Foreign Aid and Development in Sino-African Relations

Introduction

There are now new sources of development finance represented by emerging economies like Brazil, China, Russia, India, etc., whose roles in the international system are becoming incomprehensible. First, these new sources are restructuring international economics and driving global growth by playing an increasingly imperative role in the global economy. Second, these developing countries as a result of their relatively huge supply of development finance are playing a prominent role in the development of developing countries, thus, challenging the existing international development architecture (Kharas & Rogerson, 2012).

Today, emerging economies and a few Middle Eastern Gulf nations are doling-out huge amounts of aid, both in cash and kind to countries in sub-Saharan Africa (SSA), such that a World Bank Report (2008) noted that investment commitments in Africa by these emerging financiers jumped from less than US$ 1 billion per year before 2004 to US$ 8 billion in 2006 (World Bank, 2008). And by 2012 this had exceeded US$ 20 billion. Amongst these financiers in Africa, China tops the list by exporting visible capital into the continent. The tempo with which China is engaging with Africa economically is attention-grabbing. It is observed that between 2003 and 2011, foreign direct investment from China to Africa increased thirty-fold, from US$ 491 million to 14.7 billion (Zawya, 2012), portraying that China is actually filling investment vacuum in Africa that had been neglected by the West.

China’s cooperation with Africa as a donor has spanned over five decades and over those decades, China has provided Africa with large amounts of political, economic, and technical aid. However, a smaller percentage of Chinese aid is also filtered through multilateral channels like the African Development Bank (AFDB), World Health Organization, and other UN agencies. Their efforts and purpose of assistance have been considerable and commendable. And today, China has remained a huge market for Africa’s export as well as financier and investor, etc. It is common place to see the Chinese in even the remotest parts of Africa, something unheard of during the peak of relations between the West and Africa.

Some “Sino-skeptics or sinophobes” see China’s re-engagement under the auspices of the “New Strategic Partnership” with Africa in a negative light. They often point out that China’s relation with Africa is for the sole purpose of access to strategic natural resources. And that the supposed interdependent nature of the relations is at best rhetoric rather than reality. Some others assert that China is propping up “rogue states” with corrupt governments and poor human rights records. Still others charge that the influx of non-concessional Chinese loans is beginning to unravel hard-won debt sustainability gains achieved over the last decade (Zunia, 2013). However, such negative thinking, on the one hand, trivializes China–Africa relationship and has the propensity of neglecting the economic, political, and social benefits of China’s presence in Africa (Ferreira, 2008). And on the other, it has the potential to dissuade Africans from maximizing China’s gift for the development of the continent. Nonetheless, aside the views of China’s quest for resources in Africa, whether real or imaginary, China is bequeathing to Africa what the West never did. Today, in almost all countries in Africa, there is a visibility of one form of Chinese aid or another. That notwithstanding, the paper therefore aims not to only stimulate debate on the effectiveness or ineffectiveness of Chinese aid architecture in Africa, but to consider whether Chinese aid can guarantee Africa’s development and if not, how do we make the aid from China work for the continent’s development.

Dynamics of China–Africa Aid

China’s foreign aid dates back to the 1950s, immediately after the founding of the People’s Republic of China. At that time, China began providing both economic and technical aid to developing countries, although, at the time, Chinese aid was ideologically based and mostly went to socialist countries within Asia. The 1955 Bandung conference of Asian–African was a watershed because it enlarged the scope of Chinese aid to other developing countries, including Africa. Since then, Chinese foreign aid has been hinged on the 1964 Eight Principles for Economic and Technical Assistance to Other Countries, whose core content include equality, mutual benefit, and no string attached. ¹ Aid relations between China and African began in real terms in November 1956, with Egypt, as the first country in Africa to benefit from China, when the Chinese government gave 20 million Swiss Franc in cash as financial grant to the government of Egypt to support its right over the Suez Canal. In other instances, China has also sent rice-growing experts to Guinea in 1958 (Bobiash, 1992). On infrastructure development in Africa, the Tanzania–Zambia railway in 1976 was a turning point (Xiaoyun, 2010). By 1978, because of the Chinese “closed door” policy during the domestic modernization era, China’s foreign aid to developing countries scaled down (Xiaoyun, 2010). Although, this in a way did not stop China’s influence in Africa, the Chinese government only adjusted the scale, arrangement, structure, and sector of its foreign aid in accordance with its actual conditions ² at home, such that its foreign policy more or less was geared toward enhancing the domestic modernization programs at the time. In that stead therefore, its focus was also shifted to the maintenance of earlier development finance projects (Strange et al., 2013, p. 3) in Africa.

By 1982, the Chinese foreign policy was reinvigorated. This was portrayed by Premier Zhao Ziyang visit/tour to 11 African countries that included Egypt, Algeria, Morocco, Guinea, Zaire, the Congo, Zambia, Kenya, and Gabon. The symbolism of that tour was essentially an attempt to overcome strained relations caused by China’s foreign policy swing towards the West in the late 1970s, to erase the perception that Beijing had somehow abandoned Africa, to promote economic cooperation with the developing world, as well as to portray the importance of Africa in China’s foreign policy (Taylor, 2006, p. 57). The tour also promoted the Four Principles (“equality and mutual benefits,” “emphasis on practical results,” “diversity in form,” and “Common development”) of China’s economic cooperation and laid down the groundwork for expanded trade and economic cooperation with Africa (Taylor, 2006, p. 57).

