By Ali Issa
Current achievements in China-Africa Cooperation
Since the Forum on China-Africa Cooperation (FOCAC) was established 20 years ago, and the more recent initiation of the Belt and Road Forum for international cooperation, China has become Africa’s biggest economic partner. Across trade, investment and infrastructure financing, there is no other country with such depth and breadth of engagement in Africa. The multifaceted development cooperation has boosted trade and investment between the partners. In this context, China’s Foreign Minister Mr. Wang Yi underscored, (on 12 November,2020) at the occasion of the 2oth anniversary of FOCAC, that “trade between China and Africa hit US$208.9 billion in 2019, and total Chinese FDI in Africa reached US$49.1 billion, grown by 20 fold and 100 fold respectively, compared with 20 years ago”. Also, more than $200 billion has been generated in Chinese financial support for development projects in Africa as of end 2019.
Over the two decades since FOCAC, the massive economic and financial cooperation has generated large investments in economic infrastructure, in the form of construction of roads, railways, ports and power plants, which have made considerable difference in the economic and social development of countries in Africa. The post FOCAC collaboration between the partners also impacted well on the social developments of many countries, especially in the health and education sectors.
China’s expanding investments were supported by the Forum through promoting infrastructure development, encouraging Chinese enterprises to invest, and facilitating the development of SMEs in Africa. The inflows of Foreign Direct Investment (FDI), both from government and private enterprises, facilitated and under FOCAC and Chinese finance enhanced the inclusive development potential of many African countries.
China has already become a big source of finance of Africa’s development endeavors. In September 2018, at the 7th FOCAC Summit, US$60 billion was pledged in financing for Africa, which included $15 billion in grants, interest-free and concessional loans; $20 billion in credit lines; a $10 billion special fund for development finance; a $5 billion fund for financing imports from Africa; and incentives to Chinese companies to invest at least $10 billion over three years. Most of the investments under the forum were allocated to projects: in roads and railways, power generation and distribution, and building economic zones and industrial parks that promoted opportunities for jobs and economic growth. The beneficiary countries utilized the Chinese investments as a means to foster and enhance inclusive growth and poverty reduction, for opening their economies to international markets, and attaining sustainable transformation.
Undoubtedly, Chinese investments and external financing have been indispensable part of sustained economic growth achieved in the beneficiary countries in the past 2 decades. Such investments have contributed to providing world class economic infrastructure, injected much needed capital, introduced new technologies and modern management know-how, and strengthened management of projects implementation in these economies.
The countries that have benefited from the Chinese investments have been those that succeeded in synchronizing their own national strategies with Chinese investments and external financing, so as to address the principal binding constraints on their national economies. The productivity gains and spill-over positive effects of these investments have permitted these countries to leverage the contributions made by the Chinese FDI and external financing.
The views of African policy makers and academics demonstrate that countries benefited significantly from the Chinese investment inflows during the 2 decades of the FOCAC. Accordingly, China’s economic and foreign relations approach is generally perceived positively in African countries. Most observers emphasize China’s diplomacy of non-interference, mutual respect and friendship with Africa, as being fully appreciated by key decision makers.
The current achievements are broad based but tell only part of the story, as the China-Africa cooperation extends to other key sectors, as declared at the 2018 FOCAC Beijing Summit to build a stronger community with a shared future. The deepening relationship thus covers beyond the economic cooperation, and extends to critical social sectors as demonstrated by the efforts to provide support for health and educational institutions and governance in African countries; and for peace and security missions in some states.
More specifically, there is much to commend the Chinese authorities’ efforts to assist African countries under the difficult circumstances of the Covid-19 pandemic. The global health and economic impact of this pandemic is creating huge economic and social challenges globally. China’s efforts to support African countries in surmounting these challenges and achieving post-pandemic recovery is vital to ensuring that economic achievements in recent years are sustained, and poverty reduction in recent decades is not reversed.
At such critical moment in the global fight against Covid-19 pandemic, commitments made at the extraordinary China-Africa virtual Summit on solidarity against Covid-19 (on 17 June 2020) promised to build a China- Africa community of health for all. These commitments made at the Summit in the words of President Xi Jinping included: “to mobilize necessary resources, stick together in collaboration, and do whatever it takes to protect people’s lives and health and minimize the fall out of Covid-19;” as well as a pledge “that once the development and deployment of Covid -19 vaccine is completed in China, African countries will be among the first to benefit”.
The gains achieved under the FOCAC and BRI cooperation have evidently built a shared community and substantial collaboration in the socio-economic fields. The remaining issues are how to strengthen cooperation within FOCAC and BRI on issues that are of high priority need and that improve people’s livelihoods and their wellbeing.
