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Tag: The Pros and Cons

  • Africa needs China for its digital development – but at what price?

    Africa needs China for its digital development – but at what price?

    Author: Stephanie

    PhD Candidate, University di Bologna

    First Published: February 27, 2024 4.08pm SAST

    Digital technologies have many potential benefits for people in African countries. They can support the delivery of healthcare services, promote access to education and lifelong learning, and enhance financial inclusion.

    But there are obstacles to realizing these benefits. The backbone infrastructure needed to connect communities is missing in places. Technology and finance are lacking too.

    In 2023, only 83% of the population of sub-Saharan Africa was covered by at least a 3G mobile network. In all other regions the coverage was more than 95%.

    In the same year, less than half of Africa’s population had an active mobile broadband subscription, lagging behind Arab states (75%) and the Asia-Pacific region (88%).

    Therefore, Africans made up a substantial share of the estimated 2.6 billion people globally who remained offline in 2023.

    A key partner in Africa in unclogging this bottleneck is China. Several African countries depend on China as their main technology provider and sponsor of large digital infrastructural projects.

    This relationship is the subject of a study I published recently. The study showed that at least 38 countries worked closely with Chinese companies to advance their domestic fibre-optic network and data centre infrastructure or their technological know-how.

    China’s involvement was critical as African countries made great strides in digital development. Despite the persisting digital divide between Africa and other regions, 3G network coverage increased from 22% to 83% between 2010 and 2023. Active mobile broadband subscriptions increased from less than 2% in 2010 to 48% in 2023.

    For governments, however, there is a risk that foreign-driven digital development will keep existing dependence structures in place.

    Reasons for dependence on foreign technology and finance

    The global market for information and communication technology (ICT) infrastructure is controlled by a handful of producers. For instance, the main suppliers of fibre-optic cables, a network component that enables high-speed internet, are China-based Huawei and ZTE and the Swedish company Ericsson.

    Many African countries, with limited internal revenues, can’t afford these network components. Infrastructure investments depend on foreign finance, including concessional loans, commercial credits, or public-private partnerships. These may also influence a state’s choice of infrastructure provider.

    The African continent’s terrain adds to the technological and financial difficulties. Vast lands and challenging topographies make the roll-out of infrastructure very expensive. Private investors avoid sparsely populated areas because it doesn’t pay them to deliver a service there.

    Landlocked states depend on the infrastructure and goodwill of coastal countries to connect to international fibre-optic landing stations.

    A full-package solution

    It is sometimes assumed that African leaders choose Chinese providers because they offer the cheapest technology. Anecdotal evidence suggests otherwise. Chinese contractors are attractive partners because they can offer full-package solutions that include finance.

    Under the so-called “EPC+F” (Engineer, Procure, Construct + Fund/Finance) scheme, Chinese companies like Huawei and ZTE oversee the engineering, procurement and construction while Chinese banks provide state-backed finance. Angola, Uganda and Zambia are just some of the countries which seem to have benefited from this type of deal.

    All-round solutions like this appeal to African countries.

    What is in it for China?

    As part of its “go-global” strategy, the Chinese government encourages Chinese companies to invest and operate overseas. The government offers financial backing and expects companies to raise the global competitiveness of Chinese products and the national economy.

    In the long term, Beijing seeks to establish and promote Chinese digital standards and norms. Research partnerships and training opportunities expose a growing number of students to Chinese technology.

    The Chinese government’s expectation is that mobile applications and startups in Africa will increasingly reflect Beijing’s technological and ideological principles. That includes China’s interpretation of human rights, data privacy and freedom of speech.

    This aligns with the vision of China’s “Digital Silk Road”, which complements its Belt and Road Initiative, creating new trade routes.

    In the digital realm, the goal is technological primacy and greater autonomy from western suppliers. The government is striving for a more Sino-centric global digital order. Infrastructure investments and training partnerships in African countries offer a starting point.

    Long-term implications

    From a technological perspective, over-reliance on a single infrastructure supplier makes the client state more vulnerable. When a customer depends heavily on a particular supplier, it’s difficult and costly to switch to a different provider. African countries could become locked into the Chinese digital ecosystem.

    Researchers like Arthur Gwagwa from the Ethics Institute at Utrecht University (Netherlands) believe that China’s export of critical infrastructure components will enable military and industrial espionage. These claims assert that Chinese-made equipment is designed in a way that could facilitate cyber-attacks.

    Human Rights Watch, an international NGO that conducts research and advocacy on human rights, has raised concerns that Chinese infrastructure increases the risk of technology-enabled authoritarianism.

    In particular, Huawei has been accused of colluding with governments to spy on political opponents in Uganda and Zambia. Huawei has denied the allegations.

    The way forward

    Chinese involvement provides a rapid path to digital progress for African nations. It also exposes African states to the risk of long-term dependence. The remedy is to diversify infrastructure supply, training opportunities and partnerships.

    There is also a need to call for interoperability in international forums such as the International Telecommunications Union, a UN agency responsible for issues related to information and communication technologies.

