A Look at Chinese Investment in African Agriculture

23 January 2015

As the Cold War smoldered around them, countries across Asia and Africa sought out one another in hopes of strengthening their ties and redoubling their commitment to non-alignment. In April 1955, representatives from 25 countries across the two continents met in a landmark conference in Bandung, Indonesia. The attendees committed to the basic principles of non-interference, the pursuit of national sovereignty, and co-existence. For China, this represented the start of its now-extensive involvement in Africa.

Foreign direct investments and aid are rarely topics that garner much mainstream press, let alone visceral reactions. China’s recent involvement in Africa, however, has been the exception. Accusations of mineral theft have been widespread, as has, increasingly, the accusation that China is “grabbing” arable African land so that it can feed itself. Despite the certainty with which many respectable media houses, NGOs, and even policy experts argue that theft is occurring, there is a lack of evidence supporting their claim. Furthermore, there is little reliable data on land rights and administration in many parts of Africa, and many countries in the region have weak oversight of land administration.

Read more:

Background
China and infrastructure
China and African agriculture
Focus on Cameroon
Focus on The Democratic Republic of the Congo
Conclusions

Background

In the early 20th century, millennia of Chinese imperial rule came to an end, and the country’s first republican government rose to power. The era of republicanism was, however, short-lived. Mao Zedong and his communist party waged war against the Republican government, and forced it to retreat to Taiwan in 1949, where it has remained ever since. Early Chinese involvement in Africa reflected this domestic reality: the People’s Republic of China (PRC) was in competition with the republican government of Taiwan to woo African countries and win support as the legitimate government of China. This wooing happened in the form of investment and aid—particularly that which was related to agriculture. The Republic of China (ROC) launched “Operation Vanguard” in 1961, an initiative designed to assist African countries with agricultural development and food security. By 1971, the ROC has initiated over one hundred agricultural projects, and had deployed more than one thousand agricultural specialists to 24 African countries.

The PRC began investing in agricultural sectors across Africa as it continued its attempts to improve that of mainland China. In the 1950s, it tried to overhaul its agricultural sector via collectivization in the “Great Leap Forward” that proved to be a colossal failure. So the 1960s were a decade in which China began to make small leaps forward in the right direction, and attempted to help parts of Africa do the same. The PRC made more progress in its African projects than the ROC, and was therefore ultimately more successful in gaining support and recognition. The ROC began to scale back international spending. This resulted in many countries, including those in the initial 24-country-strong group of ROC supporters, severing ties with the ROC and pledging their support for the PRC. Early supporters of the PRC enjoyed benefits: in 1965, the PRC aided Tanzania in building the Ruvu State Farm, the Mahonda State Sugar Cane Farm, and the Mbarali Rice Farm Mbaye, each of which was well over 1,000 hectares in size.

The two governments continued to compete for recognition internationally, including in Africa, well into the 1990s. In fact, several countries, including Liberia, the Central African Republic, and Senegal changed allegiances five or more times throughout this period. And in 2013, Gambia’s president controversially severed ties with Taiwan in hopes of establishing relations with the People’s Republic of China. For its part, China has more of an interest in improving relations with Taiwan than it does in establishing them with Gambia. As a result, Gambia now does not have relations with either government.

Sino-African relations became more complex throughout the 1980s and 1990s, as the Chinese Premier Zhao Ziyang began to promote the idea of the “Four Principles” that should drive Chinese-African relations: equality and mutual benefit, an emphasis on practical results, diversity in form, and economic development. This was a pivotal shift in attitude, and represented a shift away from an aid-based relationship.

As China began to experience a myriad of internal struggles and obstacles throughout the 1980s, external affairs, particularly with the third world, became less of a priority, and trade efforts as well as Chinese political support against African imperialism dwindled. In the 1990s, following Tiananmen Square and the resulting global hostility, China rekindled old relationships and re-launched development programs across Africa. In 2000, the Forum on China-Africa Cooperation was formed, which helped to strengthen relations between the two. Most recently, in 2007, the China-Africa Development Fund (CAD) was created to serve as a market-based institution that focuses on African investment. It is China’s largest African-focused private equity fund, and has been a recent target of questions regarding its investors’ behavior, intent, and ethics.

