Let a Hundred Flowers Bloom: China and the governance of Africa s natural resources

Transcription

1 Let a Hundred Flowers Bloom: China and the governance of Africa s natural resources Chris Alden and Ana C. Alves (China Africa Project / SAIIA) 'Digging for Peace' Fatal Transactions conference, Bonn Nov 21 22, 2008

2 Contents I. China s resources crisis & Africa s bounty II. Growing competition amongst newcomers III. The Angola Mode IV. Major risks for Africa V. China: a change in behaviour? VI. Conclusions

3 I China s resources crisis 2 nd largest world oil consumer (2003) & 3 rd global importer (2004) 5 th major oil producer (4,8%) but provides less than half of its domestic oil needs (8 mn b/d 2007) Its oil consumption doubled in past decade and expected to reach 15 mn b/d by 2030 (OPEC) Over the past decade China became world leading consumer of most base metals (aluminium, iron ore, copper, manganese, lead, zync )

4 The African resource bounty 3 rd largest oil reserves (9,5% in 2007), fastest growth rate (doubled in last 20 years): Lybia (35%), Nigeria (31%), Algeria (10%) & Angola (8%) 4 th largest oil producer (12,5% in 2007): Nigeria (25%), Algeria (21%), Lybia (20%) & Angola (18%). SA: leading producer of platinum (80%), manganese & gold; DRC leads in cobalt (36%) & diamonds (1/3 of total); other significant producers: Gabon (Manganese), Zambia (copper and iron ore), Zimbabwe (platinum) & Angola (diamonds, copper and iron ore)

5 What China imports from Africa Dramatic surge in bilateral trade from US$ 10 bn in 2000 to US$ 72 bn in 2007 Chinese imports mostly composed by natural resources (oil accounts aprox. 3/4 ) , , , , , , ,00 other goods Non fuel minerals Wood Diamonds Cotton Crude Oil 0, (Source: World Trade Data, China Africa s top 20, 2007)

6 Growing imports concentration in other goods 53% 1995 Crude Oil 18% Minerals 9% Cotton 11% Diamond 3% Wood 6% natural resources Minerals 4% Wood 7% Diamond 2% other goods 22% 2000 Crude Oil 65% Wood 2% Minerals Diamonds 2% 8% other goods 12% 2006 Cotton 3% Crude Oil 73% (Source: World Trade Data, China Africa s top 20, 2007)

7 Africa as an oil supplier to China Chinese oil imports by origin 2007 Chinese oil imports from Africa (2007) Other Asia Pacific 15% Europe & N.A. 0% S. & Cent. America 7% Former Soviet Union 13% North Africa 8% Africa 26% Middle East 39% BP, Review of World Energy 2008 SSA 92% China s African major suppliers: Angola (51% ) / 15% of China s total oil imports Sudan (18%) Congo B (13%) Equatorial Guinea (11%), other minor sources: Nigeria (3%), Gabon and Chad (1% each)

8 China as a destination of African natural resources exports China 19% Sub Saharan Oil Exports by Destination (2007) Other Asia Pacific 18% Rest of the world 1% Europe 15% US 37% Other N. America 2% S. & Central America 8% BP, Review of World Energy 2008 China is also the final destination of : 60% of Africa s exports of Cobalt, 40% of its iron 25% to 30% of its chromium, copper and manganese exports. (PPIAF /World Bank, 2008)

9 China s Minerals imports from Africa Absolute value increased from US$ 286 million in 2000 to US$ 2,6 billion in ,00 Nickel 4% Diamonds 27% Platinum 18% 2006 Chromium 6% Copper 23% Cobalt 11% Managanese 11% 80% of China s cobalt imports and 40% of manganese originate in Africa (DRC & Gabon as main suppliers) 2.500, , , ,00 500,00 0,00 Diamonds Nickle u Platinum Chromium Managanese Cobalt Copper ( World Trade Data, China Africa s top 20, 2007)

10 II Growing Competition amongst Newcomers India also account for a significant share of the spike in commodities demand = Overlapping interests in oil and mining in Africa Sudan late 1990s/early 2000s = window of oportunity to enter african oil sector (Great Nile Petroleum Company: CNPC 40%, Petronas 30%, ONGC Videsh 25%, Sudapet 5%). More recently China, India and Brazil begun to acquire assets in the Gulf of Guinea (Angola and Nigeria are major targets) China important stakes in oil sector since 2006 by paying extremely high bids (Angola, Nigeria, Eq. Guinea, Congo B, Gabon ); Mining sector US$ 3 bn manganese project in Gabon and US$9 bn cobalt & copper project in the DRC

