Behind the scenes, the Chinese have
been lecturing African governments on financial transparency. The huge largesse
of the Chinese is now accompanied by a desire to see their funds well spent—and
accounted for. Privately, they have been aghast at Jacob Zuma’s government in
South Africa, which went through
three finance ministers in a week in December 2015. The
lack of planning and responsibility—not to mention the president’s inability to
understand economics—have raised eyebrows in Beijing.
By way of contrast, in Nigeria’s
President Muhammadu Buhari —who arrived in China on Monday for a
four-day working visit—the Chinese see a model of a disciplined man who is
seeking, against huge odds, to restore responsibility to his country’s messy
financial affairs.
President
Buhari’s visit is an important one for Africa. Within
his high-powered delegation are the Ministers of Trade and Investment,
Transport, Water Resources, and Defense. The first three play to traditional
Chinese strengths in assistance to Africa and Buhari has a particular need to
upgrade both the Nigerian road network and its water supply system. He is also
hoping for a solid agreement on scientific and technological cooperation.
The inclusion of the Minister of
Defense may well be to discuss the provision of Chinese military equipment to help
defeat Boko Haram. The military response of Buhari’s
predecessor, Goodluck Jonathan, was hugely ineffective against the militants,
who have rampaged through northeast Nigeria since 2009. Much money set aside to
re-equip the Nigerian army was stolen and often the soldiers were outgunned by better-armed
and faster-moving opposition. A former army general himself, Buhari
would have seen this as a huge embarrassment as well as a threat to national
security.
But it is in the financial sector
that all eyes will be watching the visit. Nigeria’s Finance Minister Kemi
Adeosun said in a Saturday breakfast meeting with financial journalists that
the 2016 Nigerian deficit— estimated to
be 2.2 trillion naira ($11.6 billion) —could be financed by the issue of
Panda Bonds - or basically, a bond launched by a foreign entity in China. It
depends on the Chinese market but can yield for investors, on past performance,
between 3.3 and 3.4 percent. What it means in actual practice is the Chinese
purchase of foreign debt. It can even be toxic debt. The Chinese purchased much
US toxic debt in the 2008 economic meltdown, but did so without the use of
bonds. Either with or without the use of bonds, it allows Chinese leverage over
the foreign economy concerned.
It seems likely that Buhari will
discuss this issue directly with China’s President Xi Jinping. Buhari and Xi
concluded an agreement on Tuesday regarding the free flow of the yuan
(renminbi) in Nigerian banks. The yuan will now be part of Nigeria’s foreign
exchange reserves. If Nigeria needs the inflow of liquidity, in whatever form,
the Chinese also see their outreach to Nigeria as part of a changed
globalisation in which they are seeking to secure new advantages.
But, it is not just President Buhari
who has been at work in China. Nigerian
billionaire industrialist Aliko Dangote —Africa’s richest
man— signed a $2
billion loan agreement with the Industrial Commercial Bank of China on Tuesday
that will help him expand his cement industry in Nigeria.
The defining aspect of a new page in
Chinese outreach to the changing globe is one which no longer offers only huge
grants and soft loans. Those will still feature. Increasingly, financial
instruments like bonds, commercial bank loans and export credits will be part
of the Chinese packages. It becomes, increasingly, a business model, rather
than aid. It is in this view of a business model that the Chinese can see
fruitful relations with Buhari’s Nigeria and—seemingly—are yet to be convinced about
Zuma’s South Africa.
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