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This is Part 1 of a two part series. Watch for Part 2 on Monday, May 16, 2011.
The Attractiveness: The obvious reason major countries, including China, are attracted to Africa are its rich resources. Imagine, the richest continent on earth registered the world’s 10 poorest countries below $700 per capita. Yet, the widest rich-poor gap is not in Africa but in Latin America. The world’s poorest continent weathered the global economic crisis better than the West. The African Development Bank estimated the growth rate of Africa at 7 percent in 2011 up from 5.5 percent in 2010. The latest report on Africa’s GDP per capita is $3,539. The highest per capita is recorded by Equatorial Guinea at $16,507 while the lowest by Malawi at $546. It is surprising to note that Africa’s GDP per capita is higher by more than half of India’s per capita. Six of the 10 fastest-growing countries in the world in 2000-10 were African; Angola grew faster than anywhere else on the planet. No wonder, all eyes are towards Africa, but Africa likes China.
The Admirations: The world is aware of Africa’s multibillion-dollar deal with China in over one decade to build highways, schools, hospitals, and other infrastructure in return for its minerals and oil reserves. It is reported widely that Sino-African bilateral trade topped $115 billion last year, and it continues to grow at a rate of 44 percent each year. It is assumed that China’s aid to African countries has grown so much in recent years that it has already surpassed aid provided by the World Development Bank. However Deborah Brautigam’s, author of the Dragon’s Gift, research findings reveal interesting facts including the overstated amount of the Chinese aid to Africa which is still well below World Bank annual aid. According to a report from China, their share of oil export from Africa is only 30 percent while the rest is with the West. The IBSA, started in 2003, increased trade flows between India, Brazil and South Africa from $3.8 billion in 2004 to $15 billion in 2010. The creation of BRICS has increased the development partner option for Africa. Brazil and India are keenly pursuing the race for suitable African partnership though for different reasons; India for market, Brazil for minerals while South Africa is seeking an image as suitable representative of Africa. India spent $547 million on aid related activities in 2008, either directly or indirectly linked to IBSA. It also extended $2.96 million in lines of credit, mostly to sub-Saharan Africa. Though China is not the only player in Africa, its growing commercial and economic interest in Africa is under global scrutiny.
The Savor: Meanwhile, the West is facing the dilemma between improving accountability in the aid delivery and reducing the aid to fulfill reasonable charity at home; it is deeply concerned with the emerging challenges in international development. On one hand, the economic downturn drove the point sharper for aid effectiveness. On the other hand, the philanthropy may not desire the reduction of the aid budget which accounts for only 0.2 percent of the total GDP of rich nations. As a result of these dilemmas, responses to improved aid effectiveness are expressed by way of conducting an impact study based on appropriate indicators to measure results or on reducing transaction costs and reviewing the aid conditionality. A recent suggestion for cash transfer mechanism aims at increasing accountability of the spending. The Chinese internalized the problem of aid effectiveness in their own perspective and disaggregated the problem into smaller components to detect the core problem. They found that the problem of traditional aid donors was its inability to give happiness to the most important stakeholder, i.e the aid recipient. In a typical capitalist approach, they found the answer in management approach of customer’s satisfaction and decided to deploy management strategy to satisfy the aid recipient as a valued customer for a long term relationship.
Road to Happiness: The Chinese found that the method to achieve customer’s happiness was by providing them their most desirable and pressing needs drawn from local assessment rather than repeating some stated needs inspired by philanthropy of a distant land. The Chinese allowed the Africans to set their own development goal while they focus on getting the job done.
The experience from external aided projects showed failure of projects due to lack of local capacity. The Chinese quickly addressed this critical problem through deployment of their own skilled and unskilled manpower on African projects. The strategy certainly provided employment opportunity to millions of Chinese as a bonus. For sustaining the future needs, the Chinese implemented a massive man power training program for Africa. This strategy provides a platform for raising Chinese national esteem through export of their soft culture and other technical knowledge to the biggest continent on earth.
The Chinese fully understood the local purchasing power capacity and took care not to strain the depleted capacity by providing the Africans low cost products and services. For this reason, they do not insist on quality control which, in turn, enabled them to be lenient and avoid the dreaded aid conditionality, seen as exploitative, in the traditional donor–aid relationship. This changed approach in the traditional donor’s landscape won the hearts of the Africans.
The Chinese project design found feasibility in the eyes of the Africans. The planning gave them hope for a brighter future, the method relieves the Africans from capacity constraints and the implementation ensured local accountability. The results are generally good, though sometimes deluded with broken bridges and walls. The Africans do not mind the mistakes or maybe the governance capacity is not yet developed to enforce strong accountability in the system. The issue of tied loans is accepted in the context of strengthening future partnership rather than impeding future business prospects.
ASPA member Margaret Gangte is deputy financial advisor for the Ministry of Defense of the Government of India. Email: [email protected]