How China delivers rural development assistance to Africa Hannah Edinger Economist Centre for Chinese Studies University of Stellenbosch 2 nd July 2008.

How China delivers rural development assistance to Africa

Hannah EdingerEconomistCentre for Chinese StudiesUniversity of Stellenbosch

2nd July 2008Brussels, Belgium

1

Outline

• Introduction• Overview and key findings

of how China delivers foreign aid to Africa

• Implications for agriculture and rural development

• Conclusion & recommendations

2

Introduction

• China as a new player in Africa’s development – new approach to development

• Development model of China? 30 years since economic reform programme

• What can China offer Africa?• Chinese engagement on new terms/ new rules• “Coalition investment” strategy• Africa needs to inform itself to engage China

3

China’s Aid Policy

• PRC still in process of defining aid – broad & vague• No single aid administrating body• Aid spending = disorganised; lacking in effective

coordination• Lack of data makes tracking and monitoring difficult• Ministry of Finance instructed by State Council to set

aside funds for foreign aid (grants, interest component of interest-free loans, technical assistance)

• Aid = cooperation and official development assistance

4

FOCAC

• Aid platform – dialogue & discussions

• But bilateral negotiations• Limited role thus far of AU

and NEPAD Secretariat• Result = disconnected aid

projects• Need cross-border

coordination: to add to benefits of regional integration and unity

5

FOCAC Commitments Beijing 2000

• Focus mainly on increasing economic & political ties• Establishment of infrastructure construction and

development projects• Encouragement of tourism infrastructure capacity and

focus on SME development• Set up of African Human Resources Development

Fund for training of African personnel• Cooperation on traditional medicine

6

FOCAC Commitments Addis Ababa 2003

• Infrastructure development and logistics support– Mainly transportation; telecoms; energy; water; electricity

• Prevention and treatment of infectious diseases• Human resources development

– Development Fund training up to 10000 African personnel

• Agricultural cooperation – work plan 2004-2006– Includes areas of support such as:

• Agro-infrastructure development• Farming & breeding & aquaculture• Food security• Exchange and transfer of applied agric technology• Skills transfer & technical assistance• Manufacturing of farm machinery• Processing of farm produce

7

FOCAC Commitments Beijing 2006

• Double annual development assistance by 2009• Send 100 senior Chinese agricultural experts to Africa• Set up 10 agricultural demonstration sites in Africa• Set up 100 rural schools & double scholarships• Build 10 hospitals; build 30 anti-malaria clinics• Send 300 young volunteers to support education,

agriculture, sports & health-related projects• Cancel interest-free loans maturing in 2005 of LDCs• $3bn in preferential loans & $2bn in export buyer’s credits• Establish 3-5 SEZs in Africa• Set up CADFund

8

Drivers of China’s Aid Policy towards Africa

• From political to commercial• African emerging market• Pursuing energy security• Securing commodity supply chains• Agricultural supply line• Commercial learning ground• Creation of national champions• South-South Cooperation• Game over for Taiwan• Social drivers

9

How much is China giving?

• Lack of data; lack of overarching aid body (DAFC)• Estimated that 1/3 of China’s aid outflows to Africa• Doubling aid by 2009• EXIM Bank - main financier of concessional financing• Debt relief• More promises - $3bn preferential loans; $2bn export

buyer’s credits• Other funds for assistance, twinning, etc not pure aid• Difficult to calculate aid delivered as cooperation

10

Types of aid

• Grant aid– Social welfare projects

– Hospitals, Schools, Housing, Material assistance, Technical assistance

– Office equipment (Zambia); Agricultural equipment (Zimbabwe); Irrigation equipment (Ghana)

• Interest-free loans• Concessional loans

– Infrastructure, social or industrial projects

• Debt Relief

11

Role of Policy Banks

12

EXIM Bank•Sole financier of govt concessional loans•Mainly infrastructure financing and export credits•More than 300 projects in Africa by June 2007•Investment portfolio:

• 80% infrastructure• dams, railways, oil

facilities, power plants, mines

CDB•By March 2007 loans to the value of $1bn outstanding in Africa •Monitoring developments of over 30 projects in Africa valued at $3bn•Investment portfolio:

• 70% minerals & energy• 10% infrastructure• Remainder in agriculture,

livelihood, • housing, education

•Launch of CADFund $5bn

EXIM Bank and CADFund projects (2000-Feb 2008)

13

China vs Traditional donors

• China-Africa relations based on historical assistance• China small as donor vs traditional donors • China offers alternative to structural adjustment

programmes required by Western aid• Chinese aid is tied aid and project dependent• China as developing country brands itself as

understanding Africa’s developmental needs• Main focus on infrastructure• Traditional donors signal cooperation with China• China changing “rules of the game”

14

Preferred model: the “Angola Model”

• Resource-backed financing model• Based on China’s oil-backed loan to Angola• Preferred financing model in Africa• Foreign policy tool in cash-strapped resource rich

economies• Negotiation of interest rate, grace period, maturity not

transparent• Chinese contractors receive infrastructure contracts• Coalition investments

