China in Africa: Curing the Resource Curse with Infrastructure and Modernization

Author:Jeremy Kelley
Position:J.D. Candidate at American University Washington College of Law, class of 2013
Pages:35-41
 
CONTENT
35SPRING 2012
CHINA IN AFRICA: CURING THE RESOURCE CURSE
WITH INFRASTRUCTURE AND MODERNIZATION
by Jeremy Kelley*
Seven billion is the number of human beings on this
planet and that number is growing. How to provide food,
clean water, shelter and jobs for this population, in ways
that enhances and nurtures the Earth’s natural resources and
ecosystems while supporting our survival, is the challenge of our
times. Ever since the first Earth Summit in Rio de Janeiro in
1992, we have known that sustainable development is the way
to meet this challenge. Sustainable development is living within
our means, leaving plenty for our grandchildren, and ensuring
everyone has a reasonable opportunity to lead a decent living.
However, the lack of political will on the part of governments,
social and environmental irresponsibility on the part of corpo-
rations, and inertia to adopt a sustainable life style on the part
of citizens, have collectively contributed to this failure. To
succeed in sustainable development at the quality, scale and
speed needed to meet the challenge, we need strong working
partnerships between governments, corporations and citizens
based on trust. Trust among partners is built through openness,
accountability, and participation.1
INTRODUCTION
Africa is a continent of nation states created without regard
to race, ethnicity, or the territorial interests of its inhabitants.2
Mismanaged for years by imperial powers that were simply
looking for ways to reap the benefits of its resource wealth, it
is understandable that Africans are sometimes skeptical of
Western influence and loan programs — a skepticism that the
global South made apparent in the negotiations leading to the
1992 Rio Declaration.3 With the economic and political rise of
China, African nations now have choices that were previously
unavailable to them. China represents another source of fund-
ing for infrastructure and industrial development in Africa. But
how will differences in the way China invests impact African
development?
This article will examine what an increase in Chinese
investment means for the African continent. Part II examines
what is meant by “sustainable development” and considers how
it can be achieved. Part III details China’s investments in Africa:
its history, recent growth, and areas of focus. Finally, part IV
returns to the question of how Chinese investment may influence
African development.
THE WHAT AND HOW OF
SUSTAINABLE DEVELOPMENT
DEFINING SUSTAINABLE DEVELOPMENT
Development is a value-laden concept and the definition can
vary depending on which societies are deemed the benchmark
of successful development; often this means ‘development’
with ‘westernization.’4 Certainly, even from a solely economic
perspective, sustainable development entails not only economic
growth, but an emphasis on structural change as well.5 To create
sustainable economic gains, the increased share of the industrial
sector is important for those developing countries that are typi-
cally dependent on primary exports, such as agriculture and nat-
ural resources.6 This is especially apparent in some oil-exporting
countries which experience sharp increases in GDP but don’t see
changes in their economic structure.7 But, viewing development
in purely economic terms ignores many other factors that influ-
ence the lives of people in developing nations. These other social
and political factors have become an ingrained part of how we
now define sustainable development.
The United Nations Conference on Environment and
Development (“UNCED”), held in Rio de Janeiro from June
3 to 14, 1992, presented a chance to re-envision development
policy and practice following the end of the Cold War.8 Freed
from the “distorting shadow of superpower conflict,” the devel-
oping countries of the global South began to assert themselves
more heavily.9 While ostensibly focused on environmental issues
raised by the North, UNCED was in fact steered toward issues
of sustainable development by the South, as reflected by the Rio
Declaration which culminated the work at UNCED.10
The Rio Declaration highlighted the growing importance of
governance in development11 and the role of state cooperation
in developing a sustainably supportive international economic
system.12 Inherent in the Rio Declaration was the notion that
development is more than just a factor of economic growth, but
must also include active encouragement and participation by
civil society,13 effective access to justice,14 and an awareness of
those traditionally marginalized in society.15 Above all, the Rio
Declaration was a proclamation that developing countries had a
right to decide how they would develop16 and that development
was “interdependent and indivisible” with concerns of peace and
the environment.17
Measuring development should also include “social indi-
cators” such as life expectancy, literacy, nutrition, access to
health services, and so forth.18 A country may grow rapidly in
terms of economic growth, but lag behind in these important
areas that impact peoples’ everyday lives. In his classic work,
“Development as Freedom,” Nobel Laureate Amartya Sen’s
broadened development include and to focus on the concept
of freedom.19 Life expectancy, literacy, nutrition, and access
* Jeremy Kelley is a J.D. Candidate at American University Washington College
of Law, class of 2013.
