- Africa no longer bows to the United States. Much of the continent is now economically and politically aligned to the world’s fastest emerging superpower -- China.
- Since the turn of the century, Chinese firms have built stadiums, highways, airports, schools, hospitals and, in Angola, an entire city.
- It is ironic that China is now being blamed by the West for allegedly doing exactly what the IMF has been doing for decades.
‘Damn if you do, damn if you don’t’ may as well summarise Africa’s relationship with China in the 21st century, which is increasingly getting the West worried big time.
Africa no longer bows to the United States. Much of the continent is now economically and politically aligned to the world’s fastest emerging superpower -- China.
Over the past decade, the People’s Republic of China has pumped billions of dollars into the cradle of mankind and today, China is the largest trading partner with Africa as a whole.
“China and Africa can forge a stronger comprehensive and strategic partnership. China promises to engage with Africa on a principle of sincerity and real results,” Chinese President Xi Jinping said at the close of the 2018 China-Africa Forum for Cooperation (FOCAC) summit held in Beijing.
“China’s 1.3 billion people and Africa’s 1.2 billion want a shared future,” said the Chinese leader as he promised that no obstacle will be allowed to hold back the ‘joint march’ before announcing it had set up a new $60 billion kitty meant for Africa’s development as part of a raft of new measures to strengthen Sino-Africa ties.
The US and China both trade a similar value of goods worldwide each year, roughly about $3.88 trillion and $3.95 trillion annually respectively. In this case, though, whereas US imported goods were worth approximately $33.44 billion from Africa in 2017, China-Africa trade volume amounted to $170 billion, up from just over $10 billion in 2000, in 2017, according to data from China’s Ministry of Commerce - nearly five times as much.
Since the turn of the century, Chinese firms have built stadiums, highways, airports, schools, hospitals and, in Angola, an entire city. China has pumped hundreds of billions of dollars into African governments and infrastructure in exchange for hundreds of billions in commodities.
At least five African countries have had their railway systems funded by China: Kenya, Ethiopia, Angola, Djibouti, and Nigeria.
Even the sparkling new towering African Union headquarters located in Addis Ababa, Ethiopia was fully funded and built by China at a cost of $200 million. In March 2018, West African regional bloc ECOWAS signed a deal with China to build their headquarters at Abuja at a cost of $31.6 million.
Shanghai-listed developer China Fortune Land Development is also set to invest up to $20 billion to build an upmarket residential district, an industrial zone, schools, a university and recreational centres in a new city in Egypt.
China’s growing influence in Africa has, however, not won her many foreign fans. Led by the United States, western leaders have in recent years launched a stinging criticism against Beijing and everything Chinese in Africa.
They have especially been vocal in warning against China's use of "debt-trap diplomacy" to advance the Belt and Road Initiative and create a world economic order centred around the Asian superpower.
China’s non-interference policy powered by its ‘no questions asked’ style even when dealing with repressive regimes has seen the country accused of endorsing human rights abuses among other violations by the west, something China continues to deny.
It’s unfair to paint China as bad and evil
Dr Rosalind Raddatz, Director, Office of the Provost & Assistant Professor, Politics at Aga Khan University, says China-Africa relations come with its share of challenges but trying to paint the Asian nation has all bad and evil is unfair.
“Is it the moral responsibility of a foreign nation to make the environment where it is doing business a better place and what is a better place? Because many Kenyans who benefited from Chinese businesses would say Kenya is actually doing a lot better by virtue of doing business with the Chinese, we have a functioning railroad from Nairobi to Mombasa for the first time in decades. Every individual who takes that train on a daily basis is indebted to the Chinese. How many roads have I seen go up in the last ten years? Driving in Kenya is a lot better than it used to be and that is arguably because of Chinese infrastructure,” says Dr Raddatz.
It is ironic that China is now being blamed by the West for allegedly doing exactly what the IMF has been doing for decades: providing unsustainable loans to countries in need to further plunge them into debt, weaken state capacity and open up national economies to international investors (primarily from Western countries).
While China, just like any other foreign partner, has its own interests and might as well be pursuing its own debt traps, they are certainly less experienced than the IMF when it comes to leveraging debt over heavily indebted countries.
“Where things get a little bit more complicated is in terms of Chinese labour. Often times, it is argued that China brings in its own labour and consequentially doesn’t hire Kenyans to do labour and in that respect, many Kenyans are less better off,” says Dr Raddatz.
Once the world’s most powerful financial institution, by the 1970s and 1980s, the IMF had become the key arbiter of developing countries economic continence. Those governments that defied its precepts were ordered, discreetly or otherwise, to rethink their policies, or risk getting excluded from the league of financially responsible countries.
