Monrovia – The Chinese Premier pledge yet again $60 billion in foreign assistance to Africa’s 50 countries and Liberian President George Weah and his more than 50-member delegation to Beijing for the Forum on China-Africa Cooperation (FOCAC) are said to be lobbying heavily with Chinese authorities for more than $3 Billion United Sates Dollars to support his development plans with a huge emphasis on roads connectivity.
Analysis by Rodney D. Sieh, [email protected]
Information Minister Lenn Eugene Nagbe is quoted by the government-owned New Liberian newspaper as saying that the money will be acquired through innovative financing which will be a combination of bilateral grants and concessional loans.
$US54M a Precursor to More?
According to Nagbe, Liberia’s strategy at the summit is to access financing for its development projects from a variety of sources including the soon to be announced FOCAC funding mechanisms, concessional loans from China Export-Import Bank, the China Development Bank and through investments from the One Belt One Road Initiative once Liberia gets admitted. “The President and the rest of the delegation are making a great push. We are very optimistic that we will meet our target. And Liberia will gain maximally”, the Minister noted.
US$54 million package was announced following President Weah’s meeting with his counterpart Xi Jinping. The money is supposed go toward the construction of two overpasses at SKD Boulevard and the Ministerial Complex, and provision of emergency food aid. But the Liberian Government indicates that it expects more when the delegation completes the trip to China. “The USD54 Million is an initial grant from China which we greatly appreciate, but it is just a precursor to the huge support we intend to secure from China to support development in Liberia”, Nagbe says.
For Liberia, the quest for US$3 billion is crucial to President Weah’s ambitious quest for a coastal highway throughout the southeast amid mounting concerns that two previous loan efforts – a US$536 million controversial arrangement with Eton Financial Private Limited and a US$420 million loan from President Weah’s friend, the Burkinabe businessman, Mr. Mahmadou Bonkoungou. Both the International Monetary Fund (IMF) and the World Bank had previously advised against borrowing above the country’s budget ceiling and President Weah in particular came under fire for granting a US$420 million loan to his businessman friend, Mr. Mahmadou Boukoungou’s road construction company, EBOMAF, whose planes the President has been using for presidential trip and a clear violation of the code of conduct and a conflict of interest.
Amid growing concern about the legitimate source of funding for the two loans, at a press conference in August, Liberia Minister of Finance, Samuel Tweah informed Liberians that while the two deals are not dead, the Government was now conducting “due diligence,” even though the Legislature had already passed the two loan proposal into law.
Priority Shift: Eton, Ebamof in Limbo
The government has since shifted its attention to the traditional World Bank and IMF validating speculations that the two loans are unlikely to materialize.
Finance and Economic Planning Minister Samuel Tweah acknowledged recently: “There have been legitimate concerns about either the viability of Eton, the legitimacy of Eton – we’ve received all of those queries and we have conducted our due diligence and we are still in the process of conducting our due diligence. Due diligence is not a one-off event – it is a sequence of things that you can do. So, coming out of all of these conversations will ensure that we are making progress. But the notion that Eton is off the table is not true. Eton Finance – the loan we enter with Eton is a highly concessional loan and as I told the partners, that loan is concessional and I don’t’ think they have an objection to its concessionality.”
Despite the reluctant assurances, both Eton and Ebamof arrangements have yet to be printed into handbills, more than fifty days after President Weah signed into law following a 4-G passage in the national legislature.
On June 14, 2018, President Weah signed both loans into law following ratification by the National Legislature for the construction and pavements of 830 kilometers road network.
As per law and procedure, following ratification by both Houses and approval by the President, the loans should have been printed into Handbill, thus becoming law. Best case scenario, the funds should have been in Liberia by now.
The road construction projects, according to President Weah, are expected to be completed in the first term of his administration. At that signing, President Weah declared: “It’s my desire and I pledge that at the end of my tenure, I shall have connected all 15 counties. This shall be my focus; this shall be my legacy and my footpath after my tenure.”
