Letter to The President # 5

To Access Or Not To Access? Ghana And China's $ 10 Bn Package

Excellency,

It is not because money is not available that projects are not carried through; Money is not accessible due to lack of economically feasible project proposals.

The above well-kept adage among financiers and bankers is as relevant to general project financing as it is to the recently announced $ 10 bn package of low-interest loans to African nations made by Chinese Premier We Jiabao last Sunday, November 8 in Sharm el-Sheik, Egypt. The multi-million dollar question is: What's in it for Ghana?

Before attempting to answer the question, a brief analysis. The main issues are going to be: China's Economy, especially its demand for Energy; the nature of Sino-African Trade; Africa's need for infrastructure, both built and information; and Chinese Foreign Policy on Africa.

Chinese Economy, Energy and Resources

Before yours truly could begin writing this piece, originally scheduled to only comment on the Chinese Premier's announcement of his country's package, news emerged on November 11 from China's National Bureau of Statistics that the country's latest economic data show it is well on track to meet its target of 8% growth this year. The huge economic stimulus package of the government seems to have helped a great deal. Data available indicate that activity in factories and workshops increased by 16.1% in October compared to a year ago.

It is hardly a sceret that confronted with the continuos rise in global demand for oil and the race to secure long-term energy supplies, The US, EU and Japan now have a major competitor: China. It was in 1993 that China, once the largest exprter of oil in Asia, became a net importer of oil.With an economy that has averaged close to 9% annual growth over the past two decades, China is need of huge volumes of oil supply to meet demand and to sustain economic growth. According to International Energy Agency projections, China's net oil imports will jump to 13.1 million barrels per day by 2030, from 3 .5 million barrels per day in 2006.

Sino-African Trade

In his November 6 piece in The Strait Times, Francis Chen assures Singaporean businessmen wary of doing business with Africa that „it is no longer a jungle out there.“ Having provided a subheader describing the region as „fast emerging as a market with new business opportunities, he goes on to point to the hubs fast establishing themselves in international trade, mentioning Africa's vast mineral riches, including „commodities such as gold, oil and gas.“ Chen laments that „trade between China and Africa jumped 45 per cent last year to reach US$107 billion, of which less than 1 per cent goes through Singapore“.

Although China imports about half of its oil from The Middle East, and that percentage is projected to grow, the magnitude of the energy demand has compelled the country to look to Africa, among other markets, for oil. Despite Africa holding only a fraction – less than 7%- of the global oil reserves, there are forecasts of undiscovered deposits, in areas including in Ghana.

In 2006 China received about one-third of its oil imports from Africa, 9 percent of the continent's total exports in 2006 (by contrast, the United States purchased 33 percent of that y ear's exports from Africa). China's biggest suppliers in Africa as of 2 006 were Angola, the Republic of Congo, Equatorial Guinea, and Sudan. It has also sought supplies from Chad, Nigeria, Algeria, and Gabon. Given that trade between China and Africa jumped 45 per cent to $107bn in 2008, a tenfold increase since 2000, and that the new loans are likely to sustain the expansion, it is little wonder that the latest deal has attracted so much attention. There is consensus that Africa registered 5.8 percent economic growth in 2007, its highest level ever, partly owing to Chinese investment.

Attempts to reduce China to supplier of shoddy and inferior goods fail to grasp ongoing transformation in the country's economy.

The next sections deal with the extent to which Sino-African Trade is influenced by pragmatic factors such as Africa's dire need for basic infrastructure and China's growing importance and leading role in global project finance, dwelling on her accumulated experience in such crucial fields as health, education, building and roads as well as telecommunications.

Africa's need for Infrastructure

In an interview with the IDAYA magazine in Fall 2008, Professor Yaw Nyarko of New York University questions the US and western world's approach to „dealing with Africa through the prism of aid,“ drawing attention to China's importance as a consumer of Africa's raw materials and as an investor in infrastructure projects on the continent, for instance in the case of power plants in Nigeria.

Experts say the roads, bridges, and dam s built by Chinese firms are low cost, good quality and completed in a fraction of the time such projects usually take in Africa. Moreover, China contributes peacekeepers to UN missions across Africa, including Liberia and Darfur. It has cancelled $1 0 billion in bilateral debt from African countries, sends doctors to treat Africans across the continent, and hosts thousands of African workers and students in Chinese universities and training centers. Ghana's own National Theater and the Bui Dam, currently under construction, represent two projects carried out with Chinese assistance. The latter project is a crucial organ within the anatomy of the nation's energy sector. Recently China's Huawei Technologies took the No. 2 position in the global mobile network gear market, almost doubling its market share from a year ago and surpassing Nokia Siemens. Prior to that announcement, Huawei had grabbed the No. 1 spot globally in DSL equipment. With a company name that variously translates as "achievement", "magnificent act" or "splendid act", Huawei was lifted into the above positions by the buoyant local Chinese market. But of particular note is the fact that Huawei has a global presence, enjoying expanded shipments to Europe, the Middle East and Africa. It is significant to mention that the global # 3 in DSL equipment, ZTE, is also China's second-largest telecom equipment maker and an increasingly important player in cell phones.

