The Seal of Transparency, Efficiency on Sino-African Relations

Jan 18 , 2019
By Magaye Gaye

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China-Africa relations have been beneficial to both countries. But the relationship can use more efficiency and transparency, writes Magaye Gaye (gmcconseils@gmail.com), a Senegalese economist.

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China, the world's second-largest economy, is now the largest foreign economic power in Africa. The trade between the two amounted to 170 billion dollars in 2017. France, for instance, accounted for only 48 billion dollars in the same time.

China is the largest bilateral infrastructure backer in Africa, with a 50pc market share, according to a recent report by McKinsey & Company, a management consultant. China alone is doing more in this area than the African Development Bank (AfDB), the European Union, the International Finance Corporation (IFC), the World Bank and the G8 combined.

China has thus far focused on infrastructure, raw materials and mineral and oil resources. More and more, it makes safety its workhorse. To this end, it has signed funding agreements with the joint G5 Sahel force, for the Douala military depot in Cameroon, and for the African Union mission in Somalia.

The choice of these sectors is based on a strategic vision of economic expansion - more than 10pc average economic growth rate over the last four decades, although not all targets have been met - and a desire to secure its investments.

A fascinating aspect of the relationship is that contrary to popular belief that the Chinese government is interested in Africa, a recent report by McKinsey shows that of the more than 10,000 Chinese companies operating in the continent, an increasing number are private. A third of all these companies are engaged in manufacturing, facilitating Africa's estimated 500 billion in industrial output.

Chinese financial assistance generally presents soft loan conditions, often concessional with sometimes large donations, durations, differing rates and disbursement times more than satisfactory. It also has a policy of non-interference in the affairs of other countries, unlike its Western counterparts.

China's efficient export business model has the unparalleled financial capacity with significant foreign exchange reserves valued at 3.1 trillion dollars in July 2018. Devoid of a colonial past in Africa and an observer in the non-aligned movement, the nation, it can be argued, as well benefits from a positive image on the continent. At the strategic and geopolitical level, China had the intelligence to rely on Africa to build a solid alternative to Western countries through the BRICS.

If we reason in volume, there is enough to feel a sense of satisfaction about the relationship between China and Africa. However, the stakes and challenges are numerous.

The quality of China-funded projects leave somethings to be desired. China should insist that financing projects whose impact on poverty is not real are counterproductive. It would be better to be more demanding on the destination of its resources to promote inclusive growth that can encourage the establishment of a strong middle-class.

Africa, in turn, must be more demanding in terms of technology transfer.

Is it normal that nearly six decades after independence, China continues to build stadiums in Africa by its own companies?

It takes more sharing of experience and transfer of know-how. The weak role of Sino-African relations in developing African national value chains is a limitation. In this respect, China does not behave better than the others, and this is the challenge for Africa.

Chinese policy in Africa could be likened to a policy of predation, since it does not help to transform the structure of African economies. But the fault is not only in China. Our countries and their business communities do not have the capacity and the initiative to channel Chinese investment opportunities to the interests and priorities of our economies. We have very weak institutional capacity to control foreign direct investment and put it at the service of our productive capacities.

Both partners should also take care of the risk of over-indebtedness. Public debt in sub-Saharan Africa accounted for 45pc of gross domestic product (GDP) at the end of 2017, an increase of 40pc in three years. Of this total, China appears by far the biggest creditor.

The case of Mozambique is still in everyone's minds. When the country declared itself in default in January 2017, it had confessed to the existence of a debt hidden in its books. More transparency is needed in the relationship.

It is equally desirable that the two partners develop more joint ventures in the industrial field in general, and the processing of local raw materials in particular. These can help solve the nagging issues of youth employment; China and Africa must jointly take advantage of opportunities like African Growth and Opportunity Act (AGOA) and the Everything but Arms program of the European Union. Playing the relocation map of Chinese companies with a high demand for labour is also worth exploring.

Limiting infrastructure-versus-oil barter and normalising trade relations by placing them in transparent tendering and monetisation procedures are also challenges.

Problems related to corruption, the need to better cooperate in the promising field of technological innovation and to further strengthen their monetary cooperation through integration of the yuan in monetary systems must be taken into account. This latter aspect is amply justified in view of the upward trend in trade flows between China and Africa.

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PUBLISHED ON Jan 18,2019 [ VOL 19 , NO 977]

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