36 SUSTAINABLE DEVELOPMENT LAW & POLICY
to health services, after all, are expressions of an individual’s
freedoms to health and an education. Sen defines five distinct
types of freedom: 1) political freedoms, 2) economic facili-
ties, 3) social opportunities, 4) transparency guarantees, and
5) protective security.20 These freedoms are not only the end
goals of development, but they are also the primary means for
development.21 These freedoms are inextricably intertwined. For
example, a freer political environment would generally be more
conducive to liberal economics and growth than a repressive
regime.22 People will feel more comfortable investing in a coun-
try if they know that it is secure from hostile foreign or domestic
forces, evincing protective security freedom.23
Strong economic growth is not necessary for the advance-
ment of other areas of development.24 However, it is self-evident
that a strong, growing economy can provide more opportunities
and resources to address development problems, especially if the
solutions are resource intensive, like improving infrastructure.
That which encourages political and social freedom will also
encourage economic development while the reverse is also true–
political and social repression hinders economic development.25
The Rio Declaration and the associated principle of
socio-political development have come to define a version of
sustainable development that calls for something beyond mere
economic growth. However, this ethos could be challenged as
China experiences an economic boom without the corresponding
growth in political freedom.26 This is already affecting develop-
ment in Africa because China, unlike many Western countries,
does not emphasize the development of other social indicators as
preconditions for economic development assistance.
SPURRING ECONOMIC GROWTH
While sustainable development encompasses more than
just economic growth, it is generally agreed that, especially in
the poorest countries, economic growth is a crucial component
of development.27 Economies can grow by promoting a number
of factors such as increased efficiency, enhanced education,
technological change, accumulation and investment of capital,
and the exploitation of natural resources.28 In many developing
countries these “modern” means of economic growth coex-
ist with traditional economic sectors.29 An inherent problem
in dualist economic structures is that they foster economic
and social gap between the modern and traditional means of
economic growth30 and, as a result, there are high levels of
income inequality.31 In Africa, one way this dualism can be seen
by viewing extractive industries amongst traditional or early-
stage modernizing economies.
The way a society approaches dualism and structural
change can either promote or hinder growth.32 For example,
reinvestment from agrarian sectors toward industrial sectors, the
encouragement of entrepreneurship, and creation of capital can
drive a country to the point of establishing sustainable growth.33
Although less developed countries will initially lag behind more
developed countries as they gradually develop traditional sectors
into modern ones, those less developed nations can catch, and
even overcome, developed countries if they remain committed to
this policy.34 While each country must take its own path toward
modernization, all long-term success will undoubtedly involve
structural transformation.35
ITS A TRAP! NATURAL RESOURCES AND
BAD GOVERNANCE.
“With hard work, thrift, and intelligence, a society can
gradually climb out of poverty, unless it gets trapped.”36
A short-sided reliance on the exploitation of primary
resources as an engine of growth is a temptation that confronts
many African nations and could possibly jeopardize long-term
sustainable growth.37 Primary exports can encourage economic
growth in a number of important ways.38 They can provide a
source of surplus foreign currency that eases import of those
capital goods and intermediate goods that are needed to modern-
ize an economy.39 They also provide linkages to other industries,
forward and backward, on the chain of production.40 For exam-
ple, an oil-exporting nation could develop a refining industry.
Primary exports also provide a source of income for local popu-
lations which, if spent in the domestic economy, will increase
the demand for manufactured goods that can be translated into
domestic production.41 Taxes on primary exports can provide
an important source of revenue for poor governments that can
be reinvested in other development sectors — social, health,
infrastructure, or other programs.42 However, over-reliance on a
single sector of an economy can spell ruin. Without the develop-
ment of a co-existing industrial sector to offset the exploitation
of primary resources, especially extractive industries, an econ-
omy can easily fall into the resource trap and its accompanying
problems of corruption, misgovernance, and underdevelopment.
The resource trap (or resource curse) consists of three parts:
1) Dutch disease, 2) susceptibility to fluctuations in commodity
prices, and () negative political and institutional effects.43 Under
Dutch disease, named after the effects the discovery of gas in the
North Sea on the Dutch economy in the 1960s, resource exports
cause a country’s currency to rise in value against other curren-
cies, making the country’s other export activities uncompeti-
tive.44 In moderation, this affect can be positive for development
because the surplus in foreign currency can be used to import
goods needed for industry.45 Taken to the extreme, however, the
devaluation of domestically produced goods destroys any exist-
ing export market and, as local services, agricultural products,
and manufactured items become more expensive, resources are
diverted away from production.46 Instead of building a diverse,
modern, industry-driven economy, countries plagued by Dutch
Disease find themselves unable to create competitive agricul-
tural or industrial exports, thereby limiting their chances for
sustainable economic growth.
