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Rivalry for Africa

Rivalry for Africa

Gedion G. Jalata is one of the few researchers who have broadly studied Chia and its political and economic relations with African countries. While he worked as a research consultant for eight years with the United Nations Economic Commission for Africa (UNECA), he was able to publish some 80 research articles on major international journals and dozens out of those were focused on China. When he left UNECA, Gedion had joined Oxfam Ethiopia and currently, he heads his own firm called Center of Excellence International Consult PLC, which he stared in 2017. With the unfolding events following the change of leadership at Arat Kilo, Birhanu Fikade of The Reporter sat down with Gedion to learn what potential outcomes could be expected in terms of the Ethio-Chinese relationship. Excerpts:

The Reporter: What is your take on the evolution of the diplomatic relationships between Ethiopia and China especially after the coming to power of Prime Minister Abiy Ahmed (PhD)?

Gedion Gemora Jaleta: I think the Chinese have a long term interest in Ethiopia as a result of some critical factors. They like to portray Ethiopia as a showcase for Africa and the rest of the world regarding their overseas investment activities. The Chinese also see Ethiopia as a diplomatic gateway to Africa, and because of that their eyes are wide open towards developments in Ethiopia. The third factor will be China’s commercial interest on Ethiopia. This is a country of 108 million, and it a great potential market for Chinese commerce and trade. The trade relation between the two countries has reached USD five billion. If you see the foreign direct investment (FDI), China is the biggest investor in Ethiopia at this moment. China’s 60 percent FDI in Ethiopia is primarily on manufacturing, and between 2009 and 2011, Chinese companies were awarded infrastructural projects worth USD 11.5 billion in Ethiopia. In 2011 alone, projects worth USD 3.3 billion were won by Chinese firms. These all show China is really interested in what it does in Ethiopia; where there is a bigger market for infrastructure compared to saturating construction market in China. From 2011 onwards, the Chinese government had introduced an “out go” policy to allowing firms to go wherever they see fit to invest. They are provided with sizable amount of money they could invest in countries such as Ethiopia on a concessional loan terms that comes with low interest rates but with certain conditions. In addition to the awarding contracts to Chinese firms, equipment, labor, technology and other essential conditions are also supposed to come from China. For instance, the engagement of a handful of companies in Ethiopian telecom sector looks to be on the basis of such conditional loan arrangements. These companies had more or less dominated Ethiopian telecom contracts for long. Now, we are dependent on Chinese telecom technology because of that. China also has a longstanding policy of non-interference with the affairs of other countries. But, I perceive there must be some sort of an ideological influence from China especially expressed in terms of political governance. We need to realize that since 1949, China is led by one party. Yet, they succeeded to lift some 700 million people out of poverty and managed to have one of the fastest growing economies in the world that helped to transform their society significantly. In 2009 and 2010, China initiated party politics relations with Africa including the Ethiopian People’s Revolutionary Democratic Party (EPRDF) and the African National Congress (ANC). They want to represent themselves as a role model for Africa. Implicitly, I think there is an ideological affinity that China’s Communist Party poses on EPRDF. In fact, Ethiopian politicians openly expressed they do emulate China in many ways; arguing that one party would be justified to stay in power as long as it fulfills the expectation of general public by delivering on economic progress.

So you are saying that the party-to-party relationships have grown to a state-to-state relationship as well?

Yes, for long that was how the two countries have sustained political and diplomatic ties.

Currently Ethiopia is managed by a new breed of EPRDF leadership. Yet, EPRDF has been a strong ally to the Chinese Communist Party. How is that relationship being reflected in state-to-state affairs?

With the leadership of PM Abiy Ahmed (PhD), several changes mainly in the democratization space are shaping up the country’s future. The process of opening up the political space and democracy is gaining momentum. Hence, it seems that the Prime Minister is adopting a different policy than his predecessor EPRDF chairmen. In fact, we had witnessed such trends during the 2005 national election as well until the democratic reversal experienced in the aftermath of the election. Currently, the political space is opening up although it is to be seen that whether that will keep going after the upcoming election. 

Does that mean the new leadership is slowly shifting focus to the West away from China?

Generally speaking, Ethiopia heavily depended on China for a long time. After the 2005 election, China provided an essential political support to Ethiopia. That could be expressed in terms of financial support. China was able to provide substantial loan to government of Ethiopia. When we see the railways, roads, electrification, manufacturing and other projects, we see China’s massive contribution. Some scholars, hence argue, that Ethiopia has been modeling China. They tend to say Ethiopia resembles the China of the 1970s. My presumption is that the new leadership likes to ease the excessive dependence which has been there for many years. You can see how the West is interested with the democratization pace in Ethiopia. The World Bank along with handful of Western countries has pledged to provide financial support. I think the new leadership is in a position to maximize whatever backing it gets from the West.