China and infrastructure

China has a long history of infrastructure investment in Africa, and this remains the country’s most visible legacy to this day. In the 1970s, China constructed the Tanzania-Zambia railway, which linked landlocked, mineral-rich Zambia to the Indian Ocean. China’s aid for the project consisted of a nearly 1 billion RMB (~$1.6 billion USD in 2015) interest-free loan, over 1 million tons of machinery and materials, and 50 thousand laborers to undertake construction efforts. Zambia’s first president, Kenneth Kaunda, hailed China’s support, and claimed the railway served as “a model for south-south cooperation.”

China continues to be the driving, enabling force behind the construction of African railways. The rail line—currently under construction—linking the coastal city of Mombasa to the Kenyan capital Nairobi, and beyond to landlocked Uganda, South Sudan, Burundi, and Rwanda is financed by China. According to the Kenyan president, Uhuru Kenyatta, the line is expected to cut the price of moving one ton of freight from $0.20 to $0.08. Beyond rail, China has had a monumental role in the construction and improvement of roads throughout much of Africa.

The linkages between improved transport networks and agriculture are vast. Improved road networks can help farmers reduce post-harvest losses, by offering them better, quicker access to markets. Both domestic and international trade are made more efficient as a result. Critics of Chinese involvement in African infrastructure projects argue that the investments are done in self-interest only. Improving road and rail networks, the argument goes, just makes it easier for China to extract the resources it needs from African countries. This is true—but it is true more broadly: improved road networks make it easier for everyone to do everything, including China. Improvement of transport networks can therefore be considered a universal good, even if China is directly benefiting from them.

One major infrastructure-related criticism that China has received across the board has been related to employment. In many of its projects, including the construction of a new African Union headquarters in Addis Ababa, Ethiopia, critics have argued that it could have hired more domestic labor than it did. Sources disagree as to what the ratio of Chinese to Ethiopian construction workers was, but a conservative estimate was 1:1. Many argued that that was too high.

Critics have also brought up the quality of infrastructure being constructed. This obviously varies hugely throughout the continent, and some projects may be poorly constructed while others are well-constructed.

China and African agriculture

In 2006, Beijing hosted the China-Africa Cooperation Summit, in which the host country again increased its involvement in African agriculture. The summit called for the establishment of 14 agricultural centers, the dispatch of 100 Chinese agricultural experts, and the training of 15,000 individuals. China has added to its commitments across these three fields: creating more agricultural centers than it had promised to, dispatching more experts, and training more individuals. China has also taken an increasingly hands-on role in its work and investment related to African agriculture, leasing and developing land and in many instances being accused of “grabbing” large swathes of it.

Focus on Cameroon

In 2008, a French media group reported from an allegedly 14,000-hectare rice investment by a Chinese company, Sino-Cam IKO, in Cameroon and claimed the farm’s operators were exporting produce to China. The article painted a grim picture of the situation, claiming a “Chinese raid on Cameroonian land” and alluded to a developing wave of neo-colonialism. Though the farm itself ended up being a mere 120-hectare rice center, the remnants of an original demonstration from the ROC, the media crew focused on the memorandum of understanding signed between the Chinese company and Cameroon’s government. The MOU would allow Sino-Cam IKO to own upwards of 10,000 hectares of land in total, contingent on the company’s cooperation to build technological training centers and to distribute all rice produced on this land locally. The reporters cited local opposition, detailing bags of rice for sale from the farm in question were destined for China’s market, since the bags had Chinese characters imprinted on them. It is interesting to note that China has been virtually self-sufficient in rice production between 2000 and 2010, while Cameroon’s rice imports have increased roughly 13 per cent between 2006 and 2011, the period in question.

The Sino-Cam IKO example highlights an important distinction noted in a comprehensive report from the FAO, IIED, and IFAD: “there is a big difference between announcing (land) plans and actually acquiring land – let alone starting to cultivate it.” In this case and in the vast majority of others, the actual amount of land that is ultimately acquired through Foreign Direct Investment (FDI), especially Chinese FDI, is significantly lower than the total amount of land allotted through MOUs or other terms of agreement. Although dozens of factors can explain this trend, perhaps the simplest are the natural delays between negotiating an agreement, transferring land deeds and rights, and physically cultivating the land. The FAO goes on to say that evidence that suggests Chinese land acquisition is part of a domestic food security strategy is “highly questionable.”

