Leonce Ndikumana: China invests in building Africa’s infrastructure, but fails to employ local labor
Story Transcript
JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.
During the last decade, China expanded trade with African countries tremendously. In 2012, total trade between China and Africa was $128 billion, compared to $100 billion between U.S. and Africa.
With us to discuss the importance of this relationship and what it means for the African continent is Léonce Ndikumana. He’s a professor of economics at the University of Massachusetts Amherst. He’s also the director of the African Policy Program at the PERI institute and the co-author of the paper Capital Flight from Sub-Saharan African Countries: Updated Estimates, 1970 – 2010.
Thank you for being with us.
LÉONCE NDIKUMANA, DIRECTOR, AFRICAN POLICY PROGRAM, PERI: Thank you very much for inviting me.
DESVARIEUX: So my first question is: which African countries have the closest trade ties to China?
NDIKUMANA: Thank you very much for the question. As you indicated, it has been [incompr.] that the economic relationship between China and Africa have grown very rapidly over the past decades, in fact very rapidly recently. If you look at only exports, Africa’s exports to China, in 2000 it was only $3.8 billion. By 2010, this had risen to $51 billion. For imports, Africa’s imports from China rose from $3.5 billion in 2000 to about $54 million in 2010. So that’s an increase of China’s share in Africa’s total from just 3 percent in 2000 to 13 percent. So globally Africa has become a larger market for China, and China has becoming the larger trading partner for Africa.
Now, to your question about which countries trade the most with China, the obvious ones are the natural resource rich countries, countries rich in oil and minerals, which meets the needs of China, which is growing rapidly and therefore needs a lot of raw material for its energy production and its manufacturing center. But also you find many countries which are not oil resource rich countries which also are becoming larger and larger trade partners with China. So, for example, if you look at exports to China as a percentage of total exports by country, of course you have the countries like the DRC, the Congo, Angola, which are oil exporters and mineral exporters whose exports to China represent a large share. But you have countries like Mauritania, which doesn’t have oil, doesn’t have huge mineral resources, whose exports to China represent 46.6 percent of total exports, Gambia 37 percent, Mali 31 percent, Burkina Faso 21 percent. So it’s not just the oil-rich countries that are trading more and more with China; it’s a larger and larger and more diversified group of countries in the continent. A country like Ethiopia, for example, now has over $1.4 billion in terms of trade with China, which was very, very small ten, 15 years ago. And one of the reasons is that China has been offering some preferential treatment to and preferential market access to some countries, including Ethiopia, which I just mentioned, which has secured duty-free, quota-free access to Chinese market for a larger and larger number of products.
DESVARIEUX: What is the nature of Chinese-African economic relations beyond trade? Why is China investing so heavily in Africa?
NDIKUMANA: I think it’s true to say that as the Chinese claim that most of their interests with Africa is economic, because Africa has what China needs in the sense of energy sources (oil), in the sense of material to feed their growing manufacturing center (minerals). So it’s an economic exchange which is driven by the economic needs of China. On the African part, of course, they also get the benefit of diversifying their export markets and also their import sources. So it’s an economic exchange which is motivated by rational reasoning on both parts, meeting economic needs for China and for Africa. In fact, to me it’s a good thing that Africa’s markets are being diversified. It’s never a good idea to be too concentrated in one or a few markets, whether from the import and export side. So to me it’s an advantage for African countries.
But the question is: is Africa taking full advantage of the Chinese appetite for African products? That is to be seen, because if you look at the gains in terms of employment creation, very little is coming to Africa, because most of the investments in the minerals in the oil sector, they’re very heavy capital intensive, so there’s not much employment being created. And even when the government [incompr.] for creating employment, I don’t think African countries are doing their best to extract the most–the best contracts with the Chinese companies, with the Chinese government, because you work in–you visit infrastructure projects and you find the Chinese workers doing things that don’t require much skills which African local workers could do. So the challenge is for African governments to actually design contracts with and agreements with the Chinese government and the Chinese corporations so that there is maximum benefits that accrue to the local economies in terms of employment, and in terms also of service provision to the workers who are working on the sites of the projects.
DESVARIEUX: Okay. How does China’s relationship, integration, specifically, with poorer African countries compare to Western development practices? Are trade deals favorable to both countries, for example?
NDIKUMANA: Yes, this is a question that is being raised over and over again of whether China is different from the traditional African–Africa’s trading or donor partners. What China wants the world to believe is that they come to do business with Africa. And for China, business is business. So they invest where they feel they have [incompr.] investment and they will not care about other conditions, political governance and economic [incompr.], democracy and so on. And this–they have been criticized severely about that.
But one thing that people should understand is that the fact that whether it is true or not, China would not require governance conditions and so on, doesn’t mean that aid or investment by China is totally untied or with no conditions, because when you look at the projects that are being funded, being implemented on the continent, you find that many of them might be implemented by Chinese firms. So in a one-to-one service that when you see Chinese projects, they are not all Chinese FDI, they’re not all Chinese-funded. You find you have many, many projects which are funded by other donors–the World Bank, the African Development Bank, bilateral donors–which are implemented, executed by Chinese companies because they are cheaper and they win the contracts. Many more would go out and say that China is financing roads in Kenya and other countries when in fact those roads and those projects are being funded by other donors. An example is the African Development bank, which actually finances the largest amount of infrastructure projects in the economy. But the African Development Bank doesn’t have construction companies, so you will not see them on the road. So, many of the projects that they fund are implemented by companies which are from countries like China. And many people make the leap to go that–saying that China is financing those projects. It’s not.
DESVARIEUX: Okay. So is it fair to say that China isn’t directly funding, like, or is more focused on building infrastructure in Africa? Do you feel like that is this perception that isn’t quite accurate?
NDIKUMANA: What is true is that China is financing a good amount of projects, including infrastructure. But what I’m saying is that China is involved in more projects than it is financing. Some it is financing, Some it is implementing only.
Now, of course, for African countries it’s an opportunity to see Chinese technology in the infrastructure sector. In fact, this is a sector where China is seeing an opportunity where other people see it as a constraint. When you listen to the discussion about FDI, foreign direct investment in Africa, many people point to the lack of infrastructure as a constraint to investment. The Chinese see it as an opportunity, a sector where they can actually invest and get their benefits in terms of return to investment. But for Africa, the African countries get the infrastructure, which unlocks the constraints to development.
DESVARIEUX: Okay. Thank you so much for joining us.
NDIKUMANA: Thank you.
DESVARIEUX: And thank you for joining us on The Real News Network.
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