From that period, China economic relations with the developing world expanded from economic aid to include other areas of cooperation that will result in win-win and mutual benefits. As a matter of fact, since the turn of the millennium, Chinese aid has became more diversified, flexible (Taylor, 2006) and predicated on South–South cooperation as the major platform for which China will relate with Africa and other developing countries, hence ushering in a “new strategic partnership.”

FOCAC and the New Strategic Partnership

At the turn of the millennium, with China’s expanded global reach and a robust financial muscle, it became necessary for China to solidify its relationship with Africa. To do so, China introduced and established the “New Strategic Partnership” with Africa. The Forum on China–Africa Cooperation (FOCAC) was also created to strengthen or cements this relationship. China’s meaning of a new strategic partnership with Africa transcends military and defense issues. It takes into consideration economics, social, and cultural issues. As a matter of fact, the security and military aspects of this new strategic partnership with Africa is predicated on creating a harmonious and peaceful society, where equity, equality and development are the main ingredients (Ubi, 2011a). The main essence of the new strategic partnership was buttressed in a 2006 declaration. Accordingly it was stated that:

…the establishment of a new type of strategic partnership is both the shared desire and independent choice of China and Africa, serves our common interests, and will help enhance solidarity, mutual support and assistance and unity of the developing countries and contribute to durable peace and harmonious development in the world. ³

The leaders further pledged to take a variety of measures, including increasing high-level visits, trade cooperation and cultural exchanges, and enhanced coordination in international affairs, and to draw on each other’s strengths for the mutual benefit of China and Africa. ⁴ Nevertheless, FOCAC, introduced in 2000, became a platform for China and African exchange and cooperation in various areas like politics, trade, economics, social, and culture geared toward individual countries development. Part of the purpose of the Forum is also to enhance and formalize bilateral engagement, minimize the discourses surrounding China’s relations with Africa and to strengthened China–African cooperation under the foundation of a new strategic partnership. ⁵

Although, each FOCAC meeting has had a different focus, the first FOCAC meeting in 2000 agreed on a three-year action plan that will boost Sino-African trade and investments: cancelling African countries’ debts to China; increasing development aid to Africa; and encouraging Chinese companies to invest in Africa. ⁶ The second FOCAC focused on political cooperation and socioeconomic development. In that meeting, Chinese officials made commitments to open China’s market to African exporters and apply tariff-exemption to some products exported by African countries to China. The meeting concluded with the signing of series of agreements that had been reached to encourage preferential market access for products from Africa into China. Trade agreements were also signed between African countries and China to harmonize trade policies for better trading system, economic growth and sustainable development. ⁷

The third FOCAC adopted an action plan that aims to take bilateral cooperation to a higher level and to strengthen cooperation in the areas of politics, economy, international affairs, and social development. The document also charted a roadmap of cooperation for 2007–2009 period. At that meeting, the two sides agreed to continue with the thrust of high-level visit and dialogue, to enhance traditional friendship and mutual trust, promote exchange of views and close coordination on bilateral relations and major international and regional issues, and to share experience on governance to give room for common development and progress. ⁸ The fourth FOCAC held from 8 to 9 November 2009 reviewed how the consensus of the previous Beijing Summit has been implemented and how to find new ways for enhancing Sino-African relations. To this end, the Sharm el-Sheikh declaration and an action plan for 2010–2012 was adopted to chart the path for further China–Africa cooperation in the areas of political affairs and regional peace and security, international affairs, economics, social development, and cultural and people-to-people exchanges (Gathii, 2011). It is important to note here that, at every FOCAC, a review is made of the last and how comprehensive and successful its implementation has been so far.

The fifth FOCAC recently concluded in Beijing (from 19 to 20 July 2012), with the theme “Build on past achievements and open up new prospects for the new type of China-Africa strategic partnership.” ⁹ Also reviewed with satisfaction the implementation of the follow-up actions of the Fourth Ministerial Conference of FOCAC in the last three years, and concluded that the outcome of the comprehensive and effective implementation of the Forum on China-Africa Cooperation Sharm El Sheikh Action Plan (2010–2012) was very encouraging. On that note, it was observed and concluded that, over the past 12 years since its inception, FOCAC has taken China–Africa relations to a new level, by consolidating China–Africa traditional friendship, strengthening political mutual trust, deepening practical cooperation, enhancing exchanges, and mutual learning and has advanced the comprehensive development of the new strategic partnership. Hence, China also pledged during the meeting to scale up its assistance to Africa and to create new ways of assistance and make the assistance more effective, and it will do that, through the use of the grants, interest-free loans and concessional loans to help African countries in the path of development.

It is imperative to understand that, today, FOCAC has remained the most important indicator that China seeks serious, long-term and robust cooperation with Africa, by using the platform to cultivate solidarity and cooperation based on equality, consultation, consensus, friendship, partnership, and mutual benefit. Accordingly, pledges of assistance from China to Africa have consistently been doubled at each FOCAC Summit. The pledges made in 2006 were US$ 5 billion, in 2009 US$ 10 billion and US$ 20 billion in 2012 (Strange, 2013, p. 4). One area where China–Africa’s reengagement and new strategic partnership have been more visible is through its foreign investment, trade, debt forgiveness, infrastructure development, and aid/assistance. And in that regards, China has signed many bilateral agreements with almost all the 54 African countries regarding the promotion and protection of investment, as well as agreements on avoiding double taxation, thereby creating favorable conditions for China–Africa enterprise cooperation. To give the new strategic partnership teeth, for a robust and productive relations with Africa, the Chinese government set up the China–Africa Development Fund (CADFund), with approximately an amount of US$ 50 billion. CADFund is a Chinese leading private equity investment fund that aims to give development finance and special support to Chinese enterprises when they invest in Africa. Since its establishment, CADFund has invested over US$ 500 million to support projects in Africa ¹⁰ (Table 1).

