Thursday, Jun. 24, 2010

China's New Focus on Africa

If you want to see what's wrong with Africa, take a trip to the Democratic Republic of Congo. The size of Western Europe, with almost no paved roads, Congo is the sucking vortex where Africa's heart should be. Independent Congo gave the world Mobutu Sese Seko, who for 32 years impoverished his people while traveling the world in a chartered Concorde. His death in 1997 ushered in a civil war that killed 5.4 million people and unleashed a hurricane of rape on tens of thousands more. Today AIDS and malaria are epidemics. Congo, then, is not a place you'd normally associate with a yuppie.

Tell that to Mathis Xu, 26, a manager at a Chinese state construction company whom I met last year. As a languages student in Beijing, Xu took French to be different — and different is what he got. In April 2008, he was selected to translate for the Congolese government and the state-owned China Railway Engineering Corp. (CREC) in negotiations over a $9 billion deal. CREC and others would build thousands of kilometers of roads and railways, 32 hospitals, 145 health centers and two universities — an investment of $6 billion in the kind of infrastructure Congo desperately needs. As partial payment, China would receive $3 billion in concessions to mine the copper and cobalt essential to its growing industries. When the deal was struck that month, Xu found himself posted to Kinshasa as CREC's liaison with the government. "We will transform this city," he exclaims, watching CREC's giant road builders level a hillside in Kinshasa next to the Congo River. "It will be fantastic!"

As more than 300 political figures, business leaders and champions of civil society gather in Cape Town for a forum sponsored by TIME and our corporate cousins at Fortune and CNN, China's role in Africa will be a key part of the discussions. Notwithstanding the Great Recession, many observers think the African economy is poised for great things. Fueled by a commodities boom, the continent's output grew 5% to 7% in both 2007 and '08 and even managed 2% growth in 2009. China is not the only nation that has noticed opportunities in Africa, but it is the one that has taken them most seriously, in ways that may change not just the region's economic landscape but its political one too.

The ambition, speed and scale of Chinese involvement in Africa is extraordinary. According to Chris Alden, author of China in Africa, two-way trade stood at $10 billion in 2000. By 2006, it was $55 billion, and in 2009 it hit $90 billion, making China Africa's single largest trading partner, supplanting the U.S., which did $86 billion in trade with Africa in 2009. Today the Chinese are pumping oil from Sudan to Angola, logging from Liberia to Gabon, mining from Zambia to Ghana and farming from Kenya to Zimbabwe. Chinese contractors are building roads from Equatorial Guinea to Ethiopia, dams from the Congo to the Nile, and hospitals and schools, sports stadiums and presidential palaces across the continent. They are buying too. Acquisitions range from a $5.5 billion stake in South Africa's Standard Bank to a $14 million investment in a mobile-phone company in Somalia.

Beijing insists it is a partner in Africa's development, delivering investment and gaining a new market for its products and new access to resources. Western business leaders say China is on a resource grab. They worry that it is playing unfairly, undercutting them by paying low wages; skirting standards on safety, the environment and human rights; and coordinating commerce, assistance and diplomacy in ways impossible, not to say illegal, in the West. The truth is somewhere in between. To the extent that China is using Africa as an experiment — to try out ideas of how it might be in the world — it is worthy of close study. To do that, we must answer two questions: How is China changing Africa? And how is Africa changing China?

Let's go back to Kinshasa. Congo's got problems. The Western way of helping has been with aid — multilateral, bilateral or through self-funding religious groups and NGOs. To stem fighting in the east, Congo has a 21,000-strong U.N. peacekeeping force, MONUC, the biggest in the world. These efforts have had mixed success. The war hasn't ended, and the world's loans to Congo have helped fuel corruption. Little has been done to address Congo's infrastructure. Coordinating aid among so many groups and nations remains difficult.

Enter China. Beijing doesn't do gifts; it does deals. In Congo, China's infrastructure-for-mines deal irked the International Monetary Fund (IMF). The IMF argued that Congo's guarantee to China that it would recoup at least $3 billion in minerals was an IOU on Congo's national assets and therefore a new debt. That fell afoul of debt-write-off conditions, which require that the debtor take on no new loans. "If the Congolese take the Chinese deal," said a Western official familiar with the negotiations in mid-2009, "they will not get any more [Western] support." A standoff ensued. An earlier deal, in 2007 with Angola, had also outraged the IMF, which had been negotiating a new loan with Angola for years, with carefully calibrated conditions to block corruption and alleviate poverty. By paying Luanda $5 billion in return for oil concessions and infrastructure contracts, China effectively made the IMF redundant. Diplomats across Africa like to say the continent offers space for everyone. But what's happening in Angola and Congo is a new scramble for Africa. Xu, the translator, has no doubt that he is engaged in an intense rivalry. "Not everybody is pleased to see us here, that's for sure. But we are not going to lose."

For all the heat, IMF officials admit that the Chinese model for African development has some advantages. First, it's quick. Loan talks with multilateral agencies take years. The China-Angola discussions took weeks. "With the West, there are studies, analyses and bureaucracy," says the Western official. "The Chinese just ask what the government wants, and they don't question or comment or judge. They just do it." China also works as visibly as it does quickly. Drive across almost any African country today, and you'll find Chinese engineers by the side of the road, sleeves rolled up, overseeing work crews. IMF officials in suits crunching numbers inside air-conditioned compounds just don't have the same kind of dash. "What we do is always in the shade," complains an IMF staffer in Africa. "Macroeconomic stability — what is that? You can't show it on camera."

