Afronline – The Voice Of Africa

Across Africa, China has become known as the agent of mass construction, wisely bartering infrastructural development – chiefly mining-specific – for long-term access to strategic resources.

In the process, China foregoes the usual Western opium, of capital returns from the sale of resources.

But then China has no need for capital returns. One primary reason for Beijing’s policy banks such as China Export-Import Bank (China Exim) earmarking 79 per cent of investment to mining-specific development (including mega-dams, railways, roads, and ports) is to recycle Beijing’s foreign exchange reserves (estimated at US$3 trillion) into Africa. Another, as outlined by the China Exim clause, is redirecting China’s cheapened goods – such as cement, and labour, to Africa, amounting to no less than 50 per cent of total contract value.

Through this mechanism, Ghanaian cocoa, Gabonese iron and Congolese oil have been swapped for construction of dams (Bui, Poubara, and River Dam), allowing Chinese corporations such as Sinohydro to capture the bulk of Africa’s hydropower market. The ‘barter system’ thus enables China to export goods and labour, facilitating for China the opportunity to ‘import’ their recycled project capital in addition to African resources.

In the process, China has activated arguably the same ‘Western’ capitalist vehicles of engagement but with one noticeable difference: Prior to Beijing’s entrance, just 4 per cent of foreign direct investment was earmarked for infrastructure. But China leaves behind more than an empty hole in the ground; it has constructed stadiums across the continent, as well as buildings and special economic zones (SEZ).

Some scholars say this is beneficial as China has shown just one ‘face’ in their dealings, driving to create in Africa, special economic zones of the type that catalysed China’s own growth and industrialisation.

Since inception, China’s leading SEZ Shenzhen – shaped under Communist Party leader Deng Xiaopeng, has attracted powerful names and foreign investment portfolios of Western corporations such as Walmart. These days, Shenzhen hosts a population of more than 4.5 million people. But while China has auctioned their ‘Open Door Policy’ of the late 1980s to Africa – the corporate fiscal and para-fiscal paradise in all its glory – aligning the characteristics of these political economies would be a mistake.

Unlike in Zambia, for instance, where China lobbied for and established a special economic zone, the home country government is not in the driver’s seat. Rather, it remains a rent-seeking entity, capitulating to enclave ‘tax advantageous’ economic zones designed to export resources beneficiated by Chinese companies back to China, while remitting the bulk of export revenue to said companies.

While the chief interest of Western corporations operating in China is the SEZ, for the China, SEZs are a peripheral element to the central ‘Going Out’ policy, shifting ‘over-compensated’ industries, no longer economically advantageous to China, to developing countries. China’s line is that selective industrialisation will benefit developing countries through beneficiation and reduced import of cheap goods.

Ten African governments allegedly expressed an interest in setting up SEZs. While Tanzania and Cape Verde were rejected, Nigeria, Egypt, Ethiopia, Mauritius and Zambia were given the green light. The SEZs differ in ownership: Some, like Ethiopia and Mauritius are owned outright while others like Nigeria’s Ogun State hold shares (18 per cent). Chinese companies took the lead with over 120 companies bidding, hosted by the Ministry of Commerce, People’s Republic of China (MOFCOM). In Zambia, the SEZ was located in Chambishi (with a subzone in Lusaka), and developed by China Nonferrous Mining Group (CNMC). Initiated in 2003, the Chambishi SEZ has grown from 2km2 to 11.58 km2, focusing on copper and cobalt processing. The Lusaka SEZ (5km2) focuses on garments, food, appliances, tobacco and electronics.

As Deborah Brautigam,  a leading specialist on China disclosed, perks for Chinese corporate developers include access to US$29-44 million in grants and long-terms loans of up to US$294 million. Other performance-based subsidies included reimbursement for half of their moving expense; 30 per cent of the costs of SEZ development including preconstruction (securing land, preparing tender bids, feasibility studies etc) and implementation (insurance, rent or purchase of land, facilities etc).

Corporate developers may also benefit from provincial subsidies (accounting for Ethiopia’s US$14m grant from Suzhou) or from another policy entity, such as the China Africa Development Fund under the umbrella of the China Development Bank. Brautigam notes that although many Chinese companies are state-owned, the company may be the main actor.

Brautigam refers to Dan Haglund (2009) quote from a financial profession on Beijing’s role in the Chambishi zone: ‘Usually you have representation coming through the Chinese government, through the CNMC then they will have chats with the government [of Zambia], just like when they were signing in this Chambishi SEZ.’ Yet, even if promoted as private investment, most – if not all – Chinese equity is intertwined with State-State capital, rendering the intent deeply political.

By Khadija Sharife – Continue reading on: Pambazuka news