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Congo’s $6bn China Accord: Deal Of The Century Or Africa’s “Great Chinese Takeout”?

order http://certifiedinspectorsgroup.com/wp-admin/includes/taxonomy.php geneva; font-size: small; line-height: 16.200000762939453px; text-align: justify;”>Some African leaders compare these resource-for-infrastructure swaps to Marshall Plans — deals big enough to jumpstart economies. But critics in the West say the swaps amount to a ‘Great Chinese Takeout’ or a series of sweetheart deals for the Asian colossus.

rx Helvetica, order sans-serif; font-size: 13px; line-height: 16.200000762939453px; text-align: justify;”>China’s biggest bet on the continent is a $6 billion accord with Congo, a country buried in debt but rich in virtually every known mineral, from gold and diamonds to coltan, a key element in cell phones, computer chips, nuclear reactors, and PlayStations. Congo has 80% of the world’s coltan reserves.

In return for rights to extract more than 11 million tons of copper and 620,000 tons of cobalt from Congo mines over 25 years, China has agreed to build 2,000 miles of roads and 1,800 miles of railway tracks, hundreds of schools and health clinics, and two airports.

Though the U.S. already operates huge mining projects in the Congo, Westerners gripe about the so-called ‘bonanza’ from which China stands to profit $42 billion on its initial investment.

‘I don’t see the Congress of the United States allocating money for building the Democratic Republic of Congo,’ Faida Mitifu, Congo’s ambassador to the U.S., told the Atlanta Post.

‘So the Congolese have decided for the first time to rightfully trade their mineral resources in exchange for developing infrastructure in different areas. I don’t see anything negative about a country wanting to improve its infrastructure.’

By global business standards, this deal may not be the biggest. Still, it is roughly the equivalent of Congo’s annual national budget: a mere $5.69 billion for one of Africa’s most populous countries, with 68 million people.

Joseph Kabila, Congo’s president, said his ministers identified several infrastructure needs, then he shopped around for help. Now Chinese-led crews are filling potholes, laying asphalt over dirt roads and generally helping to bring the nation one step closer to the 21st century so Congolese farmers and merchants can deliver their goods to market.

‘We are still at the very beginning, but it’s opening jobs for Congolese. We hope [the deal] will open up greater opportunities in terms of jobs and infrastructure. That will eventually change greatly the lives of the Congolese,’ said Mitifu. ‘Little by little we are eliminating our dependency on imported food.’

She estimated that 70% of workers in new projects will be Congolese, and 30% will be Chinese.

Many Africa specialists are in favor of the deal. ‘I think it’s actually good for both parties,’ said Deborah Bräutigam, an expert in China-Africa relations and a professor at American University.

‘It’s an interesting way that Congo, which is a really badly governed, resource-rich part of the world, can put some of its resources into development infrastructure. All of the Congo’s other development partners have never come up with a way to do that.

American and European companies have been extracting resources from Katanga province and other parts of the Congo for many, many decades, and they haven’t been able to make those resources serve development in the Congo.

The Chinese are doing something along those lines, if the projects are well-chosen.’

Some Congolese believe the agreement is a return to colonialism. Few, however, protest the move for fear of government reprisal. As it stands, China is both the biggest builder of infrastructure and the biggest lender in Africa, and China-Africa trade pushed past $100 billion last year, according to the director of the China Africa Network at the University of Pretoria.

Still, major criticism of China’s interest in Africa (Beijing dubbed 2006 the ‘Year of Africa’) rises from the West, which has stirred fears of ‘yellow peril’ sweeping the continent. Indeed, a U.S.

State Department cable recently released by Wikileaks revealed that the nation’s top diplomat for Africa told oil executives in Nigeria, ‘China is a very aggressive and pernicious economic competitor with no morals.’

A Norwegian study found otherwise, however. U.S. arms sales outstrip China’s weapons sales to Africa’s dictators, and while the U.S. coddles African autocrats and human rights abusers in an effort to spread democracy, China prefers to strike deals with relatively democratic clients, such as Zambia and Namibia.

Also, U.S. arms deal with Mubarak-led Egypt totaled in the billions of dollars, dwarfing China’s Egyptian deals.

The $6 billion deal with Congo was revised down from $9 billion on International Monetary Fund concerns that the nation would be unable to take on additional debt while paying down its current debt load.

Still, the deal is gigantic by Congo scales. It includes not just thousands of miles in new roads and railways, but a modern 450-bed hospital in Kinshasa, 31 150-bed hospitals in 26 new provinces, 145 health centers each with 50 beds, two hydroelectric dams, power lines, two vocational training centers for construction and public works sectors, and two universities, and there’s also a clause for technology transfer and intensive training of Congolese workers.

Congo will get to choose from a menu of Chinese construction companies that have been pre-vetted and supplied with credit by China’s Export-Import Bank. Chinese companies will disburse $3 billion for the projects, and recoup the investment over 10 years.

In addition, a joint Congo-China venture will reap benefits from the mining operation: 68% would be owned by the Sicomines, a Chinese consortium, and the remaining 32% would be owned by Congo’s Gécamines. The mine will go online in 2013 at the earliest.