Its remedies, involving sharp cuts to public spending, were blamed for political instability. It was held responsible for a phenomenon in Africa and Latin America known as the ‘IMF coup’.
The real story here, therefore, looks something like this: it’s not that Zambia, Kenya, Djibouti, Ethiopia, Guinea and much of Africa is - once again - trapped by international creditors. Rather it is that the IMF and its Western allies may be scared of losing their grip on African countries, threatened by the parallel economic system that China has built in recent years.
China’s loans to Africa are for sure not the best and the devil is always in the details but neither are western loans any better. If anything, they are becoming rarer by the day and when they become available, they take ages to process and come wrapped up with mountains of conditions.
Africa has nothing to lose in engaging with China
Aarti Shah, former Africa head of government relations at Thomson Reuters and now a consultant at The Cobalt Partners, says African countries have nothing to lose in engaging with China - and indeed any other partners - if they negotiate with its businesses' and citizens' interests in mind.
“The point here is that while funding from traditional Paris club countries has reduced relative to other sources since the global financial crisis, and non-Paris club governments and private credit have increased their share, there are other ways for Africa to fund ports, railways, mini-grids, schools, hospitals and so on,” says Shah.
Large African infrastructure projects are generally viewed as risky by traditional banks and donors and usually struggle to get funding but not when China’s export-import bank is involved.
Africa needs money like the desert needs the rain and every day is a struggle to feed, develop and usher the continent into the 21st century. Shah says it’s therefore imperative for Africa to be smart in its spending and resource allocation since funding will always have conditions whether it’s from China or the west.
“It is up to regional economic blocs and countries to prioritise what they require and then find the best value for money. After all, funding will always have conditions, but where the funding is utilised must be driven by the recipient. Why build a massive airport when you need to move millions of people a day safely and efficiently within the city to improve productivity and reduce carbon emissions?” says Shah.
“African countries need to work far more smartly to increase their taxes and other internally generated revenue. Nigeria's revenue-to-GDP, albeit at an extreme, is hardly 6%. If any country does indeed want to provide education for the Fourth Industrial Revolution, which is well underway, decent healthcare for its citizens or any other public service, it must look within its borders.”
The Chinese government has certainly provided a considerable push to the industrialisation of Africa but now that is done, economic forces are moving the initiative further forward. Chinese small businesses now dot the continent from Cape Town to Cairo.
Private Chinese companies are taking hold of Africa. Of the estimated 10,000 Chinese businesses in Africa, 90% of them are privately owned, something Africa can exploit to its advantage. Local Private-Public Partnerships (PPPs) can also come in handy.
“The world has moved towards public-private partnerships and private funding for sectors and projects that were traditionally governments' responsibility. Yet the capital markets across the continent are still a drop in the ocean. At some point, the private equity investment that has been growing over the last few years will need to exit. Who will take on the mantle?” says Shah.
During the China-Africa Forum for Cooperation (FOCAC) 2018 summit, President Xi Ji challenged Chinese private companies to directly invest upwards of $10 billion in Africa in the next 3 years.
Kenya Private Sector Alliance is already positioning itself to reap big given that the country is China’s 6th largest trading partner on the continent and leading in East Africa.
“China is key for us both as a market for Kenyan products and as a source of investments. We are therefore keen on growing trade by removing barriers and by so doing, attract more Chinese investors to Kenya especially for Big 4 leaning projects in manufacturing,” Kenya Private Sector Alliance CEO Carole Kariuki said on the sidelines of the FOCAC Summit business representatives meeting.
The risk of defaulting is, of course, high and going by China’s past behaviour, Africans nations need to be sober-minded since the Asian nation does not shy away from taking over countries’ key infrastructure to recoup its money as was the case in Sri Lanka.
China too has the option of repackaging African infrastructure debts into securities and then selling them off to investors who may not be so merciful and forcefully demand their pound of flesh.
But even if African nations embraced the IMF, their bailout programme would be a bitter pill to swallow and comes with hefty conditionalities, imposing further spending cuts and privatisations in an already downsized state. There is simply no evidence that suggests that an IMF programme would be better than a Chinese deal.
What African governments can at least try to do while at it is clean up their houses and simply get rid of unnecessary bottlenecks that are dragging ‘Mama Africa’ behind.
“Cross-border trade is shifting significantly to small parcels, but African customs authorities need to understand this and be represented at the global e-commerce tax table,” says Shah.
At the end of the day, it is also good to note that China too is not all just about business but it’s also proving itself as a reliable humanitarian partner.
“It is also good to note that China is not just all about roads and infrastructure and business, China has also brought in a lot of different aid. When I was in Liberia the largest hospital in Monrovia was built by the Chinese and not the US Government which has a traditional relationship with Liberia so I think it’s a really complicated question and then it depends on who is asking it and who is answering it,” says Dr Raddatz.