Environmental impact: More of the same?

Is China a friend or foe to the African continent? Michelle Chan-Fishel writes that while China’s investments do involve socio-economic development, environmental and social problems are emerging ‘with a new face’. Chan-Fishel looks at Chinese interests in Sudan, Angola, Nigeria, Zambia, Zimababwe, Democratic Republic of Congo, Gabon, Equatorial Guinea, Cameroon and Liberia. ‘Chinese companies are quickly generating the same kinds of environmental damage and community opposition that Western companies have spawned around the world.’

Introduction

For many African governments, China's emergence from poverty to becoming an economic powerhouse serves as an inspirational example. From the mid-1980s, China’s pursuit of market economics, with a focus on export-oriented industrialisation and inward foreign direct investment, helped raise GDP and build infrastructure. In many parts of Africa, China is perceived by governments as an ‘economic messiah’, a new investor and ally in a world where there is growing unease over what African governments perceive to be the patronising attitudes of the West.

The president of the African Development Bank Donald Kaberuka has remarked: ‘We can learn from them (China) how to organize our trade policy, to move from low- to middle-income status, to educate our children in skills and areas that pay off in just a couple of years.’ Similarly, Mozambican President Armando Emilio Guebuza has said: ‘When we see China coming up and developing an attitude of support to help our productivity, we Africans say “Welcome”, because these investments and projects, especially in infrastructure, will help reduce our poverty problems.’

There are currently an estimated 750 Chinese companies operating in 50 African countries. But Beijing's African investments are also tied to socio-economic development, including debt relief, grants, soft loans, buyer credits provided by state-owned banks, scholarships, preferential market access, and technical aid in the fields of medicine, agriculture and engineering.

Concerns

The economic foundation of China’s relationship with Africa is obvious: the procurement of natural resources. Beijing’s only political condition for establishing ties between China and African countries is the ‘one China principle’ – refusal to diplomatically recognise Taiwan.

But China's no-strings-attached support has sounded alarm bells in the West. Recently, World Bank president Paul Wolfowitz criticised Beijing for undercutting anti-corruption measures, such as requiring revenue transparency for resource extraction projects. Some human rights watchdogs have notably criticised China for weakening democracy and human rights in Africa through its readiness to deal with ¬– and sometimes sell arms to – the Sudanese, Angolan and Zimbabwean governments.

Accusations of ‘neo-colonialism’ have already surfaced, as China’s search for energy and minerals is reminiscent of the ‘scramble for resources’ that characterised Western colonialism. The history of natural resource extraction in Africa has a poor track record, characterised by environmental degradation and increased poverty. As Chinese companies become increasingly involved in the oil and gas, mining, and logging sectors, these environmental and social problems are emerging with a new face.

Sudan

Perhaps the most controversial of China’s oil interests, and one that demonstrates well China’s commitment to secure oil deals is its relationship with Sudan. Beijing is the leading developer of oil reserves in the Sudan, currently importing 60 per cent of the country’s oil output. Today, the China National Petroleum Corporation (CNPC) is the largest shareholder in the Greater Nile Petroleum Operating Company (GNPOC). What makes China’s involvement in Sudan so controversial are the atrocities occurring in the western region of Darfur region, atrocities which the US and other nations have branded genocide. Numerous human rights groups have accused Sudan of systematically massacring civilians and chasing them from ancestral lands to clear oil-producing areas.

Prior to the conflict in Darfur, China was suspected of financially underwriting Sudan’s 21-year civil war, which ended with the signing of a permanent peace accord in January 2005. In 2000, Sudanese resistance forces were said to be collecting photographs of Chinese-made weapons to prove the increase in Beijing’s support for Khartoum. In July 2000, WorldNetDaily reported that Sudan had acquired 34 new jet fighters from China. In June 2001, the Mideast Newsline reported that Sudan had built three weapons factories with Chinese assistance in order to halt rebel advances. China also reportedly provided arms support to Sudan in exchange for oil. Although it is difficult to determine exactly how much money China has invested in Sudan, one source states that ‘China reportedly invested US$20 billion in Sudan, apart from soft loans, grants and other forms of aid.’ According to a study by PFC Strategic Studies, the Sudanese government could collect as much as US$30 billion or more in total oil revenue by 2012.

Angola

In recent years, Angola has emerged as one of China’s top trading partners. Last year, China was busy securing long-term oil agreements with Angola, and Sonangol (Angola’s state-run petroleum company) committed to provide long-term oil supplies to China’s Sinopec. Sonangol and Sinopec will evaluate Angola’s offshore Block 3, and will also jointly study plans for a new oil refinery. In October 2004, as India was preparing to close a major deal for about US$620 million to buy Shell’s 50 per cent share in Block 18, China made a last minute bid – to win the deal. China’s offer of US$2billion in aid for various projects in Angola made India’s offer of US$200 million for developing railways pale in comparison.

