Natural Resources, Rural Poverty and China-Africa Trade: Equity and Sustainability in Informal Commodities Value Chains

Lead Research Organisation: International Institute for Env and Dev
Department Name: Natural Resources Group

Abstract

This project addresses two key development challenges and opportunities concerning Africa's natural resource governance today: the growing informal commodity trade and engagement with China. It focuses on the impacts of Chinese actors in informal agriculture, mining and timber trade along two fast-developing trade corridors connected to the Indian Ocean. The first corridor is a transit route for commodities such as timber and minerals from the Democratic Republic of Congo (DRC) through East Africa for export from Kenya. The second corridor links central southern Africa (Zambia and DRC's Katanga province to Beira port in Mozambique, from where agricultural products, timber and, increasingly minerals are exported).

Examining the two trade routes that link Africa's informal natural resource sectors to the ever-growing Chinese market, this work will provide urgently needed insights on natural resource governance, global trade patterns, and the positive and deleterious effects of informal resource exploitation on local poverty and the natural environment. It builds on ongoing efforts by IIED and CIFOR in relation to these topics, expanding and deepening research in the area and using a well-connected policy network to achieve impact.

Specifically, the research involves four work streams over the course of 36 months: i) value chain analysis of selected commodity chains with a particular focus on power dynamics and benefit distribution among actors, ii) political-economic analysis of regulatory and customary regimes governing the selected commodity trade, iii) environmental impacts analysis through land-use/land cover change and iv) cross-sector synthesis of the three sectors' findings and key policy lessons.

The proposed research addresses all the objectives of the DFID-ESRC China and Africa Research Programme Call. First, it takes Africa's development challenges (the growing informal economy and depleting natural resource base) as starting points to examine Chinese engagement in the context of informal commodity trade. Envisioned as one of the first systematic examinations of micro-level Chinese activities in Africa's natural resource governance, this research will provide rigorous evidence and dispel misconceptions about Chinese trade and investment in Africa's informal economy.

Second, it benefits economically-marginalized actors (such as rural resource users, women and youth not integrated in the formal economy) in the selected African countries by identifying opportunities and challenges for poverty alleviation and sustainable resource use associated with Africa's growing informal economy and China-Africa commodity trade

Third, it confronts two cross-cutting themes: gender and fragile states through gender-disaggregated value chain and livelihoods analysis and inclusion of the DRC as a research site.

Fourth, it supports national and international policymaking by generating an evidence-based body of knowledge strongly demanded by Chinese, African and international policymakers, businesses as well as rural African resource users - their requests for accurate information have been highlighted through the previous research, personal communications and policy engagement work by IIED, CIFOR, GEI and the African institutions (see Pathways to Impact).

Finally, it adds to the development literature by extending and adopting existing methodologies to informal economy research - a field that is rapidly growing in importance for studying economic development in the global South. It also takes a multidisciplinary approach through environmental impact assessment using GIS remote sensing, which is critical to obtaining a comprehensive understanding of the challenges and opportunities associated with sustainable development.

Planned Impact

This research will benefit policymakers, businesses (both formal and small-scale entrepreneurs/resource users) and practitioners in Africa, China and internationally, who work on issues related to China's natural resource governance, trade and investment in Africa.

In the policymaking arena, we have identified a strong demand for evidence-based information from Chinese, African and western/international policymakers through previous research and policy engagement. As listed on "Pathways to Impact," Chinese and African policymakers have asked for better, field-based assessment of the micro-level Chinese engagement. International policymakers have also been concerned with the growing role of Chinese trade and investment and their associated social and environmental impacts. These stakeholders will directly benefit from our research because the project establishes a rigorous evidence base for them to design appropriate policies.

Local loggers, miners and farmers in the informal sector will benefit by engaging with the national policymaking process and having their interests represented as part of our stakeholder consultations and research outreach. The large formal (both Chinese and non-Chinese) businesses will receive accurate information on the informal small-scale activities that interface with their economic activities - enabling them better to interact with small-scale producers and suppliers from upstream communities. Civil society organizations will benefit from an accurate understanding of informal sector activities and the associated challenges and opportunities for poverty reduction and sustainable resource use.

"Pathways to Impact" further elaborates on the perspectives of and benefits for the different stakeholders. It also explains our targeted methods of engagement as well as the desired impacts and potential indicators to measure these for each stakeholder group.

Policy engagement will be a priority throughout the project starting with stakeholder consultation meetings. One meeting per sector (in Nairobi for logging and mining, in Lusaka for agriculture) will be convened during the inception phase. Each meeting will involve policymakers from the relevant ministry, customs and port authorities, Chinese businesses (both large and small-scale enterprises), civil society members representing the informal actors (whenever possible, informal actors will attend in person) and local researchers on this topic. Each session will identify stakeholders' common interests as well as create a relevant research agenda allowing for co-production of knowledge.

