Chinese Investment in Africa & Technology Transfer

Will China Teach Africa How to Fish?

A few weeks ago, Blaise Aplogan wrote (En, Fr) about Li Zhaoxing's visit to Benin.  He saves what I consider his most fascinating observation for last:

""Smiles, frank handshakes, and community of Third-World experience, are quite good. But what worries me is what a friend of mine working in the Foreign Ministry told me. According to this well informed civil servant, agreements with the Chinese are interesting, but they are often accompanied by a long period of transfer of technology, not to mention ownership right. Some delays may be as long as a hundred years! A hundred years, may not be so long for China, an old nation having behind her a past of several millenniums. But for us Africans who have been languishing in the shadow of poverty an alienation, finding it hard to take hold of our destiny and get rid of the fate, we look forward to making our own the Chinese proverb which says: " it is better to learn to fish rather than be given a fish " and I shall add gladly: " and not to be reduced to salivate while it is cooking in our own kitchen, in the Chinese sauce …"

I agree that technology and skills transfer are key, but that doesn't happen by accident or simply through passive osmosis.  My guess is that real skills transfer isn't going to come unless a) African governments *really* hammer this point home as a condition for future business deals (I'm a bit skeptical on this point for the simple fact that human beings have a difficult time acting rationally in the face of mountains of cash) or b) when Africans actually start owning a significant share of Chinese-funded projects. 

Point B is key, in my opinion.  The Chinese are obsessed with joint-venture projects and introducing "strategic investors" (read: foreign money and know-how).  China is still so hot right now, that it's very easy for the Chinese government to say, "OK all you foreign companies chomping at the bit at our borders, you are more than welcome in our market: just make sure 51% of your venture is Chinese-owned."

(That rule, may have changed with the implementation of China's WTO agreements, but as with most things in China, I suspect there's a certain disconnect between paper and reality.)

The result is that indigenous business interests retain control and have real leverage against foreign interests when it counts (employee hiring and environmental management are some examples; in China, foreign companies can still rape the land or import their own workers, but only if local businessmen are complicit).  Chinese entrepreneurs get rich. Not only are basic manufacturing skills transferred, but management skills as well.

When will Africans make the same demand of the Chinese?  When will African governments say to Chinese enterprises, 50% of your workers must be citizens of Benin (or Kenya or Zimbabwe) or 30% of your venture must be locally-owned, etc.? 

The sense from Africans I've spoken to about skills transfer is that there's a pervasive attitude of hope but no sense of entitlement.  Hope that Chinese investment will bring long-term benefit to Africans.  Hope that the Chinese will graciously give Africa what it needs.  But fairness should not depend on China's sense of benevolence or goodwill.  It's up to Africans to demand it.

Comments

[Ben]

Interesting article on a subject that will only increase in significance. If Africa is unable to negotiate deals with the Chinese in which they will receive something tangible (e.g. technological knowhow) that can be used in the near future, there might not come another opportunity with such great potential anytime soon. It might be now or never for Africa.

Check out this article for a concise read on China's investment policies in Africa and its effects on all parties involved:

http://weekendeconomist.blogspot.com/2006/12/3-africa-chinas-training-ground.html

[Blaise]

The analysis is very pertinent and the arguments well informed. As I said elsewhere, I do agree with you.
But such conclusion always lives me with an ounce of sorrow. Because as far as Africa is concerned, and whatever matter we pick, one is bound to arrive at it : Africans must be more positive, more pugnacious, less dreamers and passive ; they must not rest on their laurels and wait for the chicken to "come home to roost". We must know that if we do not demand things, no political angel will bring them to us ; we must then go beyond the first level of fascination for having business opportunity with others, the Chinese or any other -- while so far we where abandonned and merely exploited ; we must take conscience of what is at stake and forsee the elements of our interest, in the short term as well as in the long term.

C'est la difficulté de traduire cette vérité dans les faits qui m'inquiète. Pour le reste nous sommes sur la même longueur d'onde : no comment !

