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The China - Africa Relationship: A Recolonization?

The China - Africa Relationship: A Recolonization?

No. 7-8, Sep.-Dec. 2017 » Bridging News

Behind all of the big headlines concerning the 73rd session of the UN General Assembly, there comes the African story which only a few in the print media has really shown interest in. When President Nana Dankwa Akufo-Addo was given the podium to address the assembly, he quickly used the opportunity to clear the air concerning the China-Africa relationship. He told the world to discard any insinuation that the movement of Ghana and some African countries towards China would result in the recolonization of the continent by a new power. He said this is not a uniquely Ghanaian or African phenomenon. “It has not been lost on us that the developed, rich and well-established countries have been paying regular visits to China and seeking to open new economic ties and improve upon existing ones”. What President Nana Akufo was pointing out was the difference between trade and colonization. The benefit of African trade with China is the return in form of investment in infrastructure. Meanwhile, the colonization process involves taking human and natural resources from Africa with no return, and there is nothing the continent can do about it. So, Africa does not perceive it relationship with China as a form of colonization or recolonization, because what they are getting from China has enduring value. 

Renewed Competition 

Some has argued that the Western relationship with Africa is like a master-servant relationship, the West is not necessarily interested in helping Africa to develop the continent. They just want to feel good about themselves by giving out some money in form of aid and not actually developing the countries. What the continent needs is to build roads, bridges, railways, ports, schools, hospitals, and to create jobs that will keep the young people engaged. The continent needs infrastructure upon which to develop an economy, without which it is not going to get further ahead. The United States, for example, is known to direct its aid to Africa in the form of military support, selling of ammunitions, building military bases, and offering military technical training. This is simply a war economy, and the only beneficiary is the United States that is using this form of aid or trade to keep its citizens engaged productively. In contrast, China has demonstrated a trade-based economy, and the Washington Post believes China in Africa has been fantastic for competition.

The European Union launched the Africa-EU Strategic Partnership in 2007 and promised to mobilize more than $54 billion in sustainable investment for Africa by 2020.

We should not be too quick to forget that the collapse of the Soviet Union was due to the inability of their system to compete with capitalism. Then again, even the developed nations are becoming lazy because they did not have anybody to challenge their ideology and policies with a different or perhaps better policy; hence making them up their game. China’s rise as a major donor and investor in Africa has led to renewed competition on the continent. The European Union launched the Africa-EU Strategic Partnership in 2007 and promised to mobilize more than $54 billion in sustainable investment for Africa by 2020. In July 2018, the United States Congress passed the Better Utilization of Investments Leading to Development Act to compete with China’s growing presence in Africa. On the 5th of October 2018, President Trump signed the act into law. The new law will do away with the Overseas Private Investment Corporation (OPIC) – the development agency which encourages investment by US companies in Africa. The new law doubles the budget of the reformed US International Development Finance Corporation (IDFC) to $60 billion. This follows the criticism of the Competitive Enterprise Institute, which argues that OPIC projects end up “enriching the politically connected”. The key change for most observers in the new agency is its autonomous power to make equity investments, something many analysts believe will make it a competitive dealmaker. This reinforced competition will lead to more US investment in Africa, hence creating a stimulus to economic development across the continent. 

Some scholars suggest the causal arrow may actually be reversed — that is, some initial level of economic development is needed to enable institutions of good governance to generate further growth and development.

Trade or Governance, Which Comes First? 

No doubt, competition between donors has led to great outcomes in Africa, and China’s no-strings-attached policy even made it better. This has made policy analysts to ponder which comes first, good governance or development. Some scholars suggest the causal arrow may actually be reversed — that is, some initial level of economic development is needed to enable institutions of good governance to generate further growth and development. In fact, China’s own development trajectory demonstrates that the relationship between governance and growth cannot be simplified as a “chicken-or-egg” issue. This is because trade comes before governance even from a historical point of view. Trade only works if both parties feel like they are getting a fair deal. The moment one party is no longer convinced that it is receiving a fair deal, trade will collapse. Trade should come before governance – the Soviet Union tried to create a perfect governance system that only brings in trade later, but it did not work. There are other evidences that reveal that economic development must come before governance. Evidence shows that China can help countries such as Kenya and Ethiopia realize such initial growth through investment and industrialization. Chinese-funded infrastructure projects will result in increased economic activities and reduced inequality.

China’s noninvolvement with other countries’ internal affairs, nor imposing any sort of restrictions on their aid in relation to government corruption, or government institutions, or cultural differences, make the country a good partner for Africa.

