Risky Business: Is China wavering in Africa?
Chinese companies and banks were once seen as bold and fearless as they invested in countries Western investors deemed too risky. But this may now be changing.
In 2007, when two Chinese state-owned companies struck a deal with the Congolese government to build the biggest mine the country had ever seen, all involved were riding high. In a mega-deal originally worth some $9 billion, Sinohydro and the China Railway Engineering Corporation (CREC) would gain access to 6.8 million metric tons of copper, the future profits of which were to underwrite the prior building of hospitals, roads and other infrastructure.
At the time, China’s involvement in Africa was booming and the Sicomines deal embodied much that was symptomatic of Sino-African relations: it was massive-scale, involved vast infrastructural construction linked with similarly vast mineral resources, and was taking place in a country many other investors would have deemed too unstable.
It was not long, however, before confidence in the deal began to wane, especially amongst the deal’s financers, China’s Export-Import Bank (Exim).
[Exim bank] didn’t anticipate is to what extent other parties such as the IMF would meddle in their settled deal.
What’s more, African governments are becoming more assertive, and more frequently reviewing contracts – especially in countries emerging from conflict.
The extreme risks of investing in the Congo that have long dampened the enthusiasm of Western investors seem now to be worrying Chinese ones too.
And China is also wavering in Ghana and Gabon.
While Chinese companies were once seen as fearless pioneers compared to their Western counterparts, recent setbacks may well be teaching them lessons in restraint that other investors had learnt before them. They may be learning that political support − in both China and Africa − for ambitious mega-deals can fade over the time it takes for the agreement to run its course. They may be learning that although partnerships with rogue African state mining companies are often unavoidable, they must be undertaken with extreme wariness. And they are certainly learning that any investment that burdens an already-indebted African nation with billions of dollars in new loans is likely to be met with opposition from Western lenders like the IMF, which expect to be repaid first.
There are signs Chinese officials have already taken some of them to heart. Exim officials disappointed their Congolese partners last year when they refused to furnish a much-anticipated $200-million investment in Congo’s state mining company to finance a separate copper mine and energy project.
Exim officials, it seems, are hesitant to invest further in the Congo after their signature deal there nearly went awry. This may be part of a new trend.
By Jacob Kushner
Read the full article here: http://thinkafricapress.com/economy/risky-business-china-wavering-africa-ghana-drc-gabon