions, and the rule of law. Implicit in this, is the establishment of a pool of skilled professionals who serve as the catalyst for development. In addition to providing the enabling environment, it is also the duty of the state to remove inhibitors to development projects. For example, article 3(3) also states, ‘States have the duty to cooperate with each other in ensuring development and eliminating obstacles to development’ (author’s emphasis). For more than a decade now, the China-Africa relationship has been underscored by these two obligations that the state must fulfil. Notwithstanding that the Declaration on the Right to Development is ‘soft law’, which elicits no obligation from states, it clearly positions principles necessary for modern bilateral and multilateral development agenda. Some of the principles espoused include mutual cooperation, sovereign equality and interdependence. Expectedly, the end prod-

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uct of this kind of engagement in the China-Africa relationship resides in promoting the wellbeing of the people and ultimately, in the realisation of human rights, including the Right to Development. Clearly, there is a correlation between the Right to Development and the development approach adopted by China towards Africa, where economic and political progress have been combined to produce one dominant approach of mutual development. Despite these positive settings, a lot of caution exists within Africa on the position of China towards human rights protection due to its ‘no strings attached’ policy on loans, as well as policy of non-interference in other countries’ internal affairs.6 In other words, there seems to be a huge chasm between what happens in practice and the philosophy of development - an issue to which I now turn.

The philosophy of the RTD in China-Africa relations China started its own development trajectory by first critically looking at her economic growth in comparison to most countries in the world. For example, in 1986, China’s economy was extremely poor and heavily distorted. It was a closed economy in which power lay

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 16 with the state and people were not the subject of development. Then reforms were made, as described by Hofman and Wu,7 in which China adopted strategies that catapulted her to the world stage as one of the biggest economies, particularly of developing countries. For China, the principle of development took a strategic shift in the following way: from gradualism to experimentation and then to decentralisation. All these stages of reform were characterised by investment in human capital development, which, in my view, is analogous to the concept of the human person as the beneficiary of the right to development. So, for China to accelerate its development, it focused on two main issues: agriculture and industry or manufacturing. These two sectors need people to drive and accelerate them for the purposes of economic development, hence, a people-driven development approach. Regarding its cooperation with Africa, its own development journey largely informs the approach in most of its cooperation agenda in Africa. To this end, China insists on human capital development because it posits that lack of skilled professionals remains a huge constraint to Africa’s development and industrialisation.8 In the first place, China is the most influential of the developing countries in the world and has reached this milestone through a sustained development agenda that includes industrialisation at its roots. Secondly, China recognises the added value of making people the main beneficiary of development, hence their huge investment in promoting skilled personnel. By so doing, China has become a development donor country, particularly for those in Africa. This current position of China has created avenues for countries in Africa to seek development assistance without relying on the traditional development models. The conditions set by the West have made many governments in Africa look towards China for infrastructure development and an alternative development model.

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The Forum on China-Africa Cooperation (FOCAC) shapes the development policies of China and FOCAC was formally established in October 2000 in Beijing. The main purpose of this formation is to align and reinforce mutual socio-economic and developmental cooperation. This is a radical departure from the traditional development approach known to African countries, in that although it is state-centric, it has a foundation of socioeconomic development.9 It is common knowledge and a well-known phenomenon in the 1980s that many African countries literally collapsed under the development formula generally referred to as the ‘Structural Adjustment Programme’ (SAP). Repaying debts became a challenge for many countries in Africa for the greater part of the last two decades, until the ‘looking east’ era. This is the era that Africa believes strongly in the development conditions offered by China and FOCAC is the vehicle used to drive the development agenda it envisages for Africa. This is accomplished through ministerial conferences, high-level exchange visits, consultations between the Secretariat of the Chinese Follow-up Committee on FOCAC and the African Diplomatic Corps. In fact, the priority of FOCAC is the industrialisation of Africa and its approach correlates with the tenets of the Right to Development.

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THE ROLE OF CHINA-AFRICA RELATIONS IN THE PROMOTION OF THE RIGHT TO DEVELOPMENT IN AFRICA | Rita Ozoemena More recently, Right to Development (RTD) received much attention as it entered the thirtieth year of its adoption as a Declaration at the United Nations level. The main objective of RTD is to advance socio-economic development in which people can freely and actively participate and contribute towards ultimately living a dignified life.10 The Declaration on the Right to Development although being a ‘soft law’, has been instrumental in drawing attention to the content of the right and its significance to developing countries. The two main objectives envisaged were to recognise the RTD as a human right located in the body of human rights instruments and to have the state put in the necessary machinery for its realisation. Most often, the state is incapable of creating an enabling environment for the realisation of the RTD. This is evident in the way many African countries have pursued their development agenda – without participation by the people. The inclusion of the people and the improvement of their living standards are factors that define a developmental state in the twenty-first century.11 Other essential features that define a developmental state are: sound policies, leadership, skilled workers and managers, and consistent application of rules. All of these are necessary to drive the development agenda within a specific office established for that purpose. Unfortunately, most of African states are constrained in terms of their development agenda, due to the lack of skilled professionals, which invariably affects standards of living, as well as service delivery. It is, therefore, no wonder that only a few African countries can be classified as being a development state, as they fail to meet the requirements even in contemporary development discourse according to Larissa.12 In fact, on the African continent, South Africa is one of the few countries, besides Rwanda and Ethiopia, that have expressly sought to

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establish a developmental state. Being a developmental state does not guarantee the benefits of RTD, but it is argued here that it depicts a model that strives to embrace the values of the right. According to the National Development Plan 2030 (NDP) launched in 2012 by the South African Government, a developmental state builds the capability of people to improve their own lives. National Development Plan of South Africa is a policy document that seeks to make huge investment in the people of the country and in that way seeks to engender the values of the Right to Development. For South Africa, the establishment of a developmental state will serve as a unique blend that could view the country as a global leader in manufactured goods and services, especially for the mining industry, where it possesses substantial know-how. The effect would be that South Africa will carve a niche for herself, thereby making an important contribution to industrialisation in a global market.

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 16

Industrialisation in Africa and Modern Agriculture Project: Seeking ways to sustain development. Industrialisation is critical to the China-Africa relationship and skilled personnel are the catalyst for the desired change. Currently, Africa’s contribution to the manufacturing sector in terms of the continent’s GDP has been on a downward spiral. It declined from 12 per cent in 1980 to 11 per cent in 2013.13 For Africa to achieve any of the targets of the Sustainable Development Goals, rapid and responsible industrialisation become imperative. It is, therefore, pertinent to ground the relationship between China and Africa in the values of the Right to Development. Unfortunately, the Right to Development has not gained the requisite attention in African development strategies. A right-based approach to development where the attainment of human rights should be one of the standards by which to measure development has also not been keenly pursued by African governments.14 The win-win model of cooperation adopted by China for Africa remains contentious in many ways, due to serious concerns in many areas regarding labour matters, human rights protection and good governance.15 It can be argued that Africa is yet to develop a comprehensive development approach in relation to mutual cooperation with China. It is obvious that the Right to Development should act as a point of departure in developing a model that will drive the much-needed industrialisation and agricultural modernisation project. For the most part, countries on the continent continue to struggle with mono-economic product because the single investment system is crumbling the economy of nations, with Nigeria’s oil being a prime example. The consequences of such a system are poor infrastructure development, poverty, inequality and decreased economic growth.

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Human capital development is also vital for the industrialisation and agricultural modernisation project of China in Africa To this end, the centrality of the human being as the beneficiary of the RTD becomes fundamental in achieving the set goals. Industrialisation is a core component of Chinese economic transformation, but it has also been identified as a weak link for Africa, because the industrial output of the continent is a mere 0.7 per cent of world output.16 So, it is imperative for Africa’s development that it improve its manufacturing, which it cannot do without the requisite skilled professionals. The premium that has been placed on human, as well as social, capital, has been aptly captured by Winston Nagan, who insists that within the context of the right to development, human and social capital are important parts of human rights.17 The RTD, as an inalienable right guaranteed in article 1 of the Declaration on the Right to Development, underscores the importance of people, wellbeing and dignity, as well as the concept of collectivism. By recognising that development is both an individual and a collective agenda, RTD presents some difficulties in formulating an appropriate and effective model of development. It is also pertinent to note that development cannot occur without a collective approach. For many actors, the view is that the Right to Development highlights development Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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THE ROLE OF CHINA-AFRICA RELATIONS IN THE PROMOTION OF THE RIGHT TO DEVELOPMENT IN AFRICA | Rita Ozoemena assistance as the duty of developed nations as well as a process to connect for common goals based on equal and mutual cooperation. Further, the Declaration on the Right to Development (DRD) underscores the relevance of states’ connectivity in developing a model that promotes the wellbeing and dignity of the people. According to article 4(1) of the Declaration on the Right to Development, it provides that: States have the duty to take steps, individually and collectively, to formulate international development policies with a view to facilitating the full realisation of the right to development. In other words, the obligation to formulate appropriate development policies must be enhanced by collective agreement. So, the best way to devise an appropriate development model is to not only depend on the traditional model, but in addition, to engage in meaningful cooperation underscored by human and social advancement. Realistically, the China-Africa cooperation path pursued under FOCAC has created the opportunity for a fused development model. In terms of the nature of this model, there will not be a hierarchy of status within the countries and in addition, such a model will not favour industrialisation over human rights, but rather build on the importance of both these matters to development. By so doing, the development model highlights the contribution of Africa in formulating a new international development order.

China-Africa relations: expanding the frontiers of development It is now widely claimed that China is the second most powerful nation in the world, after

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the United States of America. Clearly, this has great implications for the China-Africa cooperation agenda. Africa has been a trading partner to many countries of the world for many years. One cannot, however, ignore the fact that certain narratives have somewhat improved the view of Africa as an investment destination for strong economic growth. In other words, due to the form of cooperation embarked upon by China across Africa, generally, the traditional limitations to development are changing, thereby bringing a new dynamic to the concept of development investment. It is now a well-known fact that the relations between China and Africa date back to ancient times and the development of the Silk Road, which suggested the existence of trade routes along the shores of East Africa in the fourteenth century AD. At that time, the passage of luxury goods, were key to the relationship. Later, the relationship involved material and moral support for the political liberation of many countries, including South Africa.18 The relationship entered into what can be referred to as a new phase in the early 2000’s, when formal relations were entered into in Beijing, China, under the Forum on China-Africa Cooperation (FOCAC). This development marked a significant shift in the

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 16 nature of the relationship between China and Africa which has come to be characterised by phrases such as ‘strategic cooperation and comprehensive partnership’.19 This point in the China-Africa relations marked a significant shift in both the nature and extent of the form of development strategies. Currently, China’s influence in the development model of Africa strongly supports socio-economic development.20 Simply, central to the cooperation between China and Africa is what can be referred to as a development compact. This compact aim to reinvigorate economic growth of the continent as well as alleviate Africa’s development challenges through coordinated funding for development, skills transfer and professional development, as well as infrastructure development. In just about a decade from 2007, the official trade statistic between Africa and China was estimated to be about US$1.44 billion and China is the third largest commercial partner for Africa in critical areas such power, oil exploration, construction and telecommunications.21 These areas of investment by China are so critical to Africa’s development given the fact that poor infrastructure is the bane of development for most countries on the continent.22 For instance, infrastructure development is key to attracting foreign investment and lays foundation for economic development. Electricity for example, is intricately linked to quality of well-being and socio-economic development, but, it remains an intractable challenge to many countries on the continent such as Nigeria, Zambia and South Africa. To deal with is challenge, the Henan Province is instrumental in the construction of a power station in the Solwezi area of North-Western Zambia. More importantly, at the core of this contract between the Zambia Electricity Supply Corporation (Zesco) and a Chinese company lies the need to provide its people with adequate and efficient electricity, thereby improving lives and the economy of the country. In furtherance of the objective of win-win cooperation, which is foundational to the China-Africa

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relationship, Sinopec advanced a line of credit to war-torn Angola for development infrastructure by buying stakes to the tune of US$3 billion in the off-shore oil areas of Angola, alongside the state-owned Sonangol Group. Also, countries such as Ghana, South Africa and Nigeria have immensely benefitted from the development investments made by China.23 Further, China’s off-shore oil company paid US$2.7 billion for a stake in Nigeria’s oil exploration – an investment project that put China on the same footing as Europe and America, with Africa accounting for a third of China’s oil imports.24 So, in the last decade (2005 to 2015), Africa has seen a significant shift in its development agenda and goals, occasioned by the huge investments that China is making in many countries on the continent. These investments in mining, manufacturing and technology have, however, not been without some major concerns. China has come to be viewed by some as the ‘new colonialists’,25 while others, especially those from developing countries, see them as an alternative to Western development aid. In 2014, trade between China and South Africa was about R262 billion. Exports from South Africa to China were less than R95 billion, whereas imports from China were about R167 billion. Given the huge disparity in trade between China and the biggest economy in Africa, the general narrative is that the relationship leans more favourably towards Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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THE ROLE OF CHINA-AFRICA RELATIONS IN THE PROMOTION OF THE RIGHT TO DEVELOPMENT IN AFRICA | Rita Ozoemena China.26 Although for many African leaders, China presents the best solution to their development challenges as aptly articulated by the Tanzanian Foreign Affairs Minister at the China’s Dream, Africa’s Dream Conference in Dare Salaam, Tanzania. This is given the fact that the loans granted to Africans are interest free and they do not interfere in the political issues of the countries. Clearly, China-Africa relations in the last decade have brought to the fore critical questions regarding development and what it truly means for Africans.27 One of the issues to keep in mind by African leaders must be to avoid the trap of donor led integration rather than integration process founded on the philosophy of one Africa.

CHINA AND AFRICA’S CONTINENTAL AGENDA 2063 The aspiration of the African Union (AU) Agenda 2063 is that development should be people-driven and caring. Simply put, development encompasses much more than economic growth. This is made more evident when the AU, the umbrella body for all African countries, at the 50 years anniversary of the now defunct Organisation of African Unity (AOU) in May 2013 adopted the Agenda 2063. By recognising the 50 years that OAU has already devoted to African development by ensuring that Africa is free of colonisation, apartheid and any form of domination, the AU sought to develop plans for Africa’s rebirth in charting a new development course. China played a strategic role in ensuring that the infrastructure needed for the effective working of this development agenda is not compromised. To this end, China built a conference and office complex at the cost of US$200 million for the AU, which was donated as a gift.28

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Many criticisms have been levelled at China for this ‘gift’ to Africa’s main governance and policy body. However, this Chinese gift could be seen as a form of technical support aimed at ensuring that the infrastructure to aggressively pursue an industrialised Africa is not compromised but must rather be beefed up. So, as a policy framework, the Agenda 2063 as formulated by the African Union is a strategic framework for socio-economic transformation of the continent over the coming half of the century. It proposes to build and seeks to accelerate the implementation of past and existing continental enterprises for growth and sustainable development. The objective of this continental framework is based on the premise of an inclusive society, which is only be possible where there is people-centred development. In addition to supporting policy initiatives towards developmental states in Africa, the nature of the massive infrastructural development undertaken by China towards Africa has been influential in boosting the ailing sectors, such as agriculture, transportation and manufacturing, in many of the countries on the continent. Further, such initiatives have contributed in no small measure towards the push for countries to diversify their economies, thereby opening new investment areas that were ordinarily dormant. Africans on their part, have been proactive in providing China with the much-needed raw materials Forum on 298 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 16 for its own industrialisation projects. For all the cooperation and investment agreements undertaken by China and Africa, ‘people-driven Africa’ seems to be on the horizon. In other words, the continent is gearing towards an industrialised project. Consequently, the context in which the continent now has made this fundamental shift and has a new outlook, is found in the manner in which the continent has provided direction on the Right to Development, something that is still unsettled in the global arena. In terms of the African Charter on Human and Peoples’ Rights (African Charter) article 22 provides: 1. All peoples shall have the right to their economic, social and cultural development with due regard to their freedom and identity and in the equal enjoyment of the common heritage of mankind. 2.