Chinese Foreign Policy on Africa & The Role of The Package

What brings China to Africa and what role does China play in Africa's development? What factors drive Beijing's increasing economic involvement in the continent?

Ever since Beijing declared 2006 the "Year of Africa," China's leaders have embarked on trips one after another, showing such interest and skill to „cozy up to African leaders unmatched by any of their counterparts from the major powers“. The Chinese leaders are here to get what they need to get raw materials for their industries. This phenomenon is dubbed in the sub-Sahara: the Great Chinese Takeout.

China's is a multifaceted influence as market, donor, financier and investor, and contractor and builder. Initially official development aid predominated, but later government policies, markets for each other's exports, Africa's demand for infrastructure, and differences in China's approach to financing have together moved commercial activities-trade and investment-to the center of China-Africa economic relations. While China's public sector, state financial institutions in particular, has been instrumental in the process, the influence of its private sector is increasing.

Hardly had the ink in which the package was printed dried than a multitude of comments from domestic (African) and foreign experts and journalists began pouring in. Not that this was in itself a bad development at all; indeed the comments included those that sought to defend the beneficial aspects of the package and the good intentions of The Chinese.

There are charges that the modern-day rulers of The Middle Empire seek to plunder Africa's natural resources, especially oil and minerals, and nothing else!

Yet others point to the Chinese rulers' affinity to dealing with regimes known for human rights abuses and other forms of political repression. In particular, one criticism often made is that Chinese finance, which comes without political conditions, promotes unsavoury regimes in Zimbabwe and Sudan and fuels corruption.

Faced by a miasma of economic problems created by the global financial and economic cires, a host of African leaders and officials assembled in Egypt welcomed Wen's pledge. Most notable were Zimbabwe's Robert Mugabe and Sudan's Omar al-Bashir, both leaders of nations that have lost favor with the West.

The Chinese themselves have made it clear that the package is for real development. To rebuff the above allegations, Chinese Premier Wen declared: "The Chinese people cherish sincere friendship toward the African people, and China's support to Africa's development is concrete and real."

Mr Wen described the eight new policy measures as "more focused on improving people's livelihoods" than a 2006 package, constituting Beijing's "selfless" engagement in Africa. Touching on the allegation that China „had come to plunder Africa's mineral resources and practice neocolonialism“, Wen declared: "This allegation, in my view, is totally untenable," Wen told reporters. "Any person who is familiar with China-Africa interaction knows that relations between the two sides did not begin yesterday."

China has been active in Africa for decades, working on infrastructure projects and supporting African nations in their fight against colonial powers in the early 1950s and 60s. He said that at that time, China did not take a "single drop of oil or a single ton of minerals." Not to be outdone, The Chinese Foreign Ministry spokesman Qin Gang said at a regular press conference on Tuesday: "The measures focus on helping them overcome the financial crisis, and also on long-term strategic areas such as improving living standards and sustainable development."

Finally, against the backdrop of The International Monetary Fund's concern about African governments taking on too much debt from Chinese lenders, Mr Wen said China would write off some loans to the poorest and most heavily indebted countries, a gesture constituting both an economic aid and foreign policy coup.

Conclusion

A trip undertaken by Goerg Blume of Germany's Tageszeitung „TAZ“ with China's „most important business consultant“, Wang Wenning, for an article in the April 13, 2008 issue of the newspaper, describes Mr. Wang as „China's McKinsey, a man busy teaching Africa the basic lessons of managrial economics.“

Excellency may without doubt, have met Mr. Wang; if not, he (Wang) must be on the shortest list of most welcome visitors from China to The Castle. If there is one man who more than anyone else understands the quintessence of Chinese economic policy in Africa it is this unassuming Chinese consultant who might be mistaken for a dining partner at an eatery in a local Chinatown! But make no mistake, for if Mr. Wang can be believed -and there is very little reason to not do so- China needs Africa, but the vice versa is even more crucial necessity.

At a time when US President, on his maiden Presidential tour of Asia, has made a declaration of „strategic assurance“ to the Chinese of the US' interested in NOT (emphaiss this author's) containing the former's rising power; at a time when the Chinese economy is on track to achieve its set goal of 8 % annual growth, at a time when Ghana is set to enter the club of oil-producing African nations; at a time when in order to attain its objective of becoming a middle-income nation Ghana will need to pay extra attention to infrastructure provision, health, education and communications; at a time when the Chinese have,through their strategic investments in such fields as top-notch business education (world-renoned innovation management expert Professor Atuahene-Gima's brain-child, The Chain Europe International Business School, CEIBS-Ghana, the first such campus in Africa!): there remain virtually no viable option than to seriously engage the Chinese in close economic and technical co-operation.

It goes without saying that with the right leaders Africa could do very well by looking at some Chinese markets. The burden is on government and the private sector to carve out and articulate a plan highlighting the Ghana's priorities for accessing the resources made available by Beijing under the partnership. This corresponds to the view expressed by Paul Kagame, the Rwandan President. Ghana, our beloved land, must not miss the party.

May His Excellency enjoy doing his job!