China’s African Safari: Hitting Bumpy Ground

Via The Diplomat, an interesting look at China’s investment in Africa and how its unwillingness to recognize changing political realities there may prove to undo some of its African business gains of the last few years:

China is accustomed to being welcomed across Africa, by democrats and dictators alike. Recent changes of government, however, have exposed a vein of resentment that could crimp Beijing’s resource safari.

The collapse of the Gaddafi regime in Libya and South Sudan’s independence have upended the long-standing relationships that China has used to gain advantage over western competitors. Most recently, a change in leadership in the former British colony of Zambia has rattled China’s resource investment ambitions.

In September, Michael Sata swept to power in Zambia following an electoral landslide over Rupiah Banda, the incumbent. The vote also ended the grip on power that Banda’s party, the Movement for Multi-party Democracy (MMD), had held over the country since 1991.

The MMD’s lengthy tenure may have lulled China into a false sense of security. The end of the Cold War had introduced a measure of stability to African governments, and rulers have therefore tended to measure their tenures in decades. Even where ballots have been held, they’ve tended to favor those in power. But, as the Arab spring has shown, nothing lasts forever.

The upturning of the ruling class in Zambia, Africa’s largest copper producer, would have come as a particularly nasty shock to China, one of the largest consumers of the metal. Sata’s election platform leaned heavily on anti-Chinese sentiment, which, considering China is the country’s biggest investor, may have seemed a risky gambit to have taken.

But Sata, who once worked as a platform sweeper for British rail, understands his audience. “The Chinese are very crafty. I know the Chinese very well,” he said in an interview with a Danish radio station earlier this year, comments that drew wide attention in the country.

In the run-up to the previous election in 2006, which he lost, Sata referred to Taiwan as a sovereign state. China was reportedly outraged at his comments, and threatened to pull out of the country if he was elected. There were even suggestions at the time in the Zambian media that Beijing was providing covert financing for the MMD’s coffers.

Sata’s campaign this year was only slightly less confrontational. And this time, it worked.

China’s commitment to Zambia is substantial. It has invested around $2 billion in the country, mostly in copper mining projects. The metal is used mainly for electrical cabling, and China’s vast infrastructure programs have made it a voracious consumer of copper.

Under the MMD, Zambia went all-out to woo Chinese state enterprises and ease their access to the country’s wealth. Zambia is home to two of China’s six Special Economic Zones in Africa. Recently the capital, Lusaka, became the first African city to offer Chinese banking allowing the deposit and withdrawal of yuan.

While Banda and his predecessors did everything possible to make the Chinese welcome, ordinary Zambians have come to resent the competition from a flood of expatriates, many of whom compete directly with low-skilled local workers.

Some of Zambia’s markets, particularly the chicken market in downtown Lusaka, are now almost entirely Chinese run.

And, in April this year, Zambian prosecutors declined to pursue charges against two Chinese supervisors who had fired into a crowd of demonstrating miners, injuring 13. The incident, which occurred at the Chinese-owned Collum Coal Mine in 2010, caused widespread anger. The decision to suspend the investigation wasn’t unexpected, but only added to the perception that Chinese companies enjoy a privileged status in the country.

The increased presence of Chinese small traders, vendors and truck drivers, who take jobs from locals has also stirred up resentment, and Sata has made it clear that under his leadership, the relationship will have to change. His first act of office after his election was to meet with the Chinese ambassador Zhou Yuxiao. The meeting was officially meant to clear the air clouded by electioneering rhetoric. But he also said the days of allowing unrestricted immigration were over.

“We welcome your investment, but as we welcome your investment, your investment should benefit Zambians and not the Chinese,” Sata told the ambassador, according to Reuters.

“It’s in law that all investors who are coming to Zambia should bring a limited number of expatriates whom they cannot find in Zambia,” he added. “My party has taken concern at the unlimited number of people your investors are bringing to Zambia.”

Sata also briefly suspended copper exports. The ban was rescinded after a few days, but all copper exports will now be cleared by the country’s central bank to ensure that exporters aren’t misstating volumes and value. Government figures show that copper accounts for over 75 percent of the country’s export revenue, but less than 10 percent of tax revenue.

Zambian unions have been quick out the gate since Sata’s election, by embarking on a series of strikes. About 2,000 workers at NFC Africa Mining, majority-owned by China Nonferrous Metals Mining Corporation, went on a strike early in October demanding higher wages. A week later, 500 miners walked off the job at the Sino Metals copper processing plant. More labor unrest is undoubtedly to follow as unions take advantage of the change in direction of the political winds.

Investors also had an anxious wait for Zambia’s finance ministry to approve a $1.1 billion takeover by Jinchuan, a Chinese mining and refining group, of South Africa-based copper and cobalt miner Metorex. Zambian authorities needed to approve the sale because Metorex owns most of Chibuluma Copper Mine. Authorization was finally given last week, to the relief of investors who had to endure several months of uncertainty over whether it would be forthcoming or not.

For China, events in Zambia should be a warning sign. Its policy of non-interference may have bought it a substantial advantage over Western companies vying for African resources. But it is increasingly clear it risks alienating populations in countries where it does business, particularly those run by tyrants. And should these governments fall, China’s friendship with them could become a liability.

The sweeping rebellion in Libya, and the formation of the world’s newest country, South Sudan, have had Beijing scrambling to rescue oil concessions signed with previous, and deeply unpopular, regimes.

Beijing’s close ties to the regime of Robert Mugabe in Zimbabwe could also end abruptly, if the ailing despot falls from power. Earlier this year, the state-owned China Development Bank said it was poised to invest $10 billion in farming and mining activities. But Mugabe’s rule is deeply unpopular, and with his health reportedly in doubt, it may be nearing the end. A chaotic end to his reign could easily leave China at the wrong end of popular opinion.

China’s activities, regardless of what its many critics may say, have largely been positive. It provides much-needed capital, and has been prepared to invest where timid Western rivals prefer to stay away. It also doesn’t have the colonial baggage that hangs over Western engagement.

Still, China’s insistence on treating investment strictly as a government-to-government affair, ignoring the sentiments of inhabitants on the ground, could undermine this. Its refusal to acknowledge public opinion on a continent where mass political consciousness is awakening could cost it dearly in the long run.

This entry was posted on Wednesday, November 16th, 2011 at 6:50 pm and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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