Written by Daniel Elombah
And yet...A Chinese port operator statement of 06 November 2010
announced that a Chinese joint venture; China Merchants China Direct
Investments Ltd. and the China-Africa Development Fund has purchased
the 47.5% Israel Corporation holding in the Tin Can Island Container
Terminal at the Lagos Port for $154 million in cash.
The stake was owned by Israeli company's wholly-owned subsidiary Zim
Integrated Shipping Services Ltd. Zim will report a gross profit of
$120 million on the sale.
China Merchants will own 60 percent of the venture, with China-Africa
Development Fund (CADF) taking a 40 percent stake after obtaining
approval from Chinese regulators, the China Development Bank owns
CADF, a fund which supports Chinese enterprises in their investment in
Africa
Tin-Can Island Container Terminal is Nigeria's second largest
container terminal. Zim will also sign a ten-year port of call
agreement with the terminal, and sell additional rights in connection
with the asset. Zim's partner in the container terminal is Bollore
Logistics Africa, a unit of Paris-based Group Bollore SA.
Zim said that the sale was part of its long-term business plan. The
sale was brought forward from its originally planned closing in 2011.
The Tin Can Island Container Terminal has three berths, with a
capacity of 360,000 TEU containers per year. A fourth berth is being
upgraded, which will increase the terminal's capacity to 400,000 TEU
per year.
Funnily on 18 June 2010, It's Commercial Manager, Mr. Richard
Akinbosotu told a Ministerial Committee that Tincan Island Container
Terminal, one of the Concessionaires of Tin Can Island Port, that the
cost of running terminal operations in the country is becoming too
expensive to bear.
The company which recently acquired two new mobile cranes, with 500
tonnes to strengthen its cargo clearance operations, explained that it
had spent a lot of money on fuel to provide light 24 hours per day in
the terminal. The same Terminal is now bought by the Chinese venture
for $154 million in cash.
It was also reported today, Sunday, 07 November 2010 that "about 60
companies from China will be at this 24th Lagos International Trade
Fair and they are coming with various products that Nigerians will not
resist.
These two reports prompted me to go back to an article I read
recently: 'China in Africa – a Mutually Beneficial Partnership?'
Written by RANGARIRAI MIAMBO (The article is reproduced below)
But more on the Nigeria Trade Fair: According to Mr Frank Fa, the
General Manager of Brightway International Exhibition, China is to
send 60 firms to participant in the ongoing Lagos International Trade
Fair as a mark to boost Nigeria-China investments.
The presence of these "60 companies from China" at the fair "is not
for buying and selling but to look for distributors and Nigerian
partners. According to Frank, reaching out to developing countries for
trade relations in any form is one of the priorities of the Chinese
government.
He said that some of the companies would exhibit heavy duty trucks,
household utensils, among others.
Thus, what is the exact relation between Chinese Companies and the
Nigeria market? Is the Nigerian market simply a source of raw
materials for Chinese bludgeoning industries or a market for
sub-standard Chinese products? Is it a mutually benefitting
relationship? What exactly is the target of the ever expanding Chinese
investment in Nigeria and other parts of Africa?
====================================================
Happy reading - China in Africa – a Mutually Beneficial Partnership?
Written By RANGARIRAI MIAMBO
In the past few decades, Africa has seen aid and foreign direct
investment inflows increase dramatically. Among the investor nations,
China has stood out not only as one of the largest investors in
Africa, but as the largest investor among emerging countries.
Bilateral trade has grown from about US$5 billion in 1995 to over
US$100 billion in 2008, and total financial flows reached close to
US$8 billion in 2007, about a fifth of which was aid per se. These
developments have led many to ask whether this increased engagement
with Africa is mutually beneficial, and what some of the impact has
been on the business landscape, government and economic development
more broadly. Certainly, a number of myths exist about the nature of
the relationship, with many claiming that China is somehow a rogue
lender, bankrolling undemocratic regimes, or unscrupulously investing
in its search for natural resources in a way that is reminiscent of
the colonial era. But how much of this is true? Is China's engagement
with Africa truly mutually beneficial?
China's first contact with Africa has been traced as far back as the
Ming Dynasty in the 15th century. In the modern era, foreign aid to
Africa evolved from the early days along ideological lines as a
counter to Soviet dominance, and as a diplomatic tool to convince
newly independent African governments in the 1960s to recognize
Beijing rather than Taipei as "China". More recent developments
include the formation of China's "policy banks" in the 1990s (China
Development Bank, China Export-Import Bank and China Agricultural
Development Bank), the formation of the Forum on China-Africa
Cooperation (2000), the official China-Africa Policy document (2006),
and the launch of the US$5 billion China Africa Development Fund in
2007. Throughout this period, China was going through significant
internal changes, from the time of Mao and the Great Leap Forward, the
Cultural Revolution, and the eventual, gradual turn to the market.
