CHINA IS LOOKING FOR VIABLE PROJECTS – AND IS HAPPY TO WAIT UNTIL IT FINDS THEM.
In May last year, China’s President Xi Jinping announced during a visit to Tanzania that the great Asian power shall be providing $20bn in credit lines to Africa over the next three years.
The announcement, some observers opined, may have prompted United States President Barack Obama’s $7bn pledge, a few weeks after, to expand Africa’s energy infrastructure.
Predictably, the pundits and the newswires went hysterical with analysis.
after nearly a decade, the $8bn pledge to modernise Nigeria’s railways is now only showing signs of materialisation
The usual clichés about ‘no-strings attached’ aid and ‘fierce Sino-Western competition over the Africa prize’ were unleashed with characteristic repetitiveness.
No one remarked that exactly the same pledge had been made in Beijing the year before, at the summer meeting of African heads of state and their Chinese counterpart, or that the $20bn figure first surfaced in a Chinese government announcement in 2007.
It gets more curious when one realises that the $20bn sum is dwarfed by the money that often gets bandied about when African presidents make their way one by one to Beijing.
In 2008, China pledged $9bn to the Democratic Republic of Congo (DRC) for access to the latter’s huge mineral reserves.
In 2010, Ghana’s then President John Atta Mills signed credit framework agreements with pledges totalling $13bn.
In the same year, China pledged exactly the same amount to Mozambique for investments in tourism, mining and energy. In 2013, China pledged $5bn to Kenya.
All these promises outstrip the total pledges made to Africa, and we have not even in- cluded commitments to major allies such as Angola and Nigeria.
It is immediately clear that the math does not add up. And if the Chinese are good at anything, they sure are good at math. So what is going on here?
The truth is actually very simple, and it goes to the heart of the China-Africa economic relationship.
Most of the world cannot stop interpreting China’s actions through a Western prism.
To many observers, a Chinese deal with an African country is similar to an American deal with the same country.
This is, of course, patently nonsense.
You can attribute some of the complexity to the fact that when it comes to China’s engagement with Africa – whether it is actual state-offered aid, a brokered supplier credit arrangement with Chinese state-owned enterprises, concessional financing from state-owned banks or projections of project financing by private Chinese firms – the Chinese rendition of the matter is kept simple: it’s ‘Chinese assistance,’ period.
Right People at the Right Time
The confusion wrought by this lack of rigour in the way packages are bundled together is, however, merely the first stage of befuddlement.
After studying several of these packages and consequential matters, I believe I have gained a handle on some of the issues involved.
As a centrally planned economy, China’s style of tracking financial numbers, where the state is concerned, has never been a matter of mathematical precision.
And this is not because Chinese statisticians are weak. Far from that.
Just that statistics, like all other disciplines in China, are expected simply to serve the favoured public narrative of the moment.
As Chinese officials like to say in response to charges of opacity: ‘The right people have the right information at the right time.’
Thus, China’s goal at this point is to signal that money is not the issue when it comes to its strategy for the African continent.
It will spend whatever it needs to spend to pursue its interests, including outspending any competitor that dares get in its way.
But what then happens when the money does not show up? Or more precisely, when far less than the advertised amount shows up within the promised timeframe, to echo growing complaints across the continent?
The angst that long-delayed Chinese funds has generated in places like Guinea and Zimbabwe – where massive and game-changing projects have been banked on the receipt of apparently committed funds – is almost always due to a fundamental misunderstanding of how the Chinese perceive three things: time, contracts and project success.
Firstly, Chinese leaders are not subject to the same political cycles as their African counterparts.
They are happy to wait till the right set of leaders are in place in a client state before moving forward with a commitment, if the details are not synching with their original vision and the incumbent project leadership is not upping its game.
No strings attached
Secondly, for the Chinese, contracts are simply deeds of honour to enable the commencement of relationship building.
The Chinese employ the contract as a management tool to allocate precious time to conduct full due diligence and obtain hitherto unavailable data.
The fact that most African negotiators are trained in the Western deal-making mould and therefore have different conceptions of these things cannot be blamed on the Chinese.
Lastly, and more crucially, the same principle that many claim has pushed African leaders into the Chinese financial orbit is also what often defines the scope of project success for the Chinese.
This is the principle of ‘no strings attached.’
In practice, what ‘no strings attached’ really means is that the technical viability and soundness of a project incorporated in a commitment is the burden of the host country or debtor and not the Chinese side.
Should the Chinese commit management resources in their bid to push a deal forward and yet the project fails to take off, it is, to their mind, the failure of the debtor nation.
While this may sound straightforward, it is actually quite profound when you realise that most African dealmakers have been spoilt by operating in the Western milieu.
Frankly, the Chinese have not really got enough consultants with the language skills and international exposure to throw at the giant projects they are committing to.
And at any rate, they expect the debtor nation to get its own house in order and then show the viability, and very often profitability, of the project to the Chinese evaluator, whose job does not include fixing any internal mess in the debtor’s strategy, execution or analysis.
Theirs is to say, ‘We are not convinced yet,’ or ‘We are.’ Case closed.
So you need not be surprised when you hear that after nearly a decade, the $8bn pledge to modernise Nigeria’s railways is now only showing signs of materialisation with the inauguration of an approximately $870m stretch expected to be completed in 2015.
By making the sound and prudent choice to diversify their sources of funding and having already seen billions of dollars in benefits from such countries as Brazil, India and, above all, China, African leaders cannot continue to expect uniform treatment by all these diverse new friends.
The angst is fine. It comes with the territory.
Bright Simons is President of mPedigree Network, member of IMANI, Ghana
Read the original article on Theafricareport.com : China-Africa: The dragon dealmaker has Africa dazzled and dizzy | North Africa
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