The success of Chinese resource companies in tapping Africa’s bountiful natural wealth is the envy of their Western competitors, who frequently struggle to get a foothold in Africa’s alluring but frustrating mineral sector. China’s success stems from building much-needed infrastructure in exchange for privileged access to high-quality natural resources. China’s twin policies of offering no-strings investment and refusing to interfere in the internal affairs of other countries, plus the fact that China is unburdened by a toxic colonial legacy on the continent, make its state-owned companies a far more welcome partner for African governments than troublesome Western investors. (Michael Komesaroff, An African Romance, China Economic Quarterly 9 (Dec. 2010).
The recent decision by Australian miner Rio Tinto to team up with China’s aluminium champion Chinalco on a large iron-ore project in Guinea, a tiny state in west Africa, suggests that Rio is attempting to hitch a ride on China’s coattails in the continent. . . . Most importantly, the project could demonstrate that it makes sense for Rio to form a much closer relationship with Chinalco, already its largest shareholder. . . . Announcing his company’s participation in the Simandou development, Chinalco’s president Xiong Weiping mentioned both his company’s skill in executing infrastructure projects and its understanding of the Chinese market. But Chinalco’s biggest advantage in the African environment is the fact that is heavily backed by the Chinese state. In contrast, Rio Tinto’s poor relations with the Guinean government are accentuated by the fact that, as with many of its global peers, it is a company without a country. Although most of its earnings are derived from Australian mines, Rio has a dual public listing in the United Kingdom and Australia, its headquarters are in London, and very few of its board or more senior executives have any connection with Australia. But unlike national champions, companies with such confused national heritage can only expect limited support from the countries they use as domiciles of convenience. Chinese state champions like Chinalco, on the other hand, enjoy Beijing’s unswerving support. (Michael Komesaroff, An African Romance, China Economic Quarterly 9-10 (Dec. 2010).
This suggests that Chinalco’s primary motivation for investing in the Simandou project is to work with Rio. Why? With most of the next generation of game-changing mineral projects in resource-rich but risky African countries, Chinalco wants to demonstrate to big Western miners such as Rio that, by reducing project risk and lowering capital costs, working with an influential Chinese champion will give them a competitive advantage. Chinalco hopes that a successful execution of Simandou will demonstrate to Rio shareholders that their previous rejection of its overtures was shortsighted, and there is value for both companies in a closer association – possibly even a merger. (Id. at 12).
Yet, despite its undoubted success, cracks have begun to appear in China’s African strategy. One of the most contentious issues is labor relations. The core concern in a continent with a chronic shortage of jobs is that Chinese developers ship in Chinese labor in preference to local workers. In Gabon, where China National Machinery and Equipment Import and Export Corp has a 25-year accord with the government to build and operate a 30 mtpa iron ore mine, the number of Chinese workers required for the project has reportedly increased from 10,000 to 30,000 (five times the size of the local French community, in this ex-French colony). While imported Chinese labor is more expensive, China’s ability to deliver competitively priced capital projects depends on skills and work practices that are hard for non-Chinese to emulate. The Chinese also have difficulty communicating with local workers, especially unskilled laborers. (Id., at 10).
African governments are ecstatic about China's increasing economic interest in their continent. The assistance provided by China is fast, easy and effective. There is little discussion of economic policy and human rights, hallmarks of western support. According to the leaked cables, Julius Ole Sunkuli, Kenya's ambassador to China, said: "Africans were frustrated by western insistence on capacity building, which translated, in his eyes, into conferences and seminars. They instead preferred China's focus on infrastructure and tangible projects".
China's success in roadbuilding has become emblematic of a new approach to development in Africa, which is pleasing African governments. But perhaps even more important is that African governments perceive cracks in the donor edifice to be in their interests. As western donors have sought ever more to harmonise their aid, generally corralling behind the analysis of the IMF and the World Bank, the power of recipients to propose alternatives is reduced. Some western pressure has been useful, on public finance reform, for example, and on human rights. But much of it has been disastrous and loaded with self-interest (the Washington Consensus policies spring immediately to mind). So, overall, African fears of coordination are justified. In the reported words of Sunkuli: "Africa would lose the benefit of having some leverage to negotiate with their donors if their development partners joined forces." (WikiLeaks cables: China's aid to Africa has strings attached, Poverty Matters Blog, The Guardian (U.K.), Dec. 10, 2010)
Populist politicians such as Zambia’s opposition leader Michael Sato have campaigned vigorously on an anti-Chinese platform. Even previous sup- porters of Chinese investment are becoming cautious. Angola has long been China’s biggest oil supplier, but in 2009 it refused permission for Ohio-based Marathon Oil to sell its 20% stake in an offshore oil lease to two Chinese companies, CNOOC and Sinopec. Similarly, the Libyan government blocked Canadian company Verenex from selling an offshore well to CNPC. (Michael Komesaroff, An African Romance, China Economic Quarterly 10 (Dec. 2010).