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Table 1.

Chinese Investments in Africa by Sector

	Sectors	In Percentage
1	Oil and Natural Gas	19
2	Rail and Road	18.55
3	Hydroelectric Dams	9.2
4	Iron Ore	7.4
5	Copper	6.9
6	Civil Construction	5.9
7	Manufacturing	3.7
8	Uranium	2.3
9	Airports	2
10	Aid	1.8
11	Port Construction	1.6
12	Gold	0.7
13	Water	0.5
14	Other Mining	10
15	Other	11

Source: Table designed by the researcher with data from China Daily (2013).

Structures of China Aid to Countries in Africa

It is difficult to pinpoint with exactitude the agency(ies) in charge of China’s aid. This is because China does not have a central aid agency; its aid program is organized by different ministries and agencies. In a Chinese “Foreign Assistance White Paper” released in April 2011, it was opined that “Foreign aid expenditure is part of the state expenditure, under the unified management of the Ministry of Finance” ¹¹ in association with the Ministry of Commerce (MOFCOM) and other departments under the State Council, whose responsibility are to manage foreign aid, handle financial resources for foreign aid in their respective departments, and in accordance with stated jurisdiction. ¹² This is, however, in cooperation with the Ministry of Foreign Affairs and as approved by the National People’s Congress (NPC). The Ministry of Finance and the National Audit Office supervise and audit the implementation of foreign aid budget funds of these departments based on relevant state laws, regulations, and financial rules. ¹³

Three policy banks, namely, China Exim bank, China Development Bank, and China Agricultural Development Bank, are the custodian and channels through which Chinese aid programs are carried out. The essence of this is to enable the Chinese government to better finance its development objectives in Africa. However, these policy banks may also offer subsidies for export credits, or foreign investment, but these do not qualify as aid. To be more pragmatic, Chinese government also developed other sources of official finance for China–Africa relations, which include equity funds (mentioned earlier, managed by China Development Bank); non-concessional loans from the China Development Bank; and a growing mix of market rate and preferential export buyer’s credits offered by the China Exim bank (sometimes frequently mistaken by outside observers as official aid). However, Chinese official aid comes in different forms, these include:

Grants (aid gratis, mostly in-kind), provided by MOFCOM; these are basically given to help recipient countries build medium and small projects for social welfare like schools, hospitals, low-cost houses, water-supply projects, etc. It can also be given for human resources development cooperation, technical cooperation, assistance in-kind and emergency humanitarian aid (Bräutigam, 2010). ¹⁴

However, it is important to note that, the first two comes from China’s state finances, while concessional loans are as designated by the Chinese government. Nevertheless, no matter the types of Chinese aid, it is official Chinese policy and it is deemed more mutually beneficial to disburse aid in eight forms that include complete projects, goods, and materials, technical cooperation, human resource development cooperation, medical teams abroad, emergency humanitarian aid, volunteer programs in foreign countries and debt relief, such that it will favor both China and the host country economically. But for the purpose of this paper, we will restrict our discourse to aid in-kind, in-cash (including debt relief) as well as trade (also discussed here as a type of aid).

Aid in Cash

Comparable to other developing regions, Africa is the largest recipient of Chinese annual aid flows with Official Development Assistance (ODA) divided between tied aid, outright grants, a limited number of loans and new mechanisms such as government guarantees for sectoral investment in the region (Alden, Large, & Soares de Oliveira, 2008). Africa has a larger chunk of the share of aid from China for two main reasons. First, because, Chinese aid goes mainly to low-income developing countries where the aid is suppose to benefit the needy people within those countries. Second, it is official Chinese policy to dole-out two-thirds of its aid to the least developed countries of the world. ¹⁶ It is a fact that, because Africa is home to many of the world’s poorest countries, it receives about 45.7 percent of China’s aid (Figure 1).

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Figure 1.

Source: China’s Foreign Assistance White Paper, April, 2011.

Unlike some major Western powers like Britain or France, who concentrate their African assistance efforts on former colonies or those countries of specific geo-political interest, China, by providing aid to almost all African countries (compare to only 39 for the US), is one of the few bilateral aid donors with extensive involvement in all regions of Africa, including English-, French-, Portuguese-, and Arabic-speaking countries (Lönnqvist, 2008). This includes almost all 54 countries on the African continent, but with Angola, Sudan, Tanzania, Zambia, Ethiopia, and Nigeria leading the list. The exact volume of Chinese aid to Africa is unclear because it is administered in conjunction with export promotion and investment by several ministries (Lönnqvist, 2008).

Since renewing relations with Africa, China has become an important lender and provided credits to 38 African states. As a comparison, the OECD’s aid statistics database cites that the UK and the US disbursed US$ 3.7 billion and US$ 4.5 billion respectively in 2005. Hence, with China having doubled its amount of aid to Africa since 2009 it has approach levels of aid similar to the major donors (Lönnqvist, 2008). ¹⁷ However, it should be understood that, most of the aid that China gives is bilateral and tied to the use of Chinese firms and supplies. Suffice to argue here that, by tying aid to the use of Chinese firms and supplies, in itself is a form of condition for aid, even if it is not political conditions as is often imposed by the West. In that stead, it is important to mention here that, the percentage of agreed aid that comes from China into Africa oftentimes comes in the form of materials as well as labor, but with elements of commitment on the part of Chinese to deliver without much ado.