China’s noninvolvement with other countries’ internal affairs, nor imposing any sort of restrictions on their aid in relation to government corruption, or government institutions, or cultural differences, make the country a good partner for Africa. The Chinese model is trusting their partners to want to engage in trade, without putting preconditions. The most innovative business models of our time have shown how employment could be created in an unregulated trade environment. Example of trade without regulation is Airbnb (reinvented lodging), and Uber (reinvented taxi), Crypto currencies are also not regulated, and even financial innovation came first before they were regulated. Africa wants to reinvent itself as a group of startup nations and regulations can come in later. So, Africa is welcoming investment from China. 

The Debt-Trap Rhetoric 

Many observers are concerned about China’s growing influence and what they perceive as the debt trap diplomacy in the continent. Although it is true that some Chinese funded projects are riskier than those in other countries, Djibouti being a good example, the debt-trap narrative fits into a Euro-American discourse, and this grouping is very nervous about China’s ramped-up “going out” strategy — its policy of encouraging Chinese firms to invest globally. The Debt-Trap fear of China’s strategy was addressed by President Xi Jinping, who has assured that China does not invest in "vanity projects". China’s loan to Africa is more of an investment, and a win-win for both parties. The loans come with huge business for Chinese companies that have now turned the African continent into a construction site for rails, roads, electricity dams, stadia, commercial buildings and so on. The revenue of Chinese firms in Africa is expected to hit $440 billion by 2025 according to McKinsey. This might explain why President Cyril Ramaphosa of South Africa disagrees with the insinuation that a new colonialism is taking hold in Africa as those he described as detractors would have Africa to believe. 

The revenue of Chinese firms in Africa is expected to hit $440 billion by 2025 according to McKinsey.

Mercantilism - Make Africa Great Again 

Africa has seen China as a trusted partner because of the Chinese investment policies towards the continent. This China-Africa love affair has created a direct competition with other developed nations, irrespective of the country where Chinese firms are operating. The US is working to stop Huawei from building a major internet infrastructure project in Papua New Guinea, in the latest sign of international efforts to curb China’s broadening influence in the Pacific. Alongside Japan and Australia, the US is working to develop a counter offer for the telecommunication infrastructure project to contain China’s ambitions in the South Pacific region. Meanwhile, the China – US trade war and the competition with other Western counterparts is healthy and a welcome development for Africa. Countries like Kenya and Nigeria will benefit because China will target to import more from Africa; some agricultural products from Kenya, and some oil products from Nigeria for example. Kenya’s trade with China grew by 59% from 2013 to 2017 reaching $5.2 billion and creating nearly 130,000 job opportunities.

Uncertainty arising from Brexit has also made matters worse, and the United Kingdom is now in the process of working out a solo deal with the continent.

The US and EU seem to act as if Africa’s value as a trade and investment partner is news, even though most economic powerhouses are aware that Africa’s economic potential remains far from tapped. According to the McKinsey Global Institute, investment opportunities stemming from infrastructure demand in Africa will amount to at least $150 billion annually over the next decade. The EU is now engaging each African sub-region under the Economic Partnership Agreements (EPAs) framework in negotiation in the last five years, with the goal of eventually producing a free-trade agreement between the EU and the African, Caribbean, and Pacific Group of States. Due to lack of political enthusiasm, only one EPA (with Southern Africa) has been ratified, and progress on the others has stagnated. Uncertainty arising from Brexit has also made matters worse, and the United Kingdom is now in the process of working out a solo deal with the continent.

The British Prime Minister’s visit to South Africa, Kenya, and Nigeria in August this year was an attempt to strengthen the United Kingdom’s relations with Africa ahead of Britain’s rocky, risky ride to Brexit. During Theresa May’s visit in Africa, she expressed her desire for the United Kingdom to become the biggest G7 investor in Africa by 2022; hence pledging £4 billion in aid. While she was still in Africa, her German counterpart, Chancellor Angela Merkel was also having her African nations' tour to rekindle cooperation and strengthen ties in agriculture and commerce. But if the EU, UK, and US are to seize the opportunities that Africa offers in a way that is mutually beneficial, they will need to work with the continent’s leaders to build a new kind of partnership that treats African countries as equals. Simply put, the new EU-Africa relationship must be based on trade, not aid. This is because mercantilism has become the new normal. Even President Trump wants mercantilism, he wants to trade bilaterally with each partner to “Make America Great Again”. Africa has always felt left out from the global calculus, and Africans also want to make their countries great again. They want to participate in globalization because they could all see that the world is moving forward, and they want to be a part of it. But unless they could get capital in the world of capitalism, they need to go wherever the deal is, and to whoever will build their infrastructure for them to be connected onto the global highway that is global trade.

In the end, the availability of more competition in terms of funding and expertise is the ultimate benefit of China’s presence in Africa.

 
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