1. How China delivers rural development assistance to Africa Hannah Edinger Economist Centre for Chinese Studies University of Stellenbosch 2 nd July 2008 Brussels, Belgium 1

2. Outline Introduction Overview and key findings of how China delivers foreign aid to Africa Implications for agriculture and rural development Conclusion & recommendations 2

3. Introduction China as a new player in Africas 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

4. Chinas 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

5. 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

6. 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

7. 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

8. 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 buyers credits Establish 3-5 SEZs in Africa Set up CADFund 8

9. Drivers of Chinas 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

10. How much is China giving? Lack of data; lack of overarching aid body (DAFC) Estimated that 1/3 of Chinas aid outflows to Africa Doubling aid by 2009 EXIM Bank - main financier of concessional financing Debt relief More promises - $3bn preferential loans; $2bn export buyers credits Other funds for assistance, twinning, etc not pure aid Difficult to calculate aid delivered as cooperation 10

11. 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

12. 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

13. EXIM Bank and CADFund projects (2000-Feb 2008) 13

14. 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 Africas developmental needs Main focus on infrastructure Traditional donors signal cooperation with China China changing rules of the game 14

15. Preferred model: the Angola Model Resource-backed financing model Based on Chinas 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

16. Chinas agricultural and rural development assistance (May 07-June 08) 16 CountryAssistance AngolaDam 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. EthiopiaAgriculture, 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

17. Chinas agricultural and rural development assistance (May 07-June 08) 17 CountryAssistance 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

18. Chinas agricultural and rural development assistance (May 07-June 08) 18 CountryAssistance 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 ZambiaDownstream 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

19. EXIM Bank financed dams/ Chinese construction 19 YearCountryDamCostMW 2008BotswanaDikgatlhong Dam $250mn5000 2008DRCGrand Inga Dam $50-80bn39000- 50000 2008GabonGrand Poubara Dam $622mn400 2007GhanaBui Dam$600mn400 2007Guinea BissauSalthino Dam$60mn 2007MozambiqueMphanda Nkuwa Dam $2bn1350 2007SudanMerowe Dam$2bn1250 2007WAPP 2006NigeriaMambilla Dam$1.4bn2600 2003ZambiaLower Kafue Gorge Dam $600mn750 2002EthiopiaTekeze Dam$224mn100 2002MoroccoIfrane Dam$50mn

20. Recommendations 20 African CountriesChinaTraditional Donors Understand Chinas approach to aid Managing aid policyWorking towards constructive partnerships REC CoordinationCooperation with traditional donors Donor Harmonisation Avoid dividing traditional & emerging donors Greater transparencyStrengthening goal 8 of the MDGs Strengthening African voiceBroadening FOCAC Constituency Avoiding politicisation Improving reporting mechanism and monitoring Engaging Africa institutions-

21. Thank you Hannah Edinger hedinger@sun.ac.zaCentre for Chinese Studies University of StellenboschJohannesburg Office T +27 21 808 2840T +27 11 728 1509 F +27 21 808 2841F + 27 11 728 0373 E ccsinfo@sun.ac.za W www.ccs.org.za