The West had never been keen on financing Ethiopia’s economic process even if Ethiopia remained a strong ally to the likes of the US, especially during the leadership of the late Prime Minister Meles Zenawi. What could come from the West this time around by way of financial assistance?

After the Cold War ended, Africa was totally neglected by the West and that gave China the opportunity to get in touch with the continent. The Afro-Pessimism was the term that Africa was used to express Africa; nothing more than a burden to the Western world.  Thanks to China, the West is now realizing their political miscalculation. They wanted to come back to Africa. Following the launch of Japan-Africa cooperation in 1993, China took steps to launch its own cooperative framework: Forum on China Africa Cooperation (FOCAC) in 2000. Then the European Union and later the US followed suit. Indeed, there are significant opportunities in Africa that can’t be ignored anymore. The market size together with the abundant natural resources is something one can’t simply overlook. In Ethiopia, with the expanding space for reform, the West should be more than interested to come; perhaps far more than ever before.

Does that mean the West will come with their financial resources, too? 

Yes, indeed. In fact the Gulf countries as well are showing strong interest. The UAE, the Saudis, the Qataris and the like have both political and economic interests in Ethiopia.

Still whatever the political interest in Africa, so far, the West, predominantly the US, seems to be less interested to invest. The US financed far less development projects in Africa, so far. So, is it possible for the West to outpace China in Africa?

They can’t outpace China in Africa. That’s very difficult. They were anxious on how they could coup up with China. China’s financial muscle is just enormous. Imagine, in the 2015 FOCAC summit, China pledged USD 60 billion for Africa in grants and loans; and again in 2017 additional USD 60 billion was pledged to support Africa’s infrastructure. Let alone providing means to Africa, China itself is becoming mightier than the West. China has launched the Belt and Road Initiative to connect the world. Previously, the saying was: all roads lead to Rome. But that seemingly is changing to all roads lead to Beijing.

The leadership of Prime Minister Abiy seems to be more inclined towards the West. Many anticipate that China would be disenchanted with the approaches of the new leadership. What can you say on that?

Ideologically, China doesn’t chart a democratic form of government. There is only one form of government that remained in power and it claims all the magical outcomes in China are the results of the well performing communist party in governance. The style of leadership and understanding of human rights is essentially dissimilar to what the West exercises. The West says civil and political rights must come first and China, even based on their Confucius thoughts, thinks that economic rights should come first. Economic rights are prioritized than right to vote. Hence, to some extent there are some ideological gaps between the new leadership in power in Ethiopia with what China advocates. In the future, that will be a factor to reduce partnerships of the two countries. In any case, the Chinese have no troubles of working with any form of government. They have an interest with the incumbent government of Ethiopia. I presume since they already have a huge economic interest and presence in Ethiopia, they will favor working with any form of government in power. 

As you have pointed it, Ethiopia has been heavily dependent on China’s credits for its development financing. Will that put Ethiopia in an exposed position to the political influences and policy prescriptions from China?

Implicitly yes. I wouldn’t say Ethiopia is a victim of political market influence in the explicit sense.

Do you think China is less interested with the reform agenda Prime Minister Abiy has initiated?

We need to see the political fabrics of China, first. It is a unitary system. Since 1949, it is the Chinese Communist Party that is ruling the country. There are a few parties but they are insignificant to contend the ruling party. I have visited China several times and ordinary citizens are scared of saying anything against the government. Hence, I would expect they might prefer to see similar political architecture in countries they partner with. The current leadership in China wants some African countries to have similar policies with China. The West for long had pushed China to adopt a democratic form of leadership but never succeeded. I think they are less interested with what is happening in Ethiopia, at this moment, since it is in contradiction to their form of governance.

Twice in less than two years, Wang Yi, China’s Foreign Minister and State Councilor, has paid a visit to Ethiopia. And one of the focus areas for China, according to the minister, is to have a “mutual political trust”. What does that signal regarding their current relations with Ethiopia?

The reform agenda in Ethiopia might mean a break away from China but they don’t want to lose it to the West. They wanted to normalize and assure the current government that they will continue their partnerships with Ethiopia. They have strategic interest in Ethiopia and they don’t want to lose that easily. Ethiopia hosted the second FOCAC meeting and that led to having more African leaders to be part of the Summit. When Beijing hosted the third FOCAC, 48 heads of state attended the meeting and that showed how significant Ethiopia is to China. The strong diplomatic power that Ethiopia has in Africa and beyond is also another factor for China to still need to partner with Ethiopia. The visits of the foreign minister has got to do with reassuring China’s interest; and it could also be looked at from the point of view of assessing the needs of the new leadership in Ethiopia.

Is Ethiopia a victim of China-US “trade war” since Ethiopia remains a decisive ally both to the US and China in East Africa and beyond?

