(1)// AFRICAN FORUM AND NETWORK ON DEBT AND DEVELOPMENT (a) Mapping Chinese development assistance in Africa MAPPING CHINESE DEVELOPMENT ASSISTANCE J^J Mapping Chinese development Assistance in Africa: An Analysis of the experiences of Angola, Mozambique, Zambia and Zimbabwe A Synthesis ISBN: 978-0-7974-3702-9 EAN:97807974037029 ©November 2008 All rights reserved to AFRODAD African Forum and Network on Debt and Development 31 Atkinson Drive, Hillside, PO Box CY1517, Causeway, Harare, Zimbabwe Telephone 263 4 778531, 778536 Telefax 263 4 747878 E-mail: [email protected] Website: www.afrodad.org 1. AFRODAD has commissioned four country case studies to critically evaluate the growing role and impact of China on Africa's development agenda. Following completion of research in Zambia, Zimbabwe, Angola, and Mozambique, a synthesis document of the findings is to be used for public campaign and dialogue with civil society organizations and governments in the countries concerned with a purpose of un packing/demystifying the official development assistance from the people's republic of China. About AFRODAD AFRODAD Vision AFRODAD aspires for an equitable and sustainable development process leading to a prosperous Africa. AFRODAD Mission To secure policies that will redress the African debt crisis based on a human rights value system. AFRODAD Objectives include the following: 1 To enhance efficient and effective management and use of resources by African governments; 2 To secure a paradigm shift in the international socio-economic and political world order to a development processthat addresses the needs and aspirations of the majority of the people in the world. 3 To facilitate dialogue between civil society and governments on issues related to Debt and development in Africaand elsewhere. From the vision and the mission statements and from our objectives, it is clear that the Debt crisis, apart from being apolitical, economic and structural issue, has an intrinsic link to human rights. This forms the guiding philosophy for ourwork on Debt and the need to have African external debts cancelled for poverty eradication and attainment of social andeconomic justice. Furthermore, the principle of equity must of necessity apply and in this regard, responsibility ofcreditors and debtors in the debt crisis should be acknowledged and assumed by the parties. When this is not done, it isa reflection of failure of governance mechanisms at the global level that protect the interests of the weaker nations. TheTransparent Arbitration mechanism proposed by AFRODAD as one way of dealing with the debt crisis finds a fundamen-tal basis in this respect. AFRODAD aspires for an African and global society that is just (equal access to and fair distribution of resources),respects human rights and promotes popular participation as a fundamental right of citizens (Arusha Declaration of1980). In this light, African society should have the space in the global development arena to generate its own solutions,uphold good values that ensure that its development process is owned and driven by its people and not dominated bymarkets/profits and international financial institutions. AFRODAD is governed by a Board of seven people from the five regions of Africa, namely East, Central, West, Southernand the North. The Board meets twice a year. The Secretariat, based in Harare, Zimbabwe, has a staff compliment of Seven programme and five support staff. Acknowledgements AFRODAD wishes to acknowledge their great debt of gratitude to Atieno Ndomo for investing considerable time and effort in the in consolidating the research studies and writing this report. Many thanks to Dr. Nancy Dubosse the AFRODAD Research Director, country case researchers, government officers, civil society respondents, private sector groups and the local Chinese embassies who were who were involved in the research in the four countries under study of Zimbabwe, Angola, Zambia and Mozambique. We wish to thank them for their earnest contribution to the research outcomes. We remain indebted to the reference group and experts that were very instrumental in designing the terms of reference and giving feedback to the research team in the duration of the study. The central support of Diakonia, Christian Aid, and Norwegian Church Aid was invaluable to the project. This report benefited greatly from the tireless work of the AFRODAD secretariat and especially Vitalice Meja, the Lobby and Advocacy Director and reviewed by Penny Davies, the Policy Officer Diakonia. We also thank other colleagues not mentioned, but whose input into this final product remains vital. Foreword In January 2006, China announced its desire to increase co-operation with African countries by issuing China's African Policy to