Its a win-win for China in deals signed with Africa at the 2018 FOCAC

Eighteen years after inception, six Forum on China-Africa Cooperation (FOCAC) summits has been held at an interval of three years as a signal of the dynamic and expanding China-Africa relations. With each summit, millions and billions of dollar deals have been for infrastructure, business and development projects, this year is no different.

Under the theme “China and Africa: Towards an Even Stronger Community with a shared Future Through Win-Win Cooperation,” various countries went home smiling with inked contracts, grants and loans. For African Countries, FOCAC provides an opportunity for better deals. How true can this be?

To date, China has made more than $142 billion in loans to African countries with its trade in Africa growing in the past 40 years from $765 million to $170 billion a year.

China’s One Belt One Road Initiative (OBOR) which hopes to connect Asian, European and African countries more closely, aims at promoting economic prosperity, development and regional economic cooperation. However, this initiative has faced countless criticisms ranging from economic colonialism to debt trap  but the overlooked concern is China’s dumping of its Steel in Africa

DEALS SIGNED WITH SOME AFRICAN COUNTRIES

KENYA

Kenya secured deals in form of grants and loans. Kenya also signed a cooperation agreement within the Framework of the Silk Road Economic Belt and the 21st Century Maritime Silk Road Initiative.

The deals signed between Kenya and China which were witnessed by Kenya’s President Uhuru Kenyatta and  China’s resident Xi Jinping would see to the release of Sh380 billion ($3.77 billion) for the financing of a Kenyan railway project. After the completion of feasibility studies, China would finance the completion of phase 2B of Standard Gauge Railway that plies the Naivasha-Kisumu to Malaba route.

In addition, a Memorandum of Understanding between the University of Nairobi, Beijing Jiaotong University and Kenya Railways Corporation was signed for the training of Kenya’s Standard Gauge Railway (SGR) engineers and managers. This memorandum was signed by University of Nairobi’s Vice-Chancellor, Peter Mbithi and Kenya Railway Corporations Acting Managing Director Philip Mainga in the presence of Kenyatta and Jinping.

A 30-kilometre road deal from Jomo Kenyatta International Airport (JKIA) to Westlands, Modogashe-Habaswein-Samatar and then further down to Elwak-Rhamu in North Eastern part of Kenya was also signed. The road deal was paired with the development of Dongo Kundu Special Economic Zone in Mombasa and are worth Sh15 billion ($148.92 million).

Kenya’s Treasury Cabinet secretary Henry Rotich said China has also granted Kenya Sh4.2 billion to finance major infrastructural projects to be identified across the country. Though these projects are still unknown, Kenyatta noted that the money will be channelled to projects aligned to the Chinese Government’s Belt and Road Initiative covering telecommunications, construction of roads, bridges and seaports, energy, and human capacity development

NIGERIA

Nigeria signed a $328 million concessional loan agreement with China for the Information and Communication Technology Infrastructure Backbone Phase II (NICTIB II), a Memorandum of Understanding for the One Belt One Road Initiative (OBOR) project and a 50 million Chinese Yuan pledge at the 2018 Forum on China-Africa Cooperation (FOCAC).

The NICTIB II signing ceremony was done by Nigeria’s Finance Minister, Kemi Adeosun and Director-General of China’s International Development Agency, Wang Xiaotoa in the presence of both Nigeria’s President Muhammadu Buhari and Republic of China’s President Xi Jinping. The concessional loan agreement is between Galaxy Backbone Limited and Huawei Technologies Limited (HUAWEI).

Buhari solicited China’s support for the building of the 3,050 megawatts Mambila hydroelectric power project and in response to his 321-word statement, Jinping pledged 50 million Chinese Yuan support to Nigeria’s military and noted that China would import more agricultural products from Nigeria. Nigeria’s Minister of Foreign Affairs, Geoffrey Onyeama and China’s National Development and Reform Commission Director, He Lifeng signed a Memorandum of Understanding for the One Road One Belt Initiative.