Nigeria

Previously, China had been shut out of Nigeria by Western firms. However, through patience, political prowess and technological contributions, such as promising to build and launch a communication satellite for Nigeria by 2007, Chinese firms are gaining a foothold in the industry. In December 2004, China’s Sinopec and Nigeria’s NNPC signed an agreement to develop oil mining leases 64 and 66, located in the waters of the Niger Delta in southern Nigeria. In July 2005, China’s CNOOC signed a contract with NNPC worth US$800 million to guarantee China receives 30,000 barrels per day for one year.

Recently, China and Nigeria signed a deal in which China would provide a US$4 billion infrastructure investment package in exchange for first refusal rights on four oil blocks. In time, it is suspected that China could easily replace some of these Western firms when their drilling licences come up for renewal.

Mining

China is the world’s fastest-growing market for minerals. Africa figures heavily in Beijing’s strategies to secure access to mineral resources.

Copper in Zambia

Copper is Zambia’s leading export commodity, and production is soaring. The Chamber of Mines forecasts production of about 550,000 tonnes in 2005 and more than 600,000 tonnes in 2006. But as miners try to extract more and more copper ore, the accident rate is soaring. According to the Mineworkers Union of Zambia, at least 71 people died in Zambian mining accidents in 2005. ‘We're worried about the accident trends’, said Mavuto Gondwe, a union director with responsibility for health and safety. Indeed, in 2005, an explosion at a BGRIMM mine was the biggest single accident in the history of the Zambian mining industry. BGRIMM is controlled and 60 per cent owned by China Non Ferrous Metal Industries, a Chinese government-owned company.

Coal and platinum in Zimbabwe

Shunned by Western leaders and investors for the government’s human rights practices, Zimbabwe has begun a determined campaign to hitch its plummeting fortunes to China's rising star. Zimbabwe’s President Mugabe calls the policy ‘Look East’, and it has resulted in tremendous growth in trade and economic cooperation between the two countries. Several joint venture companies are being established, and under the Zimbabwe-China Joint Commission, Zimbabwe has benefited through the Chinese government's concessionary and interest free loans and grants.

The Chinese are widely reported to covet a stake in Zimbabwe's platinum mines, which have the world's second largest reserves, and the Mugabe government has hinted that he will accommodate them. The mines' principal operator denies being pressured into dealing with the Chinese, but negotiations are under way to sell a stake to Zimbabweans yet to be identified. The operator has postponed major spending on the mines, citing the cause as political uncertainty.

Cobalt in Congo

According to the Cobalt Development Institute (CDI), China was the world’s leading cobalt producer in 2005. Approximately three-quarters of all cobalt made in China in that year derived from imported concentrates, of which almost 90 per cent came from the DRC.

While the DRC is making slow progress in its transition process after a four-year civil war, the major regional and international mining houses are anticipating stability in the country. In the Katanga area, Chinese companies such as Colec and Feza Mining are initiating copper and cobalt mining and processing projects. Earlier this year, Nanjing Hanrui Cobalt Co Ltd, one of the largest conglomerates in China, purchased three high-grade copper-cobalt mines in Lubumbashi in the DRC. After a decade of growth, this private company has become the leading cobalt powder producer in Asia, ranking among the top three of the world. Because of the firm’s expansion, the international monopoly on cobalt has been broken, and the global cobalt powder prices have been reduced by half. International companies such as Japan’s Mitsubishi, Hitachi, Toshiba, Sumitomo, South Korea’s Samsung and LG all buy cobalt powder from Nanjing.

Timber

China is the largest importer of forest products in the world, and its imports of forest products have tripled in less than a decade. In 1998, China placed stringent restrictions on domestic logging, forcing the country to import a high percentage of its total wood consumption. Since then, China climbed six spots to become the world’s top forest products importer, taking 120,000,000m² in 2004. China is now the leading importer of round logs. In 2003, China was second in industrial roundwood imports, second for wood-based panels, pulp, paper and paper boards, and fifth for sawn wood. China imports 40 per cent of its total forest consumption.

Gabon

Today, China is Gabon's largest timber trading partner. In 2003 Gabon supplied 40 per cent of China's log imports from the west/central Africa region, and China imported 46 per cent of Gabon's total forest exports. Gabonese law requires processing before export, yet China's demands are for raw logs.

According to some analysts, China's influence in the sector encourages ‘flagrant disregard for the law’, and taxes are not paid on 60 per cent of the area allocated as forest concessions. National law states that failure to gain ministry approval of a management plan for a forest concession within three years triggers forfeiture of the concession; yet only five of more than 200 companies (representing 30 per cent of concessions) in 2000 had even stated their intention to start writing a plan. Additionally, all five of these companies had already logged their concessions for more than three years. The illegal timber exports to China have been estimated to be as high as 70 per cent of total timber exports.

