In a speech given on March 31, 2010, Tanzanian President Jakaya Kikwete expressed gratitude for foreign support in building a new cardiac surgery treatment center at Muhimbili National Hospital in Dar es Salaam. The object of President Kikwete’s gratitude was neither the United States nor a multilateral institution like the United Nations. Instead, it was China, a country that President Kikwete referred to as “dear rafiki,” which in Swahili means “friend.”
Traditional policy discussions regarding foreign development assistance have focused on the role of Western, industrialized countries and multilateral institutions like the UN as donors. For decades, this so-called “North-South” model of foreign aid has been criticized for its ineffectiveness. Common complaints regarding foreign aid include inefficiency in its disbursement and corruption in its use, in addition to the culture of aid dependency that it fosters. The past decade, however, has witnessed the emergence of a new paradigm for international development assistance as countries in Africa have diversified their sources of support by building new partnerships with other developing countries. As industrialized countries like the United States struggle with deficit reduction and the debt situation of Eurozone countries continues to deteriorate, many countries in Africa have found innovative solutions to their development challenges.
These emerging “South-South” partnerships are manifestations of a trend that has been developing for decades. As early as 1978, developing countries established a framework for collaboration through the Buenos Aires Plan of Action, which was a clarion call for developing countries to work in concert to promote economic growth in order to address the asymmetric balance of power between industrialized and developing countries. But it was not until the turn of the twenty-first century that these partnerships began to grow in significance. Trade between Africa and the BRIC countries of Brazil, Russia, India, and China skyrocketed to US$157 billion in 2009 from a mere US$16 billion in 2000. Currently, the BRIC countries account for 20 percent of Africa’s total trade volume, a percentage that is projected to increase to 50 percent by 2030. Specifically, the involvement of China and Brazil in Africa yield important insights about the potential of these new partnerships to transform the region’s economies. In contrast to traditional bilateral aid transfers, the assistance provided by China and Brazil to African countries is not predicated on policy conditionality because they adhere to the principle of non-interference in the affairs of recipient countries. The symmetric balance of power in these new partnerships has allowed recipient countries to build capacity by taking ownership of projects and setting domestic development agendas. Despite the challenges associated with dire domestic circumstances in recipient countries, the partnerships that China and Brazil have established with African countries collectively have the potential to be of geopolitical significance by introducing new alliances and coalitions to the modern dynamics of global affairs.
Tigers on the Savanna: China and Africa
After decades of stalled relations, President Jiang Zemin of China visited Africa in 1996 to announce the creation of the Forum on China-Africa Cooperation (FOCAC), which became operational in 2000. Thus far, there have been four FOCAC meetings, which alternate in location between China and Africa. Leaders from 42 African countries went to Beijing in 2006 to attend the third meeting of FOCAC with a policy agenda coordinated by the African Union Commission. At this summit, China pledged to double its assistance to Africa by 2009, increase its provision of loans and debt relief, and establish a China-Africa Development Fund. After this summit, China followed through on its promises by supplying Africa with US$3 billion of preferential loans and another US$2 billion of preferential export buyers’ credit. In an effort to promote Chinese private sector investment in Africa, China established the China-Africa Development Fund with initial funding of US$1 billion.
In 2009, leaders from Africa and China convened in Sharm el-Sheikh, Egypt, for the fourth FOCAC conference, at which China committed to a comprehensive assistance program that spanned multiple sectors. To address the growing challenges of climate change, China committed to the development of 100 clean energy projects in Africa, ranging from solar power to biogas and hydropower. In recognition of human capital as a catalyst of economic growth, China agreed to allow post-doctoral fellows from Africa to conduct scientific research in China, to train over 20,000 African professionals, and to supply 5,500 Chinese government-funded scholarships to Africa by 2012. Since Africa suffers from a dearth of financial capital, China committed to providing US$10 billion of concessional loans while supplying another US$1 billion in loans to small African businesses through Chinese financial institutions. On a macroeconomic scale, China established a program of debt-cancellation for very heavily indebted countries in the region that had diplomatic ties with China. To stimulate Africa’s export market, China agreed to gradually eliminate tariffs on products coming from Africa. By the end of 2010, this policy would eliminate tariffs on 60 percent of goods exported from Africa, eventually extending to 95 percent of African exports in subsequent years. In an effort to nurture the agricultural roots of many of the region’s economies, China agreed to train over 2,000 African personnel in agriculture technology while establishing more technical demonstration centers in Africa. Finally, China committed US$73.2 million of medical supplies and agreed to train 3,000 medical personnel to help Africa combat the scourge of disease.