[Theophile]

First read on Blaise’s Blog

Africa must go fish in external waters.
Skills transfer issue arouses each time raw materials crisis specially oil are outlined. It was already the case during the oil crisis of the 70s. The question of increasing the income of raw material producing countries re-appears inevitably.
Right now, Africa finds itself in a crucial situation as the end of oil period is imminent while the continent has made no real progress on the way of building a consequent industrial plan which can generate more benefit in added value exchanges.
Thought people say that we are progressing towards post-industrial era, still the fact remains that both the growth and the power of China are founded on exportation of manufactured goods on global markets.
That is where you put the right question in your post: Africans lack of aggressiveness during negotiations, as no one gives out his skills freely or easily. One has to snatch it through long and tough negotiations in a win to win discussion
But It is necessary to have trump cards to hold win to win negotiations. And the African countries taken individually don’t have it the current state in front of their so called partners.
It seems to me that NEPAD is stillborn and AFRICAN UNION is being put forward as a possible way to enhance negotiation capability.
However, time is short. AU is still in diapers and the end of oil is close to us. I would even say that urgency exceeds technological challenge and should take into account the snatching of shares in investments on markets with fruitful economy.
« You guys, you need uranium of Niger? Well give us the same in the nuclear factory on your territory »
« You want a bit of Congolese oil? Give us so amount of share of some gas deposit on your own territory »
In short, Africa must get ready to go and fish outside her own territorial water.
Otherwise Africa will continue bleeding mercilessly, as it was the case in the past, for the good and prosperity of the other continents. So it is urgent that African Union
It is thus urgent that African Union really equip herself with means at the level of her ambitions. This is the only condition for of a real freedom of operation on the international chessboard. So far, this is not yet the case.

Theophile Nouatin

[Bill]

Blaise Aplogan wrote an excellent piece about the PRC's investment and business policies in Benin under the wise and wiley guidance of the PRC's Foreign Minister. Trés bon Blaise! Great follow up comments as well.

This argument about skills and technology transfer from China to Africa:

Does Africa really need a skills and technology transfer from China??? After all, there are literally 100's of thousands (or more) Africans with university and technical college educations and loads of African people with valuable work and management experience living and working in countries all across the globe. This is especially true for the African diaspora, 18 million+ of which live in Europe alone.

These highly qualified African people DO NOT NEED a technology and skills transfer from China! These people simply need a fair chance to show what they can really accomplish in their home countries when given transparent and sustainable support from foreign investors and businesspeople and yes, even foreign governments. Perhaps most important of all they need good governance and strong leadership from politicians and businesspeople in African countries where they want to work and live.

The PR of China has very little to offer in cutting-edge advanced modern technology and business management skills. The Asian powerhouses of Singapore, Taiwan, Japan, and Korea have much more to offer Africa in that department than China. If that is what African countries seek from their foreign business partners, then they are "barking up the wrong tree" in their present Win-Win courtship with the PRC.

[benin]

Hi Jen:

Good to be here on your blog. That's a very interesting post. Actually, let me rephrase that, you've made a very strong argument.

Let me interpose a question, though. Because of the inertia facing some of Africa's governments is it possible for the businesses and entrepreneurs of Africa to take more of a lead role here on the issues that you write about? I ask because so much is always said about African governments that sometimes the business people are overshadowed. In my mind the possiblity of the people themselves taking a more active role seems plausible given some of the recent shifts in Aid to Africa.

I am referring to a trend whereby instead of donors going the traditional route of making funds aavailable to governemnts, there have been a few large aid projects where the donors worked directly with private groups, with great results.

Anyhow, I will try to not be a stranger here and likewise, feel free to stop by sometimes, ok?

[Ssembonge]

African governments or it's officials are least concerned about technology transfer. If they were, they'd be recruiting the best talent out there to work in their economies.

Its not like we always have to rely on the benevolence of foreign governments. China, India, Brazil and now Russia did not advance their economies with the help of foreign governments. They took charge of their own affairs.

We can do it without the 'help' of the Chinese government. China is out to progress its own agenda.

http://lovelymoney.blogspot.com/2007/02/china-is-new-sheriff-in-africa_05.html

[Blaise]

To count on our own force and our own skill does not necessarily mean autarchy. And there is no direct equivalency between what India or Russia did and what we would do. We must also bear in mind the specific aspects of our history and condition. Ideological pride is mere blindness. As for me, I see no incompatibility between organizing and creating things for myself and at the same time enjoying the help of anyone who is ahead of me...