guide relations with the continent based on the principles of political equality, and mutual trust, economic win-win cooperation and cultural exchanges. This economic relation with Africa has elicited mixed reactions from around the world. The reactions range from the motivations for the relationship to the potential impact it will have on both political and economic governance and sustainable development in African. Regardless of the side of the debate, China's 21st century entry into the continent remains as much political as it is economic. While the expansion of China into Africa has been welcomed by a number of African countries as a less intrusive source of finance, others have viewed Beijing's engagement in Africa from the need to secure access to oil and natural resources alone. On the other hand traditional donors and civil society groups argue that the impact could compromise efforts to develop international consensus on development cooperation reform, accountability and transparency, and regulation of export credit agencies projects that may slide Africa into a new debt trap and environmental degradation. This collaborative work of AFRODAD, Christian Aid, Diakonia and the Norwegian Church aid seeks to stimulate debate around the official development assistance from China. It specifically analyses the convergence and divergence of Chinese development assistance in relation to the four countries respective national development strategies and country system for external resource management and its impact on matters of economic governance in the countries reviewed. We see China's engagement with these countries being driven by myriad of factors including the need for new markets and investment opportunities; resource security; the need for symbolic diplomacy, development assistance and co-operation; and forging strategic partnerships in Africa. Other driving factors include China being seen as an alternative to the Western economic prescriptions that are marred by aid conditionalities and foreign interference that seek to control the direction of their Economies. However, the question of getting indebted to China in the long process raises serious questions on how accountable and transparent the cooperation is. Policy recommendations focus on strengthening the gains made from the relations as well proposing measures needed to strengthen the position of participating African countries. Charles Mutasa Executive Director AFRODAD Table of Contents ACKNOWLEDGEMENTS 5 FOREWORD 6 LIST OF ACRONYMS 9 EXECUTIVE SUMMARY 10 PART 1 11 1.0 INTRODUCTION 11 1.1 Study Objectives and Methodology 11 1.2 Motivations of Chinese Aid to Africa 14 1.3 Historical Ties and the Rise of Diplomatic Relations With China 15 PART 2 17 2.0 Chinese Aid in Context 17 2.1 Coordination and Management of Chinese Aid 19 2.2 Conditional or Free Aid: Types and Nature of Chinese Aid to Africa 20 2.3 Debt Management and Chinese Aid 25 2.4 China Comes Big: Chinese Sectoral Financing 26 2.5 Systemic issues on Chinese Aid to Africa 27 3.0 Chinese Development Cooperation and the Role Of Non-state Actors 34 4.0 Opportunities and Challenges 36 5.0 Conclusions and Recommendations 37 PART 3 39 Country Notes 39 ANNEX OF TABLES 42 BIBLIOGRAPHY 48 SACU Southern African Customs Union SADC Southern Africa Development Cooperation SSA Sub-SaharanAfrica UNDP United Nations Development Programme USD United States Dollar WB World Bank ZCBC Zimbabwe-China Business Council ZEDS Zimbabwe Economic Development Strategy ZIMPREST Zimbabwe Programme for Economic and Social Transformation ZISCO Zimbabwe Iron and Steel Company EXECUTIVE SUMMARY African countries - especially those highly dependant on foreign aid - have found themselves at an increasing disadvantage because there are few alternatives for development finance. The traditional donors mainly from Western Europe and the United States of America have been able to impose policy conditionalities on their development cooperation. On the other hand Chinese aid flows, is seen to de - emphasize the internal political and economic governance of partner countries . While additional Official development Assistance has been on the decline over the last 3 years, China's official aid target according to the Africa Policy Paper is set to double assistance to Africa by 2009. The entrance into Africa is marked by Chinese direct investment, both concessional and commercial loans to over 20 African countries is seen as condition free by some African governments while At the same time critics of Chinese official development assistance have pointed out lack of transparency, potential rise in public debt and promotion of commercial interest under the guise of development assistance as key areas of concern over the expansion of Chinese