Energy Poverty Is Killing Africans-Renewables Are Insufficient

Access to electricity for sub-Saharan nations is abysmal. A leading factor in the prevalence of poverty and hunger. (Courtesy of researchgate.net)

W. Gyude Moore published a useful article on the vital need for African nations to produce more energy: On the question of Africa’s Energy Poverty

However, I extend the implications of his analysis of energy poverty to its full impact on the lives of hundreds of millions of Africans. To wit: energy poverty is the leading cause of preventable deaths in Africa. Western political-financial elites are using their pseudo concern to “save the world” from climate change, to prevent African nations from producing vital energy from their abundant natural resources of hydrocarbons. In effect, attempting to deny nations suffering from a dearth of electricity, the right to develop their own energy sources sufficient to industrialize their economies. Hunger and poverty will not be eliminated on the African continent without nation-wide grids providing abundant and accessible electrical power.

Renewables are not capable of powering an industrialized economy. Their low energy flux density, the concentration of heat-power needed to transform minerals, is inadequate. Intense levels of heat and energy are required to convert ores into working metals. Nuclear power is orders of magnitude superior to other forms of energy in satisfying these requirements. Oil, gas, and hydro are energy sources that can be used in transition to nuclear energy. Yet, African nations are given diktats to not develop their sovereign resources and instead rely on inferior energy sources, displaying their disdain for their sovereignty and the welfare of their citizens. Thus, ensuring that African nations will never be able to become manufacturing based industrialized economies capable of eradicating poverty and hunger. One can make the argument that denying African nations this required energy capacity is a new form of colonialism, to keep them undeveloped. It is the effect, if not the intent.

Excerpts from Moore’s article: In Resolving Africa’s Energy Poverty – ALL Options Remain on the Table

Africa’s energy poverty is now a national security crisis. The region’s large and growing population places relentless pressure on small and dwindling resources, exacerbating the crisis of diminished state capacity. The specter of social and political disruption haunts regional stability, from coastal West Africa to the Great Lakes. Africa’s poverty translates into weak economic resilience and heightened vulnerability to shocks – internal and external. The recent spate of global crises has only worsened the problem. After decades of improvement, the World Bank reports that inequality is rising – that the global poor bore the brunt of the economic scarring of the pandemic, with incomes falling in the poorest countries more than they did in rich countries. “As a result, the income losses of the world’s poorest were twice as high as the world’s richest, and global inequality rose for the first time in decades.” These losses are most pronounced in Sub-Saharan Africa where “incomes are falling further behind the rest of the world.”  

Nothing aggravates this condition more than the continent’s persistent energy poverty. It is thus a positive sign when at this year’s IMF/World Bank Spring meetings, the World Bank and the African Development bank agreed to invest in providing electricity to 300 million Africans by 2030. But the announcement raises a lot of questions, including Todd Moss’s: “What will the Bank do differently?” If the idea is to double down on renewables alone, this only accentuates the glaring divergence between what Africa needs and the “solution” the Bank is offering. In times of existential crises, no options are left off the table. Unless Africa increases the diversity and complexity of its exports, its poverty will persist…

Moore makes the decisive point below that even when African nations establish policies to process their own resources, to ban the export of raw resources: they don’t have the energy for smelting, transforming the ore..

No Balanced Energy mix, No Industrialization

Africa’s export diversification is inextricably tied to its infrastructure – mainly power – endowment. Namibia, Zimbabwe, the DRC and others have all passed laws banning the export of unprocessed minerals. The legitimate attempts by these governments to ensure that their minerals are extracted and processed “in a way that helps [them] realize the full economic benefits of their resources’, should be applauded.”

But the viability of these bans remains contested, and these efforts are very likely to stall, since insufficient smelting capacity has led to repeated issuance of waivers for similar bans in the DRC.

About 80% of global energy consumption is tied to transport and heating (residential and industrial). This focus here is industrial heating (100 to 2000 C). The absence of adequate power supply to smelt ores in a commercially viable way has condemned the continent’s commodity exporters to ship their raw ore to China or India. South Africa, the continent’s most complex commodity exporting economy exports its chromite ore to China for processing into ferrochrome, which is used to manufacture corrosion, acid and heat-resistant steel.

Or take aluminum – the metal that is produced from bauxite. Guinea has the world’s largest bauxite reserves at over 7 billion metric tons. However, aluminum making is one of the most energy-intensive processes in the world. “Only paper, gasoline, steel, and ethylene manufacturing consume more total energy in the United States than aluminum. Aluminum production is the largest consumer of energy on a per-weight basis and is the largest electric energy consumer of all manufactured products.”[xv] In Guinea and Sierra Leone, converting raw bauxite into intermediate metals will require prodigious amounts of installed and dispatchable power. Renewables have struggled to be cost competitive with burning fossil fuels to smelt ores. Even the most basic levels of beneficiation (removing impurities and improving the grade of the ore) often require electricity endowment that many commodity exporters lack. Unless Africa is able to increase the availability of cost-competitive energy at a scale, adding value to its mineral exports will remain a pipe drain. If the average Ethiopian continues to consume a mere 79.25 kWh per year, Ethiopia will struggle to match Bangladesh (497 kWh per year) in apparel manufacturing. If the average Nigeria consumes only about 150 kwH per year, Nigerian firms will struggle to compete with their Vietnamese counterparts  (2450 KwH per year)

Ethiopia’s Grand Renaissance Dam (GERD) will be a game changer for East Africa; generating 5,150 megawatts of electricity

Fossil Fuels (Including Coal)  and the Existential Question:

While Europe, China and India pursue increasing coal as an energy source, African nations are intentionally denied lending for development of coal powered plants, even though coal is abundant on the continent.

