China in Africa is now a hot and contentious topic especially given the recent $60B in pledges that the Chinese Premier- Xi Jinping made during the triennial forum on China-Africa cooperation in September 2018. The Chinese have presented these pledges as aid to the ‘poor’ Africans and it is important for Africans to understand how this augurs for their image globally.
However in reality, the pledge is actually a combination of grants, loans, investment and trade finance. Chinese aid to the continent has actually declined and in its stead its concessional loans to Africa has risen and is now at $5 billion per year- its highest level ever.
Concessional loans represent fixed-low interest finance that China gives Africa in exchange for concessions for Chinese companies to access local African markets, natural resources and infrastructure construction. They are often secured against future revenue streams from export of local commodities e.g. cocoa, cobalt, oil etc.
These loans are not necessarily a bad thing if they are put to good use and the communications about what they are and associated terms are transparent.
Unfortunately, this is not the current situation and in the end Africa’s image as a beggar continent worsens and its young people will have to work their lives out to pay back these loans. In addition, the optics and access these loans give, allow the Chinese an unprecedented level of influence for their culture and companies across Africa.
To underscore the influence China wields in Africa-almost all of the leaders of the 54 African countries were present at the China-Africa Forum in Beijing. Only 6 leaders were absent- Tanzania, Burundi, DRC, Eritrea, Algeria and eSwatini (former Swaziland). And even they had high level representatives.
The optics don’t look good. China calls and Africa leaders have to scramble over. This shows the power dynamic. But this is not about China, this is about Africa’s weakness. Even when India call for their summit, Africa leaders scramble. And don’t lets get started on when the EU and the USA call. What is sad about this is how far along the world has advanced and where Africa is relatively. Only some 60 years ago, when African countries were escaping formal colonialism, many of its countries were on at least equal footing with China and India. But today; China calls, Africa scrambles.
It is important for Africans to understand the Chinese so that they are informed on how to engage with them.
1. The Chinese, just like the rest of the world, are about their business
Africans get lost in and verbalize their need to be liked. They are always on about “what do the Chinese think of us?, “do the Chinese like us?”, “at least the Chinese are better than Europeans, they didn’t colonize us”.
Good African people, the Chinese much less any other person do not give one effing about the African. They are in Africa just like the West and Arabs centuries ago were in order to make money.
Africans being so immersed in mysticism and intuition-based religions engage the world mostly on feeling. Most of the world engages on basis of rationality, self-interest and the desire to make zero-sum profit.
The Chinese went through a cultural revolution that changed the ethos of its engagement with the world. It changed from a traditional view of being this isolationist middle kingdom to a western-influenced mercantile ethos focused on bringing wealth from all over the world into China with the purpose of moving the Chinese into prosperity.
Anyone who tells you that China is different- better or worse than the Europeans or Arabs- is either being deceptive or ignorant. China is about its business and is neither better or worse than other foreigners who have engaged with Africa.
Given this insight, Africans must engage with China without moralistic qualms. China is neither a savior, a friend or an enemy. She is just a business partner. As a result, Africa must engage with China on a purely rational basis- if the numbers don’t add up after assessing hard, soft and intangible factors and on a short or long term basis, do not do the deal.
2. China needs Africa more than many Africans realize
Annual GDP Growth Rates China vs. Sub-Saharan Africa (1980-2017)
Source: adebayoalonge analysis, World Bank metadata
China with a population of 1.3 billion built its economic growth over the last 30 years on the back of becoming the factory of the world. By achieving GDP growth rates averaging 10% year on year over a 30 year period, it reduced its poverty rate from 88% in 1981 to 2% in 2018. By 2020, its poverty rate will be 0%.
Africa with a population of 1.2 billion has achieved GDP growth averaging 3% over the same period. 42% of its population are in poverty and it is adding 5 more people into poverty every minute. For more info on this stats and what Africa can do to stop poverty, read here
China’s long run (next 30 years) GDP growth is forecasted at around 3% year on year which is same as with Africa. In essence, China’s growth is slowing and will be slower far into the future. Africa’s growth on the other hand is stagnant.
You may be asking so what does this all mean. Only when the data above is considered alongside the population forecast data will we begin to understand why China is so keen on providing loans to Africa.
Africa’s population is forecast to grow 2% annually on average over the next 20 years. Its median age is 19 years. In fact of the 2.4 billion people to be added to the world population in next 30 years, 54% will come from Africa, 38% from Asia and 8% from rest of world.
China’s population growth currently at 0.5% will be 0% over the next 30 years. With a median population at 37 years, it means the Chinese population will get older and labor costs will rise. Already, China is no longer the lowest cost location for low end manufacturing. It recognizes this population disadvantage and recently detailed a Made in China 2025 program wherein it aims to invest $300 billion through low cost state provided loans and subsidies to fund local research, development and production clusters in 10 high tech industries. These industries include- AI (artificial intelligence), Integrated Circuits, Bio-Pharmacy, 5G, Robots, Electric Vehicles, Aircraft, Rail Equipment, Ships and Agric machinery. It aims for its companies to capture at least 80% of its local market in these industries while also competing as the best globally in these industries against Western companies.
