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May 2010

Vol 3 N0 7

Image courtesy of Panos Pictures
Image courtesy of Panos Pictures

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Mauritius MAURITIUS | INDIA

Round-trips and hot money

Indian companies are routing tens of billions of dollars through Mauritius each year in a giant tax avoidance scheme

India is changing its tax laws in a bid to introduce greater transparency into its financial transactions with Mauritius. The aim is to stem ‘round-...

MAURITIUS | INDIA

Tweeting Tharoor and the cricket controversy

Minister of State for External Affairs for Africa Shashi Tharoor considered himself a modern diplomat for his embracing ...

NIGERIA | CHINA

Oiling the gears

Equal measures of optimism and scepticism greeted China’s announcement of an agreement to build three oil refineries wo...

BLUE NOTES

Close

More than those of other countries, China’s business deals are regularly subject to renegotiation when there is a change of government in Africa. Each new regime can take its turn to threaten contract cancellation or demand better terms to compensate for the signature bonuses paid to the previous residents of the presidential palace.

Ruling regimes tend to have short-term friends and interests. Niger’s junta is sending mixed signals about whether it will honour Chinese mining and oil contracts. The opposition claims a US$300 million signature bonus enabled former President Mamadou Tandja to hang on to power for as long as he did.

Goodluck Jonathan’s arrival in power in Nigeria after the death of President Umaru Yar’Adua in May has left Beijing wondering if he will continue the Sino-scepticism of his predecessor. The drive to negotiate rock-bottom prices and tie government into long-term contracts remains a risky proposition when the lifespan of a regime may be much shorter.

The worst-case scenario for Beijing is cancelled contracts and lost investments. Yet, as with the renegotiation of the Bélinga iron ore contract in Gabon, being the only player with a taste for political risk and billions of dollars leaves room for making new friends.

ASIA | AFRICA

Asian solutions for Africa’s refinery problems

With limited domestic markets and poor infrastructure, the building of African refineries by Asian countries is often interpreted as cementing political ties rather than economic ones. China’s Sinopec balked at the building of a US$8 billion Angolan refinery at Lobito, sending a chill through Luanda-Beijing relations and opening the door for India to show its willingness to finance the project this year.

GABON | CHINA

Beleaguered Bélinga

When Gabon’s President El Hadj Omar Bongo Ondimba was alive, his ministers had nothing but praise for the nearly US$4 billion Bélinga iron ore mine and associated logistics projects, described by the President as ‘the project of the century’. Now that Bongo’s son, former Defence Minister El Hadj Ali Ben Bongo Ondimba, has replaced him at the presidential palace, the government (largely made up of the same Parti Démocratique Gabonais cadres as before) and the chattering classes only have bad things to say about the deal.

GHANA | SOUTH KOREA

Building on oil money

The Ghanaian government is proposing to put up US$1.5 billion of its future oil revenues to finance the first phase of a controversial housing project with the South Korean construction company STX Group, which is said to be $6.3 bn. in debt. President John Evans Atta Mills’s government brought a motion before parliament on 4 May for a supplier’s credit agreement for the first stages of the project. STX Group Chief Executive Kang Duk-soo was in Accra in early May, promising to turn Ghana into a West African industrial giant.

AFRICA | CHINA

CIF, Beijing’s stalking horse

Beijing’s relationship with the China International Fund is much clearer than it likes to admit. When the Hong Kong-registered CIF signed multibillion-dollar deals with pariah regimes in Guinea and Zimbabwe in 2009, officials of China’s Ministry of Foreign Affairs strenuously insisted that CIF and its Singapore-based sister organisation, China Sonangol, were private businesses that had nothing to do with the government (AAC Vol 2 No 12). At the same time, CIF was placing multimillion-dollar orders for train equipment with China’s state-owned enterprises.

LIBERIA | SENEGAL | TAIWAN

The long shadow of dollar diplomacy

Five years after Senegal’s break in diplomatic relations with Taiwan, the island state which only has 23 diplomatic allies continues to haunt political life. At the heart of the affair are the opaque dealings concerning a US$14 million aid package ‘offered’ by Taiwan to support bilateral cooperation. Wanting to maintain its ‘privileged’ relations with countries that recognised its sovereignty, the Taiwanese government dispensed largesse without much in the way of accounting and Senegal’s leaders allowed funds for public projects to transit through the private bank accounts of troubled businessmen linked to the regime.

ZAMBIA | CHINA

Beijing digs deeper into Zambian mines

Oppositionist Michael Sata’s rhetoric against China is not slowing down Chinese investment plans ahead of Zambia’s national elections, which are due in 2011. Chinese companies operating Zambian mines will now have access to US$5 billion from the China Development Bank under a deal signed by the Zambian Ministry of Mines and the CDB on 12 May.

BLUE NOTES

More than those of other countries, China’s business deals are regularly subject to renegotiation when there is a change of government in Africa. Each new regime can take its turn to...

Read more

SOUTH AFRICA | JAPAN

Slow to let go of Hitachi

Faced with popular outcry about profiteering from electricity shortages and opaque ties between political parties and businesses, South Africa’s governing African National Congress is being forced to abandon its stake in Japan’s Hitachi Power Africa. ANC Treasurer Mathews Phosa announced on 11 April that the Chancellor House Holdings (CHH) group, the ANC’s front company for business investment, would sell its 25% share, but by mid-May the ANC had already missed its self-imposed deadline to sell the stake.



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