By / August 5, 2013

The “Addax affair”: Gabon challenges China in oil dispute

In June 2013, the Gabonese government informed Addax Petroleum, a subsidiary of the Chinese international oil giant Sinopec that it…

© Sergiy Serdyuk / Fotolia

In June 2013, the Gabonese government informed Addax Petroleum, a subsidiary of the Chinese international oil giant Sinopec that it planned to withdraw the drilling licence for its Tsiengui onshore oilfield after the current contract expires in 2015. The reasons cited relate to contract violations; moreover Gabon is accusing Addax of failing to pay customs duties and not respecting Gabonese law. This is not an isolated incident: The previous January, Gabon seized the Obangue oilfield from Addax due to alleged breaches of contract, environmental abuse and tax dodging on oil exports. The case is still pending before the International Court of Arbitration (Paris); Addax is asking for US$330 million in damages, which is countered by a claim of US$780 million from the Gabonese Government.

Gabon is an oil-producing country. Petroleum generates some 45% of the country’s GDP. However, in recent years, it has fallen from a top producer in the African continent to rank eighth. In 2011 the state-run Gabon Oil Company was set up, in order to increase the Government’s participation in the oil sector. There are suspicions that the Addax affair is motivated by the aim of reallocating those assets into the hands of the Gabon Oil Company.

Chinese investors encounter African resistance in other sectors too

Working oil pump in rural place at sunset
© Sergiy Serdyuk / Fotolia

However, Addax is not the only Chinese investor that has recently encountered a pushback in Africa. Also in Gabon, in March 2013, the Belinga iron ore project was placed under review due to disagreements on how to develop the project. The Chinese company CMEC had been managing the project but the Gabonese Government is threatening to end the concession.

Other African governments are also criticising China for malpractices. In February, the Zambian Government revoked three mining licences from the Chinese company Collum Coal Mine due to safety problems, environmental damage and payment delays for mineral royalties. The Zambian Government will operate the mine until new investors are found.

And more recently, in June, around 200 Chinese workers were detained in Ghana, accused of illegally mining gold in the country. After being repatriated, they were classified as “prohibited immigrants”.

Is the honeymoon over or is this an opportunity for Africa?

Despite the efforts made by the Chinese Government to play down these incidents, they have had some repercussions on Sino-African relations. According to Robert Tashima, African Editor at Oxford Business Group, the enthusiasm of a few years ago for China’s presence in the continent has changed, and Chinese companies now face more scrutiny. This new resistance towards Chinese companies can be linked to a number of concerns about China’s presence in Africa, such as: the attitude towards environmental degradation and exploitation, the small number of jobs created for African people, the low participation of African companies in these projects, transparency issues and the feeling that Chinese money is not making African people’s lives better.

However, this does not mean that the relationship is about to end. What could change though is Africa’s attitude towards China. According to Bright Simons, of the Ghana-based IMANI Group, China needs to be seen as a business partner rather than a benefactor.

This could also be an opportunity for African countries. As former Secretary-General of the United Nations, Kofi Annan states in his recent plea, Africa faces a huge developing opportunity due to large-scale foreign investment. Annan invites African governments to recognise that they have to take advantage of their natural resources and reduce their external dependence. Creation of domestic business, such as setting up the Gabon Oil Company, could mean that African governments want to be more proactive in managing their own resources. It could also be the answer to one of the continent’s biggest needs, as cited in Africa Progress Report 2013: the urgency to ascend the value chain in mineral processing and manufacturing. That could be one of the keys to the continent’s development.

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