Corruption and Environmental Damage: Chinese Fossil Fuel Investments in Africa

China's relationship with Africa is multifaceted. The People's Republic of China (PRC) shares ideological bonds with many African countries because of early ties to anti-colonial struggles and through the Non-Aligned Movement. Every African country recognizes the PRC with the exception of eSwatini (Swaziland), which has diplomatic relations with Taiwan). Many African countries preserved trade relations with Beijing after the 1989 Tiananmen Square crackdown, and those commercial links have only grown stronger. China has been Africa's leading trading partner since surpassing the United States in 2009.

Criticisms have focused on adverse environmental impacts, violations of labor laws and human rights, and corrupt practices.

Many African governments seek Chinese assistance through the Belt and Road Initiative (BRI) to bridge the continent's infrastructure gap, while China in turn seeks access to a number of key strategic resources, including fossil fuels, minerals, and also access largely untapped markets. In addition to being rich in natural resources, some African countries attract Chinese interest because of relatively cheap labor, poor governance, and lax environmental standards. In 2017, McKinsey reported that more than 10,000 Chinese companies are likely operating throughout Africa.

The amount of money involved is staggering. According to a 2021 report from the Shanghai University of International Business and Economics, China has since 2000 invested a total of $47 billion throughout Africa (in 52 out of 54 countries), with new investments adding up to $2.96 billion in 2020 (an increase of over $200 million from the previous year). The vast majority of Chinese investment--87 percent--has been concentrated in four sectors: energy, transport, metals, and real estate. China's Export-Import Bank provides much of the financing for infrastructure projects in Africa, but a number of commercial banks have also established branches throughout the continent.

Yet, despite these numbers, Africa attracted only 2 percent of Chinese foreign investment in 2019.

The impact of Chinese economic interactions with Africa can also be measured at an individual level. "There are no individuals in Nigeria who don't have Chinese goods," reports Tijani Abdulkareem, the executive director of the Socio-Economic Research and Development Centre in Abuja. "It's the food that they eat, the wristwatches they own, the clothes that they wear."

China's footprint in Africa, however, has caused considerable anger, resentment, and pushback from communities in and around the projects that China has financed, constructed, or promoted, particularly those involving extraction industries. Criticisms have focused on adverse environmental impacts, violations of labor laws and human rights, and corrupt practices.

In a webinar entitled Voices from Africa: Activist Perspectives on Chinese Investments, sponsored by the Africa Climate Justice Group, six representatives from civil society organizations around Africa provided their on-the-ground perspective on Chinese activities in mining and extraction in their community followed by commentary from an expert on Chinese investments in Africa. The following report is a synthesis of their presentations.

Infrastructure Projects

China has invested in a number of high-profile infrastructure projects throughout the continent, including a $7 billion oil pipeline in Niger, a $1.3 billion port project in Cameroon, and a $3.6 billion investment into the aluminum sector in Guinea. Many of these projects are designed to facilitate access to raw materials and speed their export via roads, rail, or port.

China is also off-shoring its manufacturing capacities: because of their negative environmental impact, to reduce China's own carbon footprint, and to take advantage of lower labor costs and proximity to raw materials. Africa needs to create labor-intensive manufacturing at the same time that China is hoping to decrease that manufacturing.

In Nigeria, Tijani Abdulkareem points out, 218 Chinese firms are involved in everything from the construction industry to the food and beverage sector. Big-ticket infrastructure projects include the $5.8 billion hydroelectric Mambilla Dam, a $2.8 billion gas pipeline, a $1.5 billion harbor complex, and a $200 million airport serving Abuja.

In Guinea, reports Aboubacar Diallo of the Centre du Commerce in Conakry, China is providing $20 billion in infrastructure funding in exchange for mining concessions, an agreement that will last from 2017 to 2036. China has already invested in several hydropower plants. But the focus of its interest now is access to critical ores like iron and bauxite as well as a refinery to turn that bauxite into aluminum and a port to export the metal. In exchange, China has pledged to reconstruct a major road at the cost of $2.1 billion, rebuild four universities at a cost of $300 million, rehabilitate roads and sanitation in the capital of Conakry, and set up an electricity grid for $250 million. Only the road has been started, however, and the other three major projects have been delayed.

One of the biggest proposed projects that China is spearheading on the continent is the Musina-Makhado Special Economic Zone in the Limpopo region of South Africa, which the government approved in 2016. Contracts have been awarded to a subsidiary of the Chinese firm Shenzhen Hoi Mor and nine other Chinese companies totally more than $10 billion in investments. This industrial development zone will center around processing minerals such as chrome, manganese, and iron as well as the manufacture of cement and steel. Providing power to the zone is a proposed 3.3-gigawatt coal-fired plant.

