Saturday, September 15, 2018

BERNARD OUANDJI "THE TIME OF THE BEATITUDES IS FINISHED"


An economist and former United Nations official, he deciphers the issues of the 7th Summit of the Sino-African Forum and affirms, among other things, that new projects submitted to China for their financing will have to obey a commercial profitability.

Cameroon participated at the highest level in the recent Afro-Chinese Forum. We note in particular the promise of China to invest 60 billion dollars in Africa in the coming years; also the promise to cancel part of the debt of the most disadvantaged African countries; China's intervention will continue without political conditionality even less interference in domestic affairs. In short, everything is "win / win". Is this your opinion, when you remember that you often criticized the big Chinese projects in Cameroon?

This Beijing forum has been an euphoric success, but let me tell you that the time of the beatitudes is over. The president of China has explicitly stated that new projects will have to obey a commercial profitability. On this point, China has aligned itself with the IMF and the World Bank. China has decided to match the requirement of good economic governance. No more time for prestige projects that weigh down public finances and do not bring anything in foreign currency. The craze for pharaonic infrastructure projects, in exchange for oil, copper, will end and give way to economic calculation.

We believed that China would become a real alternative to the FMI and the diktats of the West. Has the competition disappeared?

China has worked long enough for its currency, the Yuan, to be established within the IMF; it is not Africa that will come to annihilate this coveted position. Westerners still have many grievances against China with regard to its practices (labor of children or prisoners, internal democracy, artificial exchange rates, etc.). To this list is added the corruption that is plaguing the environment of Chinese projects in Africa; African politicians have argued that Westerners are jealous because the cake escapes them.

Your opinion is nevertheless surprising, China scares the Westerners and has groomed them in Africa ...
Damned the pawn to Europe yes; it was the Europeans who first denounced China's practices in public works contracts in Africa, but could not curb the momentum of the China-Africa partnership. It took Donald Trump to seize the bull by the horns, in his words in English. Under the fire of critics and the threat of Donald Trump, China has reformulated its intervention policy in Africa. Donald Trump warned China of retaliatory measures; when the newspapers evoked the coming trade war, I explained to my interlocutors that Africa was an issue in the threat of China-United States trade war; China has finally bent to avoid the commercial war over the entry of Chinese products into American soil.

At this Beijing forum, Paul Biya was looking for funding to complete the Douala-Yaoundé, Kribi-Edéa, Yaoundé-nsimalen highways; will he succeed?

Cameroon's debt is too high in relative terms, and re-engagement conditions are not yet proven. In fact, the Cameroonian Minister of Finance has promulgated in writing a self-suspension of drawings on external loans. Government economists have persisted in looking at debt in absolute terms, pointing out that this debt is only 38% of GDP, less than the ceiling of 70% enacted by CEMAC. In truth, from the standpoint of cash flow, the Cameroonian debt became unsustainable mainly because of the stopping of growth recorded following the fall in oil prices. Somewhere, Cameroon's debt service needs to be reduced before relaunching the debt process. Over the past four years, I have been ringing the alarm on the pace of unbridled debt related to projects with no return. Of course, there is a theory in finance called leverage as a growth factor. To be validated as a debt strategy, the leverage effect requires that the planned project can generate a positive cash flow; which is far from the case of the multitude of projects funded by China over the past ten years.

What are the chances that Cameroon will obtain the cancellation of its debt with China as desired by Paul Biya?

We have all heard our President plead for the cancellation of Chinese debt. Two considerations will play; firstly China as the IMF should demand good economic governance in the near future; indeed the Chinese like the pingpong but not the kind that was played on the penetrating east of Douala. Second, Cameroon does not fall into the category of the most disadvantaged countries in Africa.

What will happen to these highway projects?

All three projects are underway, and should be completed despite the pause due to the search for funding. However, we should take advantage of the pause to redo the commercial feasibility study of these projects according to objective criteria that could lead to another way of financing these works. For example, the BOT, about which we talk a lot but never realize it in our country; or a bond issue backed by the future production of the riparian companies, that is what Dr. Schacht, Hitler's financier, had done to successfully finance Germany's motorway network.