A genuine rat race for markets and investor attention in Africa is raging between China & the United States of America following pronouncements that the world’s top two largest economies will be pouring a combined US$120 billion in concessionary loans and infrastructure development loans into the continent.
Last year, China offered Africa US$60 billion for infrastructure development at the Forum on China-Africa Cooperation (FOCAC) through the Belt and Road Initiative. The USA countered by offering the same amount recently at the US-Africa Business Council Summit in Maputo, Mozambique.
US-China War at Play
Perhaps this rat race is the other manifestation of the ongoing US-China economic war where the two are looking to outwit each other in many ways to create advantage for either in business, market access and resources in Africa.
The US$60 billion in concessionary loans announced by Chinese President Xi Jinping under the Belt and Road Initiative is meant to fund road and rail construction as well as ports development in Africa.
The US and China are the biggest players in the African extractive sector and have operations in most of the continent’s mining industries, extracting rare earth minerals, gold, diamonds, cobalt, copper, platinum, oil and gas.
Who is the Better Evil?
While the Chinese, rated as possessing the world’s fastest growing economy, are more keen with their Belt & Road Initiative, the Americans decided to theme theirs Prosper Africa Initiative and either way both are keen on finding a listening ear among African leaders in return for safe investment and loans.
But while the Chinese loan seemingly come with no conditions attached, there have been grumblings about the US initiative which politicians and diplomats on the continent say has conditions attached. It is believed the US loan comes with a condition that African states must vote on the side of the US whenever there are resolutions at the United Nations Security Council.
But US Secretary for Africa Affairs, Tibor Nagy, recently told South African media that his mission was to make sure that “whenever an investor knocks at the African door, that investor should be American”.
According to Nagy, the Americans recent drive to dangle US$60 billion in potential loans to Africa is meant to outwit China and create soft landing for American investors in Africa, a continent with a market of a billion people.
He also added that the US was looking for engagement channels that were “fair” for both parties.
“The era where Africans used to get loans and fail to pay them back are over. We are offering opportunities where loans can be offered at better rates,” said Nagy, who does not see anything wrong with the US offering loans to Africa with strict conditions, either tied to political reforms or other sorts meant to whip leaders into tying themselves down to deals that favour Washington.
In a recently delivered speech on his recent visit to South African, Nagy said, “Since I assumed my current role last September, this is my fourth trip to Africa. These trips provide me the opportunity to meet with government officials, business leaders, civil society, and Africa’s dynamic youth to hear a range of views and discuss concrete ways to strengthen cooperation.
“So today, I am truly excited to speak to you about the enduring relationship between the United States and the countries of Africa, especially South Africa. Specifically, I want to talk about the US government’s policy priorities in Africa and how we are working with partners like South Africa to achieve our common goals.”
On the flip side of the coin, China, viewed by many African states as an all-weather friend, is offering concessionary loans to Africa for infrastructure development at the lowest repayment rates but observers say these have landed a few states in debt.
University of Namibia academic and economist, Dr. Omu Kakujaha-Matundu, in a recent interview with The Southern Times, said Africa needs to find the best engagement with China which offers the Asian giant investment opportunities and also creates a market for African agriculture products in China.
Dr. Kakujaha-Matundu said the engagement between Africa and China, on one hand, and the US, on the other, should be done in the best interests of all parties.
He said while it was imperative for most African countries to borrow to create a solid infrastructure network that drives the needs of intra-Africa trade, it was important not to commit the continent to obligations future generations won’t be able to meet.
“China for a long time has been a partner to African countries and we have a lot to learn from their growth. It is important that we come up with a win-win situation for both China and Africa. Africans need the infrastructure and the loans are coming at reasonable rates so the African countries must engage in a way sustainable to them and future generations,” he said.
Another economist and academic, Dr. Hoze Riruako, in a recent interview, also stressed the need to balance the need for investment, be it from China or the US, with the priorities of countries in Africa. Riruako believes any sort of investment streaming into Africa should not be tied to conditions that will hamstring the recipient in future and should be taken on strict business principles that benefit both parties.