Let us Vote Chinese Finance :It is A Risk We Have to Take

When John Perkins released his book “The Confessions of an Economic Hitman” the US Congress was exposed for how it used institutions such as the IMF and the World Bank to swindle developing countries out of trillions. The claim that Perkins made was that there seemed to be a blurry line between government and the large corporations in the USA. Developing countries were given loans, forced into policy changes as a condition for those loans and later required to submit their natural resources once the loan was not paid. When you owe someone several billion or so, natural resources and land become a considerable down payment. Sadly though, if countries were not willing to take the loans, economic hitmen like John Perkins were sent in to convince the government to take them, if that didn’t work then a coup or riot would be staged by the economic hitmen to destabilise the country. Nations with accessible resources, like oil, gold, and fruitful agriculture were targeted. In a couple of years the nation’s valuables would be the property of U.S. corporations. Now with China expanding across Africa and also being the largest funder to the continent, fears are rising about how this relationship seems to be similar to that of the U.S. and developing countries in the past. Let’s take a look. • China invested 5.5 billion USD into South African financial services by acquiring a 20% stake in Standard Bank. As part of African development China has facilitated a further 1 billion USD in loans to Standard Bank. This is part of its 10 billion USD commitment of concessional loans to Africa. • In the DRC China plans to invest 6 billion USD of infrastructure. These are schools, railways, roads and hospitals. All in exchange for cobalt and copper from the mines. Having Chinese firms actually doing the work with subcontracted Congolese companies eliminates a large portion of the corruption that would otherwise take place  if the money was donated. • China plans to invest in tax free zones across Africa where they plan to stimulate employment across the continent, without having to pay tax of course. • The Chinese have built infrastructure in Angola worth 6 Billion USD. As Angola is China’s biggest oil source, this investment is beneficial to both parties. With that said there are more projects China is involved in across the continent. The question we have to ask as Africans is: do we blindly take much needed Chinese development finance or do we  follow the path of western development finance ? Western finance with all its promises and large figures has little to show in the 50 or so years it has been active in Africa. Yet China shows the possibility of not only a form of help but a system of mutually beneficial assistance that takes Africans away from being beggars, to building roads, schools and hospitals that will benefit Africa in the long term. I say regardless of the Chinese’ reputation of violating Human Rights and internet freedom, they mean business when it comes to Africa. The thought of having China owning mines, power plants and financial services is a scary one. But then again we as Africans don’t own those too, the British and Americans do. While it may seem that making deals with China is shaking hands with the devil, accepting finance from them is a risk we have to take.

4 thoughts on “Let us Vote Chinese Finance :It is A Risk We Have to Take

  • Profile photo of Patrick Kayongo
    October 2, 2010 at 9:23 pm
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    I agree that Africa needs to look at other forms of funding and not bound by the terms and conditions of Western loans, but running from one prison to another prison still leaves one imprisoned.
    Many of the Chinese institutions deal with resources and not necessarily cash. So when they offer to build infrastructure, and do amazing things for Africa, there is another side to the story.
    Chinese firms get preferential access to African resources. Doing this gives this generation a school, but the next generation enslaved because they’re resource making capabilities aren’t readily available (i.e. the resources).
    Secondly, economic theory suggests that with foreign investment, new skill sets are brought into the country that is being invested in, and this knowledge transfer helps build the intellectual capacity of the country. Countless reports have shown that many of the Chinese firms who come in use Chinese workers, and Chinese tools, leaving very little to no knowledge transfer to the indigenous Africans. The result of this is further enslavement to their intellectual capital.
    Like I said at the beginning, running from one prison to another still leaves one imprisoned. China comes with their own rules and regulations for their development, and African leaders seem to be taking the short term view of Eat Now, Starve Later. If capacity is not built from within, the continent will forever be enslaved: whether by legislation or “developmental” smokescreens. By hook, or by crook.

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  • October 4, 2010 at 2:39 pm
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    I fully agree Patrick. But not the slavery part. One thing at a time.

    The model of chinese finance is not ideal. We would be ignorant to believe otherwise. As I said though, it is a risk. Its a step in the right direction, with a couple of downfalls. That always happens when profit is to be made. From what I have seen the deals struck with the Chinese are more procurement of resources than ownership contracts (I could be wrong). Preferential mining, exclusivity etc. So the next generation is not messed over.