15

China’s agricultural and rural development assistance (May 07-June 08)

16

Country Assistance

Angola Dam and irrigation channel to create high production agricultural area; to benefit 116,000 rural workers grouped into 60 farming associations and cooperatives; training of 60 agric technicians by 2010; reconstructing water supply system; irrigation contract in 4 regions

DRC Built a vegetable demonstration station; agriculture cooperation since 1973; eg. planting rice and vegetables; infrastructure rehabilitation plan: 3200km of railway tracks, 3300km of paved roads, 2700km of beaten earth roads, 550km of urban roadways, two airports, two hydroelectric dams and two electricity distribution networks, 170 hospitals and health centres, two vocational training centres.

Ethiopia Agriculture, tourism and infrastructure cooperation for past 3 decades.

Ghana Economic activities in Bui area to increase with Bui Dam project; rural employment opportunities; benefits for fisheries, tourism and irrigation; electricity supply security to rural north; irrigation potential of 30,000 ha and sites downstream for agricultural development, eco-tourism and fisheries

Kenya CDB credit line promised for housing, education and health care services to improve the livelihood; modernisation of electricity distribution and rural telecommunications project; China as export market of Kenyan coffee

China’s agricultural and rural development assistance (May 07-June 08)

17

Country Assistance

Liberia Funding for hospital construction

Nigeria Assistance with development of commercial livestock production; construction of 598 boreholes to boost water supply in 18 states

Malawi Concessional financing for 2 rural schools has been promised

Mozambique Over 40 Chinese companies focusing on agro-industry, aquaculture, among other things; agreement to boost transfer of agricultural technology and promote innovation; China supports the agricultural research and technology transfer centre at Umbeluzi and a Technology Park in Moamba, both in Maputo province; pledged to build Agricultural Technology Centre

Senegal 3 cooperation agreements for provision & construction of rural schools, electricity supply

Sierra Leone Assistance to build 100-bed hospital in Freetown; anti-malaria center, education financing: two rural schools; Chinese Agricultural and Technical team will assist to cultivate rice varieties; 18 Chinese agricultural experts to assist farmers in different regions

South Africa Commitment to build agricultural demonstration centre

China’s agricultural and rural development assistance (May 07-June 08)

18

Country Assistance

Sudan Grants and interest-free loan for agricultural demonstration centre; to send Chinese agricultural experts to Sudan; possibilities in agriculture… beyond investment in oil projects

Zambia Downstream irrigation benefits from the construction of hydro project

Zimbabwe Plentiful agriculture-related programmes; loan facility for local agro-business to implement the second phase of the farm mechanisation programme -> boost agricultural production; construction of a hospital, two rural schools and an agricultural demonstration centre; previously provision of fertiliser and farm equipment/machinery to replaced damaged equipment, including 424 tractors and 50 trucks; part of $50mn loan backed by tobacco.

Africa Nanjing Agricultural University offers classes to African agric officials on rural and development reform of agriculture; trained many agricultural experts in Africa

Africa Poverty reduction experience shared at workshops such as the The Experience Sharing Programme on Development between China and Africa in Beijing; draws on success and progress of Chinese economy and poverty reduction, reforms and development in rural areas, infrastructure construction etc.

Africa Visits to provinces, Gansu province, for African officials to draw on experiences of poverty reduction programmes coordinated by China International Poverty Alleviation Center

EXIM Bank financed dams/ Chinese construction

19

Year Country Dam Cost MW

2008 Botswana Dikgatlhong Dam

$250mn 5000

2008 DRC Grand Inga Dam

$50-80bn 39000-50000

2008 Gabon Grand Poubara Dam

$622mn 400

2007 Ghana Bui Dam $600mn 400

2007 Guinea Bissau Salthino Dam $60mn

2007 Mozambique Mphanda Nkuwa Dam

$2bn 1350

2007 Sudan Merowe Dam $2bn 1250

2007 WAPP

2006 Nigeria Mambilla Dam $1.4bn 2600

2003 Zambia Lower Kafue Gorge Dam

$600mn 750

2002 Ethiopia Tekeze Dam $224mn 100

2002 Morocco Ifrane Dam $50mn

Recommendations

20

African Countries China Traditional Donors

Understand China’s approach to aid

Managing aid policy Working towards constructive partnerships

REC Coordination Cooperation with traditional donors

Donor Harmonisation

Avoid dividing traditional & emerging donors

Greater transparency Strengthening goal 8 of the MDGs

Strengthening African voice Broadening FOCAC Constituency

Avoiding politicisation

Improving reporting mechanism and monitoring

Engaging Africa institutions -

Thank you

Hannah [email protected]

Centre for Chinese Studies Centre for Chinese StudiesUniversity of Stellenbosch Johannesburg Office

T +27 21 808 2840 T +27 11 728 1509F +27 21 808 2841 F + 27 11 728 0373E [email protected] E [email protected] www.ccs.org.za W www.ccs.org.za