Written by Riddhi Deokar
Senior Research Intern,
Jindal Centre for the Global South,
O.P. Jindal Global University,
Email: 23jsia@rdeokar@jgu.edu.in
Introduction
China’s relations with Africa, in modern history, can be traced back to the Bandung Conference of 1955, where China began to reposition its foreign policy, diversifying it from depending on the Soviet Union. The Sino-Soviet relations saw a decline during the early 1960s, and due to the increasing tensions in the Sino-American Relations, China had to break out of this increasing isolation. The African continent presented itself as an opportune candidate to fulfil this objective of diversification.
In his visits to Africa in 1963 and 1964, China’s Premier Zhou Enlai proposed the five principles and later the eight principles, that elucidated China’s relations with African and Arab nations. The five principles underline China’s support to African and Arab nations to oppose imperialism and their resolve to strengthen their independence. These eight principles insist on China’s resolve to ‘never attach any conditions or ask for any privileges’ and emphasise the principle of ‘ equality and mutual benefit’. (Hongming, 2014)
Against this backdrop, Africa’s engagement with China seems logical, especially after China, in the initial stages of its relations with Africa, has enshrined in its principles the markers of a healthy partnership, i.e., a relationship that is void of conditions and one that leads nations to be economically self-reliant. Many economists and Chinese experts claim that the relationship China shares with Africa is characterised by debt traps and one that makes Africa a nation dependent on China.
This article endeavours to objectively understand Chinese investments in Africa, focusing on the investment trends between the two partners, trying to discern whether China indulges in the much-contested ‘dept-trap diplomacy’ with African nations. It would dive deep into the costs and benefits of the investment projects that Africa faces and would face in the future.
The article would then consider two key cases of Angola and Niger, to objectively understand Chinese investments in these countries. The article would also briefly touch upon China’s debt relief position and look at the future of investments in the two countries.
To understand investments, it is imperative to look at China’s investment trends in Africa, the sectors in which these investments are concentrated, and the benefit-to-risk ratio for Africa.
Investments in Africa: A Brief Overview
Ying Xia suggests that China’s economic engagements in Africa can be analysed in three phases; phase one from the 1950s to late 1975s which promoted anti-imperial and anti-colonial agendas. This phase predominantly was ideologically driven. The second phase, from the 1980s to the early 2000s, saw Chinese migrant entrepreneurship rise, while the third phase saw market considerations decide investments in Africa along with state-led initiatives to facilitate China-Africa engagements. (Xia, 2021)
The nature of China’s investments has evolved over the years in accordance with the growing economic demands of China as a leading world economy. As China grew as an economic giant, characterised by its increasing production and exports, the need for the inflow of raw materials went up, leading China to invest in a resource-rich Africa. Unlike Western nations, Chinese investments are characterised by non-interference in the domestic policies of the African nations. China exempts African nations from the expectation of any form of democratisation nor does it impose Chinese communism on these nations, making the partnership with China seems attractive and convenient to most African nations.
China invests in African nations in various sectors, but a few sectors have more concentrated investment. These sectors are usually the ones that aid China’s interests in the nations in which it invests, such as the infrastructure of a nation or the transport and energy sectors. China has been labelled as being a neo-coloniser and one that engages in a ‘debt-trap diplomacy’ with nations it invests in.
To understand the gravity of these labels, this article will study two cases: Angola and Niger. By studying these nations, Angola being the highest debtor while Niger being a relatively recent development, the article aims to discern the risks that these nations face and ultimately understand the nature of the relationship these nations share.
Angola: A Marriage of Inconvenience?
China’s interest in Angola lies in the African nation’s crude oil. This partnership has often been termed as a marriage of convenience by many as China’s investment interests lie mainly in petroleum, while Angola endeavours to rebuild its economy post the civil war of 1975, which lasted till 2002. This Sino-Angolan relationship is often scrutinised, for Angola remains China’s highest debtor, owing $45.0B to China, according to School of Advanced International Studies – China Africa Research Institute (SAIS-CARI)
The ‘go global’ policy of 2000 that China implemented and the end of Angola’s civil war in 2002 laid the foundation for deepening economic relations between the two nations (Verma, 2017). Subsequent series of investments between the two nations has led to what is known today as the China- Angola investment model. It reflects a complementary relationship between the two nations; China meets Angola’s investment requirement for infrastructure, while Angola fulfils China’s requirements for natural resources. The Angolan government uses China’s petroleum-backed credit facilities to finance investments (Liviu Stelian Begu, 2018). Although the International Monetary Fund, the World Bank and many experts call this model unsustainable, as Angola bears the consequences of this model.
China’s aid to Angola is diversified but it is also concentrated in a few sectors. Infrastructure development is given major emphasis with project concentrations in energy, water, and transport. Although the majority of these funds are not received by the Angolan government directly, they are channelled to the Chinese firms in Angola. This then raises questions regarding the employment opportunities for the Angolan citizens. Contrary to common logic, Chinese companies use their own citizens for infrastructure projects, citing reasons like a language barrier, unskilled labour force and investment of time to train foreign employees; China fails to create employment for Angolan citizens. (Liviu Stelian Begu, 2018)
Access to clean water remains one of Angola’s pressing concerns, with more than half the population unable to access clean water. There is a positive correlation between access to clean water and the export of crude oil. Still, with citizens unable to access clean water, a healthy population fails to be nurtured, which is a requisite for sustainable development. (Liviu Stelian Begu, 2018). With this backdrop one wonders if China’s aid to Angola is beneficial to the latter currently and in the future.