States shall have the duty, individually and collectively, to ensure the exercise of the right to development. (Author’s emphasis)

In more than 30 years since the guarantee of the Right to Development, it is only recently that serious consideration has been given to how the right could be reconceptualised and then realised in twenty-first century Africa. The United Nations (UN) has made a tremendous effort to realign the discourse and its relevance, particularly in Africa. Currently, a wider understanding that rights must be claimed from anyone willing to help is shaping the discourse on the RTD and its realisation. Sengupta proposes a development compact among nations as a mechanism to ensure that threats to the realisation of the right to development due to resource constraints will be removed.29 This approach is suggested, given that states have the duty to individually and collectively pursue the realisation of universal human rights. At the regional

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level, the existence of article 22 has succeeded in illustrating at least three properties: (a) putting forward new standards; (b) shaping the meaning and limits of existing and new norms, and; (c) helping to render existing or proposed norms indefensible in the conscience or mind of the state (in other words, [de]legitimise the law).30 So, this African contribution to international law, as found in article 22 of the African Charter on Human and Peoples’ Rights, though region-specific, has evolved to such an extent that it has developed the contours of the process of development. By so doing, it has reiterated the fundamental factor of human development. For instance, the first case that the African Commission had the opportunity to pronounce on in relation to the right to development was the Bakweri Land Claims case. Notwithstanding that the complaint was explicitly grounded in article 22, it did not get past the admissibility stage, and was therefore a lost opportunity. The right to development was also relegated to a bundle of rights to be ‘progressively realised’ according to the resources available to the state in the Kevin Mgwanga Gumne et al v Cameroon (commonly referred to as the Southern Cameroun case). This was notwithstanding that the complaint of economic marginalisation, as well as denial of economic infrastructure, particularly in connection to the relocation of a very Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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THE ROLE OF CHINA-AFRICA RELATIONS IN THE PROMOTION OF THE RIGHT TO DEVELOPMENT IN AFRICA | Rita Ozoemena important sea port, was made under article 22. The most authoritative decision regarding article 22 in which, yet again, Africa has shown strong direction, is the Centre for Minority Rights Development (Kenya) and Minority Rights Group International on behalf of the Endorois Welfare Council v The Republic of Kenya (Endorois case). For the first time, the African Commission found a violation of the right to development under article 22.31 The main grievance of the Endorois community was that they were not adequately consulted on the development process, whereby the land around Lake Bogoria (the ancestral land of the Endorois) was converted into a government game reserve. They further alleged that they were also not compensated for a project that will adversely affect their lifestyle as a people. The Commission held that the right enshrined in article 22 serves as both a ‘means and an end’. In other words, it is both substantive and procedural, and a violation of either of the elements constitutes a violation of the right to development.32 In developing a two-pronged test in relation to the right, the Commission underlined the fact that fulfilling only one aspect of the right cannot satisfy its realisation. Rather, there must be these five critical elements: non-discrimination, equity, accountability, transparency and participation. Above all, choice and equity must be the over-arching themes in the right to development. Through this case, Africa has again pioneered a participatory development model that requires states to ‘create conditions favourable to a people’s development’, inspired by lessons from China.

CONCLUDING REMARKS AND POLICY RECOMMENDATIONS The China-Africa relationship, under the rubric of FOCAC, has been instrumental in the

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recent paradigm shift of the development agenda. In many ways, the dominant approach seems to take into account all the elements of the right to development, such as inclusion, participation and mutual benefit. Although the cooperation between China and Africa is not without serious concerns, it is argued in this chapter that there is a concerted effort being made to ensure that win-win cooperation takes precedence over individual goals. This can be further refined through policy considerations such as: Centralising a people-driven development agenda by building capacity for critical skills needed for development in Africa through: 1. building strategic skills transfer in agriculture to ensure diversification of economies of African nations, particularly by way of modernisation techniques through technology, innovation and knowledge sharing; investing in youth development for technology transfer and innovation;



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■  integrated



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development programmes for young people, who are a catalyst and

agents of development, through strategic partnerships with communities, promotion of a rights-based approach to development, through periodic

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 16 2. The right to development presupposes creating sustainable livelihoods. How can China-Africa relations promote sustainability?

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Contributing to sustainability through building sustainable rural communities;



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Improving social development through community engagement programmes

aimed at building trust and social license to operate in local communities. 3. It is important that the win-win co-operation does not support elitism and corruption, which undermines the right to development. Development can only occur in an enabling environment that supports people-centred development. The question is whether China’s policy of non-interference will undermine the right to development.

REFERENCES 1 Odhiambo, P. 2012. Redefining China’s Role in Promoting Peace and security in Africa. In Shikwati (eds.) China-Africa Partnership: The Quest for a Win-Win relationship. Nairobi, Kenya: Inter Region Economic Network (IREN). p.76. 2 Odhiambo, P., 2012. In Shikwati (ed.) p.79. 3 Ebrahim, S. December 5, 2015. Xi Jinping gives Details of Aid Plans for Africa: SA Minister Welcomes Initiatives. Weekend Argus Newspaper. 4 Magome, M. November 29th, 2015. Summit Marks dawn of New Order. The Sunday Independent. 5 April, F., Y, December 2015. China Can Help Develop Africa’s Transport Infrastructure: Connectivity to Growth. China-Africa Summit: Celebrating Cooperation for Mutual Development. Special Edition. p 49.

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6 April, F., Y. Ibid. 7 Hofman, B. and Wu, J., 2009. Explaining China’s Development and Reforms. Commission on Growth and Development Working Paper No 50, Washington DC, World Bank. Available at http://documents. worldbank.org/curated/en/763341468025224944/Explainingchinas-development-and-reforms [Accessed 02 March 2018]. 8 Yong, L., 2017. Africa’s Decade of Industrialisation. Project Syndicate. Available at www.projectsyndicate.org/commentary/africa-industrialisation-potential-by-li-yong-2017-02 [Accessed 02 March 2018]. 9 Guangyuam, L. 2012. The Great Significance of the Era for the New Type of China-Africa Strategic Partnership. In Shikwati (ed.) China-Africa Partnership: The Quest for a Win-Win Relationship. Nairobi. Kenya: Inter Region Economic Network (IREN). p.vii. 10 Sengupta, A., 2014. Conceptualising the right to development for the twenty-first century. In Realising the Right to Development: Situating the Right to Development Report of the United Nations. 11 Mkandawire, T., 2011. Thinking about Developmental States in Africa; Larissa, S., 2011. A Developmental State in Africa: What can policy-makers in Africa learn from the idea of developmental state? A thesis submitted to the Faculty of Arts, University of Witwatersrand, Johannesburg. 12 Larissa, S. 2011. Ibid. 13 Economic Report on Africa 2016: Greening Africa’s Industrialisation. Published by ECA. Available at http://www.uneca.org/publications/economic-report-africa-2016 [Accessed 02 March 2018]. 14 Mubangizi, J, C. 2014. A Human Rights-based Approach to Development in Africa: Opportunities and Challenges. 39 (1) Journal of Social Sciences. p.67.

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THE ROLE OF CHINA-AFRICA RELATIONS IN THE PROMOTION OF THE RIGHT TO DEVELOPMENT IN AFRICA | Rita Ozoemena 15 Shikwati, J., 2012. A Win-Win Relationship with China calls for Urgency on the African Side. In Shikwati (ed.) 2012. China-Africa Partnership: The Quest for a win-win relationship. Nairobi, Kenya: Inter Region Economic Network (IREN). 16 Ebrahim, S., 4 December 2015. Concrete Plan to Meet Targets a Game-Changer for the Continent. Cape Times Newspaper. 17 Nagan, W.P. 4-6 March 2013. The Right to Development and the Importance of Human and Social Capital as Human Rights Issues. Trieste Forum on Science and Technology: Impact on Society and Economy, Trieste, Italy. 18 Nkoana-Mashabane, M., 2015. ‘Forward’. In China-Africa Summit: Celebrating Cooperation for Mutual Development. Johannesburg, South Africa. 19 Shikwati, 2012. In this edition, various authors critically engaged with aspects of China-Africa relations that are relevant to this paper. 20 Ofodile, U., 2009. Trade, Aid and Human Rights: China’s Africa Policy in Perspective. Journal of International Commercial Law and Technology, 4(2), p.13. 21 Wenping, H. 2012. China-Africa Economic Relations: Current Situation and Future Challenges, Infrastructure as an Example. In Shikwati (ed.) China-Africa Partnership: The Quest for a Win-Win Relationship. Nairobi, Kenya: Inter Region Economic Network (IREN). p.7. 22 Wenping. H. 2012. In Shikwati (ed.) China-Africa Partnership: The Quest for a Win-Win Relationship. Nairobi, Kenya: Inter Region Economic Network (IREN). p.8. 23 Wenping, H., 2012. In Shikwati (eds). p.9. 24 Rosen D., H. & Hanemann. T, China’s Growing Presence Abroad Brings New Competition but Also Commercial Opportunities. July1, 2012. China Business Review. Available at http://www.chinabusinessreview.com/the-rise-in-overseas-investments-and-what-it-means-for-american-business [Accessed 13 March 2018]. 25 Oloo, A. 2012. China and India Engagement in Africa: A Critical Analysis. In Shikwati (ed.) China-Africa Partnership: The Quest for a Win-Win Relationship. Nairobi. Kenya; Inter Region. p.150.

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26 Ka ‘Nkosi, S. 2015. SA-China Ties Set for Boost: Forum to usher in new era. In Special Commemorative Edition. December 2015. China-Africa Summit: Celebrating Cooperation for Mutual Development. p.45. 27 Ozoemena. R. & Hansungule, M. 2014.Development as a right in Africa: Changing Attitudes towards the Realisation of Women’s Citizenship. Law, Democracy and Development Journal. p.228. 28 Shikwati, J. 2012. China-Africa Relations: A Catalyst for Africa’s Integration. In Shikwati (ed.) ChinaAfrica Partnership: The Quest for a Win-Win Relationship. Nairobi. Kenya: Inter Region Economic Network (IREN). pp.46–49. 29 Sengupta, A., 2014. 30 Okafor, O.C., 2014. A Regional Perspective: Article 22 of the African Charter on Human and Peoples’ Rights. In Realising the Right to Development. A Report of the United Nations, p.374. 31 Kamga, S. 2011. The Right to Development in the African Human Rights Systems: The Endorois Case. De Jure. p.381. 32 Browning, R., August 2011. The Right to Development in Africa: An Emerging Jurisprudence? Examining the Endorois Recommendation by the African Commission. Available at http://kenyalaw.org/kl/index. php?id=1900 [Accessed 02 March 2018].

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17 CHAPTER

POST FOCAC VI – SYNERGY OR ANERGY IN THE CHINAAFRICA COOPERATION Paul Tembe

INTRODUCTION The Forum for China-Africa Cooperation (FOCAC) Action Plan (2016-2018) seeks a balance between areas of extractive industry, industrial development, infrastructure development and agricultural modernisation. It is aimed at aligning the needs of China to those of African nations, so as to draw maximum benefit from China-Africa cooperation. In short, the document aims to identify and enhance synergies for cementing China-Africa Development and Cooperation. Despite new approaches to advancing China-Africa cooperation the FOCAC VI Action Plan (2016-2018) and China’s Second Africa Policy, documents continue to reflect customary rhetoric expressed in terms of: i) the parallel trajectory of anti-colonial struggles by the African and Chinese people; ii) mutual development; iii) a win-win situation; and iv) the Western media’s anti-China rhetoric regarding the African

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continent.1 However, the abovementioned rhetoric has thus far tended to be counterproductive, as it is at most vague and reactive, and is premised on a third party that does not exist in China-Africa cooperation frameworks.2 Further reading of the above documents reveals attempts by the Chinese Government to fend off negative views regarding China-Africa cooperation. The negative views cite exploitation of Africa’s natural resources, unfair trade, flooding of African markets with cheap goods, support of authoritarian regimes, importing Chinese cheap labour, and the dominance of the ‘made in China’ political rhetoric witnessed in China-Africa cooperation frameworks.3 The abovementioned factors constitute an arsenal for those who regard the presence of China in Africa as a better alternative to five centuries of Western dominance and those against it. The former group, nicknamed ‘panda huggers’, consist of those who either perceive China as a saviour, or as the better of the two evils. The latter group, nicknamed ‘dragon slayers’, rely on arguments founded on ‘Western enlightenment’ and a Procrustean bed of Western conceptions and imaginations.4 However, China seems to have sought a strategy that aligns itself with Africa’s own developmental plans. Discernable in the FOCAC VI Action Plan (2016-2018) and China’s Second Africa Policy documents is emphasis placed on the common interests of China and Africa, with the Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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latter’s interests expressed in terms of the Africa Agenda 2063.5 Does the strategy of identifying commonalities between China and Africa serve the purpose of enhancing synergy between the two parties? It is argued here that such a strategy is at best a reaction to criticism of perceived asymmetries, which points at China as the main initiative-taker in China-Africa cooperation frameworks. Moreover, the strategy fails to question African silence and the lack of agency witnessed within China-Africa cooperation frameworks.6 Teasing out symmetries and asymmetries in China-Africa frameworks has so far proven less fruitful and tends to fuel the ‘China as new colonial masters to Africa’ rhetoric.7 This chapter suggests abandoning the model that relies on teasing out symmetries and asymmetries, as a means of enhancing China-Africa frameworks’ synergies. The suggestion is based on the rationale that synergy, by definition, presupposes an existence of differences - and not symmetries - between entities involved in a cooperation arrangement or partnerships. This chapter seeks an alternative approach for identifying and enhancing synergies between Africa and China’s spheres of interest. One such alternative is to examine the rationale or frames of reference/value systems that inform African and Chinese practice in China-Africa cooperation frameworks. The exercise of examining practice as informed by a given value system may reveal the habitus of the people that consist China-Africa cooperation, making it possible to pre-empt and mitigate future conflicts. The chapter also seeks to highlight and suggest solutions to mitigate African silences and lack of agency, which may be at the core of impeding heightened synergies and development in China-Africa cooperation, beyond all other identified factors. This chapter consists of nine sections, the first being the introduction. The second section discusses the rationale of examining traditions, values and norms behind the

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rhetoric of a particular society. In the third section, definitions are provided of lexical units’ symmetry and synergy, where ‘synergy’ and ‘systems’ are suggested as working variables that are aimed at unpacking the origins and meanings of the rhetoric witnessed in China-Africa forums. The fourth section discusses the use of popular rhetoric in China’s scholarship, as witnessed in the treatment of subjects such as ‘modernisation’ and ‘people to people relations’. The fifth section highlights the role of Confucius Institutes in the China-Africa cooperation space. The sixth section on ‘Chinese in Africa’ and ‘Africans in China’ is set to contrast the inward-looking tendencies witnessed in the previous sections. The seventh section highlights how African and Chinese scholars understand the notion of ‘pragmatism’ differently as a handle for describing China’s policy formulation and implementation. The eighth section highlights performatives that inform China’s political agency. The section that discusses the treatment of Africa as an ahistorical continent precedes those on conclusions and recommendations.

