Bräutigam advises a Chinese-based approach to Africa

Amanda Mainguy | Staff Photographer
Deborah Bräutigam, Johns Hopkins professor, discusses the relationship between China and Africa and their roles in international diplomacy, economics and relations during her morning lecture Thursday in the Amphitheater.

To open her Thursday morning lecture on Chinese investment in Africa, Johns Hopkins professor Deborah Bräutigam told the Amphitheater audience a story.

“Once upon a time,” she said, “there was a very large, very poor, but resource-rich country just emerging from a period of intense conflict. And this country decided to focus on development. ‘We need to modernize our infrastructure,’ they said. ‘We need to develop power plants, and we need to modernize our ports.’ But they didn’t have the technology to do that.

“And soon, they had a visit from a wealthy Asian nation that had already become a major consumer of their oil,” she continued. “And this Asian nation said to them, ‘We’ll make you a bargain. We will give you a line of credit worth $10 billion. Nobody else is coming to give you credit, but we will. And you can use that credit to import technologies from us. Our companies can help you develop your power plants and your harbors, and you can repay us with your oil.’

“Now, many in this poor country were very concerned about this arrangement. And it was debated for several years. But finally they agreed, and the work started.”

The wealthy Asian nation in the story was not China, but Japan, Bräutigam said. China was the large, poor, resource-rich country emerging from conflict, and the story took place in the 1970s, at the end of China’s Cultural Revolution.

Forty years after the beginning of this economic boost from Japan, China is a major world power, a rise which Bräutigam called the new millennium’s most important political and economic issue for the United States.

This historical context, Bräutigam said, is key to understanding China’s relationship with Africa today. China is applying its own experience of development through foreign investment to Africa. Bräutigam contrasted this with the U.S., which gives money to Africa on very different terms.

“We have tended to deal with Africa as a place of war and pathos, child soldiers, diseases — a place that needs our help and our pity, rather than a place for investment,” Bräutigam said. “And I think that our aid has been focused on that. Our aid has been systematically delinked from investment. We don’t want our aid necessarily to go into manufacturing so it could compete with us.”

In addition to its interest in Africa as a source of business, China’s dealings with Africa are diplomatically strategic, Bräutigam said. By befriending 50 African countries, China has garnered their support — their votes — in organizations such as the United Nations and the World Trade Organization. For the same reason, China has been politically engaged in the Caribbean and the South Pacific, which have little to offer China in the form of natural resources, but much to offer in the form of votes.

Chinese economic activity in Africa pose some environmental, social and political challenges, Bräutigam said. For one, Chinese companies export unprocessed timber from Africa, often illegally, with the “connivance” of local companies in countries such as Gabon and Mozambique.

As more of the Chinese population has entered the middle class, ivory has become a status symbol, Bräutigam added, resulting in a sharp rise in African ivory consumption in China.

Additionally, Chinese companies manufacture small arms, which help to fuel small-scale conflicts in Africa. China’s rise in political clout in Africa has made it difficult for the U.S. to broker intractable conflicts in countries such as Sudan and Zimbabwe.

Africans are concerned about Chinese goods flooding their markets, contributing to de-industrialization in some sectors, Bräutigam said. At the same time, Chinese manufacturing is moving to Africa, exemplified by the move of leather companies to countries such as Ethiopia, which has more cattle, sheep and goats than any other country in Africa.

Leather production is not new to Ethiopia, Bräutigam said. Italians started the Ethiopian leather industry when Italy occupied Ethiopia in the late 1930s. But China is increasingly outsourcing its leather manufacturing as Chinese labor costs rise 17 percent per year.

“We think of China as a cheap labor place,” Bräutigam said. “That’s no longer going to be the case.”

While one might expect China to want to avoid outsourcing jobs, Bräutigam said, that is not entirely the case.

“In part, the Chinese government wants this to happen,” she said. “They’re playing a delicate balance between trying to move China up the value scale so that they will go into less labor-intensive activities and more capital-intensive activities. That’s where the profits are, and they see that.”

In that sense, Bräutigam said, China is looking to other world powers as models.

“That’s what we’ve done,” she said. “That’s what Europe has done. That’s what they’re doing as well.”

In closing her lecture, Bräutigam contrasted the U.S. view of how a poor nation must develop, with China’s view.

“We believe that countries need aid and good governance to develop,” she said, noting that the U.S. sees its aid to Africa as altruistic, despite that it is, in many ways, self-interested.

