Day: December 14, 2022

The United States plans to commit $55 billion to Africa over the next three years, according to White House officials. The announcement comes as the administration of President Joe Biden hosts a two-day meeting with African leaders.

The U.S. three-year funding pledge contains $20 billion for health programs in Africa.

Speaking to African leaders Wednesday at a business forum, President Joe Biden said the United States is all in on Africa’s future, and he announced new trade opportunities and infrastructure commitments, including for clean energy and the digital economy.

“Improving Africa’s infrastructure is essential to our vision of building a stronger global economy that can better withstand the kinds of shocks that we’ve seen the past few years,” Biden said.

The U.S. president is facing some criticism for not interacting individually with the visiting African leaders. Administration officials say soon, Biden, Vice President Kamala Harris and some Cabinet secretaries will individually be visiting Africa for detailed discussions.

Source: Voice of America

Ports have long been integral to Africa’s connectivity with the rest of the world. Yet over the last 15 years, a new stage in maritime infrastructure planning and development has begun. Between 2004 and 2019, over US$50 billion was spent on this infrastructure – roughly 13 times more than was spent between 1990 and 2004.

Ports reflect more than simple economic imperatives. They are crucial in creating and reinforcing social, political, and cultural systems. Infrastructure can be a useful lens to understand what particular groups in society value and how political elites aim to structure the social order. Indeed, port investment makes visible the linkages and disconnections between different agendas (those of leaders, global capital and civil society).

In a recently published paper, we explored two key questions about port investment and construction. What explains the massive increase? And what does this tell us about the nature of economic growth and political change across Africa?

We argue that the latest phase of port infrastructure development – the “ports race” – is shaped by (and simultaneously shapes) three Africa-specific macro trends.

The first is reliance on the large scale export of natural resources (“extractivism”).

The second is an embrace of state-led development strategies that privilege large scale infrastructure.

Third is the repackaging of narratives that link economic growth and global connectivity. Elites do this to bolster their domestic power and legitimise processes that are often socially or environmentally destructive.

In essence, the ports race is the result of both new alliances between African political elites and global economic circumstances that favour large-scale infrastructure building. These may be drying up post-COVID-19, however.

Fashioning the ports race

African countries have long relied on primary commodity exports. This system, which began during the colonial period, largely continues today. The majority of African economies are still set up around two production systems: the export of oil and minerals, or the export of tropical agricultural products (there are a few exceptions, including Morocco).

The ports race is symptomatic of a new pattern in national development.

African politicians are aiming to use the export of unprocessed resources and commodities to develop pockets of domestic value-addition in certain strategic industries. This strategy has become ubiquitous under the umbrella of “resource-led development”. Yet it creates the conditions for the continued plunder of African resources and for hugely environmentally or socially damaging processes.

A good example is Ghana’s US$2 billion bauxite-for-infrastructure agreement with Sinohydro, a Chinese multinational. Bauxite will be processed domestically for export markets. But at least part of the Atewa forest reserve, where the bauxite is located, will be destroyed in the mining process.

The need for greater export capacity also drives port expansion projects across Africa. Increasingly, states are seeking to attract capital and bolster their legitimacy at home and abroad by creating “safe spaces” for investment.

For example, Djibouti has attracted over $4 billion for infrastructure development in the past 10 years alone. Yet, this has done little to reduce Djibouti’s poverty rates or improve employment levels. Instead, new infrastructure has served to gather international support for Ismail Omar Guelleh’s repressive regime, as corporate and state actors present the port of Djibouti as a secure regional pivot for transhipments.

The domestic stability needed to attract capital to Djibouti was realised through the erosion of press freedoms, harsh crackdowns on dissent and non-competitive elections. It is in the alliance between the interests of local political elites and foreign capital that the developmental effects of port projects are defined.

Due to rising levels of indebtedness and growing competition among African states to attract foreign investment, this is not a lasting solution.

The economic and political consequences of costly infrastructure projects falling short in delivering growth and development can be disastrous. For instance, loans might not be repaid, or funding could be directed away from projects with greater potential social impacts.

The ports race is a “risky business”. How, then, do African elites legitimise port development domestically?

They do it by associating infrastructure with modernity and connectivity. In essence, they create an idea of a future with high-tech port operations, smoothly paved roads and uninterrupted flows of goods.

Infrastructural visions are closely connected to extractivism and state-led development. They speak of “unlocking” the potential of specific African regions by connecting them with global trade and capital flows. And they portray domestic peripheries as “unproductive” and in need of infrastructure development.

Conclusion

Considering the number of large-scale maritime infrastructure projects currently under way in Africa, we view the ports race as an ongoing process. Major world events like COVID-19 and the Russian invasion of Ukraine could have an impact on it, though.

Not all port projects are harmful for growth and development. The developmental effects of ports and other maritime infrastructure are complex and varied. They depend on local factors and whether projects are tied to overarching plans.

For some countries, port construction or expansion may enhance the implementation of industrial policy frameworks by reducing transport costs and inefficiencies. Yet this is not a given. Moreover, construction of multiple ports in the same region attempting to gain the status of transhipment or gateway “hubs” means that some will certainly fall short. There will be severe political and economic consequences.

Source: The Conversation Media Group Ltd

Long-running tensions between the major international lenders and China were aired at a meeting in China’s Anhui province, where participants sought agreement on a way forward for some of the world’s most indebted countries, many of them in Africa.