To achieve this strategy, Africa is important for 2 reasons- as a backbone to enable this transition and for its data. Let us address these 2 reasons-
a) Africa as a backbone for China’s 2025 plan:
Africa’s youth bulge, high population growth rate, high poverty rate, limited local capital markets and large reserve of industrial resources makes it an important backbone to enable China’s transition.
With its large and growing youth population and high poverty rates, the African worker is the cheapest in the world. China’s dominance in low-cost manufacturing benefits from selling cheap products to Africa. More-so through its concession loans, it can move low-cost Chinese production into Africa. Expect more Chinese colonies in Africa on the back of this strategy. This plan helps China achieve 2 things- clean up its environment from dirty low cost manufacturing while accessing a large and growing unsophisticated demand market in Africa.
Africa’s limited local capital market puts it at an immense disadvantage. Its largest stock exchange is the Johannesburg stock exchange (JSE) with a market capitalization of $981 billion (March 2018) and average month traded value of $6 billion. This makes it 30x bigger than that of Nigeria- the second largest in sub-sahara Africa. On the other hand, the largest stock exchange in China is $5.5 trillion and has average month traded volume of $500 billion. China’s largest stock exchange is 180x bigger than that of Nigeria- Africa’s largest country by GDP ($405 billion). In essence, what the whole of Nigeria’s 200M population makes in one year of work, the Chinese trade in one month on their stock exchange!
The scarcity of local capital in Africa and China’s willingness to take more risk than the West in providing lower cost capital to Africa without asking for improvements in governance or structural adjustments, makes China irresistible on the continent.
But is China really taking a risk or it is just being prescient?
I think it is the latter. Its provides its capital as loans that are concessional in nature i.e. low cost fixed rate loans secured against providing access to the local market for its companies, ensuring jobs for its workers in Africa and tied to revenues of local state owned companies and more importantly the precious mineral and metal resources on the continent.
It is cheap capital for blood and metal.
Africa’s young population will work for the next 30 or more years in Chinese companies to pay back those loans. They will live to buy Chinese goods. This is the blood they will give.
If Africans are unable to pay the loans back, the Chinese will use their metal resources to pay themselves. By securing its loans against Africa’s rich metals, it can get these metals for cheap giving its high tech products an unassailable price advantage in international markets. High tech production requires scarce metal inputs as resources and around 43% of reserves are in Africa. Some African countries have the largest reserves of some strategic metals required for high tech production e.g. the DRC has 50% of the world’s cobalt, Guinea has the largest reserves of bauxite in the world and Zimbabwe has one of the largest reserves for lithium. This is the metal part of the deal.
These deals with Africa gives China the leeway to implement its high tech production plan (which requires fewer Chinese workers) while assuring that Africa will provide the base to work for those Chinese not able to work in these new high tech industries. Same scenario with Portuguese and French workers flooding their former African colonies e.g. Angola and Ivory Coast during the Great Recession in 2008. In addition, China de-risks its capital by securing access to scarce metals for the cheap.
China is not taking a risk in Africa. Its lower return on capital loaned to Africa yields it far higher returns on its high tech products while helping it extend its influence in Africa for the purposes of securing jobs and market access for its citizens and companies.
The Chinese are smart. Africans need to be smart.
b) Africa as source of data to enable Chinese high tech versatility
The Chinese built the AU headquarters and and for 5 years stole all the data generated through the tech infrastructure they had put in place there.
China’s mobile phone and equipment companies e.g. Transsion (makers of the popular Techno, Itel and Infinix phones), ZTE, Huawei, Hikvision and other no-name brands have the largest share for mobile phones, telecoms and surveillance equipment in Africa because of their low cost. China has an official policy for all hardware companies to provide access to it when required to data generated and stored on Chinese produced hardware. The Americans know this and this is one of the reasons they blocked Huawei from participating in 5G roll out in the USA.
Unfortunately Africans seem to be playing drafts while the rest of the world is playing Chess. To win in this new age of the 4th industrial revolution, the size and variance of data used to train artificial and autonomous intelligence is critical to produce high tech products with enough versatility to work any where in the world. The Chinese know this and unlike the west they have no qualms about invading their own citizen’s privacy. Do Africans think the Chinese would care about their data rights?
China already has the largest and most sophisticated mass facial recognition systems in the world. It routinely captures and monitors its citizens through ubiquitous street cameras. It uses this facial recognition technology to run a dystopian police state and to control and monitor Muslim minorities in its Uighur region
In addition, it controls its internet through highly advanced text-reading AI that is able to automatically and consistently delete negative criticisms of the Chinese government from Chinese social media in seconds.
China’s no scruples approach to data privacy helps it access huge amounts of its citizens data to train its AI algorithms. It has 1.3 billion citizens and each day they generate Yottabytes of data. Its chaotic cities and lower structured societies vs. the West adds an extra layer of variance and quality to the data it generates. With such access to a large trove of feature rich data and its massive state subsidies, it is already a world leader in artificial intelligence and entrenching its position.