The Asian model of development is looking increasingly attractive in ways beyond aid. African governments look at Western economic instability over the past two years and find a better model in Asia's extraordinary growth. Special economic zones, one of the engines of China's growth for two decades, are popping up across the continent. But what really distinguishes Chinese businesspeople from their Western rivals in Africa is how risk-happy they seem. Barely a month goes by without the announcement of a new billion-dollar investment in one of the world's least stable countries. The latest? A stunning $23 billion deal in May to rebuild Nigeria's oil-refining capacity. For Chinese businesses, having the backing of a rich state that packages aid with commerce and has an extended time horizon cuts risk significantly. Wu Zexian, Chinese ambassador to Congo, elaborates on this new model of development assistance. "Before, African countries never profited from their resources. Now they help them build infrastructure. Other countries say, This country has a lot of problems. We say, This country has huge potential." The key is long-term vision. "Yes, there is a risk," says Wu. "But in 50 years, we will still be here. So will Congo and the mines. Short term: sure, problems. Long term: not much risk."

So how is Africa changing China? In 2005, 49 workers died in an accident at a Chinese mining-explosives factory in Chambishi, Zambia. Populist opposition leader Michael Sata accused the government of selling out the country to Beijing, a stance that earned him wide support in the 2006 and '08 elections. His views on China are colorful and expressed in terms that many Chinese would find deeply offensive. "In every part of Zambia, the Chinaman is there, packed eight to a room," he says at his office in Lusaka. "What the Chinaman is doing, nobody knows."

Zambia is just one country in Africa where China's presence has provoked criticism. In South Africa, China found itself rebutting warnings from former President Thabo Mbeki about a new "colonial relationship." In Ethiopia, China had to take sides in a separatist conflict in April 2007 when Ogaden National Liberation Front rebels killed 74 workers, nine of whom were Chinese, at a Chinese oil-field installation. The same year, a Chinese engineer was killed in an attack on a stone-material plant in Mombasa, Kenya, and Chinese oil workers have been kidnapped by rebels in Nigeria. Chinese migrants fought pitched battles with Algerians in their capital, Algiers, last year.

So China is trying to explain itself. Chinese bankers, academics and diplomats now take star turns at economic summits across the continent. "There is a mistrust of China," says Wu. "We have to speak to be understood." China has done more than just speak. It has also, in some cases, abandoned its long-standing policy of noninterference in the internal affairs of sovereign states. Liu Guijin, China's special representative to Africa and its top diplomat on the continent, calls himself a "political troubleshooter" and says he spends a lot of time in Sudan mediating the conflict in Darfur. That sounds like a definite departure. "Perhaps we are having a flexible interpretation of noninterference," Liu replies with a laugh. After an earlier reluctance, China is now the fourth largest contributor of troops to peacekeeping operations; its soldiers are on the ground in Liberia, Sudan and Congo as part of U.N. operations.

One man's flexibility can be another's willingness to do deals with anyone. But China is becoming more sensitive to that criticism too. In Zimbabwe, China is often accused of helping keep Robert Mugabe in power. Not so, contends a senior member of the Movement for Democratic Change (MDC) Party, who says China went to "huge lengths" to ensure that MDC Prime Minister Morgan Tsvangirai, not Mugabe, got credit for a new $950 million loan in July 2009.

Mirroring the changes taking place in China itself, China's relationship with Africa is "changing and maturing month by month as both parties better understand each other," says Geoffrey White, CEO of the trans-African conglomerate Lonrho. It was that spirit that persuaded China to drop details in its Congo deal that the IMF found objectionable as well as cut the infrastructure part of the deal from $6 billion to $3 billion. Liu says that while China and the West have "different priorities, different approaches and different ways of doing things, we need China and [the West] to make efforts to align their interests and policies."

There are limits to how far China will go. It will continue to pursue warm relations with all African countries, whether they are democracies or dictatorships, partly because each African country represents a potential vote against Taiwan's efforts to gain diplomatic recognition. China's commitment to nonintervention also remains strong; it has, for example, not supported the International Criminal Court in its attempts to prosecute Sudanese President Omar al-Bashir for war crimes.

For all the tangled tale of aid, investment and diplomacy, what China has really brought to Africa is a change in the way the rest of the world thinks of the continent. China has helped transform the idea of Africa from a destination for charity to a place for business. In 2006, for the first time, flows of foreign direct investment (FDI) into Africa were greater than the amount of aid — $48 billion of FDI, vs. $40 billion of aid, according to the Organization for Economic Cooperation and Development. And the numbers keep growing. In 2008, according to the U.N. trade body UNCTAD, FDI hit $88 billion. "Trade, not aid" is the new mantra of influential African leaders like Rwandan President Paul Kagame.

China's largesse, whatever the explanations for its arrival in Africa, has left a mark. As the representative of the Zambian Mineworkers Union at the Chambishi complex where the 49 workers died, Mwinbe Stanslas, 45, might be expected to sound a note of caution about China's expansion. He does not. "I've worked for the British, the Americans, a Jew and the Swiss," he says. "They all closed. The way the Chinese are investing, they're not leaving. My boy will get a job in this mine, and his boy after him. China is taking over. And I tell you, it's a blessing."