What China’s Growing Presence Means for Africa – By Adam Ereli (usnews.com) / Aug 31 2018
Western companies’ departures from Botswana over governance concerns symbolizes growing opportunities for Beijing across the continent.
The African states that have failed to fulfill expectations are many and dispiriting. Zimbabwe – where last month’s contested elections have produced renewed political repression after 30 years of rule by Robert Mugabe – is but the most recent example.
The bloom came off the South African rose a decade ago, when rampant crime, elite kleptocracy and political tribalism replaced the promise of a pluralistic post-apartheid renaissance. Nigeria, the continent’s largest economy, remains plagued by sectarian identity politics, corruption and gross mismanagement. The same can be said of Kenya under the once-promising administration of Uhuru Kenyatta. Entire swathes of the continent have fallen victim to terrorist and tribal violence, from Niger, Mali and Chad to Cameroon, the Central African Republic and the Democratic Republic of the Congo.
Until recently, Botswana represented a welcome exception to the prevailing rule of failed governance on the continent. It was a poster child for the “Washington Consensus,” a term coined in 1989 by John Williamson of the Institute for International Economics for a set of emerging market policies prescribed by Washington-based institutions such as the International Monetary Fund, the World Bank and the U.S. Treasury Department. Among those policies were trade liberalization, boosting primary education, privatization and legal security for property rights.
Botswana performed well.
The Ibrahim Index of governance ranks it third among African states. Transparency International ranks Botswana 34th out of 176 countries for clean government. Its corruption perception score places Botswana ahead of all other developing countries. Economic growth fueled by diamonds and mineral wealth allowed Botswana to achieve a literacy rate of 85 percent and 90 percent primary school enrollment.
Hopes were high that the integrity of Botswana’s institutions and respect for the rule of law would overcome the resource curse that afflicted its continental neighbors. Unfortunately, as diamond and commodity values began falling, so did the government’s commitment to enlightened rule. From 2013 to 2015, diamond sales – which account for a third of the country’s gross domestic product – lost 30 percent in market value. Since 2010, when GDP growth reached 8.6 percent, it has fallen every subsequent year. Foreign debt has grown to 16 percent of GDP. Youth unemployment stands at 40 percent and 20 percent of the country’s citizens live on less than $2 per day.
Meanwhile, the country’s rulers spend with impunity. In 2015, then-President Ian Khama reportedly withdrew millions of dollars from the country’s stabilization reserve fund to create an economic stimulus package, which critics allege was spent on tenders for ruling party loyalists. He also spent over $200 million, or almost half of the country’s annual budget, on eight second-hand Gripen fighter jets that the military neither needs nor can afford.
The president’s younger brother, who was also minister of tourism, also reportedly spent $4.7 million of public funds for a private aircraft. The Panama Papers revealed that more than 100 Botswanan companies and individuals – including high court justices — were shareholders in offshore entities registered in tax havens. This level of excess leads many Botswanans to conclude, in the words of University of Botswana Sociology Professor Monageng Mogalakwe: “A scratch beneath the surface and you’ll see that this is top-down presidentialism, with an emasculated parliament and corruption and poverty in the midst of plenty.”
Western investors are voting with their feet and leaving Botswana. British Petroleum and mining giant Anglo-American have already divested themselves of their assets in Botswana. London-traded Nornickel, the world’s largest producer of nickel and platinum, has been engaged in a protracted, three-year breach of contract litigation and reckless trading claim against the government of Botswana, which should serve as a cautionary tale for any would-be investor.
In 2016, the state-owned mining and smelting conglomerate BCL failed to pay Nornickel – a Russian mining and smelting firm with operations in Botswana and South Africa – $270 million for assets it had contracted to buy two years earlier, in 2014. When the government of Botswana forced BCL into bankruptcy, Nornickel filed an application with the Botswana court seeking permission for arbitration before the London Court of International Arbitration.
It took the Botswana court more than one year to rule on Nornickel’s application, when it rejected the request this year. Nornickel issued a statement that said it was “dismayed by Botswana’s authorities’ disdain for investors’ rights.”
The Nornickel case is emblematic of a new phenomenon where the emerging “Beijing Consensus” is superseding the Washington Consensus. Hungry for the continent’s natural resources, China has arrived with the pockets full of cash that fuel corruption, exacerbate institutional mismanagement and make property rights a casualty of greed. The size of trade between China and Africa has soared from about $10 billion in 2000 to $200 billion in 2018. African nations increasingly see the Chinese model of development as preferable to the conditions-based approach of the West.
African leaders, including the president of Botswana, will convene this September in Beijing for a summit of the Forum of China-Africa Cooperation. Botswana’s elite will join the ranks of their fellow continental oligarchs to pursue a new compact that upends the liberal model of transparency, accountability and the rule of law.
