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Corruption Concerns Taint Burgeoning China-Africa Trade


Africa’s mineral, timber and oil wealth has been highly sought – and fought over – for years, mainly by Western nations.

Today, though, Africa has become a strong trading partner for China, which surpassed the United States in 2009 and whose bilateral trade reached $210 billion in 2013.

In February, China’s President Xi Jinping hosted Senegal's President Macky Sall and told him this fast-growing trade relationship with Africa "stands witness to the endlessly renewed vitality of Sino-African friendship, to the scale of the potential for co-operation" and "Sino-African strategic partnership."

Chinese Premier Li Keqiang has announced plans to double bilateral trade with Africa to $400 billion a year by 2020.

But there are concerns some of that trade may be illicit.

China aggressively pursues and locks in economic opportunities using, according to analysts, suitcases full of cash when it is needed to close the deal. Another tactic used by Beijing is the "gift" of building and donating public works projects to African states that have raw materials and other things that China wants access to.

Summit addressed corruption

At a summit on Africa hosted by the Obama administration in August in Washington, corruption was high on the agenda. And, there were complaints that Beijing is not adhering to international anti-corruption conventions as it secures African business.

Meanwhile, U.S. corporations are bound by the U.S. Foreign Corrupt Practices Act and also the United Nations Convention Against Corruption (UNCAC). It is a crime for a U.S. entity to bribe or otherwise improperly gain business overseas. Because of that, the U.S.-Chinese economic competition in Africa can be described as an uneven playing field, analysts say.

"China is observing the United States and increasingly, many other wealthy western nations in the OECD [Organization for Economic Cooperation and Development] such as Germany enforce their anti-bribery laws," said anti-corruption specialist Andrew Spalding at the University of Richmond. "China knows that this gives its own companies a competitive advantage. Accordingly, the more the west enforces anti-bribery laws, the greater the incentive for China not to enforce."

Spalding said that "China has passed a foreign bribery prohibition to satisfy its requirements under the UNCAC, but UNCAC does not require enforcement. It would seem [that] neither cultural or economic factors, nor its membership in UNCAC, will pressure China to address foreign corruption."

Corruption abounds in Africa

But China has a fertile corruption field in Africa. The continent has long suffered from rampant corruption.

When nearly 50 African leaders came to Washington in August, U.S. Vice President Joseph Biden was blunt in his remarks about corruption’s endemic prevalence on the continent.

"It’s a cancer in Africa," Biden said. "It not only undermines but prevents the establishment of genuine democratic systems. It stifles economic growth and scares away investment. It siphons off resources that should be used to lift people out of poverty."

Sub-Saharan Africa's record suffers

Sub-Saharan Africa’s anti-corruption record is, overall, dismal.

The good governance group Transparency International’s latest global Corruption Perceptions Index, released in December 2013, reported that of the 20 most corrupt nations, half are in sub-Saharan Africa. Somalia came in at the very bottom, with Sudan, Chad and Eritrea ranking very low on the index.

Some in business circles have proposed that the United States scale back on its anti-corruption measures so as to enable American companies to more aggressively compete for African business.

Spalding stands steadfast against that idea.

"We cannot, and will not, repeal or scale back anti-bribery laws," he said. "Foreign bribery prohibitions are here to stay."

Spalding proposes "encouraging and assisting African governments in enforcing their own domestic bribery laws through joint enforcement and other forms of institution building."

Joseph Siegle, with the Africa Center for Research Studies at the National Defense University in Washington, said illicit activity causes Africa to ultimately wind up with less .

"In a competition involving corruption," he said, "there will always be actors willing to take the process one rung lower. This process would simply accelerate a race to the bottom. … With these actors, however, there is a risk premium on the part of African governments and business partners. There is often a poorer standard of performance, lower reliability and fewer avenues of recourse if there are disagreements over a contract.

"Business transactions with international partners upholding the rule of law, in contrast, are more apt to be sustainable and bring African businesses into other corporate networks, creating more opportunity over the short and long term," he said.

William Fanjoy, with the U.S. Commerce Department’s U.S. Export Assistance Center, said American business attributes ultimately trump shady deals with others.

"U.S. companies can never 'sweeten’ a deal in Africa, but they do offer African partners quality, responsiveness, financing, training and a long-term business relationship," Fanjoy said. "After years of getting to know Chinese poor quality, we find that African companies are seeking out known American quality and reliability."

African countries split on convention

While the United States and China, along with other nations, compete for Africa’s wealth and business, the continent has taken steps to address illicit economic activity.

The African Union in 2003 forged its Convention on Preventing and Combatting Corruption, which so far has been ratified by only 35 of the AU’s 54 members. Transparency International notes, however, that many of those signatory states "have not taken action to implement the necessary legal frameworks" supporting the AU’s Convention.

In 2012, a high-level anti-corruption working group was launched by the United Nations and the African Union. The goal is to find ways to curb illicit financial flows from sub-Saharan Africa, which the good governance group Global Financial Integrity says took 5.7 percent of the region's collective GDP. This U.N.-AU group is expected to issue a report on its strategies for fighting illicit activity later in 2014.

Transparency International puts the responsibility for combatting corruption not only on those African states but also on the G20 – the world’s top 20 nations measured by their economies.

The group is calling for adopting mandatory reporting standards for the natural resource sector for all G20 countries, and country-by-country reporting by multi-national companies.

This would show where the money for oil, gas, logging and precious minerals goes. T-I says "only if leaders and civil society work together to enforce tough laws, and share information on illicit financial flows, will these latest commitments stop the pillaging of Africa."

Africa attracts China

As for China, Africa is a continuing lure.

Former New York Times reporter Howard French, who wrote a book on the burgeoning China-Africa ties, reported that "China’s Export-Import Bank extended $62.7 billion in loans to African countries between 2001-2010, or $12.5 billion more than the World Bank."

U.S. President Barack Obama said this summer that China can be good business for Africa, as long as trade is above board.

"My view is the more the merrier," he said. When I was in Africa, the question of China often came up, and my attitude was every country that sees investment opportunities and is willing to partner with African countries should be welcomed.

"The caution is to make sure that African governments negotiate a good deal with whoever they’re partnering with," Obama said. "And that is true whether it’s the United States; that’s true whether it’s China."

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    Jeffrey Young

    Jeffrey Young is a Senior Analyst in VOA’s Global English TV.  He has spent years covering global strategic issues, corruption, the Middle East, and Africa. During most of 2013, he was on special assignment in Baghdad and elsewhere with the Special Inspector General for Iraq Reconstruction (SIGIR).  Previous VOA activities include video journalism and the “Focus” news analysis unit. He also does journalist training overseas for VOA.

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