News / Africa

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."

 


Jeffrey Young

Jeffrey Young came to the “Corruption” beat after years of doing news analysis, primarily on global strategic issues such as nuclear proliferation.  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 VOA-TV, where he created the “How America Works” and “How America Elects” series, and the “Focus” news analysis unit.

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Comments
     
by: ngugi from: kenya
September 05, 2014 2:48 AM
I love China. The white man is busy killing black people. The white man is busy lying. Lying about China, lying about Africa, even lying about himself. He is great etc etc while he has made money on the back of Africans

by: Eric Olander from: Ho Chi Minh City, Vietnam
September 01, 2014 8:29 PM
If the author thinks the FCPA prevents US corruption in Africa then a) he has not spent time with US businesses on the continent to see firsthand how that is not true; b) he is wholly unfamiliar with the USAID procurement process in Africa where I witnessed firsthand countless no bid contracts being given to friends/cronies of those in the decision making authority. While he is right to point out the prevalence of Chinese corruption in Africa, the implication that the West's laws insulate it from similar illicit behavior is naive at best, delusional at worst. This is written clearly from the point of view of someone who has not spent much time outside the confines of the USG world.
In Response

by: Eric Claude Olander from: Berkeley
September 02, 2014 9:00 AM
Mr. Young, with sincere due respect, you DO imply that FCPA effectively curtails US corruption by noting the comment from anonymous sources: "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." More over, China's corruption in Africa occurs within a broader context that all major actors also participate in and your omission that China is by no means alone as a foreign actor (corporate and government) also implies that somehow the Chinese are in fact different than the US and EU governments/companies when there is ample evidence to the contrary. Context is critical here and to single out China as somehow being more corrupt than other foreign actors is quite misleading.

With respect to your background outside of the USG, well, that is not obvious from your biography in the footer of your article. No offense was intended however it does seem appropriate to at least raise the issue when you write on a US-government operated website about a US competitor being singled out without the appropriate editorial context of the larger corruption story. To avoid the perception of partisanship, I and your readers would no doubt benefit from additional information about your private sector background.
In Response

by: Jeffrey Young from: Voice of America
September 02, 2014 8:06 AM
Mr. Olander: Never in my article did I state or imply that I believe the FCPA has prevented instances of corruption. I lived in the Middle East for many years, and in 2013, was detailed to Stuart Bowen, Special Inspector General for Iraq Reconstruction. I saw plenty of instances in Iraq where U.S. companies blatantly violated the FCPA. Our job in the IG's office was to identify these perpetrators, investigate, and then turn them over to DOJ.

I am also very familiar with the USAID's workings, at least in Iraq. So you contend that I have "not spent much time outside the confines of the USG world?"
30 years of my professional career was in the private sector at several major news organizations. Because of that your comment has no basis. Regards...

by: Maribel from: Spain
September 01, 2014 8:04 PM
Actually, I can't stand what China and other countries are doing with Africa. We have news every other day, about ilegal african inmigrants who try to cross the bordered wall. They come becouse of trafficking human and a lot of horrible things more. They could live well in they countries, if they didn't have corrupt politicians and if the rest of the countries and multinationals didn't want to take advantage of it.
I am sorry.

by: Maigari from: Zaia, Nigeria
September 01, 2014 4:10 PM
Much as there are valid concerns on China's "we don;t ask" policy one fact stands out The West is not any batter when it comes to corruption. Long before the Chinese arrived it was the Western multinational corporations that made corruption a routine. Huge sums were set aside as PE or whatever that usually end up in the private pocket of public officers. To cap it all, most of the corruption proceeds are banked and laundered in Western banks purchasing expensive estates, cars and unnecessary luxury goods all under the watchful eyes of the Western governments.
In Response

by: Jeffrey Young from: Voice of America, DC
September 02, 2014 8:13 AM
Mr. Maigari: I agree with your point that western nations were bribing and plundering in Africa long before the Chinese entered that continent. I also agree that it has, for years, been the western banks who gladly took suitcases full of cash from the likes of Mobutu and Mugabe...and the rest of them. Other "loot" from African operations gets repatriated (and laundered as well) to China where it is used for construction and other developments.

But whereas the United States investigates and prosecutes under the FCPA, China does not appear to be interested in using its anti-corruption laws outside of its borders. Regards...

by: max ajida from: pretoria , South Africa
September 01, 2014 9:37 AM
Africa needs constructive investment but China is destroying Africa. Its business policy are illicit and encouraging Africans leaders to corrupt. China as a later come to Africa ,needs our resources badly that it doesn't care whether the deals hurt indigenous people, provided they get our resources. China's aid benefit the ruling elites. We need proper deal that benefit locals and pressure must be exerted on China.

China's foot in Africa is destructive instead of developing Africa ,it is looting our resources. It doesn't implement democratic reforms but get our natural resources with corrupt leaders. Every African who has been shun by the West goes to China for the cheque without questioning. This encourages African leader to corrupt. China , your aid without strings attached must have limitation.

And you Western nations you need to change your attitudes towards Africans. When we tell you this is against our culture and values, it doesn't deserve aid cancellation. That is inhuman that's why African leaders opts for China. African leaders don't tell to stop dancing Mozart.

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