This article first appeared in my weekly column with the Business Daily on March 31, 2019
Last week Italy became the first major European economy to join China’s Belt and Road Initiative (BRI). Italy and China signed 29 deals worth USD 2.8 billion, and while the absolute amount agreed to may not be large, this marked an ideological shift where Italy broke rank with other powers in the global north by openly endorsing BRI which has been subject to deep skepticism and criticism in both Europe and North America. Closer to home, Kenya’s Standard Gauge Railway is a key BRI project in Africa and exemplifies the opportunities and risks linked to the BRI rollout in Africa. There are two key issues to manage on both the African and Chinese side if BRI is to be effectively leveraged.
The first opportunity BRI presents Africa is addressing Africa’s infrastructure deficit. The African Development Bank (AfDB) estimates the continent’s infrastructure deficit to stand at USD 170 billion a year. BRI is a clear opportunity for African countries to meet this gap on a long term basis. Additionally, the momentum behind the African Continental Free Trade Area (AfCFTA), provides an opportunity for African governments to link the BRI to the vision to interconnect the continent and increase the movement of people, goods, products and services across Africa.
The second opportunity that BRI presents Africa is further opening the continent up to the Chinese private sector and FDI from China. After years of the Sino-African relationship being defined by government to government deals (and this still dominates), Chinese private sector is increasingly independently coming into Africa on their own terms and with their own visions. BRI opens the continent further to both Chinese FDI and private sector relocation to Africa which presents opportunities for job creation, income growth and increasing Africa’s manufacturing capacity.
However there are key risks linked with the aforementioned opportunities. With regards to plugging the infrastructure deficit, there is clear concern that BRI may further indebt already deeply indebted African governments. When this is coupled with fiscal opacity in Sino-African government deals, there is unease that BRI will not only further indebt African governments, but also debt will continue to be mismanaged by some African governments with no pushback from the Chinese government.
The second risk is to do with the quality of Chinese FDI and private sector engagement in Africa. In many parts of the continent, there are concerns with regards to the extent to which Chinese comply with ESG standards in the countries in which they are domiciled. If BRI opens Africa up more deeply to Chinese private sector engagement, it is crucial that concerns with Chinese private sector activity with regards to ESG standards are addressed.
BRI will best serve both African and Chinese governments and the African people if BRI deals have far more stringent controls with regards to ESG due diligence, financial feasibility and financial transparency. Additionally BRI should be more deliberately linked to AfCFTA and the continent’s vision for interconnectedness. Secondly, the Chinese government should begin to hold Chinese firms active abroad to Chinese legal and ESG requirements. This will prevent laxity on ESG standards on the part of African governments from being misused and ensure that Chinese private sector activity in Africa is holistically beneficial to African publics.
Anzetse Were is a development economist
As the world’s second-largest economy, China is now looking to further open up its markets to the world’s economies– particularly African countries.
I was part of a TV panel that discussed the implications of the China International Import Expo for Africa.
This article first appeared in my weekly column with the Business Daily on October 28, 2018
Last month, the South African Institute of International Affairs published my policy insight on the Chinese Debt Trap. In short, Africa’s growing public debt has sparked a renewed global debate about debt sustainability on the continent. This is largely due to the emergence of China as a major financier of African infrastructure, resulting in a narrative that China is using debt to gain geopolitical leverage by trapping poor countries in unsustainable loans. It essentially argues that African governments are being deliberately lured into debt by the Chinese government through debt trap diplomacy and that China has an ominous plan to mire the continent in debt in order to gain economic and geopolitical control of Africa.
My counter-argument is simple: The debt trap narrative undermines the decision-making power and agency of African governments. Even worse, the debt trap narrative infantalises African governments, painting them as little more than overgrown children who have to be constantly supervised by other powers if there is any hope of them getting anything right.
More seriously, the debt trap narrative is deeply worrying because it is deeply dangerous. Arguing that African governments are being lured or tricked by China actually begins the process of preventing sovereign African governments from being held accountable for the financial commitments made on behalf of the African people. The narrative gives wiggle room for some governments to become intellectually dishonest and say that they did not know what they were getting into as they signed multi-billion dollar deals with China, rather than stand up and be counted. The narrative, in its determination to paint China as the ‘bad guy’, actually begins to absolve African governments of their fiscal responsibility and obligations. It creates space for some African governments to avoid hard questions from their publics about how debt is used, accounted for and whether the debt has led to economic gains and development.
Last week, the Financial Times (FT) took this argument further, pointing out that the heaviest cost for African countries comes from private lenders, not the Chinese. Nearly a third of African governments’ debt is owed to private creditors, but they account for 55 percent of interest payments. By contrast China, is owed about 20 percent of African nations’ external government debt, and receives just 17 percent of interest payments.
And to be honest even if that number were higher and Africa owed China far more, the responsibility for that rests squarely on the shoulders of the Ministries of Finance/ Treasuries of African governments, not China. African governments have demonstrated tremendous appetite for debt and have not only gone to China looking for it, they have floated sovereign bonds and continue to borrow from their traditional partners.
Frankly, the debt trap narrative seems motivated more by frantic Sinophobia than any genuine concern for the economic and fiscal health of African countries. Africans are worried about growing public debt, period. After all, it is the African people alone who will have to pay back all the debt in question. Thus, let the concerns of the African people about the fiscal accountability of their governments take centre stage in the conversation about public debt on the continent.
Anzetse Were is a development economist, email@example.com
On September 15, I sat down with Citizen TV to discuss dynamics between Chinese and Kenyans.