My argument is that developing countries in general could benefit out of the trade war because significant agricultural products channeled from the US are because of the trade war and because it is reciprocated. This is an opportunity for Ethiopia and others. They could supply those resources and commodities either to China or the US, since they have stopped to buy from each other. But, the problem is that Africa or Ethiopia in particular is a net importer country. They don’t have the economies of scale to capitalize on this opportunity. They have to work on value addition to capitalize on what is happening.  

Is there a possibility China could take over some of Ethiopia’s high-valued assets or enterprises such as the Ethiopian Airlines as a means to settle the $13.5 billion Ethiopia owes to China?

There is a probability for that to happen. China has a model called the Angola Mode. It is a model that came to be known widely as the government of Angola made a deal to provide its oil resources as a guarantee for loans it had received from the Chinese. Whatever profitable sector you have, the Chinese would agree to take it as a guarantee for the loans they provide in case of defaults; so they could take over those. In Zambia, reports have indicated that an energy producing firm has been taken over until the nation’s debt is settled. Similarly, when the government of Ethiopia defaults, there is a possibility that they would nationalize any profitable enterprise and Ethiopian Airlines might be one that fits their interest. Once you are indebted you end up being dictated.

The government of Ethiopia decided to avoid non-concessional loans, most of which had been originating from China. It is clear that the government no longer affords taking commercial loans. However, the capping of the non-concessional loan policy recommendation came from the IMF and the World Bank. Could that be taken as one sign possibly of a disappointment to China?

The Chinese know that there is a strong government in Ethiopia. The bureaucracy is very strong. They know the government still has some ability to repay the loans they have extended. But, we should also need to see how challenging that could be for the current government as it has to make payments every three months or so while grappling with a declining export performance. I think that is a bit worrisome for both sides. Perhaps, the competition coming from the likes of the Breton Woods Institutions could be very strategic to provide more financial resources to the current administration. The foreign policy of Ethiopia was projected to go both ways to the East and the Western. For years, the policy remained tilted to China as the west for long was interested only in providing assistance for soft infrastructures: health, education and terrorism. Ethiopia had made use of that. China on the hand was interested in hard infrastructures and kept on investing on roads, railways and the likes. Ethiopia was also interested in maximizing its diplomatic relations with Japan and India. The policy is not solely focused on China alone. I think, rebalancing of the foreign policy of the country is trending with the new leadership.  

The political reform initiative the Prime Minister has launched has been welcomed by the West. However, we have heard hardly anything coming from China until recently. What do you see unfolding?

I said they don’t have that nature of governance and I don’t expect them to assert and commend the unfolding reforms in Ethiopia. Implicitly, there was a Chinese modeled development exercised in Ethiopia. African countries have welcomed Chinese model of growth because it doesn’t require what form of regime should be in power to bring about the economic change. Totalitarian regimes could bring development and that was a case in South Korea as well. But what we had witnessed during the Arab Spring and with our own political fabrics is that the need for democratic space is also necessary. Fairness and respect for the human rights are equally important to economic progresses as well.

Do you agree China is involved in hosting some illegal wealth transfers and accumulations in its territory as some accuse Ethiopian officials of doing? 

It’s not only China that hosts illegal transfers or what is called illicit financial outflows from Africa. Many western countries have been safe havens for illicit outflows. Normally, both China and the West tend to be off-limits with regards to such issues. The money channeled either ways to those countries help to strengthen their financial muscles and it is to their interest to welcome such practices. It doesn’t cost these countries to receive easy money from elsewhere. It is obvious that Ethiopia is among the list of countries losing financial resources in such a way. There has been grand corruption in Ethiopia growing in size following the death of Prime Minister Meles and I don’t see illicit financial outflows to be any different.

China’s renewed presence in Africa has transformed into establishing a naval base in the Horn. Well, some see it as a part of political scramble for Africa, yet China argues its first ever military maneuver there is to provide protection to its economic interests? Which one is the reality?

The Chinese came late to Africa. Following the introduction of FOCAC you could see a comprehensive partnership evolving between China and Africa. The partnership took shape at the level of political, economic, diplomatic and commercial heads. Chinese nationals and companies flocked to Africa and at times, it might be a reason for Chinese to be scared with since the sizes of economic interest they have here. With their immensely growing economic and commercial interests in Africa, I think their military presence has a judicious backing. Previously, they would tend to say they don’t interfere with the affairs of any country they work with but now stories are changing.

Western countries have military interest and their presence in the Horn of Africa is enormous when we see Djibouti, Somalia and now Eretria. How do you explain that?

 The Red Sea line is perhaps the busiest route for ships. The commercial routes hence need to be safeguarded. To make sure that shipments are well guarded, they might see military presence as a necessary means for protection. There are daily voyages from and to China. A lot of African traders are taking this route to ship their commodities from major commercial cities of China. I think the economic interest is what makes protection and safety to be the principal reason that dragged China into a military presence in Africa.