Towards enhancing the strategic partnership
The recent primary focus on trade, investment and finance of the China Africa relationship merits further examination and assessment; so as to increase and expand the core priorities fields, beyond the successes achieved in the economic and finance cooperation in the last 20 years. There are core areas of vital importance for the transformation of Africa that should be covered urgently, including (i) poverty reduction in fragile economies through learning from China’s successes; (ii) expanding efforts to develop Africa’s industrialization through accelerated technology transfers; (iii) avoiding the risks of accumulating unsustainable external debts; and (iv) addressing the impact of adverse climate change that is an existential threat to some African countries.
There are concerns that the investment and financial resources from China while key for some African countries growth and transformation, could aggravate the income inequalities within the continent and individual countries. First the top African recipients of Chinese finance and investments are relatively the more developed countries and/or those that have proven natural resources, such as minerals or hydrocarbons in abundance. Second, within individual countries, the projects that benefit from the Chinese financial and investment access are centered in few urban centers within high income countries.
The widening income inequality is contrary to the “Development Model of China”, which targeted and achieved phenomenal poverty reduction in the country in a few decades. The achievements of China’s transformation to eliminate poverty of 700 million of its population, both urban and rural, in a few decades is much desired and aspired to by Africans.
Certain challenges faced in some African countries, including endemic instability, insecurity, and poor governance lead to limited access to foreign direct investment and financial flows. In such countries, evidence of fragility and ineffective institutional governance clearly are contributing factors to insufficient access to China’s support, and thus different modalities of engagement (e.g. highly concessional credits and grants) should be explored.
Policy makers and academics have argued that successes of considerable home grown technological progress in China in the last 3-4 decades will permit African countries to tap into this know-how in a quick manner. The over whelming evidence, however, is that most of the skilled labor and advanced technology that built the base of China’s global success has yet to impact on Africa. It needs to be underlined that host countries capture technology transfers associated with FDI only when they achieve a certain threshold in terms of skills, technological capabilities, and viable industrial development. Accordingly, emphasis should be laid to support competitive industrialization in Africa on the basis of the Continent’s Free trade agreement, which is under implementation.
Some African countries have accumulated unsustainable levels of foreign public debts, raising the question of what sacrifices they may have to make to repay these loans. China has shown willingness to reschedule debts owed by several African countries in recent years; to cancel or suspend debt service obligations for African countries that are hardest hit by the coronavirus pandemic and are under heavy financial stress; and to participate in the G20’s debt service suspension initiative for countries facing debt distress.
In any event, it is the responsibility of borrowing governments to ensure that the terms and conditions of the loans and credits negotiated are affordable and are used for productive investments. Moreover, the acquired foreign financing ought to generate additional productive capacity, and add to foreign exchange earnings to meet debt service payments. Both the lending and borrowing countries should maintain caution, and ensure debt obligations would not lead to default and debt crisis; as they would both share the blame if “expenditures on vanity projects” lead a country to early debt distress. Responsible policy makers in African countries should be wary and vigilant that access to funding and its terms and conditions ought to be based on capacity of a country to maintain debt sustainability in the long term.
Many African countries are suffering from perennial drought and chronic food insecurity. The prevalence of undernourishment in such countries is more pronounced than anywhere in the world. Vulnerability to food insecurity is not only high but is becoming structural with most of the poor concentrated in arid and semi-arid ecosystems. Drought is one of the most pervasive climate events and has significant impact across the food value chain.
The affected countries lack the institutional capacity and advanced operational systems to effectively respond to the magnitude of climate change risks. This calls for establishment of an integrated response for resilience building to boost overall risk-management capacity, and deliver means of addressing climate crisis effects. In view of China’s success in building models of food security and addressing adverse climate impact on agricultural productivity; ways and means of collaborating in this critical area for human resilience should be set as a priority in extending the achievements.
The Chinese leadership has declared readiness to work with Africa countries on a framework of strategic cooperation on climate change to jointly tackle this challenge; as well as willingness to explore broader cooperation in new business forms as clean energy and advanced communications.
Over the past 2o years, FOCAC has considerably enhanced the cooperation and friendship of China and Africa, and the Belt and Road Initiative could further strengthen the relationships built over the period. Substantial mutual gains have been registered in the economic front as demonstrated by the current magnitudes of trade, investments and financial resource inflows from China, which have substantially transformed economic infrastructure.
The Effective cooperation has also been extended to social areas, particularly in building educational and health institutions capacities, and strengthening knowledge base across multiple productive sectors to assist in health and economic recovery. The cooperation in the preparedness for and mitigation of the impact of the Covid-19 pandemic has strengthened Chinese and African solidarity thus far. However, comprehensive assistance to Africa to address the pandemic is critical in meeting the challenges of the unfinished recovery from on-going health and economic crisis.
The broad China-Africa relations under the FOCAC and BRI have been immensely effective in the core areas of engagement; notably in the development of trade facilitation, investment promotion and access to finance. These current effective practices should be further strengthened and deepened, and the China and Africa strategic relations should be enhanced in fields that are vital for improving people’s lives and promoting sustainable development.
Ali Issa (PhD) is Managing Director of Horn Economic and Social Policy Institute