China Promises Further Investment in African Agriculture: “Debt Trap” or Marketing Ploy?

12 September 2018 Mervyn Piesse, Research Manager, Global Food and Water Crises Research Programme

Background

The seventh forum on China-Africa Co-operation (FOCAC) was held in Beijing on 3-4 September. The triennial forum serves as the official summit between the Chinese president and African heads of state. At the forum, China pledged US$60 billion for African development projects. Those funds include loans, grants and equity funds. The same amount was allocated at the last FOCAC held in Johannesburg, South Africa, in 2015. While not all of those funds were necessarily dispersed in Africa, there is evidence that suggests that Chinese loan commitments to African states increased significantly after the 2015 FOCAC.

Agricultural development was identified at previous FOCAC meetings as an area that could benefit from mutual co-operation. Chinese President, Xi Jinping, stated that China is seeking to promote agricultural modernisation in Africa through 50 agricultural assistance programmes, the provision of one billion renminbi of emergency food aid and by sending 500 senior agricultural experts to Africa to train agricultural scientists and entrepreneurs.

Comment

While most Chinese investment in Africa finances infrastructure projects, such as roads, railways, ports, harbours and electric power projects, agriculture has been a major theme at FOCAC since 2006. At that forum, 14 African countries and China agreed to the creation of Agricultural Technology Demonstration Centres in Africa. There are now 23 centres across the continent, funded by the Chinese Ministry of Commerce. Those centres train thousands of African officials each year.

The establishment of the training centres sparked debate about Chinese motives in relation to African agricultural land. Some commentators suggested that Beijing was engaged in “land grabbing” and plans to use African resources to augment its own food supply. Research from the China Africa Research Initiative, however, found that those claims are wildly exaggerated, with only 252,901 hectares of land, out of an alleged six million, actually acquired by Chinese interests. Beijing sees African agricultural modernisation as a way to generate business opportunities for Chinese companies and sell Chinese-made products into new markets, rather than as an opportunity to improve Chinese food security through the exploitation of African land.

Nonetheless, African nations need to guard against complacency as far as Chinese investment in the continent goes. Grant T. Harris, the Senior Director for Africa in the Obama Administration, described Chinese debt as:

[…] the methamphetamines of infrastructure finance: highly addictive, readily available, and with long-term negative effects that far outweigh any temporary high. This is particularly true in sub-Saharan Africa, where China has become the largest provider of bilateral loans. Forty percent of sub-Saharan African countries are already at high risk of debt distress; by having so much debt concentrated in the hands of a single lender, they are dangerously beholden to their supplier.

Chinese President, Xi Jinping, stated that the funds unveiled at FOCAC would not trap developing countries in an unsustainable level of debt. He said that ‘only Chinese and African people have a say when judging if the co-operation is good or not between China and Africa. No one should malign it based on imagination or assumptions’. To suggest otherwise, undermines the ability of African policymakers to make decisions based on their own national interests.

Beijing has been heavily criticised for its foreign lending practices, particularly in relation to the funding of several Sri Lankan projects. The former Sri Lankan Government, led by Mahinda Rajapaksa, however, is equally to blame for the development of several “white elephant” projects in that country. According to a New York Times report, Mr Rajapaksa’s re-election campaign received donations from China Harbor, an engineering company that was involved in the construction of Hambantota Port. It is possible that similar arrangements could be made in Africa, despite President Xi declaring that efforts will be made to counter corruption in the financing of international projects.

That risk is minimal in Chinese plans for African agricultural development, however, as most of its attention is directed toward training centres and the provision of agricultural equipment. For Africa to able to feed its growing population, farming practices across the continent need to be modernised. China appears to be perfectly placed to assist in that regard, as African farmers have stated that Chinese technology is often cheaper to purchase and better suited to local conditions than that sourced from the West.

While Chinese infrastructure investment in Africa could pose a risk to heavily indebted countries, its agricultural initiatives pose only a limited threat. Agricultural development programmes and training centres present few opportunities for China to trap African states in unsustainable levels of debt. As far as African food security is concerned, these arrangements are likely to be of more benefit than harm.

Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future Directions International.

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