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China’s Agro-Development Cooperation with Africa: The Agribusiness Model

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Beyond Official Development Assistance

Part of the book series: Governing China in the 21st Century ((GC21))

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Abstract

This chapter examines the ‘agribusiness model’ adopted in Chinese agro-development cooperation with Africa. It introduces the model by exploring its motives, actors and modalities and further unpacks the model by examining four fieldwork-based case studies of Chinese agribusiness projects in Mozambique. The four cases bring to light different types of company actors, governmental relations, investment fields and modalities. Meanwhile, they also share certain similarities with each other and thus provide a good basis for a comparative integrated analysis. A preliminary analysis of the results—particularly concerning the financing, production, processing and market aspects of the agro-investment—of the ‘agribusiness model’ is provided at the end of the chapter.

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Notes

  1. 1.

    That is $39.8 billion by the end of 2016 according to the online database of National Bureau of Statistics of China (http://data.stats.gov.cn/english/easyquery.htm?cn=C01).

  2. 2.

    For instance, to optimize and upgrade the agro-industrial structure through growing crops of comparative advantages, e.g. labour-intensive vegetables and fruits, and accordingly, developing land-intensive crops in suitable foreign countries.

  3. 3.

    For more details about Chinese ‘agriculture-related companies’, see Sect. 4.1.2.

  4. 4.

    This is a very important government agency in China. Authorized by the State Council, the SASAC is entrusted with investor’s responsibilities on behalf of Chinese people and government, supervising and managing the state-owned assets of the enterprises under the supervision of the Central Government (excluding financial enterprises), thus enhancing the management of the state-owned assets.

  5. 5.

    NDRC is the key ministry under the State Council that is responsible for monitoring and guiding the national macro-economy and social development.

  6. 6.

    Others also include general foreign investment, foreign engineering project contracting, and foreign labour cooperation.

  7. 7.

    There are mainly three types of taxes applied in the overseas investment area, namely business income tax, goods and labour tax and import and export tariff.

  8. 8.

    The CADFund was established in 2007 as one of the practical measures pledged by Chinese government during the 2006 FOCAC with the view to boosting China-Africa economic relations. Specifically, it is aimed to support Chinese companies entering African markets and conducting foreign investment. As a sovereign fund, CADFund is provided by China Development Bank and adopts the PE (private equity) model in financing the targeted projects, which is different from the traditional free aid or loan model (CADFund website). The funding scale of CADFund reached $10 billion in 2018; and by the same year, the Fund had established 5 branches in Africa and financed more than 90 projects across 36 African countries, with pledged and realized investment value totaling at $4.6 billion and $3.3 billion, respectively (Zhou 2018). Agriculture is among the Fund’s key areas of investment (others include, for instance, infrastructure, manufacturing and energy).

  9. 9.

    In less-common cases of agro-investment through M&As, Chinese companies may not be directly involved in the production process.

  10. 10.

    Mozambique is among a few African countries with which China also maintains good inter-party relations, which is surely a boost to inter-state relations of the two countries and helps pave the way for wider political and economic cooperation.

  11. 11.

    19 farms were chosen from the 53 state-owned farms under the Hubei state farming system to form the Lianfeng company (Zhang 2008).

  12. 12.

    For more information about state farming enterprise, see Sect. 4.1.2.

  13. 13.

    This is by the Chinese standards: as set by the Chinese government, agro-companies with an annual revenue over 200 million RMB are considered ‘large-scale’, between 0.5 and 200 million RMB ‘medium-scale’ and under 0.5 million ‘small-scale’ (NBS of the PRC 2011).

  14. 14.

    Hainan, Dongbei, Hanjiang are different regions in China that have good natural conditions for farming.

  15. 15.

    For more about the local politics between central and provincial Mozambican authorities around this issue, see Ganho (2013).

  16. 16.

    More specifically, the main responsibility of RBL-EP is to grant Wanbao the concession of 20,000 hectares of land and ensure that the land will not be given or transferred to any third-party. The land lease expires in 50 years. Also, RBL-EP needs to help coordinate the entire process of the project development. In return, Wanbao takes the full responsibility to exploit the 20,000 hectares of land. In addition, the company is required to transfer Chinese farming technology and provide agricultural services to the local agro-producers and assist in the training of RBL in the area of irrigation, production and improvement of the market environment. According to the agreement, 10% of the cultivated and irrigated land within the project’s perimeter should be allocated back to the local producers for the purpose of technology transfer.

  17. 17.

    A most recent development of the Wanbao project is that, it’s been transferred from the private Wanbao company to China Railway 20 Bureau Group Corporation (CR 20), a Chinese SOE, since September 2017 due to some management issue of Wanbao company. The project is also renamed ‘Wanbao Moz Agricultural Park’ and has since operated well. The actual farming areas, however, remain at a similar level of around 3000 hectares (Sun 2019) with that in 2013 when the fieldwork was conducted (see above).

  18. 18.

    These two farms are also among the 19 Hubei farms that constitute the Lianfeng company.

  19. 19.

    There are several reasons for this. It is first and foremost required by the local regulations. There is a fixed quota for foreigners to be employed. In addition, it is also regarded by the Chinese managers as more costly and ‘troublesome’ to use Chinese farmers. Most of these Chinese farmers had never been abroad in their lives, not to say to places as far and tough as Africa. They tended to feel homesick, easy to get ill (malaria illness and even death) and violated local regulations or cultural rules unknowingly, which thus often caused troubles to the company. They were, therefore, regarded difficult to manage.

  20. 20.

