China pouring money into African infrastructure projects

McClatchy NewspapersSeptember 13, 2006 

KHARTOUM, Sudan—This summer, the biggest oil refinery in Sudan completed a $341 million expansion that doubled its capacity, boosting exports and the country's domestic gasoline supply.

A few dozen miles away, on a riverbank that once was a trash dump, developers pressed ahead with plans for a $4 billion business complex that they hope will turn Khartoum into a commercial hub for eastern Africa.

Both projects are showpieces for Sudan, which is enjoying an unprecedented economic boom, and neither would have been possible without China. Chinese firms built the refinery and operate it in partnership with the Sudanese government, and are among the lead contractors on the business complex.

This reflects a trend across Africa, where Chinese companies are pouring hundreds of millions of dollars into construction projects of all sizes, from refineries and dams to roads and shopping malls.

Over the past decade, China increasingly has turned to Africa to feed its seemingly boundless appetite for natural resources, becoming the continent's No. 3 trading partner. But the $40 billion-a-year-and-growing trade relationship isn't just about oil and precious minerals anymore.

With the United States and other Western countries having all but abandoned big infrastructure and industrial ventures in Africa decades ago, deeming them unprofitable or too risky because of the chronic instability that plagues much of the continent, Chinese companies have swooped in.

Helped by low labor costs, Chinese enterprises are taking on the work that cash-starved African countries need but lack the capacity to do themselves.

Chinese companies have built or agreed to build hospitals and railway lines in war-ravaged Angola, roads and bridges in Sudan and Kenya, dams in Ethiopia and Liberia and telecommunications networks in Ghana and Zimbabwe, along with scores of other projects.

Sen. Barack Obama, D-Ill., who just concluded a two-week tour of the continent, recently told a Congressional Black Caucus legislative conference: "One of the striking things about traveling through Africa is everybody says that the United States' absence is as noticeable and prominent as the Chinese's presence."

Analysts say it's unclear whether the Chinese are reaping big profits. But by doing work that the United States and others don't do, China is cementing ties with African leaders while securing support for its own agenda, especially its claim to separately governed Taiwan and its efforts to prevent the island from having diplomatic relations with any countries.

The United States and its European allies have tried to cripple authoritarian regimes such as those in Sudan and Zimbabwe with heavy sanctions, only to find China doing business with them with no political strings attached. Unlike U.S. policy, Chinese investment comes with no conditions on making democratic reforms or promoting human rights.

"The Chinese are operating from a different set of business calculations," said J. Stephen Morrison, the Africa director at the Center for Strategic and International Studies, a national-security research center in Washington. "They're entering these settings with a strategic political blessing, but they're also entering them as a business enterprise."

"Western countries may think these projects are too small. But China doesn't think they are small," said Shao Weijian, an economic adviser at the Chinese Embassy in Kenya. Last month the Chinese contractor Wuyi secured a $37 million deal to renovate the international airport in Nairobi, Kenya's capital.

Analysts say China's top priority is still energy, and it often uses infrastructure projects to sweeten oil and mining deals. Earlier this year, a Chinese state-owned company agreed to pump more than $2 billion into a major, loss-generating refinery in northern Nigeria—Africa's leading oil producer—in exchange for drilling rights in four sought-after oil blocks.

However, China also is doing business in countries with no known oil reserves. In drought-weary Ethiopia, a Chinese company is at work on a $350 million dam that's expected to provide irrigation and power.

In 2004, there were 450 Chinese investment projects in Africa, the vast majority in manufacturing and services, according to World Bank statistics. Unofficial estimates put the number of Chinese companies in Africa at more than 700. Chinatowns are springing up all over the continent to cater to some 80,000 Chinese nationals.

But the changes may go deeper. Chinese investment is altering the playing field on a continent where Western countries have long controlled the purse strings of development assistance, and by extension the political agenda.

It's over Sudan that China and the United States have been most clearly at odds. The Bush administration says Sudan's Islamic regime is presiding over genocide against ethnic Africans in the Darfur region. Meanwhile, industry observers say China has sold Sudan weapons and military equipment worth tens of millions of dollars, including the helicopter gunships that the government is thought to have unleashed on civilians in Darfur.