External debt is a significant percentage of the total debt owed to principal Chinese banks. As the Angolan economy depends heavily on oil exports, the repayment of these loans to China is linked to the oil prices and exchange rate movements, which can be volatile and hamper Angola’s debt repayment. (Gupta, 2022)
As the loans with Angola are obscure and the clauses of agreements are replete with uncertainty, Angola’s debt repayment remains a big question. This is not to say that Angola fails to benefit from China, but the investment to benefit ratio does not progress positively. According to a Reuters report, Angola has secured three years of relief from Chinese creditors and is making the effort to diversify its export options but given the debt amount, Angola seems to be tied to China.
Niger: Securing Political and Energy security for China.
Contrary to other African nations like Angola, Niger has limited natural resources. Relations between Niger and China gained momentum after Tandja came to power in 2000. At Niger’s request China’s interest in its uranium sector was the beginning of Sino-Nigerien relations. Tandja played an important role in Sino-Nigerien relations coming to fruition as he aided Niger’s willingness to open the Uranium and oil sectors. (Cabestan, 2018)
With the aid of Chinese companies Niger became an oil exporting nation. (Cabestan, 2018) China had various objectives with this investment; it wanted to enhance its energy security by securing the oil fields in most nations and hence diversifying its oil resources, it wants to play an increasingly important role in Africa and aid the nations like Niger to internationalize their oil resources. (Cabestan, 2018)
A commonality in the investments is that the Chinese companies own majority of the shares which raises the questions regarding the reasons behind Niger’s continuation of this relationship with China. Niger takes advantage of the financial support that China provides as it aids Niger in developing the basic human infrastructure needed. Moreover, the presence of Chinese companies has given the Nigerien government better leverage over the French company Areva, on which it was heavily dependent since 1970s, which is known for its obscure agreements. Although, when it comes to the oil sector unlike the uranium sector, China holds more power.
Niger is becoming the focus of many Chinese analysts due to the recent coup that took place in the nation, which ousted President Mohamed Bazoum, The Chinese foreign ministry said it was closely monitoring the situation and the coup in Niger would not affect the existing deals of building an industrial park, the Niger-Benin Pipeline, and a new uranium. Although China’s partnership with African countries is based on the factor of non-interference, Beijing has emerged as a successful mediator in the post-coup hostility between Niger and Benin, significantly reducing the deadlock between the two nations and subsequently on the pipeline negotiations. Hence, China’s exit from Niger is improbable given its vested interests in the region leading it to be not just a pivotal economic player but now a significant political player as well.
Niger’s debt to China is characterized by the fluctuating prices of commodities. Additionally, the study of Niger becomes important today, especially post-coup, as it underlines that China’s interests in African regions, even though stem from purely economic needs, the lack of Beijing’s historical baggage in Africa intertwines the political aspect in the form of its mediation in the structurally volatile African continent. Niger, for China, is an important player when it comes to securing Chinese influence in the continent.
Conclusion:
The lack of transparency in the agreements between China and African nations and the keeping of data on the loans acquired by African nations makes it tougher to understand whether these nations are truly being engaged in a debt-trap by China. African nations are becoming increasingly reliant on China for financing and development of infrastructure in their country.
The division of ownership of various companies between China and the nations of Angola and Niger brings back on the table the debate regarding the neo-colonial label that is often levied on China. With China retaining more of the shares in these companies the concerns regarding the autonomy of these nations and authority they get to exercise in the decisions taken becomes pertinent. Although one must keep in mind the argument that, in the outset of the relationship between China and most African nations, the latter had little to no economic standing to negotiate the terms of the agreements they were involved in. Moreover, the attractive nature of Chinese investments accompanied by the non-interference principle made China a convenient and attractive investment partner.
Along with the economic intentions, China’s political intentions are also well understood through its economic activities in the concerned nations. Through economic means China not only secures itself in terms of the supply of raw materials, but by investing in nations’ infrastructure projects, secures a political stronghold. Most importantly China operates bilaterally with African nations and not through existing international frameworks, which cements the notions of a neo-colonial China.
The existence of a non-dubious Sino-African equation is dependent on the transparency of the investments and leniency on China’s end when it comes to debt-restructuring efforts. This research article recommends that the African nations must insist on the inclusion of collective restructuring clauses in the loan contracts with China in anticipation of possible debt-restructuring scenarios. They must play a leading role in talks involving finance and moreover the African nations must align their demands and showcase one voice to avoid being taken for granted. (OBE, Butler, & Jie, 2022)
Additionally involving the private sector in debt-restructuring demands helps the lenders and debtors understand third party perspectives working towards the national goal of development. Working out high-level dialogues between these three players and eventually other nations to follow the diversification approach can provide African nations a way out of deadlock agreements. Albeit China being the nation having the political and economic upper hand the onus of ensuring a transparent, equal and sustainable investment equation surely lies on Beijing.
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The opinions expressed in this article are those of the author (s). They do not purport to reflect the opinions or views of the Jindal Centre for the Global South or its members.
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