China Friend or Foe? Published in AU’s “Invest in Africa” magazine

Below is my article on China: Friend or Foe?-January 2019, that was published (abridged) in the African Union magazine: “Invest in Africa“-2019 vol 1. You can find it on page 65 (85 on the link to the magazine). There are many worth while articles to read in this volume of the AU magazine  

By Lawrence Freeman

January 1, 2019

          The short answer is a China is friend and contributor to Africa’s progress. Ignore all the propaganda, ignorance and outright lies claiming that China is the new colonizer of Africa. There is absolutely no truth in the contorted comparison between China’s involvement in Africa today, and 500 years of slavery and colonialism by Western nations.

          Following the successful September 3-4, Forum on China Africa Cooperation (FOCAC) summit in Beijing, we have witnessed an escalated disinformation campaign alleging that China is attempting to snare African nations in a new “debt-trap.” New vicious rumors have emerged that China is taking over ownership of key infrastructure projects in Africa. Every African Head of State who has spoken out, has refuted these allegations and praised their cooperative relationship with China.  

According to a report by the British based Jubilee Debt Campaign, “Africa’s growing debt crisis: Who is the debt owed to?” China is owed a minority of external debt. Their figures compiled from the World Bank and the China Africa Research Institute show that 20% of African government external debt is owed to China in contrast 32% to private lenders, and 35% to multilateral institutions such as the World Bank.

Of these 14 countries that have they examined: 11 owe less than 18% of their debt to China (Burundi, Cape Verde, Central African Republic, Chad, Gambia, Ghana, Mauritania, Mozambique, Sao Tome and Principe, South Sudan, Sudan and Zimbabwe); and three owe more than 24% -Djibouti (68%), Zambia (30%) and Cameroon (29%).

The proponents of the “debt-trap” accusation conspicuously, egregiously omit from their chronicle the history of the financial imprisonment of the then newly independent African nations by the IMF, World Bank, Paris Club, and their kith and kin in the City of London and Wall Street. Through manipulation of terms of trade, controlling prices, and forcing currency deviations, African nations found themselves shackled in several hundred billion dollars of new debt to the West shortly after African nations achieved liberation from imperialist colonial masters. Western debt replaced slavery and colonialism as the new method of looting Africa of its wealth, reinforced by the ill-fated Structural Adjustment Programs-SAPs, otherwise known as the “Washington Consensus.”

So, who is kidding whom about a “debt-trap?”

Debt for Infrastructure is Necessary

Railroads from the colonial period versus railroads of the future. The East-West and North-South railroads are long overdue

Credits issued for hard infrastructure; energy, railroads, ports, roads, bridges, and soft infrastructure in well equipped; schools, libraries, universities, and hospitals will always result in an increase in productivity i.e. the economic power of the society. By employing advanced technologies embedded in new capital equipment, including infrastructure, farmers and workers can produce more efficiently. Simply providing abundant energy, high-speed railroads, and water inputs to an African nation would lead to a jump in economic output.

All nations that have experienced real economic growth and raised the living standard of their citizens have created credit i.e. public-sector debt or borrowed debt at non-usurious interest rates for targeted physical economic growth.

China is the single largest nation contributing to financing and constructing of infrastructure projects in Africa according, to Deloitte’s 2017 edition of Africa Constructive Trends. The report examines 303 infrastructure projects begun in the first half of 2017 that costs over $50 million. Appropriately, energy& power, and transport comprise 167 of these projects-over 55% of the total. While African governments fund 27.1 % of the funding, China accounts for 15.5% of the funding and 28.1% of the construction for these projects. The US accounts for 3% and 3.3% respectively. Both Italy and France are larger than  the US percentage in building infrastructure in Africa. 

African Development Bank President, Akinwumi Adesina, speaking on November 28, 2016 accurately linked the deadly migrant crisis to deficiencies in Africa’s economic development and infrastructure.

“I believe that Africa development deserves significant support, even in the midst of these challenges. We must not forget that the reason several thousands of Africans have been (illegally) migrating to Europe, is because of the lack of jobs and shrinking economic opportunities at home. Our result must not be to reduce support, but to increase support to help build greater resilience, boost its economies, address its structural challenge, such as closing its huge infrastructure gap, strengthening intra-related trade, and creating jobs for its teeming youths.”