Representatives of the International Monetary Fund, World Bank, and Beijing’s finance ministry participated in the meeting to discuss debt restructuring for low-income countries — 60% of which the IMF says are at or near debt distress.

The relationship between the IMF and China — the world’s largest bilateral creditor — has not been an easy one, Harry Verhoeven, a senior research scholar at Columbia University, told VOA.

“The Fund has in recent years come under great pressure from its most important shareholders — the U.S. and European countries — to be much tougher on China and debt — and to help identify ways that either expose China as driving the build-up of unsustainable levels of indebtedness in African states” or that force China to cancel some of the debts owed to Beijing, he said.

“Yet on the other hand, the Fund also suffers from a crisis of legitimacy related to its perceived prioritizing of Western interests and concerns,” he added. “A growing number of developing countries in recent years/decades have sought to turn away from the Fund and deeply distrust its advice and conditionalities.”

What African countries hoped for as the outcome of this meeting, analysts said, was a combination of debt restructuring and forgiveness — as well as more predictability and reassurances that fresh capital will still be available to them.

“A large number of African countries’ balance sheets are shot to bits and these countries are technically insolvent,” said Kenya-based economist Aly-Khan Satchu.

Conciliatory tone

The press releases from both Beijing and the IMF after the meeting struck an optimistic tone.

IMF chief Kristalina Georgieva said she had a “fruitful exchange” with her Chinese counterparts on how to accelerate debt relief to prevent “triggering a global debt crisis.”

Georgieva said China could “play an active role” in helping speed up the Common Framework, a plan by the G-20 announced two years ago to help countries buckling under debt by getting private creditors to participate and share the burden fairly.

So far, only Ethiopia, Chad and Zambia have made requests for debt relief under the Common Framework.

Ethiopia has been suffering a civil war, so its restructuring has been delayed, according to Reuters. Chad has completed the debt treatment process — although the agreement has been criticized for failing to reduce Chad’s overall debt.

“We need to build on the momentum of the agreement on Chad’s debt treatment and accelerate and finalize the debt treatments for Zambia and Sri Lanka, which would allow for disbursements from the IMF and multilateral development banks,” said Georgieva.

In 2020, Zambia became the first African nation in the COVID-19 pandemic era to default on its loans. In July its official creditors, led by China, agreed to provide debt relief. The move was welcomed by the International Monetary Fund, but the process is moving slowly. The finance minister of Zambia recently told Reuters he hopes his country will complete its debt-restructuring by the first quarter of 2023.

Meanwhile, crisis-hit Sri Lanka, which defaulted on its sovereign debt this year, is not eligible for the Common Framework because it’s a middle-income country. However, it has begun debt-restructuring talks, with creditors China, India and Japan playing key roles in the outcome.

The Chinese response

China has often come under criticism, especially from U.S. Treasury Secretary Janet Yellen, for not participating enough in international efforts to reduce developing nations’ debt burdens or for delaying those efforts.

However, after last week’s meeting, Chinese Premier Li Keqiang said that “China will continue to strengthen macro-policy coordination with all parties, including the IMF, to tackle debt” and will “work with relevant G-20 members to formulate and participate in a fair and equitable debt-restructuring plan.”

“As expected, China and the IMF made lots of positive noises about China’s role in finalizing restructuring for Sri Lanka and Zambia, as both the [IMF] managing director and the Beijing leadership need each other to recognize the efforts and legitimacy of the other,” said Verhoeven.

However, “there was no full-throated endorsement of the IMF-led Common Framework for Debt Treatments by China,” he noted, something the IMF would have liked.

Verhoeven noted that in the IMF’s communique after the Anhui meeting, “there was a recognition that the Framework must become more functional and predictable, which in Beijing translates as a recognition that China should not be uniquely vilified for the accumulation of debts by emerging economies in Africa and elsewhere.”

China has often been accused by the West of practicing “debt-trap diplomacy” — deliberately lending to countries that it knows cannot pay back, thereby increasing its political leverage — though the theory has largely been rejected by academics.

Just this week, China’s ambassador to the U.S., Qin Gang, cited a report by British charity Debt Justice that shows African countries in fact owe three times as much to Western private lenders.

China has often argued that multilateral development banks should also participate in debt restructurings.

Hard road ahead

World Bank President David Malpass was also in attendance at the Anhui meeting and took a more confrontational line than Georgieva, saying: “In our meetings, we discussed in detail the debt crisis that is intensifying in the world’s poorest countries and China’s role and responsibility in initiating and implementing solutions.”

He said there is an urgent need for more rapid progress in debt restructuring discussions for Zambia and that “changes in China’s positions are critical in this effort.”

He also urged China to be transparent in its loan contracts to help investors make informed decisions.

Kenya-based economist Satchu was not convinced the meeting achieved much, in the end.

“The Chinese clearly prefer to maintain a degree of autonomy in all discussions with debtor countries and I suspect this visit was an attempt to reach some kind of modus operandi between the IMF and China after some quite ham-fisted railroading attempts by the IMF,” he said.

“In a geoeconomic context, it’s crystal clear China’s Africa lending appetite is satiated, that the U.S. and the Multilaterals will need to step into the breach. … The challenge for the U.S. [and the IMF] is that … a lot of these new funds will be round-tripped back to China to pay down Chinese loans,” said Satchu.

Source: Voice of America