What Africa can learn from Sheffield’s investment deal with China
The British press has
been devoting acres of coverage to a £1bn (US$1.31bn) foreign direct investment
deal into Sheffield, a former mining town in northern England. Branded as an
extension of the “golden era” of relations between Britain and China, the
contract between Sheffield and Sichuan Guodong Construction Group
has been
heralded as a remarkable investment. It is easily the largest Chinese
investment in Britain outside London. And it comes with a 60-year life span.
The deal elicits
useful lessons for Chinese investments across the African continent.
The Sheffield deal
came with clearly stipulated terms of engagement. These included the creation
of employment opportunities, and an obligation to fill a clearly defined urban
development gap. This includes a five-star hotel, sport fields, new office and
leisure properties and both high-end and affordable housing in the city centre.
Significantly, the
developments are to be undertaken using local and not Chinese labour.
These conditions stand
in contrast with what deals look like between many African countries and China.
Despite a plethora of such deals, leaders on the continent have not shown
enough commitment to ensuring equitable partnerships with China. The Sheffield
case shows what’s possible if the negotiating partner is firm about insisting
on certain conditions for any deal.
Chinese interest in
Africa
Trade between China
and Africa has risen significantly. It now stands at an estimated $198.5bn.
This has been shaped largely by Chinese hunger for raw materials.
By some estimates
there are about 1,673 Chinese-backed projects dotted across 51 African
countries. This is obviously significant and surpasses any other region of the
globe. By and large the terms of these pacts have been dominated by China’s
needs. This is inimical – but it needn’t be the case.
The Chinese probably
possess the most malleable foreign and trade strategy on the international
landscape. As such it responds to the strategic investment programmes of its
partner states. Chinese investors respond to the robust policy of Europe and
America just as easily as they meet Africa with what demands it brings to the
table.
Current Sino-Africa
relations are best understood against the backdrop of the strategic Beijing
China-Africa Summit of 2006 and the recent Johannesburg Forum on China-Africa
Cooperation. Since then numerous loans, grants andinfrastructure contracts have been inked between
African governments and Chinese entities.
In addition, Africa
plays host to a flourishing “barter” enclave. Under these deals the continent
feeds sprawling Chinese industries in exchange for development loans and
infrastructure contracts.
This form of barter
comes with significant implications for Sino-Africa relations. In most
instances the barter promotes an indirect involvement of China’s corporations
in the extraction of Africa’s mineral resources. A case in point is the £3bn ($3.93bn)
loan agreement between China Development Bank and the government of Ghana, as well as other deals with Exim Bank China. These
formed part of a $13bn concessionary agreement for the development of
infrastructure in Ghana, including its oil sector.
About 60% of contracts
emanating out of this relationship are in the hands of Chinese corporations.
Vital ingredients are missing. Issues such as corporate governance, social
responsibility, corporate reporting, stakeholder engagement and responsible
investment are ignored. These governance factors come to be treated as
nonessential.
Many Chinese investors
are also not directly involved in the actual mineral extraction. They often
work through third parties. This means that the investors themselves cannot be
held directly accountable and often evade their responsibilities.
The social and
environmental effects across Africa’s resource value chain are massive. And
African governments are left to deal with the environmental damage.
Africa has a strong
hand to play
Given China’s need for
raw materials, there is undoubtedly an opportunity for Africa to redefine power
relations in its dealings with the new global giant. The mineral-rich continent
can set on course a win-win situation within the rubric of this existing relationship.
Failure to do so might perpetually limit the continent’s ability to maximise
economic value from its mineral resources.
Key factors must
include skill transfer initiatives, localisation and fit for purpose
infrastructure development.
Since the first
Beijing Ministerial Conference in 2000 Africa has made little progress in
preparing itself to meet China as an equal partner in economic dealings. The
conference set in motion the Forum on China-Africa Cooperation and Programme
for China-Africa Cooperation in Economic and Social Development. It could have
spurred Africa to develop a more strategic response designed to accelerate
development.
Africa needs to
assemble the required mettle to change power relations in its dealings with
China. The continent’s relations with China must be tailored to yield
commensurate benefits.
Sheffield’s City
Council seems to have been empowered enough to engage China on a mutual benefit
bases. Given that Africa is the epicentre of most Chinese foreign direct
investment it has a much stronger hand to play.
Even though the
Sheffield case involved a private sector player, Africa must also turn
agreements at government level into deals that deliver maximum economic value.
And African countries
must use existing safety valves, like constitutional clauses and parliamentary
agreements, to their advantage.
Sharif Mahmud Khalid
is a lecturer in accounting at the University of Sheffield. This article was
originally published on The Conversation.
Source: howwemadeitinafrica.com
Commentaires
Enregistrer un commentaire