In some African countries, however, infrastructure is conspicuously absent from the picture. Zimbabwe, mostly smaller scale Chinese companies have been involved in the mining sector. But as Farai Maguwu of the Centre for Natural Resource Governance in Harare points out, the Chinese "don't build anything in the area. They simply dig and leave behind open pits. There's no investment in education or in road infrastructure, which they destroy using their machinery."

The experience in South Sudan, where China has been developing oil fields since the 1990s, has been similar. "The communities are supposed to benefit from the oil being produced in their area," observes Pach Ayuen Pach of the Heart of Mother Earth Foundation. "It's their right, but there are no good schools, no clean water, no roads, no hospitals, and nothing good for the community."

Environmental Impact

The environmental impact of Chinese investments depends on the nature of project, the behavior of Chinese firms, and the laws and enforcement of the host country.

Chinese financing arms--the Ministry of Commerce, the Export-Import Bank--have environmental regulations on the books. But if you look closely, there are very few regulations and they largely apply to administrative processes. Chinese administrative agencies have to comply with regulations when they review investments, but there no laws to force them to screen these investments. There are no Environmental Impact Assessment requirements, no requirement of disclosure of Chinese overseas conduct.

National environmental protection laws and oversight mechanisms vary widely across the continent. South Africa has perhaps the strongest environmental regulations on the books. For instance, NGO activists won a court case to shut down a proposed coal-fired plant in Mpumalanga province in July 2020. "In South Africa, we do have legislation that helps us stop carbon-intensive projects," says David Tshidzumba of Save Our Limpopo Valley Environment.

But so far activists have been unable to stop the Musina-Makhado Special Economic Zone on the grounds of environmental impact, largely because such SEZs are exempt from the usual environmental regulations. South Africa, Tshidzumba explains, is a water-scarce country and the site of the SEZ "is one of the most water-scarce regions in the country." The industrial zone will need 80 million cubic liters of water per year, but it remains unclear where this water will come from. Also troubling is that the project will contribute a full 15 percent to South Africa's carbon budget even as the government has agreed to reduce carbon emissions. "If it goes ahead, South Africa will be on its backfoot," Tshidzumba continues. "And we'll probably see sanctions against South Africa because of this project." The Environmental Impact Assessment of the economic zone is still ongoing, but "the Chinese speak of the project as if it is already been given the go-ahead."

In Guinea, where Chinese investments have been concentrated in bauxite and iron industries, the mining has had tremendous impact on the land. "Local law requires restoration of the land," Aboubacar Diallo reports, "but none of it has been rehabilitated." Guinea also has mining laws that require compensation for land taken for such operations, yet companies have seized arable land and displaced people without providing compensation. Rice is the major crop, occupying nearly one-third of the arable land, but the discharge of lubricants and waste water from bauxite mining has compromised this food production. Dust from the mining has polluted the air, and there has been sound pollution as well from blasting and the use of heavy equipment.

Sometimes the environmental impact stems from not only ostensibly legal projects but also illegal operations. Reporters in Nigeria, for instance, have exposed the pollution connected to illegal logging, fishing, and mining done either by Chinese entities or by local actors who then sell to Chinese firms. The impacts include "increased flooding, erosion, the extinction of animals and plants," says Tijani Abdulkareem. "Illegal logging denies communities sources of food and livelihood."

Illegal fishing and mining are a problem as well in Madagascar, where China is a major trade partner. "The Chinese use mercury for gold exploration even though it's prohibited," reports Volahery Andriamanantenansoa of the Center for Research and Support for Alternatives to Development--Indian Ocean. "The Malagasy government doesn't have the means to do anything about it."

But the principal mining interest China now has in Madagascar is rare earth minerals. Reducing the mining of these minerals in China itself, because of adverse effects on environment and health, Beijing is eager to find other sources of these critical inputs into high-tech products. In Madagascar, China expects to extract from 300-800 tons of rare earth minerals during the pilot phase of its extraction. But the removal of only one ton of such minerals generates 1,000 tons of contaminated water and 2,000 tons of toxic waste. Over the full lifetime of the project, which could be 40-50 years, that would total an astonishing 500 million tons of poisoned water and one billion tons of toxic waste. "This is simply catastrophic," Volahery says. The mining will have a devastating impact on the rich biodiversity of the region, adversely affect the tourism sector, and undermine key agricultural products like vanilla and coffee.

The mining company has "promised to use less devastating technique," she continues, "but they don't have experience in rare earth mining." And even though these companies are well aware of the environmental impact this kind of mining has had in China, they are turning a blind eye to the consequences in Madagascar.

