China Ignores Warning Bells

Chinese investments come under greater scrutiny in Africa.
An analysis by Parameswaran Ponnudurai
Workers from China and Sudan celebrate the completion of a major oil pipeline project near Sudan's Darfur region, Nov. 2, 2010.

If Zambia's President Michael Sata's recent election victory on the wave of an anti-Chinese business sentiment is a wake-up call to China to review its African investment strategy, then the leaders in Beijing are not listening.

Sata, an ex-opposition leader who once described Chinese investors as "infesters," has accused companies from China of abusing and exploiting workers and crippling local industries with their cheap goods, a perception shared by several other African nations as well.

More than a month after the presidential election, Human Rights Watch said an investigation has found "persistent" abuses in copper-rich Zambia's Chinese-run mines.

It cited poor health and safety conditions, up to 18-hour work shifts per day, and anti-union activities in violation of national laws or international labor standards.

“Many of the poor health and safety practices we found in Zambia’s Chinese-run mines look strikingly similar to abuses we see in China,” said Daniel Bekele, Africa director at Human Rights Watch, which released the 122-page probe report last week.

The four Chinese-run copper mining companies in Zambia are subsidiaries of Beijing state-owned enterprise under the authority of China’s highest executive body.

Denial mode

China however appears to be in denial mode.

"Regrettably, the relevant contents of the report [are] not faithful to the truth," the Chinese embassy in Lusaka said in a statement, dismissing the probe.

Aside from its poor record in Africa for workers' safety and labor practices, China has been criticized for allowing harmful and counterfeit products manufactured by private Chinese companies into African states.

"African nations do not have the institutions to keep harmful and counterfeit products from entering, and China has either not figured out or is not interested in preventing these problems at the source," said David Shinn, an African expert at George Washington University.

Chinese firms have also been accused of engaging in corruption in Africa, for which China is the largest trading partner with total trade valued at U.S. $127 billion last year.

"[T]here are few indications that China is beginning to see corruption as a negative factor for doing business in Africa," said Shinn, a former U.S. ambassador to Ethiopia and Burkina Faso.

If Zambia is any indication, the growing Chinese influence over the economy may also become a key political issue in elections in other countries in Africa.

"One should not be surprised if similar issues develop in other countries on the continent," said Stephen Hayes, president of the Corporate Council on Africa, which has more than 180 companies as members.

"I have traveled to no African country where some citizens of the country did not express concern about the growing Chinese domination of the local markets and their influence in displacing African workers on construction projects and in new business."

While Chinese companies win infrastructure contracts with low bids and subsidized financing, they also have developed a "reputation for limited employment for Africans, limited technology transfer, and in some cases, uneven workmanship," he said.

The Chinese population on the African continent is also increasing in nearly every nation.

'Permanent immigrants'

Chinese laborers are brought in with Chinese construction projects, and it is difficult to determine if the laborers return to China after the projects are completed, Hayes said.

"In many areas, the Chinese appear to be permanent immigrants."

Has Zambia set the stage for a backlash against the Chinese investment drive in Africa?

Many see President Sata’s victory as "the marked beginning of an adverse response to Chinese investment not only in Zambia, but perhaps across all of Africa," said a commentary in the "China Elections and Governance" blog, part of a joint project between the U.S.-based Carter Center and the Renmin University of China.

"The occurrences in Zambia could potentially be echoed in other countries with Chinese SEZs [Special Economic Zones] like Egypt’'s Suez economic zone or in Nigeria’'s Lekki or Ogun," according to the report.

China began establishing SEZs in Africa following criticism that its investment and trade with the vast continent hinges largely on import of raw materials such as oil and metals to fuel the Asian giant's rapid economic growth.

The African governments believed that if the Chinese could attract considerable infrastructure investments to these special zones, the continent could boost export-oriented production, local manufacturing industries, skills, and technology, as well as its competitiveness in global markets.

But at least four SEZs in Sub-Saharan Africa—in Nigeria, Ethiopia, and Mauritius—are grappling with a plethora of issues, and international advice to help China resolve them has been rebuffed by Beijing.

The zones "show low levels of investment and exports, and their job creation impacts and integration with the local economies have been limited," the World Bank said in a study conducted with the endorsement of the Chinese government.

"In addition, these zones have not facilitated industrial upgrading,or acted as a catalyst of wider economic reforms, raising serious questions about the fundamental competitiveness of the zone programs."


China seems uninterested in adopting the report recommendations.

Nearly a year after the World Bank prepared the blueprint for China to polish up its investing image in the African special zones, the nearly 100-page document is gathering dust in the rooms of the Ministry of Commerce in Beijing, sources told RFA.

"The bottom line is that they are political deals and not pure business deals and they were adopted without proper studies," one source said.

"The zones have not taken off because the business logic is missing."

But Beijing sees political logic in its trade and investment strategy in Africa.
China makes every effort to cultivate the maximum number of African countries on all issues of interest to Beijing that arise in international forums, African expert Shinn said.

African countries, on the other hand, can depend on China to avoid raising controversial African human rights issues in conferences and perhaps even to support them when they are criticized by Western nations.

"China's interest in access to raw materials reinforced its long-standing policy of developing strong political relations with as many countries as possible in Africa," Shinn said.

In South Africa, for example, the Chinese recently used their influence to pressure the government to deny a visa to Tibet's spiritual leader the Dalai Lama, an ardent anti-apartheid campaigner.

China also ignores Western sanctions imposed on Zimbabwe and Sudan over their human rights record and continues to be a key supplier of military equipment to them.

As Zambian President Sata enters his second month in office, he faces increasing pressure to live up to his campaign promises.
“Rather than simply blame Chinese-run firms, President Sata needs to ensure that his government is effectively protecting workers’ rights,” Human Rights Watch's Bekele said. “More stringent measures are needed against all companies that flout labor laws and mining regulations.”

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