A study done by the AidData Research Lab at William and Mary College in Virginia that analyzed China’s investments in the developing sector between 2000 and 2014, concluded:

“We find that Chinese development projects in general, and Chinese transportation projects in particular, reduce economic inequality within and between sub-national localities,” and “produce positive economic spillover that leads to a more equal distribution of economic activity.”

China has come to know, what the US has forgotten, that infrastructure is the sine qua non to drive economic growth. 

Africa’s huge infrastructure deficit is the causal factor for widespread poverty, and insecurity across the continent, precisely that which China has begun to address over the last decade. The Western financial system that dominated Africa from 1960-2000 contributed almost nothing to help African nations industrialize and failed to help create vibrant agro-manufacturing sectors. China with its Belt and Road Initiative has presented the world with a new paradigm to guide political-economic relations among nations; Africa is the beneficiary.

Lawrence Freeman is a Political-Economic Analyst for Africa, and Vice Chairman of the International Scientific Advisory Committee to the Lake Chad Basin Commission

Africa Needs Real Economic Growth, Not IMF Accountants

February 4, 2019

A recent forum sponsored by Brookings Institute in Washington DC entitled: “Top priorities for Africa in 2019” produced a healthy discussion that alluded to important fundamental conceptions of economics. Although the deeper principles of what should be called economic science were not elucidated, issues raised in the dialogue serve as a useful starting point for further elaboration of that subject.

The event was organized to present FORESIGHT AFRICA, a new publication by the Africa Growth Initiative. Representative from the International Monetary Fund-(IMF), and Mo Ibrahim Foundation, joined Ambassador Linda-Thomas Greenfield, and Brahima Coulibaly, director of the African Growth Initiative, for a wide-ranging discussion on the future of Africa to a packed audience.  

Members of the audience challenged the prevailing assumptions of the International Monetary Fund. One participant raised the inadequacy of the IMF’s rigid macro-analytic approach, when what is needed, she said, is a fine-tuned micro-economic intervention to deal with the scope of the challenges facing African nations. Another suggested the need for a state-funded public sector job program to put the millions of unemployed youth to work—a proposal which the IMF representative categorically rejected. The IMF’s hostility to state sector involvement belies the several hundred-year historical record of the modern economy, which is replete with successful and indispensable interventions by the state to foster economic growth.

Measuring Real Economic Growth      

While the Brookings report, FORESIGHT AFRICA, provides some relevant statistics, its analysis rests on erroneous axioms of what comprises economic growth

The commonly accepted notion that African nations today are experiencing “jobless economic growth” reveals the fundamental antagonism between the analysis of the IMF and its co-thinkers, and proponents of real i.e. physical-economic growth. Jobless growth is a moronic oxymoron.  Real*economic growth augments the productive power of society to increase its surplus of tangible wealth in order to sustain an expanding population at a higher standard of living. The IMF pretends to measure growth by adding up monetary values such as the price of extracted resources and real estate, stock market gains, etc.  The aggregation of prices is not a measure of the economy’s growth.  The only true calculation for economic growth is the result: an improvement in the living conditions of the population.

Africa’s Bright Economic Future Is Its Youth

Creating Real Economic Growth          

An excellent example of this defective thinking is highlighted in the article from the Brookings report entitled “How Industries without smokestacks can address Africa’s youth unemployment crisis.”  Author John Page reports that Africa has not only failed to industrialize, but shockingly, its share of global manufacturing today is smaller than it was in 1980! He forecast that Africa’s working age population (15-64 years of age) will grow by 450 million between 2015 and 2035, and that “20 percent of new employment for wages will be in the service sector, and only 4 to 5 percent will be in a wage paying job in industry.” His conclusions for the future of youth employment in Africa are ill-founded and deadly when he states that since: “industry has declined as a share of output and employment…over the past four decades…Africa may not be able to rely on industry to lead structural change…”

Page then proceeds to dangerously postulate the equivalence of employment in manufacturing with tourists and service jobs. He writes: “The same forces that limit Africa’s opportunities in industry, however, are also creating a growing number of tradeable services—such as tourism and remote office services…”

“Growth in tourism is outpacing manufacturing in many African countries… It has the potential to create some of the millions of formal sector jobs Africa needs each year to employ youth entering the labor force…”

This is not an academic question for the people of Africa. We should all be level-headed about the implications of this prognostication: without industrialization Africans will die. African are dying every day due to lack of infrastructure, a diminutive manufacturing sector, and an inefficient food-producing industry. The industrialization of Africa with a massive expansion of its manufacturing base is not an option, but a life-or-death necessity!