In my new paper for the South African Institute of International Affairs, I suggest that Kenya’s leaders, not China, should be the ones held accountable for borrowing too much money without a detailed, transparent plan on how to repay the loans.
I join Eric & Cobus on the China-Africa Project podcast to discuss the growing anti-Chinese backlash in Kenya and the country’s’ burgeoning economic crisis.
This article first appeared in my weekly column with the Business Daily on September 9, 2018
Last week African leaders attended the Forum on China Africa Cooperation (FOCAC), an event that has become the symbol of strengthening ties between China and Africa. In his speech, Xi Jinping stated that China will extend USD 60 billion of financing to Africa, a combination of grants, interest-free loans and concessional loans, credit lines, development financing, and a fund for financing imports from Africa. There are three key takeaways I think are important for African governments and Africa’s fiscal engagement with China.
Firstly, Xi Jinping indicated an intention to ensure Sino-African cooperation delivers real benefits to both China and Africa perhaps indicating and awareness of the concern as to the economic viability of some of the projects financed by China on the continent. Some analysts are of the view that there will be an increase in China monitoring deals agreed to with African governments. The signalling of China perhaps having a keener eye to ensure real benefits accrue through Sino-African engagement is likely to be welcomed by African citizens, not so much African governments. I am of the view African governments enjoy the fiscal opacity that has defined deals made between them and China. If Sino-African deals undergo more scrutiny going forward, this would be welcome and perhaps push African governments to better demonstrate the intended and actual use of Chinese debt and financing.
Secondly, Xi Jinping announced plans for debt relief with a focus on Africa’s least developed countries, heavily indebted and poor countries, landlocked developing countries and small island developing countries that have diplomatic relations with China. He stated that the debt incurred in the form of interest-free Chinese government loans due to mature by the end of 2018 will be exempted. This was a smart diplomatic move on the part of China given the fearmongering in some media circles that argued China was using debt to trap and control African governments and unilaterally seize China-financed assets.
Finally, alongside FOCAC was a clear push of the debt trap diplomacy narrative, particularly by European and US media. The debt trap diplomacy narrative is part of a long history of Sinophobic narratives by EuroAmerica, focused on Sino-African relations. The narrative argues China is luring African governments into debt in order to control African governments and assets. The reality is starkly different. Debt appetite is coming from African governments, debt is not being pushed onto Africa by China; Kenya owes more to the World Bank than it does to China for example. Further, the West’s Sinophobic narrative on Chinese debt in Africa seems more rooted in a dislike, fear and paranoia about China rather than a genuine concern for Africa. The priority for most African citizens is a focus on African governments to ensure the debt deals make sense for the country, and that they’re sustainable and used properly, no matter the source of debt. Thus FOCAC in my view, signalled a divergence between EuroAmerica’s paranoid obsession with China, and the real concerns Africans have with regards to growing public debt.
Anzetse Were is a development economist; firstname.lastname@example.org
This article first appeared in my weekly column with the Business Daily on September 2, 2018
Last week President Kenyatta went to the USA to meet with Donald Trump. This was followed by a trip to Kenya by British Prime Minister Theresa May, and this week Kenyatta is attending the Forum on China Africa Cooperation (FOCAC). This flurry of diplomatic activity spotlights the ongoing interest in Africa and Kenya by both the West and East, as well a growing sense within the West for renewed relevance on the continent.
Kenyatta is the second African leader to meet with Trump at the White House, following a visit by Nigeria’s Buhari earlier in the year. Following the meeting, investments worth USD 237 million were committed to wind power and food security, signed with companies in Kenya and facilitated by the Overseas Private Investment Corporation (Opic) which is a U.S. Government agency that helps American businesses invest in emerging markets.
On Thursday, Ms May and Mr Kenyatta held their bilateral meeting in Nairobi, where Kenya was able to secure a deal to continue quota-free exports of horticulture produce to Britain after it leaves the European Union (EU). From her visit to South Africa, May pledged GBP 4 billion in support for African economies, which is expected to be matched by the private sector. May’s focus is on job creation for African youth and she signalled an intent of British government to focus more on long-term economic challenges rather than short-term poverty reduction. In her speech, the emerging rivalry for Africa within the West itself became evident when May stated that she wanted the UK to overtake the US and become the G7’s biggest investor in Africa by 2022.
There are several points to note in the patterns emerging in the renewed push into Africa by the West. Firstly, there seems to be a difference with US versus UK style in economic deals; what is common however is the focus on private sector. The US let private sector take front and centre in the deals announced so far. Opic facilitated the process, and the role of the Kenyan government in all this is not clear yet. It seems that the Kenyan private sector, not government, is the focus of US interests.
In the case of the UK, there seems to be a blend of both public and private sector funding, with public engagement leading. Again, the extent to which deals will be signed directly with the Kenyan government is not clear perhaps indicating that the UK is also more focused on private sector engagement than on large programs with the Kenyan government.
The style of the US and UK contrasts starkly with that of China. Sino-African deals are a government to government affair with no clear articulation of how African private sector will benefit from the engagements, or even link to the private sector in China. Interestingly, the focus on the private sector and Foreign Direct Investment (FDI) by the US and UK complements China’s focus on debt and African governments. This emerging complementarity can create a powerful blend of financing for the continent going forward.
It will be interesting to see what key deals emerge from FOCAC this week and whether China will begin to shift from being debt-focused, to FDI- focused given concerns with growing indebtedness to China.
Anzetse Were is a development economist; email@example.com