Resource-dependent economies are also susceptible to
fluctuations in world commodity prices.47 The result is a boom
and bust cycle: the economy is flushed with money when com-
modity prices are high, but starved for revenue when the prices
drop.48 When there is a great excess of wealth, governments
tend to spend on all sorts of projects whether they are needed or
37SPRING 2012
not.49 During the lean times, living standards start to fall and the
government must make tough choices about what must be cut.
This cyclical boom and bust makes it difficult for electorates to
judge whether the government is making wise use of money or
investing in great mistakes.50
Above all, “[t]he heart of the resource curse is that resource
rents make democracy malfunction.”51 Corruption and misgover-
nance are the effects of patronage politics that too often become
the standard when massive resource rents find their way into a
democratic society.52 Furthermore, the more ethnically diverse a
society, the more patronage politics comes into play; this is one
reason why Africa experiences such grand corruption.53
In a resource state, the government is less accountable to
the people. First, because there is less need to tax the popula-
tion, citizens are less apt to scrutinize how tax income is spent.54
Second, resource dependence erodes governmental checks and
balances, leaving the electoral competition unconstrained and,
when combined with patronage and ethnic division, parties can
use the resource rents to buy votes, rig elections, or simply force
opposition parties out of power.55
“The resource-rich, ethnically diverse societies need a
democracy that is distinctive in having a strong emphasis on
political restraints relative to electoral competition.”56 In the
alternative, these countries will likely misuse resources and miss
the chance to invest resource income in ways that drive economic
modernization and diversification. Caught in a downward spiral
of uncompetitive exports and bad governance, the abundance of
resources can spell disaster for a developing economy.
CHINESE INVESTMENT IN AFRICA
Sino-African trade has recently exploded as China’s growing
economy requires more resources and markets for its manufac-
tured goods.57 Two-way trade between Africa and China stood at
10 billion U.S. dollars in 2000, rising to $18 billion in 2003, then
$50 billion in 2006.58 During this period the average increase in
trade per year was thirty-three percent.59 Trade surpassed $120
billion in 2010.60 In the past two years, China has given more
loans to poor countries than the World Bank.61
HISTORY OF CHINESE TRADE IN AFRICA
China has been trading with Africa for centuries, dating as
far back as the Tang Dynasty (618-906 AD).62 Chinese porcelain
from the 9th century and coins from the 12th century have been
found across East Africa.63 Early trade, however, collapsed with
the death of Emperor Yongle and the resurgence of Confucianism
which promoted agriculture to exploration and trade.64
Only in the 1960s did China again begin to show inter-
est in Africa. Between 1963 and 1964, Zhou Enlai, then
Vice-Chairman of the Communist Party of China, made an
extensive tour of Africa to strengthen Sino-African relations.65
Foreshadowing the concept of South-South cooperation, he
advocated mutual economic assistance between “poor friends”
and attacked the “maltreatment of small and weak countries by
the big and strong.”66 He pledged that Chinese assistance “would
respect the sovereignty of the recipient country, would be given
on generous terms, and would strive to enhance self-reliance.67
Modern Chinese investment in African infrastructure proj-
ects was born during this era.68 The 1860-kilometer Tanzania-
Zambia (“Tanzam”) Railroad linking Zambia with the port in
Dar es Salaam in Tanzania exemplified this new investiture.69
Employing 50,000 Chinese workers and costing $500 million, it
has remained one of the most costly infrastructure investments
China has ever made in Africa.70 However, Chinese investment
during this time was more ideologically than economically moti-
vated and focused on supporting the region’s guerilla fighters
and Socialist regimes, such as Julius Nyere’s Tanzania.71 This
ideological approach to investment ended with the death of Mao
and the end of the Cultural Revolution, but more economically
focused development emerged from the economic reforms
undertaken by the Deng Xiaoping regime.72
Two key events marked the beginning of the current
trend of increasing Sino-African trade.73 First, the Tiananmen
Square demonstrations served to isolate China from the West.74
Unwilling to criticize China for fear of exposing themselves to
criticism and hoping to gain support from China, most African
nations remained silent about the events and worked behind the
scenes to move into the void that Western isolation had left.75
Second, the end of the cold war in 1991 meant that the
economic tug-of-war for African allegiance was at an end76
and, suddenly, aid and loans from Western nations and insti-
tutions such as the World Bank and the IMF began to come
with attached conditions.77 African leaders that were once
accustomed to maintaining power through patronage systems
of Western funds were now faced with the prospect of losing
power.78 Increased investment from China, who does not give
the same weight to concerns of governance and human rights,
can provide African states with less-encumbered loans and aid,
addressing the need for capital in Africa and skirting the very
real issue of misgovernance.
