China faces tougher deals in Africa

07 October 2013

Sino-African economic relations have taken a new turn despite China spending billions of dollars on infrastructure in Africa. Photo: AFP
The dynamics of Sino-African economic relations are changing, with emboldened African governments now driving harder bargains with China, analysts say.

"There is push-back from many African countries," said Jean-Pierre Cabestan, the head of government and international studies at Hong Kong Baptist University.

Anthony Desir, a partner of Strategic African Mineral Investment Fund, an African resource consultancy, said progress on some pending Sino-African deals had slowed, as the African side became more cautious about what terms they would accept from the Chinese.
Desir declined to disclose the deals but cited the legal dispute between state-owned oil giant Sinopec and the Gabon government.
Addax Petroleum, owned by Sinopec, recently lost a ruling at an international tribunal in a dispute over an oilfield in Gabon that involved legal claims of more than US$1 billion, Reuters reported last month.

The International Chamber of Commerce's arbitration court rejected Addax's bid to resume operations at the oilfield and prevent the Gabon government from selling the licence to a third party.

In recent years, there had been growing criticism of Chinese business in African countries, said Lizzie Parsons, a senior China adviser of Global Witness, a British non-governmental organisation.

Complaints included poor labour conditions, financing of armed groups, environmental pollution and unfair contracts, Parsons said.
Some Sino-African contracts were being reviewed to ensure better terms for the African parties, she said.

Global Witness has found from interviews that some larger Chinese firms are behaving more responsibly by increased communication with local communities. "These factors have contributed to an adjustment in the dynamic relationship between African governments and Chinese companies," Parsons said.

"Increasingly, China's role in Africa is contested, not by Westerners but Africans. Too often, descriptions of China-Africa relations assume Africans should be happy to get something from China. It is not the case," said Roland Marchal, a research fellow at Sciences Po University in Paris, France.

Chinese-African economic ties were substantial, underscored by the fact that a third of Chinese international contracts were won in Africa last year, Marchal said.

China is Africa's biggest trading partner.
African leaders, who were initially courted by China, were being removed or replaced through changes such as elections, Desir said. "Losing partners in Africa is frustrating to Chinese state planners, because China's expensive guanxi (relationships) evaporate when African government figures they cultivated no longer hold power."

Desir also said China's economic initiatives had not benefited ordinary Africans much. "In the beginning, the grand announcements of billion-dollar deals were greeted with hope and excitement, but there have been so many unfulfilled promises of job creation or improved livelihood that China's goodwill is likely to be questioned whenever another large China deal is announced."
Because many African nations are democracies, many African leaders needed to deliver to their people, and hence ask better terms from China, he added.

"African states are more likely to challenge terms not to their liking. China will need to adjust to working on commercial terms rather than relying on political patronage."

The South African government had warned the Chinese not to cause the South African textile industry to collapse from the flood of cheap Chinese textile exports, said Marchal.

As a result, the Chinese were exporting machines to Africa to equip factories, he said.
Although China is building billions of dollars of infrastructure in Africa, the problem was Western companies created jobs in Africa while the African perception was that Chinese companies brought their own workers to Africa, Marchal said.

He said some African ministers had complained about the lack of transparency and delays in contracts by Chinese companies.
Although Chinese firms offer huge contracts liberally financed by Chinese banks, African officials said they had difficulty getting access to the fine print in the contract, he said.

However, the pendulum could swing back in favour of Chinese companies as a result of slowing economic growth in Africa, said Martyn Davies, the chief executive of Frontier Advisory, a South African consultancy.