Winning resources, influencing friends: Chinese President Hu Jintao with Mozambique counterpart Armando Guebuza (left) in 2007
China, India and Brazil target Mozambique for energy and strategic reasons
On Mar. 18, Asia Sentinel ran the first part of this two-part series by Yale Global, the online publication of the Yale University Center for Globalization. We now present Part II
Mozambique, a former Portuguese colony in East Africa, is not the richest nation in natural resources, and yet is fast becoming one of many playing grounds for new powers of the 21st century.
China, India and Brazil compete for economic resources, political influence and geo-strategy.
Energy tops the list for foreign investors. As new mines open, the African Development Bank predicts that by 2020, Mozambique will become the second-largest coal producer in Africa with projected coal exports of 110 million tons a year. Total reserves are estimated at 10 billion tons, adding to the interest of China, India and Brazil, all eager to lock in new energy resources to sustain rapid economic growth.
China’s single largest investment in Mozambique so far is a US$1 billion project in the coal-mining sector by Wuhan Iron and Steel, as reported by the Financial Times in June 2010.
India has pledged to invest US$1 billion in the coal sector and offered US$45 million in training and technology transfer to the country’s mining sector. In 2010 following President Armando Guebuza’s visit to India, New Delhi granted his country a US$500 million credit line. In March 2011 Indian giant Tata acquired a 27 percent share from Australian Riverside Mining, a move worth US$90 million.
Brazilian mining giant Vale also competes for Mozambican coal. Since 2009, Vale invested US$1.3 billion in coal mines in the central provinces of Zambezia and Tete, so far exceeding Chinese and Indian investments. Since 2009, Brazilian steel giant CSN invested US$179 million in a joint venture with Australian mining giant Rio Tinto in steel-processing plants.
Brazil has also invested heavily in oil-rich Angola, another former Portuguese colony where China is the country’s main trading partner and oil importer. In 2008 the director of the Brazilian state investment agency denied reports of Brazilian-Chinese competition over resources in Africa. However, during former President’s Lula da Silva visit to Africa in July 2010, the Brazilian newspaper Globo ran a story entitled "Lula exacerbates competition with China," describing the growing competition for resources and markets between the two giants. While Brazil is not as dependent on energy imports as China, its large and efficient mining giants make billions exporting these resources to Asia.
Other natural resources in Mozambique are titanium, natural gas and tantalum, an excellent conductor of heat and electricity used by the electronics industry. The northern provinces of Niassa and Cabo Delgado are rich in precious stones such as emeralds, rubies and sapphires.
Land is another draw. Brazilian investors announced their intention to invest up to US$6 billion in biofuel, for jatrofa production, taking advantage of Mozambican government allocation of 60,000 hectares of land for foreign investors in Gaza. To balance China, Brazil has entered in joint ventures with Japanese, European and Australian companies while also engaging India.
Eager to meet its own growing food demand, China has keen interest in the country’s large land tracts. In May 2008 Li Zhengdong, director for international cooperation with China’s Ministry of Agriculture, announced that the government was in negotiations with Mozambique to lease land for cereal production, according to the 21st Century Business Herald. The Mozambican government denied the report, but by August 2010, the Shanghai Chamber of Commerce stated that the Mozambican government had offered a yearly lease of land at US$8 per hectare to Chinese investors. According to Food and Agriculture Organization of the United Nations, Mozambique possesses 36 million hectares of arable land of which only 12 percent are currently being used.
Mozambique offers a major strategic presence in the Indian Ocean, with the Mozambique Channel as an important alternative route to the Suez Canal. The nation also offers the nearest sea exit for landlocked Zambia and Zimbabwe, which host two of China’s five Special Economic Zones, or SEZ, in Africa.
On January 31 Mozambican media reported that Chinese shipping companies negotiate with the government to modernize and expand the Beira harbor. If completed, Beira may become another pearl in China’s "string of pearls" – modernized ports in Tanzania, Sri Lanka and Pakistan. Two of five Chinese SEZs in Africa are in the Indian Ocean, Tanzania and Mauritius.
With the exception of the US Navy, the Indian Navy is by far the dominant force in the Indian Ocean. India has grown apprehensive over China’s expanding presence in East Africa. In 2007 the Indian military established an electronic listening center in Madagascar, just off the coast of Mozambique and near Mauritius, the home of one of China’s SEZs, as described by an Indian defense report.
In 2006 at the request of the Mozambican government, Indian warships patrolled the capital’s coast during the Summit of Heads of State of the African Union. Chinese military officials and academics have called for military bases in East Africa and the Indian Ocean. As navies expand, interest and conflicts in the Indian Ocean and East Africa are likely to increase.
