12 September 2018

Africa: What the China-Africa U.S.$60 Billion Deal Promises

Scores of Heads of State and Government from Africa and other representatives convened in China's capital Beijing for the Forum on China-Africa Cooperation (FOCAC) summit.

The forum is about advancing economic ties and facilitating African nations to promote and realise their development agenda. And the summit is usually known for its surprises. For instance, the previous forum in 2015, which took place in South Africa, had seen China pledge $60 billion to African countries.

This year, the Asian country kept its trend - another commitment of $60 billion was made by China's President Xi Jinping at a summit. The money is in form of loans, grants and export credit.

This announcement attracted criticism and applause from experts, political analysts and economists alike. Some observers, for instance, have pointed to Africa's growing debt as cause for concern while others said that Africa is committed to its friendship with China and views such a pledge in different light.

Rwanda's President, Paul Kagame, who is also the Chairman of the African Union, backed China's development framework, specifically the declaration on closer cooperation and the Beijing Action Plan.

"Both the Summit Declaration and the Beijing Action Plan capture the key issues and provide a roadmap for next steps. Rwanda supports the adoption of these texts and strongly endorses the vision of a community of shared future," he said at the summit.

Under the framework, China will not only extend the $60 billion financing to African countries, but a number of other activities that will benefit ordinary citizens will be conducted.

What to look forward to

China's pledge will come in the form of government assistance as well as investment and financing by financial institutions and companies.

The financing includes $15 billion of grants, interest free loans and concessional loans, $20-billion in credit lines and $10 billion earmarked as development financing. A further $5-billion will serve as a special fund for financing imports from Africa.

The development framework, among other things, will encourage Chinese firms to invest at least $10 billion in African in the next three year.

Hudson Wang Jiaxin, the Counselor at China's Economic and Commercial Department in Kigali, said Rwanda can benefit from what China is committing to African countries.

"At Beijing FOCAC summit, China pledged to finance eight plans within the coming three years with $60 billion. The eight plans cover a wide range of fields and surely Rwanda can benefit comprehensively from that," he said.

The official highlighted the infrastructure sector, health, vocational training, as well as special economic zones and industrial parks as some of the areas that Rwanda could potentially benefit from China's commitment.

Wang noted that there is no allocation plan for the amount of money the country pledged, and that the provision of the financial support depends on the practical and feasible proposals of each African country.

He also said that there are ongoing discussions with the Government of Rwanda on possible projects that China might finance through the $60 billion commitment package, without revealing which specific projects.

Rwanda has already benefitted from the recent FOCAC initiatives with projects like the expansion of Kigali Urban Road ($77 million), IPRC-Musanze ($15.7 million), and Masaka hospital, among others.

In practical terms, China says, it will implement 50 agricultural assistance programmes, provide RMB1 billion of emergency humanitarian food assistance to African countries affected by natural disasters, send 500 senior agriculture experts to Africa, and train entrepreneurs in agri-business.

China also plans to explore possibilities to facilitate trade of sugar products with high potential. This is generally part of the country's commitment to contribute to the modernisation of the continent's agricultural sector.

Under the action plan, China says it will implement 50 trade facilitation programmes for Africa, as well as undertake 50 projects for green development and ecological and environmental protection.

Tailor-made programmes to train 1,000 high-calibre Africans will also be put in place. 50,000 government scholarships and 50,000 training opportunities for seminars and workshops will be offered.

On the other hand, 50 medical and health aid programmes for Africa will be upgraded.

Research

The Asian country is also planning to set up different centres in Africa to build the capacity for the continent in several areas.

Top of the agenda is the China-Africa Research Centre for the Development of Green Agriculture, the China-Africa Cooperation Centre for Ocean Science and Blue Economy and China-Africa Bamboo Centre.

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