Investigating the nexus between rural poverty, natural resources and China-Africa trade

Rosewood logging

China has massively increased its investment in African countries over the past ten years. Chinese companies and entrepreneurs have become ubiquitous in Africa’s primary sectors such as agriculture, timber and extractive industries. Some of the investments are made to feed the rapidly growing industry in China with raw materials and trade with wider global markets, others are made to build business ventures on African soil.

While this trend has received a lot of attention from the media, academia and policy-makers alike, three aspects of this development are not yet well understood:

  1. Do new (Chinese) businesses engage with Africa’s small-scale producers and the rural economy differently from established businesses?
  2. How do African actors and governance systems respond to and shape the relationships with Chinese businesses, especially in the informal economy?
  3. How are Africa’s environment and its small-scale producers (of agricultural goods, timber and minerals) affected by such changes in the commercial landscape and governance systems?

These are the questions the DEGRP research project Natural Resources, Rural Poverty and China-Africa Trade: Equity and Sustainability in Informal Commodities Value Chains set out to answer. The research was conducted as a collaboration among African, Chinese and European researchers and research institutions based in Zambia, Zimbabwe, Kenya, China and the UK.

The research team – a collaboration led by Xiaoxue Weng (formerly) of the International Institute of the Environment and Development (IIED) – comprised of three different streams. The first worked on forestry and was led by Paolo Cerutti from the Center for International Forestry Research (CIFOR). The second stream focused on mining and was headed by George Schoneveld from CIFOR. The third stream conducted its research on agriculture under Bill Vorley of the IIED.

This impact case study looks at was has been achieved by these three research streams. The project played a crucial role in Zambia’s national Cotton Sector Strategy and influenced the Convention on International Trade in Endangered Species of Wild Fauna and Flora to implement restrictions on rosewood trade.

The challenge

Before the project could start in earnest, the researchers needed to sharpen the scope of the research. During the inception phase of the project, they reached out to trading networks in several countries in Eastern and Southern Africa where Chinese enterprises were linked to informal trade. Eventually, the research was narrowed down to three value chains, one in each stream.

In forestry (1), the focus was on informal logging of mukula – also known as rosewood – in Zambia (and, to a degree, in neighbouring countries). In the mining stream (2), the artisanal and small-scale mining sector in Tanzania was chosen as the sub-sector of interest. Finally, in the agricultural stream (3), small-scale cotton farming in Zambia and Zimbabwe was the focus. All three were chosen because of the assumed presence of Chinese businesses in the value chain, the high degree of informal economic activities as well as the potential social and environmental impacts on Africa’s rural communities.

In many African countries, and indeed where the research took place, the informal economy is where poor, rural and marginalised communities operate to make livelihoods. The research aligned with existing assumptions that, because it operates outside government purview, the informal economy has higher environmental impacts than the formal economy.

The research

In order to create a better understanding of these informal markets, the research team collected survey responses from over 700 people, conducted 130 key informant interviews and held 100 focus group discussions in Zambia, Zimbabwe,Tanzania and China.

The first main finding was that new Chinese investors indeed disrupted the commodity trade markets. In Zambia, they cut out the middlemen and started dealing directly with the rural communities whose members engaged as rosewood loggers. In Zambia and Zimbabwe, they disrupted the prevailing contract farming model and instead offered cash, and higher prices, to farmers while providing only limited input support. In Tanzania, they activated dormant artisanal mining licenses, promoted mechanisation and brought in outside expertise.

However, when comparing the behaviour of Chinese firms and investors with other new investors to the market, the research did not find them to be particularly different. This is true for mining in Tanzania and cotton farming in Zambia and Zimbabwe where the demand for commodities comes from emerging markets such as India. It holds less for the case of rosewood logging in Zambia, as the current demand for rosewood is predominantly driven by the Chinese market. This means that – apart from a few specific resources that are in high demand mostly on the Chinese market – Chinese investments in Africa generally appear not to be special when compared to other investments from emerging markets.