In South Sudan, meanwhile, "the Chinese are not observing international environmental standards," reports Pach Ayuen Pach, and their operations in the oil sector are "causing air, water, and soil pollution," including the emission of gasses through diesel engine generators, the evaporation of gases from burrow pit, and the emission of unburned gasses at the field processing facilities. "The oil industry in South Sudan has left a landscape pocked with hundreds of open waste pits along with water and soil contaminated by toxic chemicals," he concludes.

Labor Impact

The infrastructure projects and mining concessions are supposed to generate not only revenue for African governments but also jobs for local workers. African countries like South Africa, Nigeria, and Namibia have the highest rates of unemployment in the world at 33-34 percent.

In many cases, Chinese firms have resisted hiring locally and has instead brought in their own workers from China. By the end of 2019, 182,000 Chinese were working Africa, many of them on construction projects. According to McKinsey, however, Chinese firms rely on Africans for nearly 90 percent of the jobs.

Conditions at those jobs vary. At one factory in Zimbabwe, Farai Maguwu reports, "workers allege that they are locked up during lunch hour. The Chinese say, 'if we leave you free, you will steal.' They are only released after lunch hour. We have also seen Chinese discharge firearms where workers are demanding a minimum wage."

Pach Ayuen Pach has been tasked with monitoring health and safety conditions for workers at the UNI Afro oil company in South Sudan. The Chinese company has largely ignored the South Sudanese labor laws. So, for instance, workers labor nine hours a day, seven days a week, 30 days a month. "Employees have no option," he points out. "It is either work or a pay cut, or dismissal. People in this regard choose to work even if it is against their personal health." The food provided lacks vegetables aside from raw onions; accommodation for Sudanese workers is of lesser quality than where Chinese workers stay. Workers are entitled to a month off every three months but at half-pay, which discourages them from taking the time off. The language barrier complicates all of these interactions.

In South Africa, the Musina-Makhado Special Economic Zone will reportedly create as many as 53,000 jobs at the site plus many more in supporting industries. To get those jobs, the South African government has promised to apply special treatment such as tax-exemption and a waiver of import duties to the Chinese companies operating there, which means a considerable drop in government revenue.

"Whenever we try to delve into the details of the job creation," David Tshidzumba reports, "we're given the silent treatment. We need more transparency. Our laws afford us the opportunity to get that information."

Lack of Accountability

One of the challenges of dealing with Chinese companies is the lack of transparency and clear lines of accountability. Some of that has to do with linguistic and cultural gaps. But it also reflects a certain pattern of corporate behavior.

Even when communities and civil groups raise concerns with Chinese companies in Guinea--for instance about the violation of laws or rights--"the companies continue to move ahead with impunity," observes Aboubacar Diallo. "When a community contacts the World Bank, they are able to have recourse. That's not the case with any Chinese company."

"Chinese companies don't do business like other multinationals do," agrees Tijani Abdulkareem. "Even when we raise issues of environmental degradation, they don't care what civil society says. China made a commitment at the UN General Assembly to support clean energy. We have to step up our game to hold them to their commitments."

In the case of rare earth mining in Madagascar, the company Reenova has deliberately avoided transparency to boost profits. Although Chinese in origin and based in Singapore, Reenova is registered in Mauritius in order to take advantage of a tax reduction agreement between that island and Madagascar. It was issued a permit for "research" in 2003 and, despite the prohibition against selling minerals extracted during such a period, company documents filed on the Singapore stock exchange suggest that it indeed plans to sell up to 800 tons of material mined during this pilot phase. Moreover, the company hasn't consulted with the affected communities, offering only information about the purported benefits of the project and resorting to threats when the community remains unconvinced.

In Zimbabwe, where the mining operations are smaller scale, the companies often have no physical address at all, not even a website. Still, they maintain close relations with the Zimbabwean government. In one case, the government sent out state security forces on behalf of a Chinese company to bulldoze a site in a community that clearly was opposed to coal mining. When the community continued to insist that the Chinese company leave, "the Chinese instructed the government that the community leader be put in jail and barred from visiting the community for four months," Farai Maguwu reports.

In another case, Maguwu asked the Zimbabwean parliament to investigate a Chinese company that was mining diamonds in partnership with the Zimbabwean defense industry. The Chinese were arguing that they were just in the "exploration" phase even though the same company "had mined in the country from 2011 to 2015 before the former president kicked them out," Maguwu added. "They returned in 2018. It doesn't make sense that they are now doing 'exploration.'"

Corruption

One obvious way that Chinese companies have gotten around environmental and labor laws and maintained both a lack of accountability and transparency has been by bribing or otherwise paying off officials.

In Jigawa, one of the poorest Nigerian states, Chinese businesses can with impunity seize land being farmed by community members because "local politicians who have been bribed don't care," notes Tijani Abdulkareem. "Most of the officials have been bribed. In these states where there is high state of banditry, a Chinese businessman can bribe to get whatever he wants."