At this year’s Spring Meetings,  “The Big Shift Global”, a global movement against fossil fuels, protested against the Bank’s financing fossil fuels. Their best intentions notwithstanding, this activism condemns Africa and Africans to indigence, since the countries adding the most fossil fuel capacity do not borrow from the World Bank. This earnest, but misguided, activism simply provides a convenient cover for rich countries’ World Bank executive directors who want to push the bank away from financing natural gas in Africa.

Increasing Africa’s energy per capita consumption is an existential question – from keeping South Sudanese children alive in extreme heat to earning more from African exports. African governments ought to understand that outsourcing existential questions to outsiders whose intentions are, at best, ambivalent is a dereliction of duty to their people.

When coal-powered electricity is rising in prominence in the world’s largest industrial countries, it is unreasonable to expect Africans to “save the world”, by sacrificing their poverty reduction and industrialization goals on the unrealistic “hope” of an all-renewable energy mix. Every form of energy generation must remain on the table. Where viable, nuclear energy ought to be pursued too – whether the partner of choice is China or Russia, especially since Rosatom and the African Commission on Nuclear Energy (AFCONE) have approved a plan for cooperation. China has made progress on small modular reactors; this option and all others must remain on the table...

Both the World Bank and some private capital are hesitant to extend financing for new fossil fuel. Because this is a national security imperative, African governments should be prepared to make hard choices about using domestic resources, making cuts to spending elsewhere to fund these plants.

For economies where coal power plants are viable, governments must make demonstrable efforts – setting aside land, conducting feasibility studies, and mapping the coal value chain for these plants. For countries where the option is natural gas – the same processes should be set in motion.

Read my earlier posts below:

South Africa Energy Minister Rejects Western Dictates & Hypocrisy Against Africa’s Use of Energy Resources

“Electricity is the lifeblood of a nation” Nuclear Energy Can Be A Solution To The Continent’s Dearth of Electricity

GERD: Utilizing the Blue Nile to Create Energy for Development in Ethiopia & The Horn of Africa

Lawrence Freeman is a Political-Economic Analyst for Africa, who has been involved in economic development policies for Africa for over 30 years. He is a teacher, writer, public speaker, and consultant on Africa. Mr. Freeman strongly believes that economic development is an essential human right. He is also the creator of the blog:  lawrencefreemanafricaandtheworld.com that has hundreds of articles for you to review.

The West Votes against Development at United Nations

This article below locates precisely the problem with the foreign policy of the West and the United States in particular towards the developing sector-the Global South. The U.S. lacks a commitment or even an understanding of the importance of economic development. This has been the failure of U.S. policy toward Africa since the death of President John Kennedy; lack of vison and moral devotion to develop the world’s population. This is what I am fighting to provide. The world needs a new paradigm to eliminate poverty and ensure peace and stability. This new paradigm or New Bretton Woods must have as its foundation, economic development. Below you will find my lecture on the intentions of President Franklin Roosevelt for the creation of his Bretton Woods.

by Clifford Kiracofe, Dec. 26, 2022, reprinted from China Focus

In the face of the present international situation, cooperation is essential to meet unprecedented challenges”.

Western countries, joined by South Korea and Japan, voted this month against economic development and poverty reduction resolutions considered by the United Nations General Assembly. The stance of the Western countries and partners reflects the power of finance capitalism and its longstanding support for neoliberal economic policy to the detriment of developing nations.

The United Nations General Assembly Second Committee (Economic and Financial) recently adopted 38 of 41 resolutions. The West and partners voted against two resolutions of special importance. The first vote was 123 for to 51 against on the resolution “Eradicating Rural Poverty to implement the 2030 Agenda for Sustainable Development”.

The second vote was 123 for to 50 against by the West and partners (Turkey abstained) the perennial resolution “Towards a New International Economic Order (NIEO).”

Clearly there is a stark division between the West and its partners and all of the “Rest”. Put in another way, the votes reflect the increasingly sharp contradiction between the developed “North” and the developing “Global South”. Two major powers, China and Russia, align with the Global South.

A wide view of the General Assembly’s 53rd plenary meeting, discussing reports of the Second Committee on Dec. 14, 2022. (UN Photo)

Failure of the Bretton Woods System

The international financial architecture erected in 1944 to serve the devastated post-World War II international community did not live up to its promises. Instead, it became machinery to impose finance capitalism around the world and to oppose alternate development models.

The International Monetary Fund was supposed to help states with balance of payment and debt problems. The International Bank for Reconstruction (IRBD), later called the World Bank (WB), was supposed to focus long term on development following a post-war reconstruction. Over the years, both institutions failed in their purpose owing to a variety of factors.

At the Bretton Woods conference, delegations from China, India, and Latin American countries voiced their concerns for development. But the IRBD/WB gave its primary attention to reconstruction rather than to development.