Nor is this conjecture on my part. From the standpoint of economic science of physical economy there is no equivalence. Manufacturing, by transforming nature and producing needed goods, contributes real value to society; tourism and services do not. A variety of services are required for a functioning society, but this sector should not perform role of a primary employer for new entrants into the labor force. Tourism serves no vital task except to promote the natural beauty of a county.  No new wealth is created by tourism; it is essentially collecting other people’s earned income.

Service-related jobs, whether useful or not, will never lead to real economic growth for one elementary reason. They do not contribute to the creation of new wealth. A properly organized economy would only have a relatively small percentage of its employed labor in the service sector. To do otherwise, as some African nations unfortunately are, is not sustainable, and will lead to calamity. To equate non-goods producing employment with manufacturing jobs is a grave fundamental error that should be rejected by serious economists and leaders.

Africa’s Youth Bulge Is Not A Curse

FORESIGHT AFRICA estimates that today 60% of Africa’s 1.25 billion people are under 25 years of age. That amounts to 750 million youth, a majority of which are unemployed or mis-employed in the pathological informal economy. It is projected that in sub-Saharan Africa alone, the youth population will expand by 522 million, and comprise one-third of the world’s youth by 2050. Thus, making  Africa the continent with the youngest population, and potentially the largest workforce on the planet.

While these figures are striking, they do not justify enforced population reduction measures, as extremists advocate. Human life is intrinsically sacred because it is endowed with the divine spark of creativity. Contrary to popular misguided opinion, human creativity is the underlying source of all wealth; not money or even natural resources.  Paleoanthropology shows us that millions of years ago before the emergence of homo sapiens-sapiens (wise-wise man), proto-humans, homo hablis, (handy man) designed tools first in the mind’s eye before shaping rocks into useful implements that were used to transform the environment for the benefit of mankind. Africa is not facing a crisis of too many people, but rather the urgency to formulate the best policies today that will incorporate millions of youth as productive members of the labor force.

What African nations most desperately need, and which will have the greatest impact of their economies, is infrastructure, infrastructure, and more infrastructure.  It is not hyperbole to state that the lack of infrastructure is responsible for millions of deaths on the continent. The dearth of on-grid energy, arguably the most crucial component of an industrialized-manufacturing society, is preventing African nations from attaining the levels of economic growth required to sustain their populations.

For example. If we desire, as we should, that Africans enjoy the same relative living standard as Western nations, then each of the 2.5 billion Africans in the year 2050 should have access to at least one kilowatt (1,000 watts) of power every day. That would require, starting immediately, erecting enough power plants to generate 2,400 gigawatts of electricity. Itemize the bill of materials to build that many thermal, hydro, and nuclear power plants.

Now contemplate the number of workers that would be employed in this endeavor. Extend the same mode of thinking to constructing hundreds of thousands of kilometers of high-speed rail lines to connect the major cities, ports, and manufacturing centers across this vast continent. Add to that the number of new roads, hospitals, schools, libraries, and water ways that need to be built to provide an adequate standard of living. How many tens of millions or more youths will Africa need to employ in just the construction of primary infrastructure projects? Imagine how many additional jobs will be created in the spin-off industries.

Nuclear Energy is Critical to Meet Africa’s Energy Needs (ESI Africa)

Africa’s Future Begins Today

Trillions of dollars of long-term low interest credit must be made available to fund these projects. Only state-issued public credit will suffice for this scope of investment. The private sector, investments funds, or any other fund that is motivated by seeking high yield and quick financial returns on their investment will never, ever, underwrite the credit necessary. The overriding concern of the nation state is not making quick monetary profits, but the welfare of its citizens living and their posterity.  The IMF thus far shown itself to be mentally, emotionally, and ideologically incapable of comprehending the true economic needs of Africa, or how to fund them. Those who are blinded by their erroneous view of evaluating an economy by its monetary worth, will forever be incompetent, and are not qualified to give advice, much less diktats to developing nations.