China wants to be the world leader in AI and other high tech and as always it is prescient. While the West balks from Africa, the Chinese know that Africans will soon represent 25% of the world population in 30 years (currently it is 16%). No one can lead in AI and high tech without African data otherwise you would run into the problem of bias (a situation where AI makes decisions using data with limited feature variance). AI already determines who gets hired, admitted into Ivy league schools, gets a bank loan and has access to airports. Without data from 25% of the world’s population, existing AI have only a very limited understanding of the black person. This has immense impact on how black people, not just Africans will navigate the world in the coming years.
The Chinese are aware that accessing and using African data to train its AI will give it an almost unassailable edge in an era of social rights movements and identity politics. Its no qualms approach and influence in Africa gives it access to cheap African data that can be ‘ancillarised’ for use on other black populations in the Americas and the Caribbean. In pursuit of this strategy, one of its companies- Cloudwalk (a recipient of $300M in Chinese government grants) recently signed a deal to provide mass facial surveillance systems to the Zimbabwe government.
Africans need to stop playing checkers while the world plays chess.
Our country(ies) produce(s) enough to feed (support) us all. Alas, for lack of organization, we are forced to beg for food aid (and capital). It’s this aid (and loans) that instills in our spirits the attitude of beggars (and the dependence of slaves).
‘words in () are the author’s own edits’
I) Use the Chinese deals to create local jobs, achieve technology transfer and grow capital markets
This is the exact template China used to achieve 10% year on year GDP growth over 30 years. African governments must ensure that the deals they sign with China enable them become self sufficient in a number of years. The deals should not kill local industries, they should not bring in Chinese workers in lieu of the African and must ensure implementation tie-ins with local companies to allow for technology transfer.
African governments must ensure that Chinese companies working in Africa on the basis of these deals keep their profits on the continent for a period of time so that we can build the local capital markets and achieve deep pooling of capital.
II) Develop continental-wide high-tech development plan aimed at creating African companies that are leaders in collecting and building tech on African data
The AU and its member governments need to set up a continental wide policy that keeps Africa’s data in Africa and assures its use by African tech companies so that they have the edge in developing AI products for the black race.
1 in 4 people in the world will be African in 30 years. Africans and their companies need to be the ones benefiting from tech products used to serve them and other people around the world.
Join me to sign a petition that keeps African data in Africa and ensures that Africans and their tech companies benefit the most from their data. If 500 people sign this petition I will personally deliver this to the office of the AU president and the AU headquarters.
III) Ensure judicious use of Chinese loans if collected
As future generations of Africans will toil- in blood and metal- to pay back the Chinese, African governments who take the Chinese loans should ensure that they are used in projects that generate returns sufficient to pay back the loans. These loans should not be frittered or used for non-productive projects.
Young Africans should play active roles in monitoring the loans collected in their name and ensure that the monies are invested wisely.
IV) Engage with China and the rest of the world on a rational, self-interest and mercantile basis
If engagement does not leave the average African better tomorrow than today both in terms of monetary and other intangible returns, it should not be done. If the loan makes the African more dependent tomorrow than he is today, it should not be accepted.
The terms of the loan and other forms of engagement must be on self interest basis to assure that future Africans are more self sufficient and that they can hold their own when facing their counterparts from anywhere in the world.
V) Drive own media and communications about the nature of Chinese engagement
China has through its media made it appear that it is mostly providing aid to Africa when it is in fact simply doing business. This positioning helps to bolster Chinese image at home, internationally and especially in Africa. Unfortunately it does not help the African who is seen as the persistent and beggarly poor man.
Africans must create and own their own story about the true nature of Chinese engagement with the continent. It must state with clarity and aggressively what it is giving in return for Chinese capital so that the rest of the world does not look down on its people. This is especially important so that Africans do not begin to lose their self confidence and esteem in presence of the Chinese. Otherwise they will begin aspire to Yellow supremacy as they currently do to White supremacy.
VI) Know that China is neither a friend or a foe nor is she better or worse than the West. China is simply a business partner and must be engaged solely on that premise.
The world needs Africa- for its markets, its data and its resources. Although Africa is relatively weak, she can hold her own when engaging with the rest of the world if her member countries work together and understand their strategic importance.
Africans need to drive the media story about the true nature of Chinese engagement on the continent. They must work with China as a business partner- neither as a friend or foe and always in the spirit of self interest.
Africans must realize that the world engages only on the basis of rational and mercantile self interest. The Chinese are no better or worse than the West- they are simply about their interests. So Africans must also be about theirs.
Young Africans will have to pay whatever Chinese loans are collected in their names- in blood and metal. They must therefore work to ensure that loans if collected are well used.
Finally, no one should have more African data than Africans. The Chinese have more of their data and in fact require all foreign companies to keep their data banks in China. Africa must apply the same principle. It will be a shame if in the race for high tech leadership, foreign companies end up knowing more about Africans than African tech companies do. Even more disastrous it will be, if Africans earn no income from their data.
China is smart. Africa must be smart.