The amount of Chinese aid to Africa has quadruple over the years. A new roadmap defining Chinese aid shows that the continent will receive US$ 20 billion over the coming three years (2013–2015), about double what it has received in the past three years (Global Times, 2013). In total, China’s foreign aid accounts for around 0.07 percent of the country’s GDP which means the nation spent around 40 billion Yuan (US$ 6.4 billion) annually to provide aids to more than 100 countries. Aid to African countries accounts for around half of China’s total contribution in this field (China Daily, 2013a).

Since after the 2012 fifth FOCAC, series of aid agreements have been entered into between China and many countries in Africa. The end of 2012, China had offered aid to 53 African countries, assisting 1,000 agricultural, infrastructure construction, housing, and education, and healthcare projects. China also provided free training to 53,700 people from Africa, and sent medical teams to 42 African countries by the end of 2012 (China Daily, 2013a).

Recently, Mali and China signed about three agreements relating to loans. The first of the loan agreement worth FCFA 16.8 billion (US$ 33.5 million) is to finance priority projects that is people centered. The second loan agreement, worth FCFA 700 million (US$ 1.3 million) was meant for the provision of office equipment and vehicles for the Malian Ministry of Foreign Affairs. And the third agreement relates to the zero tariff treatment applying to 95 percent of Malian products exported to China, as discussed under trade. ¹⁸ However, taking into consideration the sectors where the cash from Chinese aid goes to in Africa, it then suggest that China’s benevolence in Africa is aimed at getting Africa out of the dungeon of poverty.

In terms of debt relief, China has provided debt relief to countries in Africa on its own terms. She has exempted 31 heavily indebted and least developed African countries of debts amounting to 1.4 billion dollars. As a matter of fact, three debt relief packages were announced in 2000, 2005, and 2006. In 2000, China pledged to write-off in 2 years, overdue obligations on 156 loans owed by African countries. As a matter of fact, China fulfilled its pledge by writing-off US$ 1.2 billion in African debt ahead of schedule (Wang, 2007, p. 8). Furthermore, in 2003, it forgave another US$ 750 million. And in November 2006, China announced a debt cancellation of US$ 1.3 billion of 168 interest-free government loans that had matured by the end of 2005 and were owed by 33 of the heavily indebted and least developed countries in Africa (Wang, 2007). Put together, as at April 17, 2007, the first package had been delivered to a value of 10.9 billion RMB (approximately US$ 1.38 billion) to 31 African countries.

Trade in Chinese Aid

International trade has come to signify an important aspect of aid; it has become even much more prominent than any other form of aid. Much recently, the aid for trade (AFT) has become the relevant mechanism to acquire the adequate level of infrastructure required to conduct conformity assessment procedures and harmonize measures among countries. ¹⁹ Trade involves a two-way opening up of markets for countries engaging in it. Since renewed engagement between China and Africa, there has been a steady surge in their trans-national trade to the extent that, Africa is China’s fastest-growing trade partner, accelerating faster than even Latin America and Asia. Today, while, China had established between 1000 and 2000 enterprises in Africa involving a total investment of 6 billion dollars, China has also accounts for 20 percent of Africa’s trade (up from 10 percent in 2008). With this tremendous trade flow, China is most likely to take an increasingly larger chunk of Africa’s external trade, except in the petroleum sector, where the traditional colonial powers and the United States still maintain strong monopoly (Brown, 2011).

Trade relations between Africa and China have been accelerating geometrically since 1990 to date. Data for 1999 showed that trade between China and Africa amounted to US$ 6.48 billion. In 2000, trade between the two was about US$ 10.6 billion (Anshan, Haifang, Huaqiong, Aiping, & Wenping, 2012, p. 55). Furthermore, in 2006 alone, SSA accounted for the bulk of China–Africa trade. That year, all Africa’s export to China increased at an annual rate of over 40 percent, rising from US$ 4.8 billion to reach US$ 28.8 billion. While, Africa’s import from China quadrupled to US$ 26.7 billion (Wang, 2007, p. 5). And in 2010, the figure had reached US$ 126.9 billion (Anshan et al., 2012, p. 55). In 2011, China and Africa trade increased 15-fold to US$ 160 billion (Brown, 2011).

However, 2012 saw the trade between them to have also increased by 19.8 percent to a total of US$ 198.5 billion. ²⁰ For instance, between January and May 2012, trade between China and Africa grew by 22 percent, reaching nearly US$ 80.5 billion. Accordingly, a report from Standard Bank estimated that in the year 2012, 18 percent of Africa’s imports were sourced from China, up from 16.8 percent in 2011, 10 percent in 2008 and as low as 4.5 percent a decade ago. More so, Africa’s share of China’s exports is increasingly gaining significance, rising from 3.3 percent in 2011 to 5 percent in 2012. Whereas, China’s imports from Africa increased by 26 percent in 2012 (signifying twice China’s imports from any other region) (China Daily, 2012a). ²¹

One sector in which trade between China and Africa showed real growth is in electronics and information communication technology. According to the Ministry of Industry and Information Technology (MIIT) of China, in 2012 alone, between January and October, import and export value of the Chinese electronics and information technology industry increase by 3.3 percent during the same period in 2011. In total, export of electronic goods grew 3.9 percent (0.5 percent points higher than that of the first three-quarters of 2012), whereas import of electronic products grew 2.5 percent. Meanwhile, between January and October of 2012, the export volume of telecommunication equipment also saw a swift growth of 12.9 percent, while that of computers grew 1.9 percent. Also about the same period, however, exports of home appliances experienced a drop by 7.9 percent. From indication, while exports of electronic devices grew by 11.6 percent, those of electronic materials saw a rapid decline of 20.8 percent (China Daily, 2012b). This might be due in part to inflation in the national economies of specific countries as well as the euro zone economic crisis.

