Q+A-Reality bites at China's "win-win" African dream

Tue Nov 3, 2009 6:22am EST

By Ed Cropley, African Investment Correspondent

JOHANNESBURG, Nov 3 (Reuters) - Trade between China and Africa has boomed since a bullish summit three years ago, but some promising investment and development projects have hit snags and delays.

As a result, both sides are likely to take a more sober and realistic view of their relationship when leaders meet in Egypt on Nov. 8-9.

WHAT WAS ALL THE HYPE ABOUT?

Chinese officials are quick to remind outsiders that ties with Africa date back as far as the 1400s and the Ming dynasty admiral Zheng He, and were shaped more recently by the common struggle against colonialism.

Over the last 20 years, the focus has shifted from politics to commerce, with Africa and its vast untapped energy and mineral resources increasingly providing the raw materials for China's economic boom.

In 2006, more than 30 African leaders went to Beijing for the a Forum on China-Africa Cooperation (FOCAC) that formalised the shift in African trade and investment policy away from the United States and Europe.

Promises of lavish aid and assistance also served notice to the International Monetary Fund and World Bank that they were no longer the only sources of development finance open to Africa.

The set-up was touted as a "new strategic partnership" that would finally end poverty in Africa. It would provide China with raw materials, while Chinese cash and companies would build an African version of China's infrastructure revolution.

AND HAS IT LIVED UP TO IT?

When Beijing talks "strategic", it means a very long time -- certainly well beyond the annual reporting cycles of listed Western companies. As such, it will not be judging the success or failure of a venture on the outcome of its first three years.

That said, problems with infrastructure-for-minerals deals in Nigeria and the Democratic Republic of Congo (DRC) have delivered a reality check to both sides: China has realised working in Africa is tough, and Africa has started to worry about simply swapping perceived exploitation by the West with perceived exploitation by China.

"The last FOCAC was the high-water mark, on both sides, of starry-eyed optimism about China-Africa engagement," said Tom Cargill of London's Royal Institute of International Affairs.

"The Chinese government has realised doing business in many of these countries is a lot more complicated than previously thought, and African countries have realised China is a big and important country -- but ultimately just another country."

WHAT ARE THE PROBLEMS?

Lack of progress has been most notable in Nigeria, Africa's biggest prize due to its 36 billion barrels of oil reserves.

Deals struck with President Olusegun Obasanjo, who left office in 2007, are being reviewed amid concerns about graft and national interest, and there is precious little on the ground to show for the promises of Chinese-built roads.

China has fared better in Angola, which rivals Nigeria as Africa's top oil producer, but in September Luanda blocked the sale of a stake in an off-shore block to two Chinese firms, suggesting it does not want to be too reliant on any one buyer.

"There is an increasing wariness in some African capitals of replacing one kind of dependent relationship, and all its baggage, with another," said Antony Goldman of political risk firm PM Consulting.

Chinese companies building roads and other infrastructure have also been criticised for bringing their own labour and not passing on skills and know-how to Africans.

African manufacturers also complain about pressure from cheap Chinese imports, which have nevertheless gone down very well with African consumers.


BUT CHINA IS STILL BIG IN AFRICA, RIGHT?

Despite the hiccups, trade between Africa and China has grown at 30 percent a year, climbing to $107 billion in 2008 to eclipse the United States for the first time.

According to the South Africa-based Centre for Chinese Studies, implementation of FOCAC pledges is "fairly advanced" in Angola, DRC, Mozambique, Uganda and Tanzania.

China is also moving into areas such as agriculture -- it has lent Angola $1 billion for farming -- and many African leaders still see working with Beijing as the best way of getting things done.

"The Chinese bring Africa what it needs: investment and money for governments and companies. China invests in infrastructure, builds streets," Rwandan President Paul Kagame told a German newspaper last month.

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