CHINA’S FORAY INTO AFRICA: The ‘Other’ African Perspective

BY KWAME MARFO

In the third quarter of 2010, China’s $16 billion investment in Ghana elicited a wide variety of responses, some out rightly derisory. While such responses on blogs and public forums are not to be unexpected, unfortunately, some of the most distasteful rhetoric have been spewed by public officials who ought to have known better. It is amazing how soon we’ve forgotten. Thirty years ago, Ghana – and a host of other African countries – staggering on the verge of bankruptcy went cap in hand to international financial institutions to be bailed out. The punishing conditions that were attached to those loans drove many an African country into the economic quagmire for well over a decade. In the midst of the biggest economic slump in living memory, even more prosperous countries such as Iceland and Ireland have been brought to their knees. Heaven knows what these countries will do for a Chinese bail-out, so to speak. Ghana, on the other hand, receives soft loans without the painful conditions, that we have grown accustomed to, and we have the nerve to complain?

The truth of the matter is China is sitting on $2.5 trillion dollars of dry powder. Countries are falling over themselves for pieces of that pie. Larry Summers’ (former President of Obama’s National Economic Council) made trips to China to smoothen diplomatic tensions despite legitimate concerns over China’s ‘mercantilist’ currency policies, knowing too well that the US would need China to keep its role as the US’ sugar daddy. UK’s Prime Minister, David Cameron has not relented in his efforts to realign his country’s interest in the East, making a trip to India to drum up investment, weeks upon being elected into office.

To put China’s investment in Ghana into perspective, with an annual GDP of $15.5 billion, if we add the wages generated from all 25 million of Ghana’s population, petty trades in Makola market and beyond, tourist dollars, remittances from abroad, money spent by Ghanaians living abroad when they visit the country, exports from oil, gold, cocoa and bush meat, etc,..ALL GENERATED IN A YEAR, we still will be over $400 million short of what China is giving to us, with a stroke of a pen, albeit for some slice of our resources.

There can be but a few outcomes in our relationship with China. In both cases, I see a net win for the continent.

At one extreme, if the relationship turns exploitative, there may be a silver lining to it. We cannot expect China to bring money to the table and also negotiate on our behalf. That would be preposterous. As a matter of fact, it would be a great act of injustice if African leaders, as has been the case in the past, do not get penalized by being dealt a bad hand by the Chinese investors (in this case), if they do not negotiate smartly. What some call exploitation, I call learning curve. We as a people need to learn the hard way. I’m sure China learned its lessons the hard way when it opened up its economy in the seventies. Some may argue that China’s economic prowess puts them in a superior bargaining position. While this may be true in principle, there are several intervening factors that should even the play field somewhat. Firstly, it is no secret that China has a voracious appetite for resources. It currently accounts for roughly one-fifth of global seaborne trade in coal. It also consumes roughly half the world’s cement, a third of its steel and a quarter of its aluminium. This demand is only going to get bigger as China develops. Africa has resources in abundance. Any attempt by China to take undue advantage of its “generous” African hosts will only come back to haunt them in the near future, in the global race for resources, hence keeping them in check.

Secondly, it is no secret that China has money – perhaps too much of it.  It is over-exposed to the US dollar and is quite desperate to diversify from it. This should play into African hands in the same way that wealthier football clubs- Manchester City, Chelsea and Real Madrid – (to borrow an analogy from football) tend to overpay for football talent because other parties to the transaction know that these teams have money to spend and hence these other teams try to make most out of the situation.

The other point to note is with over 90% of sub-Saharan countries currently engaged in oil production, exploration, or concession of some form, the continent is due for a major oil shake-out. Klare and Volman (2006) point out that in 2010, West Africa shoreline (the Gulf of Guinea), by itself, is projected to become the number one source of oil in the world outside the OPEC region. Nothing should prevent African countries from leveraging this position to negotiate with China (in consortia, for example) to get the best buck for its resources.

On the flip side, if the relationship turns out to be anything but exploitative, we win as well. The center of gravity of the international political economy is shifting. China has had the biggest economy in 18 of the last 20 centuries. Their rise (or as some would call it, their return) to global dominance is inevitable. The earlier we embrace and nurture it for our own good, the better. Admittedly, China would need to improve on its poor record in environment, treatment of local employees, human rights and propping up despotic regimes. Whichever way, we have too much to gain and too little to lose. Let the game begin!

Copyright 2010 (October) Neo-African Consensus

Advertisements
This entry was posted in Original Content. Bookmark the permalink.

3 Responses to CHINA’S FORAY INTO AFRICA: The ‘Other’ African Perspective

  1. Mr WordPress says:

    Hi, this is a comment.
    To delete a comment, just log in, and view the posts’ comments, there you will have the option to edit or delete them.

  2. Teddy says:

    I enjoyed the analysis. It boils down to responsibility and piorities.

  3. Ollie Ogunmokun says:

    An analysis way overdue! While it is prudent to be cautious about China’s foray into the sub-Saharan zone, our leaders need to balance this with the reality on the ground (we desperately need foreign investment to spur growth), and the fact that the alternatives, Russian and IMF/World Bank investments, have been devastating to our economies with their crazy structural adjustment programs and terms even they can’t put to practice. After the 2008 collapse, very few European countries and the U.S found it possible to gut Education, Health Care and other “social” spending in the same manner that borrower-countries were required.

    That being said, we still need to be weary of the Chinese and their motives in the sub-Saharan zone. I, for one, will recommend we take the initiative and force their hands with more imports of other non-oil assets, oil being finite and as implied in your article, can be effectively used as leverage. We should also steal a page from China by using (by crook or hook) more foreign intellectual property to expand access and develop our own electronics, and build up our infrastructure with more ambitious goals in transportation and generating power. Can you believe China built about 11,000 miles in high-speed train rails in 2010 alone!?

    There is no doubt about it, China is the future, and the sooner our leaders register this reality in their hyper-reactive minds, the better we would be as a people (although this might be limited to Ghana, Nigerians seem not to have these issues -lol). Ultimately, we don’t want our cities smogged up like Shanghai and Beijing, but we still need to aim high for future generations. Thanks for feeding us curious minds with a forward-looking analysis …I guess the LSE is still producing some great minds.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s