In addition, the project found that the new investment often generated short-term cash gains for the local population. The farmers-turned-loggers in Zambia could sell rosewood trees and the cotton farmers were able to side-sell cotton to new (Chinese) companies for much needed cash. The activation of dormant small-scale mines led to more employment in rural mining towns, although not surprisingly, the (Chinese) owners captured a majority of the revenues. However, the socioeconomic gains were often short-lived after the resources were depleted and were unlikely to contribute to livelihoods that were sustainable in the long term.

Another key finding from the research highlighted that new investments from China and other new investors resulted in substantial environmental degradation. The mukula population was drastically reduced as a direct consequence of increased logging. The local farmers-turned-loggers often had little to no knowledge of existing environmental regulations and hence did not follow them. The cotton farmers in Zambia and Zimbabwe – trying to side-sell as much cotton as possible for additional cash – employed unsustainable farming methods that likely led to soil depletion, endangering long-term yields and reducing income in the long run. And in Tanzania, the additional mining activities increased heavy metal contamination of the soil and water supplies.

The research also found that national legislation and regulation were often not fast or effective enough to deal with swift changes in the business environment. When new investors and businesses swept into Zambia, Zimbabwe and Tanzania, the government would often only be able to respond years later and would employ policies that went against the interests of the informal workers and small-scale producers. The rosewood trade ban in Zambia, for instance, ended up criminalising loggers and weakened their bargaining position and hence income vis-à-vis the Chinese exporters. At the same time, rich and resourceful Zambian middlemen and politicians were able to circumvent the regulations.

The project’s influence

The project was set up with the explicit goal of aiding policy-makers with policy-relevant findings. Indeed its impact stretches across policy-making in Zimbabwe, Zambia, Tanzania and, indirectly, China. One way the DEGRP researchers managed to increase policy impact successfully was by specifically looking for partners to not only push the envelope academically but also advance policy discussions.

Another way to increase research impact was by having researchers from African countries drive the overall direction of the research. They identified the policy-relevant knowledge gaps and engagement opportunities with local and international stakeholders. The UK researchers offered support in the form of methodological inputs, communication products, writing outputs and general project management. As one of the key researchers put it: ‘[Our] African partners were genuine co-leaders in that [project].’

The project’s management ensured the involvement of all research partners in the complete research cycle including in design, data collection, analysis and report writing. This participation helped to better embed the final results in national debates – inside academia and beyond. Finally, the validation workshops in the respective countries at national and regional level were important to get buy in from national and local authorities, but also for enriching the research with crucial contextual information from the start.

Beyond the sector-specific policy outreach, the project also tapped into other forums such as the China-Africa Forest Governance project and the IIED artisanal mining platform. The project also organised a visit of a delegation of the Chinese State Forest Administration to Zambia to discuss legal timber trade and future collaboration with the Zambian Forestry Department. Furthermore, the Zambian researchers presented at the International Cotton Advisory Committee Plenary meeting held in Uzbekistan.

All this work on policy processes bore fruit: the policy impact of the project was substantial in both the cotton and forestry sectors. In 2018, the researchers played a crucial role in Zambia in drafting the Cotton Sector Strategy together with stakeholders and policy-makers. They also contributed to the discussions on the need to have the Cotton Act amended in order to respond to the changing sector. Both the validation workshop in the regions with all the stakeholders and the policy engagement workshop in Lusaka were vital in ensuring research findings were incorporated into policy throughout the policy development process.

Last, another important result of the DEGRP project and example of impact was the inclusion of the mukula species in Appendix II of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) in 2019. Doing so had been a direct recommendation of the project, as outlined in one of the its info briefs. The project’s research played an important role in enriching the knowledge base on which this decision was taken, as evidenced by the significant number of citations in the final proposal from the Malawian government, which was supported by several other countries – namely Angola, Burundi, the Democratic Republic of Congo, Mozambique, Tanzania and Zambia. The update of the convention means that international rosewood trade now has to be closely monitored by law in order for the species not to become endangered in the near future.