The same applies to Nigerian businessmen who act on behalf of Chinese companies. One such businessman, nicknamed "Dan China," presided over illegal mines that extracted $278 billion in lead, zinc, tin, and other ores. "Protected by bribed security agents and local officials, Dan China allegedly smuggled the illegally mined ore to China via the port of Lagos," Abdulkareem recounts. In 2017, in an unusual anti-corruption effort, "the Nigerian government cracked down on one of the largest of these illegal mining operations at Kampanin Zurak, a rural area about 150 miles outside the state capital, Jos. During the raid, police arrested sixteen Chinese nationals working at the remote site."

In their eagerness to supply Chinese buyers, illegal loggers and fishers are deforesting Nigeria and depleting fishing supplies along the coast, again protected by local officials who have been bought off. Nigeria loses an estimated $70 million annually from illegal fishing alone. "In July 2017, Sinopec-owned Addax paid $32 million to settle Swiss legal charges that the company had paid up to $100 million in bribes to Nigerian government officials via middlemen," Abdulkareem reports.

Similar levels of corruption accompany mining operations in Guinea. In 2020, Israeli-French mining magnate Beny Steinmetz and two others stood accused in a Swiss court of paying $10 million in bribes to acquire access to the lucrative iron deposits in Guinea. Earlier corruption charges were dropped when Steinmetz relinquished the iron mining contracts. The government subsequently gave the contract to a Chinese-Singapore-Guinean joint venture, which has promised a rail link and a deep-water port to transport the ore to global markets.

In Zimbabwe, the Chinese business owners "give the impression that they are protected by someone in high office who has given them the permission to do what they please," Farai Maguwu reports. "When communities oppose mines, the state will react, arresting Zimbabweans to protect the Chinese."

Cultural Impact

Mines and infrastructure projects don't just have economic and environmental impact. They also have consequences for the social and cultural life of the communities where they are sited.

In the Musina-Makhado Special Economic Zone in South Africa, for instance, "the sacred animals and trees of the Venda people will be destroyed when making way for this project," says David Tshidzumba. "They will exhume graves that are more than 60 years old, uproot trees sacred to indigenous people. Once you destroy the land, once you take away the water, we don't have a sense of belonging. It's not just heritage but also livelihood, our way of life."

Mining projects in Zimbabwe have involved the appropriation of communal land, including drilling in gravesites. "I don't think there is anywhere in the world where there has been such a blatant violation of cultural rights as is happening in Zimbabwe," says Farai Maguwu. At one granite stone mining site, the Chinese company Heijin told villagers that the operation would go forward because they didn't own the land. The Zimbabwean government, meanwhile, tried to downplay the number of villagers affected by the operation.

Looking Ahead

Civil society activists have mounted campaigns against a variety of Chinese-financed extraction projects throughout Africa. They are pursuing legal strategies to prevent the Musina-Makhado zone from getting green-lighted. They are working with impacted communities to disseminate information about environmental impact, expose examples of corruption, and put pressure on governments to abide by local laws when dealing with Chinese companies. They want to establish greater transparency and accountability around Chinese projects and more durable mechanisms that can responsibly handle the complaints of workers and community members. And they are emphasizing non-extractive projects--sustainable agriculture, ecotourism, clean energy--that can provide comparable economic benefits without the devastating impact on the environment and the community.

With Western firms, African activists can pursue actions against companies in the host country's judicial system. But, China doesn't have an independent judiciary. Corporate social responsibility became part of Chinese contract law in 2006 and entered into force in 2014, but companies don't necessarily uphold such principles. Although Beijing established a court in 2018 under the authority of the Supreme People's Court to handle international claims arising from the Belt and Road Initiative, it's unclear how independent this judicial body will be.

China is, however, increasingly concerned about its reputation. It has provided $60 billion in foreign aid and devoted $1 billion of its Belt and Road Initiative to African infrastructure. It wants to be seen as helping Africa not exploiting it.

Recently, the government of the Democratic Republic of Congo suspended a number of Chinese companies for illegal mining activities and Beijing responded by ordering the companies to leave the region and promising sanctions if the companies are found guilty of violations. This case demonstrates that the Chinese government is sensitive to public backlash.

China has long maintained that it will not interfere with the sovereignty of the countries where it is economically involved. On this question of self-determination, then, African stakeholders perhaps have their greatest leverage. If they can publicize complaints, mobilize discontent, and persuade governments to take action, as in the DRC case, then China can be persuaded to change course, if not to uphold principles of corporate responsibility then to respect the sovereign will of the population and protect whatever remains of China's international reputation.