Could some Chinese funds invested abroad be more destructive than beneficial?
At a cursory glance, the Forum of China Africa Co-operation (Focac) would appear to be a surprising and resounding success for all involved. By the close of talks on September 4, China had pledged another $60bn for emerging economic developments. This is on top of $20bn in 2012 and $60bn in 2015, which has been loaned to build development-focused infrastructure such as roads, rail and ports.
It is no secret that the Chinese government is a growing source of investment and lending into Africa but there are rising concerns — not just in Africa but also in South East Asia — that some of the Chinese money invested abroad could be more destructive than it is beneficial.
There are legitimate concerns about Africa’s growing trade deficit with China and the ability of the individual countries to finance rapidly growing, Chinese-financed external debt, but the biggest risk that no one wants to talk about is the risk to governance.
Transparency is one of the basic principles of good governance, yet a common characteristic of the deals struck between the Chinese government and its emerging-market "partners" is that the terms of these deals are not made public. A case in point was the $2.5bn long-term loan facility that Eskom signed with the China Development Bank (CDB) following the Brics summit in July.
Although this loan was the second tranche of a $1.5bn loan agreement that Eskom signed with the CDB in 2017 for financing part of the Medupi Power Plant, the details of both loans remain unclear — even to other funders.
When President Cyril Ramaphosa was pressed for more information in parliament by the leader of the opposition, Mmusi Maimane, he was only able to offer a weak reassurance that the agreements that the South African government enters into are based on "ethics", "good corporate governance" and are "meant to advance the interests of our people". This is hardly encouraging given that the very heart of good governance requires that the public has insight into the work of public administration bodies.
With this in mind, the biggest obstacle to successful co-operation between China and Africa is a lack of transparency in the deals that are made. Without transparency there is an increased risk of governance failure, specifically corruption. The parallels with the shady deals negotiated by the Zuma administration with the Russians to enable our defunct nuclear ambitions are being re-lived.
As much as the recent Focac has been hailed as a triumph for the China-Africa relations, the inability of the government to open the books and reassure other investors that the Chinese interests genuinely come with "no strings attached" is deeply worrying.
Ramaphosa has gone to great lengths to refute accusations that a new colonialism is taking hold in Africa but he needs to back up his words with actions. As the recipient of the lion’s share of Chinese loans and investment on the continent, the South African government is unquestionably at an increased risk of political interference.
Unless it is clear that money invested in Africa by any foreign power is used for development goals or at least has a clear developmental outcome it is hard not to be suspicious. Good governance is built on transparency and accountability and without it we risk continuing along the same destructive path that has lead us to where we find ourselves today. SA’s economic growth has ground to a halt almost entirely as a result of governance failures.
Over the past decade more than enough in tax revenue has been collected to build growth-supportive infrastructure and provide the population with adequate healthcare, education, and housing. Instead, a lack of accountability and a deliberate attempt to destroy transparency has resulted in massive governance failures.
Money that should have been spent on education in Mpumalanga was spent shoring up political support within the ANC. Tax revenues that should have been collected were overlooked, and infrastructure projects that were meant to drive growth were seen as personal piggy banks for the politically connected. What started off as a sleight of hand became a textbook case of what happens when governance fails.
So what can we do?
The state capture inquiry is a step in the right direction, but improving institutional capacity and achieving good governance requires us to do more than pillory those who have been raiding state coffers. To take back control of our economy — both literally and figuratively — we need to put the right people in charge in the first place. It is easier to lock the door than to catch a thief.
Next we need to make sure that those in charge are held to account, and that requires transparency. If President Ramaphosa is unwilling to provide the public with insight into one foreign loan, how can his government be trusted with oversight of the entire economy?
So far the state capture inquiry has confirmed what many knew and has produced a few revelations, but without making an example of those who were responsible, there will never be any accountability.
• Craker is the CEO of IQbusiness