Speech: Five Steps for Africans to seize the FOCAC 2021 Opportunity
Speech by Development Reimagined CEO, Hannah Ryder, at the 2nd China and International Development Forum, hosted by CAITEC.
Full Speech Below
Distinguished guests, Your excellencies, Vice President Yu Zirong, Chairperson Mao Xiaojing, Director General Wu Peng, Your Excellency Osman, Deputy Director General He Song, Resident Representative Trankmann, Director He Yuan, distinguished fellow speakers, ladies and gentlemen, good morning and a huge thank you to CAITEC for the kind invitation to Development Reimagined to join this 2nd edition of the China and International Development forum today. It gives me great pleasure to join you virtually this morning to take stock and plan ahead for the most effective and impactful Africa-China cooperation.
In November 2021, I and my team stood in the meeting halls of the eighth Forum on China-Africa Cooperation (FOCAC) in Dakar, Senegal, waiting eagerly for new targets to be announced by President Xi and President Macky Sall as co-chairs of the forum. We were aware that these targets would shape the China-Africa relationship for the next three years and up to 2035.
Immediately after the Forum’s close, a flurry of headlines reported on a supposedly “underwhelming” $40 billion financial commitment from China. The overall implication was that the 2021 FOCAC reflected a weakening China-Africa relationship.
But as we have all discussed here, the headlines missed a huge chunk of the picture – not taking into account the key negotiated documents agreed during the meeting and I would suggest were based on implicit problematic analysis that both African countries and China itself are ‘high risk’ when it comes to financial lending and other relationships such as trade.
In fact, the analysis of my firm Development Reimagined is that is clear that there are two trends likely to continue. First, the post-2021 Africa-China relationship will intensify and second, the relationship can and I sincerely hope will become more African-led.
Many of the speeches so far have discussed and shared how the cooperation will intensify, so let me focus my remarks now on how the relationship can become more African-led, and as Ambassador Osman mentioned in his speech, and building on the point he identified that Agenda 2063 and its implementation frameworks are now at the centre of FOCAC, how African governments, businesses and citizens can work together and with Chinese stakeholders most effectively to implement the FOCAC commitments.
While there is a great deal of work to do, I believe five specific steps are necessary to seize the opportunity from the FOCAC commitments made. Although there are many more steps to be taken, these five can be thought of as key strategic priorities.
First, the FOCAC Action plan rightly recognises the “persistent infrastructure gap” in Africa and commits to helping close the gap through concessional finance. This is the right way to go. Regional infrastructure projects will be key to meeting African pre-COVID19 growth goals, the external cost of which the African Development Bank estimate at up to $68 billion to $108 billion a year, even without taking account of climate change and post-COVID-19 recovery needs. The AU’s Programme for Infrastructure Development (PIDA) has been sourcing high priority regional infrastructure projects on the continent. DG Wu Peng already mentioned the need to extend railways across East Africa, which if linked would facilitate low-carbon cross-border flows of goods and people and create huge spill-over effects in terms of employment. This is also the case in West Africa too and beyond. For instance, extending the Lagos railway line to Benin’s capital, to serve Togo and Ghana’s capital cities, and even further across the West coast, would have similar effects. The Grand Inga Dam, a cross-regional energy project envisioned decades ago, still requires financing support, and will not only meet gaps in access to energy for households but provide crucial, consistent and green electricity for manufacturing, necessary for the value-addition on the continent that Africa’s development plans necessitate. Thus, a key first step is African coordination to put forward priority, green regional projects for China’s concessional support, and begin work to structure these in the best manner, to minimise risk and maximise returns.
Second, Africans, via the Africa CDC in particular, need to take action to see the vision of 400 million locally manufactured Chinese COVID-19 vaccines as well as other medicines and equipment on the continent. Local manufacturing is a major priority for Africa, given that Africa imports 99% of its vaccines. This is due to a huge number of structural problems, many of which will not be solved just by new investment and are not only in Africa’s control, such as intellectual property constraints, but nevertheless, there is clearly a major opportunity to be grasped. We have already seen some positive developments in Egypt, but the Africa CDC has already begun to map out other priority countries for manufacturing, sharing this information with Chinese counterparts and facilitating joint ventures in this area will be crucial in 2022.
Third, African organisations will need to make proposals for how China can see through some of the financial commitments it made at FOCAC. In this regard two sub-actions are crucial.
