Zambia: Chinese-FOCAC funding

Jeff Kapembwa

Lusaka – African countries jostling for Chinese assistance in loans and grants under the $60 billion Forum for Africa China Co-operation (FOCAC) need a critical analysis to avert  a ‘physiological’ re-colonisation of the continent by some super powers.

Several African countries, excluding Swaziland, South Sudan and Libya, have applied to China for consideration to access the $60 billion funding being availed to the continent under FOCAC either through grants or loans over a three year period for various undertakings including infrastructure development.

Zambia is one of the African countries benefiting from the FOCAC facilitation and has secured $8 billion under the three-year programme.

The funding sourced by the Southern African state and continent’s second richest copper producer is for undertaking various developmental projects, including rehabilitation and construction of health institutions, energy, roads and other national needs.

“The response has been overwhelming since we introduced the $60 billion. So far, all the countries, other than Swaziland and two other countries in North Africa and South Sudan, are yet to make an application for funding and we hope all these will come on board soon,” Yang Youming, the Chinese ambassador to Zambia said in an interview in Lusaka this week.

However,  the Zambia Institute for Policy Analysis and Research (ZIPAR), one of the continent’s think-tanks, has joined other interest groups in dissecting the motive behind China’s unwavering desire to help Africa overcome some of the challenges and is urging the interested states to evaluate the gesture and understand the motive behind the goodwill.

ZIPAR warns countries against falling prey to China but instead demand what they stand to benefit amid the trade and cultural imbalances exhibited by one of the world’s super powers.

It notes that while China has taken the lead in increasing direct foreign investment in most African states, with Zambia benefiting over $8 billion to date, more needs to be done to review and evaluate the trade and cultural imbalances that China has in turn “imposed” on Africa.

In a  research paper dubbed “China-Africa Trade Developments and Impacts: Cases of China-Zambia Relations, ZIPAR urges China and Africa to  establish a common platform, including enhancing the Sino Africa Stock Exchange in which investment vehicles, companies and project operators can be listed and equity offered.

“This will open up the different ventures to the participation of both Chinese and African citizens as well as private enterprises and state-owned enterprises in the two blocs,” the report reads.

To prevent a divisive scramble for Chinese financial resources among African countries, FOCAC, it adds, should establish pro-rata quota based and performance based mechanisms for determining the allocations of FOCAC financial resources to African countries.

The current approach of FOCAC, mainly focusing its cultural and person-to-person exchange programmes on migration and exposing Africans to China, need to be reviewed. The current set up does not help Chinese people to familiarise and be comfortable to operate in Africa’s social,  economic, political and legal spaces and systems, ZIPAR said.

“The  support towards infrastructure development, industrialisation, financial services and trade and investment facilitation offered under FOCAC, without careful homegrown African thinking and planning for economic transformation, the benefits of such a support will be limited,” the research think-tank said in its 40-page report.

According to FOCAC reports, Zimbabwe and Botswana and other countries on the continent have sought funding from China for various projects. The money is expected to assist in among others, conflict resolution and investment in infrastructure development.

The loans being secured are expected to be settled at negligible interest rates, averaging 0.8-15 percent per annum.  Grants are being secured on different agreements and terms, added Yang.

The disbursement of the funds follows feasibility studies and evaluations undertaken by China on proposals submitted for consideration under FOCAC during the summit hosted by South Africa in December 2015.

China had offered to work with African countries to develop various economies as well as assist resolve conflicts and make the continent attractive for direct foreign investment.  China is disbursing funds based on projects sought.

“We finished the feasibility studies of various projects that were indicated country by country and we are happy that many of them are feasible and bankable that is why we have extended the gesture (funding) to deserving recipient countries,” added Yang.

During the sixth FOCAC conference, Chinese President Xi Jinping told over 50 African leaders that the financing was being made available for the continent in loans and grants.

The gesture is intended  to assist Africa foster and uphold existing ties with China. Trade relations between China and African countries have since the formation of FOCAC in 2000 grown from a humble beginning, recording a sharp rise until after 15 years later as China’s economy continues to grow.

Under the $60 billion financial package for 2016–19,  China has pledged $35 billion in preferential loans and export credits and $5 billion in grants and interest-free loans.

There is an additional $5 billion each for the China–Africa Development Fund and the special loan for African small and medium enterprises, as well as a $10 billion China–Africa production capacity cooperation fund, according to data.

However, Yang disputes ZIPAR’s observations adding: “That’s not correct . . . FOCAC is not here to dominate Africa, we are cooperating so that we develop the continent and ultimately achieve a win-win situation in exports and imports . . . our doors are open.”

October 2017
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