There have also been a steady increase in China’s share of trade by regional groupings since 1998 but this is largely dominated by commodity exports. China’s share of each regional group’s trade increased steadily from 1998 to 2008, most notably for the Economic Community of Central African States (ECCAS), where trade with China in 2008 reached 25 percent of total trade. Expanding trade with China was led by the strong rise in commodity exports from three ECCAS members (Angola, Republic of Congo, and Cameroon). Data for the other regional organizations show a steady growth of overall trade with China, largely dominated by commodity exports (Schiere & Rugamba, 2011, p. 11).

From the above data, trade in 2012, shows that China and Africa saw an exponential two-way trade from US$ 10.6 billion in 2000 to well over US$ 198.5 billion in 2012. In comparable terms, if we are to take sub-Saharan African trade with the European Union at a total of US$ 198.9 billion and with the US at a total of about US$ 90.2 billion (Zawya, 2012), then China becomes Africa’s leading bilateral trade partner. Although, in relations to China trade with Middle Eastern and developing countries of the Western Hemisphere, China–Africa trade is relatively small (Zawya, 2012). This disparity in the size of China–Africa trade is due in part to lack of technology and to this degree, the lack of production of manufactured goods has to a great extent undermine Africa’s capability to compete favorably with China or even to surpass China’s trade with Middle Eastern and developing countries of the Western Hemisphere or by bringing the two-way trade to a balance. Despite the challenge, China advance in Africa is 10 years ahead of similar moves by the BRIC(S) emerging market leaders in Africa. That notwithstanding, the terms of trade reflecting both the composition of trade and the rising prices of Africa’s main export commodities has been in favor of Africa (Wang, 2007, p. 5). As at the end of 2012, the countries with largest Chinese investment were Nigeria (US$ 15.4 billion), Algeria (US$ 9.2 billion), South Africa ($6.6 billion), the Democratic Republic of the Congo (US$ 6.5 billion), Niger (US$ 5.2 billion), Egypt (US$ 3.2 billion), Libya (US$ 2.6 billion), Zambia (US$ 2.4 billion), Sudan (US$ 2.2 billion), and Ethiopia (US$ 1.9 billion) (China Daily, 2013b). ²²

Since the beginning of 2013, China–Africa bilateral trade volume has increased by an average of 22 percent year on year each month. And if this trend continues, their trade is anticipated to exceed US$ 200 billion by the end of the 2013 (Standard Bank, 2013), up from US$ 198.5 billion in 2012. In 2015 it is speculated that this might increase to US$ 325 billion. And by 2020, there is a probability that China will secure more economic and political influence in Africa that least rivals, if not outdo that enjoyed by Europe and the US in the last 150 years (Wang, 2007, p. 5, see also Brown, 2011, p. 1). If this materializes, there is a probability that it will provide a strong foundation for growth in Yuan trade settlement. ²³ There are also prospects that China and Africa will continue to gain market shares into the nearest future, although not in comparable terms. While this to a considerable extent will lead to mutual development and win-win cooperation, it will also increase capital within these countries and open a whole lot of economic opportunities.

At the fifth Ministerial conference on FOCAC held in Beijing July 2012, China pledged to further open its market to African countries with a decision to grant, progressively under South–South cooperation, the zero-tariff treatment to 95 percent of African members of the Least Developed Countries (LDCs) having diplomatic ties with it. ²⁴ As a matter of fact, if FOCAC is to maintain the momentum of the new strategic partnership, Africa will remain China’s fastest-growing trade partner. However, it is important for Africa to maximize its export income with China toward the growth and development of the continent (Figure 2).

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Figure 2.

Sources: MOFCOM, Standard Chartered Research.

Aid in Kind (Infrastructural Aid in Africa)

Lack of infrastructure in Africa has constituted a bane to economic growth and development, and has remained a major constraint to doing business in Africa. Recently, support for infrastructure in Africa has risen significantly, with commitments from donors in 2007 exceeding US$ 12.4 billion – a 61 percent increase from the US$ 7.5 billion in commitments in 2006 – and well above the roughly US$ 7 billion pledged in 2005. In 2007 alone, China’s commitments amounted to about US$ 4.5 billion, while Arab countries and India committed US$ 2.6 billion and US$ 700 million respectively (African Development, 2008, p. 3). ²⁵ Today, China is the biggest investor in infrastructure in Africa, and these are the only ones willing to support certain vital and hard infrastructure projects in Africa in areas where Western aid agencies and private investors have ignored.

Over the past 50 years, China’s foreign aid to Africa has sponsored more than 900 infrastructure and social development projects, ²⁶ although often financed on the condition that they are carried out by Chinese companies. This is in line with the “go out” strategy – driven by the Chinese government to promote the internationalization of Chinese companies (Idun-Arkhurst & Laing, 2007). The Chinese have overtime developed a discernible constructive geographical distribution and sectorial patterns of aid in kind to countries in Africa. The focus of such projects in Africa has been in the area of productive infrastructure – projects that are meant to alleviate poverty, touch the lives of common people, and guarantee development, etc. Funding for these infrastructures comes from concessional loans, investments, credit lines, and grants and sometimes through deals like infrastructure for resources. Deals on infrastructure for resources total around 15 percent of the total Chinese investment in Africa. This method of funding has proved to be the most effective and fastest way of building African infrastructures, and has endeared Africa to China. ²⁷ However, it is difficult to get cumulative information of the quantity, concentration, to which countries and what projects China directs its assistance; these have remained however elusive (Alden, Large, & Soares de Oliveira, 2008; Davies, 2007). This is because China does not have an independent agency responsible for all forms of its aid. However, much of Chinese finance often goes to large-scale infrastructure projects in nearly every country in Africa. Today, 54 African countries are engaging with China on infrastructure finance deals. The biggest recipients of Chinese infrastructure finance are Mozambique, Angola, Ethiopia, and Sudan (Davies, 2007; Foster et al., 2009) and Nigeria. Apart from Ethiopia, the other four countries are rich in natural resources.