The President said the Loan Agreements will help provide the opportunities for economic growth, increase development and will provide access to youth employment, while also impacting meaningful contributions to national development.
Sources have pointed to issues involving the equivalent of Eurobonds to the Liberia financial equation and Ebamof’s reported interest in concession or some form of guarantee before proceeding. Eton on the other hand have been struggling to come up with the money and raised eyebrows recently when it reportedly requested US$500,000 from the government to process the US$536 million loan.
In frustration, independent sources within the World Bank informed Frontpage that President Weah was irritated that the World Bank and the international partners were frowning upon the two loans, and so demanded that the World Bank put up the $500 million for the road construction. Sources indicate that the World Bank informed the President that it had already spent $500 million over the past 12 years on road construction in Liberia and getting a one-time $500 million is a long shot, requiring years of paper work and negotiation.
Another last ditch effort, the President sent an team including Justice Minister, Finance Minister and Minister of State to Turkey to ask a concession company for advance payments on future taxes, while other senior cabinet members remained in Liberia to press other concession companies to make payments on future taxes.
Knowing the pressing need for cash to finance the president’s promised development projects (coast highway, new city at Bali Island, Military Hospital, etc.), some Liberians (namely Samuel Jackson and Chris Neyor) step up and offer to raise $700 million in bilateral and development loan from t6he Brazilian Development Bank. Nothing much have been heard of that initiative since it was reported in July 2018.
Now Comes the Chinese
The Weah administration, which appears determine to seal a multi-billion package in a bid to commence its coastal highway in the next dry season, see China as the new way forward – even as it keeps tabs on the World Bank and the IMF; bearing in mind the long process those funding take to materialize.
At the forum this week, President Xi Jinping announced China’s $60 billion for African development over the next three years, marking only the second time in three years that Beijing has made such a pledge.
Speaking at the opening of a major summit with African leaders in Beijing on Monday, Xi said the figure included $15bn in grants, interest-free loans and concessional loans, a credit line of $20bn, $10bn for “development financing” and $5bn to buy imports from the continent.
But it comes with a catch. China, according to Xi will carry out 50 projects on green development and environmental protection in Africa, focusing on fighting climate change, desertification and wildlife protection.
Additionally, Chinese companies, according to Xi will be encouraged to invest no less than $10bn in African countries in the next three years.
Government debt from China’s interest-free loans due by the end of 2018 will be written off for indebted poor African countries, as well as for developing nations in the continent’s interior and small island nations, Xi said.
For Xi, “China-Africa cooperation must give Chinese and African people tangible benefits and successes that can be seen, that can be felt,” he said.
At the Forum on China-Africa Cooperation (FOCAC), hosted in Johannesburg on Dec. 4-5 2015 and gathering delegations from 50 African countries, the African Union, and of course China, China pledged to invest $60 billion in Africa, but most of the announced $60 billion were earmarked as loans and export credits. Only $5 billion was to arrive as grants and interest-free loans. Liberia did not get much of that $60 billion in 2015.
But the 2018 $60 billion announcement is where the Weah administration is hoping to benefit – if its argument is persuasive enough to convince Beijing into doling out US$3 billion.
The Split: $60 Billion – Amongst 51 Nations?
The key for Liberia will be the pitch. Where does the country of 4.6 million people fit in and how could it move ahead of the line in securing a sizeable chunk of the $US60 billion.
Between 2000 and 2017, Beijing loaned around $136 billion to the continent, according to data from the China-Africa Research Initiative at Washington’s Johns Hopkins University School of Advanced International Studies.
Angola is the top recipient of Chinese loans, with $42.2 billion disbursed over 17 years. South Africa, Ghana, Mauritania, Sudan, and Ethiopia etc are also in the top ten recipients of Chinese foreign assistance and investment.
Diplomatic observers say, Liberia’s $3 billion quest while on paper appear to be unrealistic, the key lies how much of a leverage the delegation can muscle and what would the Chinese want in return.