Despite international sanctions, Chinese investment has helped Sudan become Africa's third largest oil producer. Of the $2 billion in oil it exports annually, half goes to China.

"In this case where Sudan remains at odds with Washington—and to a significant degree with Europe—over the continued drama around Darfur, the partnership with China is only getting bigger and deeper," Morrison said. "It's only fortifying the confidence that Khartoum has that they can flourish in this period."

Other African countries also are benefiting. Continentwide, the economy grew by 5.3 percent last year and is expected to do better this year, thanks largely to China's investment and its appetite for African raw materials.

During the Cold War, as dueling powers, the United States and China each tried to stake a claim on newly independent Africa by building major public projects. Today many of the stadiums, government buildings and other structures built during that period are ruined, destroyed by conflict or years of neglect.

China's most ambitious project then was the 1,160-mile Tanzam Railway linking Tanzania and Zambia in eastern Africa. Built by Chinese workers who left when it was completed, it's long since fallen into disrepair.

Some in Africa worry that the current wave of investment also will go to waste if builders don't properly train local people. Chinese companies employ many expatriates —one-third of the employees at the Khartoum refinery, for example, are Chinese—with Africans often taking the low-level jobs.

"The potential danger for Africa is this turns out to be a repetition of previous development disasters," said Steven Friedman, an analyst with the Institute for Democracy in South Africa, an independent advocacy group. "In cases where there's not the local capacity to ensure they're maintained, they don't have the development impact they're meant to have."

China says it intends to be in Africa for the long haul. Beijing proclaimed 2006 "the year of Africa" and issued a policy paper in January pledging long-term investment in infrastructure and in training African workers. New deals probably will be announced at a China-Africa summit in November.

In their increasingly frequent visits to African countries, Chinese leaders often speak of one developing country helping another.

Many in Africa have chafed under what they see as patriarchal Western aid policies, which increasingly demand political reforms in exchange for help. Experts say China sees the world's poorest continent not as a problem to be solved but as an investment opportunity.

"I don't get a sense at this stage that the Chinese role is primarily devoted to political influence," Friedman said. "They're far more concerned with the economic dimension."

Resentment is starting to brew over Chinese business practices, however. Disputes over wages and working conditions have roiled Chinese-run copper mines in Zambia, resulting in riots and shootings. Trade unions have come out strongly against China's control of Zambia's economy.

"That's something we'll soon see much more often in other emerging states, a result of massive Chinese economic influence in some of the world's most underdeveloped countries," Ian Bremmer, the president of the Eurasia Group risk-management consultancy, wrote in a note to clients last week.

Perhaps nowhere is China's influence more striking than in flat, dusty Khartoum, where high-rises built by Chinese companies dot the skyline. On freshly paved streets below, slickly dressed oilmen top off the tanks of their Mercedes-Benzes at Chinese-owned gas stations.

"The Chinese are the No. 1 people benefiting from Sudan," businessman Hisham Aboulela said. "The U.S. sanctions have only opened up the market for the Chinese."

A senior American diplomat in Khartoum, who wasn't authorized to speak on the record, said Sudan's rapid economic growth had surprised some U.S. officials.

"I could at a certain point say, `Have we missed an opportunity here?'" the diplomat said.

But the diplomat said sanctions were justified, and downplayed suggestions that China's investment in Sudan directly threatened U.S. interests.

"Are they antagonistic to us? No," the diplomat said. "There is space for increased U.S.-China cooperation in Sudan. Our policy goals are not necessarily in conflict."

Some in the United States are pushing for a change in policy that accounts for China's growing role. Last year, an Africa task force at the nonpartisan Council on Foreign Relations recommended that the American government enter into partnerships with private companies to compete with China for infrastructure projects.

The task force noted that while U.S. companies are primarily focused on extractive industries such as oil, building infrastructure and industry are necessary for Africa's long-term growth.

Morrison, who served as co-director of the task force, said China might be applying lessons it had learned from its own startling economic rise.

"I think in some ways they're less burdened by our own pessimism about what's possible in Africa," he said. "They've lifted several hundred million people out of poverty in the last 20 years. ... They are less cynical about Africa than we are."

———

(c) 2006, McClatchy-Tribune Information Services.

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