In quantifiable terms, Chinese financial commitments to African infrastructure projects rose from around US$ 5 billion per year in 2001–2003 to around US$ 1.5 billion per year in 2004–2005, reaching US$ 7 billion in 2006 – however, in China’s official “year of Africa” – it trailed back to US$ 4.5 billion in 2007 (Foster et al., 2009, p. xi). However, it is estimated that between 2001 and 2010, China Exim bank loans to SSA made through its trademark “package loans” and targeting infrastructure development, reached US$ 67.2 billion, overtaking World Bank lending of US$ 54.7 billion to Africa during the same period. ²⁸ In specific terms, in 2010, data showed that around 800 projects were underway, including projects worth more than US$ 1 billion in various sectors (Anshan et al., 2012, p. 55). And by 2011, project list of Chinese commitments to large-scale infrastructure projects in SSA alone amounted to US$ 14.9 billion, showing a 66 percent increase compared to year 2010 (Anshan et al., 2012). More than 70 percent of these in terms of value were infrastructure aid to resource-rich African countries. However, loans from the Exim Bank accounted for most of China’s infrastructure commitments. A closer analysis of “to which country” with the largest Chinese infrastructural deals tend to substantiate the argument by “sinophobes” that China is in Africa and doling out so much aid because of its quest for resources.

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Figure 3.

Source: ICA Annual Report, 2012.

In terms of the geographical and regional spread of Chinese infrastructural finance in Africa, Central Africa is the highest recipient, with a share of 79 percent, followed by East Africa taking 12 percent and West Africa having a share of 8 percent (ICA Annual Report, 2011) (see Figure 3).

In sectoral terms, a large share of the Chinese infrastructural finance is allocated to general hydropower, followed by transport, information communication technology, water and sanitation, and multi-sector infrastructure within the framework of broad bilateral cooperation agreement that allows resources to be allocated in accordance with the recipient government priorities. However, it is apparent that the two largest beneficiary sectors are power (mainly hydropower) and transport (mainly roads and railways; Table 2).

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Table 2.

Chinese Infrastructure Finance Commitments in Sub-Saharan Africa (SSA)

Electricity	33.40%
Transport	33.20%
ICT	17.40%
General	14.00%
Water	2.00%

Source: Zawya (2012).

A large percentage of China’s activities in Africa have focused on the construction of large hydropower scheme and dams. By the end of 2007, China committed US$ 5.3 billion in financing for hydropower, including the construction of 10 projects (six currently under construction) that will boost Africa’s installed hydropower capacity by 30 percent when completed (Foster et al., 2008). In the transport sector, since 2007, the Chinese have launched major projects in the area of transport infrastructure. As at the end of 2012, a number of deals were signed between China and many countries in Africa. For instance, in Nigeria, US$ 1 billion earmarked for a Sinohydro-China National Electric Equipment Corporation project aimed at stabilizing the country’s power supply. Others include investment of US$ 100 million by Chinese energy firm Haohua Energy International to acquire a 23.6 stake in the South African Coal mining company.

In the transport sector, the most significant Chinese investment directed to transport infrastructure development, is the 2012 China promise to support the construction of a 2,000 km coastal highway that will stretch from Dakar to Lagos, crossing through nine West African countries in the process (African Portal, 2013). Although, the modalities of the agreement are still unclear, but China recommended that their financial contribution is contingent on a comprehensive proposal from all nine participating countries. And in the East African Community (EAC), as at August 2012, Chinese investments amounted to US$ 1.5 billion across such sectors as roads, energy, and power. And much recently, China is also a leading contender, in lobbying for Kenya’s flagship US$ 20 billion Lamu Port South Sudan-Ethiopia Transport Corridor (LAPSSET) Project. This project includes an 800 km highway (which will stretch from Lamu, Kenya connecting Ethiopia, and Juba, South Sudan), a railway line, an oil pipeline, oil refinery, a new port and airport in the coastal town of Lamu. This project is dubbed as one of China–Africa’s largest infrastructure projects. This project has a strategic importance, and will be of mutual benefit to a number of African countries within Horn of/East Africa, since it will increase intra-regional trade, interconnection, and integration (Ventures Africa, 2012). Being cognizance of recent developments between Africa and China, it is suggestive that the new infrastructures that are being developed are regionally based and aimed toward enhancing Africa’s integration process. Developing regional infrastructure is advantageous to countries within the region and will enhanced unity, integration, and trade amongst them. Another investment by China is the US$ 1 billion pledged for the financing of the Lagos Mega City rail project. China has made a major comeback in the rail sector, with financing commitment to the tune of US$ 4 billion for this sector, which includes rehabilitation of more than 1350 km of existing railway lines and the construction of more than 1600 km of new railroad.

For Information Communication Technology (ICT) sector, China’s involvement in Africa mainly takes the form of equipment sales to African countries, either through normal commercial contracts or through intergovernmental financing tied to purchases of Chinese equipment by state-owned telecom incumbents. An important focus has been the development of national backbone infrastructure. In total, between 2001 and 2007 Chinese telecom firms supplied almost US$ 3 billion worth of ICT equipment, mainly in Ethiopia, Sudan, and Ghana (Ventures Africa, 2012). For water, the Chinese are involve in financing a significant number of projects. However, when combined, that is, ICT, water, and multi-sector infrastructure projects, it amounts to more than US$ 4 billion.