As ports and security boost trade, China has emerged as Mozambique’s second largest trading partner. Trade increased from US$208 million in 2007 to US$690 million in 2010. State-owned Export-Import Bank of China granted the Mozambican government more than US$2 billion for construction of a mega dam. Chinese companies have built roads, bridges, military installations, hospitals and other infrastructure throughout the country, with a mixture of aid and contracts. The Chinese government invested US$160 million to modernize the country’s main airport, the national stadium and the country’s largest convention center. Following a June 2010 investment seminar hosted by the Mozambican government in Shanghai, Chinese business interests pledged up to US$13 billion in infrastructure, mining, agriculture and tourism investment over the next 10 years, reports Economic Times.
Regional powerhouse South Africa has been Mozambique’s largest trading partner for the past two decades and invested heavily in agriculture and mineral sectors. South Africa has so far invested US$7 billion in Mozambique in 45 projects. Currently 820 South African middle- and large-scale farmers are operating in Mozambique, and this presence is likely to continue to grow.
Mozambique was traditionally an agriculture-based economy, with revenues coming primarily from exports of cashew nuts, sugar, cotton, citrus, tea, cassava and other crops. In recent years the discovery of significant mineral resources is fast increasing the importance of the mining sector for the country’s economy. Natural gas, coal and aluminum are likely to emerge as crucial sources of revenue for the country. Expansion of the extractive industries and growing foreign investment have the potential to bring significant benefits, yet these also present the country with new challenges. The list of resource-rich countries that have fallen victim to the resource curse and resulting foreign meddling is endless.
So far the experienced Front for the Liberation of Mozambique, in power since 1975, plays a sophisticated balancing game, preventing any one country from gaining dominance. However, with the country’s growing coal-mining sector, its massive potential for biofuel and reports of oil finds, this balancing act will likely grow more complex. As the African saying goes, "When elephants fight, the grass gets trampled."
By Loro Horta graduate of the senior officers course, People’s Liberation Army National Defense University, and the Chinese Ministry of Commerce Central School. He was born and raised in Mozambique, where he worked for international relief organizations and in law enforcement. Asia Sentinel
Chinese supervisors are arrested for shooting African mine workers
To fuel its own growth, China emerges as Africa's major trade partner
"Africa is ripe for take-off" is one of the more pleasant of mantras reiterated by China's Communist Party leaders. To some extent, the attitude expresses the approach of other Asian powers – from South Korea to India. But massive Chinese involvement in Africa is likely to be the most influential factor in shaping the continent's economic take-off and governance.
The search by Chinese state-owned companies and other Asian multinationals for raw materials in Africa and Chinese financing Africa's construction boom contribute to better development prospects for the world's poorest continent. New South-South cooperation, or SSC, particularly Asian-African partnerships, are deepening economic and political relations with African countries and in turn redrawing Africa's geo-economic boundaries and geopolitical map.
To sustain their industrialization, Chinese, Indian and Malaysian oil companies such as Sinopec, Indian Oil Corporation and Petronas are competing for access to existing and untapped oil reserves, primarily located in Nigeria, Angola, Equatorial Guinea and Sudan. Holding high the rhetorical banner of SSC yields a bargaining chip in contrast to traditionally exploitative Western multinationals. South Korea increasingly targets African countries for joint exploration of energy and natural resources. The Koreans have just embarked on a solar-energy aid program in Mozambique that's set to bring power, about 500 kilowatts per plant, to the Niassa countryside.
This South-South expanding corridor was only reinforced in the aftermath of the 2008 global financial crisis. In 2009 China surpassed the United States as the African continent's major trading partner. Last year, between January and 31 November, Sino-African trade reached $114.8 billion as opposed to US-Africa total trade in 2010 of $113.2 billion. According to the latest World Bank forecast, economic growth for Africa is projected at 5.3 percent in 2011.
To a large extent, this growth is rooted in the voracious Asian appetite for natural resources. But China invests in manufacturing, too. As much as 22 percent of Chinese investment is directed to this sector. Significant investments and preferential loans from Chinese banks and sovereign wealth funds go into package deals to build crucial infrastructure connecting markets and people. Between 2008 and 2010, China provided more loans to the developing world than the World Bank did – US$110 billion.
These intercontinental transformations have far-reaching consequences for a world order long dominated by Euro-Atlantic and Japanese military and economic power. For Africa, arguably, China's growing role for Africa's development is by far the biggest game-changer in foreign relations of African countries since gaining independence and the collapse of the Soviet Union. For China, Africa holds a special place in terms of political loyalties and mutual support exchanged in multilateral forums focusing on climate change and human rights, its abundant natural resources, and emerging markets for inexpensive goods.