Liberia has several oil blocks and its Wologisi Mountain reserve that could come into play.
After all, other African nations are walking away with much more – but far from the billions Liberia envisages.
Nigerian President Muhammadu Buhari, for example, oversaw the signing of a telecommunication infrastructure deal backed by a $328m loan facility from China’s Exim bank during his visit, according to his office.
Djibouti has become heavily dependent on Chinese financing after China opened its first overseas military base in the Horn of Africa country last year, a powerful signal of the continent’s strategic importance to Beijing.
In Liberia’s next-door neighbors, Sierra Leone, some 30 Chinese companies are currently operating due to a huge commercial interest to extract Sierra Leone’s mineral resources. The Chinese are also said to be exploring and expanding its influence by purchasing radio stations, building new television networks and even acquiring local newspapers in the near future.
At the forum this week, as part of a bilateral agreement between China and Sierra Leone, China will send a team of nine experts to conduct a feasibility study on the fish harbour project; an agreement for the Chinese Government to provide emergency humanitarian assistance of a batch of rice valued at 50 million RMB Yuan; a Memorandum of Understanding on cooperation within the framework of the Belt and Road Initiative and an agreement on the economic and technical cooperation with gratuitous assistance from the Chinese Government of 250 million RMB Yuan.
Sierra Leone’s Minister of Transport and Aviation, Kabineh Kallon, while at the forum also signed an agreement with Golden Dragon, a Chinese transportation company, for the supply of two hundred buses to Sierra Leone.
In October 2011, China agreed to partially finance the construction of a new airport for Sierra Leone through a loan from ExIm Bank; the other contributor is the Government of Sierra Leone, according to a 2011-2015 budget annex. According to a source from September 2013, the Government of China delivered a 315 million USD loan from ExIm Bank to Sierra Leone for the development of a new airport at Mamamah village.
Sierra Leone has broadened trade relations with China to levels not seen since the 1980s. Today, Chinese companies have secured the largest iron ore concession in the country and built roads through underdeveloped areas, including a US$159 million tollway. China has become one of the largest importers of Sierra Leone’s fish and timber.
Rising Rwanda a Rarity for Beijing
Ghana’s President John Akufu-Addo also won assurances from President Xi Jinping that China will provide a grant of 200 million Chinese yuan, the equivalent of $30 million to Ghana to assist in the effective implementation of the economic policies of President Akufo-Addo. Additionally, the two Presidents signed eight agreements that define the ambit of Chinese cooperation with Ghana. Principal amongst them was the $2 billion Sino-Sure Framework Agreement, which will enable Sino-Hydro Corporation, a subsidiary of Power China, to finance and participate in major infrastructure, road and railway construction projects. The project embarked on by the Chinese government to construct 1,000 boreholes across some parts of Ghana will also help to ensure access to water.
Rwanda, like Liberia endured a lengthy civil war but has turned the corner of late. Rwanda is also among the top priorities for Beijing of late, despite being a land-locked country with very little minerals to offer, defying the convention that China’s interest in Africa is solely for mineral interests.
Today, private Chinese companies and entrepreneurs are investing in property, telecoms, manufacturing, and small-scale businesses like restaurants, car import outfits, and travel agencies. Big state-owned Chinese enterprises are building much of Rwanda’s roads and infrastructure, but not in exchange for oil or mining rights.
Rwanda has rebounded from war and genocide to emerge as one of the fastest-growing economies on the continent and rapidly cementing itself as the business and technological hub of the continent. The country is also attracting investments and slowly easing its way out of reliance on foreign aid.
Despite its numerous outreach to Africa, China has faced criticisms.
In Zambia, regarded as having perhaps the longest relationship with Beijing, dating back to five months after independence in 1964, China reportedly has uncontrolled access to the country’s natural resources. As a result, Zambia has over borrowed from China and opened its doors to unfettered emigration of Chinese nationals. The Chinese effectively controlled the body politics in Zambia, with a recent outcry from Zambians when Chinese were allowed to enter the police force and were seeing on the streets directing traffic in Zambia, wearing Zambian police uniform.