    Interoperability allows a product or system to interact with other products and systems. It means clients can buy technological components from different providers and switch to other technological solutions. It favours market competition and higher quality solutions by preventing users from being locked in to one vendor.

    Finally, in the long term African countries should produce their own infrastructure and become less dependent.

    SOURCE

    The Conversation 

     

  • Ghana wants to make importing food like rice and tomatoes more costly: expert explains why it’s a bad idea

    Published: January 22, 2024 4.19pm SAST

    Associate Professor, Agri-Food Trade and Policy, University of Guelph

    Ghana, like many other developing nations, relies heavily on imports of food and consumer goods to feed its population. For instance, Ghana imports 55% of the rice that is consumed locally. The country’s import dependence is primarily a consequence of the production of low-value primary products without substantial value addition.

    To forestall over-dependence on foreign goods, the government has proposed a trade restrictive policy via a legislative instrument on 22 major items. It has justified the policy on the grounds that it wants to reduce Ghana’s dependence on foreign goods by making locally produced goods more attractive from a price perspective. In turn, the idea is that this will drive up domestic production.

    The list of items includes essential food products such as rice, offal, poultry, cooking oil, fruit juices, noodles and pasta, fish, sugar and canned tomatoes. All are commonly consumed in most Ghanaian households.

    But imposing constraints on these food items has the potential to escalate food prices, as set out in my recent paper, prompting concerns about potential threats to food security. Restricting imports without ensuring high-quality and competitive domestic products will not lead to consumer preference for locally made goods. What Ghana’s industries need are fewer production constraints and more incentives to compete domestically.

    Opposition to the instrument

    Opposition to the proposal emerged from various quarters, including civil society organisations, trade associations and the minority in parliament.

    Opponents of the proposed policy contended that its restrictive nature would lead to severe economic and food security repercussions for Ghana. They argued that domestic producers might struggle to meet local demand for the specific items the government aims to restrict. For example, 90% of Ghana’s total poultry consumption relies on imports.

    The government consequently suspended the proposed mechanism in December 2023 for broader consultation.

    The reasons

    The ministry wanted the restriction for two main reasons.

    First, to curb the depreciation of the Ghanaian cedi. A surge in imports of the products in question increased the demand for US dollars, putting pressure on the local currency. In 2022, Ghana imported food products and related goods worth an estimated US$2.6 billion.

    Second, the aim was to foster industrialisation in Ghana. According to the ministry, import restriction was a strategy to reduce competition for local producers, fostering increased local production and making Ghana less reliant on foreign countries to meet domestic demand.

    But there are a number of concerns about the potential impacts of the proposed restrictions. Among them are food security, government revenue, trade distortions, and the cost of doing business.

    The likely impact

    Food insecurity: Data from the Food and Agriculture Organization shows that there were 21 million severely food-insecure individuals in 2021. Constraints on imports of commonly consumed foods, leading to scarcity and thus an increase in food prices, would reduce food security further.

    Producers might benefit from selling at higher prices but consumers would not.

    Revenue loss: There is the potential for revenue loss, particularly from customs and import duties. Many developing countries, including Ghana, depend heavily on import duties for government revenue. Recent statistics from the World Bank’s World Development Indicators for 2020 indicate that customs and import duties accounted for 12.4% of Ghana’s tax revenue.

    Trade rules: Ghana is a member of the World Trade Organization (WTO), which expects countries to align their trade policies with the relevant globally agreed provisions and rules.

    The WTO allows a member country to set conditions for importing certain products. This is known as import licensing. But the WTO stipulates that import licensing should not distort and impede trade.

    Ghana may face retaliation from other countries if the restrictions harm their interests.

    Take import licensing. This is an administrative procedure requiring the submission of an application or other documentation (other than those required for customs purposes) to the relevant administrative body as a prior condition for importation of goods. This is permissible under WTO rules. But challenges arise in its implementation, particularly the allocation of quotas. Successful implementation requires thorough consultation with importers and importing countries.

    The initial opposition within Ghana suggests a lack of serious consultation by the government.

    Import licensing can introduce rent-seeking activities in a country like Ghana. Establishing a committee to grant licences to importers opens avenues for bribery and corruption. Transparency International and the World Bank rank Ghana higher in the corruption index than other developing countries.

    For instance, the World Bank Enterprise Survey indicates a high percentage of firms in Ghana are expected to pay bribes to obtain licences, government contracts and business permits. When businesses resort to bribery, it leads to inefficiency and a higher cost of conducting business.

    The answers

    Restraining imports without alternative domestic production and supply mechanisms is economically unsound. Policies that drive industrialisation and position Ghana as a net exporter are needed.

    That’s not happening. The recently presented 2024 budget revealed a negative 2.2% growth rate for the industrial sector.

    To drive industrialisation, the government should focus on reducing production constraints such as inadequate power supply, lack of capital, and high cost of farm inputs, and providing incentives that give Ghanaian producers a competitive advantage in the domestic market. Closing borders to international trade or restricting imports contradicts the objective of promoting industrialisation. It is not a sustainable approach.

    SOURCE

    The Conversation