IMPACT OF THE FINANCIAL CRISIS — THE NEED FOR
CAPITAL
The current global economic crisis has dramatically
reduced Western foreign direct investment in Africa79 and
has also reduced the value of commodity assets countries once
relied upon for export profits.80 The result has been that it is
“virtually impossible” to raise capital for exploration or devel-
opment of resources.81 This scarcity of capital has negatively
impacted African infrastructure development.82 According to the
World Bank’s Public-Private Infrastructure Advisory Facility, the
retreat of investment capital from Africa has made “[infrastructure]
financing (both debt and equity) more onerous and difficult
to secure.”83
While capital is being withdrawn by western investors,
Chinese institutions have been expanding their investment,
especially in extractive industries.84 China’s major players in this
field are not only private investment banks, but also state-owned
policy banks.85 Jiang Jianqing, Chairman of the Industrial
Commercial Bank of China (“ICBC”), expressed that Chinese
38 SUSTAINABLE DEVELOPMENT LAW & POLICY
investment in Africa is “growing and becoming more diversi-
fied, even as the global downturn curbs investment by other
countries.”86
OIL ABOVE ALL, BUT THERE IS MORE
Currently, extractive industries remain the central focus of
Chinese investment in Africa. This investment has turned China
from the second largest exporter of oil in Asia to the second larg-
est importer of oil in the world in a matter of only nine years.87
Driven partly by the meteoric increase of cars on Chinese roads
(estimated to reach 100 million by 2015) and partly by increased
industrial demands, China expects to import between ten and
fifteen million barrels of oil per day by 2020 — twice Saudi
Arabia’s total production and equal to that of the entire African
continent.88 Currently, Africa supplies thirty percent of China’s
oil needs, compared to the fifteen percent of demand Africa sat-
isfies for the U.S.89 Approximately seventy percent of African
exports to China consist of crude oil and an additional fifteen
consist of other raw materials.90
As a late-comer to the established oil fields such as those
in Nigeria and Angola, China has had to work hard to make
inroads against established players.91 For this reason, China is
actively seeking new fields in Gabon, Niger, Kenya, Uganda,
and other areas often over-looked by Western states.92 Unlike
many Western companies, Chinese companies are willing to take
more risk and will work in more politically unstable regions.93
Oil is not the only resource China is seeking in Africa. While
oil constitutes seventy percent of African exports to China, an
additional fifteen percent of exports are in the form of other min-
eral resources.94 In particular, China has been active in pursuing
sources of cobalt in Africa. Africa produces fifty-one percent of
the world’s cobalt, of which, eighty-eight percent of that comes
solely from the Democratic Republic of the Congo (“DRC”).95
Recently, Chinese companies, China Railway Engineering
Corporation (“CREC”) and Sinohydro, have entered into an
agreement to establish a joint Sino-Congolese venture, named
Sicomines, that will provide the DRC with China Export-Import
(“EXIM”) Bank financed infrastructure in exchange for copper
and cobalt mining concessions.96 The $9 billion venture would
provide $6 billion worth of road construction, two hydroelectric
dams, hospitals, schools and railway links to southern Africa,
to Katanga, and to the Congo Atlantic port at Matadi; the other
$3 billion was to be invested by China in development of new
mining areas.97 The deal has recently come under fire as a $23
million signing bonus for Gecamines, the Congolese partner
involved, disappeared under allegations of corruption.98 Such
allegations have unfortunately become standard in Chinese-
financed programs which typically lack even a modest amount
of transparency.
IS CHINESE INVESTMENT IN AFRICA
A CURSE OR A CURE?
There is no doubt that Chinese investment presents African
states with some clear advantages, especially at a time when
Western investment has declined. Chinese investment could be
the cure for a continent in need of capital-intensive investment
in infrastructure and economic modernization. However, it
is important to bear in mind that sustainable development is
not solely about economic growth. Without examining the
potential pitfalls of Chinese investment, particularly the over-
investment in extractive sectors and its accompanying problems
of misgovernance and dependence on a sole export, the increased
economic growth may instead end up as a curse for Africa.