Developing countries also expressed a desire for an international financial system that would be friendly to developing countries. This meant that states exporting commodities be given attention and that alternate development models be supported. Alternate development models included state-led industrialization.

The prospects for a development focus were dashed by the Cold War and the “East versus West” bloc confrontation. This bloc confrontation was framed not only in political terms but also in economic terms.  Thus, the antipathy of the West to various socialist models of development sharpened.

State-led industrial development was rejected. Significantly, the issue of financing development over the long term led to sharp debate over the degree of public and private financing.

Photo taken on Sept. 12, 2012 shows the logo of the World Bank headquarters in Washington D.C., capital of the United States. (Photo/Xinhua)

Decolonization, Development, and UNCTAD

During the 1950s and 1960s, the process of decolonization brought many newly independent states into the international community. Naturally, economic development was at the forefront for them. To address the issue of development, 36 developing countries in 1962 joined together to create the United Nations Conference on Trade and Development (UNCTAD).

The first meeting occurred in 1964 in Cairo. The key issues addressed were: terms of trade by primary commodity exporters, development financing, and export-oriented strategies. At the conclusion of the conference, UNCTAD was made a permanent body within the UN system.

Unfortunately, despite the best efforts of UNCTAD during the 1960s and 1970s, there were no major results for the developing countries. It is not surprising that the developing countries then banned together as the “Group of 77” (G77) to call for a “new and just world economic order”. As a result, in 1974, a special session of the UN convened to promote negotiations and new initiatives to promote economic development.

The negotiations were inspired by recommendations of UNCTAD and aimed to promote cooperation among developing countries. The international context at the time included global economic and monetary instability owing to the disintegration of the Bretton Woods system of fixed exchange rates as well as other factors such as the 1973 oil crisis.

Photo taken on Apr. 9, 2020 shows the Dar es Salaam Port undergoing upgrading of port berths 1 to 7 in Dar es Salaam, Tanzania. (Photo/Xinhua)

The Brandt Commission

In 1977, the “Independent Commission for International Developmental Issues” was established to research and make re commendations. The former German Chancellor, Willy Brandt, was nominated by Robert McNamara, then head of the World Bank, as chair. The report of the commission was released in 1980 and was called the “Brandt Report”.

The Brandt Report focused on the North-South divide and called for measures to overcome it. Issues such as poverty, health, housing, and education were considered. Additional issues included women in development, hunger and food, disarmament, energy, monetary reform, industrialization, and development finance.

“A new century nears, and with it the prospects of a new civilization”, Brandt said in 1983. “Could we not begin to lay the basis for that new community with reasonable relations among all people and nations, and to build a world in which sharing, justice, freedom and peace might prevail?”

The Washington Consensus

In the face of the progressive Brandt Report, international finance capital mounted a campaign against it. One result was what came to be called the “Washington Consensus,” so-called “free market” policy prescriptions proposed during the 1980s and 1990s. This consensus was associated with the imposition of neoliberal economic policies globally. Such policy prescriptions include: austerity, reduction of government spending, privatization, deregulation, free trade, and monetarism.

People walk on Times Square in New York, the United States, Nov. 23, 2021. (Photo/Xinhua)

The decline in the West of a Keynesian consensus in the 1970s coupled with the end of the Cold War in 1988-89 and the demise of the Soviet Union in 1991 gave triumphalist proponents of “market fundamentalism” major play.

Today, the Washington Consensus forms the basis of the international economic policy of the United States and the West, critics say.

The recent votes in the United Nations General Assembly underscore the North-South divide. The West appears to insist on the Washington Consensus and opposes alternate development models.

“New Bretton Woods”

The international community faces a severe recession beginning in 2023, according to some experts. A combination of factors is leading to such an international economic crisis. The economic slowdown in Europe began in 2018-19 and then was followed by the Trump Trade and Tech wars and by the Covid crisis. To these factors, an energy crisis, a supply chain crisis, and a food crisis has been added compounding the problems facing the international community.

In the face of the present international situation, cooperation is essential to meet unprecedented challenges. Various mechanisms, platforms, and processes have been created in recent years to address development. The Belt and Road process, Shanghai Cooperation Organization, Eurasian Economic Union, and BRICS are important initiatives.

Today, a “New Bretton Woods” conference with an emphasis on development as well as on the update and stabilization of the international monetary system must be considered.

http://www.cnfocus.com/the-west-votes-against-development-at-un/

Read my earlier post on Roosevelt’s Bretton Woods: For the Development of Africa: Know and Apply Franklin Roosevelt’s Credit Policy

Lawrence Freeman is a Political-Economic Analyst for Africa, who has been involved in economic development policies for Africa for over 30 years. He is a teacher, writer, public speaker, and consultant on Africa. He is also the creator of the blog: lawrencefreemanafricaandtheworld.com. Mr. Freeman’s stated personal mission is; to eliminate poverty and hunger in Africa by applying the scientific economic principles of Alexander Hamilton

Will IMF Austerity Policies Lead to More Deaths in Africa? The Answer is Obvious

African nations must have infrastructure to develop industrialized economies .