11 Growing Competition amongst Newcomers India: ONGC Videsh s assets much smaller (Lybia, Egypt and Sudan), 2 failed attempts to enter the Angolan oil market (2004, 2008); mining sector diamonds account for its oldest interest in Africa; Tata steel has assets in S.A., in Mozambique (coal) and is looking to expand its business to Liberia (iron ore) and Angola (iron ore) Brazil: Petrobras has assets in Angola (1979), Nigeria (1998) and more recently in Tanzania and Lybia (2004); mining sector coal in Mozambique (late 1980s), diamond, copper and manganese in Angola, manganese in Gabon and various interests in S.A.

12 Growing Competition amongst Newcomers Occasional cooperation but mostly competition characterizes Chinese, Indian and Brazilian ventures in Africa (having Chinese companies outbid the others in a number of projects oil in Angola 2006 & 2008 and manganese in Gabon 2006) There is room for future cooperation, namely in technology (Brazil has deep water drilling tech missing in the other 2) Chinese, Indian and Brazilian acquisitions are most of the times part of larger intergovernmental deals to develop infrastructure.

13 III The Angola Mode China s most used financial practice in Africa: infrastructure loans backed by resources Stems from previous western loans to Angola way to overcome lack of creditworthiness in internacional financial market Intergovernmental framework agreement (purpose, amount, maturity & interest rate) + ExIm Bank loan agreement with the borrower (terms vary from country to country) US$ 4,5 billion to Angola in 2004 secured by oil, US$ 3 billion to Gabon in 2006 guaranteed by Manganese exploration rights, and US$ 9 billion to DRC in 2007/2008 in exchange for cobalt mining development

14 China and Risk in Africa Underpinning comprehensive package ( Angola mode ) is a Chinese approach to risk management in Africa Use of familiar Chinese firms and labour to fulfil terms of Chinese financed infrastructure packages minimises exposure to risk negative factors in African environment that put other investors off, namely local corruption, local labour costs, are offset or reduced

15 China and Risk in Africa At same time, mitigating risk emphasizes elite ties Chinese interests associated w/ regime in power and therefore drawn into local politics, despite noninterference approach Sustaining its sunk interests pose new challenges Resource security in hard and soft commodities must face African social environment Chinese migration may hold negative consequences

16 China and Risk in Africa Lack of transparency in Chinese investment/economic co operation packages fuels African suspicion It is incoherent, unbalanced... and forces us to sell off our national heritage to the detriment of several generations. It cannot therefore be accepted in its current state without being entirely reviewed and submitted to international competition. Jean Lusian Mbusa, Congolese opposition leader, on Chinese $9bn package loan

17 IV Major Risks for Africa Alternative substantial source of funding with no strings attached impact on transparency & governance debt sustainability and its long term impact on economic stability in the continent. Opacity of Chinese deals raise concerns over bidding processes, environmental impact studies, and assessment of overall debt and fiscal policies. Unfair competition: Chinese companies enjoy political and financial backing from Beijing (+ cheap labour and technology). risks entailed for sustainable development (resources exploration & environmental impact ) due to Chinese low standards and local poor regulation Risks for economic diversification

18 V. China: a Change in Behaviour? EITI / Equator Principles / ExIm Bank WB Environmental awakening, esp post Olympics Cleaning up or shifting highly polluting industry outside China? Policy shifts? (Sudan vs Zimbabwe) Collateral damage (Sudan & Ethiopia) Cope with criticism over companies profit driven behaviour & low labour standards creating controversy for Chinese interests in Zambia & DRC

19 VI. CONCLUSIONS China s foray in Africa follows patterns set previously by traditional partners (elitist, resource backed loans, profit driven) No clear correlation between China s loans & governance and transparency indicators (e.g Angola) Beijing has shown some degree of flexibility in accomodating multilateral interests (EITI, Eq.Principles

20 Conclusions China proven some cases sensitive to int pressure and introduced policy changes (e.g. conflict zones, environmental) = changes by reaction and not pro action All this positive signs but huge gap between the narrative in Beijing and the practice of its companies in Africa Long road ahead in which all stakeholders have a role to play (local gov, development partners, civil society)

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