Credit issuance by the nation state is not a new or novel concept. The success of United States’ economy, which was maintained with ups and downs until its decline over the last five decades, emanated from the accomplishment of President George Washington’s Treasury Secretary, Alexander Hamilton.  It was Hamilton’s understanding of credit and the central role of manufacturing that created the basis for U.S. economic growth from thirteen indebted colonies.  Over the last 230 years, those leaders, in the U.S. or abroad, who were wise enough to comprehend and apply Hamilton’s understanding of national banking and credit, have been successful in stimulating economic growth for their nations.

Africa’s future does not begin in 2050; it begins now. It is incumbent on Africans, with the assistance of their friends and allies, to prioritize crucial transformative infrastructure and related projects that must be built and funded. This cannot wait. This is a war to eradicate poverty, hunger, and disease, and secure a productive life for billions of Africans living and yet to be born. Thus, this campaign should be conducted with a military-like commitment to achieve objectives and goals each month and each year. Hence, we are not waiting for the future; we are creating the future in the present.

*real and true are interchangeable terms signifying a physical (non-monetary) improvement in the economy.

Lawrence Freeman has been involved in Africa for over 25 years as a writer, analyst, and consultant. He teaches courses on African History in Maryland. In 2014 he was appointed Vice chairman of the Scientific Advisory Committee to the Lake Chad Basin Commission.

Guardian of Nigeria Publishes “Proposal for Nigeria’s Future” by Lawrence Freeman

The Guardian of Nigeria published on Monday, January 28, 2019, my article: “Proposal for Nigeria’s Future”  with included pictures of President Trump, President Xi, and myself that were omitted from the on-line article.

 

Proposal for Nigeria’s future

 

Don’t Listen to Propaganda & Gossip. Follow the Facts: China is not Creating a ‘debt-trap’ for Africa

A useful report, “Africa’s growing debt crisis: Who is the debt owed to?” by the British based Jubilee Debt Campaign, again belies the propaganda and gossip that China is manipulating African nations into a ‘debt-trap.’  This report excerpted below, using figures from the World Bank, and the China Africa Research Institute-(CARI) at Johns Hopkins SAIS in Washington DC, shows the percentage of debt owed to China by African nations is not the cause of a debt crisis. In fact, in many cases the debt owed to China is less than the total owed to Western nations and financial institutions.

It is clear that for strictly geo-political reasons many Western think tanks and various media have gone into overdrive demonizing China with false claims of a new ‘debt-trap.’ This has also led to increased attacks on African leaders, portraying them as weak and not acting in the interest of their citizens. They have been accused of succumbing to China, which has been dubbed, the new imperial power. Sadly, many Africans have been duped, or simply out of frustration and anger, joined this western orchestrated chorus.

Of course, the truth of the matter is quite different. From the early 1980s on Western financial intuitions such as the IMF, World Bank, and Paris Club, loaded up African nations with so much debt that they were unable to service the debt, forcing them into unpayable arrears.  The vicious irony, is that several hundred billion dollars of debt lent by the West was never meant to actual develop African economies. It was in fact, intended to create a real ‘debt-trap’ for Africa. It has only been in the last ten years that Africa’s huge deficit in infrastructure is being addressed in collaboration with China’s non-western model of development. As I have written over many years, debt is not the problem when it is used as credit to improve the productive powers of a society to increase its physical wealth. Technologically advanced infrastructure is an excellent, if not the premiere method to drive an economy forward. This is exactly what China is accomplishing through its Belt and Road Initiative, and is at the heart of the Forum on China-Africa Cooperation-(FOCAC).

Unfortunately, the dominance of the “geo-political” ideology since the death of Franklin Roosevelt has thoroughly contaminated the thinking of Westerners and Africans alike. Creating a culture (with few exceptions) of people unable to think strategically, and who cynically reject the idea that a powerful nation would extend itself to actually assist other nations. China, according to all accounts, has lifted 700 million of its people out of poverty. President Xi Xinping has pledged to help eliminate poverty in Africa, the continent with highest rate of poverty in the world. Yet, many Africans reject this offer as insincere, suggesting a sinister motive lurking behind China’s offer. This attitude, is in part, the result of today’s political culture, which has failed to understand one of the most profound universal principles: all mankind shares a common interest in the development of the creative potential of each and every human being.  

