On Dec. 4-5, Chinese leaders visited Johannesburg’s central business district to pledge $60 billion to help industrialise the African continent. More than 40 African heads of state were in attendance for the Forum on China-Africa Cooperation (Focac).
Will Beijing amplify the neo-colonial patterns of extractive looting paved by Western capital?
To me, Focac’s most impressive feature was the hard-sell by Beijing’s local allies. In an unprecedented display of bias, the English-language daily newspaper (the Independent group) considered the most important in South Africa’s four largest cities – Johannesburg, Cape Town, Durban and Pretoria – ran non-stop, mind-numbingly positive “sunshine journalism.”
The Independent chain’s most intelligent reporters and commentators were flummoxed by a harsh reality they dared not mention: China has amplified African under-development over the past third of a century.
To illustrate, consider enthusiastic Sunday Independent claims by a prominent international relations expert, University of the Witwatersrand Professor Garth Shelton: “China’s ongoing engagement with Africa is a major success story and constitutes a positive example of co-operative interdependence.”
The evidence is useful to consider because Shelton is not a state spin-doctor; he is a leading scholar whose lines of argument are hegemonic, e.g. “Commodity exports to China provide a foundation for economic growth across the African continent.”
But from 2002-11, this was true only if ‘growth’ is measured simply as rising Gross Domestic Product
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. (GDP), uncorrected for depletion of non-renewable resources (what is termed ‘Natural Capital’, drawn down). If that correction is made, Africa’s wealth drains out rapidly, not to mention other ‘Resource Curses’: ecological wreckage, social displacement in mining areas, systemic corruption and serious economic distortions.
Not according to Shelton: “Increased African raw material exports to China significantly benefit national economies.” No, even the World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.
It consists of several closely associated institutions, among which :
1. The International Bank for Reconstruction and Development (IBRD, 180 members in 1997), which provides loans in productive sectors such as farming or energy ;
2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;
3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.
As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.
http://worldbank.org admitted in its 2014 Little Green Data Book that once we apply Natural Capital accounting, 88 percent of Sub-Saharan African countries are net losers from mineral and petroleum exports.
Moreover, the price cycle has since turned, with most commodity exports worth less than half their 2011 peak value. Having overproduced, China has even redirected its own production of semi-processed commodities Commodities The goods exchanged on the commodities market, traditionally raw materials such as metals and fuels, and cereals. back to African countries that were formerly net suppliers. South Africa’s largest steel factory (Arcelor Mittal, owned by an Indian) spent 2015 closing five foundries and the second largest (Evraz Highveld, owned by a Russian) declared a form of bankruptcy.
South Africa’s trade and industry minister (Rob Davies, a Communist Party leader) was compelled to impose a 10 percent price surcharge, notwithstanding the SA currency’s crash from R6/$ in 2011 to R14.5/$ today. Frustrated Nigerian steel manufacturers have a similar story.
Such frenetic overproduction at the world scale is one of the main reasons the Focac promise of Africa’s next-wave economic growth – industrialization – is a pipe dream. The first waves of cheap Chinese imports began a third of a century ago, as structural adjustment
Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.
Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).
IMF : http://www.worldbank.org/ policies shrunk Africa’s disposable income, decimating local clothing, textiles, footwear, appliances and electronics industries.
Moreover, Chinese manufacturers’ demand for oil, gas and coal is the main factor – along with irresponsibility by the EU, the US, India and other consumers of African fossil fuels – behind climate change. When the leaders of China, South Africa, India, Brazil and the US signed the Copenhagen Accord in December 2009 (as an undemocratic side-deal to the UN negotiations then underway), they replaced the Kyoto Protocol’s binding provisions with voluntary pledges. This set the stage for the Paris deal now coming to fruition, with its 3+ degree pledges assuring runaway climate change. Copenhagen fused sub-imperial BRICS countries (minus Russia) with.