As the fourth FOCAC conference demonstrated, China has pledged to increase its funding despite the global economic crisis, thereby becoming a source of countercyclical development assistance for Africa. As a general policy framework, China often ties its official development flows with its twin objectives of promoting trade and investment in the region. While traditional donors from industrialized countries often use grants, China provides the vast majority of its funding through concessional loans. Offered at below-market interest rates with extended grace periods, these concessional loans constituted 50 percent of China’s infrastructure financing to sub-Saharan Africa from 2001 to 2007.
Indeed, infrastructure development constitutes China’s main area of engagement. Poor infrastructure in many sub-Saharan African countries is a major impediment to economic growth because it fragments national markets and imposes significant hardships on producers who need to transport their goods to overseas markets. Dilapidated power systems render industrial production anemic in most sub-Saharan African countries. Lack of information and communications technology also inhibits entrepreneurs who want to expand their businesses. National infrastructure development is capital-intensive, and funding from traditional donors has never been sufficient in addressing the pressing infrastructure needs of the region. The World Bank estimates that Africa suffers from an annual funding shortfall of about US$35 billion in infrastructure financing.
China has addressed this funding gap by allocating the majority of its development assistance to infrastructure. From 2002 to 2007, China devoted as much as 54 percent of its total aid to Africa to infrastructure and public works projects. According to the Economic Development in Africa Report 2010 published by the United Nations Conference on Trade and Development (UNCTAD), 35 countries in sub-Saharan Africa benefit from China’s infrastructure investments in the region. Furthermore, UNCTAD estimates that Chinese infrastructure financing in sub-Saharan Africa skyrocketed to US$ 4.5 billion in 2007 from only US$ 470 million in 2001. Of the 2007 amount, 33 percent was devoted to electricity, 33 percent to transportation, and another 17 percent to information and communications technology.
An important caveat is that most of China’s development assistance is concentrated in the resource-rich countries of Angola, Nigeria, Democratic Republic of the Congo, and Zambia. Indeed, Nigeria and Angola collectively receive over half of all Chinese infrastructure financing. Though China does not impose policy conditions as part of its development assistance, it often requests access to natural resources in return. In oil-rich countries like Nigeria, these development policies can often entail high risk. In Nigeria, religious and ethnic tensions are threatening to tear the northern and southern parts of the country asunder while decades of poor governance have given the government in Abuja a reputation for graft. The Niger Delta has become an epicenter of militancy as locals have protested against perceived injustices in the way that oil revenues are distributed. Chinese development assistance in this region is complicated by the need to avoid exacerbating dire domestic conditions and to prevent recipient nations from growing even more dependent on resource-based exports.
These challenges are magnified in the context of China’s trade relations with Africa. From 2000 to 2008, UNCTAD estimated that total merchandise trade between China and Africa rose from US$8 billion to US$93 billion. This trend made China Africa’s second largest trade partner in 2008 and the continent’s largest source of imports, most of which consisted of technological and manufactured goods from China. In contrast, Africa’s exports to China have followed two trends. First, primary products like crude oil make up the bulk of Africa’s exports to China, accounting for 84 percent of the total volume of exports in 2008. In addition, Africa’s exports to China are concentrated in a few key countries, with Angola producing 48 percent of the region’s total exports to China in 2008. Economic prudence dictates that commodity-dependent exports are not sustainable due to price volatility in global markets. The extractive industries that dominate the economies of so many African countries are not sufficient drivers of employment growth. Thus, the current trade situation between China and Africa is tenuous at best and has the potential to undermine development objectives.