Focus on The Democratic Republic of the Congo

It has long been rumored that the Chinese firm Zhongxing Telecommunications (ZTE) has purchased 3 million hectares of land to develop a palm oil plantation in the Democratic Republic of the Congo (DRC). But this figure is far from straightforward. Congolese journalists reported that the farm was to be more than 3 million hectares in 2007, and in 2008 the Associated Press cited a similar figure. ZTE representatives and government ministers have, however, contradicted these claims and sometimes even contradicted each other. ZTE’s regional head announced the project would be 1,000,000 hectares, while the Chinese ambassador was quoted at 300,000. Despite these varying figures, only 100,000 hectares was approved by the DRC Council of Ministers; a very sizeable swath of land, but a small fraction of the reported figures. In the end however, ZTE never got the project off the ground. There was and is very little clarity about what happened and what is happening as it relates to ZTE and the DRC, as data on land purchases continues to be lacking. Reporters quote numbers with seemingly little to back them up.

It is in the Democratic Republic of the Congo, one of the most notoriously dysfunctional states, that China’s footprint has been particularly visible. It has invested substantially in infrastructure, electricity, and agriculture projects. On the one hand, it makes sense and is thoughtful and benevolent to invest in a country that many other wealthy countries choose to ignore or give up on. On the other hand, this means that no one is able to really scrutinize these investments.

This inability to adequately analyze Chinese agricultural investments is not unique to the Democratic Republic of Congo. Rather, this opacity is the crux of the problem: there is not enough information made available by African governments or by Chinese investors. Furthermore, many African countries unfortunately have murky laws on land rights, which are in desperate need of reform. This, in addition to the general dearth of concrete information and data, makes it impossible to know for certain which parties in a conflict are exaggerating or telling the truth.

Conclusions

Relations between Africa and China, particularly those related to agriculture, are complex and constantly evolving. And due to the relatively opaque nature of Chinese investments in particular, it is impossible to make any sort of judgment call as to whether such investments are a “good” or a “bad.”

The complexity and opacity of Sino-African relations do, however, offer some important lessons. First off, how terms are defined is important. A “land grab” is an imprecise and sensationalist term. What is a land grab? Is it a country buying land in another country? Leasing land? Developing land? Is it a land grab if all affected parties know what is happening? There needs to be movement away from empty terms like “land grab” and movement towards precise terms that depict what is happening and why.

Furthermore, uncertainty about who owns land or who has bought land brings to light the shortcomings of land policies in many countries in Africa. In many countries, the amount of undocumented land is staggering, while the processes required to legally transfer deeds are costly and time-consuming. Improving land policies and clarity regarding ownership not only helps average people by offering better security—and by even increasing the productivity of farmers—but it also makes sure that land is not “grabbed” unknowingly.

An interesting idea for some countries might be to implement a sort of transparency initiative related to land. Many countries in Africa, and indeed around the world, are signatories of the Extractive Industries Transparency Initiative (EITI), which obligates governments and companies to disclose detailed information around payments made related to the extractive industries. Although obviously different in nature, land is also a natural resource and should be governed and overseen stringently. Requiring the adherence to a strict, international standard when it comes to land dealings could be a good step in the right direction.

Earlier this week in Nairobi, headlines were filled with accusations of a land grab. A hotel developer was accused of illegally grabbing land from a primary school during the holidays, and had started erecting walls on the school’s two-acre plot. The attempt to illegally develop this land and ensuing police action caused an uproar that made it to international headlines, and the developer was rightfully required to stand down. Although it seems to ultimately be a happy ending for the primary school, it is still troubling that in even one of the biggest, most developed cities in sub-Saharan Africa, there can be major uncertainties over land ownership, and that people can feel emboldened to take land that is not theirs. Improving land administration throughout the region is essential not only to ensure that foreigners are buying and using land correctly, but also to ensure that citizens are doing so too. In countries with good land administration systems, farmers are able to use their land as collateral and take out loans to afford yield-enhancing inputs. In short, better transparency in land can directly lead to higher agricultural productivity organically with no need for foreign direct investment.

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