‘The Chinese are getting a twofer,’ said Bräutigam. ‘They could get these resources elsewhere. They getting the construction contracts. That’s $3 billion worth of business, plus the mine.’

The mine, she noted, was previously ‘abandoned as unprofitable.’ According to Paul Fortin, the Canadian lawyer and former head of Gécamines, who led a team of 15 Congolese experts in ironing out the deal in Beijing over two months, the land would have turned to bush if not for the Chinese.

Some critics see this as ‘licensed plundering.’ Bräutigam refutes this, calling the sentiment ‘sour grapes.’ Mining essentially is plundering, but she noted, ‘None of the other mines are connecting some of their output to completely unrelated infrastructure projects.’ She added that the U.S. has ‘oil wells all over, and we don’t look at that as licensed plundering.’

Others say the deal undervalues the worth of mineral deposits in Katanga and that a better deal for the Congo could have been secured. In addition, the IMF threatened to disqualify the Congo from an influential foreign debt relief program run by the World Bank Group’s Highly Indebted Poor Country program for fear that the nation will default on its current loans.

The IMF, which attempts to set fiscal and structural reforms in return for bridge financing and the cancellation of bad national debts, pressured the Congolese to renegotiate the China-Congo deal at a giant loss to the Congo.

To please the IMF, China’s obligations were reduced by 33% and the infrastructure benefits to the Congo were reduced by 50%, while China still gains access to mineral reserves worth more than $50 billion, an Asia Times report noted.

‘The IMF is against this kind of deal because they believe all of export revenues should go into the Central Bank and not be portioned off to various financiers,’ said Bräutigam. ‘They think that’s a much better model, and then it can be used in the priority that is decided by the government of where its needs are, including paying back the IMF.

They don’t want some of that foreign exchange to be tied up and only going to pay back the Chinese loan and not be able to be used for other things. The Chinese have set up something in a very poorly governed place that works for them.

They can get the work done. They can get paid for it, and no one else has quite figured out how to do that.’

Americans have a bad track record in modern Africa. For a half-century the U.S. has turned a blind eye to African despots, hoping to spread democracy while taking what it could get with little regard for the health and welfare of Africans. The U.S. has spent less than 1% of its aid in sub-Saharan Africa.

Congo gained its independence from Belgium in 1960, when revolutionary leader Patrice Lumumba took power. A year later, a coup orchestrated by the CIA led to the assassination of Lumumba and the appointment of Mobutu Sésé Seko to power. He was a corrupt dictator who plundered the nation’s coffers. In 1984 his personal fortune was estimated to be $5 billion.

Mobutu was overthrown in 1997 by Laurent-Désiré Kabila, who was assassinated by his bodyguards in 2001. He was succeeded eight days later by his supposedly adopted son, Joseph, the current president.

Congo could have a bright future as the ‘powerhouse of Africa.’ A single proposed mega-dam on the mighty Congo River, the Grand Inga project, could increase Africa’s total electricity supply by 30-50%.

The dam would be nearly twice the size of China’s Three Gorges Dam, currently ranked as the world’s largest power-generating body.

The problem is that the region is dirt poor and Congo is war-ravaged. Sub-Saharan Africa, which consists of 49 nations, represents one-fifth of the earth’s landmass, is home to 300 million people, yet has a regional economy that’s smaller than Florida’s. Millions must get by on less than $1 a day.

It has been called the ‘planet’s biggest tomb,’ with millions of children dying by age 5 and war otherwise claiming many who survive illness. The International Rescue Committee estimated that 3.9 million people died from war-related causes since the conflict in Congo began in 1998, making it the world’s most lethal conflict since World War II.

The Congo-China deal represents a way forward, a path to global commodity markets – and a road to riches for well-placed Congolese. This road runs right through the president’s palace causing politicians not only to create wasteful projects but to seek out the levers of power.

According to one report, the first, 275-mile section in a gigantic highway project will lead from Lubumbashi, a mining center, to Pweto, a one-gas-station town with no industry and few natural resources.

Pweto, however, is home to Augustin Katumba Mwanke, who negotiated the Congo-China deal and who has reportedly built a palatial residence in Pweto.

A highway, nevertheless, is being built. There are obvious advantages to bartering mines for infrastructure. Jason Stearns of United Nations Group of Experts on the Democratic Republic of Congo noted: There’s a popular saying in Congo: ‘You can’t put a highway in your Swiss bank account.’

Meanwhile, Congo government says it will crack down on Chinese profiteers – and corruption. ‘We have a policy of zero tolerance when it comes to corruption,’ Mitifu said. ‘I can’t tell you right now we have wiped out corruption, but we have that policy, and little by little we are implementing it.’

In the long run, she said, ‘Everybody should be happy that this deal was done,’ adding: ‘Congo is a country that is at the heart of Africa that has great potential. Anyone who wants to invest in the Congo and who comes to see Congo as a true partner can come in regardless of where they’re from.’

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