Despite these challenges, China has committed to a policy framework of interregional cooperation as it attempts to work with African countries to promote economic growth that is mutually beneficial. In 2005, the New Asian-African Strategic Partnership was established to cement ties between the two regions. Chinese economic engagement with the region has also begun to take the form of foreign direct investment (FDI). In 2008, Chinese FDI stock in Africa totaled US$7.8 billion, with the biggest recipients being South Africa, Nigeria, and Zambia. Increasingly, the private sector is playing a significant role in interregional transactions. China has also begun to experiment with the creation of special economic zones in Nigeria, Ethiopia, Zambia, and Mauritius, demonstrating that it will remain committed in the near future to the continent’s growth and security.
South Atlantic Partnerships: Brazil and Africa
The administration of Brazilian President Luiz Inácio Lula da Silva from 2003 to 2010 promoted a foreign policy predicated on the attainment of a multipolar scheme of power in global affairs in which developing countries have a significant voice. A cornerstone of Brazil’s foreign policy during this time period was the establishment of stronger connections with Africa, which President Lula declared to be a “political, moral and historical obligation.” Brazil’s partnerships with African countries, though still relatively limited in scope, are uniquely positioned to be effective because Brazil confronted similar development challenges over the past few decades. The Organization for Economic Co-operation and Development (OECD) estimated in 2011 that Brazil’s per capita GDP grew at an average annual rate of 3.6 percent from 2003 to 2008, which in turn allowed the country to lift millions of people out of poverty. Brazil channels most of its support through transfers of technology and knowledge that do not involve direct financial transactions and are not tied to policy conditions. Brazilian law actually proscribes the direct transfer of governmental funds to recipient governments unless channeled through organizations like the UN. As Cameroon’s ambassador to Brazil said in December 2010, “What Brazil has to offer is not money, it is knowledge.” While China’s focal point in Africa is infrastructure development, Brazil allocates most of its assistance to the agriculture and health sectors. The Brazilian Cooperation Agency estimated that 19 percent of Brazil’s total project portfolio in sub-Saharan Africa was devoted to agriculture while another 14 percent was devoted to health in 2009. In the period from 2005 to 2009, Brazil’s provision of technical assistance totaled US$1.7 billion, according to estimates calculated by the Brazilian Institute of Applied Economic Research.
Since agriculture accounts for 30 percent of sub-Saharan Africa’s GDP, Brazil’s technical support in this area is a boon to the region’s productivity, especially since Brazil specializes in tropical agriculture. Though it has technical assistance projects in 22 sub-Saharan African countries, Brazil gives 74 percent of its total development assistance to the Portuguese-speaking countries of Angola, Cape Verde, Guinea-Bissau, Mozambique, and Sao Tome and Principe. In 2006, the Brazilian Agriculture Research Corporation opened a branch in Accra, Ghana, to promote the transfer of agriculture-related technical knowledge. Two years later, Brazil launched the Cotton Four Project to support the cotton industry in Benin, Burkina Faso, Chad, and Mali. In 2010, Brazil launched a US$ 2.4 million bilateral project with the Senegal Institute for Agricultural Research to promote rice development. Brazil also uses trilateral policy frameworks, such as the partnership it established with the Agricultural Research Institute of Mozambique and the United States Agency for International Development. As this example illustrates, partnerships between developing countries are not mutually exclusive with partnerships involving industrialized countries. Oftentimes, there are remarkable synergies of expertise that can be harnessed in such trilateral arrangements.