Let us all agree, now, that we will all act on the this principle of the common good, and affirm as did the Treaty of Westphalia, that the interest of the other is also the interest of thy self.

 

Forum On China-Africa Cooperation, Beijing, September 3-4, 2018

“Africa’s growing debt crisis: Who is the debt owed to?”

October 2018

(excerpts follow)

Summary
• African government external debt payments have doubled in two years, from an average of
5.9% of government revenue in 2015 to 11.8% in 2017
• 20% of African government external debt is owed to China
• 17% of African government external interest payments are made to China
• In contrast, 32% of African government external debt is owed to private lenders, and 35% to
multilateral institutions such as the World Bank
• 55% of external interest payments are to private creditors

Minimum amount of African government external debt owed to China as percentage of total debt is 18%

Creditor grouping, total debt owed, percentage of external debt owed, are as follows:
China $72 billion 18%
Paris Club $40 billion 10%
Other governments $18 billion 4%
World Bank $66 billion 16%
IMF $18 billion 4%
Other multilateral institutions $61 billion 15%
Private sector $132 billion 32%
Total $407 billion 

Maximum amount of African government external debt owed to China as percentage of total debt is 24%

Creditor grouping’Total debt owed, percentage of external debt owed, are as follows:
China $100 billion 24%
Paris Club $40 billion 10%
World Bank $66 billion 16%
IMF $18 billion 4%
Other multilateral institutions $61 billion 15%
Private sector (excl. Chinese
private sector)
$132 billion 32%
Total $417 billion

Checking these figures through country cases

Another way of identifying how much African government debt is owed to China is to look bottom-up at the individual data available by each government.

Of these 16 countries, 14 have figures on how much debt is owed to China (for the full analysis see Appendix 1.). Of these 14:

• 11 owe less than 18% of their debt to China (Burundi, Cabo Verde, Central African Republic, Chad, Gambia, Ghana, Mauritania, Mozambique, Sao Tome and Principe, South Sudan, Sudan and Zimbabwe).
• Three owe more than 24% -Djibouti (68%), Zambia (30%) and Cameroon (29%).
• The mean average amount owed to China is 15% of a government’s external debt, and the median average is 8%

Read Complete Report: Who Is Africa Debt’s Owed To?

Who Owns Africa’s Debt: China or Western Nations & Institutions?

Some Western media and politicians have recently created the phrase “debtbook diplomacy” to accuse China of “miring nations in debt” and “undercutting their sovereignty.”

According to CNN, a new report presented to the US State Department claims the “Chinese government is leveraging billions of dollars in debt to gain political leverage with developing countries.”

“This phrase ‘debtbook diplomacy’ shows the West is nervous of China-Africa cooperation. ‘Debtbook diplomacy’ is what they did to Africa for decades, but now China is actually helping African nations rid themselves of ‘the debt trap’ set by the West,” said Wang Yiwei, director of the Institute of International Affairs at Renmin University of China in Beijing.

The West left African countries with a heavy debt on projects and failed to support their sustainable development, or to increase productivity and help them realize self-reliance, Wang noted. “Western countries wanted Africa to become their raw materials supplier while maintaining their post-colonial influence over the continent. This prevented African countries from realizing their own industrialization, Wang said.

China, on the other hand, is helping the nations move toward self-reliance and industrialization. The West doesn’t like that and this is why it is attempting to slander China, Wang added.

Xu Weizhong, deputy director of the China Institutes of Contemporary International Relations’ Institute of West Asian and African Studies, said that “Africa needs a lot of investment to build infrastructure, and China’s loans, which have increased African countries’ debt, are necessary for their development.”

China’s assistance to Africa differs from what the West offers. China has a “crucial principle,” which is to respect African countries’ will and conditions. China has never forced African countries to accept loans on large infrastructure projects beyond their ability to pay, Wang said.

“China and Africa have walked an extraordinary path in developing relations and cooperation, and our peoples have benefited greatly from it,” Assistant Foreign Minister Chen Xiaodong said at the opening ceremony of the Seventh China-Africa Think Tank Forum in Beijing on July 4.

“A minority of Westerners are blinded by their ‘pride and prejudice’ and choose not to see this… maybe that is what they call ‘sour grapes’?” Chen said.