    When compared to the rest of the help the continent has received,Chinese finance is far more progressive. Fifa with all the revenue collected from the world cup biult “20 centres of hope” across africa, (there are 20 private schools in KZN and Gauteng alone with more facilities). Add the school Oprah biult and Maybe a couple by USAID, you still realise that China has done more. 1goal will get a billion or so people signed up, promising to educate all africas childen, this will take years to complete.

    The nations resources should help the people of that nation, with Africa known for back door deals and lack of distrubtion of wealth. Billions in community infrastructure is a direct form of distribution.

    Adressing skills, and building schools, and solving corruption, and freeing the innovation of africans and building healthcare facilities. Its not as it stands Chinas responsibility.It would be great if they did, but its their fight. China is still a solution.

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  • October 7, 2010 at 12:30 pm
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    There is a little concept I bumped into the other day in some book or another. False dichotomies or false choices. The basic idea behind it is that people tend to find themselves in positions where they are forced to make choices between things that they actually do not have to choose between. They are told that they cannot have both at the same time when in fact they can. This is the first problem with the idea that we must choose China over the West. We do not have to choose, we can have both. The best part about it is that we can have both on our terms and conditions, not theirs. The sooner we realise that, the sooner Africa will prosper. Both China and the Western nations need Africa more than it is made out to be the case. Africa has every mineral that has been discovered. Nothing on earth can be created without the mineral resources that we have in Africa. Does that not sound like a shift in power to you? The secret is that it’s not even a shift, this has always been the case but African leaders refuse to see it.

    The real problem is one of patience. If African leaders had the patience to simply wait, they would in time see all countries around the world come to their doorsteps begging for the resources we have. It’s crazy to say lets choose to take China’s offer of human rights violations instead of possible coup’s from the West. We should not settle for either. Anybody who wants what we have must only get it on our terms. No political meddling and no human rights violations. When they come to ask for what we have, they can only get it if our people are learning and developing the skills to give it to them. They can either patiently wait for us to develop these skills on our own, or they can show us what they already know so that we can get right to it. Why should Namibia have to house 200 000 Chinese people just so that there can be a state house built in the capital – Namibia’s population is just over a million for goodness sake. If those Chinese people were to vote they would immediately swing elections because they suddenly hold about 20% of the vote. It’s all madness if you ask me.

    The slogan should be simple enough. Our resources, Our terms!

    We are not children having favours done for them by their elder brothers to the West and to the East. We are adults ourselves having to bargain, not beg, and work for what we want. I say we choose independence of thought, not China. I say we choose development, not human right violations. I say we choose to empower our people, not have Chinese workers build things for us. I say we choose to do things in a way that lets the world know that we do not need to have our hands held.

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  • October 8, 2010 at 1:59 pm
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    Hey Thulani, Thanks for reading.

    It would be great for africa to develop from within and even dictate the terms on which we trade our resources. The problem is though, it takes too much time. And patience is something no polititian can afford. The average government term is 5 years, ministers and micro managers in government are judged purely on what they achieve in this time frame. If there are several schools biult after your term that is success. If there is a hospital or two in rural communities that otherwise had to travel, that is success.

    Once again. Aid is only supposed to lay a platform for development not do the actual development.

    The other problem is that nations are interdependant. So we can hoard our resources in wait for the best offer, but business indicies would drop, trade would be hindered and the most extreme of western nations might even impose sanctions, impose trade taxes on export goods, high tarriffs. etc.

    I dont know if you have seen the SA department of housing billboard, “1.4 million homes biult and 5 million homes created since 1994”. Regardless of the type of funding that went in to the campaign, the voting community believes that there is progress when this actualy turns out to be a fact. And results are evident.

    The only institutions that are not bound by time are businesses. When businesses decide to interact with governments of forein nations, projects can be pushed from 5 to 10 years, maybe even 15 years. But business is of course out for profit. SO might not even share the same sentiment and vision but offer helpful hand. So matters relating to skills development may still be a talking point until businesses consider it in their budgets.

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