CURES
The Commodities-for-Infrastructure model
“The Chinese Government’s strategy in Africa is starting
to mimic the approach adopted in the home market itself, one
that channels sizeable amounts of capital through state-owned
(policy) banks at key sectors.”99 While this strategy has been
directed mostly towards direct investment in extractive indus-
tries, a shift has begun to focus on infrastructure development in
exchange for concessions on resources.100 In 2006, China spent
$7 billion dollars on infrastructure in Africa; in 2007 China
invested an additional $4.5 billion dollars.101
While Africa has been showing robust growth in recent
years, one major constraint on sustainable development has been
the poor state of the continent’s infrastructure, which depresses
productivity by as much as forty percent.102 It is estimated
that Africa needs at least $93 billion to close the infrastructure
gap.103 Another challenge to developing infrastructure is the
current cost of transportation in Africa, which is higher than that
of other developing regions. According to the United Nations
Conference on Trade and Development, “while freight costs
for the world on average amount to 5.4 percent of imports, this
value is up to five times higher for some African countries.104
A World Bank study showed that, in 2007, the average cost in U.S.
dollars to export a container from Africa was $1,649 compared to
the Organization for Economic Co-operation and Development
(“OECD”) average of $889.105
Many African states have received financing for thermal
or hydro power projects to facilitate much-needed electrifica-
tion.106 By the end of 2007, China had provided $3.3 billion
for hydropower amounting to a 6,000 megawatt capacity, which
would increase total generation capacity in sub-Saharan Africa
by 30%.107
Given Africa’s need for infrastructure, China’s infrastructure-
for-concessions policy may be seen as a win-win situation for
Africa. As of 2008, China has financed infrastructure projects
in over thirty-five African countries.108 Yet, criticism tugs at the
edges of this investment boom. First, Chinese companies often
use Chinese labor in places where local labor could be used.109
Instead of the money for infrastructure projects being pumped
into the local economy, much of it is repatriated back to China
where it originated. Second, there is little financial or technical
investment to maintain the infrastructure constructed by Chinese
workers.110 While African states will benefit from the infra-
structure, the money could also be used to finance employment
opportunities for African workers. Additionally, there are always
potential issues of transparency and corruption associated with
39SPRING 2012
large investments, as indicated in the DRC Sicomines deal,
which must be addressed to encourage sustainable development.
Investment in the Industrialization of Africa
“As China Inc.’s knowledge and network in Africa deepens,
the diversification of China’s investment footprint away from
the energy sector in Africa will become an emerging trend in
China-Africa commercial ties.”111 There is a hopeful sign in this
diversification; Chinese companies are increasingly investing in
manufacturing in Africa in addition to the usual extractive indus-
tries.112 “A Chinese government sur vey shows the growing use
of Africa as an industrial base. Manufacturing’s share of total
Chinese investment (22%) is catching up with mining (29%).113
Future Chinese investment in manufacturing could help mitigate
the negative effects that heavy investment in extractive industries
alone causes to African export industries.
China announced the “Go Global” strategy in 2000114 as
a strategy to both develop markets for China’s export products
and relieve pressure from the accumulation of foreign currency
as well as develop new sources of energy and raw materials115
Go Global has encouraged Chinese enterprises to establish
offshore operations in designated Chinese special economic
zones (“SEZ”).116 These zones “promote Chinese foreign com-
mercial interests,” “create safe-havens for Chinese capital”, and
offset “increased protectionist trade practices against Chinese
companies.”117
The establishment of these light industrial zones creates
jobs for local citizens and helps offset the criticism that cheap
Chinese imports have undermined Africa’s weak manufactur-
ing sectors.118 The African Development Bank recently said of
the Chinese SEZs, “The special economic zones are expected
to make a significant contribution to industrialization in Africa
although their success is by no means guaranteed.”119 This type of
industrialization could be conjoined with the extractive industry
to establish forward and backward links in production–such as
refining and the manufacture of mining machinery–which can
help diversify and strengthen local economies.120
However, nternational criticism of the SEZs points to the
employment of large numbers of Chinese laborers in the con-
struction of SEZs and to the procurement of resources exclu-
sively through Chinese channels.121 Too heavy a focus on SEZs
“could limit progress towards regional integration,” as countries
compete for investment from China instead of developing local
capacity.122
CURSES
Heavy Investment in Extractive Industry May
Exacerbate the Resource Curse
It is not only the Chinese who come to Africa and heavily
invest in extractive industries. Western companies have been
exploiting African resources since the colonial period and con-
tinue to dominate, especially in the oil industry. This has had
adverse effects on African economies through the resource curse
and its resultant bad governance.
