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The Africa Confidential Blog

  • 4th September 2018

CHINA/AFRICA: President Xi Jinping wins battle of the suitors with his second pledge of US$60 billion funding package this year

Patrick Smith

We start at the Africa mega-summit in Beijing before moving swiftly onto the contest for Nigeria's presidency next year. In Uganda, opposition to President Yoweri Museveni is growing after two opposition MPs claim they were tortured by state security. And land reform demands will test President Cyril Ramaphosa's ability to balance politics and the markets.

CHINA/AFRICA: President Xi Jinping wins battle of the suitors with his second pledge of US$60 billion funding package this year
With its hosting of the summit on Africa today and tomorrow (4-5 September), attended by all but a handful of Africa's heads of state, Beijing burnished its credentials as the leading supplier of finance to the continent, ahead of the World Bank and IMF as well as Europe and the United States.

If Beijing goes ahead with both the $60 bn. financing package offered in South Africa in July as well as this latest tranche, which is a mixture of loans, aid and trade and project finance, it would add about $100 bn. to Africa's debts to China on top of what regional experts calculate to be existing liabilities of over $120 bn.

The new offer comes as Western countries, especially the United States, accuse Beijing of 'debt-trap diplomacy'. Even some Asian leaders, such as Malaysia's Prime Minister Mahathir Mohammed, who has long-established ties with Africa, has accused Beijing of following a 'neo-colonial' economic strategy. Others point to what happened when Sri Lanka defaulted on a loan to China. Citing the terms of the financing agreement, Beijing immediately claimed ownership of the port.

Many of Beijing's loans to African states are secured on the borrowing country's natural resources. In almost as many cases, repayments are made directly from revenues from commodity exports to China or other markets.

For many African governments, facing tougher conditions in the international markets and the prospects of rising interest rates, the 'China price' for finance is one worth paying. Apart from the volume of cash in the Beijing-Africa pipeline, no countries or institutions seem able to match China's refusal to attach political or governance conditions on its massive lending programme.

The downside is that borrowing countries sometimes complain that they are obliged to work with certain contractors or accept projects that don't fit with their national priorities. Today (4 September), President Xi pushed back a little, insisting that Beijing would not finance 'vanity projects'. He also responded to criticism that some projects had damaged the environment and employed and trained too few African workers by urging Chinese companies to raise their standards.

More widely, Beijing's profession of 'developing country solidarity' is about to be tested in Africa with at least 15 countries facing debt distress, according to the IMF. If repayments come under pressure, so will Beijing's carefully formulated Africa strategy.

NIGERIA: Promises galore and administrative doubts as main parties pick presidential candidates next month
Senate President Bukola Saraki and former Vice-President Atiku Abubakar have emerged as frontrunners in the race for the presidential nomination of the opposition People's Democratic Party which is due to hold its primary elections on 5-6 October.

Both Saraki and Abubakar present themselves as business-friendly candidates committed to wide-ranging economic reform. A bill to reform the oil and gas sector, piloted by Saraki through the National Assembly, has just been rejected by President Muhammadu Buhari (AC Vol 59 No 17, Blame game scuppers reform). Atiku has promised to end multiple exchange rates for the naira but he remains unclear about whether he would countenance a devaluation of the national currency.

Two other candidates in the PDP, former governor of Kano Rabiu Kwankwaso, and the current governor of Sokoto, Aminu Tambuwal, are also vying for the nomination, albeit with less cash at their disposal. The big question is whether the PDP can hold together after the primaries or whether disappointed contenders will quit the party in protest. For that reason, the party's managers have scheduled the primaries just one day before the national electoral body requires all presidential nominations to be submitted.

In the ruling All Progressives' Congress, President Buhari will have an easier run to the nomination, with no serious candidates willing to put their heads above the parapet. The APC primaries are due on 24 September, followed by primaries for the National Assembly and state governorships. That may give Buhari greater powers of patronage to ensure that his faction within the party gets the bulk of nominations. The opposition hopes that if Buhari is nominated it could trigger another round of defections from the ruling party.

UGANDA: Criticism mounts of Museveni's crackdown after two opposition MPs seek medical treatment after detention
The political crisis facing President Yoweri Museveni, in power for 32 years, is intensifying – both within his own party and from a new grassroots protest movement working with the established opposition.

Despite Museveni's reputation for ruthless crackdowns on his opponents, his long-time rival Kizza Besigye in particular, the government blinked on 31 August after it had arrested two opposition MPs trying to fly out of the country for medical treatment.

The two men – Robert Kyagulanyi, better known as the singer Bobi Wine, and Francis Zaake – say they were beaten and tortured by state security officials while in detention with three other opposition MPs. It seems the government decided to release the two after their arrest sparked widespread protests across Kampala. Some demonstrators were burning tyres and building barricades across the city.

Out of the country, Kyagulanyi and Zaake, are winning more support for their campaign against Museveni, 73, who has just won a court battle on ending age restrictions on presidential candidates. Unwilling to name a successor, Museveni appears to plan to stay in the presidency for another six years at least – despite mounting protests against corruption, economic mismanagement and political repression.

SOUTH AFRICA: Long, hard road to land reform to dominate political scene and investor views ahead of 2019 elections
Fluctuations in the value of the rand and investor sentiment suggest that President Ramaphosa's plan to redistribute land away from the white minority, reckoned to possess about 72% of commercial farmland, will be tortuous on both the financial and political campaigning level.

Although Ramaphosa, a rand billionaire with extensive livestock holdings, insists there will be no land grab or attacks on private property, steadying the markets and sounding politically credible at the same time will demand much of him on the road to elections early next year.

Much is riding on those elections for Ramaphosa. To consolidate his leadership of the African National Congress he has to reverse the decline in the party's share of the national vote under his predecessor, Jacob Zuma.

Without a firm stand on land reform, the ANC could lose substantial votes to the radical Economic Freedom Fighters, who are demanding land seizures without compensation. At the same time, the plan to get a land reform bill through parliament before the elections is looking increasingly improbable.

The week ahead in brief

ETHIOPIA: Prime Minister Abiy announces US$ 1 billion of new financing from World Bank after his July trip to Washington

GERMANY/AFRICA: Berlin leads fund-raising drive in Lake Chad region at centre of Boko Haram and Da'ish insurgency

BRITAIN/AFRICA: In wake of her trip to Kenya, Nigeria and South Africa, Premier May promises Britain will become top Western investor in Africa within five years