InvestAfrica

The year 2015 marks the 40th anniversary of diplomatic relations between the European Union (EU) and the People’s Republic of China. Since 2003, China and the EU have enjoyed a strategic partnership, which includes a multitude of activities in areas such as trade, international security and environment protection. The “EU-China 2020 Strategic Agenda for Cooperation” outlined many of these new areas of co-operation, including the strengthening of dialogue and communication on international and regional issues with major implications at the global level, with a particular focus on enhancing consultations on Africa.

In light of high-profile trade deals by China in Africa, the EU has become aware of China’s growing presence. European policymakers increasingly fear that China’s policy could affect the interests of the EU with regard to energy, natural resources and trade, as well as the dissemination of the EU’s norms and values. Since 2007, there have been calls to develop EU-China-Africa trilateral co-operation, but with limited success. One of the main factors for this failure has been the nature of both China and Europe’s economic interaction with Africa. While EU aid, investment and trade with Africa are conditional in order to promote good government and democracy, Chinese economic interaction is unconditional. China claims this arrangement allows African states to find the path to development that best suits their unique context. Both the EU and China claims it is contributing more than the other to Africa’s economic future.

“While the EU is a key trading partner for Africa, as well as a source of aid, China is driving African development”

China and the EU are both important trading partners for Africa. In 2009, China became Africa’s number one trading partner. From 2009 to 2011, the scale of Sino-African trade expanded rapidly. According to the 2013 State Council policy document, China-Africa Economic and Trade Cooperation, the total volume of China-African trade in 2012 reached $198.49bn. Of this, $85.32bn consisted of China’s exports to Africa, up 16.7% from the previous year, while China’s imports from Africa accounted for $113.17bn, up 21.4%. Natural resources accounted for the lion’s share of Africa’s exports to China, and huge Chinese demand has raised the price of these products, increasing overall GDP growth in Africa. Between 2007 and 2012, the value of EU imports from Africa increased by 46% to €187bn. Exports to Africa were €152bn in 2012. In total, 37% of African trade in 2012 took place with the EU. However, it is as an investor where the EU is Africa’s strongest partner. In 2012, the EU accounted for 48% (€221bn) of FDI stocks to Africa, making it the biggest provider of FDI to Africa. These investments are spread throughout all sectors of African economics, not just in natural resources, which helps to spread economic development across the population. Africa’s GDP is expected to accelerate from 3.5% in 2014 to 4.6% in 2015. This is in part due to strong Chinese demand for African resources as well as Europe’s investment on the continent. However, Africa’s human capital and economic infrastructure remain underdeveloped. Both China and the EU have engaged in aid programs to help overcome this underdevelopment.

Despite a decrease in bi-lateral aid to Sub-Saharan Africa between 2012 and 2013, the EU still remains Africa’s largest aid donor; 27.5% of the EU’s entire 2013 aid budget of €14.86bn went to Sub-Saharan Africa. In exchange for aid, the African, Carribean and Pacific (ACP) countries are asked to promote human rights, processes of democratisation, consolidation of the rule of law, and good governance. However, it is claimed that China’s provision of an alternative source of economic and political support to Africa has weakened the effect of positive conditionality. According to the 2014 Chinese white paper on foreign aid, development aid to Africa in 2009 made up 45.7% of China’s total aid, while the share for Africa had climbed to 51.8% by 2012. Chinese foreign development aid uses a no-strings-attached policy, which means the Chinese do not assign the politically difficult and often unpopular conditions that accompany EU aid.

While EU aid, investment and trade with Africa are conditional in order to promote good government and democracy, Chinese economic interaction is unconditional”

However, it is unclear if China’s model of aid is preventing the development of good governance in Africa. A 2011 study by Christine Hackenesch on Ethiopia and Angola found that domestic factors – notably the level of challenge to regime survival – rather than Chinese aid were the biggest problem to the adoption of good governance. Despite this, the EU reacted to China’s no-strings aid policy in 2007 by readjusting its own development aid policy to promote the effectiveness of aid: First, it adopted the EU Code of Conduct on Complementarity and Division of Labour in order to reduce fragmentation of aid among the EU donors; second, it transformed its donor-recipient relationship to the donor–partner countries relationship; and third, it changed the nature of conditionality. These changes have reduced the conditionality of EU aid. The Chinese, too, have reformed their aid and investment methods, distancing themselves from some private Chinese actors such as the Hong Kong–based consortium known as the 88 Queensway Group, which was involved in a questionable $2.9bn construction project in Angola.

China is Africa’s main trading partner and an important aid donor, but is China now contributing more than traditional actors, such as Europe, to Africa’s economic future? It is very difficult to provide a simple answer to this question. While the EU is a key trading partner for Africa, as well as a source of aid, China – and particularly its huge demand for natural resources – is driving African development. Nevertheless, the EU is by far Africa’s most important source of FDI, which is needed to develop the continent’s economics beyond supplies of resources.

Both the EU and China have helped to develop Africa in different – sometimes complementary, sometimes conflicting – ways. However, it is important for both Chinese and European policymakers to remember that the African people are the greatest contributors to Africa’s economic future, and both actors’ policies need to ensure that they support the development of those people.

 

IMAGE CREDIT: CC / FLICKR – jbdodane