China Gives Africa $10 Billion as It Fights Exploitation Charge

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By Daniel Williams and Mahmoud Kassem

Nov. 9 (Bloomberg) -- China promised $10 billion in cheap loans to Africa, pledged to cut customs duties and distributed a newspaper with photos of Chinese leaders among beaming Africans, as part of an effort to fight claims it is exploiting the continent’s minerals.

China’s interest in Africa “is not what Western reports described, that China went to Africa only for the energy,” Premier Wen Jiabao told Chinese reporters Saturday at the Forum on China-Africa Cooperation conference in Sharm el-Sheikh, Egypt, according to the government-owned China Daily newspaper.

Chinese officials have been battling that accusation as their country presses forward with a decade-long drive to invest in African minerals and energy to feed its growing economy. Last year, European Union lawmakers assailed China for courting “oppressive” African governments, such as Sudan, to satisfy its soaring demand for oil and raw materials.

“China is very stung by criticism from so-called Western quarters in recent years,” said Martyn Davies, chief executive officer of Frontier Advisory, a Johannesburg-based research and strategy consulting company. China is trying “to have a softer approach” in an effort to rebut the notion that its interest in Africa is “extractionist in nature.”

Wen announced yesterday at the meeting that the $10 billion in preferential loans over the next three years would be used to develop infrastructure and social programs, and that China will write off the debt of some of the poorest African nations. He said China will construct 100 new clean-energy projects on the continent and gradually lower customs duties on 95 percent of products from African states with which it has diplomatic ties.

Anger

The pattern of trade -- raw materials going to China and Chinese finished goods flooding Africa -- has angered some Africans.

“We are sick and tired of the old model, where China comes to Africa and extracts raw materials and goes back to China,” Zimbabwean Deputy Prime Minister Arthur Mutambara said in the Zimbabwe Times in September. “We are not now interested in that.”

In the last meeting of the FOCAC, in Beijing in 2006, China promised to provide $3 billion in preferential loans and $2 billion in buyers credits through 2009. Chinese Foreign Minister Yang Jiechi told the official Xinhua news agency that China fulfilled the pledge.

Bilateral trade totaled $107 billion last year, a 45 percent increase over the year before, China Daily said.

Since 2006, China’s energy companies have announced plans to spend at least $16 billion on oil and gas fields on the continent.

Nigerian Oil

In West Africa, Beijing-based China Petrochemical Corp., or Sinopec Group, the nation’s second-largest oil company, acquired Addax Petroleum Corp. this year for C$8.3 billion ($7.7 billion), adding oil reserves in Nigeria, Cameroon and Gabon.

Last year, China agreed to invest $9 billion in Congolese infrastructure in return for control of mining deposits.

The commemorative newspaper handed out at the conference featured smiling Chinese leaders among Africans. There’s Mao Zedong, founder of the People’s Republic of China; Deng Xiaoping, who turned China away from rigid Communism to capitalism; and Jiang Zemin and Hu Jintao, successive presidents who oversaw China’s rapid economic growth.

The message: China is no newcomer to Africa and not solely interested in exploiting the continent’s energy wealth.

“What China expects is comprehensive cooperation and mutual benefit,” Wen told reporters on Saturday.

FOCAC was founded by China in 2000. Its meetings every three years have highlighted China’s growing economic interest in Africa.

Changed Perceptions

China’s focus on the region has awakened notice among investors, said Razia Khan, head of Africa economic research at Standard Chartered Plc. “It has turned around perceptions of Africa,” Khan said in a phone interview from London. “China’s need to increase commodity consumption has raised the strategic value of Africa. China has managed, almost single-handedly, to alter the long term undervaluation that investors had placed on African assets.”

With aid and development financing from traditional Western partners drying up as a result of the global financial crisis, “Chinese investment has become even more important for Africa,” Ridle Markus, Africa economist at Absa Group Ltd. in Johannesburg, said in an e-mail. “With substantial infrastructural backlogs in Africa and the need to reduce these backlogs to reduce poverty and become more competitive, Chinese investment will play an even bigger role in future.”

To contact the reporter on this story: Daniel Williams in Sharm El-Sheikh at [email protected]; Mahmoud Kassem in Sharm El-Sheikh at [email protected]