[Jennifer Brea]

Thank you so much for all of your thoughtful comments. I see Blaise and I aren't the only ones with this topic on our minds!

@Blaise. My observation is depressing, you're right, for the simple fact that it's been made so many times before. I think the difference here is that you have a people (the Chinese) who endured centuries of "humiliation" and unequal treaties, who were forced to sell their resources and their people to the Europeans and the Japanese for nothing. But the Chinese learned over time and are now incredibly savvy, at least when it comes to deal-making. The point is, this CAN be learned and practiced, and I'm afraid that most African governments won't be able to jump the learning curve. Perhaps they don't see clearly or just lack the incentive (I'm convinced that one of the reasons corruption in Africa is so much more devastating than corruption in China, is because in China, there are so many people to pay off. In Africa, you pay off a few key officials with money that is a lot of them, but a pittance in relation to the value of the deal as a whole, and you're in. In the face of that kind of easy money, what leader is going to think twice about the long-term consequences?)

@Theophile. I think this point is an incredibly important one: "But It is necessary to have trump cards to hold win to win negotiations. And the African countries taken individually don’t have it the current state in front of their so called partners." China can easily play countries against each other. They are one, giant power bargaining with dozens of smaller ones, and there is perhaps pressure to get on the bandwagon before your neighbor does. But I still hope that it's a two-way street. That this also means that savvy African governments can play China, India, France, the US, Brazil, etc. off each other to get the best deal.

That said, stronger regional cooperation whether it be through the African Union or various regional multilateral economic agreements, is key. It's just sorely lacking and I believe it will take a long time before these kinds of organizations can have a real effect.

"Africa must get ready to go and fish outside her own territorial water.
Otherwise Africa will continue bleeding mercilessly." - I also think this is an absolutely fascinating point. I mean, theoretically, the capital DOES exist. Unfortunately, it exists in the hands of the too few who are perhaps more interested in hoarding it away in their Swiss bank accounts than using to to be captains of industry in other parts of the world. More Africans should invest in Africa, but the truth is, investment elsewhere=bargaining power. Perhaps, then, Africans should also be investing in China.

@Bill. I think when we talk about technology and skills transfer...well, let me not say "we." What I meant in my post was not training doctors and high-level engineers (although despite the size of expatriate Africa, Africa proper still could use more of that). What I mean are more basic skills at the level of workers and managers. Also, entrepreneurs in a variety of industries could benefit from joint partnerships with Chinese firms. In Beijing, I met with a number of fellows from about 10 different Sub-Saharan African countries who were here in Beijing for a meeting on food processing. Many of them described to me how the food their own countries were producing in their unfinished form was being shipped to Europe to be processed and then shipped back to Africa to be sold. There is an extreme shortage of food processing plants, and yes part of that is lack of organized capital, but you had all of these businessmen and women in Beijing who were simply there to learn how to start and run successful food processing plants and a successful food processing business. So yes, I believe skills transfer is incredibly important, not just in this industry, but in a variety of mundane manufacturing sectors people outside of Africa take for granted.

@Benin. You wrote, "businesses and entrepreneurs of Africa to take more of a lead role here on the issues that you write about." I think my response to Bill is a partial answer. And you're right, governments are not the only players. Unfortunately, they are the ones with the rights to sign away their countries' natural resources and pocket the profits. I really think that more African entrepreneurs entering into business arrangements with Chinese entrepreneurs - independent of whatever their governments are doing - is an incredibly important part of the picture. The challenge is, of course, that in China, it's often difficult to say exactly where government ends and business begins.

@Ben. Unfortunately, the link you posted got cut off. It would be lovely if you could repost. I believe HTML should be allowed in the comments :-)

[Ben]

Dear Jennifer,

Here is the link once more: http://weekendeconomist.blogspot.com/2006/12/3-africa-chinas-training-ground.html

It appears to be corect in my previous post as well, but it doesn't create a direct link.

Regards,

Ben

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