Ghana’s Center for Policy Analysis (“CEPA”) recently
warned that Ghana will likely suffer from the effects of Dutch
Disease as it begins commercial production of oil.123 To mitigate
the effects of Dutch Disease, CEPA plans to closely manage
the exchange rate, perhaps pegging the Ghanaian Cedi to parity
with the US dollar.124 The economics of Dutch Disease can be
offset by efficient management of currency, appropriate pacing
of resource exploitation, and concurrent investment in modern-
izing industry.125 It is the effects that resource rents have on the
governance of a politically divided, weak, or unstable nation that
are the most concerning aspect of the resource curse.126
Chinese investment in Africa has the potential to exacerbate
the misgovernance aspect of the resource curse. While Western
countries have demanded more of their companies and criticized
them for investment in nations with poor human rights records,
China makes no such distinctions. Chinese investment does
not require recipient countries to implement any kind of anti-
corruption measures, nor does it monitor whether the money
is appropriately spent or disappears into the pockets of corrupt
leadership.127
Addressing the Resource Curse
In general, three interconnecting factors can be addressed
to encourage appropriate use of resource revenues: (1) transpar-
ency, (2) accountable governance, and (3) economic and political
policies which take proper account of horizontal and vertical
divisions of power in the society.128 Even as the Rio Declaration
has called for further transparency,129 new global initiatives have
brought transparency in the extractive industries to the forefront
of development.
The Extractive Industries Transparency Initiative (“EITI”)
“aims to strengthen governance by improving transparency and
accountability in the extractives sector.130 It does so by monitoring
and reconciling company payments and government revenues at
the level of individual countries; to be deemed “EITI compliant,
each country needs to implement EITI compliant regula-
tions and establish a multi-stakeholder group of civil society,
government, and private industry representatives to oversee
implementation.131
Under ideal conditions, EITI would be a benefit for all
parties involved: governments would benefit from transparency
and an anti-corruption stance which would lead to improvements
in tax revenue and “enhanced trust and stability in a volatile
sector;” companies would benefit from a level playing field
where all companies must disclose the same information; civil
society benefits from receiving reliable information from the
government and companies; and the energy sector would see
increased stability which encourages long-term investment.132
While it is empirically inconclusive whether EITI enhances
a country’s development potential, there are many positive
signs which have encouraged countries to begin the compliance
process.133 To date, twenty-one African nations have completed
or are in the process of obtaining EITI compliance status.134 One
recent case study suggests that, even in the most pervasively
corrupt countries, EITI initiatives can shed light on the issues
40 SUSTAINABLE DEVELOPMENT LAW & POLICY
of governance and accountability, even if it offers no certain
answers.135
Chinese companies working in an EITI compliant country
are following the reporting framework established by that country
and, to date, Chinese companies have reported in Gabon,
Kazakhstan, Mongolia, and Nigeria.136 China has expressed its
support for the EITI “in several international fora,” including the
UN General Assembly and the G20.137 China could benefit from
further support of EITI as it would provide more political stability
when challenging operational environments and would allow
Chinese companies to compete at an equal level with Western
companies.138 Because EITI “affirm[s] that management of
natural resource wealth for the benefit of a country’s citizens is
in the domain of sovereign governments to be exercised in the
interest of their national development,” China need not worry
about moving from its “non-interference” foreign policy.139
Instead, since EITI is implemented and monitored domestically,
Chinese companies are merely complying with domestic law
and that law offers benefits for compliance.140
Transparency, however, will not solve the problem entirely.
A government must be accountable to its citizen if disclosure
of potential corruption is to have any effect.141 Effective anti-
corruption initiatives are based upon “mass mobilization” and
hold leaders politically accountable for the misuse of state
funds.142 Of course, a multi-party democracy is the most obvi-
ous form of accountable governance.143 However, even in a
dictatorship, mass protest to the misuse of resources may impose
pressure to reduce corruption.
In order to secure accountability, any development ini-
tiative must take into account a country’s horizontal and
vertical power relationships.144 This is especially true in multi-
ethnic and divided societies; because trust is a powerful factor in
governance and corruption, development programs must work
to establish institutional and economic ties between horizontally
fractured power structures.145
ADDRESSING CHINESE INVESTMENT IN LIGHT OF THE
PRINCIPLES OF SUSTAINABLE DEVELOPMENT
The Rio Declaration urges states to cooperate in promot-
ing sustainable development.146 It also embeds principles of
transparency and accountability.147 As a direct result, a global
network of civil society organizations is working to ensure
access to information, participation, and access to tribunals and
justice.148 While gaps still remain, norms of accountability are
gaining force.149
Rio + 20 looks to further emphasize issues of accountability
and governance which affect sustainable development.150 The
High-Level Panel on Global Sustainability recently highlighted
the “need to integrate economic, social, and environmental
dimensions” in order to achieve sustainable development.151
The Panel, in the tradition of the Rio Declaration’s Principle
1, places humans at the center of sustainable development.152
Unlike Rio, the Panel calls on humans to “claim their rights
and voice their concerns” against “persistent inequality which
offends deeply held universal principles of social justice.153 The
socio-economic change needed will only come through transpar-
ent and accountable public-private partnerships.154 The writing
is on the wall that transparency and accountability are the new
emphasis in development and that China would be wise to turn
its investment policy in that direction.