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 17

TOWARDS A CONCEPTUAL OVERVIEW What concepts and theoretical tools may apply to help establish and enhance synergy in China-Africa cooperation? Prior to answering this question, though, it is imperative to emphasise that concepts alone do not constitute solutions. Instead, it is the people who apply concepts in accordance with local frames of reference that are embedded in the prevailing habitus, who provide insight into underlying traditions, cultures, customs, practice and possible futures.8 Bourdieu terms the total manifestation of traditions, customs and practice by a given cultural group the ‘habitus’.9 He explains that habitus is a system by which individuals in a given culture conduct their lives through values inculcated at a very young age and transmitted from one generation to the next. However, he also cautions that such a system is not permanent, but changeable at times of acute social crisis. The above rationale is helpful in understanding how people produce, bargain, exchange, offer and lose a variety of capitals found within cultural, social, political and economic fields.10 Bourdieu concludes that, in order for any type of human relation to thrive, all parties involved must believe in the game. All members must believe that there are favourable benefits for the self, otherwise none would partake. Given the above scenario, it is then imperative that scholars of China-Africa studies examine underlying circumstances that bring together two cultures and the impact one has on the other. The working thesis of the suggested inquiry relies on the notion that humans only partner with one another in order to either strengthen an individual condition/status in a given field or to sustain one’s own group standing.11 Such an analogy may extend to include people from different cultures, business partners, colleagues, brothers-in-arms, and slave-master, oppressor-oppressed and husband-wife relations. Such a rationale suggests

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that, in order for any relation to prevail, there must first exist a notion of perceived gains, imagined or real, spheres of mutual interests not necessarily based on equality/symmetry and that these interests should aim at either short or long-term benefits for both parties. However, Butler warns that a meeting of different values is usually accompanied by expressions that may seem foreign to either party.12 Both parties may experience new expressions as insurrectionary acts risking the ending of the partnership at its infancy. In order to prevent rebuke on either side of a partnership, conformity acts ease the way for insurrectionary acts to enter new environments, using the rhetoric representative of local value system.13 Application of the above rationale ought to mitigate, if not entirely question, the validity of symmetrical relations as a pre-condition for establishing and enhancing synergy in the China-Africa cooperation frameworks.

Synergy versus symmetry The lexical unit ‘synergy’ is suggested to serve as a concept of inquiry in the analysis of rhetoric witnessed to inform practice in China-Africa cooperation. The ‘Webster Unabridged Dictionary’, defines ‘synergy’ as a system that cannot be predicted by the

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behaviour of its parts.14 The definition helps understand that ‘synergy’ may occur and yield results that are irrespective of its parts. The second variable suggested to help an inquiry into the impact of underlying value systems in China-Africa cooperation rhetoric is the lexical unit ‘system’. The reason for applying the lexical unit ‘system’ or ‘systems’ as a variable of inquiry in this study, is as follows: ‘synergy’, beyond it being referred to as a system on its own right, also combines a variety of systems that may or may not produce unique outcomes sought by individuals, groups of cultures and nations, as those witnessed to consist China-Africa cooperation. Cultural, political and economic systems constitute integral entities that manifest and impact on China-Africa cooperation. These systems are generally categorised as follows: top-down versus bottom-up political systems, central and open government systems, state-planned and free-market systems, individualistic and communal value systems. The above classification presupposes that each system has a unique and underlying cultural and localised rationale that, in turn, informs and supports a specific type of practice that is reflective of a given society.15 According to the above analogy, symmetry does not seem to qualify as a prerequisite for synergy to take place in China-Africa cooperation. Such a view seems to support the argument that the absence of symmetries and meeting of different systems provide spaces for synergy that may result in cultural, political, social and economic benefits.16 The above analysis seem to reveal that, in examining possibilities for synergies in ChinaAfrica cooperation, one ought to start at the level of abstraction before moving to practice. However, a tendency to evade the underlying constructs that impact on practice in China-Africa cooperation is witnessed in China-Africa studies. Such may have led to an emergence of scholarship exempt of theoretical foundations, as presented in the section

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below.

PARADOXES OF SCHOLARSHIP EXEMPT OF THEORETICAL FOUNDATIONS China-Africa scholarship has, at one time or another, suffered from the following malady: reliance on one-sided and selective sources, either of Western or Chinese origins. It is usual for Western scholars who are examining China-Africa cooperation, including those of African origin, to ignore works by Chinese scholars. Such a tendency may have prevented an all-round and exhaustive inquiry leading into a weak China-Africa scholarship. Similar tendencies are also discernable to a given extent on the side of the Chinese ChinaAfrica scholars. As the language barrier is usually cited as the culprit in the omissions mentioned above, Chinese scholars tend to fare better, as the majority of China-Africa scholarship forums are conducted in the English language. Selective scholarship such as that witnessed in China-Africa studies may result not only in omissions of theory and knowledge, but may also lead to misconceptions. The omission of works by African or Chinese scholars not only impacts on knowledge transfer

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 17 but results in obscuring realities of respective cultures and peoples. The paradox that comes forth is: Why does a scholar examine and have an opinion on Africa or China if he or she is determined to alienate underlying cultures? Furthermore, what variables will one apply to study the realities of African and Chinese practice, if one excludes their works in the name of language and other feigned barriers? Thirdly, beyond sowing the seeds of misconception, what does evading works written by scholars on either side constitute?17 Similar to the Western epistemology that has (since the ‘age of enlightenment’) resulted in the emergence of different eras of scholarship, from universalism, structuralism, post-structuralism, modernism, post-modernism and multi-disciplinarity to postdisciplinarity, so has sinology – a subject that has served as an interface for studying China since the eighteenth century. Moreover, China has, since beginning with the Spring and Autumn Period (476 BC to 221 BC) its own schools of thought, formalised into civil service examination during the Han dynasty (206 BC to 220 AD) and utilised as a major path to bureaucratic office since the Tang dynasty (618 to 907 AD). Although abolished in 1905, the model and parts of its tenets continue to inform the Civil Servant Examination, which is a prerequisite to occupying public office in China today. The absence of the ancient and contemporary African scholarship, although having remained a reserve for debunking colonialism and all of its vicissitudes, from the growing literature of ChinaAfrica studies is inexcusable. Dominance by one model of scientific inquiry as witnessed in China-Africa studies may lead into stagnation, risking a repeat of a master-servant rhetoric, albeit this time around it will be donned in notions of multi-culturalism, preser-

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vation of environment, fairness, democracy and human rights.

ORIENTALISM: SINOLOGICAL-ORIENTALISM AND SINOLOGISM Selective scholarship and the dominance of Western theories have led to omissions and misconceptions about China and its intended path for China-Africa cooperation. Such tendencies contribute to archaic views of China based on Orientalism as explained by Edward Said as regarding the other based on race and ethnic traits.18 Daniel Vukovich argues that using such a framework reveals an inferior China as viewed through the lens of Western scholarship.19 Vukovich calls such a trait Sinological-orientalism. O’Brian points out that the notion of Sinological-orientalism was born out of ‘universal’ Socialscientificism and Cold War writing, which always imposes Western superiority over an entity called China.20 In their haste to learn from the West and take leadership in the international arena Chinese scholars seem to have adopted Sinological-orientalism to study other places and cultures, including Africa. O’Brian points out that within the framework of Sinologicalorientalism, Chinese scholars tend to practice what Gu21 terms Sinologism, and explains it as follows: ‘Whilst Orientalism and Sinological-orientalism are seen to have been

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“employed” for political gain, and a tool for governments and traders, Sinologism is an unconscious process used by academics and wider society. China, and its scholars, now represents itself as the West does.’ The above scenario is discernable in the triple paradox manifest in China-Africa scholarship. Western scholars tend to apply both colonial and Sinological-orientalism frameworks and methodologies to position themselves as guardians of China-Africa scholarship. Colonial ethos is applied as anti-colonial warnings by Western scholars to Africans. Warnings of a possible re-colonisation of Africa, imagined or real, although dismissed by some Africans and by most Chinese scholars, tend to ‘perform’22 a hierarchical perception of the other between Africans and Chinese. In the hierarchy, Africans place at the bottom as possible victims of re-colonisation followed by China in the middle perceived as an agent of re-colonisation, which leaves the top position to the Western scholar as the arbitrator. The thin veil of Western colonial ethos pervades China-Africa scholarship, riding on the manifestation of Sinological-orientalism, as described by Vukovich in the above section. On the other hand, Chinese scholars whose agency is to strengthen China-Africa cooperation tend to distance themselves from the colonial ethos presented above. Nevertheless, in an attempt to provide a counter-narrative that is framed as ‘no intentions to colonise an old friend’, the latter made in reference to Africa, China finds itself having to walk a tightrope between Western hostility and African expectations. In the process China is left in a defensive mode, where in order to prove that it has good intentions to the African it must offset and take the position formerly occupied by the West, even if only in the form of counter-discourse. In taking such a stance, China falls right into the trap of

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Sinologism, as it must be seen to defend and baby-sit Africa. The irony is that the Chinese scholar is compelled to occupy the role founded within the Western ethos of possible recolonialism of Africa. Such circumstances leave China in a ‘Catch 22’ situation – damned if you do and damned if you don’t. In the above analysis, beyond highlighting Chinese and Western scholars’ power-play in China-Africa forums, it also reveals the absence of African’s voices. Currently, the African scholar either buys into the Western knee-jerk mode of analysis or resorts to mimicking the ‘made in China’ popular rhetoric, especially in the works that seek to argue for a pro-China stance in Africa. There are currently no signs or empirical data that support the view that the African scholar is able to speak from a position of strength and influence policy, nor that he /she has a deep understanding of the goings-on within ChinaAfrica cooperation frameworks, except for a handful of individuals. If Western theoretical frameworks and methodologies have not yielded desired gains for China-Africa cooperation, what alternative avenues are left for inquiry?

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 17

MODERNISATION WITH CHINESE CHARACTERISTICS Since the inception of the 1978 reforms, several Chinese dignitaries, including Deng Xiaoping, Hu Jintao and, recently, Foreign Minister Wang Yi, have warned that Africa cannot hope to achieve its development through a specific given model from China. Dambisa Moyo reiterates that very warning in one of her recent books on China-Africa.23 The above statements by Chinese leaders were uttered as warnings to their elite African counterparts, as the latter showed eagerness to learn from China. In the above warnings, Chinese dignitaries reflect the rationale that, when dealing with people from other cultures, or when in foreign lands, one ought to conform to the customs and conditions of the host country,24 as in the time-tested dictum, ‘When in Rome do as the Romans do’.25 The decorum and tact witnessed in Chinese dignitaries’ dealings with Africa are seemingly rare among some Chinese scholars. One such example is that witnessed in the analysis of the concept of modernisation, which tends to rely on popular rhetoric or political maxims. In explaining why industrialisation and modernisation has so far evaded the African continent, He states that: ‘African countries, they all have one common factor, which is the inability to engage in mineral industrialisation, infrastructure development, and agriculture modernisation.’26 Politically, the statement lacks the necessary caution and decorum observed in other areas of China-Africa relations. Secondly, it is fraught with fallacies that lack justification even beyond scientific inquiry settings. The discussion of modernisation mentioned above ascribes the concept’s success in China to its implementation within the parameters of ‘Chinese Characteristics’.27 However, the above narrative omits the fact that the concept ‘modernisation’ has undergone a variety of changes and controversies and was eventually abandoned during the late 1960s.

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It was only resuscitated during the initial stages of the reform and opening up of China during the late 1970s. Explicating the recent successes of ‘Modernisation theory’ in China solely through a ubiquitous notion, such as ‘Chinese characteristics’, has limitations. The exercise may be misleading in the sense that it identifies ‘Chinese Characteristics’ as a tenet of China knowledge. This tendency begs the question: Is the expression ‘with Chinese Characteristics’ (WCC) supposed to act as a tenet or a repository of Chinese knowledge, or as a Chinese knowledge search parameter? In revisiting the statement by He above: does it presuppose that the whole of the African continent is endowed with natural resources and that it possesses all the factors necessary to carry out the desired industrial development? Does the statement take into account that Africa has histories and arrangements in place, albeit the nature of the arrangements has so far impeded it from advancing at will? Does it take into consideration that China represents yet another international player (among many others) with a much longer track record on the African continent? China-Africa scholars ought to first answer the above questions in order to formulate robust theoretical frameworks that may help enhance synergy between the two parties. Ignoring a variety of Africa’s histories as a variable that impacts on China-Africa cooperation synergies will only lead to a weakened Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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China-Africa cooperation whose endeavours, including scholarship, are not taken seriously by either its citizens, or by the international community. What are discernable efforts carried out by China towards gaining appeal in Africa and the world at large?

Inward-looking Confucius Institutes as agents of soft power The majority of China-Africa studies have identified the establishment of Confucius Institutes the world over as evidence of the implementation of soft power by China.28 Confucius Institutes have served to spread the visibility of China in Africa through their presence at the majority of universities and through Confucius classrooms spread all over the continent. Kenneth King points out that Confucius Institutes, in spreading and advancing Chinese culture on the African continent, has turned China into a favoured destination for tertiary education for African students.29 However, the success of Confucius Institutes in spreading the Chinese culture and language in Africa has been shrouded with criticism. One such criticism cites its lack of transparency, where a refusal of unflattering chapters of history may be misleading for understanding the interplay between a variety of historical and contemporary Chinese events, and cultural aspects.30 Although Confucius Institutes insist on a double directorship – one Chinese national and one local national – the latter seems to serve as a tool for mitigating possible criticism. Confucius Institutes have been observed to manifest as independent sealed units that are immune from the regulations and statutes of the institutions that host them.31 Such tendencies render Confucius Institutes unsuitable for establishing a platform for critical Chinese studies in the traditional sense of contemporary scholarship.

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An understanding that China is a particularistic culture may explain the manner in which Confucius Institutes are run.32 However, relying on such constructs for the presentation of China abroad may beg the question; why do Confucius Institutes insist on selective treatment of a variety of subjects that pertain to China? An even more pressing question is: why do the host tertiary institutions abroad condone the terms and conditions under which Confucius Institutes run their programs, which at times constitute direct violations of regulations and statutes in place? Although Confucius Institutes are officially referred to as tools of public diplomacy, their manifestation borders on that of ‘dollar diplomacy’. The above argument reflects the tendency for Confucius Institutes to go beyond serving as a platform for marketing selective images and narratives about China to the world, and to double as a recommendations board for students seeking to further their education in China. Confucius Institutes have also proven attractive to universities abroad, as they are accompanied by generous Chinese Government funding worth several hundred dollars a year.33 In a sense, Confucius Institutes serve as an alternative avenue for social upward mobility for the majority of African scholars and some students, while asserting the presence of China on the continent. Nevertheless, Confucius Institutes contribute, within their limitations, Forum on 310 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 17 to a specific image of China that is beyond the reach of the dominant Western discourse witnessed in China-Africa cooperation frameworks and studies.