Also of utmost importance amongst the gifts from China to Africa is the Chinese involvement in the building of Special Economic Zones (SEZ) in African countries, namely, Egypt (for petroleum equipment, electrical appliances, textiles, and automobiles), Nigeria (for transport equipment, textiles, home appliances, and telecommunications industry and another in Ogun state, with interests in construction materials, ceramics, ironware, furniture, wood processing, medicine, and computers), Mauritius (with investments in textiles, garments, machinery, and high-tech manufacturing, as well as trade, tourism, and finance), Zambia (focusing on copper and copper-related industries, as well as a subzone in Lusaka, Zambia, focusing on garments, food, appliances, tobacco, and electronics) and Tanzania.

The zones if properly utilized will provide the needed capacity for Africa’s development. The essences of these zones are dual focused. On the one hand, the SEZ are to promote industrialization and/or for export. Just as the zones will exclusively provide for Chinese investors, it will also seek to attract capital from domestic as well foreign investors (Davies, 2010, pp. 25–26). On the other hand, the zones are also intended to promote China’s foreign commercial interests and create safe-havens for Chinese capital, and to also offset risk against increasing protectionist trade practices against Chinese companies to secure new markets on the African continent through investment in industrial clustered zones (Davies, 2010, p. 24). And much recently, China International Trust and Investment Corporation completed a US$ 3.5 billion housing project spanning 5,000 hectares which will house about 500,000 people in a satellite city on the outskirts of Angola’s capital city of Luanda (China Daily, 2013b).

However, with the US$ 20 billion in loan pledged by China at the 5th FOCAC held in July 2012 to Africa over the next three years for infrastructure, agriculture, and manufacturing (Zawya, 2012), and with infrastructure development and integration efforts in Africa taking the bulk, suggests that more than US$ 15 billion will be spent on 900 roads and energy projects in Africa (Global Times, 2013) over the next 3 years.

Advancing Chinese Benevolence for Africa’s Development

The evolution of South–South aid, especially Chinese aid to countries in Africa has re-engendered the aid effectiveness debate. The argument is that, because Chinese aid does not follow the criteria of the OECD/DAC, the aid thus, will become ineffective, hence, undermine Africa’s development. However, instead of the ineffectiveness debate on Chinese aid, energy should be spent on discourse at how to make Chinese aid bring about growth and development in Africa. Because Western aid has been unfavorable and effective in Africa is not enough reasons to write-off aid, especially aid from China. What should be important to countries in Africa and China and other South–South development partners, should be the lessons they can draw from the history of global failure of aid in Africa and what made aid ineffective. The difference between Western and Chinese aid to countries in Africa rhetorically speaking is that Chinese aid is practically aimed at development and self-reliance. For instance, Chinese aid is given to recipient countries based on national priorities such that will guarantee a win-win, mutual benefit situation as well as that which will lead to development of the recipient country.

Assessing China–Africa aid relations portrays prospects and challenges, but on whether China’s foreign aid to Africa will contribute to sustainable development will depend on two factors. First, it will be dependent on possibly, the nature of the agreements reached between China and recipient countries in Africa, and on how both sides administer the finances and supervise projects. Second and most importantly, it will also depend on commitments on both sides (Ubi, 2011b). If Chinese aid must work for Africa’s development, a basic factor that must be taken into consideration is the political will and commitment of the donor as well as the recipient countries. As matter of fact there is the need for greater political will and commitments on the part of countries to meet past commitments and deal coherently and effectively with the major development challenges confronting their individual countries. A greater part of the commitments should come from the ruling elites in African countries.

In a speech in 2009 in Ethiopia, former Chinese Premier, Wen Jiaboa, opined that Chinese assistance to Africa had not only added to Africa’s capacity for self-development, but have also produce practical results in Africa. ²⁹ Anshan (2007) also emphasized on the benefits that had accrued to Africa in its engagement with China. According to him, this reengagement has increased continue demand for Africa’s products, raised the bargaining position of African countries, built infrastructure in Africa and in turn had led to African economic growth, etc. (Anshan, 2007, p. 2). However true, it will be difficult for Africa to sustain the self-development or the practical result gained without either technology transfer or acquisition. For instance, the Chinese government through its ministry of science has initiated science and technology partnership plan with Africa. The plan concludes that China will carry out 100 joint research and demonstration projects, invite 100 African Post-Doctoral candidates to conduct scientific research in China and offer research equipment to all African science researchers as they return to their various countries (Anshan et al., 2012, p. 23). In another dimension, China’s pledge to train and use local peoples during the construction of projects, whether real or imaginary, the above is commendable and should be fulfilled and sustained in order to enhance capacity building and technology know-how, so that in the near future these local people will be able to reproduce, take-over, and run these projects. However, it is one thing to pledge and another thing to fulfill the promise. In that stead, African government should hold Chinese government on their pledge.

