Guest Column By Charles Onunaiju
Ahead of the 2019 Presidential election, in which he was the candidate for the opposition’s Peoples Democratic Party (PDP), former vice president, Atiku Abubakar said in an interview with the London-based News-magazine “Africa Report” that “with the West, they lend you money and it has to be based on an investment schedule and there must be returns. In the case of China, they are just giving you money, – okay, go and build an airport, or go and build a railway station. Where are the feasibility studies? What is the return on investment? How long will it take you to repay the money?”
The former vice president whose press interview implied that China’s concessional loans to African countries including Nigeria are give-away is not only a fallacy but pure fiction.
The fact is that China’s concessional loans to African countries are clearly directed to squarely address the financial bottleneck and funding gaps of key and strategic economic categories that is of absolute necessity, for sustainable economic recovery and growth. To suggest that funding of such major infrastructure projects as railways, seaports, airports, power plants, etc can be carried out without feasibility studies is to stand basic facts on its head. China’s concessional loans are meticulously negotiated to accommodate not only to the broad impact of the overall economy but in its multiplier effects to trigger value-creating economic activities with consequence for social inclusion and stability but also viability to generate returns on investments. Recipient countries as a rule provide modest counterpart funding to give a sense of ownership and responsibility. Even grants and other funding supports extended to African countries by China, which includes construction of schools, hospitals, skills acquisition centers are not just give-aways but are targeted social efforts designed to support recipient countries to accumulate the necessary human capital through investments in the vital sectors of capacity building and enhancement. China’s concessional loans do not have political strings attached to it, but are reasonably secured through the viability of the economic values it creates in thye economies of the recipient countries. Its low-interest rates and fairly long period of repayment ensures that the recipient countries are not burdened or trapped in a debt. The spectre of the so-called debt trap in which Beijing would seize assets of African countries is not only fallacy but a fiction craftily woven to scare-monger Africa from an essential financial oxygen, it would need to pull its respective national economies from the abyss.
If Washington is fine with Beijing holding more than a trillion dollars of its treasury bills, a virtual credit line, African countries should welcome financial support to unlock their economic prospects through investments in enabling strategic infrastructures, an area that China’s concessional loans have been mostly directed.
Opposition politicians who aim at Western support to boost their fortunes in elections, twist facts and regal in China-bashing. One such was former Zambian President, Mr. Michael Sata, but on winning the elections in 2011, his first foreign relations engagement was a meeting with the Chinese ambassador to the Zambia. At a subsequent state visit to China, he urged his Africa. Counterparts to emulate China focused leadership and strategy of inclusive development.
Even the U.S former Secretary of State, Mr. Rex Tillerson during his visit to Africa early last year before he was sacked, conceded that “Chinese investment does have the potential to address Africa’s infrastructure gap” and as I wrote elsewhere, “China herself is not a stranger to the use of concessional loans as a funding mechanism for her own economic modernization. At the outset of her reform and opening up, precisely in March 1978, China announced an ambitious ten-year plan that focused on 120 key modernization projects, which included 30 electric power stations, 6 trunk railways, 8 coal mines, 10 new steel plants, 5 habours, 9 non-ferrous metal complexes, and 10 new oil and gas fields. And “by the end of 1978, Chinese officials have signed 74 contracts with Japan to finance turn-key projects that would form the backbone of China’s modernization and all would be repaid in oil and coal. With the signing of the treaty of friendship between China and Japan in 1978, Tokyo agreed to provide large five year loan packages to China. The first loan package (1978-1983) totaled 330 billion Japanese yen. The second installment of the loan package between 1984 and 1989 was 470 billion yen, with the third loan package between 1990 and 1995, totaling 500 billion yen.
The point here is that China herself is an example and a good demonstration of prudent management of concessional loans to finance strategically enabling infrastructures that is indispensable in any sustainable economic growth and development.
Smarting from the devastation of the “cultural revolution,” which spanned nearly a decade and ended in 1978, China needed the enabling financial oxygen to fund the vital outlines in the fresh vision of reforms and opening up. China was simply in the situation then, that most Africa countries have found themselves today, and concessional loans, grants, and more importantly the ambiance of domestic policy space facilitated by the leadership of the Communist Party of China in consultations with other political parties and social forces, ensured that Beijing judiciously seized the moment and unleashed the most successful economic reforms, that the world has dubbed “a miracle”.
Related to the fiction that Beijing is overloading African countries with debt is that Chinese companies are flooding the continent with workers that could be readily found in Africa. In the 2017 report issued by U.S based International management consulting firm Mckinsey & Company, titled “Dance of the Lions and Dragons: How are Africa and China engaging and how will the partnership evolve?”, it observed that “A walk through a Chinese factory or construction site almost anywhere in Africa will confirm what our research finds.” According to the report “Chinese enterprises overwhelmingly employ local workers. At the more than 1, 000 companies we surveyed, 89% of employees were African, adding up to more than 300,000 jobs for African workers.
Scaled up across more than 10,000 Chinese firms in Africa, these numbers suggest that Chinese owned business employ several million Africans.”
In explaining the trend for the bias toward local labour, the report found that employing Africans by Chinese enterprises in Africa leads to lower overall cost,” noting that “although China rose to global manufacturing prominence on large, low-cost labour pool, its payroll cost have been rising and its labour is becoming less price competitive with Africa.” The report noted “one construction-company supervisor,” who said that even though “Chinese workers tend to be more productive, it is now five times more expensive to bring a Chinese worker to Africa than it is to hire locally.”
So the vast job opportunities opened to Africans by the burgeoning Chinese enterprises in Africa is not so much the consequence of benevolence but the implicit and cold logic of economics. Therefore, as China enters the post-industrial era with services set to dominate her economy, the gap in the huge Chinese market for light and medium scale industrial products can be filled by industrializing Africa, seizing the opportunity of China-Africa industrial and capacity cooperation to export to the Chinese market and elsewhere, “made in Africa with China.”
Just as China seized the moment of rising labour costs of key industrial powers-Japan, Europe and America in the 1980s and 1990s to turn herself into the workshop of the world by harnessing the advantage of her huge workforce and its low-labor cost, Africa is at the cusp of such historic opportunity but the empty talk of speculating China’s intentions in Africa by weaving outlandish fictions and fallacies around it would delay the grasping of the real facts about the opportunity of China-Africa cooperation.
In a decisive effort to eliminate poverty completely of the 1.4 billion of her people by the end of this year, with guarantees of decent jobs, food security, universal access to education and comprehensive health insurance coverage, the governance process of the Peoples Republic of China -Socialist consultative democracy featuring broad and inclusive multi-party cooperation and participation of all social categories aimed at building consensus around key policies and programs should be worthy of more than casual examinations and interrogations in Africa.
Onunaiju, is research director, Center for China Studies, Utako Abuja.