West is largest debt holder

Data shows that Western countries and West-led organizations are the largest owners of African debt, not China, Shen Shiwei, a research fellow at the Charhar Institute and former government relations and business consultant for Chinese enterprises in Africa, said in an article published on CGTN’s website.

Research from SAIS and the China Africa Research Initiative at Johns Hopkins University shows that China has provided loans worth $114.4 billion to Africa from 2000-2016, which accounts for 1.8 percent of Africa’s total external debt. 

“The IMF and World Bank own 36 percent of African debt. These multilateral financial institutions and other giant investors in Europe and the US have far stronger leverage [than China],” Shen noted in his article.

“For historical reasons, the West has many interests in Africa. Those that are reasonable should be respected when we cooperate with Africa. But for those that are unreasonable, should China and African countries continue to respect them? Before accusing China, the West should think about this carefully,” Xu said                   (emphasis added)

 

China’s Global Times Highlights Flaws of US and Europe Policy Towards Africa

By Mark Kapchanga
June 26, 2018

Illustration: Liu Rui/GT

On June 18 in Michigan, US Secretary of State Mike Pompeo addressed a meeting under the umbrella of the Detroit Economic Club. In a question that seemed to have made him a tad uncomfortable, the secretary of state was informed that Africa appeared to be evolving and transforming rapidly, and further, China was asserting itself in the continent.

He rightly confirmed that Africa is facing two issues. One is extremist groups threatening to tear apart the continent’s fabric of unity. But the second issue is the opportunities that lie in Africa. It is here that Pompeo seems to have stained his otherwise well researched address to the people of Michigan. With obvious jealousy that is always expected from Western countries against China’s foray into Africa, Pompeo downgraded Africa’s growth potential that is underpinned by significant Chinese investments and trade by saying that Africa will see actual growth with a Westernized model of development.

He meant that the foundation for growth in Africa is the rule of law and property rights. In his usual way of disparaging China, Pompeo further claimed that Chinese trade and investments are about exercising political influence in Africa.

African countries and their leaders have grown sick and tired of such stereotyped thoughts coming from Western nations. History has proved that America and European countries are behind Africa’s underdevelopment. They not only colonized Africa but also stripped it of resources and displaced people from their lands.

This is described by Walter Rodney in his book How Europe Underdeveloped Africa where he argues that the short period of colonialism and its negative consequences for Africa spring mainly from the fact that the continent lost power. Rodney notes that power is the ultimate determinant in human society, and implies that one should have the ability to defend one’s interests and if necessary impose one’s will by any means available.

There is no doubt that when the question of power emanates, it determines one’s bargaining power, the degree to which a people survive as a physical and cultural entity. But as Rodney vividly says, “when one society finds itself forced to relinquish power entirely to another society, that in itself is a form of underdevelopment.”

Instead of Western powers always complaining about China’s presence in Africa, they should transform and improve their strategies for the continent. The old template they applied to Africa is already stale. Africa cannot be developed through conditionalities that only massage the whims of America and Europe.

Through the International Monetary Fund and the World Bank, Europe and America bullied African countries for more than three decades. Those nations seeking access to the General Account of the Fund had to commit themselves to explicit conditions regarding the conduct of their international policies.

Ultimately, African countries in need of financial support to boost their infrastructure, education and health failed to do so as the conditions were too tough. Globally, economists termed the conditions inefficient and mistargeted.

With the urge for greater development, China filled in the void. Its support to Africa has been less bureaucratic and almost without conditions.

As Pompeo and his fellow Western leaders continue complaining about China and its relations with Africa, youths in the continent are grinning having secured jobs in various projects being pursued by China. In Kenya, for instance, thousands of youths continue to earn an income from the construction of the standard gauge railway whose construction is now being extended from Nairobi to Naivasha.

The enormous investments China is pursuing in Addis Ababa have totally transformed the face of Ethiopia, a country once ranked among the poorest in the world. Today, Ethiopia is the only country in Africa that can manufacture its own leather shoes, thanks to support from China. This is the kind of friendship Africa has been yearning for.

Africa’s development can only be shaped by Africans. Europe and the US can therefore involve African leaders in designing the kind of investments and relations that fit them. If they continue condemning China on its relations with Africa, the continent’s ties with Beijing will only get stronger and thrive all the more.

The author is an economist specializing in China-Africa relations. Twitter: @kapchanga opinion@globaltimes.com.cn