N. F. Kenure
Beijing, Sept 3. The Chinese president Xi Jinpeng offered $60 Billion to over 50 African leaders at a two day summit. This is after another $60 Billion pledged in South Africa at a previous summit three years ago.
Not to look a gift horse in the mouth, but why is China being generous?
The West is preoccupied with Brexit, their refugee crises, the rise of fascism and Donald Trump, leaving room for China to stake big claims in Africa. And yet, right before the Africans left for China, there was a flurry of state visits from Theresa May of the U.K and Angela Merkel of Germany to various African countries.
Heyden Briscoe of UBS Asset Management says that in the next few years, three of the largest cities in the world will be in Africa (Nigeria, Congo and Tanzania) and China is ahead of the trend. "China is playing the long game by investing in Africa".
President Ramaphosa of South Africa believes that China is an equal partner in development and economic growth, but what exactly does China get in return?
China already owns 21.3% of Kenya's external debt and Angola owes China 70 Billion. It has lent Africa over 125 Billion between 2000 - 2016 and is Africa's largest trading partner.
The IMF included RMB in its Special Drawing Right currency basket with the Dollar, British Pound, Euro and Yen in 2015, a key milestone in the Chinese quest for domination in the global monetary system.
The Macroeconomic and Financial Management Institute of Eastern and Southern Africa
MEFMI includes Angola, Botswana, Burundi, Kenya, Lesotho, Malawi, Mozambique, Namibia, Rwanda, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe.
"Most countries in the MEFMI region have loans or grants from China and it would only make economic sense to repay in renminbi (Chinese yuan)", said MEFMI spokesperson Gladys Siwela-Jadagub.
So, Africa is more likely to embrace the RMB as reserve currency as a major "partner" in the African economy.
But are the African leaders ensuring that their countries are not falling for the same predatory practices of the World Bank and the IMF?
Aly-Kahn Satchu, an investment advisor in Nairobi says,
"We cannot be naive, China is not Santa Claus, though a lot of our leaders seem to believe that. We need to negotiate with our national interest in mind".
China denies "debt trap" diplomacy with Africa but what happens when many of these countries default?
Oby Ezekwesili a former Vice-President of the World’s Bank Africa division is rightfully fearful.
President Xi Jinpeng claims there are no political attachments to these new funds, and warns the African leaders against vanity projects.
China is investing heavily in capital and resources in Africa to the chagrin of many in the West and many more in China who believe these funds could be best used internally.
It is now in China's financial interest to see Africa succeed.
Sep 6, 2018
