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Opinions of Tuesday, 11 January 2011

Columnist: Atta-Krufi, Hayford

Ghana government is walking into an Angolan Syndrome

Foreign Loan-trap: Ghana government is walking into an Angolan Syndrome- NPP UK and Ireland Warns

... and the Angolans see collaterization as “too humiliating”.

We in the NPP UK and Ireland have a strong sense of foreboding regarding the unfettered extent in which the NDC government is walking Ghana into economic strangulation with foreign loans.

The President has described 2011 as his year of action as he plans to spend his unearned money on what many see as politically expedient projects. We are rather seeing a year of horrors as the full extent of the borrowing spree begins to dawn on us as a nation. These last two years alone the NDC government has committed the nation to loans worth more than the loan contracted by the NPP in its eight years in power.

As if this is not enough they have pledged to mortgage the nation’s future with the collaterization of our oil money and the sovereign guarantee of the $10bn STX deal with the Koreans. Earlier this year President Mills visited China and returned a very contented visitor with the news that the China Development Bank had agreed to provide $3bn for investments in Ghana’s fledgling oil and gas sector, while the China EXIM Bank will provide $150m for an e-government project and $260m to expand water supply systems in Ghana. Further, he said, the China EXIM Bank, the world’s largest export credit agency, had signed a memorandum of understanding (MoU) with the Ghanaian delegation to provide up to $10.4bn for future projects in infrastructure construction and rehabilitation, which will include roads and railways.

In total the Chinese are ready to lend Ghana the sum of $14bn to support various infrastructural projects. The President in his merry-around-world–in-eighty-days returned to Japan and came back contented with another $4bn loan deal. This is not to mention the billions that the World Bank and IMF have given us over the last two years. These loan deals have been heralded at home by the NDC as the biggest achievement of President Mills. However what we have failed to realise is that there is nothing such as a free lunch in this world.

The NDC government on the strength of this decided to go into their usual macho posturing which they had exhibited earlier in securing the STX deal with Parliament and felt emboldened to secure an amendment of Clause 5 of the Petroleum Revenue Bill to pave way for the foreign money some of which was conditioned on the collaterization of our oil. In 2011 the government of Ghana is lacing its boots to cart into Ghana, plane loads of this foreign money. This is fine for the lending nations after all they are looking for markets in Africa and Ghana is a really juicy for many reason, not least, our good nature, relatively good politics and institutions and above all the divine discovery of oil.

The Chinese, for example, are muzzling into Ghana in the same way and using the same formula as they entered other African nations. We in NPP UK and Ireland strongly believe that these deals and unsustainable are no doubt going to create an economic strangulation of our economy with danger of sending us straight back into HIPC and bankruptcy. Angola is just a few latitudes down the road from Ghana and we know what is happening to them and what they are saying now. Let us look as the Angolan experience.

The Chinese presence is extremely large in Angola. They have undoubtedly been involved in the Angolan reconstruction since their bitter civil war. According to a recent wikileaks disclosure “although exact numbers are elusive, a minimum of 50,000 Chinese are in the country; most other estimates are markedly higher. Few question that the Chinese have contributed importantly to Angola's ongoing national reconstruction. Nonetheless, some Angolans express concerns that Chinese engagement, financed by loans that Angola needs to repay, has failed to create jobs for Angolans, has failed to transfer technology to Angolans, and has often resulted in poor quality performance. Concerns have also been raised about the opaque nature of the Chinese funding, which is channelled through the Office of National Reconstruction of the Presidency.”

The Chinese have a certain formula of development and growth and that formula is working for them and therefore is unlikely to change that formula. That is why the West is pushing them to devalue their currency to no avail. They also need to increase interest rates but are refusing. The new emerging African democracies are getting caught up in this Chinese formula and are aggressively taking hold of African countries is which is very akin to the days of the cold war, except that now it is not about politics, its more about economics and profit and this time round Chinese has more muzzle than the whole of the West.