China, in contrast, sees a need for investment and infrastructure, and uses aid as a diplomatic maneuver. In the Chinese view, governments improve slowly as the result of their economies developing.

The two approaches are different. But after the U.S.-Africa Leaders Summit held in Washington, D.C., last week, Bräutigam sees a shift toward new — perhaps more Chinese — approaches to Africa among U.S. leaders.


Q: This is a question via Twitter: There’s a reluctance to invest in Africa due to corruption or instability. Which African countries are reliable for investment?

A: I think I should set up a consulting firm and answer that question professionally. I think there are a number of countries that are open for investment and where corruption is not as big a problem as it is in others. Ethiopia is a really good example. Rwanda, surprisingly, is getting hugely good ratings in terms of its investment climate. They aren’t still getting a lot of investment. And there are places where there are niche areas for investment. Certainly, Kenya is still a good place. It’s getting a lot of investment; South Africa is getting a lot of investment, and even Nigeria surprisingly — huge problems with corruption — but they have areas in which their economy is growing and there’s increasing investment in the infrastructure sectors and manufacturing there. There are a number of other places as well, but it really depends on what sector you’re looking at, and I think that there’s a lot that Americans aren’t seeing, and it’s interesting that even the Europeans are ahead of us in this regard.

Q: Can you talk about China’s influence on African education? For example, are they building schools in Africa, and are they funding African students to study in Chinese universities?

A: That’s a great question. As part of their pledges in one of their African summits in 2006, the Chinese pledged to build, I think it was, 300 primary schools across Africa. And so most countries have gotten up to three or more of these primary schools, and they’re all equipped with all of the latest technologies appropriate for the context where they are. I’ve noticed one thing about these schools is that, usually, at least one of them is located near the president’s hometown of that country, so again how the aid and the politics work together. But I don’t think that’s going to affect education that much in Africa. There are a couple of other things that they’re doing, and one is that they are now offering university scholarships to about 7,000 Africans every year to study for free in China, and that’s a lot more than we’re offering at least at the government level. We certainly offer scholarships at the private level, at private universities — ours does and others — and we don’t have any figures on that for America. But the Chinese engagement in higher level education is quite intense, and if you go to China you’ll see many Africans studying at the universities there. And they’re studying a range of subjects, they don’t control what they study, and some are studying at the graduate level, and through the Ph.D.

Q: Will China try to make the yuan the reserve currency in Africa?

A: The Chinese move gradually in most areas, and the convertibility of the yuan and making it an important global currency is on the way. And one of the ways they’re doing it is by having currency swaps and other arrangements country by country. So I don’t think they’ll do that for the continent of Africa, but they will be experimenting there as well as other areas where it makes sense for the trade relationship to be denominated more in yuan. For example, right now, it doesn’t really make sense for the Chinese to export in dollars and then convert back into something being sold in South African rand. You lose on each of those transactions, so it makes a lot more sense if they can come to an exchange rate between the rand and the yuan and then just do that directly, so that’s more what they’re trying to do.

Q: What happened in 2009 that affected all of your graphs on the economy?

A: The global financial crisis. China’s part of the global economy, and so it hit Chinese companies, and there are so many investments where I’ve been tracking, and the investor said, ‘Whoa, I couldn’t do what I want to do because of my business back in China was hit, so I just didn’t have the capital I thought I was going to have to make an investment in Africa.’

Q: Charities and missionaries have engaged African countries for better or worse, this person on Twitter says. How does that compare with Chinese engagement?

A: It’s so different. I have relatives who are missionaries in India, not in Africa, and I actually think that missionaries have done a wonderful job. And I think we’ve moved away from that. We’ve kind of substituted foreign aid in a way for a lot of our missionary engagement in the past, and NGOs. And the missions were different from the NGOs in that the NGOs sort of come and go. They don’t really stay in the same place for decades and decades and decades. And what the missions did were two things that were particularly important: they built schools and operated them, and they built hospitals and operated them. So that’s still happening, but we have a whole lot of other activities in which we’re putting our charitable contributions, and those are all the NGO activities, some of which are a lot less sustainable than these. There are so many African leaders in our generation, speaking broadly for all of us, who were educated in mission schools in Africa, so those are really important contributions to building the foundation of leadership there.

Q: Several questions about corruption and how that affects trade and whether China’s more successful in dealing with corruption, and also about unrest. So I’ll let you combine those two ideas and answer that question.

