Is the West losing its economic place in Africa, as China takes over? According to UN figures, China ranks fifth in the list of top investor economies in Africa. She trailed France, the Netherlands, the US, and the UK in 2017. But what is the reality of the presence of China in Africa?
In praise of China in Africa
During the September 2018 Forum on China-Africa Cooperation (FOCAC) in Beijing, Rwandan President and Head of the AU, Paul Kagame, lauded the China’s investment strategy in Africa. He praised Chinese aid in Africa as a source of positive transformation for the continent. Kagame claimed that the cooperation between Africa and China is solely based on mutual respect, which is for the betterment of all partners. Perhaps, this sentiment is common among African leaders, considering their massive turn out in the summit.
Additionally, the trap of debt is not a predictable aftermath of loans. President Kagame stated that “The outcome depends on us Africans”. What determines the Chinese loans’ success to Africa is whether the governments of Africa use these loans for productive capital investment. To Kagame, the onus of ensuring the viable use of Chinese financial aid to Africa rests entirely on the accountability of the continent’s leadership.
Various palpable reasons make China an ideal partner for Africa. For the people of Africa, the four prime attractions of China are:
- Access to capital and unconditional soft loans
- Quick delivery of cheap goods and services
- An alternate development model
- Peacekeeping and diplomacy.
Firstly, China’s little or no conditional cooperation permits African governments to enjoy access to finance, development aid and expertise. In 2016, China’s trade in Africa reached $128bn, a drastic blow up from $1bn in 1980. As of 2017, importing goods worth more than US$70 billion, China is Africa’s biggest trading partner. Of these, around 95% were minerals, fuels and other goods. In light of this, China had to diversify its export structure.
The work of China in Africa
While the United States was facing an economic hurdle in the 2000s, and the EU also restricted their investment in Africa, China stepped ahead and made the commitment to invest in the continent in 2015. This year, At FOCAC, China signed off $60bn for growth and development financing in Africa, until 2021.
China’s soft loans attracted scrutiny from the World Bank and the IMF. They pressed China for adherence to Western norms of conditionality and accountability, associated with economic and political modifications . That includes the notorious structural adjustment program that doesn’t always interest Africa. However, China’s $5bn per annum interest-free loan makes her the third largest donor to Africa, after the US (nearly $12bn in 2016) and the EU (nearly $11bn).
Secondly, with China in Africa, governments can now meet rapidly increasing domestic demands for affordable infrastructure and services more quickly. Urban Africans have become used to prompt delivery of Chinese professional services especially in education, transportation, telecommunication and health. This economic relationship has created an appetite for Chinese businesses in the continent.
Figures from McKinsey & Company, reveal that there are more than 10,000 Chinese-owned firms operating in only 8 African countries. Of the firms, 90% are privately owned. By 2025, the revenues of these Chinese firms in Africa are expected to reach $250 billion. In this case, the dominating industries will be raw mineral resources, manufacturing and infrastructure.
There is also a likelihood for Chinese business expansion the aforementioned industries as well as in several new markets. These include, insurance, banking, agriculture, ICT, housing, telecommunications, and transport and logistics. In this scenario, their sum-revenues are forecasted to shoot up to $440 billion in 2025, according to McKinsey & Co..
The lagging West
China surpassed the United States in 2009 and became Africa’s largest trading partner. Multiple bilateral trade agreements have been signed between China and over 40 African countries. While China makes these strides in the fresh economy of the south, the West seems rests on its trade bowells. Rather, there has been what some have called a distracting trade bout between the US and China, at least since 2018. In the last year, these two economic powers have imposed tariffs on one another’s goods worth billions of dollars. The US has imposed tariffs on about $250bn of Chinese goods. In retaliation, China has countered with tariffs on US commodities worth $110bn.
While US-China trade relations will hopefully improve, the question of whether China in Africa is a good thing at all remains. For one thing, US President Donald Trump has long accused China of unfair trading practices. He has trumped on Chinese intellectual property theft, which the latter may extend in her dealings with Africa.
Furthermore, despite the seeming honeymoon enjoyed between Africa’s leadership and China, the perception of Beijing as a “predatory” element in Africa lingers on. One study by the Rand Corporation maintains that the common African citizens are not all excited about Sino-African relations. Reports of China’s neo-colonial tendencies frequently leave the editorial tables of civil society and watchdog organizations.
In 2018, Kenya’s public debt crossed the $50bn mark when China was its largest provider. Their debt to China was eight fold to that received from its largest lender, France. Following this, the IMF ceased Kenya’s access to a $1.5bn standby credit facility. The decision forced Kenya to potentially give up control of its biggest and most profitable port in Mombasa to China. This, among other issues, raises flags in Sino-African relations. Some pundits believe that the activities of China in Africa are remiscent of neocolonialism.