To China, development has been more of an economic
concept than it is to Western organizations and as portrayed in
the Rio Declaration. While it is China’s policy not to interfere
with the political situations in the countries where it invests, it
must be assured of political stability to ensure the security of
its investments. Democracy typically provides stability. Through
support for EITI and other governance initiatives, China may not
be supporting democracy per se, but is supporting accountable
governance.
One promising outlook for African development is the
increased practice of corporate social responsibility (“CSR”)
within Chinese companies.155 CSR generally means that compa-
nies will meet “the legal requirements and broader expectations
of stakeholders in order to contribute to a better society through
actions in the workplace, marketplace and local community and
through public policy advocacy and partnerships.”156 Almost all
Chinese business leaders in Africa surveyed in 2010 were familiar
with CSR and generally described CSR “in terms of contributing
to local economic growth and job creation, complying with local
laws and caring for the environment, and making philanthropic
donations to support schools and hospitals.”157 Key drivers of
CSR growth included Chinese government support for CSR, the
adoption of international standards and collaboration (including
EITI), and the establishment of CSR training and skills develop-
ment programs.158
It seems Chinese businesses are open to the idea of CSR,
but as the 2010 study concludes:
One key difference between Chinese and western con-
ceptions of CSR concerns the extent to which they are
willing to consider whether business practices reinforce
or undermine local legal and political institutions, par-
ticularly in institutionally weak countries. While the
Western model for overcoming state corr uption in man-
aging natural resource revenues is based on encourag-
ing transparency, the Chinese model has tended to rely
on direct provision of public infrastructure. This is
aided by Chinese companies’ access to low-cost and
long-term capital. However, there is long experience of
foreign funded infrastructure projects being developed
in Africa, which do not meet local needs, and are not
supported with maintenance, which remains a chal-
lenge to this model of business in development.159
CONCLUSION — IS CHINESE INVESTMENT
JUST LIKE THE REST? OR WILL IT KICK-START
AN AFRICAN RENAISSANCE?
The central question about Chinese investment in Africa
is whether it will be more effective at establishing long-term
sustainable development than the Western model, which has
41SPRING 2012
not been as effective as the West would have hoped. Certainly,
Chinese investment in Africa is popular amongst Africans, even
more so than aid which comes from the West.160 It is also certain
that Chinese and Africa fortunes are tied together as there is a
clear correlation between Chinese and African growth since
1999.161 Chinese investment in infrastructure and modernizing
industry has the potential to kick-start stagnant African growth
and begin a new era of economic development.
However, economic growth will not translate into
sustainable development if it does not deal with Africa’s limited
diversification, susceptibility to volatile commodity prices, and
misgovernance and corruption. While it may not be willing to
interfere directly, China will want political stability to ensure its
investments pay off and its supply lines remain intact. This may
mean supporting authoritarian regimes, as China did in Sudan.162
Yet, it may also mean supporting new emerging international
standards for transparency and accountability such as the EITI.
Significant criticism has been laid on the West’s doorstep for
the failures that billions of dollars in aid have produced in Africa.
Whether Chinese investment creates sustainable development in
Africa will be determined not only by the continued diversification
and investment in infrastructure, but also by the way African
society adapts to and propels the changing economic and social
environment. While Chinese development may not expressly
include many of the freedoms the West deems to be indicators
of development, it remains to be seen whether these freedoms
will be the ends and means of a uniquely African sustainable
development.
Endnotes: China in Africa: Curing the Resource Curse with
Infrastructure and Modernization
1 Lalanath De Silva, Opinion Piece, Sustainable Development Cannot
Happen Without Good Governance, U.N. NON-GOVERNMENTAL LIAISON SERVICE,
http://www.un-ngls.org/rioplus20/newsletter/issue4/article8.html (last visited
Apr. 18, 2012).
2 See, e.g., W.E. SMITH, NYERERE OF TANZANIA 88 (1974) (quoting Julius
Nyere, the father and first president of the modern state of Tanzania as saying,
“It is impossible to draw a line anywhere on a map of Africa which does not
violate the history or future needs of the people.”).