October 16, 2020

An October 12, 2020, Oxfam International press release, IMF Paves Way for New Era of Austerity Post-Covid-19, exposes the danger of African nations following the dictates of the International Monetary Fund. A major reason that African nations have fragile healthcare systems is the IMF insistence on countries servicing their yearly debt service at the cost of under funding healthcare. Prime Minister, Abiy Ahmed, emphasized the cost service service early this year: “In 2019, 64 countries, nearly half of them in sub-Saharan Africa, spent more on servicing external debt than on health. Ethiopia spends twice as much on paying off external debt as on health. We spend 47 percent of our merchandise export revenue on debt servicing…” Ethiopian PM Abiy Ahmed: Debt Cancellation for the World to Survive. Read my post: IMF Conditionalities Contribute to Shortage of Health Workers: Africa Suffers.

Africa has the highest number of people working in the informal economy. In some countries-over 80% of its people have to live hand to mouth each day to provide for their families. Millions are struggling every day just to survive, with no health and unemployment insurance safety-net. The COVID-19 pandemic has driven more Africans into poverty, and hunger is increasing across the continent. It is criminal and immoral for the IMF to to insist that nations implement austerity, when hundreds of millions are already suffering from lack of income, lack of food, and lack of healthcare. In fact, IMF policies have never helped nations develop their economies. African nations have yet to recover from the infamous IMF dictated “Structural Adjust Program” (SAPs) that destroyed their economies in the 1980s and 1990s. It may be difficult for people to hear, but the truth is; IMF’s Insistence on maintaining debt service and IMF conditionalities are killing Africans. Read my post: Africa Needs Real Economic Growth, Not IMF Accountants

In the history of modern economy, austerity measures have never led to economic growth. All honest economists, and even the IMF and World Bank, know this. The only solution is the creation of a New Bretton Woods system that must include: 1) suspension of debt service, 2) a new financial mechanism to issue credit for economic development 3) upgrading of healthcare infrastructure, 4)  massive investments in hard physical infrastructure of roads, energy, and railroads.

Excerpts from Oxfam:

“84 percent of the International Monetary Fund’s (IMF) COVID-19 loans encourage, and in some cases require, poor countries hard hit by the economic fallout from the pandemic to adopt more tough austerity measures in the aftermath of the health crisis, warned Oxfam today.

New analysis by Oxfam finds that 76 out of the 91 IMF loans negotiated with 81 countries since March 2020 – when the pandemic was declared – push for belt-tightening that could result in deep cuts to public healthcare systems and pension schemes, wage freezes and cuts for public sector workers such as doctors, nurses and teachers, and unemployment benefits, like sick pay.

“The IMF has sounded the alarm about a massive spike in inequality in the wake of the pandemic. Yet it is steering countries to pay for pandemic spending by making austerity cuts that will fuel poverty and inequality. These measures could leave millions of people without access to healthcare or income support while they search for work, and could thwart any hope of sustainable recovery. In taking this approach, the IMF is doing an injustice to its own research. Its head needs to start speaking to its hands,” said Chema Vera, Oxfam International’s Interim Executive Director…

“Nine countries including Angola and Nigeria are likely to introduce or increase the collection of value-added taxes (VAT), which apply to everyday products like food, clothing and households supplies, and fall disproportionately on poor people. Unemployment in Nigeria has surged to 27 percent, the highest in at least a decade…

“The IMF has contributed to these failures by consistently pushing a policy agenda that seeks to balance national budgets through cuts to public services, increases in taxes paid by the poorest, and moves to undermine labor rights and protections..

“The IMF’s austerity drive will hurt the countries it claims to help.” (emphasis added)

IMF Conditionalities Contribute to Shortage of Health Workers: Africa Suffers

Ethiopian PM Abiy Ahmed: Debt Cancellation for the World to Survive

IMF Paves Way for New Era of Austerity Post-Covid-19

Africa Needs Real Economic Growth, Not IMF Accountants

South African Pres. Ramaphosa Calls For End to Poverty and a New Global Deal

UN General Assembly celebrating 75th anniversary virtually - YouTube

South African President, Cyril Ramaphosa in his address to the United Nations calls for the necessity to end poverty in Africa and the need to establish a New Global Deal that provides affordable credit. I fully support these goals. I have advocated for the creation of a New Bretton Woods for decades. Without a new international financial architecture that provides long-term low-interest credit to developing nations for infrastructure, African nations will not be able to fulfill their ambition to end poverty.

Address by President of the Republic of South Africa and African Union Chair, President Cyril Ramaphosa at the 75th United Nations General Assembly Debate, September 22, 2020

Excerpts below:

“When the Secretary-General António Guterres delivered the 18th Nelson Mandela Annual Lecture in July 2020, he called on the nations of the world to forge a New Social Contract and a New Global Deal.

“He said we must create equal opportunities for all, that we must advance a more inclusive and balanced multilateral trading system, that debt architecture must be reformed, and that there should be greater access to affordable credit for developing countries…

“As the African Union we are encouraged by the collaboration of the G20, the IMF, the World Bank and the UN towards finding solutions to debt sustainability in developing countries.

“It is a call we as South Africa wholly endorse.

“This pandemic has highlighted the urgency with which we must strive to meet all the Sustainable Development Goals, but more importantly Goal 1 – to end poverty in all its forms everywhere.

