China

international

china

A CAUTIOUS SHIFT

C h i n a’s relations with Africa could be moving towards private sector-led development as the country looks to reduce risk —reputational and otherwise —in its investments

Carien du Plessis

hinese diplomats take exception to

Cany labelling of Chinese loans to Africa as constituting a “debt trap”.

After all, according toC h i n a’s ambassador for the Forum on China-Africa Co-operation (Focac), Zhou Yuxiao, his country’s own trajectory out of poverty was by way of loans.

“Af r ic a’s development is not as fast as we expected it to bebecause there is a lack of infrastructure, a lack of funds, and a lack of qualified personnel,”he said at a Business Day Dialogues webinar following the Focac summit in Dakar, Senegal, in late November.

Still, China believes it can help by “build ing infrastructure for you to help you”, by lending money to help African governments afford thisand by inviting African students to study technology in China.

“Our intention is 100% good,”Zhou said. But when countries can’t repay their loans, it is China that loses out.Zambia, for example, owes China $6.6bn.

At this year’s Focac summit, China for t he first time in two decadesreduced its financing pledges —from $60bn each in 2015 and 2018to a total of $40bn. Its actual lending already started falling in 2019, to $7bnfrom a high of $28bnthree years before, according to research by the China-Africa research initiative at Johns Hopkins University.

In part, that’s the result of the p a nde m ic ’s pinch on China’s economy: its GDP growth droppedfrom 6% in 2019 to 2.3% last year.

But the cuts also reflect the country’s growing risk aversion, says Gert Grobler, former ambassador and senior research fellow at the Institute of African Studies at Zhe jiang Normal University.

The “debt trap”allegations that arise when countries struggle to repay loans have cast China in a bad light. An Afrobarometer survey in 19 countries, for example, has shown increasing concern amongcitizens that their governments can’t repay loans from China, or are paying too much for them.

“There are also corruption issues on the co nt i ne nt in some of the countries where C h i n a’s state-owned entities and companies are involved, such as recently in the Democratic Republic of Congo [DRC],”says Grobler, “while conflicts in Ethiopia, Sudan and the DRC, where China has a large vested interest, moved the Chinese authorities to take a more cautious stance with financial

The next three years

In his video address to the recent Forum on China-Africa Co-operation,President Xi Jinping laid out China’s commitmentto Africa over the next three years.

The programme sees a steep cut in investment pledges and a reduction in planned activities compared with the previous commitment in 2018. ● China is to provide 1-billion doses of vaccines to Africa. It will undertake 10 medical and health projects on the continent and send 1,500 health workers and experts. ● China will undertake 10 poverty reduction and agricultural projects for Africa, and send 500 agricultural experts. It will also encourage Chinese institutions and companies to build “d e m o n s t ra t i o n v i l l a g e s”to showcase co-operation. ● It will provide “green lanes”for agricul tural exports to China, and add more products to the list of zero-tariff goods. The aim is for $300bnin total imports from Africa. Beijing will provide $10bn int ra d e f i n a n ce , and build azone in China to promote trade and economic co-operation with Africa. It will undertake 10 connectivity projectsand form an expert group on e co nomic co-operation with theAf r i ca n Continental Free Trade Area’s secretariat. ● Chinese businesses will be encouraged to invest $10bnin Africa, and a platform will be established for private investment promotion. China will undertake 10 industrialisation and employment promotion p ro j e c t s , provide credit facilities of $10bn to African financial institutions and support African SME development. It will write off some debts due in 2021 and channel into Africa $10bnfrom its share of the International Monetary Fund’s new allocation of special drawing rights. ● China will undertake 10 digital economy p ro j e c t s and support the development of joint laboratories, partner institutes and innovation co-operation bases. A marketing campaign willshowcase 100 African stores and 1,000 African products on ecommerce platforms. ● China will contribute to the Great Green Wa l l project in the Sahel with 10 green d eve l o p ment, environmental protection and climate action programmes. It will build African centres of excellence on lowcarbon development and climate change adaptation. ● China will help build or upgrade 10 African schoolsand invite 10,000 Af r i ca n p ro fe ss i o n als to seminars and workshops. Chinese companieswill be encouraged to create at least 800,000 jobs in Africa. ● Chinese tourists will be encouraged to travel to Africa and there will be film festivals and China-Africa women’s and youth forums. ● China will undertake 10 peace and security projects for Africa, continue to deliver military assistance to the AU and support regional security and antiterrorism efforts. x

PAST THE PEAK?

