What China’s $10 billion means for Africa

What China’s $10 billion means for Africa

CAIRO: China continued its push in Africa over the weekend at an international conference in Sharm el-Sheikh, offering the continent $10 billion in concessional loans. The two-day forum on China-Africa Cooperation began on Sunday and many analysts see Beijing’s efforts to establish itself as the top development partner in Africa as a sign the Chinese are moving forward on their plans to push out from Asia and enter the global community, as a leader not a follower.

A clash of development ideas appear to be manifesting, but for the most part, China is winning over the hearts of their African counterparts.

“It is obvious what is going on to anyone who has a clue,” began Ahmed Mohsen Goma’a, an investment analyst attending the Sharm conference. He believes China is making a play for African hearts and minds.

“Unlike other nations, China sees the importance of a relationship based on mutual needs and respect and by entering this continent with the belief they can be profitable and still help develop Africa’s stalled economies, it could be bad news for other Western donors,” he added.

China’s Prime Minister Wen Jiabao pledged the $10 billion at the opening of the conference, setting the tone for the weekend. Optimism abounded, but Goma’a says Western viewers were not too happy.

“They see their power eroding and their spot at the top of the development world going bye-bye because of China’s efforts,” the analyst continued.

“We will help Africa build up its financing capabilities… we will provide 10 billion US dollars for Africa in concessional loans,” Wen said at the forum at the Red Sea resort.

In 2006, at the last Forum in Beijing, China pledged $5 billion over three years to Africa. At that conference, China also signed agreements to cancel or relieve debt of 31 African nations. This year, China hopes the funds will go toward “small and medium-sized businesses,” Wen said.

“China is ready to deepen practical cooperation in Africa,” he said, adding that Beijing was prepared to take on a role in “the settlement of issues of peace and security.”

The Asian giant, who is quickly rising in the ranks of top economies worldwide, also said it would remove tariffs on 95 percent of products “from the least-developed African states that have diplomatic relations with China.”

China also plans to set up environmental programs in the continent, including 100 clean energy projects and to increase cultural exchanges with the continent.

In the past half decade, Chinese investment in Africa has skyrocketed, from $491 million in 2003 to $7.8 billion in 2008, according to official Chinese figures.

What does this mean for Africa?

Economists and analysts have long viewed China’s efforts in Africa as a way of garnering political and cultural support vis-a-vis Western nations who still view Beijing skeptically, but one Chinese official told Bikya Masr that these efforts are mainly economical, not political.

“There is not a need for our government to deal in politics in Africa at this point. What concerns us is making a profit and making these places more profitable. In turn, this money will go a long way in developing a relationship between businessmen and women who can then help support and make their countries a better place to live in,” the official said.

But, not everyone is convinced. Michael Sabah, a Lebanese-American analyst with a leading security firm, says that the Chinese government’s efforts are an attempt to ensure Africa uses Chinese products and goes to Beijing for aid instead of looking to the West for its security.

“China understands the effect they are having on Africa and people believe in China. They believe they can achieve what Western nations have been unable to do for decades. They may be right, but for now, Africa needs to think twice before they take so much from China. These altruistic notions that China has Africa’s best interest at heart may not be what they seem,” Sabah argued.

He said that what many are forgetting is that China is becoming overpopulated and they need to get jobs to their own citizens. What better way, he says, than to implement for-profit endeavors in Africa that hire Chinese workers?

“Look at what is going on here in Egypt? Already we have seen Chinese companies enter the market, taking advantage of Egypt’s relationship with the United States via Israel, but what people forget is that despite all the jobs they are giving to Egyptians, they are essentially doing the same thing other companies do: give Chinese citizens management positions that get paid a lot more than the average Egyptian to make certain profits are high. Africa is full of underpaid workers and China sees this as an opportunity,” the analyst added.


Highlighting China’s push in Africa is their alleged commitment to water security. The Nile Basin has quickly become one of the most contentious regions in the world in terms of water use. Egypt maintains that it receives the lion’s share of water from the Nile and has been unwilling to renegotiate terms with the other 8 Nile Basin Initiative nations, but China might cause more damage to political relations among African nations than thought.

According to Egypt’s Water Ministry, they are closely watching Beijing’s development efforts in the Nile Basin, seeing what the country will do. Khaled Hegazy, a ministry consultant, said recently that if China attempts to help the upstream nations – Tanzania, Burundi, Ethiopia, Rwanda etc. – develop means to take water from the Nile, Egypt would “stop diplomatic relations with a number of countries, including China.”

This would be detrimental to China’s efforts in Africa, as Egypt is seen as the gateway to the rest of the continent based on its position as the second largest economy in Africa, next to South Africa.

Rwanda’s President Paul Kagame – also the chairman of the East African Community – is not concerned with Egypt’s threats. He says that trade between the region and China has grown by over 200 percent since 2007 and is helping push the region forward.

“Partnership with China will be crucial for the infrastructure projects planned to facilitate the region’s vast potential for commerce and investment,” the Rwandan leader said.


Sabah believes that while China can have a positive affect on Africa as a whole, it must be looked through a realist prism that does not take anything for granted.

“It is easy to see China as the savior of Africa, especially after the West failed miserably to do much in the continent, but we must remain cautious, cautiously optimistic maybe, that China will succeed where so many have failed,” he said.

With $15 billion pledged in the past three years in aid to the continent, loan and debt relief continuing, it is hard to imagine China’s role diminishing in the near future.