The `China-fication` of Africa

There is virtually no measurable investment in Africa`s ICT space

AS CHINA RACES to feed its inflamed economy and plunders large tracts of Africa's natural resources, that country's foreign policy and divergent ideology relegates Africa to a fate worse than during the previous colonial era in the full pervasive glare of the entire international community.

Cash flush and starved for resources, China`s foray into Africa is based almost exclusively on building infrastructure that serves the singular purpose of processing and moving natural resources that will ultimately and virtually exclusively ensure these scarce and un-replenishable resources reach and feed their economy.

Behind China`s advances into the continent lies a cold and ruthless pursuit that will leave in its wake a wasteland brought on by an unsustainable assault on the Continent and its mineral riches.

However, an obvious fact is that there is virtually no measurable investment whatsoever in Africa`s information, communication and technology space?

It is both startling and stark that the omens are there, but are largely being ignored.

The global landscape is changing dramatically, and with it there are demographic trends that are already largely determined, which will contribute to a substantial reshaping of the global landscape, a reshaping that in less than half a decade will see Africa irreversibly and permanently relegated to a state of abject poverty, with only small pockets of prosperity.

China holds over a trillion dollars in hard currency reserves, growing by leaps and bounds and already a recognised nuclear power, and is developing a blue-water navy. The National Intelligence Council, a US government think tank, projects that by 2025, China will have the world`s second largest economy. Such growth is opening the way for a multi-polar era in world politics.

This tectonic shift will pose a challenge to the US-dominated global institutions that have been in place since the 1940s.

In a modern world, already deep into globalisation, ICT is an enabler. Investing in a country, or plundering one, while similarly enabling a population to disseminate and communicate in an open and transparent manner about such activities simply doesn`t go hand-in-hand.

Recently, it`s been published that China has stepped forward to provide Telkom with the credit needed to fund its fledgling cellular arm, 8ta. But this does not equate to investing in ICT. This is providing finance on a commercial basis, which serves only to further enslave either a company or country in debt. China is, in fact, funding ICT projects in Africa at a massive premium and in a manner that is highly uncompetitive.

Geopolitical landscape

China`s productivity and global standing are deeply uncertain, in part because of the large resources required to deal with its demographic problems.

In the near-term, China is struggling fiscally to keep up the social infrastructure necessary to support its large, growing, increasingly urban population. It is also constrained by the enormous costs required to restructure its state enterprises and failing banking sectors.

According to the IMF, China`s overall fiscal deficit in 2000 was estimated to be about 4% of GDP, up from 1.6% in 1996.

China`s overall budget deficit hit 660 billion yuan ($129 billion) in 2010, according to Reuters calculations last month, after the China Ministry of Finance published its December fiscal revenue and expenditure data.

In only 30 years, China will have to expend tremendous resources to deal with its own aging crisis and most likely will not have the same coping mechanisms - sophisticated tax structures, deep capital markets and developed pension and healthcare systems - that developed countries have for dealing with an aging population.

By 2025, China will have more than 200 million people aged 65 and over and, by 2050, more than 300 million - more than the current size of the US population. As a result, China could confront slower growth, increased political instability, and perhaps even pressure for significant cultural changes.

China has responded to the challenge of the large-scale resources required to deal with its demographic problems by turning to Africa.

After trade grew at an average rate of 33.5% annually, between 2000 and 2008, China became Africa`s largest trade partner last year, even though exchanges declined due to the global financial crisis.

Chinese capital has poured into the continent, despite criticism in the West of Beijing`s support for the hard-line regimes of leaders such as Sudan`s Omar al-Bashir and Robert Mugabe of Zimbabwe.

Beijing had pumped a total of $9.3 billion in direct investment into Africa by the end of 2009, covering several sectors, including mining, agriculture, forestry and construction, it claims. From 2000 to 2009, China cancelled more than 300 debts of 35 African countries, worth $2.9 billion.

Trade between China and Africa surged 43.5% year-on-year in the first 11 months of 2010. The value of two-way trade reached $114.8 billion from January to November, the state council said in a report on Sino-African economic and trade co-operation.

China is investing heavily in African oil exploration to help meet its rapidly-growing consumption. In 2003, it overtook Japan to become the world`s second-biggest consumer of petroleum products after the US.

The US Energy Information Administration (EIA) adds that China accounted for 40% of the total growth in global oil demand over the past four years.

Clearly, the West remains rooted in the Middle East to satisfy its demands for energy. Under ordinary circumstances, this power shift should be welcomed if it translates favourably for Africa, which on the face of it, seems to, with the massive increase in trade between the two trading blocks, China and Africa. But it doesn`t.

As of 2008, nearly 1 600 Chinese companies landed their business operations in Africa, while China has undertaken more than 900 projects in African countries.

Zambia

Zambia has embarked on massive projects in the copper belt to boost copper production prior to and during the global economic meltdown, which has seen copper prices, as well as other commodities, tank.

There are at least three new smelters simultaneously being built by the Chinese, employing hundreds of Chinese workers. The entire project relies on finished products, labour, tools and equipment being supplied by China.