To address the scourge of disease in Africa, Brazil has channeled a significant amount of its development assistance to the health-care sector. According to a 2011 World Bank report entitled Bridging the Atlantic, Brazil has signed a total of 53 bilateral agreements with 22 African countries regarding health issues. Similar to its project-based method of delivering agricultural support, Brazil partnered with Mozambique to build a US$23 million production facility for HIV/AIDS treatment drugs. Beyond healthcare, Brazil has a vested interest in promoting vocational training in the region. Brazil’s National Service for Industrial Apprenticeship has established vocational training centers in Angola, Cape Verde, Mozambique, Guinea-Bissau, and Săo Tomé and Principe. This organization also works with the private sector. For example, it helped the Brazilian mining company Vale train African workers in 2008 for its carbon mine in Mozambique.
Brazilian corporations have followed the example set by their government through increasing investments in Africa. Similar to China’s development work in oil-rich countries, the Brazilian state-owned oil company Petrobras has operations in Angola, Benin, Gabon, Nigeria, and Senegal. The business model of Brazilian corporations in Africa emphasizes the hiring of local workers. In fact, the Brazilian construction firm Odebrecht is Angola’s largest private employer. Though Brazilian FDI in Africa is not substantial, current trends indicate that it will increase in the immediate future. Vale, for example, has invested around US$2.5 billion in Africa since October 2010 and is planning to invest up to US$20 billion more in the region by 2015.
Brazil’s trade with Africa is small in volume but is on an upward trend. The World Bank estimates that from 2000 to 2010, Brazil’s trade with sub-Saharan Africa grew from US$2 billion to US$12 billion. Most of Brazil’s trade is concentrated in a few countries, namely Nigeria, South Africa, and Angola, which collectively make up over half of Brazil’s total trade with the region. Mirroring China’s trade relations with Africa, the majority of Brazil’s exports to the region consist of manufactured and technological goods while its imports from the region are mainly primary commodities. UNCTAD estimates that in 2008, Brazil imported over 73 percent of its crude oil from Africa. These trade relations threaten to perpetuate the status quo in which African countries rely on commodity-driven exports while importing manufactures, which is deleterious to sustainable economic growth. Recent efforts spearheaded by the Brazilian Agency for the Promotion of Exports and Investments, however, have granted financial benefits to Brazilian companies to diversify exports to Africa. Brazil’s relationship with Africa will strengthen in the immediate future, as President Dilma Rousseff, who took office in January 2011, is continuing Brazil’s policy of engagement.
Looking Towards the Horizon
The development challenges facing Africa remain formidable. UNCTAD estimates that Africa’s portion of global GDP is a mere 2.5 percent and that it produces only 3 percent of global merchandise trade. The western and southern regions of Africa are still heavily dependent on commodity-exports, though non-extractive industries in east Africa are flourishing. Seemingly intractable health challenges still hamper economic growth, as the World Bank estimates that the costs of malaria deplete Africa’s GDP by almost US$ 12 billion annually.
Despite these challenges, the horizon looks bright for Africa. The World Bank estimated that economic growth in sub-Saharan economies exceeded that of East Asian economies in eight years during the past decade. Most African economies are transitioning away from commodity-based growth and expanding into other industries like mobile technology. Foreign investment in extractive industries has decreased by 13 percent in recent years. Mobile connectivity has transformed the economic, agricultural, and social landscape of Africa, as over 600 million people in Africa have mobile phones. In 2011, the World Bank estimated that sub-Saharan Africa’s GDP will grow by 5.5 percent in 2012 even as most industrialized countries are projected to experience stagnant growth due to the global economic slowdown. This economic growth will occur in the context of increasing urbanization throughout the continent, as cities will become important entrepreneurial hubs and catalysts of innovation. With a population that is projected to reach 1.5 billion by 2050, economic development will need to accelerate in order to improve the continent’s standard of living. As Africa looks to the horizon, it will find, in the words of Tanzanian President Jakaya Kikwete, that developing giants like China and Brazil will each continue to be a “dear rafiki” in the years ahead.
Staff Writer Tianhao He