People to people relations The ‘people to people relations’ (人与人关系 or ren yu ren guanxi) became the buzzword of FOCAC V and gained prominence in China-Africa studies.34 The subject examined the means to enhance relations between Africans and Chinese people. The positive aspect in the popularity of ‘people to people relations’ is that it signalled a closer relationship and a turning point in the China-Africa cooperation. Li Anshan points out that the majority of works on the subject of people to people relations tend to concentrate on politics, i.e. either on the ‘soft power’ connotation, or on examining ‘China’s strategy’.35 He further points out that such an approach is rather narrow and does not offer a full understanding of people to people contact as witnessed in China-Africa relations. However, despite the above caution, Li concludes with a narrative on how a government/state-sanctioned body, such as the China Civil Organisation (CCO), is better suited for conducting people to people relations.36 Another discernable conflict in the text is to attribute a negative role to African non-governmental organisations (NGOs), only to later identify them as part of the means to advance people to people relations in China-Africa relations.37 Li concludes with recommendations that read as follows: It is imperative to promote P2P activities and get more people involved in ChinaAfrica cooperation, to form a partnership within a triple coordinate system of

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government-enterprise-CCO (NGO in Africa).38 Such an approach is in line with the need for all China-related initiatives, even beyond its national borders, to be state driven. Such an inward and central looking perspective is similar to tendencies witnessed in the running of Confucius Institutes and other China initiatives within the realm of China-Africa cooperation. While the CCO may seem suitable for advancing people to people relations according to the standards of the Chinese Government and society, its suitability may not be so obvious to the African counterparts. The CCO is a construct and an extended arm of government structures and it is meant to help with peripheral vision and to assist where the centre might suffer from a blind spot. By its nature, it needs to heed the voice of the status quo. An African NGO, on the other hand, is, by tradition, a peripheral organisation that double-checks the government and calls it to task when it is at fault. It neither heeds the voice of the status quo, nor does it answer to the government. The challenge for enhancing China-Africa cooperation synergy through people to people relations is when two agencies that seem to have a similar function and makeup are paired, but do not resonate in the task, as one adheres to the top-down mode of practice while the other holds unto the bottom-up rationale. Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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Comparisons between African and Chinese cultures or ‘Ubuntu’ made in America versus ‘English Confucianism’ There have been studies that suggest China-Africa cooperation ought to exploit African and Chinese cultural similarities as a vehicle for cementing and advancing relations. African cultures are very similar or have similarities to Chinese culture. Ubuntu is very similar to Confucianism, as they are both based on communal traditions and value systems ... in contrast to Western individualistic traditions and value systems.39 The above mantra manifests in a void of African voices in China-Africa studies and has tended to adopt inward-looking tendencies, along with tendencies of hedging scholarship inquiry. This new wave of scholarship has tended to be sensitive and nonchalant to any criticism regarding factual constructs of the cultures it purports to examine. When the rationale of studies is probed on the basis of Chinese history and philosophy, the standard answer is, ‘here, we base our arguments on Confucianism from English sources’, or ‘we discuss Confucianism found in English sources’. If a question arises regarding the actual language that informs the culture under examination, the standard answer reads as: ‘not all of us can be experts in either Mandarin or isiZulu’ and that marks the end of a discussion. The novel aspect in the above described scenario is that the intolerance and inward-looking tendencies are those of a third party beyond those that consist ChinaAfrica cooperation.

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Similarities between studies cited above and the running of Confucius Institutes are discernable in that both enjoy unlimited financial support from their respective nations of origin. The observation begs the question: Where is the voice of the African scholar that is supposed to position the continent in the new global paradigm shift as the two players of South-South cooperation contend for central spaces in the international system? In essence, the narrative or paradigm divide witnessed in China-Africa studies is not that between African and Chinese scholars, but that embedded within the old conflict of East versus West ideologies, as explicated through the notions of Orientalism, Sinologicalorientalism and the resultant sinologism discussed earlier on in the chapter. However, not all is doom and gloom: there exist exceptions to the above-witnessed African silences, as presented in the next section.

CHINESE IN AFRICA AND AFRICANS IN CHINA At the other end of the spectrum, a new scholarship has emerged at the periphery of China-Africa studies. The emerging scholarship on Chinese in Africa and Africans in

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 17 China seems to have made an effort at situating and contextualising the two peoples in their newly found territories.40 These works also describe how host communities have reacted to the presence of the newcomers. The abovementioned body of work on Chinese in Africa and Africans in China is distant from the centre of the quasi-political and popular rhetoric literature witnessed to populate China-Africa scholarship. The subject of Africans in China has been largely championed by individuals of Chinese descent on the African continent.41 These studies reveal a vibrant Chinese presence and heritage in Africa away from that which emerged in the post-2000 China-Africa discourse.42 South African Chinese communities have been vocal and prominent in driving the project of Chinese-African interaction or Chinese presence in Africa beyond the recent standard narrative of the seafaring Admiral Zheng He.43 Scholarship on South African Chinese is unique in the sense that it reveals a community that has achieved milestones by riding on both South African recent democracies and China-Africa cooperation developments.44 South African Chinese driven rhetoric relies on situating and contextualising the Chinese population within African societies using a variety of hands-on issues, as witnessed in the campaigning for Black Empowerment status within South African legislation. Perhaps it is in this community with African experiences that both Chinese and African scholars may gain an insight when seeking factors that may enhance people to people relations and synergy in China-Africa cooperation. Similar to the above hands-on perspective, are studies examining the plight of Africans in China. Bodomo et al. use a variety of perspectives in describing and contextualising the situation of Africans in Chinese society.45 Among the variables witnessed in these studies are: i) the learning and the use of language by Africans in China; ii) food culture that Africans bring into Chinese society; iii) mixed marriages and the plight of mixed

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children in a near-future China. These studies point out that learning Mandarin has helped Africans in China to communicate and adapt easily in their new environment.46 African food culture is identified as a factor that has enabled Africans to mark their presence and promote their culture within a variety of Chinese spaces beyond the customary trade enclaves of Guangzhou and Yiwu in the South Eastern region of China.47 Lastly, Bodomo examines the role of mixed marriages between African men and Chinese women as a variable for situating race relations in the present Chinese society.48 The broad and outward-looking perspectives and methodologies witnessed in works by Bodomo et al.49 are absent in the majority of China-Africa studies examining the subject of people to people relations. In Chinese society, birth, marriage, language and food impacts on the identities of all individuals, from those in the remotest hamlet to the biggest metropolis.50 These constitute pillars of traditional Chinese cardinal variables that define one’s sense of identity and stage in life.51 Language, including dialect, identifies and defines a person’s social position and possibilities in the total sum of Chinese hierarchies reflected in its role in a variety of paradigm shifts since ancient times to present.52 Food is a primary indicator as to the regional origins of a Chinese individual and defines whether one belongs to Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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minorities or major nationalities.53 China has policies in place that favour minorities, enabling them access to the centre of political, academic, cultural and economic spheres of Chinese society.54 Marriage, in a culture where endogamous practice was enforced under the law, marriage continues to define one’s hierarchy and possible upward social mobility to this day.55 The practice of endogamy under the rationale or dictum Mendang hudui 门当户 对,56 states that when considering a marriage partner one must consider the following: social standing, family background, economic status, educational level and language.57 In Chinese society, marriage constitutes more than cultural formation and continuity. It also doubles as a cornerstone of Guanxi 关系 or ‘social networks’, where individuals stand to gain or lose social, cultural, political and economic capital by association.58 It then begs the question about why all the abovementioned central traditional Chinese social principles do not feature as variables in the works that examine people to people relations within the ambit of China-Africa studies.

FROM ABSTRACTION TO PRACTICE All successful nations reveal similarities in respect of possession and adherence to their foundational texts.59 The trajectory of history and politics of China all the way to the present era reflects adherence to the tenets of its foundational texts.60 Such texts have proven to be decisive in guiding practice in society as these contain the traditions, norms, customs and value system of a given culture and history. Lagerwey explains the notion of nations adhering to their foundational texts in the

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following manner: a history of any nation consists of paradigm shifts, with a new social system rising when the one in place has become obsolete.61 He goes on to state that the former, although regarded as new, does not stray from the original foundational texts of that particular culture. Stated in more manageable terms; China-Africa relations consist of traditional Chinese culture systems, diverse African cultures systems, Chinese government system and diverse African governments systems. All of the abovementioned systems have origins in specific thought processes and historical patterns that cannot be understood or overturned overnight. Such a rationale is yet another instance that seeks to point at the importance of making an analysis based on cultures that consist ChinaAfrica cooperation rather than on the idealistic amorphous potpourri witnessed in the majority of China-Africa works, especially those by African scholars, with the exception of a few.

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BRIEF ANALYSIS OF TRADITIONAL AND MODERN CHINESE FOUNDATION FOR PRACTICE It may appear that a majority of African scholars are at a loss in regard to traditional Chinese cultural constructs and principles, judging from the arguments and responses provided during deliberations in China-Africa forums. To a lesser degree, the same may be stated in regard to Chinese scholars, discerned from a tendency to hedge a direct question with a long historical and sometimes unrelated incident. Case in point – a question to a South African problem may be answered by mentioning an unrelated incident that took place in Togo 50 years ago. Such tendencies tend to leave scholars of both sides speaking out of context. Such an observation leads one to question if China-Africa scholars have taken the time to examine the foundations of the different styles of rhetoric each side employs. Furthermore, have China-Africa scholars sought to understand the meanings embedded beyond the spoken word of either side? Given the above analysis and the rationale of the present paper – that behind ideas are the identities of a given culture – a question that remains unanswered is: Which cultural platform is employed during the processes of rationalisation and decision making in China-Africa cooperation forums? Furthermore, how does one strengthen relations without a thorough understanding of value systems that impact on either side of the cooperation? Below is an example of how much remains obscured or lost for the lack of a robust and concise cross-cultural platform in China-Africa forums.

Pragmatism and its different meanings in China-Africa forums

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In discussions concerning China-Africa cooperation policy formulation and implementation, frequently featured are the expressions ‘pragmatic’ and ‘pragmatism’. Chinese dignitaries and scholars are quick to point out that there is no system or model that is China specific beyond the witnessed trial and error that informs China’s development since the inception of its reform policies. Such a statement may imply that China relies on pragmatism when involved in policy formulation and implementation. What is not pointed out in the China-Africa deliberations is that China has a set traditional, political and social framework, upon which the practice of being ‘pragmatic’ or upon which ‘pragmatism’ is framed. The principal traditional Chinese framework that informs practice, including that of ‘pragmatism’, is that found within the conceptualisation of a Chinese family. Since preimperial times, the Chinese micro family has served as a platform for rationalising the construct of its macro family, i.e. the nation.62 国是大家，家是小国 – ‘A nation consists of everyone; a family is a small nation.’63

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Mencius said, ‘People generally speak of “the world”, “the state”, and “the family”. The root of the world lies in the state; the root of the state lies in the family; the root of the family lies in the person.”64 The structure of the Chinese family differs from that of other cultures in the way it serves as a foundational field for inculcating and transferring social traditions, in that it tends to manifest within the logic of gong/si 公/私 (public/private), where gong 公 (public) takes primacy over si 私 (private), and is strongly reliant on the notions of rong 荣 (virtue) and chi 耻 (shame), which serve as a framework that guides and legitimates all practice.65 The above analysis reveals that while an African scholar may assume or understand ‘pragmatism’ as employed by China to be a combination of a variety of factors meant to address whatever issue is at hand; a Chinese scholar understands ‘pragmatism’ within the given parameters found within the Chinese value system.

Performatives that inform Chinese frames of reference and practice In contemporary China, the parameters of a family value system, as described above, are witnessed in the maxims that express the rationale of a given political era. The maxims read as follows: ‘Serving the People’ wei renmin fuwu, 为人民服务 is a maxim that informed political rationale and all practice in China from the Yenan era to the inception of reform policies between the years 1944 and 1978.66 ‘Four Modernisations’ sige xiandai hua, 四个现代化 informed the era of the reform and opening up policy championed by Deng Xiaping.67 The ‘Three Represents’ sange daibiao, 三个代表, is representative of the rationale set in place by Jiang Zemin.68 ‘Eight Honours and Eight Shames’, barong, bachi, 八荣八耻, represents the rationale that informed practice during the era of Hu Jintao.69

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The present ‘China Dream’, zhongguo meng 中国梦, is representative of the current era under President Xi Jinping.70 Discernable in the above maxims is that, although they are meant to respond to acute pressing problems of a given era, all do not abandon the foundational framework that conceptualises the traditional Chinese value system, as practiced within the confines of a micro and macro Chinese family.71 In all instances, the rationale behind the construct of a traditional Chinese family serves as a platform upon which practice is rationalised, be it in search of cultural, social, political or economic solutions. The above conceptualisation of the Chinese family is one perceived as a manifestation of a top-down form of government by the greater world.72 An understanding of the above presented Chinese rationale is crucial for Africa if it is to draw maximum benefits from its China-Africa encounters. Identifying China’s political and social systems as a simple top-down type of government is not helpful within the ambit of China-Africa cooperation frameworks. Even if China-Africa cooperation is understood in terms of an interaction between a top-down versus bottom-up systems, with the latter representative of Africa, there still remains the task of teasing out the following: how does a bottom-up political and social formation, represented in this instance Forum on 316 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 17 by Africa, benefit from that which is informed by a top-down rationale, as represented by China?

AHISTORICAL AFRICA The above section highlighted possible shortcomings that are due to a lack of understanding of traditional Chinese culture by the African counterparts. This section focuses on the tendency of China to treat Africa as an ahistorical locus for cooperation and investment. A group of African countries still rely on their former colonial masters for industrial development and modernisation, despite the romanticism witnessed in China-Africa frameworks on the matter. These African countries continue to pay a huge colonial debt that impedes local progress and despite China’s huge investments.73 One such example is that of France, which continues to receive substantial yearly payments from former colonies, based on colonial debt.74 On top of that, France controls the CFA franc currency of the so-called franc zone countries.75 Furthermore, France receives 65 per cent of total foreign currency deposits from these African member states and keeps a further 20 per cent to cover any financial liabilities, which means 85 per cent of their combined foreign reserve.76 Such an arrangement impedes the FCA franc currency member states from conducting any meaningful business beyond the confines of French fiscal authorities. How do colonial trade and debt manifest and how do these impact on China-Africa cooperation? Colonial trade defines a type that only served the colonist at the expense of the colonies and their people.77 Such trade persisted throughout colonial history around the world. Colonial debt, on the other hand, is witnessed today in a variety of nations

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scattered all over the African continent, especially in the former French colonies. Colonial debt is very much alive in the sense that it is usually embedded in a variety of assistance pledges made by the former colonial master to respective former colonies. The terms of colonial debts are usually designed in such a manner that any breach would cause an entire political and economic system to crumble, threatening the very existence of a former colony as a nation state.78 A case in point is when Mali and Senegal had terrorist threats and it was France that swiftly moved in with military assistance.79 The meeting of the Sahel G5, which had gathered to discuss the threat of terrorism in the region, had an army of 600 French troops on standby.80 A reading of the above scenario reveals that colonial debt is meant to ensure the continued presence and enrichment of former colonial masters’ nations. Former president of France, Francois Mitterand, was cited as saying, ‘We cannot afford to leave Africa alone. If we do this, it will be to our peril. Europe has nothing without Africa’.81 Compounded with the issue of colonial debt is the ownership of land and natural resources in Africa. A greater percentage of land and natural resources are no longer in the hands of African indigenous people or government. Ghana and Zambia may be cited as examples where national produce no longer benefits local communities. In Ghana Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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cocoa plantations are largely owned by multinationals and Zambia has reduced or no control over its mines. Market decisions for the produce indigenous to Africa are taken somewhere else than in countries of origin.82 The majority of Africa’s mineral and natural resources have either long been sold to the highest bidder, or put up as collateral to a variety of multinationals and international finance institutions.83 The scenario is pervasive throughout Africa. On the other hand, China’s arrival in Africa did not result in a new game plan. Instead, China is competing with the old players, only causing temporary inconvenience for the initiated while providing a breathing space for the African continent. Such conditions reveal that China does not hold a permanent solution for the African continent. The fact that Africa lacks ownership and control of the greater part of the natural resources found on the continent should strongly feature in the analysis of China-Africa cooperation synergies.