Complicity in the business and human rights context refers to the indirect involvement of companies in human rights abuses. In essence, complicity means that a company knowingly contributed to another’s abuse of human rights. It is conceived as indirect involvement because the company itself does not actually carry out the abuse. In principle, complicity may be alleged in relation to knowingly contributing to any type of human rights abuse, whether of civil or political rights, or economic, social and cultural rights. Allegations of company complicity typically have concerned involvement in abuses by State or non-State actors. For example, legal uses of the term refer to both indirect involvements in government abuses and those of non-State actors, such as paramilitaries.15 Additionally, shareholder divestment decisions have been made in response to alleged indirect involvement of a company in a supplier’s violations of human rights in the workplace. (Clarifying the Concepts of “Sphere of influence” and “Complicity” Report of the Special Representative of the Secretary-General on the Issue of Human Rights and Transnational Corporations and other Business Enterprises, John Ruggie, A/HRC/8/16, 15 May 2008 at Paras. 30-31)The potential application of these standards on China's Africa policies and activities can be understood as touching on one of two aspects of its engagement. First, China's state to state activities, and especially its relationships with governments that may in time come to be judged to have violated human rights and humanitarian law, may expose the Chinese state to charges of complicity. Second, China's engagement in economic activity within states that may be responsible for human rights violations may expose Chinese state companies, and the Chinese state itself (as thew effective owner of these enterprises) to charges of corporate complicity. Chinese enterprise exposure to charges of corporate complicity may be augmented under the developing normative standards of business and human rights.
This framework is quickly moving toward institutionalization at the international level. On 22 November 2010, Special Representative Ruggie proposed draft "Guiding Principles for the Implementation of the United Nations 'Protect, Respect and Remedy' Framework" (Announcement [PDF] and Draft report by Special Representative Ruggie with full text of Guiding Principles & commentaries [PDF]). The draft Guiding Principles are open for comment at Special Representative Ruggie's online consultation forum until 31 January 2011. "The Guiding Principles elaborate and clarify for companies, states, and other stakeholders how they can operationalize the UN ‘Protect, Respect and Remedy’ Framework, by taking practical steps to address business impacts on the human rights of individuals. The UN Human Rights Council had endorsed the Framework unanimously in 2008, and asked Ruggie to provide this additional concrete guidance." (Announcement [PDF]).
Michael Komesaroff, then, has drawn back the curtain on a development that has implications not merely for China, its competitors, African states, global civil society, but also for the development of the basic framework within which economic globalization operates. What Chinalco and Rio Tinto point to, in the dealings of both, and the African governments with and through which they operate. At one level, China is pointing toward new patterns of global engagement by states, through economic enterprises in global markets as participants. It also suggests the increasingly powerful way in which economic actors, whether state owned or private, continue to increase their ability to influence smaller or weaker states. On another level, global economic activity is making clearer that conventional notions of states and the relationship of states with their citizens and outsiders, are increasingly less connected to the ideological foundations from which they draw a certain amount of legitimacy. Not only do states produce powerful corporate actors, but private corporate actors have a greater incentive to acquire public authority if they mean to compete without a state "sponsor". At yet another level, these activities suggest the growing importance of international normative frameworks for the regulation of economic activity--whether conducted in state-to.-state activity, or between states and economic actors (public or private). More importantly, it points ot the growing importance of international soft law as the basis on which such conduct is likely to be measured. While states, including China and others, may dismiss emerging soft law governance frameworks like the U.N.'s Protect-Respect-Remedy framework as not binding as a matter of law, it is likely that to the extent conformity to those standards may affect China's efforts to reach customers and markets, or affect host state willingness to deal (in part as a result of popular reaction), even the most powerful public actors will begin to conform their operation to new governance realities.
All of this points toward a future that is not all that far from the present. For the moment, Chinese activity in Africa suggests the new face of public engagement in markets, the importance of host states as market participants and regulators when dealing with foreign states seeking to project their economic activity outside their national borders, and the importance of the private corporate form for public policy objectives.