China developed its investment policy towards Africa as it was
emerging from a state of relative poverty into the economic powerhouse
we know today. The current investment and aid regime in Africa is
based on China's own experience as a recipient of aid. This is one
aspect which attracts China to Africa: there is a sense that Africa
can learn something from China's experience. The fact that China
maintains a foreign aid program even while many households live in
dire poverty within China provides a strong incentive for China to
carefully assess its foreign opportunities to find the most beneficial
ones. In 1982, Chinese premier Zhao Ziyang set out four principles of
economic engagement with other developing nations. Among them was
equality and mutual benefit.
Thus the idea that China gives aid or lends unscrupulously to Africa
seems unfounded, at least in principle, but we now look at four common
'myths' about China in Africa in a little more detail.
China does not put conditions on its loans to Africa. Research
suggests that in the 1980s, loans from the World Bank had an average
of sixty conditions, compared to a much lower figure for
Chinese-originated loans. One tool that China has used to facilitate
this is the use of natural resources as a guarantee for the loan
(so-called 'recourse-credit swaps' or 'resource-backed loans'). These
loans enable faster project funding with the natural resource as a
guarantee, rather than requiring a prior set of conditions to be met.
An example of this is a US$2 billion "oil-for-infrastructure" loan
that Angola negotiated with the China Export-Import Bank in 2004 after
failing to meet the conditions of several IMF programs. While this
loan was at below-market rates with an attractive repayment window, it
was not an "unconditional" loan, but simply a cheap loan. In the
aftermath of this event, Angola was subsequently able to repay some of
its debts using the oil revenues it gained from its infrastructure
investments. We see that it is not that conditions are absent; rather,
the conditions are set up to speed up access to lending and to enable
easier repayment in future.
China's foreign expansion stifles local manufacturing. One of China's
strategies to going abroad was to help leading companies expand
overseas using support from the policy banks. This was true for
leading firms like Huawei and China National Oil Company as well as
other firms in mature industries like textiles and leather goods.
However, field research has so far found mixed evidence that Chinese
manufacturing operations in Africa act as significant catalysts for
local entrepreneurs who learn from the Chinese manufacturers, though
there are some promising examples of this effect in Kenya, Nigeria and
Mauritius. It remains to be seen whether this effect will catch on
widely and have a significant effect on local markets. A related issue
is whether these foreign ventures employ local workers to develop the
local talent pool, which we address below.
China floods the labor market with Chinese workers. There are a
variety of reasons why Chinese firms working in Africa bring Chinese
staff onto the scene. Shortage of locally skilled people, and ease of
communication are among them. Another important reason is that foreign
factory workers may sometimes have higher productivity than their
African counterparts (which may be related to poorer training and
difficulties in communication). China has made significant commitments
to train locals and provide scholarships for Africans to study in
China, which will greatly assist local skills development. However,
the other side of expatriate labor is in the control of the country
government. For example, Angola requires all employers to have at
least 70% local staff. That figure was 80% for infrastructure and
mining ventures in the Democratic Republic of the Congo. To a large
extent, therefore, foreign labor influx is largely within the control
of the African governments – they could simply refuse to grant work
permits. So, it is unclear that China is solely responsible for
massive expatriate hiring if and where this is actually observed.
China bankrolls corrupt regimes. One commonly cited examples of this
is Sudan. Like the Angola example, Sudan is a case where Chinese
investment was crucial to developing the country's infrastructure.
China was prospecting for oil in Sudan in the late 1990s, some time
before the conflict in Darfur broke out. By the end of 2003, Chinese
investment in Sudan totaled over US$2.7 billion, primarily in
pipelines, gas stations and a crude oil processing plant. Sudan is now
an oil exporting country as a result of the Chinese investment. By
contrast, Shell has been active in Nigeria for over 50 years, and yet
Nigeria still imports refined gasoline. Of course, there is more that
China and other outside players could be doing to promote peace in
Sudan. However, China's involvement with Sudanese oil does not seem to
suggest that "bankrolling" of the government was the primary
motivation.
By now, it should hopefully be clear that China's involvement in
Africa has a long history, and that the form and impact of that
engagement is complex and constantly changing. Given China's own place
as a large emerging economy, it is safe to assume that any foreign
engagement is well considered to ensure that it benefits China in some
way. China's Africa Policy articulates the principle of mutual
benefit, and in this article I have presented arguments that China's
engagement appears to be a force for good on the continent. However, I
also believe that ultimately African governments and investment
partners have the primary responsibility for making sure that they
engage China in ways that are also beneficial for Africa.
On another note, China-Africa relations will be the topic of a panel
at this year's Wharton Asia Business Conference (Nov. 19th) and Africa
Business Forum (Nov 20th). The discussions will try to understand some
of the specific activities that China has undertaken in Africa
recently, and hopefully shed light on how the business landscape in
Africa is changing as a result of this trend.
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