It is also a fact that Africa has benefited considerably from increased trade and investment in infrastructure, health, education, small-scale businesses, and low and medium technologies. ³⁰ It is also important for China and countries in Africa to understand that development is not only predicated on aid in cash or in kind, but development is sustained mostly through investment and trade. Of course, with China flexible policy of giving more assistance to countries lacking in resources and markets, and more international trade and investment to countries rich in resources and market (Anshan et al., 2012, p. 57), it is pertinent for African countries to depending on where they fall to maximize the African–China relations in both trade and investment to boost their economies. Although, it is well understood that African countries are major exporter of raw materials, that should not stop them from gaining access to Chinese market and establishing small and medium enterprises just like the Chinese are doing in Africa. It is important for countries in Africa to understand that countries with more rapid growth of trade also tend to have more rapid growth rate in Gross Domestic Product (GDP). ³¹

It is a known fact that aid amounts are often dwarfed by a rich country’s protectionism that denies market access for poor country products, and on the contrary, rich nations use aid as a lever to open poor country markets to their products. That should not be the case with Africa–China trade and investment relations. Today, there are many Chinese in the retail businesses in Africa; this is something that the Chinese will not tolerate in their own country, allowing this in a way will undermine growth and development. It is advisable that African governments should create national legislation to take care of this problem in individual countries, and also create policy reforms to change their trade strategies to improve growth, which must include, as embedded the Report of the Ministers for Trade in Africa; transparency on new measures being introduced by trading partners; conformity assessment procedures; and harmonization of measures among countries. ³²

Following the decades of aid “fatigue,” it has become increasingly clear that a new approach and good policies for better management of resources need to be created by the both the government of China and African countries, in other that aid will produce better development results. Aid can only be successful in raising growth rate in countries following “good” policies. Therefore, for the success of any aid program, it is not the amount, the sectoral or geographical distribution of aid that matters, but how effectively and efficiently the money is use to generate the growth effect envisaged in recipient countries is very important (Burnside & Dollar, 2000; Lahiri, 2007, pp. 18–19). In other words, aid resources if it is well targeted and properly administered hold the key to the survival and eventual development of Africa as well as the development of a large number of people. For it is only by doing that will the aid guarantee Africa’s development. The challenge therefore, is to understand under what conditions governments can use aid for productive purposes and redistributive purposes. Therefore, it is good for the continent to take a cue from China and some examples of countries that have attained developmental strides as a result of well managed and properly channeled aid.

The building of Special Economic Zones (SEZ) in Africa is really commendable for China, because these SEZ could be among one of the stepping stones for Africa’s growth and development. Today, the industrial success of many Asian economies are attributable to the creation of manufacturing and export processing zones with incentives provided to investors to set up industrial clusters (Davies, 2010, p. 25). Therefore, for Africa to develop, it needs the development of well-functioning clusters. These zones will invariably contribute to the backward (to the country’s hinterland) and forward (to export market) linkages in the domestic economy. Most importantly, the zones will create employment opportunities and generate greater foreign exchange reserves through more diversified sources of income. Furthermore, according to Davies (2010), the zones will focus on value-added industries and provide liberalized investment environments for investors (Davies, 2010). However, for Africa to maximize the benefits of these cluster zones being provided by China, it is pertinent that African governments move away from import-substituting industrialization policies if they can, because this serve to restrict economic openness and result in protectionism, and hence, should adopt manufacturing- and export-oriented policies (Davies, 2010).

Finally, although, it is understood that China does not follow the OECD/DAC criteria; it is, however, necessary and most appropriate, on the one hand, for China to imbibe the new approach that is focused on development effectiveness rather than aid effectiveness. In other words, China should dole out aid based on development cooperation architecture that is inclusive, right-based, people-centered and should cover all modalities of development cooperation and not just aid (Better Aid, 2010). And on the other hand, what countries in Africa must do to achieve better result, is to claim ownership of the aid by setting their own strategies for development, improve their institutions and tackle corruption; make sure that donor countries (this time China) align their support in line with these strategies and use where possible, local systems (Better Aid, 2010) and make sure that whatever aid is pledge, must necessarily aim on improving the lives of the poor and geared toward economic growth and development.

Conclusion

From the above discourse, there is great optimism about the potential benefits of the new China–Africa co-operation, although, skepticism also abounds among people from the recipient countries and the international community. That notwithstanding, it is important that the debate about how good/bad Chinese aid is or how effective or ineffective the aid is should not be the focus. However, what should predicate our discussion should be where and how to utilize the aid money well, and make sure it is properly channel into the appropriate quarter.

Today, there are propositions in favor of Chinese as a remedy of Africa’s situation. This stems from two points, first, it is because China which shares history of oppression and underdevelopment with Africa, deemed itself in a better position to be of veritable assistance to Africa, and second, Africa has plenty of lessons to draw from China’s development experiences. It is important that Africa must use the events of the past to shape the future. In other words, Africa should draw lessons from its past history and experiences with the West and at the same time emulate the Chinese experiences in growth, development, poverty reduction strategy, etc. The much acclaimed China’s growth and development today, was never accidental; it was a product of careful and well thought out planning and determined implementation of development policies. The 1978 Chinese reform was all-inclusive; it covered almost all facets of the economy. It is therefore suggestive that development strategies in Africa should take a cue from the Chinese reform (strategies, patterns, structure, and commitments). Although, it is good to emulate China, it is however important for countries in Africa to avoid some of the challenges and mistakes that the Chinese are facing, including but not limited to environmental pollution and degradation. It should be understood that, every national economy is peculiar and unique in its own way. Therefore, national economic planners in African countries should take their individual and unique situation into consideration when strategizing for development.

Importantly, China–Africa relations is unique in that it builds on complementarities across different sectors, in trade, investment, aid, etc. For Africa to gain from this relationship, African governments must develop good policies for development as well as have a policy of engagement with China, policies that will guarantee Africa’s development. Hence, adequate institutional framework to enable Africa benefit in an all round way, especially in preferential market access is imperative. Therefore, policymakers and economic planners in Africa will have to be conscious of what their individual countries need for development and strategizes in that respect toward development. For it is only by fashioning-out good policies will development take place.