How China delivers rural development assistance to Africa

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

Outline
Introduction
Overview and key findings of how China delivers foreign aid to Africa
Implications for agriculture and rural development
Conclusion & recommendations

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

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

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

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

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

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

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

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

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

Role of Policy Banks
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)

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”

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

China’s agricultural and rural development assistance (May 07-June 08) 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; i rrigation 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) 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) 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 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 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 Edinger [email_address] Centre for Chinese Studies Centre for Chinese Studies University of Stellenbosch Johannesburg Office T +27 21 808 2840 T +27 11 728 1509 F +27 21 808 2841 F + 27 11 728 0373 E ccsinfo@sun.ac.za E ccsinfo@sun.ac.za W www.ccs.org.za W www.ccs.org.za

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How China delivers rural development assistance to Africa

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How China delivers rural development assistance to Africa — Presentation Transcript