China in Cape Verde: the Dragon’s African Paradise

China’s first established relations with the West African nation of Cape Verde in April 1976. Ties remained friendly and courteous in subsequent years, but largely confined to intermittent cultural exchanges and rare visits to Cape Verde by mid ranking Chinese officials. China had hardly any economic interests in the archipelago nation of some 300,000 inhabitants, and Cape Verde’s complete lack of natural resources made the islands a low priority in Chinese foreign policy. Nonetheless, China kept a diplomatic presence in order to prevent Taiwan from gaining entree.

The task of barring Taiwanese influence was made easier by Cape Verde’s relative invulnerability to Taipei’s “checkbook diplomacy.” Despite its disadvantages, Cape Verde is something of a success story in terms of nation-building. Relying on a large and well-educated diaspora in the United States and Europe, good governance, and a pragmatic approach to foreign relations, Cape Verde has become one of the wealthiest nations in sub-Saharan Africa. It’s GDP per capita stands at $6.000, and the country’s health and education systems are among Africa’s best.

China’s engagement in Cape Verde began to intensify in the mid-1990s, with the arrival of Chinese small-scale private investors. Their numbers were few at first, but increased steadily as the local economy prospered and stories of their success reached home. This investment pattern is quite different from that seen in the oil-rich countries, such as Angola or Sudan, where large state-owned Chinese companies led the way. Typically the head of a small business (baihuo in Chinese) – usually the head of the family – would move to Cape Verde, accompanied by a male relative to assist him. They set up the business, and if things went well, other family members would join them to expand and diversify the enterprise. This type of investment continues, and an estimated 200 Chinese shops can now be found in Cape Verde, concentrated on the islands of Santiago and Sao Vicente. As is the case elsewhere in Africa, realiable statistics on the number of Chinese in Cape Verde are hard to come by, but a Cape Verdean official estimates that as many as 2,300 Chinese nationals now live there “in one way or another.” This is a large number, considering the country’s small population; and the Chinese foreign community is second in size only to the Portuguese.

Now that China’s small investors have shown the way, larger investors are following. The tourism sector is a big draw in view of Cape Verde’s proximity to major European tourist hot spots, such as the Spanish Canary Islands and the Portuguese islands of Madeira and Porto Santo. In early 2007, Macau millionaire David Chaw announced a $100 million project to build a massive entertainment park, with a casino, restaurants, night clubs, hotels, and a marina, on the islet of Santa Maria, just off Praia, the capital, to be completed in 2009. He pledged a further $300 million in coming years in major infrastructure projects in the capital, including power plants, roads, and office buildings. Chaw’s role in Cape Verde highlights the increasing involvement of Macau business tycoons elsewhere in Portuguese Africa, including Angola and Mozambique, and even in war-torn, narcotics-infested Guinea Bissau.

The pre-eminent Macau tycoon is billionaire Stanley Ho, whose fortune is based on casino ownership. Over more than five decades, Ho has proven to be an wily investor taking advantage of new opportunities well ahead of the competition. He has already invested in a casino on Caravela Island in Guinea Bissau and purchased a 60% stake in that country’s only viable bank, the Banco da Africa Ocidental (BAO). Now his attention is turning to Cape Verde, and investments in tourism and casinos are expected to follow shortly. It will be interesting to watch how he fares on Cape Verde, since the nearby Canary islands and to a lesser extent Madeira are well-known for their organized crime syndicates with links to powerful crime families of the Corsican and Sicilian mafias. Chinese have little experience in dealing with these unsavory actors, who will surely see the coming expansion of the Cape Verde casino sector as a tempting opportunity.

To date, the Chinese “invaders” have generally been welcomed by the Cape Verde population. Cheap Chinese commodities, such as clothing, shoes, and domestic household items, cost considerably less than comparable goods coming from Portugal and the EU zone. The new arrivals have also benefited the housing market by renting property on an unprecedented scale to establish their businesses. The rent for a small shop in downtown Praia has now reached as high as $2,000-$3,000 a month, much to the joy of the local owners.