Angola, a country similar to Ghana in the sense of oil discovery has found itself in a web of indebtedness as a result of foreign financing in Angolan development. Even though Angola may seem to be developing in the short term, in the long term this country will be neck deep in debt and would not know how to get itself out of this debt trap. Now the Angolan have realised the situation they are finding themselves in and are now beginning to back out from Collaterization with oil money.

They have realised, all being too late, that the country has mortgaged its oil revenue to foreigners already. The Angolans are now finding this situation very humiliating according to Chinese Ambassador to Angola.

Ambassador Zhang said in one of the wikileaks cables that “Angolan President Dos Santos discussed a new loan package for Angola during his December 16-19 trip to China and it was clear that these loans would not be backed by Angola's oil reserves as that would be "too humiliating" for the Angolans.”

Even the Chinese are themselves getting alarmed at the rate at which the Government of the Republic of Angola (GRA) are borrowing to extent that they beginning to distance themselves from it. The strategy the Chinese are using is very similar to the one they are using in Ghana.

The formula starts at government level - this preamble as was in the case of the Angolans “China supports Angola's reconstruction efforts and is providing technology, equipment, and communications infrastructure through government-to-government oil-backed loans” however as it turns out it is negotiated on behalf of the China International Fund (CIF) which is private and financed through the Chinese EX-IM bank. The terms and symptoms of the Angolan debt negotiations are very similar to that which the Ghana government is warming itself into. No wonder the Chinese ambassador in Luanda wants to distance its government from what seems to the Angolans to be a Chinese government sponsored deals but in actual fact these are “private” deals with the EX-IM bank.

One can remove “Angola” from these cable releases and replace “Ghana” and it will not be far from right. Are we walking blindly into another trap? Can the NDC read the signs? Another revelation is that the Chinese EX-IM Bank line of credit is linked to the use of Chinese companies as prime contractors for Chinese-funded projects. Many sub-contractors for these projects are Chinese companies as well. This kills of local enterprise and creates unemployment as the work force is also brought from China.

Another gruelling example of an African experience with the foreign interest is in our oil. The Nigerian experience with the Chinese as far as oil is concerned is an example for Ghana to learn from. But will we? The Nigerian National Petroleum Company (NNPC) do not even want to touch the Chinese with a barge pole because according to them the in a recent wikileaks disclosure “Chinese oil companies had made a lot of mistakes in Nigeria as the Chinese do not respect local laws. The poor image of the Chinese helps to explain why they were never a serious threat to the renewal of the international oil companies' (IOCs) oil mining licenses...the Chinese are very aggressive because they need the oil... They came in with big money, and they were ready with large loans with low interest rates... but the Chinese also made some mistakes...We know what had happened in the Sudan and Chad and we know enough about them to know where we want them and where we don't."

Even before the first pick axe to dug deep into our soil to put up the first house under the STX deal, We are not saying that we should not deal with foreign countries. We have dealt with the Chinese, for example, in the past with a human face. They built stadia and dams for us but there were no questions of sovereign guarantees of collaterization of our commodities.

We are questioning the aggression with which the government is negotiating and securing loans from Japan, China and Korea and committing of our nation with sovereign guarantee and collateralization of our oil revenue serves as a warning to us going down the Nigerian and the Angolan ways.

Fortunately, both the Angolans and the Nigerians have realised their mistakes and are aggressively backing out of earlier deals. With the Angolan loan debacle and the Nigerian oil experience with the Chinese it is important for the government of Ghana, the civil society, the media, the clergy, and all pressure groups to begin to question the unfettered access that we seem to be giving these eastern bloc into our political lives. Our sense of foreboding is therefore that Ghana is pursuing an unblinking agenda towards this same cul-de-sac and a possible bankruptcy and resultant HIPC.

Hayford Atta-Krufi
Chairman
NPP UK and Ireland