CONCLUSION This chapter has sought to interrogate possibilities of synergy and/or anergy in the ChinaAfrica cooperation models, as conceptualised and implemented in the FOCAC VI Action Plan, and concomitantly in the Africa Agenda 2063. In themselves, these models are instruments established in order to transcend the didactic relationships between China and Africa, assumingly centred on extractive industry, agricultural modernisation, infrastructure and industrial development. It has been argued that there is a middle ground in the position of those viewing China as a benign African partner, i.e., panda huggers,

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and those convinced of China’s malign intentions toward Africa, namely dragon slayers. The chapter concludes that in order for synergy to take place in China-Africa relations there is a need to first examine the cultural and philosophical constructs that underlie the practice of the peoples that consist the cooperation. Furthermore, the currently dominant decoloniality discourse on the continent ought to help offset the ‘colonial ethos’ and notions of ahistorical Africa witnessed in China-Africa cooperation frameworks.84 The move would also help contextualise discussions that aim to find similarities between African and Chinese value systems in an effort to mitigate African silences witnessed in China-Africa cooperation frameworks. The chapter urges China-Africa scholars to ask the following questions: How does one maximise and manage gains from a top-down social system, represented by China, to benefit bottom-up social systems, represented by Africa?; How can the project of people to people relations be extended beyond the confines of the elite and government institutions to benefit the greater population of China-Africa cooperation? The chapter has also revealed that the greater part of China-Africa cooperation scholarship consists of a duel between the Western powers and China, each coming across as a viable suitor trying to appeal to the African mind. Analysis of theoretical and Forum on 318 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 17 methodological frameworks in the chapter reveal that the West continues to imagine and relate to China in a manner similar to the past eras and informed by its imagination, in the manner informed by the Procrustean bed of Western conceptions and imaginations’ as observed by Gu and O’Brian above.85 The chapter concludes that China has relied on the ‘made in China’ popular rhetoric in an attempt to establish a counter-Western discourse in China-Africa forums. Nevertheless, such practice has tended to result in scholarship devoid of scientific inquiry, nuance and grounding in actual practice. The chapter calls for both African and Chinese scholars to establish complex theoretical and grounded methodological frameworks that favour the advancement of China-Africa development and cooperation while cognisant of the shortcomings in each partner in the China-Africa relationship. The chapter has also revealed that African silence and China’s defensive stance against the Western re-colonisation discourse has led to a tendency to treat Africa as an ahistorical continent. Although China seems to insist on a hands-off policy regarding matters of an individual country’s national sovereignty, its reactive response to Western dominant rhetoric in China-Africa forums may lead to an even more politicised China in Africa. The latter scenario would certainly lead to anergy, instead of the desired synergy, in China-Africa development and cooperation.

Recommendations In preparation for the FOCAC 2018, this chapter proposes the following: A In order for China-Africa cooperation to yield maximum benefit for all partners, Africa

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needs to take following initiatives aimed at eliminating its silence and at galvanising agency:

■  Establish

mechanisms to encourage African scholars to conduct independent re-

search in China, instead of the customary short visits that accompany specific projects by Chinese stakeholders in Africa.86

■  Establish

independent African cultural and knowledge centres in greater China.

This would render the presence of Confucius Institutes and other Chinese cultural entities less insurrectionary on the African continent.

■  Establish



■  Establish

mechanisms to encourage private African cultural sponsorships, produc-

tions and broadcast in China. mechanisms for private African entities to develop and replicate local

type of entertainment genres and industry in China. B The subject of decoloniality and transformation that has gained traction in Africa ought to apply as part and parcel of seeking solutions aimed at benefitting the African continent from spaces provided by China-Africa cooperation.

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■  China-Africa

scholarship ought to apply decoloniality theories and frameworks in

an attempt to help offset the dominant Western discourse in China-Africa cooperation frameworks.

■  China-Africa

scholarship ought to apply decoloniality theories and frameworks in

order to offset current tendencies of treating Africa as a terra nova, i.e. an ahistorical continent.

■  The

subject of decoloniality and transformation ought to be an essential part of

the African Studies’ curriculum both in China and Africa. C China-Africa cooperation stakeholders ought to help establish the following entities, in order to gain maximum benefit from students who have completed their studies in China (‘African China graduates’):

■  Establish

conditions for African China graduates to do an internship in China, in

order to learn more about their specialities and further understand Chinese society before returning to their home countries.

■  Establish

China-Africa facilitation centres in Africa, manned by African China

graduates, which will serve as a talent pool for public and private China-Africa related issues.

■  Establish

an Africa-China centre that will offer advice on China from an African

perspective. The exercise is aimed at preventing the reactive tendencies witnessed in the treatment of China-Africa related matters on the African continent. Furthermore, the exercise would help improve the face of China in Africa, and vice versa, in private and public spheres beyond the confines of government institutions. Such a

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move is paramount for the future of China-Africa relations, where cooperation will manifest as second nature to the people of both sides of the cooperation initiative. D African governments, tertiary institutions and other China-Africa cooperation stakeholders ought to seek and apply the advice of African China graduates and scholars with traditional and contemporary Chinese cultural knowledge background. E Individual African nations need to formulate a China policy that is reflective of their own individual development priorities and strategies.

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References 1 Tembe, P., 2016. Understanding China Through its Culture – Does Africa Need a Collective China Strategy? South African Institute for Global Dialogue. 2 Ibid. 3 Sautman, B., 2009. The Forest for the Trees: Trade, Investment and the China-in-Africa Discourse. Hong Kong University of Science and Technology Yan Hairong, University of Hong Kong. Available at http:// www.tni.org/archives/acts/forestfortress-sautman.pdf [Accessed November 2016]. Also see the following: Grimes, S., 2014. Criticism of China’s role in Africa misguided. China Daily Africa. Available at http:// africa.chinadaily.com.cn/weekly/2014-11/14/content_18913799.htm [Accessed 16 December 2016].; Blair, D., 2007. Why China is trying to colonise Africa. Available at http://www.telegraph.co.uk/comment/ personal-view/3642345/Why-China-is-trying-to-colonise-Africa.html [Accessed 28 November 2016].; Zhou, S., China as Africa’s ‘angel in white’. Available at http://www.atimes.com/atimes/China_Business/ HK03Cb04.html [Accessed 9 October 2016]. 4 Czin, J., 2011. Dragon-slayer or Panda-hugger? Chinese Perspectives on ‘Responsible Stakeholder’ Diplomacy. Yale Journal of International Affairs. Available at http://yalejournal.org/wp-content/ uploads/2011/01/072208czin.pdf [Accessed 29 November 2016].; Gifford, R., 2010. Panda-Huggers and Dragon-Slayers: How to View Modern China Today. ERIC, Social Education, 74(1), pp.9–11, Available at https://eric.ed.gov/?id=EJ878896 [Accessed 10 December 2016].; Ivanov, J., 2012. Panda Huggers and Dragon Slayers ‘Two sides of the expat mind’. Beijing Review.com.cn. Available at http://www.bjreview. com.cn/eye/txt/2010-08/09/content_289707.htm [Accessed 12 December 2016].

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5 Tembe, P., 2016. 6 Gadzala, A., 2015. Africa and China ‘How Africa and their Governments are Shaping Relations with China.’ Lanham: Rowman & Littlef ield P ublishers; Corkin, L., 2014. China’s rising Soft Power: the role of rhetoric in constructing China-Africa relations. Rev. Bras. Polít Int., 57(special edition), pp.49–72. Available at http://www.scielo.br/pdf/rbpi/v57nspe/0034-7329-rbpi-57-spe-00049.pdf [Accessed 10 January 2017].; Van Staden, C. et al., 2015. The China Africa Relationship: Crossroads or Cliff? China File Conversation. 24 November 2015. Available at https://www.chinafile.com/conversation/china-africarelationship-crossroads-or-cliff [Accessed 3 December 2016]. 7 Lokong, A., 2014. Zimbabwe: Underway – the re-colonization of Africa. Available at http://allafrica.com/ stories/201409120191.html [Accessed 23 December 2014]. 8 Lau, R., 2004. Habitus and the Practical Logic of Practice. Sociology, 38(2) (April 2004), pp.369–387. 9 Bourdieu, P. and Thompson, B., 1991. Language and symbolic power. [Ce que parler veut dire. English]. Cambridge: Polity Press. 10 Bourdieu uses the term ‘capital’ in reference to gains that may be acquired in any given ‘field’ and points out that one needs to understand the underlying patterns of games/struggles that individuals of a society engage upon in order to achieve what they deem valuable for survival and development. Bourdieu, P., 1990. Trans. Nice, R. The logic of practice. Cambridge: Polity Press. 11 Mao, Z., 1942. Talks at the Yenan Forum on Literature and Art, 2 May 1942. Selected Works of Mao Tsetung. Available at https://www.marxists.org/reference/archive/mao/selected-works/volume-3/mswv3_08. htm [Accessed 2 December 2016]. 12 Butler, J., 1997. Excitable speech: A politics of the performative. New York and London: Routledge. 13 Tembe, P. 2013. Re-evaluating Political Performatives of the PRC: Maoist Discourse – The Historical Trajectory of the ‘Laosanpian’. Centre for China Studies, Chinese University of Hong Kong. Hong Kong: (S.A.R.), PRC, 2013.

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POST FOCAC VI – SYNERGY OR ANERGY IN THE CHINA-AFRICA COOPERATION | Paul Tembe 14 Merrian, G. and C. 1913. Webster Unabridged Dictionary. 15 Archer, M.S., 2004. Culture and Agency: The Place of Culture in Social Theory. Revised Edition. New York and Cambridge: Cambridge University Press. 16 Mandela, N., 1994. Long Walk to Freedom. Boston: Little, Brown & Company. cf. A plethora of literature on Anti-colonial struggles reflect situations where absence of symmetry and competing social systems result in the emergence of synergy, ‘forced’ or otherwise. 17 Matondo, P., 2012. Cross-Cultural Values Comparison between Chinese and Sub-Saharan Africans. International Journal of Business and Social Science, 3(11). 18 Said, E., 1978. Orientalism. New York: Pantheon Books. 19 Vukovich, D., 2012. China and Orientalism: Western knowledge production and the PRC. Abingdon: Routledge. 20 O’Brian, L., 2016. With those views, you should work for the Communist Party of China: Challenging Western Knowledge Production on China-Africa Relations. African East-Asian Affairs/ The China Monitor. 4(December 2016). 21 Gu, M.D., 2013. Sinologism: An alternative to Orientalism and postcolonialism. Oxford: Routledge. 22 Austin, J.L., 1975. How to do things with words. William James lectures. (2d ed.) Vol. 1955. Oxford: Clarendon Press. 23 Moyo, D., 2012. Winner Take All: China’s Race for Resources and What It Means for the World. New York: Basic Books. 24 Tembe, P., 2013. 25 Parsons, W., 1951. Trans. St Augustine: Letters Volume 1 –Letter 54 to Januarius circa 390 AD. 26 He, C., 2016. What’s Modernization in the 21st Century: A Chinese Version. Modernization Science Newsletter, 6(1). 27 He, C., 2016.

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28 Zhou, Y., 2016. Establishing Confucius Institutes: a tool for promoting China’s soft power? Journal of Contemporary China, 25(100), pp.628–642. Available at http://www.tandfonline.com/doi/full/10.1080/10 670564.2015.1132961 [Accessed 11 November 2016]. 29 King, K., 2013. China’s Aid and Soft Power in Africa: The Case of Education and Training. Woodbridge: Boydell & Brewer. 30 Belikin, D., 2014. Penn State Latest School to Drop China’s Confucius Institute – Chain of Academic Centers Criticized for Influence of Chinese Government. The Wall Street Journal. 1 October 2014. 4:50 p.m. ET. Available at https://www.wsj.com/articles/penn-state-latest-school-to-drop-chinas-confuciusinstitute-1412196655 [Accessed 5 February 2017]. Voldzko, D., 2015. China’s Confucius Institutes and the Soft War. China Power. The Diplomat. Available at http://thediplomat.com/2015/07/chinas-confuciusinstitutes-and-the-soft-war/ [Accessed 18 November 2016]. 31 Redden, E., 2014. Confucius Controversies. Inside Higher ED. Available at https://www.insidehighered. com/news/2014/07/24/debate-renews-over-confucius-institutes [Accessed 2 November 2016].; Press Trust of India. 2016. China denies shutting down 109 Confucius institutes in US. Available at http:// www.india.com/news/world/china-denies-shutting-down-109-confucius-institutes-in-us-1223153/ [Accessed 16 November 2016]. cf. Guttenplan, 2012. 32 Trompenaars, F., 2011. VI. Universalism versus particularism. via-web.de International Business Cultures. Available at http://www.via-web.de/universalism-versus-particularism/ [Accessed 5 April 2017]. 33 Scotton, J., 2015. Confucius Institutes and China’s ‘soft power’. China Policy Institute: Analysis. 34 Zhang, C. The Sino-Africa Relationship: Toward a New Strategic Partnership.Available at https://www. lse.ac.uk/IDEAS/publications/reports/pdf/SR016/SR-016-Chun.pdf [Accessed 18 January 2017].

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 17 35 Wei, H., 2009. The pressure of African NGO on China-Africa Relations and the counter measure. Socialism Studies, 4, pp.137–141.; Wang, X., 2009. African NGO and China-Africa relations. West Asia and Africa, 8, pp.56–61.; Zhao, M., 2010. China-Africa people-to-people contact: Development and challenge. International Perspective, 6, pp.49-62. In Li, 2015. 36 Li, A., 2015. A Long-Time Neglected Subject: China-Africa People-to-People Contact. 37 Ibid. 38 Ibid. 39 Metz, T., 2015. Values in China as Compared to Africa. In The Rise and Decline and Rise of China: Searching for an Organising Philosophy In Search of Chinese Philosophy and Civilization. Africa Press. South Africa. 40 Elphick, R. and Giliomee, H., 1979. The Shaping of South African Society. Middletown: Wesleyan University Press. 41 Yap, M. and Leong Man, D., 1996. Colour, Confusion and Concessions: The History of the Chinese in South Africa. Hong Kong: Hong Kong University Press; Park, Y.J., 2009. Recent Chinese Migrations to South Africa – New Intersections of Race, Class and Ethnicity. In Rahimy, T. (ed.), 2009. Representation, Expression and Identity. Interdisciplinary Perspectives. Oxford: Inter-Disciplinary Press. 42 Harris, K., 1994. The Chinese in South Africa: a preliminary overview to 1910. Sahistory.org.za. Available at http://www.sahistory.org.za/article/preliminary-overview-1910 [Accessed 14 December 2016]. 43 Yap and Man, 1996. Park, Y.J., 2012). Living In Between: The Chinese in South Africa. Immigration Information Source. Available at http://www.migrationpolicy.org/article/living-between-chinese-southafrica/ [Accessed 29 November 2016]. 44 Mapungubwe Institute for Strategic Reflection. 2015. Nation Formation and Social Cohesion: An Enquiry into the Hopes and Aspirations of South Africans. Real African Publishers; Clayton, J., 2008. We agree that you are black South African court tells Chinese. The Times, London. 19 June 2008. 45 Bodomo, A. and Silva, R., 2012. Language matters: The role of linguistic identity in the growth of the Lusophone African community in Macau. African Studies, 71(1), pp.71–90.

