Institutions Matter: Why China is Africa’s Friend, Without Benefits

By Shona Carter, Global Governance Analyst

The late nineteenth and early twentieth century “scramble for Africa,” as many have come to know it, marked a period of Europe’s control over most of Africa’s land and resources. The systematic carving of the continent shifted its cultural, social, and political structure, contributing to weak governance, longstanding regional conflicts, and vicious cycles of poverty extending decades after independence. This has long called for aid from foreign countries, as statistics often justify Africa’s rank as the poorest continent.


Over the past decade, financial flows to Africa have risen dramatically. Yet China’s skyrocketing aid and investment in the continent evokes a fundamental question: Will its growing stake in African nations strengthen their economies in the long-run? In addition to being Africa’s biggest trading partner, China is investing heavily in natural resource extraction across the continent. According to RAND, Chinese foreign aid and government-sponsored investment activities in Africa rose from a cumulative $52 million in 2001 to $18.4 billion in 2011, and some of the biggest oil and mineral producers – Ghana, Nigeria, Ethiopia, Congo, and Sudan – are top recipients of Chinese financing, receiving more than half of Chinese funds designated for Africa. 


In 2011 then-U.S. Secretary of State Hillary Clinton questioned China as a model of governance and warned: “We don’t want to see a new colonialism in Africa. We want, when people come to Africa and make investments, we want them to do well, but we also want them to do good. We don’t want them to undermine good governance.” Last March, then-governor of the Nigerian Central Bank, Lamido Sanusi, expressed a similar view: “So China takes our primary goods and sells us manufactured ones. This was also the essence of colonialism. The British went to Africa and India to secure raw materials and markets. Africa is now willingly opening itself up to a new form of imperialism.” 


Economists hold polar views on whether Chinese financing is a blessing or a curse. Zambian economist Dambisa Moyo, argues that Chinese investment is a “boon for Africa.” An advocate of job creation and sustainable development, Ms. Moyo supports China’s pursuits in Africa, arguing that its motives are “quite pure” and that imperial or colonial ambitions would be “wholly irrational and out of sync with China’s current strategic thinking.” In a swipe at Western aid to the continent, Dr. Moyo also stated: “The fact that so many African governments can stay in power by relying on foreign aid that has few strings attached, instead of revenues from their own populations, allows corrupt politicians to remain in charge.” 


Yet China’s looser conditions on financial contributions to Africa contradict this argument. The World Bank and the IMF, in fact, employ far more stringent standards as they condition financing on progress toward combating corruption and improving governance more generally.Few-strings-attached financing therefore gives China a sort of monopolistic edge in terms of financial investments, because African governments have little to no incentive to abide by Western policies that protect, among other things, human rights. The recent passage of an anti-gay law in Uganda, which criminalizes homosexuality with 14 years to life in prison, demonstrates how African countries will have increasing freedom to violate human rights. U.S. secretary of State, John Kerry, stated: “Now that this law has been enacted, we are beginning an internal review of our relationship with the Government of Uganda to ensure that all dimensions of our engagement, including assistance programs, uphold our anti-discrimination policies and principles and reflect our values.”


But it is doubtful that the government of this African nation, where Chinese investment is projected to reach $683 million this year, will lose too much sleep over attempts at leveraging financing to repeal the law. Similarly, the IMF and World Bank have little influence in Nigeria, where homosexuality is punishable by death, considering China’s multi-billion dollar investments in the country.  In other words, China goes where Western aid is reluctant.


The president of the African development Bank, Donald Kaburuka, stated: “…if aid is truly effective, it will progressively put itself out of business.” But the fact that the West’s contributions to Africa are going “out of business” – i.e., declining relative to developing countries – is not evolving in a manner that is ideal for Africa. Opponents of China’s approach argue that without promoting better governance, Chinese pursuits in Africa will either continue the cycle of weak institutions or worsen it.

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