- First, the question of the allocation of the $10bn of Special Drawing Rights that China committed to Africa – accounting for an unprecedented 25% of China’s own allocation – is crucial. This was a very welcome announcement that has emphasised China’s willingness to support African countries with the fiscal space they need to manage COVID19, which has been a major problem and will remain so in 2022. Just in the first few months of COVID19 in 2020, my firm calculated that African governments spent 68 billion USD to address the pandemic. They have spent a lot more since, meaning that every RMB, dollar or euro of support that comes is welcomed. Options for the reallocation include the African Development Bank, as well as the Asia Infrastructure Investment Bank, the New Development Bank, China Exim Bank, and more. These organisations should take the opportunity to urgently put forward to China proposals for how reallocated SDRs could generate even more economic recovery, to have the greatest impact.
- Second, regional and national African Financial Institutions such as Afri Exim Bank and others – who know African businesses and investment landscapes best – need to come forward with proposals for how they can deliver the $10bn USD China has suggested is spent to target Small and Medium Enterprises. African financial institutions have the potential to reach thousands not just hundreds of African SMEs, who again continue to suffer significantly due to COVID19 but are also crucial to African growth going forwards.
Fourth, African governments and businesses need to be even more proactive when it comes to exporting to China. Certainly, policy-wise we need to take up Director General Wu Peng’s question of how a preferential trade agreement linking to the African Continental Free Trade Area can be made acceptable within WTO rules. I hope the economic working group with the AfCFTA already established can take this as a priority, and I and my colleagues are willing to support that process. In the meantime, African governments and export agencies in particular need to understand and take advantage of the new green lanes for agricultural products, and in this regard, let me also as a Kenyan, just mention how pleased I am to know Kenyan fresh avocados may well soon be sold in Chinese supermarkets. I hope many others in East Africa and beyond will have this opportunity as well. Beyond this, as Africans, we also need to work to understand the Chinese market trends better, initiate the process to register geographical indications of African products such as Ethiopian coffee so as to protect their value when sold in China, and initiate proposals for e-commerce hubs also envisioned in FOCAC which can be an efficient way to send African products to China. As many of you may know my firm has a specialised market entry programme for high-value, sustainable African products to China, through which we introduced close to 20 innovative African brands to the Chinese market, including by participating in the China Africa Expos in 2019 and 2021. Initiatives like this need to grow, strengthen and proliferate, and we welcome both African and Chinese partners in this endeavour.
Fifth and finally, African governments and businesses need to start to promote a much wider and diverse set of investment opportunities and potential projects for PPPs in a more targeted and proactive manner. There are hundreds of existing special economic zones that need a diverse range of Chinese factories to relocate into them, while being upgraded. We must present these zones to the Chinese private sector – not just our overall, broad investment conditions, and also tackle challenges such as security concerns proactively, without overdoing narratives of “risk” that evidence suggests leads to an unfair “Africa risk premium” applied by many foreign investors. In addition, while PPPs are in many cases an exciting prospect, the African experience of PPPs in the 1980s and 1990s with other development partners was very mixed, in many cases highly problematic. We do not want to see the negative history repeated. Therefore we must understand our own experience – what did work and why, and also understand China’s own experience with PPPs domestically in order to understand how to work with China on PPPs – it will not necessarily be the same as other foreign investors. I have seen some excellent examples of PPPs in China, and so I certainly believe there is huge potential in African countries, including in digital connectivity which has become even more crucial in COVID-19 times, but as I said this must be targeted and adapted to each country’s conditions.
While I have presented these five suggestions, I would like to emphasise that this is just the start, there are many other actions required as well, and of course Chinese stakeholders will be crucial. My task here, as an African and as the head of an African firm in China, is to explain what Africans can do and encourage us to work together strategically and in a streamlined way. Win-win cooperation is just that. It requires efforts on both sides.
Ladies and Gentlemen, distinguished guests, the fact is that FOCAC 2021, with the targets announced in speeches and the four agreed documents, could set China to be Africa’s top development partner across several sectors, including making China Africa’s top vaccine donator as well as supplier, Africa’s largest export destination, our largest investor in the continent, and providing the highest proportion of SDR reallocations to Africa. But Africa is also an exciting proposition for China. As the 9th largest economy in the world, and with our aspiration to become the 3rd largest economy in the world, encapsulated in Agenda 2063, with our growing domestic market, our incredible natural resources and our manufacturing potential, to an objective development partner, building stronger relationships with African countries is what is colloquially known as a “no-brainer”. African stakeholders must now take advantage of these aspirations, and by doing so also cement the continent’s place as a crucial partner to China and beyond, and by doing so ensure Africa is not just imagined globally as a poor and vulnerable continent to support, but in fact reimagined as a stronger, essential force and partner for good in the world.
Thank you for your time and attention! Asanteni, and xie xie dajia.