A thriving African economy requires commitment, unity

Tuesday, September 11, 2018

Frank talk. Optimism. Pragmatism.

These are the buzz words African states will have to embrace if the continent is to make tangible strides in eradicating alarming poverty rates and propel stubborn economic growth.

Until then, the continent might be seen as navigating a landmine blindfolded, while wobbling in high heels. A grim chef’s certified recipe for disaster.

This much has been conceded by leaders of the 52 African states attending the recent Forum on China-Africa Cooperation (FOCAC) in the bustling Beijing metropolis.  

In the 48 hours that the first citizens of each country huddled to chart a new path, Chinese President Xi Jinping was able to thrash out eight major initiatives to be pursued by the world’s second largest economy. These initiatives, ranging from industrial promotion, infrastructure connectivity, trade facilitation and green development, will see China increasing African imports over the next three years.

President Xi pledged $60 billion to Africa in loans, export credits and aid. Of this amount, $15 billion is interest-free.

And, a further boon would be a planned economic and trade expo on China-Africa, to be held in China, with Chinese companies urged to invest in Africa to enhance industrial promotion.

In addition, China will carry out over 50 agricultural assistance programs to provide emergency humanitarian food aid amounting to 1 billion yuan (147 million US dollars) to African countries affected by natural disasters.

China and the African Union, President Xi said, would also work together to formulate an infrastructure cooperation plan. This will see Chinese companies participate in Africa's infrastructure development for investment-construction-operation models.

“China will buy more goods, especially non-resource products, from Africa, and will continue its free-trade negotiations with African countries that wish to do so,” the President reportedly said.

Over the years, the China-Africa bromance has seen China squash billions of yuan in debt owed to it by 31 African countries, while hordes of trade and bilateral agreements and memoranda of understanding aimed at strengthening flailing economies were entered into.

FOCAC on its website defines the collective as a “consultation mechanism” advancing “equal consultation, enhancing understanding, expanding consensus, strengthening friendship and promotion”. 

South African President Cyril says the relationship between Africa and China forged through FOCAC “was premised on the fundamental and inalienable right of the African people to determine their own future”.

“It is premised on the African Union’s Agenda 2063, a vision that has been crafted in Africa, by Africans,” the President contends.

The grouping has, however, been met with much scepticism, as was the case wherever China latched its tentacles. Think BRICS.

Professor André Thomashausen, a member of the European Academy of Sciences, Academia Europaea, leans on the side that says there’s empirical evidence to prove that FOCAC had been beneficial to Africa.

“There’s been definite benefits for Africa that are measurable,” he emphatically states. “Every African city today has a new airport which was built through the FOCAC. Every African [city] has a new Convention Centre and at least one five-star hotel that is as a result of this cooperation.”

Telecommunications and technology has over the past 20 years vastly advanced, he adds. “Every village in Africa today has some sort of mobile connectivity that is changing our politics because people can use the internet, especially the youth. That is all being done with Chinese technology. Huawei and ZTE are the two backbones throughout Africa. It has changed the continent. We used to talk a lot about it in the 2000s and now it’s a reality – people have connectivity.

But “there’s no free lunch,” argues a less optimistic Bonke Dumisa, a KwaZulu-Natal-based economist, stopping short of describing China’s goodwill as a poisoned chalice of debt. 

“So what’s the catch?” he asks.  

In his assessment, the only tangible benefit from the recent meeting was that parts of the loans pledged by China were interest-free.

“Not to be negative about China, but when China says it will invest, they come with their own conditions and most of those conditions relate to them using their own labour. Whatever money they ‘invest’ in your country ends up going back to their own people. They leave a lot to be desired, just like the United States and the West. We must be happy with China being in our corner but there’s a lot of apprehension about how they do their business,” he said.

Thomashausen says there is a grain of truth in this assertion but “in reality, nothing is for free”.

“Why should anyone give anything away to get nothing in return? As Africa, the question is: ‘where do you get the best deal?’ Loans in Europe and America have always been very expensive. South Africa today pays up to one third of the national income on loans because we’ve been borrowing money from the western banking system. We are paying eight to nine percent interest, it’s not very sustainable in the long term,” he argues.  

“The Chinese have accepted the risk of investing in Africa,” he says.

“They have already invested a total of over $200 billion in the continent over the last 20 years. That’s actually three times the amount we had originally budgeted in the Thabo Mbeki era when it was said $70 billion was required to fix the infrastructure. Out of that $200 billion, $100 billion is in loans that have to be paid back. That is projection for reasonable growth and… all African economies are working from very low bases so it shouldn’t be difficult to get six to seven percent economic growth a year.”

Earlier this year, the World Economic Forum argued that Africa needed to embrace sustainable intra-trade in order to harvest a significant slice of global economic growth.

According to World Bank figures, intra-African trade was at a paltry 11 percent between 2007 and 2011. This improved by a measly five percent four years later, the 2017 African Economic Outlook found last year. In 2015, despite potential trading measuring at about trillions of dollars, statistics for that year reveal that intra-Africa trade was a mere $170 million in that year. Not a very pretty sight.

According to Dumisa, intra-Africa trade was not thriving, due to hostilities, such as in the example of the recent “aggression” South African telecommunication giant MTN experienced in Nigeria. A further example was that of local food chain Shoprite Checkers considering scaling down operations in the same country.  If Africa is to prosper, acquaintances such as China would have to be embraced, as much as there were murmurs of suspicion. The 18-year-old FOCAC relationship has already produced irrefutable results, with infrastructure development gradually picking up steam. A lack of infrastructure has long been seen as an impediment to the continent’s advancement.

Aggressive, yet calculated, risks can only benefit the millions of hunger ravaged citizens languishing in Africa’s natural resource-rich backwaters.

The politicians have talked a big game, it’s time to implement. This year is merely seven years to 2025, the African Union’s target of eliminating hunger in the world’s second most populated continent. Can this be achieved? Only time will tell. – SAnews.gov.za