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China hunts African oil as economic clout grows

By Emma Graham-Harrison

BEIJING – China’s Premier Wen Jiabao sets off to woo key African nations this week including the country’s second-largest oil supplier, Angola, but Beijing’s growing economic power may mean his welcome is tempered by resentment.

Thirsty for oil and raw materials, China has poured billions into African countries blessed with mineral wealth, building on a legacy of goodwill from its support of independence movements in the 1960s and 70s.

Nearly one third of the country’s crude imports already come from Africa, and Angola was second only to Saudi Arabia in supplying China over the first four months of the year, sending around half a million barrels per day.

“Africa is hugely important. The Middle East is largely about buying oil, while in Africa it is also about investing in assets,” said Gavin Thompson, China manager at Wood Mackenzie.

“It provides security of supply and also they have integrated it with more of their commodity development plans for minerals.”

Building on past tours by President Hu Jintao and Foreign Minister Li Zhaoxing in what one Chinese official has dubbed an “African year”, Wen swings through Egypt, Ghana, Congo Republic, South Africa, Angola, Uganda and Tanzania between June 17 and 24.

Closer than Latin America, in need of more technical help than Middle Eastern nations, and possessing key mineral deposits left undisturbed for years because of war or civil strife, the continent offers a perfect hunting ground for China’s majors.

Investment is bearing fruit. Booming crude and commodity markets should help push African growth to a 30 year high of 5.8 percent this year, the International Monetary Fund said in April.


But resentment has begun to build that the bounty of cheap manufactured goods China sends in return for raw materials is damaging local industries and stunting Africa’s development.

Complaints which might sound more common from European or American workers are starting to echo through Africa as well, as the cutprice power of China’s manufacturing sector hits home.

The Textile, Garments and Tailoring Senior Staff Association of Nigeria estimates more than 1.8 million jobs were lost over five years directly and indirectly due to Chinese competition.

Even a senior Chinese diplomat noted friction.

“Of course in the development of China-Africa relations, there will be some problems. This is not strange,” Assistant Foreign Minister He Yafei said at a briefing ahead of the visit.

Western nations and rights groups also fret that China exports guns and environmental destruction to Africa along with cheap textiles, and that Beijing is prepared to do business with countries they want to pressure into better governance.

“China’s stated policy to increase aid and boost free trade sounds positive but is undermined by its willingness to engage with more dubious regimes,” said a Western diplomat in Beijing who did not want to be named.

But some Africans are sanguine about the cost of growth on a continent that Western investors often write off as too risky.

“Beijing has a very pragmatic stance, one aimed at securing supply chains of commodities, resources and energy assets, at securing market space for Chinese products,” said Martyn Davies, Director of the Centre for Chinese Studies at South Africa’s Stellenbosch University.

“If China is the reason that African economies are growing at five percent or more, it seems like a good thing to me.”

Beijing seems determined to boost its presence.

If Wen follows the precedent of Chinese leaders’ recent visits, a string of energy deals may be signed in his wake.

Angola last month awarded state-owned Sinopec a 40 percent stake in its lucrative offshore oil Block 18, after the firm proposed a $1.1 billion government signature bonus — out of total investment of over $1.4 billion. It also won a 25.5 percent stake in Block 17, but shocked other firms with its ruthless bid.

“The oil industry has never seen anything like the signature bonuses that they bid on blocks 17 and 18, in its entire history,” said Wood Mackenzie’s Thompson.

“It’s fair to say they are pretty aggressive in Africa.” — Reuter

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