World / FOCAC

China's $60b package shows commitment to Africa

By Andrew Moody in Johannesburg (chinadaily.com.cn) Updated: 2015-12-05 08:45

President Xi Jinping's announcement in his opening address to the 2nd Summit of the Forum on China Africa Cooperation that he was to triple funding to Africa came as a major surprise to delegates and others attending.

He announced $60 billion of grants and concessionary loans as well as other funding measures.

This was dramatic increase over the $20 billion offered at the last FOCAC meeting in Beijing in 2012 and 50 percent more than the $40 billion that had been widely forecast ahead of the summit.

Harry Verhoeven, a lecturer at Georgetown University's School of Foreign Service in Qatar and a leading China- Africa expert, said it was certainly a lot of money.

"It is an impressive headline figure at a time when so many people are worried about the health of the financial system in China and the slowdown," he said.

"Because we have got so used to China-Africa meetings revolving around big money, not everybody may appreciate just how much cash this really is."

He said China was reaffirming China was not losing interest in the relationship, as some have suggested.

"It is clearly sending an important signal as to how important its relationship with Africa remains and that it is in it for the long haul. Even in economically challenging times, it continues to commit to Africa."

Windsor Chan, strategy consultant for the Asia practice of lawyers Hogan Lovells, based in Johannesburg and a respected figure within the South African business community, agreed it made clear China had an Africa focus and was not wanting to just build relations with developed nations, after his recent high-profile trips to the US and UK.

"The 200 percent increase of concessionary loans demonstrates China's long-term view on Africa and has not been interrupted by the turbulent in the global economy," he says.

The extra funding pledge came alongside Chinese help on security issues, agricultural modernization, vocational training, infrastructural development and widely anticipated moves to assist the continent with its industrialization efforts.

This could include concessionary loans for Chinese companies setting up manufacturing operations in Africa.

This was welcomed by Justin Yifu Lin, the former chief economist of the World Bank and now professor of economics at Beijing University, who was in the audience as Xi delivered his address.

He has been helping a number of African governments with their manufacturing strategies.

"The program announced puts industrialization right at the top of China and Africa's future cooperation. The way to create jobs, reduce poverty and avoid the middle income trap is to have the continuous innovation that manufacturing provides," he said.

He believes Chinese manufacturing in Africa could change everyone's image of African products and kick-start African-owned manufacturing enterprises.

"International buyers don't have the confidence to place orders because they worry African firms will not be able to produce goods that are of decent quality. That is why Chinese investment is vital."

Helen Hai, goodwill ambassador for the United Nations Industrial Development Organization and who has been directly involved in setting up manufacturing operations in Ethiopia and Rwanda, also said Xi's moves on African industrialization could be a catalyst.

"I am very glad to see an industrialization movement sweeping across Africa. This was a very well received speech," she says.

The $60 billion financial package included $35 billion of preferential facilities, export credit lines and concession loans and $5 billion of grants and zero interest loans.

There was also a $5 billion increase for the China Africa Development Fund and a further $5 billion of special loans for SMEs.

China is also setting up a new China Africa Fund of Production Capacity with initial capital of $10 billion.

Deborah Brautigam, director of the China-Africa Research Initiative at John Hopkins University and a leading expert on the China Africa relationship, wonders whether African governments will take up some of the loans on offer over the next three years.

"I doubt they will be willing to take on serious debt between 2016 and 2018, given the clouds hanging over their economic horizon," she says.

She did, however, welcome other initiatives in the speech such as support and funding for vocational training.

"It has never received this degree of emphasis and I applaud this. Chinese companies have long complained about their difficulties in finding skilled workers for their African operations," she said.

Michael Osime, founder and chief executive officer of ICMG Securities, a leading financial company based in Lagos, Nigeria, hopes that some of the $60 billion will be used to further develop infrastructure on the continent.

"With this money we will be able to fill the gap. Africa needs to invest massively in infrastructure. Evidence suggests we could hit growth rates of 15 percent if we can only sort out our infrastructure," he said.

He also welcomed the President Xi's pledge to boost security in Africa by training African peacekeeping personnel and also contributing to UN peacekeeping efforts.

"Peace and security is important because you need security to attract investment," he said.

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