Monday, June 1, 2020

China’s growing economic muscle no debt trap for Botswana – Masisi

BY BONNIE MODIAKGOTLA

President Mokgweetsi Masisi says his administration is committed to diversifying the economy despite being in the shadow of an economic powerhouse dismissing talks that Botswana could find itself trapped in debt by China.

Masisi made his views known to different media outlets when attending the week long World Economic Forum at Davos.

In an interview with Reuters, Masisi revealed that he is not convinced that China is using loans as a part of its diplomacy to trap African countries.

China’s soft loans to Africa, marked by low interest rates and little oversight, have been viewed with suspicion by some observers, including the West, accusing the country of predatory lending.  Related to this, US President Donald Trump at one point in one of his rants accused China of currency manipulation during trade war exchanges.

Part of the theory is, with many African countries trapped in debts, they will have no choice but to make serious concessions to China, including giving up their strategic resources or assets.

However, China has denied such insinuations, insisting its investment strategy is simply part of the Belt and Road Initiative, its $1 trillion plan to build a new trade network. China is estimated to have forked out as much as $150 million in loans since 2000, and some data indicates that China’s loans to Africa are currently in excess of $14 billion.

Last August, three months after he ascended to Botswana’s top office, Masisi went on a state visit to China, and later attended the 3rd summit of the Forum on China-Africa Cooperation (FOCAC) where he managed to secure a P10.2 billion loan from Beijing.

Before President Masisi’s state visit to China, the world’s second largest economy had written off some of Botswana’s loans amounting to P80 million.

China is already Botswana’s biggest credit provider in terms of loans from other governments, with its total outstanding loans to Botswana estimated at P20.7 billion.

Masisi has joined a chorus defending China’s loans to African states arguing there is no threat that Botswana will find itself trapped in Chinese loans because there are measures to safeguard that from happening.

“We have legislative provisions that protect the country against getting itself in a debt trap,” Masisi told Simon Robinson, a business editor at Reuters who was interviewing him.

“We will never go beyond that,” he added.

Masisi said it was the responsibility of every country to look out for itself and take “wise and frugal decisions” and to avoid getting trapped in bad deals.

He pointed out that he is not convinced China goes out to force people to take the loans, adding that instead “this is money we asked for.”

The President says, the behaviour of countries and the responsibility to repay loans is what should be dominating the debate and not the attacks on China’s motives.

Masisi added that criticism of Chinese loans is misplaced considering that it is not the first time countries borrow money as they have been getting loans from International Monetary Fund (IMF) and the World Bank.

“The responsibility should be on the borrower as it should always be. You are responsible for the terms and conditions,” Masisi said. The terms and conditions of the P10.2 billion loan Masisi negotiated for Botswana are yet to be made public.

On a different issue, Masisi opened up to Reuters that the ongoing trade between USA and China has not been necessarily thought of as it affects other countries.

He said Botswana as a top diamond producer is worried because the two biggest warring economies in the world are also the main destinations of Botswana’s main export ÔÇô diamonds, which are the economic mainstay of the landlocked country.

“With that disruption, there is every possibility of what we do sell being disrupted too and we do not have control over it. We are passive bystanders and all we can do is appeal to them to come to terms,” said Masisi.

Botswana, once the poorest country in the world at independence, became an economic success after the discovery of diamonds shortly after it gained independence in 1966.

The prudent management of natural resources based economy propelled Botswana into a middle income country ÔÇô a development that is frequently lauded as a model of success for other African countries who are perceived to be plagued by the natural resources curse ÔÇô in which discovery of precious resources has plunged those countries into civil wars and rampart corruption.

Despite being a middle income country, Botswana is facing its toughest challenge: weaning itself from a mineral led economy to a diversified economy.

Efforts to diversify are yet to bear any fruits. The country has never before been so desperate for a new model of growth given the rising unemployment that has mostly affected the country’s young population.

“Diversification is a long term objective. It is still relevant, we are still at it and we will be at it for a long time,” Masisi told Reuters. “It is important to make the economy more resilient and more dynamic. We have been making efforts and made strides in doing that.”

Part of the efforts has been promotion of locally produced goods, helped in part by protectionist policies. Nonetheless, Masisi says diversification was always going to be a tall order given the massive influence South Africa has.

As the economic powerhouse of Africa after Nigeria, South Africa attracts top investors who prefer to set up base there and alter push their products and services to countries like Botswana.

In fact, Botswana’s private sector is dominated by large South African multinational firms which are investing little in Botswana’s economy yet repatriate much of the capital outside the country. Masisi says Botswana is not only disadvantaged by its narrow economic base but also by the limited infrastructure in a vast and sparsely populated country with limited power and water.

“But with human capital development, we have done a lot of work in growing that and what we also need now is capital and that is why we come Davos and other places to seek and interest those with capital to come and invest in Botswana,” Masisi said.

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