However, there have been some complaints from local unions over low salaries and long working hours in Chinese-owned establishments, sometimes accused of paying only half the average national wage. A few strikes have taken place. Local business owners, meanwhile, have complained of unfair Chinese practices that are putting them out of business and killing off the already small indigenous business class. But the Cape Verde government is taking a benevolent view of the Chinese role, which it views as healthy for the economy. On the occasion of one small shop worker strike, the minister of Labor said that “local unions should adapt themselves to the realities of a global economy.”

This does not mean that Cape Verde will become a mere client of Beijing. Cape Verde has traditionally been very close to the west, and there are more Cape Verdeans living in the United States and Europe than in the country itself. Cape Verde is one of the most latinized nations in Africa – a legacy of 500 years of Portuguese colonization. Its population is overwhelmingly Catholic and of mixed European and African background, speaking a creole language based on Portuguese. Cape Verde’s s elites are still being mostly educated in Portugal’s universities, such as the University of Coimbra and the University of Lisbon, and in other western schools. To this day, the national currency is the escudo, the old Portuguese currency, abandoned by Portugal itself when it joined the Euro zone.

Nonetheless, China’s influence will continue to grow. China’s large state-owned corporations are beginning to show interest, and the Chinese government is stepping forward in a major way with funding. The first major state owned investment came in October 2003, when the China Building-Material Industrial Corporation for Foreign Econo-Technical Cooperation, signed a contract with the Cape Verde government to build a large cement plant at a cost of $55 million. The factory will be the country’s largest such facility and is expected to produce 350,000 tons of cement per year, transforming Cape Verde from a net cement importer to an exporter.

Meanwhile, the Chinese government is funding the construction of the national parliament, a government palace, a national stadium, the national library, and a national auditorium. It is paying for the construction of two dams, a most welcome project in view of Cape Verde’s severe water shortages. China is providing a fleet of vessels to connect Cape Verde’s eight dispersed and poorly linked islands; offering 100 scholarships for Cape Verdean students; and deploying an 8 member medical team on a regular basis to Praia hospital, the country’s main health facility. It has pledged to build a fisheries processing center and make substantial investments in the sector. In addition, China has cancelled Cape Verde’s bilateral debt.

In July 2007, the Chinese deputy minister for commerce visited Cape Verde to discuss ways of improving tourism, tourist infrastructure, and freight handling. This was followed in October 2007 by an agreement signed by the Chinese Ambassador to Cape Verde, Wu Yuanshuan, and Cape Verde's economy minister, Jose Brito, pledging to make Cape Verde a major destination for Chinese tourists. With its warm climate and idyllic palm-lined beaches, Cape Verde is well poised to tap into the burgeoning Chinese tourist market. Political stability and low levels of crime and corruption only increase its selling potential as a tourist destination.

Cape Verde is a strong candidate for selection to host one of the five “economic cooperation zones” China intends to create in Africa. In late 2007, the Chinese ambassador stated that the island of Sao Vicente was high on the list due to the quality of its infrastructure, which is in part the result to recent Chinese investment. The Sao Vicente special economic zone would be primarily developed as a major fisheries processing center to cater for the various Chinese fleets operating in the Atlantic. China also hopes to make the island a transit point for replenishment and logistical support for the thousands of Chinese ships crossing the South Atlantic on their way to Europe. (On the other side of the South Atlantic, China is investing heavily in Brazilian ports, such as Salvador in the state of Bahia.)

The Cape Verde example shows that China’s economic relations with Africa are becoming more sophisticated and multidimensional. The stereotypical view in some western quarters is that China and Chinese businesses are only interested in raw materials and fast profits in Africa; and are best able to succeed in despotic and internationally isolated countries, such as Zimbabwe or Sudan. This is a vast oversimplification. True, there are many instances of predatory behavior on the part of Chinese capitalists, both state and private. But today, Chinese business are increasingly adaptable and able to thrive even in well-governed countries traditionally tied to the west.

The second lesson that emerges from the Cape Verde case is that small-scale Chinese private businesses may fast be emerging as the most dynamic element of China’s engagement with Africa. It was the early success of private Chinese businesspeople in Cape Verde, after all, that drew the attention of larger investors and of the Chinese government, opening the way for the flourishing relationship that exists today. _____________________________________________________________________
Loro Horta is a research associate fellow at the S. Rajaratnam School of International Studies, Nanyang Technological University, Singapore. He lived and worked in Africa for several years and has written extensively on Portuguese Africa.

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Loro Horta