“For until we eradicate global poverty, we will always fall short of realizing the vision of the founders of the United Nations…

“Together, we must raise our level of ambition to ensure that every man, every woman and every child has an equal chance at a better future.

“It is a future free of hunger, disease, insecurity and war.” (emphassis added)

Read full speech: South Africa Pres Ramaphosa Address to the UN

Lawrence Freeman is a Political-Economic Analyst for Africa, who has been involved in the economic development policy of Africa for over 30 years. He is the creator of the blog: lawrencefreemanafricaandtheworld.com

The West Continues to Attack China to the Detriment of Africa

A new Cold War is coming. Africa should not pick sides

August 28, 2020

The author, W Gyude Moore, a senior policy fellow at the Center for Global Development, and a former minister of public works in Liberia, makes some insightful observations about the difference between the US and China in their economic strategy for Africa.  China’s investment in infrastructure in Africa is unsurpassed and would not be replaced by the West, if China withdrew from Africa. 

Excerpts below:

“It is, thus, frustrating that in its complicated, enmeshed, centuries-long history in Africa, there has never been a Western proposal for continental-scale infrastructure building. Outside Cecil John Rhodes’s racist “civilising” project of connecting Cape to Cairo from the 1870s, there has never been any programme, backed by financial resources, to build Africa’s rail, roads, ports, water-filtration plants, or power stations. It was the Chinese who sought to build a road, rail and maritime infrastructure network to link Africa’s economies with the rest of the world.

“The Western argument of Chinese debt-trap diplomacy, inferior loan terms and an insidious, covert campaign to seize African national infrastructure assets rings hollow in the absence of a like-for-like Western alternative. Until the arrival of the Chinese, the infrastructure construction space in Africa was dominated by Europeans…

“In the past eight months, Western countries have spent more than $5- trillion to prop up their economies in response to the Covid-19 pandemic. JP Morgan projects that over 14 years (2013 to 2027), China’s Belt and Road Initiative (BRI) will cost about $1.2-trillion to $1.3-trillion. That kind of gap (both in dollars and time) makes it clear that, if it wanted to, the West could equal or surpass China’s BRI with its own infrastructure programme. If Africa steps away from China’s infrastructure programme, which Western country is ready and willing to fill the gap?”

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China, the World Bank, and African Debt: A War of Words

Deborah Brautigam, Director of the SAIS China Africa Research Initiative, discusses in her article below, the duplicity of  the World Bank, in their attacks on the China Development Bank. If the US and Western Institutions would cease attacking China, stopped peddling lies about the “Africa debt–trap” and joined China’s Belt and Road Initiative, Africa’s huge infrastructure deficit could be addressed to the benefit of all Africans.

Read: https://thediplomat.com/2020/08/china-the-world-bank-and-african-debt-a-war-of-words/

Lawrence Freeman is a Political-Economic Analyst for Africa, who has been involved in the economic development policy of Africa for 30 years. He is the creator of the blog: lawrencefreemanafricaandtheworld.com

No More Lies, No More Anti-China Propaganda: There is No China-Africa ‘Debt-trap’

June 20, 2020

China-Africa Research Initiative-(CARI) presented an interesting and useful webinar entitled : Debt Relief with Chinese Characteristics, using research presented from a Working Paper #39 and Policy Brief #46. View: CARI: Debt Relief With Chinese Characteristics

In response to China’s growing economic and political influence in the world, especially on the African continent, various propaganda outlets located in the West have launched a new assault on China. Their line of attack is to malign China and African leaders with the false narrative that China is intentionally luring African nations into a ‘debt-trap’ in order to seize control of their natural resources. This cynical view of China’s alliance with African nations flows from the age old doctrine of “geo-politics” that only perceives nations as either winners or losers in a fixed zero-sum view of the world.  In this evil world view, stronger powers, hegemons believe they can only maintain their supremacy by having their foot on the neck of weaker nations. The “geo-political” doctrine rejects the notion that all nations share a common interest.

Misinformation or Disinformation

As Deborah Brautigam, director of CARI has stated before, there is no evidence, none, not one single case of China using debt to seize control of an African nation’s assets. “We found no “asset seizures” and despite contract clauses requiring arbitration, no evidence of the use of courts to enforce payments, or application of penalty interest rates.” Despite no substantiation of China using debt as a weapon against African nations, the ‘debt-trap’ mantra is repeated by either misinformed individuals, including Africans, or by those who are deliberately disseminating disinformation with malice.