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46 Ibid. 47 Bodomo, A. and Ma, E., 2012. We are what we eat: food in the process of community formation and identity shaping among African traders in Guangzhou and Yiwu. African Diaspora, 5(1), pp.3–26. Available at http://hdl.handle.net/10722/166109 [Accessed 27 November 2016]. 48 Bodomo, A., 2012. Africans in China: A Sociocultural Study and Its Implications for Africa-China Relations. Amherst: Cambria Books. 49 Bodomo, A. and Ma, E., 2012. We are what we eat: food in the process of community formation and identity shaping among African traders in Guangzhou and Yiwu. African Diaspora, 5(1), pp.3–26. Available at http://hdl.handle.net/10722/166109 [Accessed 27 November 2016]. 50 Che, W-K., 1979. The modern Chinese family. Palo Alto, California: R & E Research Associates, INC. 51 Baker, H., 1979. Chinese family and kinship. London: Macmillan. 52 Ji, F., 2004. Linguistic engineering: Language and politics in Mao’s China. Honolulu: University of Hawai’i Press. 53 Chang, K.C., Food in Chinese Culture. Worldwide Locations. Asia Society. Available at http://asiasociety. org/blog/asia/food-chinese-culture [Accessed 28 November 2016]. 54 Minorities in China enjoy special treatment that enables them to have a relatively level playing ground with the Han majority, which constitute 91.5 per cent of the Chinese population. 55 Ebrey, P. and Watson, R., 1991. Marriage and inequality in Chinese society. Joint Committee on Chinese Studies. Los Angeles: University of California Press.

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POST FOCAC VI – SYNERGY OR ANERGY IN THE CHINA-AFRICA COOPERATION | Paul Tembe 56 Hanyu Chengyu Daquan. p.986. 57 Youdao. 2016. Available at http://www.youdao.com/w/门当户对/#keyfrom=dict.index [Accessed 30 November 2016]. 58 Luo, Y., Ying, H., and Lu Wang, S., 2011. Guanxi and Organisational Performance: A Meta-Analysis. Management and Organization Review, 8(1), pp.139–72. 59 Lagerwey, J. and Kalinowski, M. (ed.), 2009. Early Chinese religion. Part 1, Shang through Han (1250 BC-220 AD). Boston: Brill; Sehume and Tembe. 2015. Investment in young people is crucial in this new economic era. The Sunday Independent. Available at https://www.pressreader.com/south-africa/ weekend-argus-sunday-edition/20161211/283764198648556 [Accessed 29 December 2016]. 60 Hu, S., 2007. Confucianism and Contemporary Chinese Politics. Politics and Policy, 35(1), pp.136–153. 61 Lagerwey, J. and Lü, P. (ed.), 2010. Early Chinese religion. Part 2, The period of division (220–589 AD) Boston: Brill. Lagerwey, J., 2010. China: A Religious State. Hong Kong: Hong Kong University Press. cf. Tembe, 2013. 62 Giskin, H. and Walsh, B., 1956. An introduction to Chinese culture through family. Albany, NY: State University of New York Press. 63 Tembe, 2013. 64 Ivanhoe, P. and Bloom, I. 2016. Mencius. New York: Columbia University Press.Eno, R. trans. 2016. Mencius, 4A.5. Version 1. 0. Available at http://www.indiana.edu/~p374/Mengzi.pdf [Accessed 21 March 2017]. 65 Tembe refers to opposing lexical units that form a stem of Chinese thought patterns as ‘antipodal structures’, because one cannot exist without the other within the construct of the traditional Chinese cultural realm. An example of such a logic is that of the North Pole and the South Pole: although situated at opposing ends of our globe they depend upon each other to keep the earth in place. For details see Tembe, 2013. 66 Mao, Z. 1944. Serve the People. Selected Works of Mao Tse-tung. September 8, 1944. Available at https://www.marxists.org/reference/archive/mao/selected-works/volume-3/mswv3_19.htm [Accessed 2 December 2016].

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67 Hsü, I.C.Y., 2000. The Rise of Modern China (6th ed.). New York: Oxford University Press. 68 Zemin, J., 2013. Three Represents. Selected Works of Jiang Zemin, Eng. ed., FLP, Beijing, Vol. III, pp.1–2 and p.519. 69 Hu, J., 2012. Eight Honours and Eight Shames. Available at ”Full text of Hu Jintao’s report at 18th Party Congress”. People’s Daily. 19 November 2012 [Accessed 17 December 2016]. 70 Central Party School/Central Committee of the Communist Party of China. The Chinese Dream infuses Socialism with Chinese characteristics with New Energy. Qiushi. Available at chinacopyrightandmedia. wordpress.com [Accessed 2 December 2016]. 71 Tembe, P., 2013. From Serving the People to Eight Virtues and Eight Shames. 72 Asian Values and Democracy in Asia. Proceedings of a conference held on 28 March 1997 at Hamamatsu, Shizuoka, Japan, as Part of the First Shizuoka Asia-Pacific Forum: The Future of the Asia-Pacific Region. Available at http://archive.unu.edu/unupress/asian-values.html [Accessed 18 January 2017]. 73 Koutonin, M., 2014. Fourteen African Countries Forced by France to Pay Colonial Tax for the Benefits of Slavery and Colonisation Benefits. Tuesday, 28 January 2014. Available at http://www.siliconafrica. com/france-colonial-tax/ [Accessed 30 November 2016]. 74 Williams, B., 2015. Change your Channel. TEDTalks. Berlin. 75 The CFA franc is the name of two currencies used in Africa that are guaranteed by the French treasury. The two CFA franc currencies are used by the following countries; Benin, Burkina Faso, Guinea-Bissau, Ivory

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PART 5: Aligning China –Africa Cooperation with the UN 2030 Agenda for Sustainable Development | Chapter 17 Coast, Mali, Niger, Senegal, Togo in the West and Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea and Gabon in central Africa. 76 Koutonin, M., 2014. Colonial Tax: How France still gets away with this in Africa. Silicon Africa. Monday, 24 November 2014 at 1:55 p.m. Available at http://www.siliconafrica.com/colonial-tax-how-france-stillgets-away-with-this-in-africa/ [Accessed 8 April 2017]. 77 Colonial Trade. The Great Soviet Encyclopedia, 3rd Edition (1970–1979). 2010. The Gale Group, Inc. All rights reserved. Available at http://encyclopedia2.thefreedictionary.com/Colonial+trade [Accessed 26 November 2016]. 78 Lehmann, C., 2012. French Africa Policy Damages African and European Economies. Friday, 12 October 2012. NSNBC International. 79 France’s military ties with Africa strengthen. The Economist – Intelligent Unit. 2017 The Economist Intelligence Unit Limited. Available at http://country.eiu.com/article.aspx?articleid=1801832364&Count ry=Chad&topic=Politics [Accessed 10 January 2017]. 80 Larive, M., 2014. Welcome to the France’s New War on Terror in Africa: Operation Barkhane. The National Interest – Foreign Policy Experts Roundtable. 7 August 2014. 81 Illisha. Bleeding Africa: A Half Century of the Françafrique. 25 March 2014. Available at http://www.loonwatch.com/2014/03/bleeding-africa-a-half-century-of-the-francafrique/ [Accessed 18 November 2016]. 82 Jayaram, K. et al. Africa’s Path to Growth Sector by Sector – Agriculture: Abundant opportunities. Available at http://www.mckinsey.com/global-themes/middle-east-and-africa/africas-path-to-growth-sector-bysector [Accessed 2 December 2015].

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83 Beard, L. Choosing China: Ghana’s $3 Billion Loan Decision. Leadership Academy for Development. John Hopkins. School of Advanced International Studies. Stanford. Available at https://fsi.stanford.edu/sites/ default/files/ghana_loan.pdf [Accessed 15 January 2017]. 84 Wa Thiogo, N., 2016. Decolonising the Mind. Colonial, Post-Colonial, and Transnational Studies. In Rivkin, J. and Ryan, M. (ed.), 2016. Literary Theory – An Anthology (Blackwell Anthologies). Second Edition. Hoboken: Blackwell Publishing, pp.11-42.; Ndlovu-Gatsheni, S., 2013. Empire, Global Coloniality and African Subjectivity. New York: Berghahn Books; Ndlovu-Gatsheni, S. and Ndhlovu, F. (ed.), 2013. Nationalism and National Projects in Southern Africa. New Critical Reflections. Pretoria: Africa Institute of South Africa.; Gumede, V., 2016. Post-Apartheid South Africa – Economic and Social Inclusion. Amherst: Cambria Press.; Muchie, M., Gumede, V. and Lukhele-Oloronju, P. (ed.), 2015. Unite or Perish. Africa Fifty Years After the Founding of the OAU. Pretoria: AISA. 85 Gu, 2013; O’Brian, 2016. 86 Language barriers should no longer be a hindrance to such initiatives, as Africa already has a large pool of African China graduates who are fluent in Mandarin and have good knowledge of Chinese society and local customs.

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18 CHAPTER

CONCLUSION

A NEW FOCAC AGENDA FOR AGRICULTURAL MODERNISATION AND INDUSTRIALISATION Garth Shelton, Yazini April, Hu Bilang & Chris Alden

CHINA, FOCAC AND AFRICA At the December 2015 FOCAC Summit in Johannesburg, South Africa, President Xi Jinping provided a detailed overview of China’s new thinking and engagement objectives regarding Africa. He elevated China-Africa relations to a ‘comprehensive strategic and cooperative partnership’, in which he specifically promised China’s support for industrialisation and agricultural modernisation in Africa. President Xi pledged US$60 billion for the next three years to support and promote FOCAC plans and programmes.1 The new roadmap for China-Africa cooperation confirmed the win-win content of cooperation and outlined ‘five pillars of cooperation’, along with ten specific plans to implement the cooperation process. This book has sought to investigate industrialisation and agricultural modernisation in Africa, with a view to identifying specific policy proposals and suggestions that could be included in the evolving FOCAC agenda. Successful indus-

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trialisation and agricultural modernisation is critical for poverty reduction and economic growth in Africa. The next phase of Africa’s economic development requires a shift from over-reliance on raw material exports to domestic economic transformation. China is the ideal development partner to assist Africa in this process through the FOCAC process.2 The Johannesburg FOCAC Summit sought to respond positively to African aspirations for accelerated economic growth, towards achieving the UN’s Sustainable Development Goals (SDGs). The FOCAC outcome aims to build on the last three decades of comprehensive cooperation, which have witnessed growing China-Africa political and commercial engagement that promotes increasingly positive outcomes for both sides. During this time, China’s economy has grown significantly, while China’s expanding trade and investment with Africa has boosted economic prosperity across the continent. China’s active engagement has contributed to an African growth rate of over five per cent in recent years, as well as a significant improvement in roads, railways and related infrastructure.3 African leaders have strongly welcomed China’s active involvement in major construction projects, such as dams and electricity supply systems - an area of activity that traditional Western donors have long neglected. Scholarly assessments of China’s engagement in Africa confirm a significant range of benefits and potential benefits. At the same time, Forum on 326 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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over the last 20 years, increased African raw material exports to China conclusively benefited national economies and created new economic opportunities. The International Monetary Fund (IMF) has reported that Africa’s increasing growth rate is partly due to increased commodity demand from China. The IMF’s findings tend to overturn much of the Western scholarly discourse on Africa, which has consistently criticised and disparaged China’s growing engagement with Africa. To counter the pessimistic Western narrative, Chinese and African scholars should develop new theoretical and methodological frameworks to explain, evaluate and enhance China-Africa cooperation. African analysts contend that trade, investment and China-Africa bilateral relations have been very beneficial for both sides. The World Bank has acknowledged that China-Africa trade has been decisive in promoting growth in Africa and helping to combat poverty. China’s own economic growth and modernisation has helped to sustain growth in Africa.4 Moreover, Chinese exports to the continent have brought a range of low-cost consumer products into African homes for the first time, which has enhanced lives and improved standards of living. China’s aid and investment have boosted growth, and strengthened sovereignty and self-confidence, while offering African countries new options for trade and political partnerships. Africans who have undergone technical training in China, have returned to the continent and added skills and knowledge to local development. Since 2000, FOCAC has become an important multilateral mechanism driving, managing and facilitating this creative and mutually beneficial China-Africa interaction. FOCAC has evolved to become the ‘core platform’ of debate and diplomatic collaboration between China and Africa. To date, the FOCAC process and its outcomes have been strongly supported and endorsed by Africa’s leadership, confirming the mutually beneficial content of

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this process. Following the conclusion of FOCAC VI in Johannesburg, the new challenge is for China and Africa to continue to build a sustainable, long-term relationship that produces specific and quantifiable development benefits for both sides. The FOCAC VI Declaration and Three-year Action Plan offers a comprehensive agenda for broadening and strengthening political and commercial cooperation, and outlines a long-term vision to advance a practical development partnership. The FOCAC Summit in Johannesburg brought Chinese and African leaders together to promote policy coordination and expanded commercial interaction towards common prosperity. FOCAC is expected to become more important as a process for advancing global cooperation and harmony, in response to the emerging anti-globalisation forces represented by Brexit and the new Trump administration in the United States of America.5 A new FOCAC synergy with Africa’s development programme, especially the African Union’s (AU) Agenda 2063, is expected to be key to championing a long-term sustainable development partnership. The evolving FOCAC process promotes an increase in the volume of inter-state transactions that are intended to provide new opportunities and prospects for mutual benefit. These regular and structured diplomatic interactions provide a mechanism to identify and develop new opportunities. The FOCAC deliberations have Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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crafted a process for policy coordination, expanded commercial interaction and shared development. FOCAC VI mapped out a future for both sides to achieve common prosperity. At the Johannesburg FOCAC Summit, China promised to increase direct investment in Africa from the current approximately US$30 billion to over US$100 billion. A more positive African investment environment is expected to see increased Chinese foreign direct investment (FDI) to the continent, bringing new technologies, skills, capital and, most importantly, jobs for Africa’s youth. Chinese and African leaders agreed to increase two-way trade from the current approximately US$220 billion annually to US$400 billion by 2020. To this end, China has undertaken to implement more than 50 trade promotion programmes across Africa. Over the last 30 years, China’s exports have brought affordable products to African households. However, current trends in Africa require a new China-Africa trade relationship that is based less on raw material transfers to China and more on the supply of value-added manufactured items. Without a change in the content of African exports to China, the balance of trade will continue to shift in China’s favour, with growing negative consequences for Africa. China responded positively to Africa’s needs and has thus prioritised mineral beneficiation and industrialisation in its roadmap for future China-Africa cooperation. To advance this process, China agreed to set up a capacity cooperation fund based on a pledge of US$10 billion to promote new manufacturing in Africa. In addition, China promised to strengthen its focus on African agricultural modernisation to broaden and deepen assistance to African farmers. Both creative proposals were widely welcomed in Africa. Much depends on attracting new Chinese investment into Africa to fund manufacturing and agricultural expansion. Thus, if Africa can provide a more positive and business-