Equatorial Guinea

China purchases an estimated 60 per cent of the timber exported from Equatorial Guinea, another country with known illegal logging problems. According to the World Wildlife Fund, annual timber extraction in Equatorial Guinea exceeds the maximum legally allowed limit by 40–60 per cent. It is also estimated that up to 90 per cent of the total harvest going to China is illegal. Shimmer International, a subsidiary of the notorious Rimbunan Hijau, has close ties with the minister of forests. Along with its many subsidiaries and associated companies, it is the dominant player in the country’s logging sector. China’s Jilin Forest Industry (Group) is also involved in timber extraction and processing.

Cameroon

Cameroon exports about 11 per cent of its timber to China. The Centre pour l’Environnement et développement estimates that at least 50 per cent of logging is illegal in Cameroon. According to Friends of the Earth, 96 per cent of logging violations in Cameroon between 1992 and 1993 were followed by incomplete judicial procedures, and one in five cases in this time period were dropped after intervention by an ‘influential person'.

Hong Kong-owned Vicwood Pacific acquired the Cameroon subsidiaries of the Thanry Group in 1997. From 2002, Thanry has been one of the principle loggers and international timber traders in the Congo River Basin and had established itself as a major violator of forestry laws and a creator of regional social unrest. Between 2000 and 2002, Thanry was fined over US$1,300,000 for what has been called 'anarchic logging', including cutting undersized trees, logging outside legal boundaries, and logging in unallocated concessions. The World Bank also discovered that the origin of many of Thanry's logs had been falsified so as to avoid Cameroon's export controls.

Liberia

In Liberia, rebel leader-turned President Charles Taylor relied heavily on timber resources to support his own military efforts and to fund mercenaries in neighbouring Sierra Leone and Côte d'Ivoire. Taylor used the revenue gained from the sale of the timber to buy arms for troops, support foreign mercenaries, create enormous personal wealth, and support the personal security forces that were essential to his power. The timber transport vessels were also used to traffic arms throughout the region.

China has rapidly increased its log imports from Liberia. By 2001, it was Liberia's largest buyer of wood products. That year, China imported US$42 million worth of logs (58 per cent of the country's total exports), most of which came from the OTC through Chinese importer Global Star Tradings. A report commissioned by USAID stated: ‘Harvested timber is transported to Liberian ports where it is bartered to Chinese and other trading partners either directly in exchange for weapons and munitions needed by Taylor to carry on his wars, or is sold to raise funds to achieve the same end.’ On 6 May 2003, the UN Security Council imposed an embargo on Liberian timber products. China had imported 365,000m³ of logs from Liberia in 2003 before the sanctions. But log imports plunged to 30,000m³ in the second half of 2003; and China did not appear to have imported Liberian logs during the first half of 2004.

Conclusion

While conventional wisdom posits that Chinese multinationals treat their workers and the environment more poorly than their Western counterparts, not enough research has been done to actually prove this hypothesis. What is clear, however, is that Chinese companies are quickly generating the same kinds of environmental damage and community opposition that Western companies have spawned around the world.

For communities adversely affected by these mega-projects (regardless of the corporate sponsor), the question is: first, do they give their free, prior and informed consent to the investment? If the answer is ‘yes’ then the challenge becomes, ‘How can communities and governments negotiate with the sponsor to receive the best deal possible, in terms of economic benefits sharing, human rights, sustained livelihoods, environmental quality, and cultural and community integrity?’

Evaluated this way it is evident that in some cases, what private companies can provide through ’corporate social responsibility’ – e.g. health clinics that may or may not be furnished with medicines, books for local schools – pales in comparison with the deals that Chinese state-owned companies can offer (e.g. debt relief, concessional lending).

Furthermore, African leaders and policy makers are faced with additional question when it comes to Chinese investment: Is the Chinese model of development, which admittedly has been characterised by spectacular economic growth, worth emulating? Based on the unlimited extraction of natural resources, ultra low-wage manufacturing, and the export of cheap goods (due especially to ‘throwaway’ societies in the West), this paradigm – which is in essence one of corporate globalisation, not of China alone – is simply not sustainable.

This low-price development model actually comes at a very high cost – to societies, both inside and outside China, as well as to the environment. The untold story of China’s rapid economic growth is one characterised by vast levels of income disparity, unfair treatment of workers and lost livelihoods, especially in the rural areas. These problems are so acute that they threaten political stability. Environmental problems are similarly acute: breathing the air in China’s most polluted cities is the equivalent of smoking two packets of cigarettes a day. On an international level, meanwhile, the effects of corporate globalisation (particularly Western consumption) are leading to the destruction of the ecological support systems on which all life depends.

It is tempting for African leaders to simply want to play Western and Chinese extraction companies off against each other in an effort to ’get a better deal’, and doggedly follow China’s path of economic growth. Indeed, it is important for them to carefully conceive extraction projects in order to secure the best possible deal for their people. But ultimately, it will be important to realise that this low-price/high-cost economic model will not work: neither for Africa, nor for China, nor for the rest of the world.

• This is a shortened version of an article by Michelle Chan-Fishel. The full version, including references, will be available in a forthcoming book to be published in January by Fahamu and called ‘African perspectives on China in Africa’. The full articles will also be made available as .PDF files on the Pambazuka News website.

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