A full results framework and strategies for in-country policy engagement will be developed after the first six months based on the scoping study's findings and stakeholder consultations in the selected African countries as well as China.
 
Description The research aimed to understand Chinese trade and investments in Africa's rural economy in the agriculture, forestry and mining sectors. Based on data collected from over 700 surveys, 130 interviews and 100 focus groups, we find that Chinese and other newcomer investors employ a variety of business strategies that contrast with those employed by established players. In all cases, this has upset the prevailing governance regimes, though the disruptive impacts and replicability by other investors varies greatly across sectors. Indeed, two of the three sector case studies suggest that a 'newcomer-versus-established player' lens is more helpful for viewing the disruptive impacts than a 'Chinese-versus-other investor' focus. Nevertheless, a common thread testifies to the fact that change associated with newcomer business strategies is rapid and accompanied by significant impacts, requiring governance systems in each sector to evolve quickly to respond to the new realities. The immediate socio-economic impacts on small-scale rural producers (farmers, loggers and miners) are found to be generally positive. Direct benefits include cash incomes earned from participating in Chinese-linked trade and investments. The increased revenue flows enable a large share of our sampled producers - who suffer from multidimensional poverty in the form of food insecurity and lack of access
to education for household members - to improve their livelihoods. The surveyed producers, however, perceived the long-term uncertainty of this income source differently across the case studies. Some were more preoccupied with immediate benefits, and expressed limited concerns for the long-term sustainability, while others acknowledged their reliance on overall sector performance. Indirect benefits include the empowerment of rural producers, particularly in the way they exercise agency to adapt and take advantage of the new commercial landscape created by Chinese and other newcomer traders and investors. Their disruptive business strategies allow rural producers to bypass the formal economic structures perceived to be exclusionary and unfair - in terms of lack of resource rights, high regulatory barriers, and collusion between industry and government resulting in a small share of the end value for them - and integrate into the global commodity trade with better financial returns. Positive socio-economic gains were accompanied by high environmental risks across the sectors, including biodiversity losses (for example, risks of extinction for certain tree species), long-term soil depletion, and water and soil pollution by toxic metals Regulatory responses by national governments - mostly designed around the logic of 'classic' business strategies used by established players in the formal economy - have proved inadequate. In the face of the disrupting business strategies employed by the Chinese and other newcomers, the governance systems have proved too slow in design and implementation, over-reliant on industry self-governance, and insufficiently innovative to address the social, economic and environmental trade-offs. Overall, the government's responses have achieved limited success in all cases, at times not only doing little to allay environmental concerns but also harming the interests of small- scale producers. In some cases, regulatory responses not only disproportionally affected small-scale producers but fostered vicious cycles of poor governance, perpetuating producer- unfriendly market structures and increasing opportunities for rent-seeking behaviours. In certain cases, those with access to power and capital - elites, officials, investors and local brokers - were able to circumvent the official rules and continue their business. As a result, an informal set of rules and practices has emerged, condoned by most stakeholder groups, while the formal governance systems have remained a reality only on paper. Capturing the evolving China-Africa relationship therefore requires an understanding of the reality that lies in the (formal and informal) interactions between Chinese and African actors, and also what lies between written policies and regulations, and the actual practice on the ground.
Despite the cross-sector similarities, we tell a cautionary tale about development research or interventions focused solely on Chinese actors. The heterogeneous nature of China-Africa commercial relationships highlights the need to identify leverage points with the role of all stakeholders in mind. Indeed, we highlight the agency of both Chinese and African actors in co-creating the new commercial landscape. In contrast, improving local governance - through increased capacity, aligned incentive structures, and better coordination across government agencies - appears to be universally useful to achieve better socioeconomic and environmental outcomes.
Exploitation Route Despite the broad-brush similarities between sectors, our research tells a cautionary tale about development research or interventions focused solely on Chinese actors.
The complex interactions among all stakeholders, and their effects on outcomes and governance structures, demonstrate the need for a tailored approach that accounts for the heterogeneous nature of China-Africa commercial relationships and their respective leverage points. For example, advocacy aimed at the Chinese market will likely prove more effective for tropical timber trade than for cotton or small-scale mineral trade, for which the market pull does not directly shape behaviours at production sites.
In contrast, improving local governance - through increased capacity, aligned incentive structures and better horizontal and vertical coordination across government agencies - appears to be universally useful. This is especially useful in cases where investors from other emerging economies are also adopting similarly disruptive business strategies.
Sectors Agriculture, Food and Drink,Environment,Government, Democracy and Justice,Other