The CARI working paper reports the following:

“The rating agency Moody’s warned that countries ‘rich in natural resources, like Angola, Zambia, and Republic of the Congo, or with strategically important infrastructure, like ports or railways such as Kenya, are most vulnerable to the risk of losing control over important assets in negotiations with Chinese creditors.’ These assumptions of a malign China were repeated in publications like The New York Times, which contended that Chinese loans “frequently use national assets as collateral” and require refinancing ‘every couple years’ (our Africa data supports neither of these statements).” (emphasis added)

If there is any honesty or integrity left in our duplicitous culture, all claptrap about China’ alleged ‘debt-trap’ as a nefarious attempt to gain control of Africa’s wealth should cease immediately! If one examines the long history of China’s relationship with Africa and the more recent twenty year period, it is clear that China desires to resolve issues with African nations through consultation. China may choose other means of responding to payment difficulties, but there is no evidence that they want to take over African holdings, contrary to prevalent popular opinion. Read: Chinese ‘debt-trap’ Propaganda Exposed-Time to End Ignorance & Prejudice Against China in Africa

Debt Cancellation

As COVID-19 spreads in Africa, nations are struggling to survive economically and simultaneously defeat the deadly virus.  Debt service is onerous and must be suspended indefinitely or cancelled, as leaders of many Africans nation have rightly insisted. According to Dr. Brautigam, from 2000-2018, China has made loan commitments of $152 billion, and of Africa’ total external debt, China holds 17%, while the World Bank hold 18%, and private lenders 31%.  Thus, China will and has already engaged in debt relief, but will do it differently than western institutions like the Paris Club and World Bank.

“Our [CARI] study found that between 2000 and 2019, China has cancelled at least US$ 3.4 billion of debt in Africa. There is no “China, Inc.”: for interest-bearing loans, treatment for inter-governmental debt and Chinese company loans are negotiated separately, and often loan-by-loan rather than for the entire portfolio. While rescheduling by increasing the repayment period is common, changes in interest rates, reductions in principal (“haircuts”), or refinancing are not. We found that China has restructured or refinanced approximately US$ 15 billion of debt in Africa between 2000 and 20190…Chinese lenders prefer to address restructuring quietly, on a bilateral basis, tailoring programs to each situation.”   

China, up this point has only cancelled zero interest loans, which represent only 5% of loans from China, and are issued from China’s Ministry of Commerce. It is unlikely that there will be unilateral debt suspension.  Thus, we can expect that China will negotiate debt relief bilaterally with each nation, and each loan reviewed separately.

Even if debt cancellation is continued into 2021, which has not yet been agreed to, it will be insufficient. The level of investment required to meet Africa’s’ minimal infrastructure needs is in the trillions of dollars, which belies the “geo-political” nonsense of zero-sum assumptions.  Debt relief must be accompanied by issuance of credit for infrastructure and related sectors of production, otherwise Africa and the world will suffer from the spread of COVID-19 and future zoonotic diseases. Poverty is a co-factor for all diseases. Lack of electricity is a co-factor for the spread of disease and hunger, as is the lack of clean water, and inadequate transportation.

China’s Belt and Road Initiative over recent years has begun to address Africa’s infrastructure deficit, but much, much more is required. Collaboration between the U.S. and China on the development of Africa would be consequential for the continent.

I have addressed this issue in earlier posts: World Needs New Economic Platform to Fight COVID-19, New Economic Order Required to Combat COVID-19 in Africa

ViewCARI: Debt Relief With Chinese Characteristics

Lawrence Freeman is a Political-Economic Analyst for Africa, who has been involved in the economic development policy of Africa for 30 years. He is the creator of the blog: lawrencefreemanafricaandtheworld.com

China’s Belt & Road Redefining Globalization & International Relations for Belt-Road Forum

April 10, 2019

Preparations for the Second Belt and Road Forum

On March 29, Yang Jiechi, member of the Political Bureau of the Central Committee of the Communist Party of China and director of the Office of the Central Commission for Foreign Affairs, spoke at length with the media about preparations for the late April Second Belt and Road Forum for International Cooperation in Beijing.

President Xi Jinping addressing 1st Belt Road Forum on May 15, 2017. (image credit: Reuters/Nicloas Asfouri)

“Since its inception, the BRI has received strong endorsement and warm support of the international community. So far, a total of 124 countries and 29 international organizations have signed BRI cooperation documents with China. Most recently, during President Xi’s visit to Italy, the two countries signed an MOU on promoting BRI cooperation, giving a new impetus to this process. Meanwhile, the BRI vision has been included in documents of major international institutions including the United Nations, the G20, the Asia-Pacific Economic Cooperation and the Shanghai Cooperation Organization. Indeed, the BRI has proved a popular and worthy cause that goes along with the trend of our times and responds to the shared aspiration of countries for development through mutually beneficial cooperation. Looking back at this pursuit over the last few years, I would draw your attention to the positive role the BRI has played in the following three ways…

“The BRI has created new impetus and opportunities for global growth.

“Since the outbreak of the international financial crisis in 2008, to create both new growth drivers and a new cycle of global growth has become a common task for the international community. The BRI aims to address the fundamental issue of promoting development by enhancing all-round connectivity. It has helped countries involved to remove development bottlenecks and implement the UN 2030 Agenda for Sustainable Development. This initiative has thus become an important way for boosting global growth.

“The latest studies by the World Bank and other international institutions suggest that the BRI cooperation will cut the costs of global trade by 1.1 to 2.2% and those of trade along the China-Central Asia-West Asia Economic Corridor by 10.2%. What is more, it will contribute at least 0.1% of global growth in 2019….

“As President Xi Jinping pointed out, the BRI aims to replace estrangement with exchanges between different civilizations, replace clashes with mutual learning and replace a sense of superiority with coexistence; and it aims to boost mutual understanding, mutual respect and mutual trust among different countries. So the BRI is a sure path toward peace and cooperation for win-win outcomes.