The issue is so prevalent that prior to the Zambian delegations visit to Beijing, the Centre for Trade Policy and Development advised the Zambian delegation attending the Forum to avoid contracting any fresh loans.
According to the Lusaka Times, the scale of this Chinese lending is significant. The newspaper quoted a former Chinese ambassador to Zambia as saying that more than 600 Chinese enterprises are investing in Zambia and the total Chinese investment is close to US$4 billion, making Zambia one of the top ten destinations in Africa for Chinese investment. Ironically, about 95% of all of Zambia’s external debt from export and suppliers’ credit sources comes from China, with debt from Chinese sources equaling approximately US$3 billion (or 30% of Zambia’s total external debt stock) in 2017, according to the report.
“Additionally, in 2016 a staggering US$1.7 billion – 50% of all new loans contracted that year – was lent by Chinese sources. More importantly, according to a statement issued by the Zambian Minister of Finance on 21 February 2018, it was stated that China is a natural first creditor and accounts for 28% of Zambia’s debt.”
Since the Cold War, China has provided billions in aid to Africa raising suspicions from the West about Beijing’s motives despite growing influence and reputation of China as the lead global trading power for Africa.
For Liberia, which has benefited immensely from Beijing over the years, past development aid could mark a gauging point for the foreseeable future – in terms of expectations.
According to statistics issued by the Ministry of Commerce of China, the Sino-Liberian trade volume in 2006 totaled 531.76 million US dollars, among which China’s export reached 529.83 million US dollars while its import was 1.93 million US dollars.
According to the Chinese embassy’s website, China has been encouraging all sectors in Liberia to expand its export to China by taking the advantages of China’s offer of zero-tariff on more than 440 commodity items exported to China by the least developed countries, so as to reduce its imbalance of trade. “Trade, economic assistance and cooperation have always been important factors in China and Liberian relations. Particularly since the resumption of bilateral relations in 2003, the Chinese Government has tried its best to promote bilateral cooperation and trade and provide assistance within its capacity to Liberia in fields of education and human resources development, agriculture, health, infrastructure and etc.”
Billions in Pledge Not New
The latest offer from China follows one made three years ago when China pledge a similar amount at the Forum on China-Africa Cooperation (FOCAC) in South Africa.
Skepticism about China’s interest in Africa has been massive. Former U.S. Secretary of State Rex Tillerson, during his first official visit to Africa early this year, warned that “African countries” should be careful not to “forfeit their sovereignty” in their dealings with China.
For Liberia and the Weah administration, the risks are crucial and a must for its ambitious development agenda. How it fits in China’s overtures remains to be seen. But as President Xi made it clear Monday, China would not finance “vanity projects” but would concentrate on commercially viable, sustainable and green investments. Xi pledged, without giving details that China would set up a peace and security fund and a related forum, while continuing to provide free military assistance to the African Union.
Before some 54 African countries — including several heads of state — Xi sounded a poignant message:
“Only Chinese and African people have a say when judging if the co-operation is good or not between China and Africa. No one should malign it based on imagination or assumptions.” Said Mr. Xi reacting to criticism that China had been engaging in “debt diplomacy” by loading countries up with debt so they became politically beholden to Beijing.
With global second guessing of China’s intent, China has become also including in its support for Africa some form of accountability and transparency, signalling while Rwanda, a country with less natural resources but superior governance structures relative to many African countries, is among the top recipients of Chinese commercial investments and foreign assistance.
A diplomat, who has long watched Chinese investments and foreign assistance to Africa is dependent on solid, viable and sustainable projects, market size of the economy and population, and strategic importance to China. With 50 plus African nation competing for $60 billion from the Chinese over the next three years, who gets the bigger piece of the pie is dependent on issues narrative, plus China’s new insistence on some type of good governance.