Thursday, 15 May 2014

Why China fascinates Africa


AFRICA IS RAPIDLY becoming a battle ground for both the West and China. Both are seeking to exert their influence in the region. However, the bungling Western governments and NGOs look like observers rather than a contestants. Even then, the Western private sector deserves credit for reading the signs of the time and getting on with it.

owever, credit goes to the private sector in the West for being decisive


Tony Blair, the former British Prime Minister once pronounced a truth that the West had better take note of. He said; “Africans have realised that whenever they ask China for help, the Chinese show up the next day with a digger. The West on the other hand loads Africa with sheaves of paper and plenty of lectures on human rights."


Propaganda or Genuine concern?
That realisation is the major driver of Africa’s shift to the east. And China has not disappointed Africa despite noise from the West and its fans in Africa. Due to years of dependence on the unreliable and unpredictable West, Africa ground to stand still. Africa was billed the "Hopeless continent" by the western Media not so long ago.


Then Africa began to emerge from its doldrums. Now Africa is on the second decade of robust economic growth. Thanks in part to growth in China and India as their demand for Africa resources has ensured stable prices for Africa resources. 


The robust growth has defined Africa's development goals- infrastructure and internal markets.  And these costs huge amounts of money which Africa alone cannot afford. According to Africa development Bank estimates, Africa needs to invest US$90 million a year over the next 10 years in Infrastructure- Roads, Sea ports, Airports, Railway lines and power generation and distribution networks.  


Yet the continent can only manage to raise US$40 billion a year leaving huge $ 50billion deficit. Without these, the cost of doing business in Africa also the cost of living will remain high; the private sector-both western and eastern- will be dissuaded from investing the continent which will stifle economic growth. No government but the most callous will countenance such a prospect. Hence they turn to friends for help.

This is how neighbours with deep pockets in the West and East come in. And this is where influence is peddled around. And this is where the West, which was the only bull in the street for years, has lost it. In the past, it dispensed aid to Africa in tiny doses and could withdraw even such tiny doses at whim.


Addis Adama expressway Ethiopia
 China on the other hand dispenses aid to Africa in full dose. This is where Tony Blair’s truth comes in. While the West is still dispensing doses, China gives the full dose. China’s comes in with the digger while the West loads Africa with sheaves of paper. Aid dished in large doses assures project completion -on time and within budget. Small doses produce the opposite results: Cost escalations, slow and delayed project completion.


Consider this: In the past week, China signed a $13billion deal to finance and build a standard Gauge railway line in Nigeria, a US$3.6 billion deal to build a Standard gauge Railway line in Kenya which could rise to US$20 billion if it is extended into Uganda, Rwanda, Burundi and South Sudan. 

Just a week earlier, the World Bank, which is synonymous with the West advanced to Tanzania US$300 million to upgrade the Railway line on the East African Central transport Corridor. This line, which is  the old meter gauge line will compete with the more efficient SGR on the east Africa Northern transport Corridor on which China could end up investing more than US$20 billion. 


Will the central corridor ever compete with the northern corridor to supply Burundi, Uganda, Rwanda and D R Congo? Let's leave that to your imagination.


On failing to match the Chinese muscle, the West and its fans in Africa have resorted to intimidation with such slogan as “you shall pay through the nose, China will cart away all your wealth. Failed, suspended or cancelled Chinese projects in Africa.” True Chinese Money is not a free lunch. Africa will have to repay the debt unless forgiven.


However, the critics only focus on the costs and failures without looking at the benefits of such borrowing and other successes of Chinese enterprise in Africa. For instance the Standard Gauge Railway line, in east Africa’s northern transport corridor will cost Kenya up to US$3.6 billion from Mombasa to Nairobi, a distance of roughly 500Km. But it includes both the Railway line and the rolling stock. This means that the second half of the line from Nairobi to the Ugandan Border will cost a lot less since there will be no rolling stock factored in.


 The Loan will attract a 4.4 per cent, which is way below the world lending rate. This means there will be savings in loan repayment of 1.6 per cent compared to the ruling world market price. Further, officials tell us the Railway line will generate an additional 1.5 per cent to Kenya’s GDP. At the current GDP level of US$40 billion, that translates into a Whopping US$600 million. The implication here is, the Railway line, whose lifespan is say 60 years, will repay its loan within the first 8 years of operation. 


 In addition, the Railway will shrink freight costs by 60 per cent and shrink the shipping duration within Kenya to just about  10 hours max.. This will mean lower prices of consumer goods since the high freight costs are passed on to final consumers. Further, the line will removed the heavy trucks from our roads which will reduce the damage to our roads, reduce accidents involving heavy trucks and other vehicles.


Kenyan tax payers will save on the cost repairing and re-building roads damaged by overloaded freight trucks and also save on repair to their own vehicles caused by the damaged on roads. The same benefits can also be recited in the case of Adama- Addis-Ababa express way in Ethiopia.


As for China carting Africa resources especially oil away to China at their price, that sounds far-fetched. While China could be seeking to be the front runner in terms of accessing eastern Africa oil, there has never been a hint that the financial support the region is getting is linked to natural resources. In fact the western oil majors dominate the resources sectors in east Africa. That is what good sense is all about: use the East to develop the infrastructure and the West to exploit the resources.

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