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friendly investment environment, new Chinese FDI will accelerate and more jobs will be created across the continent.6 Implementing comprehensive business-friendly policies in Africa is key to enhancing the China-Africa relationship and lifting the African continent out of poverty. China’s business-friendly policies, especially in the special economic zones (SEZs), were the catalyst that ignited new industrialisation and prosperity for the Chinese people. Emulating the China model means good planning, and creating investment opportunities, such as lowering taxes and leveraging comparative advantage.7 New SEZs across Africa, supported by Chinese investment in export-orientated manufacturing, could be the key to job-creation and rapid economic growth. As the Chinese economy continues to grow, increased commercial engagement with Africa will offer the continent new and rewarding prospects for trade and investment. The challenge is for Africa to grasp these opportunities and take full advantage of new trade, investment, aid and assistance programmes. The key to future success for Africa depends on Africa’s appropriate response in addressing its own impediments to growth, such as low levels of productivity, high transaction costs, poor market access and an unfavourable investment climate. Developmental states have been associated with economic growth, which has often been seen to be the Forum on 328 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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PART 6: Conclusion | Chapter 18

result of upgrading the economic basis of the national economy, in order to undertake industrialisation as a key element of the developmental story.8 The legitimacy of developmental states in countries such as China rested on improvement in socio-economic standards of living for a broad cross-section of society.9 Indeed, the central challenge for Africa is to be more like China in terms of economic reform and especially in creating favourable conditions for inward FDI flows. Guided by the Chinese development experience, the framework for Africa’s successful development agenda would include: pro-growth policies; inclusive systems of government; improved political and corporate governance; work-place conflict resolution; and more competitive labour practices. This could open the way for new Chinese investments in manufacturing to kick-start Africa’s industrialisation.

FOCAC – THE FRAMEWORK FOR COOPERATION FOCAC provides an all-inclusive diplomatic consultation mechanism to advance ChinaAfrica cooperation and to effectively manage expanding economic interdependence. Currently, the FOCAC process provides a unique institutional framework to facilitate constructive dialogue between China and Africa, while at the same time facilitating the development of a common political and economic programme that advances South-South cooperation.10 FOCAC is the political arena for developing Sino-African cooperation and problem solving, while providing an important framework for developing a common development agenda in a globalising international system.11 Given new global trends towards anti-globalisation, FOCAC’s importance is expected to increase in the years ahead.

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Guided by China’s long-held policy of equality and non-interference, China and Africa have developed a friendly and constructive process of state-to-state interaction that promotes new opportunities for engagement, while at the same time offering an effective diplomatic system for congenial problem solving. Through the FOCAC process, China is rapidly becoming Africa’s key development partner and is providing the necessary infrastructure to underpin the continent’s longer term growth.12 To advance the ChinaAfrica relationship, African leaders, scholars and researchers should strengthen their understanding of China’s history, language and culture. This would assist in overcoming differences and understanding disparate approaches to problem solving. Moreover, African scholars should avoid being trapped in the emotional Western anti-China narrative, which perceives China as a new neo-colonial, exploitative external power in Africa. African scholars should rather be guided by a balanced, scientific and objective study of the China-Africa relationship that is grounded on wide investigation, analysis and empirical evidence. Besides the obvious economic benefits from closer China-Africa cooperation, the China-Africa relationship is firmly based on a close and binding historical friendship. Solidarity between China and Africa is founded in the African liberation struggles, where Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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China was a committed comrade and supporter.13 Moreover, China and Africa have long supported each other in international institutions and share many core interests.14 The evolving FOCAC process is increasing the volume of China-Africa inter-state transactions, which will, in turn, provide new opportunities and prospects for mutual benefit. FOCAC is the catalyst to promote an increasing number of cooperative ventures, commercial endeavours and strategic political collaboration. Since inception in 2000, the various FOCAC declarations, agreements and diplomatic proceedings have provided the impetus for a growing collaboration and cooperation process. The FOCAC declarations provide policy frameworks for building Sino-African relations and set the agenda for future constructive interaction. Thus, FOCAC offers Africa a unique opportunity to shape Sino-African relations through high-level consultation and constructive diplomatic interaction. FOCAC is promoting a process of comprehensive China-Africa interdependence, based on China’s foreign policy commitment to peaceful coexistence, equality and respect for sovereign independence. China’s strong emphasis on non-interference is widely welcomed and respected in Africa. Chinese President Xi Jinping has stressed that China and Africa should seek ‘common and sustainable development through a win-win partnership’. FOCAC is the institutional framework within which this partnership can be forged and promoted. Through shared knowledge and information, exchanged in FOCAC Summits and meetings, Chinese and African leaders can map a common future that is guided by common core interests. FOCAC thus reflects the past successes of China-Africa relations, while creating an opportunity to plan a future grounded on common prosperity. Besides a common commitment to economic development, China and Africa are linked by a shared objective to advance South-South cooperation. In this context, China and Africa are seeking a stronger voice for the developing world on the world stage and in

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international institutions, such as the United Nations (UN), World Trade Organisation (WTO), IMF and World Bank (WB). China is seen as Africa’s natural reform partner in the struggle to democratise international institutions and reshape global development agendas.15 Africa’s perception of China is informed by its historical commitment to Africa’s freedom struggles and cooperation in advancing a multipolar world system, while a strong and enduring sentiment of liberation solidarity underpins the relationship. At the same time, China’s very successful development model, grounded in strong state management of economic liberalisation and development, holds wide appeal in Africa, where states are seeking to emulate China to escape the poverty trap. Within the FOCAC framework, China has completed numerous projects across Africa that contribute directly, or indirectly, to the continent’s economic development and progress. Chinese investments are making an important contribution to improving Africa’s infrastructure, such as roads and bridges in the Democratic Republic of Congo (DRC), railways in Angola, Nigeria and Kenya, and power stations in Zambia.16 Chinese companies are building power transmission lines to interconnect African countries, thereby strengthening Africa’s integration projects. Major new rail development systems, built by Chinese construction companies in Kenya, Nigeria, Gabon and Mauritania, are expected Forum on 330 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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to make a significant contribution to the development of those countries and to the West African region as a whole.17 An extensive national communications network in Ethiopia is expected to have a positive impact on economic growth and social stability throughout the East African region. The Johannesburg FOCAC Summit unanimously agreed to elevate China-Africa relations to a ‘comprehensive strategic cooperative partnership’, with a view to building on these past successes. This implies that, in the years ahead, there will be more opportunities for constructive China-Africa joint projects and effective collaboration. This study focused on the first two elements of the FOCAC VI programme: industrialisation and agricultural modernisation. Progress on African industrialisation and agricultural modernisation is crucial for addressing poverty and creating employment. As the Johannesburg FOCAC Declaration indicates, the FOCAC process is grounded on promoting a positive win-win outcome within the framework of South-South cooperation.18 FOCAC has created a new form of constructive South-South cooperation, through which developing countries can work together to address the issues of poverty reduction and accelerated economic development. Moreover, FOCAC provides Africa with an alternative to the traditional North-South, neo-colonial association, which has had a limited impact on Africa’s development, while imposing new and, in many cases, unreasonable administrative demands on African governments.19 Rather, FOCAC suggests cooperation in a parallel trajectory within post-colonial and anti-imperial struggles towards poverty reduction and economic development. The FOCAC, South-South relationship is less demanding and more appropriate for Africa’s current economic conditions and challenges. FOCAC provides the financing and encouragement for Chinese companies to actively participate in major infrastructure projects in Africa. These completed projects now provide the foundation for economic

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development and progress in many African countries. The urgent need for African industrialisation has been widely accepted and acknowledged. At the April 2015 SADC Summit in Harare, a specific plan for SADC’s economic transformation was proposed, by which to leverage the region’s natural resources for sustainable, economic development through beneficiation and value addition. African leaders agreed that SADC and Africa, as a whole, need to urgently implement a comprehensive industrialisation strategy to promote development and job creation.20 Zimbabwe’s President Robert Mugabe, as SADC Chairperson, confirmed that industrialisation was SADC’s priority to advance socio-economic development. The Summit’s Revised Regional Indicative Strategic Development Plan (2015-2020) thus focussed on industrialisation and market integration. The plan outlined many new areas for potential China-Africa cooperation towards building manufacturing plants in Africa. At the Johannesburg Summit, Chinese officials acknowledged that China-Africa relations cannot be based solely on China’s importation of Africa’s oil and raw materials. Rather, Africa should move into manufacturing and should export manufactured items to the growing Chinese market. New ideas for China-Africa industrial cooperation were thus called for to promote this

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process. Given China’s recent very successful industrialisation, it is well placed to assist Africa towards industrialisation and economic modernisation. The Johannesburg Summit made a clear undertaking to boost Africa’s agricultural output, with the long-term objective of comprehensive sustainable food security. Food production in Africa has not increased as fast as it has in other parts of the world, thus Africa currently remains the least food secure region in the world. As discussed in earlier chapters, China is contributing to increased agricultural production through a range of projects in numerous African countries. But an expanded programme, with Africa’s full participation and political support, could be instrumental in addressing the challenge of food security across the continent. China’s own success in rapidly modernising its own agricultural sector, serves as the inspiration and motivation for African farmers.21 Given both the growing demand for food security and Africa’s expanding population, agriculture is expected to take centre stage in China-African relations in the future. The Johannesburg FOCAC Summit is noted for China’s commitment to provide US$60 billion to support development in Africa. The funding allocation breakdown was as follows: ■■

Concessional loans and exports credits



US$35 billion

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Industrial cooperation fund

■■

China-Africa Development Fund

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SME development in Africa



US$5 billion

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Grants and zero-interest loans



US$5 billion



US$10 billion



US$5 billion

The specific funding allocations suggest that FOCAC can play a key role in advancing the priority areas of industrialisation and agricultural modernisation. Improved infrastruc-

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ture in Africa would create economies of scale, which would, in turn, motivate Chinese investors to relocate manufacturing to Africa and to modernise agriculture.22 At the same time, closer FOCAC alignment with the AU’s Agenda 2063 is the key to a sustainable, winwin FOCAC process over the long term. China could provide direct and focussed support for some elements of the AU’s development agenda, thereby providing major impetus to Africa’s economic transformation. Arguably, the main emphasis for the evolving FOCAC process should be on ensuring synergy and collaboration between FOCAC action plans and the AU’s Agenda 2063. The AU’s Agenda 2063 provides a broad consensus on Africa’s future development path, and offers hope for a significant reduction in poverty. China’s direct and active support for the Agenda would significantly strengthen and augment FOCAC, while laying the foundation for an important China-Africa development partnership. Agenda 2063 is the ‘strategic guideline’ for long-term sustainable development in Africa. Aligning FOCAC with Agenda 2063 would increase the legitimacy of the process, while strengthening policy synergy and diplomatic focus. Agenda 2063 could inform and guide future FOCAC agendas towards a closer development partnership. Agenda 2063 focuses on peace and security, beneficiation, investment in human capital, youth and women development, Forum on 332 China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

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improved governance, increased project financing, accelerated regional integration, enhanced export trade and industrialisation.23 Thus a strong synergy between FOCAC and Agenda 2063, would reconstruct FOCAC as an essential enabler for Africa’s long-term economic development. Moreover, FOCAC should increasingly be promoted as the model for South-South dialogue and multilateral cooperation.

Strengthening the FOCAC Agenda China has lifted 800 million people out of poverty during the last 30 years. This is surely one of the greatest achievements in human history.24 Africa’s challenge is the same – to lift millions out of poverty. Increased African cooperation with China through FOCAC offers the potential for knowledge transfer and counsel to help Africa overcome poverty. The historical record confirms that FOCAC has been an important multilateral institution that has produced broad positive outcomes for both China and Africa. The 2018 FOCAC meeting is expected to build on past successes, but also refocus the China-Africa development partnership on industrialisation and agricultural modernisation. Both African and Chinese scholarly input would be helpful in crafting the evolving FOCAC agenda. In this volume, Paul Tembe has suggested that in order to maximise China-Africa cooperation, Africa needs a ‘coherent Africa policy’. FOCAC’s evolution can be positively shaped by all African participants, through new policy input, such as that contained in this volume, towards increased mutual benefit and positive outcomes. This concluding chapter seeks to offer some suggestions and ideas towards crafting new policy proposals for FOCAC towards strengthening FOCAC in building a more positive and fruitful China-Africa relationship over the long term.

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As discussed in this study, China fully recognises and supports Africa’s right to develop and has proposed a process of ‘common development’ based on ‘win-win outcomes’. Moreover, China encourages African countries to choose their own model of development, without external interference. China is willing to provide suggestions and ideas on poverty reduction programmes and policies, but does not exhort African states to follow the ‘China model’ of development. Rather, the FOCAC process offers a dialogue platform of equals with common development objectives. It also offers Africa an opportunity to actively and directly participate in shaping the evolving FOCAC agenda for common longterm benefit. Moreover, as the FOCAC Johannesburg Action Plan indicates, the focus of China-Africa engagement is now shifting to industrialisation and agricultural modernisation. Thus, with a view to advancing a future win-win FOCAC agenda that focuses on African industrialisation and agricultural modernisation, a number of specific ideas and suggestions are outlined below.

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FOCAC and Agriculture Modernisation The authors featured in this book have successfully explained how China’s engagement in the agricultural sector can serve as a catalyst for agricultural modernisation in Africa. Several authors propose the need to promote small-scale family-based agriculture with technology and innovation. The book establishes through its various case studies, particularly in Chapter 10 and Chapter 11, that through the various Chinese interventions that have occurred, knowledge of local conditions is crucial for agricultural modernisation to succeed under the 2016 FOCAC Action Plan. Integrating an understanding of social relations with African local communities, managing labour, land rights and issues relating to policy transfer are viewed as potential stumbling blocks against any intervention in African agriculture. State intervention and political aspects are also viewed as stumbling blocks for agricultural policies to work on the continent. Despite the recognition of African regional organisations, such as the AU through CADP, national governments continue to fall short of translating these documents into the requisite support for African agricultural development. The authors’ recommendations on agriculture cooperation between African and China serve as a credible strategy for FOCAC implementation going forward. Consolidated below, are the key recommendations, i.e.: Knowledge transfer. China can help Africa through knowledge transfer of its own experience and assist in making the necessary modifications for the current African situation. The Agricultural Demonstration Centres are a crucial instrument in this process. Recent trends suggest that Chinese agricultural businesses, both state run and private, are seeking to expand their activities in Africa. Adapting the Chinese model to the African

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context is important to ensure the proverbial lessons from Chinese experience are appropriate to the local circumstances. ■■

Regulatory reforms. Research presented in this study suggests that African governments should modify existing land and agriculture policies to make new agricultural FDI more attractive. In addition, ‘one-stop shops’ to provide comprehensive information and investment requirements, and advice to prospective investors, would be helpful. Increased China-Africa dialogue and exchange regarding agriculture modernisation and joint venture production would also be appropriate.