 
Description [FY20 outcomes, progress on FY19 outcomes] As described below in the FY19 outcome section, we achieved a major milestone in an international agreement: listing of mukula rosewood (Pterocarpus tinctorius) in the Appendix II of the CITES. The proposal submitted by the Malawi government, for which our research Cerutti et al 2018 served as a critical piece of evidence, was adopted by the 183 parties who are signatory to the international agreement in June 2019. [FY19 outcomes; addition to the FY18 outcomes reported in the previous reporting cycle] FY19 was a fruitful year in terms of research dissemination and uptake. The project published its final findings in the form of four research reports in 2018. Accompanying these final publications were a few outreach products (blog posts and policy briefs) reported in the other sections. The practitioners and policymakers' uptake of our research findings was highly encouraging. At the international level, the research has been heavily quoted and used for decision-making at CITES (the Convention on International Trade in Endangered Species of Wild Fauna and Flora), an international agreement between governments. The project researchers engaged in more than 10 informal consultations with CITES representatives from at least 10 African and EU member states directly involved in preparing the proposal to be considered at the Sri Lanka COP in May 2019. Project Co-Is also assisted the Belgian CITES mission to Southern DR Congo to discuss the issue related to cross-border trade of mukula and related species. The number of citations of our report in CITES' confidential internal documents, communications as well as their official proposal document demonstrates the instrumental role that our research has played in shaping the international efforts to protect mukula and its related timber species in the midst of growing trade of precious timber between China and Africa. On this related topic, we have also been engaging with three international campaign NGOs to provide inputs into their on-going investigations on the illegal trade of precious timber species between China and Africa - we expect that whatever campaigns launched on this topic in the near future will have benefited from project findings and advices on the benefits and risks of the trade for rural African communities. At the national level, our timber report (Cerutti et al 2018) continued to attract much attention from Zambian media and government stakeholders, leading to government's review of its timber trade policies and several closed-door consultations with project Co-Is (see details in the policy influence section). Overall, we expect further uptake of the project research findings in the coming year as the research reports are more widely disseminated and shared by relevant stakeholders. [FY18 outcomes] Agriculture package: Zambia's policy engagement workshop was conducted in October with 30 key attendants from the government, private sector and farmers' representatives and academia; the research was well received by the participants as critical information which may help steer the future of the cotton sector in the country (detailed report available upon request). Zimbabwe's polity engagement workshop was conducted in October with 44 key attendants from government, private sector and farmers' representatives and academia; similarly, the research was very well received and was considered highly valuable in shaping the discussion for the country's cotton sector (detailed report available). Internationally, the Zambian and Zimbabwean teams attended the 76th Plenary of the International Cotton Advisory Committee, held in October 2017 in Tashkent, Uzbekistan where the teams made a presentation of our research to over 100 attendants from governments and other key organisations. The presentation was considered as highly valuable inputs from the ground based on solid research on a pertinent topic affecting the future of the industry in the region. The research team was requested by the Committee to spearhead research on reviving the cotton sector in the region (a detailed report available upon request).
First Year Of Impact 2019
Sector Agriculture, Food and Drink,Environment
Impact Types Policy & public services

 
Description Adopted into course curriculum of the ERAIFT (Regional Postgraduate School of Integrated Management and Planning of Forests and Tropical Territories) in Kinshasa, DRC.
Geographic Reach Africa 
Policy Influence Type Influenced training of practitioners or researchers
Impact On April 18th 2018, about 30 MSc students from 15 African countries, many of whom have careers in key government, university and civil society positions related to forest conservation in Central Africa, used the project's timber report (Cerutti et al 2018) for their timber trade module during their Regional Postgraduate School of Integrated Management and Planning of Forests and Tropical Territories, funded by multiple donors. The infographics and the video created based on the report's findings were noted particularly for their usefulness as learning tools by the participants.
URL http://www.eraift-rdc.org/
 
Description Instrumental in CITES preparation for voting on Appendix II listing of mukula and related timber species from Africa
Geographic Reach Multiple continents/international 
Policy Influence Type Citation in other policy documents
Impact The Co-Is for the project engaged in more than 10 informal discussions with CITES representatives from more than 10 African range-states and EU member states directly linked to the preparation for the proposal and assisted the Belgian CITES mission to Southern DR Congo to discuss the issue related to cross-border trade of mukula and related species. The CITES decision will be taken in May in Sri Lanka during COP 18 meeting, however the submission of the proposal by member states already means significantly increased awareness regarding the sustainability of trading the related timber species among key policymakers (European, Asian and African) who make international and national decisions on future trade rules.
URL https://cites.org/sites/default/files/eng/cop/18/prop/020119_d/E-CoP18-Prop_draft-Pterocarpus-tincto...
 
