Tough governments are able to get the most out of the rise in emerging-market interest in Africa. Here is one example of countries trying to get beyond the 'win-win' rhetoric in engagements with their Chinese partners. In Ethiopia Addis Ababa holds the reigns.
MELES ZENAWI AND WEN JIABAO/ PHOTO/ REUTERS
He invited his Chinese hosts to visit Ethiopia. Among other things, he wanted them to look at a leather-based industrial cluster Ethiopia is developing to better utilise its live stock population, Africa's largest.
Within weeks, a delegation of Chinese businessmen had arrived in Addis Ababa. Among them were representatives of the privately owned Huajian Group that produces 16m pairs of leather shoes per year. By October, Huajian had decided to invest.
Huajian's general manager arrived in November, hired 50 Ethiopian technical school graduates and sent them off to China for training.
Huajian is leasing a factory site in Ethiopia's Eastern (Oriental) Industrial Zone, Hagos Sequar, an Ethiopian industry ministry official told The Africa Report.
"The machinery is already on its way to Djibouti," he added. Ethiopia, at the end of 2011, reflects the surprising complexity of Chinese engagement in Africa, how it differs from that of the West and – possibly of more significance to the continent –how central the role of African agency is.
China is no newcomer here. In 1972, China financed the Wereta-Weldiya road across Ethiopia's Rift Valley. Between 1998 and 2004, the Chinese contributed 15 per cent of the cost of Addis Ababa's ring road, while Ethiopia paid the rest.
But when Ethiopia's economy began to grow at Asian rates, Chinese investors saw increased opportunities. Not all were in the direction stereotypes would have predicted.
Yes, China's state-owned petroleum companies explored for oil but often as contractors for Ethiopian companies. The Chinese government also unleashed a variety of state-sponsored tools for building economic ties.
Most of these do not involve China's relatively modest foreign aid. The China-Africa Development Fund has made equity investments in a leather factory, a cement plant and a glass factory.
The Eastern Industrial Zone is being built and run by a private Chinese company, with performance-based subsidies from China's economic cooperation fund.
Chinese telecoms firm ZTE teamed up with Chinese banks to provide a $1.5bn commercial suppliers' credit (at the London Interbank Offered Rate [LIBOR]plus 1.5 per cent) to roll out cellular and 3G service across the country.
A preferential export buyer's credit is paying more than half of the $612m cost of a toll road between Addis Ababa and Djibouti.
The tolls will help repay the loan over 20 years. In a twist on a financing mode popularised in Angola, where infrastructure loans were repaid with Angola's main export, oil, China's Export-Import Bank has provided commercial loans for electricity distribution lines, cement factories and other projects, secured (and repaid) by Ethiopia's exports to China, mainly sesame seeds.
These credits are known as hu hui dai kuan or mutual benefit loans. A Chinese company gets the business, Ethiopia gets finance for development at LIBOR plus 2-3 per cent.
Of course, there are downsides. Chinese banks continue to show interest in financing large hydro-power projects with daunting environmental and social challenges.
Reportedly, working conditions were so onerous at the enormous African Union complex built by a Chinese firm that some Chinese workers went on strike.
Ethiopians also complain about the quality of ZTE's technology. At the same time, observers sometimes accuse China of sins it has yet to commit.
In July, Günter Nooke, German chancellor AngelaMerkel's Africa adviser, said that in Ethiopia China's "large-scale land purchases" were partly to blame for a devastating famine.
The California-based Oakland Institute had reported just a month earlier, after an exhaustive four-month 'land grab'study, that Chinese investors were "surprisingly absent from land investment deals" in Ethiopia.
Ethiopia is clearly in charge in this engagement. Chinese traders and shop keepers, who are fixtures across many African cities, are absent on Ethiopia's streets.
These positions are reserved for locals and the Ethiopian government enforces the rules. And China listens. A decade ago, Chinese companies building the ring road complained they could not find enough local skilled workers.
The Ethiopian government asked China to establish a college that would focus on construction and industrial skills. The fully equipped Ethio-China Polytechnic College opened in late 2009, funded by Chinese aid.
Chinese professors offer a two-year degree with Chinese language classes alongside engineering modules. Chinese companies are waiting to hire its first crop of graduates.
This article was first published in the November edition of The Africa Report, on sale at newsstands,
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