A: I think you can combine those two. From the Chinese perspective, if they look at their own development experience there’s a lot of corruption, and they recognize that, and the new leadership in China has been trying to crack down more on corruption. There’s a long road still to go on that. But what they see is that it’s not corruption that stops development from happening, and they look around Asia. Leaders in Japan, Taiwan, Korea, have all been indicted for corruption, and yet those economies are all fairly robust, strong and well developed. So the Chinese say well, it’s not corruption that’s stopping development from happening, at least not the way we have it in Asia. And so they say it’s political stability that you need. So having political stability and an investment environment where people know they can invest and they can invest for the future. So if there’s a ten percent payoff that has to happen, they’re certainly willing to do that. Now of course corruption, where it’s 100 percent, they’re not getting anything on either side. So the Chinese are different in how they approach that. We are very concerned about corruption. The United States has led this global march against corruption, and it’s not a bad thing, it’s a good thing, but it took us decades to get Europe to join with us. So we passed a law in 1997 against foreign corruption practices, the Foreign Corrupt Practices Act, it wasn’t until 1997 that Europe joined with us in a convention against corruption through the OECD in Paris. And so it’s going to take a lot longer to get the Chinese to join that as well. But I think we should recognize that first of all, development can happen in corrupt context, but that there has to be the stability to allow that to happen. And second that it’s an evolution to improve governance and corruption is one part of that.

Q: Does Chinese investment help develop an African middle class, or is it Chinese managers and Africans in menial jobs?

A: It depends. The longer a Chinese company is present in an African country, the more their employment at all levels becomes African. And this is purely for economics. As they train people, as people move up the hierarchy in a factory or a construction company, they become confident. And as the Chinese company learns the local language, they realize they can communicate better; they don’t need to have the management hierarchy speak Chinese. It just makes economic sense because the Chinese are expensive. Imagine: you have to pay every 18 months, you have to send someone back on home leave at the management level for most companies, you have to pay their airfare, you have to pay their housing, you have to pay their food, and you have to pay and allowance, and you have to pay for an incentive package to bring them to Africa in the first place because it’s not exactly a preferred place to come and work. All of that’s very costly, so if you can hire someone locally it’s by far to be preferred, and that’s what the companies do. So the longer they’re there, the higher they go. I was just writing actually couple days ago about one of the Chinese farms I’ve been studying. They’ve been in Africa since 2000, so that’s about 14 years now. And when I visited them they had about 1,000 Africans working there, and there were two Chinese (they actually employ six Chinese but four of them were away) so they have a very small number of Chinese, and that’s typical.

Q: Someone takes a cue from one of your slides and starts the question… Once upon a time… 1970s for example, we were worried about the role of Soviets and Castro in Africa, what happened to them?

A: The Soviets. That’s a good question. The Soviets are kind of absent in Africa. I suppose, at some point, we might have a Russia summit of African leaders. The Russians have their own oil, so that’s interesting. They’re a very large country and they have a lot of resources on their own. So the complementarity between the Russian and African economies just isn’t there. Whereas, we’re a manufactured country and services, so there is complementarity there. So for the Russians, the Cold War is over. They don’t really have diplomatic needs that strongly to be in Africa, although that might be something that would bring them back if this thing with Putin and us continues to escalate, they might want that diplomatic support, but what can they offer?

Q: I’m going to let you choose your last question, because there are so many great ones here, but I’m going to give you your choice of three. One is, if you look forward 10 to 20 years, what will be China’s economic relationship with Africa? Your second choice, how much interest are you finding in the United States government regarding our economic involvement in Africa, and the third is, what are the Chinese doing for women in Africa?

A: I’m going to be very quick and answer all three. For women, very little specifically, but as you know that Chinese have this idea that women hold up half the sky, so their approach is that they don’t discriminate against women, and I do see that. There are lots of Chinese women working in Africa, and also within the students who come to study in Africa there are quite a few women as well. In terms of what China will look like in Africa in the next 20 years, I think it will look a lot like Japan in Southeast Asia, which is a lot of close commercial ties, a lot of investment and dynamism in the engagement, so I think it’s going to be diversified. And, what was the last question? Oh, yes! The United States does see this, and I talk to people a lot. I speak at the Foreign Service Institute training our diplomats regularly, and I give them this same kind of lecture. And I think they really are getting the picture and I’m so pleased that the African Summit seems to be reflecting that.

— Transcribed by Zachary Lloyd


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