Shelton expresses faith that “As the Chinese middle class expands, the range of export opportunities to China will become enormous.” But that class has a profound problem: over-indebtedness and with it, the inability to convert real estate collateral Collateral Transferable assets or a guarantee serving as security against the repayment of a loan, should the borrower default. to cash. The middle-class strategy of property speculation has come unstuck what with massive overbuilding of residential real estate, followed by a 20 percent crash in 2014-15, a problem far worse in the provincial cities. The ratio of real estate to GDP (23 percent) in China is three times higher today than the US at its most property-bubbly in 2007.
In any case it is most unlikely African countries can produce consumables for the middle class that are of the bulk volume to achieve economies of scale and hence lower prices. And today there is a world glut not only in over-supplied raw materials from Africa, e.g. coal, for which Chinese import demand is 120 million tonnes/year for the foreseeable future after a peak of 150 million tonnes in 2013 (a 20 percent crash). More generally, world trade has also been shrinking over the last year, after stagnating since 2011.
Though Shelton claims that “Africa benefits from access to reasonably priced Chinese manufactured products,” the continent’s currencies are crashing, so prices of imports have soared. China’s ability to keep its products cheap was based on its currency being artificially undervalued.
This is much harder now that the yuan is considered an IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.
When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.
As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).
The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
http://imf.org world reserve currency. But Chinese prices are still ‘reasonable’ because Beijing rejects worker rights and health (and bans non-sweetheart trade unions), severely damages natural environments both locally and globally, continues the apartheid-style rural-urban migrant labor system, and uses marketing prowess pioneered in the U.S. to foist consumption of especially shabby products, whose planned obsolescence is even more rapid than U.S. corporations’ slovenly standards.
In rebuttal, says Shelton, “China-Africa trade grew from only $10 billion in 2000 to over $200 billion in 2015.” True, but that left Africa with a widening trade deficit today, as well as a payments deficit – i.e., profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. outflows to multinational corporate headquarters, whether Western or BRICS – resulting in today’s Sub-Saharan African annual current account deficit: now more than $50 billion. (Illicit outflows make this far worse.)
From 2007-15, finding hard currency to cover the worsening trade and payments imbalances entailed vast amounts of lending from Chinese creditors to African countries. The sub-continent’s foreign debt suddenly doubled, by $200 billion, and the impact of macro-economic imbalances will devastate Africa’s finances for years to come.
The typical neoliberal path out of this dilemma is opening up African borders for more Foreign Direct Investment, as Focac promised. According to Shelton, “Growing Chinese investments in Africa benefit local economies and create new commercial opportunities in domestic markets. China’s investments in hydrocarbons, mining, dams, road and rail systems, as well as infrastructure and telecommunications, are immensely beneficial for Africa’s development.”
There were indeed profitable projects during the short-lived commodity boom, but also mega-deals that revealed limits to the hyped infrastructure and mining investment drive. In Southern Africa, Zimbabwe’s main diamond mines were looted by the Chinese and Zimbabwean military in cahoots, Botswana’s coal-fired power-plant failed, and Zambia’s disastrous hydro-electricity expansion suffered allegations of sub-standard Chinese equipment. Other notorious mega-project failures, according to the Wall Street Journal, include China Railways in Nigeria ($7.5 billion) and Libya ($4.2 billion), Chinese petroleum in Angola ($3.4 billion) and Nigeria ($1.4 billion), and Chinese metal investors in the DRC and Ghana ($3 billion each).
“China’s successful development model,” concluded Shelton, “holds wide appeal in Africa where states are seeking to escape the poverty trap.” But a centralized dictatorship, cheap labor prohibited from organizing, a mass market still to be indebted beyond salvation, Western consumerism, and several planets worth of resources are fantasies that only weakly disguise the role Focac has set for itself.
That role is simple: facilitating neo-colonialism, with Johannesburg elites like Shelton lubricating the journey by pretending there are no made-in-China African potholes.
Courtesy of the author.
Source : teleSUR
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