KAGWANJA: China's “Marshall Plan” for Africa — debt or new deal? - Daily Nation

China's “Marshall Plan” for Africa — debt or new deal?

Sunday September 9 2018

China

China's President Xi Jinping (right) invites Congo President Denis Sassou Nguesso to view an honour guard during a welcoming ceremony inside the Great Hall of the People in Beijing on September 5, 2018, a day after the conclusion of the Forum On China-Africa Cooperation. PHOTO | LINTAO ZHANG | AFP 

By PETER KAGWANJA
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The recently concluded China-Africa Summit offers a new deal for Africa’s recovery.

The Forum for China-Africa Cooperation (FOCAC) has the making of a 21st century equivalent of the Marshall Plan, America's massive economic rescue programme that President Harry Truman unveiled for Europe on April 3, 1948.

In the largest financial bailout in human history — officially the European Recovery Programme (ERP) — named after United States Secretary of State George Marshall, Washington offered $17 billion (equivalent to $193.53 billion in 2018) in economic assistance to help rebuild Western European economies after World War II.

It is doubtful that Europe would have emerged from poverty without the American bailout.

Sadly, Africa was left out of the Marshall Plan, and post-colonial U.S. aid to Africa ideologically bolstered dictatorial regimes as bulwarks against communism.

INCREASE IN LOANS

In the 21st century, Beijing is offering to Africa a South-to-South economic rescue deal. From 2000 to 2017, the Chinese government, banks and contractors extended US $136 billion (Sh13tn) in loans to Africa.

Chinese foreign aid expenditure in Africa has increased steadily in the past decade, growing by an annual average rate of 14 percent, from US$631 million in 2003 to close to US$3 billion by 2015.

In September 2018, Beijing offered $60 billion in form of official development assistance, capacity building, export credits, suppliers' credits and commercial loans to cover the 2018-2021 period.

There are striking similarities between America’s aid to the kith-and-kin in Europe and China’s South-to-South aid to Africa.

The Marshall Plan sought to remove trade barriers, modernise industry and improve European prosperity.

SHARING MONEY

American aid to Europe had an overt ideological agenda: to promote liberalism (elected government, free market and consumerist culture — and prevent the spread of Communism.

Chinese aid to Africa seeks to create prosperity and incorporate Africa into “a community of shared destiny for humanity”.

After the 2018 Beijing Summit, the big question is how the $60 billion will be shared out among the 54 participating African nations.

The Marshall Plan aid was divided among some 18 European states roughly on a per capita basis.

The large industrial powers received the lion's share of the bailout and with less going to the Axis powers or those that remained neutral during the war.

In this configuration, the United Kingdom received about 26 percent of the total followed by France (18pc) and West Germany (11pc).

AFRICA'S INDUSTRIALISATION

On its part, China is taking a Pan-African approach targeting projects with regional impact such as Kenya’s standard gauge railway.

Like the Marshall Plan that prioritised the reindustrialisation of Europe after the war, China is laudably giving a pride of place to Africa’s industrialisation.

Industrialisation was top on the list of President Xi Jinping's eight-point plan to guide Chinese aid to Africa in the next three years. Recipients of Marshall Plan had to invest 60 percent of these funds in industry.

The funds also involved Technical Assistance Programmes to create a skilled labour force to drive industrialisation.

The 1940s and 1950s witnessed large-scale tours of American factories, farms, stores, and offices by European recipients of Marshall Plan, enabling them to return to their home countries and implement the technologies used in the United States.

PRUDENCE

An enduring lesson from America’s aid to Europe is that it takes more than aid to develop.

The jury is still out there as to whether the Marshall Plan was singularly responsible for Europe's rapid recovery.

Naysayers of the Marshall Plan rejected the idea that the rescue project alone miraculously revived Europe.

But Africa must use Chinese aid prudently. It has to avoid the pitfall of the Marshall Plan where aid was mostly used for the purchase of goods from the United States.

Ahead of the 2015 FOCAC Summit, China’s African strategists toyed with the idea of implementing Mr Jinping’s $1.2 trillion Belt and Road Initiative (BRI) in four ‘pilot countries’: Kenya, Tanzania, Ethiopia and Egypt. This raised resistance from the rest of Africa.

The Marshall Plan offers invaluable lessons to Africa on how to manage the repayment of Chinese loans.

Aware that the Marshall Plan aid was to be repaid, Germany spent its funds very carefully, explaining why it became more industrialised than the rest of Europe.

MOLOTOV PLAN

As in Europe, the speed of recovery and degree of success of China's aid will vary across Africa's 54 nations participating in FOCAC.

In Europe, both France and the United Kingdom received more aid, but West Germany recovered significantly faster.

Finally, as in Europe, Africa has to deal with a raft of propaganda against China's aid. America’s Marshall Plan was lampooned as economic imperialism.

Indeed, the Soviet Union refused the Plan benefits, and blocked it to Eastern European countries to check American imperialism. Instead, it developed its own recovery plan known as the Molotov Plan.

European critics saw the America’s deal as an attempt to gain control over Western Europe.

Today, critics of Chinese aid to Africa are fretting China’s “debt-heavy projects abroad”.

However, President Xi Jinping has reiterated that China's investments on the continent have "no political strings attached". Africa should use China’s Marshall Plan wisely to industrialise.

Prof Peter Kagwanja is former government adviser and currently Chief Executive of Africa Policy Institute.