One of the biggest African stories since the year 2000 has been that of the massive growth in China’s presence. Before then, China emphasized diplomatic relations and political ties with African states inspired by an ideology anchored on Third World solidarity. However, China has now succeeded in expanding, rather rapidly, into Africa’s economic arena more for business reasons.
The booming relationship has been marked by China’s high propensity to give soft loans toward the execution of large-scale infrastructural construction projects such as roads, railways, dams, sea ports and airports, the opening of mining ventures, and filling of a critical gap in donor funding of national budgets across the continent. For instance, according to some estimates, Sub-Saharan Africa received $67.2 billion from China’s Export-Import Bank between 2001 and 2010, compared to the World Bank’s $54.7 billion.
Africa’s governments and citizenry at large have generally greeted this Chinese ‘invasion’ with so much joyous euphoria. Grand ceremonies have usually marked the launching of China-sponsored activities to more or less tout their socio-economic benefits. Indeed, China’s soft loans, grants, investments, infrastructural projects and imports trade have contributed significantly to the continent’s economic growth. Some critics, rather in the minority but with a growing voice, however, have maintained that the relationship with China is not all that good and that it may as well be bad in the long-run.
Ghana established diplomatic relations with China in 1960 and earned a total of US$43.5 million in development assistance from China between 1964 and 1970, and a write-off of US$25 million of debt under the country’s HIPC programme in the early 2000s. However, China’s interest in Ghana in terms of investments and trade grew strongly from the year 2000. And, as evidence of the importance China attaches to its economic relationship with Ghana, Premier Wen Jiabao visited Ghana in 2007 and an office of the China-Africa Development Fund opened in Accra in November 2011 to focus on the West African region.
The list of Chinese loans and aid projects and trade benefits that have come Ghana’s way is very long, including the following –
- US$0 million concessionary loan to expand and upgrade telecommunications network in the country. In the first phase, all ten regional capitals and 36 towns have been linked with fibre optic cables using a US$30.0 million concessionary loan.
- $6.0 billion concessionary loan from the China Export-Import Bank to extend the rail network.
- US$562.0 million China Export-Import Bank loan for the construction of the Bui hydro-electric dam.
- US$28 million interest-free loan for the construction of the 17 km Ofankor-Nsawam road.
- US$99 million interest-free loan for the construction of landing sites for fishing communities and the Afife rice project.
- 0 million concessionary loan for the security sector, including US$7.5 million for the construction of the Ghana Ministry of Defence office complex.
- US$13.0 billion deals with China Development Bank and the China Exim Bank in 2010, to finance infrastructure projects and transform its economy through gas and proposed oil-driven industrialization, including $3.0 billion for the Western Corridor gas commercialization project, $9.0 billion for road, railway and dam projects, and $250 million for rehabilitation of the Kpong water works.
- As technical support, more than 700 Ghanaians are recorded to have attended Chinese-funded training courses in education, trading, communication, energy, auditing, agriculture, and fisheries operation.
- Growth in imports from China from US$93.13 million in 2000 to US$433.74 million in 2005, with China currently the second largest exporter to Ghana.
- Total foreign direct investment in 283 projects in 2008 worth US$75.8 million from China mainly focused on manufacturing, construction, tourism, trading and services.
- The latest $33 million Cape Coast Sports complex.
What has been termed Chinese invasion or presence in the various African countries followed an interesting pattern. In the beginning, the Chinese government lavished soft loans and publicly-funded investment linked with grand infrastructural constructions. Next to tug in was private Chinese investment, the promotion of the importation of all manner of Chinese consumer goods and technical equipment, and the arrival of a mass of Chinese merchants and businessmen who quickly established a huge local base across the economy and country, dealing in all manner of products which hitherto African traders travelled to China for or were manufactured locally.
This pattern has been played out to perfection in the particular case of Ghana. As listed above, Ghana has had a fair share of the Chinese soft loans and grants for publicly-funded investments. Beyond these accomplishments, Ghana has now been flooded with Chinese products, businesses, capital, and even traders and labour, and some assign a lot of the decline in the manufacturing sector to this phenomenon. One may well ponder if the economic presence of China in Ghana in particular is now impacting negatively on the national economy.
China touts that its growing presence in Africa is guided by the principle of mutual benefits to both sides. For this reason, China continues to mobilize its vast state financial resources to invest broadly in infrastructural projects across Africa in exchange for the extraction of Africa’s vast natural resources. However, the claim of mutual benefits is proving to be a mirage. This is because the Chinese investments are generating multiple layers of benefits more to China than Africa, such as contracts for Chinese service companies to the exclusion of local service companies, the relocation of labour-intensive, heavy-pollution industries from China, and the dumping of Chinese products on African economies to the detriment of local production.
In my view, China is eventually demonstrating a selfish quest for Africa’s vast natural resources to fuel its own domestic economic growth, not caring hoot about the sustainability of whatever contribution it is making to Africa’s economic development through infrastructure projects and lop-sided trade. I also agree that the terms and conditions of these Chinese loans are not good for Ghana’s industrialization. Chinese firms and materials are the dominant content used under these agreements. Local contractors and manufacturers are hugely sidelined. Chinese companies are involved in sectors such as agriculture, construction, energy, fishing, manufacturing, and telecommunications.
To guarantee themselves more benefits from the growing relationship with China, Ghana and the rest of Africa should diversify their economies away from supplying unprocessed natural resources to China and also encourage more Chinese business-to-business investment into more labor intensive sectors.
Another area of concern is the ability to negotiate better terms on both government-to-government and business-to-business investments involving China. Due to poor negotiation, African countries tend to be shortchanged in terms of quality control of products, linkages with local economies, workmanship on infrastructural projects, local employment, working conditions, and transfer of skills and technology. There is the need to improve on the terms of all the above to enhance the benefits to be derived by African countries from the Chinese invasion or presence.
By Daniel Otabil Koomson
This writer is a seasoned economic journalist and public relations practitioner.