“The vision of building a new type of international relations and a community with a shared future for mankind is an important component of Xi Jinping Thought on Diplomacy. The BRI champions mutual respect, consultation on an equal footing, openness and inclusiveness, and mutual benefit. It is an approach to global governance featuring consultation and cooperation for shared benefits. And it aims to promote connectivity the world over. These are all important dimensions of the vision of a community with a shared future for mankind and a new type of international relations….

“The BRF is the highest-level platform for Belt and Road cooperation where all parties concerned meet to build consensus and adopt plans for future cooperation. We have set up a BRF Advisory Council consisting of leading international figures to provide advice on the growth of the Forum. In addition, China and other participating countries have in recent years set up platforms for multilateral cooperation on port, shipping, finance, taxation, energy, culture, think tank, the media and other areas and launched initiatives on a green Silk Road and a clean Silk Road….

“The opportunities come with the BRI’s growing international influence, moral appeal and cooperation potential. Against the backdrop of mounting protectionism and unilateralism in the world, the BRI principle of consultation and cooperation for shared benefits has gained wide recognition. Support for the BRI is the mainstream view of the international community, and the opportunities created by BRI cooperation are widely appreciated in the global community….

“The opportunities come with the accelerated industrialization of a vast number of developing countries, a process which generates new demands in infrastructure connectivity and industrial investment, and promises huge potential for international cooperation…

“We have noticed that some people have expressed different views about the BRI, claiming that the Initiative is China’s geopolitical tool and could cause some countries to fall into a debt trap. Such views are less than objective or balanced. They are simply a misunderstanding, misrepresentation and even biased view of the BRI….

“China and other 27 countries have jointly adopted the Guiding Principles on Financing the Development of the Belt and Road, which highlights the need to ensure debt sustainability in project financing. In case our cooperation partners face difficulties in servicing debts, China will properly address this issue through friendly consultation, and will never press them for debt payment. As a matter of fact, no country has got trapped in a debt crisis since its participation in the BRI. Quite on the contrary, it is through participating in BRI cooperation that many countries have got out of the trap of no development….

“The theme of this year’s BRF is: ‘Belt and Road Cooperation: Shaping a Brighter Shared Future,’ and the Forum events include the opening ceremony, a leaders’ round-table, a high-level meeting, thematic forums, a CEO conference and other side events. “Representatives from over 100 countries, including about 40 leaders of foreign governments, have confirmed their attendance. As the host country, we will, together with other Forum parties, take stock of what has been achieved and draw a blueprint for future cooperation to further enrich BRI cooperation….

“BRI cooperation is not a talk shop, but an action-oriented initiative that delivers real outcomes. The second BRF is expected to produce a full range of outcomes, including both governmental cooperation agreements and initiatives, and concrete cooperation projects involving participation of the business sector. All these will be included in a list of deliverables and be released in due course. We are confident that the second BRF will produce even greater numbers of cooperation outcomes that are of still higher quality.”

Will Africa Emulate China in Eliminating Poverty with BRI? More Electrical Power Needed

March 7, 2019

Rwanda Acknowledges Partnership With China Is Beneficial for Both Nations

President Xi Jinping left and President Paul Kegame-right (East African)

Answering a media query in Kigali on March 5, Rwandan Foreign Minister Richard Sezibera said that the Belt and Road Initiative is a partnership that is mutually beneficial for Rwanda and China, and addresses Rwanda’s development challenges, Xinhua reported. China is an important partner for Rwanda at all levels, and Rwanda welcomes the growing partnership with China, he said, adding that Rwanda and China have important relationships in infrastructure development, party-to-party and people-to-people exchanges, and at the political level.

Last August, {China Daily} reported Rwandan Ambassador to China Charles Kayonga telling the newspaper, through e-mail, that in Rwanda, “we have had financing for a number of roads, and we have seen direct investment by Chinese companies in a number of businesses rise.” 

 Africa is in need of infrastructure, among other things, to achieve sustainable economic transformation, he said, adding that cooperation with China will help finance the infrastructure projects to help spur the continent’s industrial development, which will, in turn, favor China in its vision of going global.

Prescient Xi: China is Eliminating Poverty

Speaking today with deputies from Gansu Province, President Xi Jinping underlined the importance of reaching the goal of eliminating poverty by 2020.

“There should be no retreat until a complete victory is won,” Xi said. “Decisive progress has been achieved in the country’s tough fight against poverty over the past years, marking a new chapter in the poverty reduction history of mankind.” Xi stressed, that the goal to eradicate extreme poverty must be achieved on time. He warned that the tasks ahead remain arduous and hard, as those still in poverty are the worst stricken. He also warned that, “the practices of ‘formalities for formalities’ sake and bureaucratism hamper the effective advancement of poverty reduction.” He also warned against the tendency to celebrate short-term gains when it comes to addressing the problem of poverty. He insisted that claims of success should be grounded in reality, and that the results of poverty alleviation work must be able to stand the test of time.