3 United Nations Rio Declaration on Environment and Development
(June 13, 1992), 31 I.L.M. 874 (1992). See generally DAVID HUNTER ET AL.,
INTERNATIONAL ENVIRONMENTAL LAW AND POLICY 154-57, 163 (4th ed. 2011)
(examining the Rio Declaration as the result of “serious divisions” between
North and South which resulted in a “grand bargain” between North and South).
4 ADAM SZIRMAI, THE DYNAMICS OF SOCIO-ECONOMIC DEVELOPMENT 11-12
(2005) (noting that although “Western countries have become models for
‘modern’ societies” and development and westernization may have become
conflated, these ideas are challenged by the shifting center of economic and
political gravity toward Asia).
5 Id. at 6 (“[E]ven if we limit ourselves to the economic sphere, it is clear
that economic development is more than economic growth alone. Economic
development refers to growth accompanied by qualitative chances in the structure
of production and employment, generally referred to as structural change.”
(citing S. KUZNETS, MODERN ECONOMIC GROWTH : RATE, STRUCTURE AND SPREAD
(1966)).
6 Id.; see also id. at 109-12 (detailing how developing countries may affect
structural change through first the development of industry and a later transition
into the service sector).
7 Id. at 23 (placing oil-exporting developing countries in a separate
group, cutting across income classification, and noting their central problem
in realizing structural change).
8 See generally Gen. Assembly, Report of the United Nation Conference on
Environment and Development, U.N. Doc. A/CONF. 151/26 (June 13, 1992).
9 HUNTER, supra note 3, at 155.
10 Id. at 155, 163 (noting that the “Rio Declaration may be understood as
a bargain between the affluent North concerned with global environmental
problems and the poor South concerned primarily with development questions,”
but that the South appeared to gain much leverage and, in the end, “the Rio
Declaration seems to highlight development issues more than the environment”).
11 See Rio Declaration, supra note 3, princ. 10 (raising the importance of civil
society knowledge of and participation in the decision-making processes);
De Silva, supra note 1 (describing how “[n]otions of transparency, participation
and accountability were embedded in Principle 10 of the Rio Declaration”).
12 Rio Declaration, supra note 3, princ. 12 (“States should co-operate to
promote a supportive and open international economic system that would lead
to economic growth and sustainable development in all countries, to better
address the problems of environmental degradation.”)
13 Id. princ. 10. (“States shall facilitate and encourage public awareness
and participation by making information widely available.”).
14 Id. (“Effective access to judicial and administrative proceedings, including
redress and remedy, shall be provided.”).
15 Id. princ. 20 (women); id. princ. 21 (youth); id. princ. 22 (indigenous people).
16 Id. princ. 2 (“States have . . . the sovereign right to exploit their own
resources pursuant to their own environmental and developmental policies . . . .”).
17 Id. princ. 25.
18 AMARTYA SEN, DEVELOPMENT AS FREEDOM 7, 15-16 (1999) (explaining the
many ‘unfreedoms’ people across the world suffer to include social, political,
and economic deprivations of freedom).
19 Id. at 3 (noting that “[f]ocusing on human freedoms contrasts with the
narrower views of development, such as identifying development with the
growth of gross national product, or with the rise in personal incomes, or with
industrialization, or with technological advance, or with social modernization”
but that freedom depends on these other influences as well).
20 Id. at 38 (explaining that these freedoms are instrumental because they
“contribute to the general capability of a person to live more freely” as well
as compliment and strengthen each other).
21 Id. at 10, 36 (defining development as “the process of expanding human
freedoms).
22 See id. at 53 (noting that the “instrumental roles of freedom include several
distinct but interrelated components” the development of one is required for and
supported by the development of all others).
23 Id.
24 See id. at 46-48 (exemplifying that life expectancies in China and Sri Lanka
in 1994 were above 70 years while GDP per capita lagged back at less than
$1000, while in contrast, South Africa and Gabon had GDP per capita around
$4000 and yet life expectancy was below 60 years of age in both countries).
25 See id. at 3 (emphasizing that economic growth is not merely an end, but there
is an inter-relation between other development indicators and economic growth).
26 See SHIRZMAI, supra note 4, at 12 (noting that “an emerging China might
well become a new model of modernity”).
27 Id. at 7 (finding in his analysis, that “most authors reached the conclusion
that, especially in the poorest countries, growth is a prerequisite for development,
which development is more than just growth”); see also SEN, supra note 18.
28 SHIRZMAI, supra note 4, at 69 (listing these factors which can each “be
represented in the form of a basic production function, which relates to the
so-called proximate sources of growth” (emphasis omitted)).
29 Id. at 78 (explaining that the modern sector is technologically
developed and located in or around urban centers, while the traditional sector
is predominantly rural and lacks the productive capacity of modern means).
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