Is China displacing traditional aid donors in Africa?

by Haley J. Swedlund 0

In keeping with a two decades long diplomatic tradition, the Chinese Foreign Minister Wang Yi chose Africa for his first overseas visit of 2017. Wang’s decision to make Africa his first stop on a five-nation tour in early January highlights the importance China places on its relations with Africa. The Conversation

Dramatic claims are often made about relations between China and African countries. China is often portrayed as either a pariah or a saviour. This is also true in the aid world, where there is a pervasive argument that China is upending the dominance of traditional foreign aid donors.

According to this rhetoric, the emergence of China as a big player in African development increases African power vis–à–vis traditional donors. The assumption is that financing from China allows governments to decline aid from donors like the US or the World Bank. This gives African governments more “room to maneuver”.

This claim, however, is largely based on narratives about the rise of China in Africa that are highly susceptible to exaggeration. In research recently published, I draw on new evidence to test the claim that China is eroding the bargaining power of traditional donors in Africa. My research suggests that we should be deeply sceptical of claims that China is causing a “silent revolution” in international development.

Reality versus rhetoric

Estimates on aid to China are often grossly inflated. China does not publicly release figures on its official finance. Therefore, estimates are often based on media reports of promised aid that may or may not actually arrive, and foreign direct investment is often conflated with official finance. Still Chinese aid to Africa is clearly growing.

To investigate the claim that finance from China is decreasing the bargaining power of traditional donors, I first surveyed 49 high-ranking donor officials working for 23 different donor agencies in 15 African countries. When asked directly whether China is decreasing their agency’s bargaining power, the largest number of respondents (47%) said “no”. Only 20% answered “yes”, while the remaining 33% answered that they were “not sure”.

Even more telling were answers to questions about how much their agencies consider China in several different scenarios. Respondents reported giving China only limited consideration. Those scenarios were:

  • in their aid negotiations with the recipient government;

  • in the drafting of their country strategy;

  • in their decisions about future aid allocations; and

  • in decisions about development cooperation in the extractive or natural resource sector.

Donor officials were asked to rate the impact of Chinese aid on a scale of zero (“not a consideration”) to ten (“a major consideration”). The mean values for all the scenarios were only around three. That is, on average, donor officials reported giving only minimal consideration to China in these situations.

I wanted to know why donor officials’ responses were so out of line with claims about the rise of China and its impact on traditional donors. I therefore looked into what types of projects China is actually funding in three African countries: Ghana, Tanzania, and Uganda.

What I found is that, in practice, China rarely competes with traditional donors. Chinese official financing goes almost exclusively to state-owned Chinese companies. Funding is heavily concentrated in the productive sectors, mainly infrastructure, agriculture and mining.

In contrast, traditional donors fund the social sectors, such as health and education. The money is also more likely to end up in the bank accounts of recipient governments.

Many African leaders would like to distance themselves from traditional donors. However, Chinese official financing is not, at least as yet, a direct alternative to the aid on offer by traditional partners. Government officials in charge of the national budget – or those responsible for sectors dependent on traditional donor financing, such as health and education – cannot afford to alienate traditional donors.

Why rise of China still needs attention

My findings do not mean development practitioners should care any less about the rise of China in Africa. As I argue there is evidence in certain areas that China is directly competing with traditional donors (and winning). In large infrastructure projects, African governments often prefer Chinese financing because it is typically quicker to materialise and has less red tape. The Bui Dam project in Ghana, for example, languished as a World Bank project but moved more quickly to completion once the Chinese took over.

China also provides the most aid to growing economies that can provide a home for Chinese capital. China invests heavily in countries like Ghana that are already becoming less and less dependent on aid from traditional donors. Foreign aid as a share of Ghana’s gross national income (GNI) decreased from over 12% in 2000 to below 3% in 2013. Therefore, there may be a correlation with an increased Chinese presence and a decline in the bargaining power of traditional donors, even if China is not the cause.

Nonetheless, the results clearly suggest that we need to be careful about overestimating Chinese aid and financing. The findings challenge conventional assumptions about the impact of China on traditional development cooperation. They also challenge China’s impact on the bargaining power of traditional donors.

Taken together, evidence from the survey and the case studies suggests a more nuanced narrative. Certainly, the bargaining power of traditional donors is not systematically declining across the African continent as a result of the increasing presence of China.

Haley J. Swedlund, Assistant Professor, Centre for International Conflict Analysis and Management, Radboud University

This article was originally published on The Conversation. Read the original article.