    Ganho (2013), for instance, casts doubt about the fairness of the trainee selection and suggests implicitly that Wanbao was involved in this unfair selection process. Indeed, as confirmed by a Mozambican scholar (Chichava 2013) who is well aware of the local situation, there were a lot of politics at play among local actors in this process in order to benefit from it. However, to what extent Wanbao was involved in it is not clear. First, Wanbao did not seem to know the local situations very well; for instance, they did not even clearly know the background and role of RBL-EP, their main partner. Second, the criteria they did propose to the Mozambican government were concerned mostly with agro-productivity; for example, they hoped the Mozambican government to choose trainees who have a family rather than being a bachelor so that, out of family responsibility, they would work harder and better. They would also prefer to have smallholders rather than people with other sorts of ‘background’ because the latter were often only half-hearted towards the training or even not present at all; this may have a direct impact on their performance and, accordingly, the productivity of Wanbao’s project (Interview 18 November 2013).

  21. 21.

    Ganho (2013), for instance, notes in her research that the farmers had to pay for the training, which was not true according to the author’s interviews. She confused it with the fees the farmers were required to pre-pay for agro-materials and equipment in the Demonstration Stage. The training was free as per the ‘exchange’ agreement between Wanbao and EP-RBL in 2012.

  22. 22.

    Having witnessed the performance of Wanbao, many Mozambican farm owners who had long suffered financial loss due to the low agricultural productivity expressed the interest of cooperation with Wanbao. Wanbao also found it feasible and thus started to cooperate with some of them since 2008. Specifically, the cooperative farming model is very much similar with that of the Demonstration Stage: While the farm owners would have to pre-pay 50% of the basic fees for the agro-materials, equipment and services that Wanbao provided, the other half of the fees would be deducted in the end.

  23. 23.

    According to the most updated data from news report (Sun 2019), the households participating in Wanbao’s cooperative/contracting farming has reached 491 with a total farming area up to 500 hectares, increasing significantly from 12 households and 60 hectares at the time when the fieldwork was conducted (Interview 30 November 2013b).

  24. 24.

    Professor Bräutigam has come to the same conclusion based on her and her team’s fieldwork in different African countries (Bräutigam 2016)

  25. 25.

    As to the number of the population affected by the Wanbao project, the author interviewed people from RBL-EP, Wanbao, DPA and FONGA; they provided significantly different figures about that, varying from hundreds to tens of thousands of people (Interview 21 November 2013a, 21 November 2013b, 22 November 2013, and 20 December 2013).

  26. 26.

    This is actually also an interesting point, for Wanbao, and indeed including many other Chinese companies operating in Africa, normally feel hesitant to cooperate or engage too closely with local NGOs; instead, they tend to work more closely with the local governments. Many observers tend to criticize the Chinese companies for this and accuse them of nurturing corruption, which is in some cases true and fair, but not always. Many Chinese companies do not bribe local governments or officials but still tend to work closely and always in line with the local governments while keeping themselves at a safe distance from those civil society actors such as NGOs. A less mentioned point concerning this phenomenon is that these companies, to some extent, have got used to this sort of behavioral pattern that is very much shaped by the domestic environment in China. It is more effective, given the power of the Chinese government, and also much safer.

  27. 27.

    For more information about Lianfeng, see Sect. 4.2.1.

  28. 28.

    A more updated figure, as provided by Hefeng’s CEO, is that by the end of 2015 the company’s investment in Buzi had amounted to $6.4 million, including the reclaiming and infrastructure building of 5000-hectare land in total (Sohu News 2018).

  29. 29.

    A recent news report on the project reveals that the current contract-farming area of Hefeng in the neighbourhoods had increased to 5000 hectares by 2018 (Cheng and Bai 2018).

  30. 30.

    At least in Sofala where Hefeng was based, there were not factories producing such-sized package bags.

  31. 31.

    CNADC is one of the six Chinese central-level SAEs (see Sect. 4.1.2).

  32. 32.

    The four key areas that SDIC has traditionally focused on are respectively infrastructure industry, burgeoning industries of strategic importance, financial service and other services, and international business.

  33. 33.

    The author tried a number of times through different channels but still did not manage to get interview and site-visit opportunities with CACD. Given the representativeness of CACD, I did not drop the case but had to base largely on secondary sources.

  34. 34.

    Ruichang started to enter the African market, first through Zambia, since 2003.

  35. 35.

    What they proposed then was to let Wanbao be the majority shareholder (51% by Wanbao and 49% by CADFund) and take the full responsibility of the project operation and management, while the CADFund itself, apart from assigning a staff of their own to monitor the Wanbao’s financial issue, will only regularly gain its deserved part of revenue from the company’s yearly profits (Interviews 19 November 2013c and Interview 20 November 2013a).

  36. 36.

    The 20,000-ha proposal is indeed a really ambitious business plan compared to many of those even relatively sizable agro-projects in which Chinese companies invested in Africa, especially for a private agro-firm like Wanbao. What seems to be more problematic is that the company started to put a large amount of capital into the downstream value chain, such as building large-scale processing lines and high-standard storage systems, even before reclaiming all the land allocated and thus without any corresponding productivity guaranteed. The downstream investment was so much that they later found not adequate capital to be put into the fundamental production activities, including paying salaries to the workers, and therefore faced both financial and managerial problems.

  37. 37.

    This is mostly due to the increasing number of foreign investors.

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Jiang, L. (2020). China’s Agro-Development Cooperation with Africa: The Agribusiness Model. In: Beyond Official Development Assistance. Governing China in the 21st Century. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-32-9507-0_4

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