The issue of Zambia`s power scarcity is currently being addressed by the Chinese in the form of massive projects to increase generating capacity. One such project is Zambia`s Kariba North Bank hydro power station, which is currently being upgraded. The scheme kicked off in 2008, with $325 million provided by Exim Bank, owned by the Chinese government. The outstanding amount of $105 million has recently been sourced through a loan from the Development Bank of Southern Africa. The funding from China is based on an engineering, procurement and construction (EPC) agreement.

China`s Sino Hydro Corporation is the sole project contractor, and the EPC contract means it has taken full responsibility for construction - including the supply of material and labour. The project is due to be completed by December 2012, and the plant expected to be operational by early 2013.

There are advanced plans for the construction of a $1.5 billion new project, the 600MW Kafue Gorge Lower hydro station. Work will begin there by mid-2011. Sino Hydro will also work with Zesco on this project.

China has built the smelters to produce copper, smelters that cannot be brought online, but will be kept in mothballs until such time as China builds capacity to generate sufficient power to bring the smelters online.

There will almost certainly be a buy-back agreement between the Chinese and the Zambians that guarantees the Chinese get power for their smelters at a very attractive rate from increased generation.

Simply put, Zambia will supply China with copper ore for power; while China will benefit from cheap energy and copper ore value add through the full cycle of production.

Nigeria

Compared to China`s enormous Internet market of 420 million users (50% of the Asian continent), Africa has a combined market of 110 million users, or 10% of the total African population.

Africa already has a poor record of press freedom and the widespread arrest and detention of journalists. This record is likely to be duplicated in cyber-space. African governments, like China, caught between a rock and a hard place as liberalisation of telecommunications open up the Internet market to more users, are reluctant to relinquish state control of information.

Consequently, there is investment by African countries into ICT, but many are seeking to control the flow of information, in much the same way as traditional media channels have been controlled.

Regimes are likely to make greater use of Internet censorship techniques and crack down on those who use the Internet to express contrary views.

With an official intolerance for opposing views, which has led the Chinese to develop sophisticated Web-monitoring and censoring systems, China seems a logical partner to develop an ICT infrastructure in Africa.

In 2005, China Great Wall Industry Corporation, a state-owned hardware manufacturer, won a $311 million contract from the Nigerian government to manufacture and launch the NigComSat-1 communications satellite. Under the management of the Nigerian National Space Research Development Agency, NigComSat-1 will harvest contracts from Nigeria-based telecom operators, who will no longer need to solicit service through foreign satellite operators. The satellite was launched in May 2007.

China is currently supporting the Nigerian government`s purchase with a $200 million credit facility from Exim Bank.

Huawei Technologies, one of China`s leading networking and telecommunications equipment suppliers, won a $100 million contract in 2006 to become the leading CDMA network provider for Nigeria`s Multi-Links, a loss-making company part-owned by Telkom. The same year, Huawei announced that Starcomms Nigeria, Nigeria`s largest telecom operator, would deploy Nigeria`s first 1xEV-DO-based mobile broadband network.

Huawei has opened a new "Technology Support Centre" for Western Africa, in Abuja. Huawei also announced a $200 million memorandum of understanding for the Phase II rural telephone network.

Nigeria is bedevilled by worse power outages than Zambia by a significant stretch, and despite being ranked the world`s seventh-largest gas producer, is contending with an energy crisis.

The poor electricity supply in Nigeria has proved a major impediment to the operation and growth of ICT in the nation`s universities. Only a trickle of daily electricity production dribbles erratically into the country`s 93 institutions, rendering ICT systems dysfunctional.

Ironically, Nigeria has spent $311 million on sending a telecoms satellite into space funded by the Chinese when, in fact, the most critical necessity for a stable ICT network, an uninterrupted power supply, is virtually non-existent. Instead, in Nigeria, a satellite has replaced the smelter.

By funding the satellite, China, through the China Great Wall Industry Corporation, Huawei Technologies and Exim Bank of China, stand to control large tracts of Nigeria`s ICT sector, at a time when the country is in the throes of a debilitating power generation and distribution crisis.

Naturally, this locks out competition when the power grid of Nigeria is enhanced, and is paid for in Nigerian oil in any event.

A consortium of Chinese firms, including SEPCOIII Electric Power Construction Corporation and China National Machinery and Equipment Import and Export Corporation, is set to take over the 335MW-capacity Omotosho Thermal Station, in Ondo State.

The Nigeria Federal Government decided to sell the power station to the contractors that handled its construction, due to the inability of the Power Holding Company of Nigeria to operate the plant, according to press reports in January. The government built the power plant through a credit line from Exim Bank of China.

Three power plants benefited from the credit line, including Papalanto, a 335MW-capacity plant in Ogun state, which was developed by Chinese group SEPCO; Omotosho, developed by China National Machinery and Equipment Import & Export Corporation; and Geregu Power Station, a 138MW-capacity plant, in Kogi State, developed by Siemens.

In essence, the Nigerian government took out loans from China to build and refurbish power plants and promptly sold the same plants back to the Chinese for as yet undisclosed sums.

Nigerians will now pay for their electricity in oil - electricity they paid for in oil but now no longer own.

The list in Africa, including South Africa, of China`s imperialism and colonisation is stark as it is endless. It is not that China is investing in Africa, but how it is going about it.

It would indeed do well for Africa to remember that the Chinese are masters in the art of war, and Africa`s citizens must begin to strategically defend, not only their sustainability, but also their sovereignty, or pay the price.