China's African Honeymoon is Over

China Tightens Purse Strings in Guinea and Other African Nations
http://www.nytimes.com/2009/03/26/world/africa/26chinaafrica.html?pagewanted=print

China’s approach to securing minerals in Africa has been to sign agreements to build huge projects in exchange for minerals.

But that formulation has proved problematic in an economic downturn. African governments are now realizing that these deals are in essence loans against future revenue, and falling prices could leave them saddled with giant piles of debt.

China, Inc. is starting to realize that the road to globalization for Chinese enterprises does not begin with Europe or North America, but with emerging and developing  markets like the nations of Africa.

They are also starting to understand that winning friends, influencing people, and building markets demands more than dumping a few fat wads of cash on the natives. The problem is that few of these companies - if any - know what to do to arrest the tattering of their image in their most promising markets.  

Posted via email from Silicon Hutong on Posterous

Comments

[Jason Lau]

Interesting article, David, one of an increasing collection about relationships turning sour in Africa. However, it is a little old. The article mentions low commodity prices as being partially responsible for the situation. A year on, do you know if the end (we hope) of the GFC and re-entry of Western competition is making any difference?

[darnoc]

Thursday's session at WEF Africa may be of interest: China-Africa: Defining a Partnership for Growth. (http://bit.ly/aasGw2 ) Hoping that the program's 'on the record' notice means this will be included among the webcast sessions.

[David]

Jason, you're right, the article is brutally old, and I should have used something much more up-to-date to make my point. Actually, what amazes me is that the China Rules in Africa meme remains as hot as it does. I can't speak to how things might be changing on the ground in Africa as the GFC has begun to ease, but it is amazing how the excitement about the Africa partnership has sort of died out in Beijing.

[ed reed]

Yes and no. The idea of China rampaging across Africa was never that accurate but the Chinese willingness to stump up large amounts of cash for commodities remains.
There have been a number of signs of local opposition to Chinese investment, although it's an open question whether it's a case of criminality or more deep-rooted political problems.
Stronger African governments are being more difficult, certainly, if you look at CNPC's failed bid to buy Verenex in Libya or the joint Sinopec-CNOOC bid for a stake in Angola's Block 32.
On the other hand, Angola was China's largest supplier of crude in March and Sinopec spent a shedload of cash buying Addax last year.
I wouldn't be too quick to call China-Africa trade dead.

[David]

Ed, I apologize if I gave you the impression that I was suggesting China-Africa trade is dead. What I meant to say is that the initial exuberance about Africa here in Beijing has died out, replaced with a growing appreciation that the relationship will be nuanced and fraught with challenges. China will spend its national treasure on the commodities it needs, but I get the feeling that RMB Diplomacy will be conducted with greater appreciation for what it really buys for China, and where it can really deliver long-term investment.

But the bigger point is this - cash or not, China can ill afford to find itself forever branded as the 21st Century version of a 19th Century mercantilist in Africa, or CNPC the new Union Miniere. And unless the nation, its corporations, and individual Chinese in Africa recognize that, the Ugly Chinese will replace the Ugly American as the hated face of the outside world in Africa. And we all know how that worked out for the English, the French, the Belgians, the Portuguese, the Germans, the Soviets, and the Americans.