Description Series of closed-door informal consultation with the Forestry Department of Zambian Government related to timber policy
Geographic Reach Africa 
Policy Influence Type Participation in a advisory committee
Impact The evidence presented by our research stirred heated discussions among government stakeholders and media, which led to better scrutiny of the current government policy over timber trade and non-transparent flow of income accred from regulating the trade. This has led the Forestry Department of the Zambian Government to review its policies regarding the mukula timber trade. The Co-Is on this project participated in more than 5 incidents of closed-door discussions with the leadership, including the Director, of the department.
 
Description DEGRP/ODI policy impact support for photo essay
Amount £5,000 (GBP)
Organisation Overseas Development Institute (ODI) 
Sector Charity/Non Profit
Country United Kingdom
Start 01/2017 
End 03/2017
 
Description A Ponzi scheme with Nature? Lessons from the Zambia-China rosewood trade 
Form Of Engagement Activity Engagement focused website, blog or social media channel
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact A blog post intended for policymakers and practitioners working on China-linked tropical wood trade, especially related to illegal logging and trade. It was shared more 170 times on social media (excluding those who simply accessed the blog link to read it).
Year(s) Of Engagement Activity 2018
URL https://forestsnews.cifor.org/55820/a-ponzi-scheme-with-nature?fnl=en
 
Description Artisanal Mining Workshop in Tanzania 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Industry/Business
Results and Impact The project co-funded and participated in the Artisanal Mining Workshop in Tanzania in November, attended by ca. 100 participants with strong representation of key government departments and the private sector. The research was presented to the audience in a session titled "upgrading artisanal mining and foreign investments." The stakeholders considered the research to be highly relevant to the on-going sector reforms.
Year(s) Of Engagement Activity 2017
URL https://www.iied.org/time-right-for-dialogue-about-sustainable-asm-tanzania
 
Description China-Zambia forestry cooperation dialogue 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact A meeting between a Chinese delegation (consisting of the Forestry department and Ministry of Commerce, private sector and academia) and the Zambian Forestry Department and the industry was conducted in October; the meeting facilitated better understanding of the nature of the China-Zambia timber trade and discussion of collaboration between the two countries. Furthermore, a validation meeting with the Forestry Department in Zambia was conducted in December and attended by the Director and several key senior officials of the Department (detailed report available). The research was well received and further engagement plans have been discussed.
Year(s) Of Engagement Activity 2017
 
Description Cotton policy engagement workshop in Zambia and Zimbabwe 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact Zambia's policy engagement workshop was conducted in October with 30 key attendants from the government, private sector and farmers' representatives and academia; the research was well received by the participants as critical information which may help steer the future of the cotton sector in the country (detailed report available upon request). Zimbabwe's polity engagement workshop was conducted in October with 44 key attendants from government, private sector and farmers' representatives and academia; similarly, the research was very well received and was considered highly valuable in shaping the discussion for the country's cotton sector (detailed report available)
Year(s) Of Engagement Activity 2017
 
Description Cotton validation workshop in Chipata Zambia 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach Regional
Primary Audience Industry/Business
Results and Impact 20+ cotton company managers attended the validation workshop in Chipata Zambia to discuss the preliminary results from our research and provide more insights about how to make the cotton policies in Zambia better for farmers and companies.
Year(s) Of Engagement Activity 2016
 
Description Cotton validation workshop in Zimbabwe 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach Regional
Primary Audience Industry/Business
Results and Impact Preliminary results from our research in Zimbabwe were presented to cotton businesses and farmers to seek their inputs regarding improving cotton policies before finalizing the report.
Year(s) Of Engagement Activity 2016
 
Description Photo story on the cotton sector in Zambia 
Form Of Engagement Activity Engagement focused website, blog or social media channel
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact A photo story detailing the role of smallholder farmers in cotton farming in Zambia and the impact of side-trading and the need for improved policymaking.
Year(s) Of Engagement Activity 2017
URL https://www.iied.org/cotton-crossroads
 
Description Timber photo essay 
Form Of Engagement Activity Engagement focused website, blog or social media channel
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact A photo story detailing the role of and impacts on rural small-scale loggers in the rosewood mukula trade, intended to reach the development community and change perceptions about the appropriate responses to illegal logging and trade.
Year(s) Of Engagement Activity 2017
URL https://www.iied.org/saving-trees-or-improving-lives
 
Description Web blog 
Form Of Engagement Activity Engagement focused website, blog or social media channel
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact The blog intended to share intermediate results from the research and stir discussion about cross-regional forestry policymaking among professionals based on our research.
Year(s) Of Engagement Activity 2017
URL http://blog.cifor.org/48662/the-chicken-or-the-egg?fnl=en