GHANA

Ghana signed eight Cooperation Agreements and Memoranda of Understanding with China.

The agreements are One Belt One Road Memorandum of Understanding, Memorandum of Understanding on the country’s regional aviation cooperation, agreement for cooperation in the peaceful use of nuclear energy, a $2 billion Sino-Hydro deal to carry out maternal and child health project, framework agreement on financing insurance cooperation, an economic cooperation on Phase 2 project of the University of health and allied sciences in Ho, an expansion deal for Cape Coast Stadium and finally a deal for China to supply vehicles to the Ghana Police Service

EGYPT

Egyptian President, Abdel-Fattah El-Sisi witnessed the signing of different developmental projects worth $18. 3 billion.  The construction of the world’s biggest power plant in Al-Hamrawein region on Egypt’s Red Sea coast which will be powered by clean coal technology with a production capacity of 6000 Megawatts was among the deals inked by Egypt, Bassam Rady, Egypt’s Presidential Spokesperson said.

Stage 2 of central operations in Egypt’s new Administrative Capital, the construction of a petrochemical refinery plant in the Suez canal zone, a pumping and storage plant in Ataqa mountain, the construction of Shaodong Roi textile complex and a Tai Chan plant for gypsum panels were part of the deals signed at the Forum

GOOD OR BAD DEALS?

As China pushes its influence in Africa with deals, African countries see the contracts as developmental and wealth creating measures. Critics have expressed concerns that these deals marginalize most African businesses and are detrimental to Africa’s overall competitiveness.

Recent research has also suggested that the Chinese presence has failed to bring significant skill developments, adequate technological transfer or any measurable upgrade to the productivity levels of Africans.

Thanks to trade deals, investment in Africa has been structured around Chinese ownership, with about 90 percent of firms in the continent either majorly controlled or outrightly owned by Chinese nationals. And even though there are estimated to be over 10,000 Chinese firms in Africa that have created jobs for millions of Africans, the influx of these Chinese deals redirect most of the contracts to Chinese contractors leaving local businesses lagging behind.

Former Vice-President of the World Bank’s Africa division, Oby Ezekwesili, who categorised the China-African deals as bad deals stated that African leaders lack the will to carry out bold and costly reforms that will attract private sector investment into critical sectors of the economy, hence they rush to sign these deals. It was the commitment to Economic Reforms that gave China its structural transformation miracle, she noted.

According to Ezekwesili, “All those African Presidents, Prime Ministers and Ministers must not return to our continent from China, without imbibing the spirit of deep market reforms from 1978 that changed it from a statist to a market-based economy and triggered its average 10-11 percent GDP growth annually.”

How China benefits from these deals?

Asides looking to become the top global power, China has the challenge of steel glut. According to a report by BMI Research, China will produce over 825 million metric tons of crude steel in 2018, a 0.5 percentage increase from 2016 but the country might not consume half of its production. Statistics show that in July 2018, China had already produced around 81.24 million metric tons of crude steel.

Over the past two decades, the Chinese steel industry has increased its output significantly and has grown into the world’s largest crude steel producing country and there have been concerns that the Asian country is dumping its cheap steel in so many countries. China has devised alternative ways to push out its steel through signing infrastructural deals and having Chinese companies use its steel for the construction of roads, bridges, railways and even cars.

Even the Director of industrial policy at China’s Ministry of Industry, Miao Changxing noted that Chinese Enterprises could begin pushing its steel by supporting infrastructure, setting up joint venture enterprises and setting up distribution centres in its host countries. This act, China has already begun perfecting, by issuing loans and signing infrastructure deals with countries on the continent.

In the guise of helping Africa develop, creating jobs and fostering a seemingly symbiotic relationship, China is not only leaving Africa in more debt than it can repay by offering cheap lodeals, it is also benefiting by heading these construction projects, selling their steel and making huge money from the continent while milking Africa’s natural resources.