The inroads by China and other Asian countries today portend a remarkable shift in trade relations and aid paradigms, triggering a rise in prices for raw materials. Currently, copper stands at an all-time high, contributing to economic growth and employment in copper-rich Zambia.
Given the statistics on economic growth, one would expect African populations to view China favorably, and indeed, polling figures from Pew Institute studies conducted in 2007 and 2010 show that a majority in Sub-Saharan Africa is favorably disposed to China's presence.
Nevertheless, more qualitative studies show that China's presence does not make everyone happy. Critics have highlighted how China's foreign aid is directed toward Chinese construction companies, thus not contributing real job growth.
Zambia is a case in point, with discontent emerging due to ongoing labor discord between Chinese managers and Zambian miners. A 2009 study conducted by Zambian labor unions concluded: "Chinese FDI has had modest impact on national development but with overall negative impacts on the labor market." Adding to the negative view are violent accidents and confrontations in the mining sector. The latest incident, in October 2010, two Chinese company bosses at the Callum mine in Maamba opened fire on a group of Zambian mine workers who demanded wage increases. Thirteen people were injured. Out on bail since October, the managers have yet to appear in court.
Obviously Asian-African state-to-state relations are asymmetrical in terms of power distribution. Therefore, relations are bound to have far-reaching implications for new economic dependency as well as national sovereignty. The problem is not that China brings an authoritarian political agenda to Africa. It doesn't, as there's no evidence of a direct ideological Chinese imperative. Nonetheless, it's evident that China's principle of non-interference in the affairs of other countries means that the grip of authoritarian ruling parties over civil society will strengthen in the short term.
The most intriguing question is if a more liberal Chinese approach to the principle of non-interference and state sovereignty is in the making. Reports of how China has maneuvered to rescue more than 30,000 stranded PRC citizens from Libya indicate a further, albeit slow, erosion of China's traditional stance on strict respect of sovereignty ongoing since the 1990s. China took the unusual step to vote for a UN resolution that included a travel ban and froze assets of Libyan leader Muammar Gaddafi, an opening for a charge at the International Criminal Court. This issue is not just about evacuation of civilians. An interfering China will not necessarily be viewed favorably by competing Western countries or local African states.
In fact, it can be argued that Chinese investments already shape contradictory attitudes at both ends of the Sino-African spectrum. Take the special economic zone in Chambishi, Zambia's Copperbelt, operated by NFC Africa Mining, a state-owned Chinese company. In 2011 the Chinese government's white paper on economic and trade cooperation with Africa praised its success: "So far 13 companies have moved in; they engage in mining, prospecting, nonferrous metals processing, chemical engineering, and construction, having made investment worth US$600 million, and providing more than 6,000 jobs for local people."
I asked ministerial level officials in the capital Lusaka and local officials in the Copperbelt region in August about progress of the Chambishi zone, and opinions ranged from skepticism to despondent irritation. One economist argued: "On paper the zone looks good, and if implemented it would also be good. But later on the initial Chinese contractor for the zone, said it was no longer feasible – it was too expensive. So now they wanted Zambia to borrow money from China to pay for the buildup."
I put the same question to a local official in the city of Ndola, capital of the Copperbelt, and he replied, "I can tell you that in fact everyone is in the dark. No one seems to be in charge – that's the problem. You know, even if you are a boss from cabinet office they still won't let you into their zone! Even when the minister of the Copperbelt was to attend an enterprise presentation, the Chinese delegation did not care about translation."
Should such remarks be dismissed as trivial complaints coming from sidelined local officials? Or do they indicate that China, commonly perceived as an alternative to the West that expands policy space in Africa, may contract local policy and harm states' sovereign authority over their economic and political affairs?
Adding to political and strategic risks, this issue is likely to top future agendas. Barring a collapse of Chinese-style authoritarian capitalism, China will have a particularly heavy impact on both the economic and political future of African countries in coming decades.
However, there's room for optimism. After the forced, unfair absorption of African resources and lives into global processes during the colonial and Cold War eras, this time Africans are more free to negotiate their own destinies and take-off.
Johan Lagerkvist is senior research fellow at the Swedish Institute of International Affairs. This is reprinted with permission of YaleGlobal, the Internet site of the Yale Centerfor the Study of Globalization. Asia Sentinel by Johan Lagerkvist
Winning resources, influencing friends: Chinese President Hu Jintao with Mozambique counterpart Armando Guebuza (left) in 2007