■■

Improved agriculture-related infrastructure. Research suggests that a 10 per cent reduction in transport costs could have a very positive impact on facilitating farmers’ access to markets. An increased Chinese commitment to improving Africa’s rural infrastructure could have a very positive impact on agriculture. In this context, Chinese support for hydro-electric dams, transportation and improved port facilities could enhance the attractiveness of investment into the agricultural sector, by developing downstream infrastructure needed for the expansion of commercial agriculture.

■■

Cooperating through collaboration. Joint agricultural ventures between China and Africa could be the key to Africa’s long-term food security and could make a major

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contribution to China’s food security requirements as well. Flowing from sound regulatory reform and Chinese support for infrastructure aimed at improving African agricultural development as an attractive foreign investment destination, is the pursuit of cooperative joint ventures. At the same time, addressing the sensitivities related to land ownership and long-term farm rental could also play an important role in removing obstacles to closer cooperation. ■■

Financing for agriculture. An expanded programme to finance Africa’s agriculture could be the key to unlocking the continent’s potential. Africa’s vast, under-utilised arable land could be mobilised to achieve food security through appropriate loans and financing from Chinese sources. New financing sources offering concessional rates could make it viable to promote joint ventures that open vast tracts of unused African land for cultivation.

■■

Agriculture marketing. The increased marketing of Africa’s agriculture, both locally and internationally, would help to develop and modernise farming. Assuming domestic markets are satisfied, increased export of Africa’s agricultural output to China would be very helpful. Africa and China should consider a long-term agricultural partnership to increase production, satisfy Africa’s food security needs and increase supply to the growing Chinese market.

■■

Promoting agribusinesses. Agri-processing through Chinese-sponsored industrial parks would create employment and new opportunities for the export of processed agricultural products. Given the need to create jobs in Africa and the vast potential for agriculture, agribusinesses could be decisive in boosting economic growth.

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FOCAC and Africa’s Industrialisation The research presented in this book broadly confirms that without industrialisation and beneficiation in Africa, the continent will remain burdened with wide-spread poverty and unemployment. African countries are immensely wealthy in terms of oil and raw materials, but have been unable to leverage this wealth into jobs and sustainable economic growth.25 For many years, African countries have struggled with the task of escaping the resource curse and using mineral wealth as a foundation for inclusive growth and job creation.26 Industrialisation can break the cycle of perpetual dependency, which has plagued Africa since independence. There is much that Africa can do to strengthen its investment and business-friendly policies, in order to attract Chinese and other FDI to manufacturing and beneficiation. This includes stable macro-economic policies, expanded infrastructure, tax incentives, the provision of appropriate skills, limited administrative requirements and the promotion of exports through subsidies. Africa also needs to re-brand itself to compete with other contenders for Chinese investment, such as Vietnam and other South East Asian countries.

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The authors propose various industrial strategies that could assist the industrial cause on the continent. Some of the key strategies include the need to implement FOCAC joint working groups that would promote issues such as innovation in the manufacturing sector. There is also a lot of emphasis placed on African governments playing an active role in implementing infrastructure investment, which is essential for economic growth. The continent also needs to determine how to urgently upgrade its industrial plan 1.0 and align it with China’s 4.0 level plan. Technological growth and smart manufacturing are fast becoming an unavoidable industrial process in all sectors, from agriculture and manufacturing to mining. African governments are also urged not to depend on China to implement huge projects such as special economic zones (SEZs) without localising them. Currently, few African countries subsidise local investors or implement regulatory frameworks for local suppliers to provide input and services to SEZ-based companies. A clear classification system of Sino-African cooperation zones is also highly recommended in the book, as the identity and definition of Sino-African cooperation zones currently remain ambiguous. Most importantly, African governments should outline specific industrialisation policies that are linked to clear objectives, much like China has done through its five-year development programmes.27 In addition, FOCAC could strengthen the promotion of industrialisation in Africa by endorsing and fully supporting the AU’s Industrial Plan. Over 3 000 Chinese companies are now active in Africa, with an estimated investment of over US$30 billion, which has created more than 600 000 jobs. This suggests that China could play a key role in promoting a continental industrial take-off, which will create new employment and sustained economic growth. The property rights of Chinese investors should also be protected at the legislative and administrative level. One of the major

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concerns of Chinese investors about the African cooperation zone is that their property rights may be violated. The book also proposes that people to people relations are an essential synergy that could fast-track the 2016 FOCAC Action Plan. Currently, a lot of Chinese companies and institutions still experience communication challenges that affect economic progress, as demonstrated in the agricultural case study in Mozambique in Chapter 10. Basically, people to people relations need to be improved upon in private and public spheres beyond the confines of FOCAC government institutions. With a view to leveraging FOCAC as a mechanism to advance Africa’s industrialisation, the following policy proposals and suggestions are offered: ■■

Strengthen the Chinese-backed SEZs in Africa. SEZs have been exceptionally successful in China, boosting inward FDI, economic growth and job creation. Existing and new SEZs should be more focussed on industrialisation and small business development. Zones should be aligned with national needs and should have the full support and encouragement of the host government. Skills upgrading, in order to provide appropriate labour for manufacturing, would be a very positive contribution. The challenges to SEZs in Africa outlined by Alden and Alves in this study should

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PART 6: Conclusion | Chapter 18

be addressed through expanded FOCAC dialogue and exchange to strengthen China’s engagement with the continent. ■■

New infrastructure for SEZs. Improved infrastructure that links SEZs to harbours and local markets would be a major new incentive for Chinese investment in Africa. SEZs have been successful in China due to the reduction of transport and transaction costs. Getting products to market - domestic or international - quickly and efficiently has been a key factor in strengthening China’s SEZs. In this study, Feng Lu and Xiaoguang Liu have stressed the need for adequate infrastructure to support manufacturing and product marketing.

■■

Focussed SEZs. To address the challenges faced by SEZs, as discussed in this study, the development of more focussed and dedicated SEZs may be useful. For example, the SEZ in Mauritius focuses almost exclusively on textile production. This specialisation allows for easier problem solving and creates opportunities for specific employment.

■■

Mineral beneficiation before export to China. Investment in mines should be directly linked to beneficiation processes. Our research confirms that mineral beneficiation is essential as a first step to creating jobs and new business opportunities in Africa. Programmes that advance win-win mineral beneficiation should be included in the FOCAC process.

■■

Emerging industry incubators. African governments need to give incentives to pioneer enterprises in comparative advantage industries. Tax reductions or full exemptions guarantee profits for investors and make new investments very attractive. But at the same time, jobs are created and local economies experience new growth and prosperity.

■■

Industrial parks have been very successful in China in promoting business development and product innovation. A new Chinese-financed industrial park in South Africa

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is planned to boost cooperation in manufacturing and research. Industrial parks with an appropriate focus relating to local conditions could help with job creation and new manufacturing in other African countries. ■■

Off-shoring of manufacturing. Rising labour costs in China should create new opportunities for industrial transfer programmes. Labour-intensive light industry could be the first step towards building manufacturing capacity across Africa. At the same time, African states need to improve investment conditions and advance businessfriendly policies to attract manufacturing investment.

■■

Create regional value chains (RVCs) to support the industrialisation process. New manufacturing in Africa could be linked to RVCs, which would promote regional integration and increased inter-state cooperation. This would, in turn, create bigger economies of scale and so attract new investors and traders.

■■

Finance the development of small and medium sized (SMEs) enterprises in Africa. Extensive research suggests that SMEs are the best way to create jobs and to stimulate economic growth. If Chinese banks, through FOCAC, could extend support for the development of SMEs in Africa, this could go a long way to creating jobs and opportunity for Africa’s youth.

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■■

Open the Chinese market for African manufactured products. Past FOCAC action plans have given less developed African countries greater access to the Chinese market. Greater access to the Chinese market through preferential trade agreements and lower tariff barriers would be a major boost for African exporters.

■■

Human resource training. China already offers a range of training programmes through FOCAC. In future, perhaps training programmes could be more focussed on business management, manufacturing and industrialisation. More focussed and tailored training programmes, specifically for Africa’s current industrialisation challenges, could be significant.

CONCLUSION – CONTRIBUTING TO THE FOCAC AGENDA This study suggests that the China-Africa engagement has indeed been very positive for both China and Africa and that FOCAC has been an important multilateral mechanism driving, managing and facilitating this rewarding relationship. The current challenge is to build a sustainable, long-term collaboration effort that produces clear, specific and quantifiable benefits for both sides. FOCAC can play a key role in this process, by identifying a common long-term vision along with proposals and projects for a mutually beneficial partnership. To ensure that FOCAC is effectively managed and advanced for mutual long-term benefit is an important issue for both Chinese and African decision makers. The challenge for African governments is to respond to China’s FOCAC agenda with effective and appropriate suggestions for the constructive focussing, development and expansion of that agenda. Africa should be a more ‘pro-active player’ in shaping

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and driving the FOCAC agenda.28 In order for FOCAC to become successful, strong state intervention and political will is essential. Academic and think-tank input, such as this study, could help Africa to become a more pro-active FOCAC player. Within the FOCAC discourse, the role for scholars and researchers is to suggest new policy proposals, ideas and suggestions that could help to promote a successful, sustainable FOCAC process, as well as a long-term and fruitful China-Africa relationship. Arguably, the development of an effective Sino-African development agenda requires a more concerted and vigorous academic and diplomatic engagement from Africa’s side. To that end, think-tank and scholarly contributions can play a role in suggesting possible new FOCAC agenda items, projects and programmes. It is hoped that this study and the specific suggestions flowing from this research, will make a positive contribution to further mobilising FOCAC as a dynamic mechanism for China-Africa win-win, common development and shared prosperity.

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REFERENCES 1 President Xi Jinping. 2015. FOCAC Summit. Chinafrica, December 2017, p.2. 2 Ni, Y., 2015. Gaining Momentum. Chinafrica, December, p.20. 3 Zhou, Y., 2016. A Historic Opportunity. Chinafrica, March, p.10. 4 He, Y., 2016. G20: China’s Part in Global Economic Growth. China Today, July, p.15. 5 He, Y., 2016. A New Phase of Globalization. China Today, December, p.17. 6 April, F.Y., 2016. Sicomines: A Successful Case of Mineral Industrialisation in Africa. China Today, June, p.41. 7 Wang, C., 2016. Food Security in China. Beijing: China Agriculture Press, p.10. 8

Donnor, R.F, Ritchie, B.K. and Slater, D., 2005. Systematic Vulnerability and the Origins of Developmental States: Northeast and Southeast Asia in comparative perspective. International Organizations, 59, pp.327–361.

9

Wade, R., 2003. What Strategies are Viable for Developing Countries Today? The World Trade Organization and the Shrinking of “development space”. Review of International Political Economy, 10(4), pp.621–644.

10 Moody, A., 2016. Looking for the Right Mix. China Daily, September, p.1. 11 Ross, J., 2016. China’s New Position in Global Economic Governance. China Today, March, p.57. 12 He, W., 2017. China-Africa Co-operation in Full Swing. Chinafrica, January, p.29. 13 Adejumobi, S., 2015. Beyond the Money and the Infrastructure. New African, March, p.12. 14 Ambassador Tian Xuejun, Ambassador to South Africa. 2012. Friendship and Co-operation for a Better Future of China-Africa Relations. Address at SAIIA, Johannesburg, 4 July. 15 Liu, Y., 2016. International Co-operation. China Today, December, p.32. 16 Hou, W., 2017. Sweetening the Pot. Chinafrica, March, p.42. 17 Sakar, S. and Dube, F., 2016. Full Steam Ahead. Chinafrica, December, p.35.

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18 Schiere, R. and Rugamba, A., 2011. Chinese Infrastructure Investments and African Integration. African Development Bank Group, Working Paper Series, No. 127, April. 19 Editorial. 2014. China, Japan Square up over Africa. African Business, February, p.13. 20 Lu, A., 2016. Behind the Wheel. Chinafrica, September, p.44. 21 Yu, N., 2016. Agricultural Upgrade. Chinafrica, March, p.48. 22 Du Plessis, R., 2016. China’s African Infrastructure Projects: A Tool in Reshaping Global Norms. SAIIA Policy Insights, 35, p.4. 23 Ruigu, W., 2016. Moving up the Value Chain. Chinafrica, October, p.41. 24 Xu, L., 2017. China Set to Hit Target of Eliminating Poverty. China Today, January, p.43. 25 Thomas, D., 2017. Tackling Africa’s Jobs Challenge. African Business, April, p.13. 26 Tana Forum. 2017. Unravelling the Resource Curse. New African, April, p.38. 27 Yifu, L., 2016. Learning from China’s Industrialisation. Chinafrica, February, p.10. 28 Mthembu, P., 2016. Reflecting on the Johannesburg Summit of the Forum on China-Africa Co-operation (FOCAC): Where to from here? IGD Global Insight, 125, p.5.

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Industrialisation and Agricultural Modernisation As the Chinese economy continues to grow, increased commercial engagement with Africa will offer the continent new and rewarding prospects for trade, investment and economic development. The challenge is for Africa to grasp these opportunities and take full advantage of China’s friendship and willingness to co-operate. The Forum on China-Africa Co-operation (FOCAC) provides a mechanism for all-inclusive diplomatic consultation to advance China-Africa co-operation and to effectively manage expanding economic inter-dependence. FOCAC is a political arena for developing Sino-African co-operation and problem solving. FOCAC also provides an important framework for developing a common development agenda. Given new global trends towards antiglobalisation, FOCAC’s importance is expected to increase in the years ahead. This book seeks to strengthen the China-Africa relationship and offer new suggestions for both policy makers and scholars seeking to understand and advance FOCAC for mutual benefit. FOCAC holds the key to Africa’s development and long-term prosperity. The new policy initiatives and proposals outlined in this study make a very valuable contribution to strengthening FOCAC and advancing Africa’s economic development.

About the editors

Copyright © 2014. Africa Institute of South Africa. All rights reserved.

Dr Funeka Yazini April works at the Human Science Research Council (HSRC) as a research specialist with expertise in industrialisation between China and South Africa, and China and Africa. Professor Garth Shelton is an Associate Professor at the University of the Witwatersrand, in Johannesburg, South Africa. Professor Chris Alden teaches International Relations at the London School of Economics and Political Science (LSE) and is a research associate with the Global Powers and Africa Programme, South African Institute of International Affairs (SAIIA). Professor Biliang Hu is Professor of Economics, Dean of Emerging Markets Institute (EMI), and Director of the Belt and Road Research Institute (BRRI) at Beijing Normal University.

Forum on China-Africa Cooperation Industrialisation and Agricultural Modernisation

Forum on China-Africa Cooperation

AISA Forum on China-Africa Cooperation : Industrialisation and Agricultural Modernisation, Africa Institute of South Africa, 2014. ProQuest Ebook

Forum on China-Africa Cooperation Industrialisation and Agricultural Modernisation

Funeka Yazini April, Garth Shelton, Chris Alden and Biliang Hu (eds.)