China’s investment pledges to Africa during Focac meetings ($bn)

2006 2009 2012 2015 2018 2021

Note: Data is not available for the 2000 and 2003 meetings Source: Quartz/Bloomberg

support and loans.”

Grobler believesChina wants to be seen as a responsible international citizen t h at keeps to multilateral rules. This is especially true for China’s involvement in the UN and its agencies, the World Trade Organisation, the World Health Organisationand o t he r world bodies such as the G20.

Because of this,C h i n a’s economic and financial involvement in other countries “will increasingly be done in a more careful, calculated, transparent and sustainable way”, Grobler says.

On the whole, he thinks Beijing is genuinely committed to multilateralism. “A good example of this is President Xi Jinping’spro posed global development initiative, a concept that the international community should take to heart.”

Xi first flighted the concept during the UN General As s e m bly ’s session in September, in a call to the international community to speed upimplementation of the UN 2030 Agenda for Sustainable Development.

However, China do e s n ’t intend scaling back in Africa, according to Zhou.“Ac t u a l ly , China believes that Africa is the continent with full potential,and the future will be brighter for Africa when we look at Africa as a rising star,”he said. “So there might be a possibility that investment is going down, but that is temporary.”

Analysts have suggested that China’s relations with Africa could be shifting from the traditional model of infrastructure and construction investment towards private sector-led development, as is evident in Xi’s nine-point plan (see box).

C h i n a’sstate council information office for the first time published a white paper on the subject, “China and Africa in the New Era: A Partnership of Equals”, a few days before the conference. It lays out Beijing’s new vision as follows: “China is promoting a new development paradigm with domestic economy and international engagement providing mutual reinforcementand the former as the mainstay. China’s development will create more opportunities for Africa’s development.”

Kenyan development economist Anzetse We r e told an SA Institute of International Affairs webinar last month that there is appetite on both sides for a local development approach in sectors such as construction, agriculture, renewable energy, digitisation and innovation and manufacturing.

And the African Continental Free Trade Ag r e e me nt , too, can be leveraged to promote trade between Africa and China.

“The reality and the perception of AfricaChina relations will [in future] be a triangle of state-to-state relations, civil society organisations and private sector engagements,” Were said.

Folashadé Soulé, senior research associate in the global economic governance programme at Oxford University’s Blavatnik School of Government, agrees that “China has become a strategic partner for Africa’s private sector”.

To many African businesspeople, “China has also become an African business”, says So u lé , due to the supply of, for example, con struction materials, textiles, furniture and mo t o r cy c le s . But she warnsabout the trade i m b a l a nce between the continent and China.

C h i n a’s imports from Africa in 2020 accounted for $72.7bn, mostly in raw materials; its exports to Africa were valued at $ 1 1 4 . 2 bn .

The shift in China’s approach to Africa is also reflected in its intentionto provide credit to African financial institutions to support the development of local companies, rather than to African governments to fund Chinese projects. This could shield China from being accused of setting debt traps fo r African governments.

Most African countries, including SA, want C h i n a’s involvement in Africa to continue. President Cyril Ramaphosa —a proponent of development through trade —said in his address to the summit that Focac is “an engine for progress”, and that the continent should work with China “to improve liquidity in our respective countries so that they have the necessary fiscal space to recover”.

Africa should, however, ensureit takes advantage of China’s private sector approach and improve its products on offer, says David Monyae, director of the Centre for Africa-China Studies at the University of Jo h a n ne s bu r g .

“We can’t keep taking raw bananas to C h i n a ,”he says. “We need to compete with other countries in Asia who are selling more or less the same products to China. We need this to be a two-way project.” x

123 R F/a ka ra t p h asu ra

China has become a strategic partner for Africa’s private s e c to r Folashadé Soulé