 Also today, a comprehensive briefing was given on the success of poverty reduction over the last few years by Liu Yongfu, Director of the State Council Leading Group Office of Poverty Alleviation and Development. He held a press conference outlining the progress of the poverty-alleviation campaign. Liu noted that between 2012 and 2018, some 80 million people had been brought out of poverty at an average of 13 million people a year. Of the nine eastern provinces, eight were now free of poverty. He said there are 832 counties still enmired in poverty. In 2016, there were 28 counties that had been lifted out of poverty, and in 2017, some 125 counties, and in 2018, an estimated 280 counties. In 2013 there were 128,000 villages in poverty, while in 2018 there were 20,000. Poverty has been reduced during that period by 85%, Liu said, and the goal this year is to bring 10 million more people out of poverty. In 2019 the government will increase the funds devoted to poverty alleviation by 18.9%


African Development Bank Funding New Power Transmission Line For East Africa

In an article on its website, the African Development Bank (AfDB), pointing to regular power cuts in the East African countries from Kenya to Tanzania, from Uganda to Ethiopia, said this is about to change with the upcoming commissioning of a power transmission line to interconnect Kenya and Ethiopia. This project falls under one of the AfDB’s ‘High 5 priorities’ to ‘Light up and Power Africa.’ Working with
institutional partners, the Bank has mobilized resources to ensure the success of this project. At a cost of $1.26 billion, the project was co-funded by the African Development Bank ($338 million), the World Bank ($684 million), the Government of Kenya ($88 million), and the Government of Ethiopia ($32 million), the article noted.

The interconnection will function by means of a 1,068-km, 500-kilovolt high-voltage direct current transmission line, 437 km in Ethiopia and 631 km in Kenya with related facilities at Wolayta-Sodo (Ethiopia) and Suswa (Kenya). By December 2020, it will have a transmission capacity of 2,000 MW. This will make Ethiopia the energy giant of East Africa, while Kenya will become the epicenter of electricity trading in this part of the continent.

“The project will initially be able to transfer 400 MW from Ethiopia to Kenya, but negotiations are under way to better match the capacity of the line to Kenyan demand,” said Joseph Njogore, first secretary at the Kenyan Ministry of Energy, at an energy forum held in Nairobi in August 2018, the website noted.

 

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

China is NOT Exploiting Africa, But Investing in its Future: The Case of Nigeria

The article below, “Nigeria’s balanced and diverse relationship with China is key to sustainability,” provides a useful examination of the healthy bilateral relationship that China has developed with Nigeria, especially during the administration of President Buhari.  It is also important to note that Nigeria has officially joined China’s Belt and Road Initiative in January of this year. (excerpts below followed by a link to complete article)

1)    Infrastructure

Nigeria has one of the largest infrastructure deficits in the world; two thirds of the population still does not have access to safe water and over half of the population has no access to reliable electricity. Logistics costs are also extremely high; it costs more to transport a good from Lagos in Nigeria’s South to Kano in the North (1000km), than it does to ship a good from Shanghai to Lagos (over 12,000 km).

Nigeria’s government is investing in infrastructure, but external funding is needed. As cited in the National Integrated Infrastructure Master-plan (NIIMP) developed by Nigeria’s Ministry for Planning in 2015, it is estimated that the country requires $3 trillion over the next 30 years, with $500 billion required in the first 10 years. This estimate, which has wide sectoral scope, is reached by comparing Nigeria’s core infrastructure stock of around 20-25% GDP to international benchmarks of around 70%. Yet, even as the government increased its budget allocation for capital expenditure to 30% in 2017, this remains at least 80% short of the annual amount prescribed by NIIMP.

Alongside self-funding new infrastructure, Nigeria has also looked to the World Bank, European Commission and African Development Bank as sources of infrastructure capital. Yet while they might have the risk tolerance and investment horizons, their capital remains diluted over a number of countries. In its 60 years of operation in Nigeria, the World Bank has invested on average $100 million on infrastructure a year – significant but still a drop in the ocean versus Nigeria’s needs…

3)    Manufacturing    

While Nigeria is the richest economy in Africa, with the largest population and one of the better educated work forces, 4 in every 10 people still remain unemployed. Nigeria needs more inclusive industrialization that creates jobs for all, as opposed to focusing solely on sectors such as oil. Opportunities lie in the manufacturing sector, which creates more jobs through stronger forward and backwards economic linkages than any other sector.

Nigeria is again leveraging its relationship with China here. Some Chinese manufacturers have started relocating production to Nigeria, partly in response to rising wages in China and to take full advantage of the size of Nigeria’s domestic market. Sun Ceramics is one such example; they produce ceramics the size of 10 football fields every day, employ over 1,000 locals and also source all their raw materials from Nigeria. If it weren’t for Nigeria’s difficult business environment, Chinese firms claim they would commit greater amounts of investment.

Stronger ties to stand the test of time.

Nigeria, however, has managed to…build a balanced and more diverse relationship with China. Nigeria’s relationship with China extends beyond resources and infrastructure to security, financial planning and sharing of best-practice in manufacturing, to name a few areas of cooperation. Particularly in the realms of security cooperation; the Chinese have found an area that helps win them local support on the ground in Nigeria given a near-universal desire to eliminate insurgent forces. Nigeria also recognizes that the size of its domestic market offers the largest opportunity in Africa for Chinese companies; and that has helped to improve the balance in the relationship.

It is this combination of balance and diversification that is key to a sustainable relationship with China.

 

Read: Nigeria’s Balanced and Diverse Relationship with China