Feeding Namibia to the Chinese

There has been a lot of anger at the Chinese companies operating in Namibia of late.
This anger has been simmering over time but came to a head after the revelation that the Chinese population in Namibia today is about 100 000.
Home affairs spokesperson Salome Kambala last year said the Chinese population in the country was increasing at an alarming rate.
“What they do is that they come through visits, some on work permits and others on business engagements.  Many who have been here for years are now permanent residents,” Kambala said.
Even this number could be an economical estimate because as early as 2009, there was talk that the Chinese population in Namibia had reached 100 000.
Although it was never confirmed at the time, a Wikileaks cable claimed in 2010 that Namibia had agreed to settle 5 000 Chinese families in the country after failing to pay a debt.
The government and the ruling Swapo Party denied the Wikileaks cables, arguing that such a number could not just be settled in the country without raising questions.
But the major source of anger from the locals is how the Chinese have taken over the whole business sector, especially in construction and retail.
While such anger is understandable, the Chinese are just coming in to take up opportunities made available by the government.
It should be understood that the government has not created any conducive financial support system for the local businesses as well as its own enterprises.
Unlike the Chinese companies that have the backing of their government through the Zhōngguó Jìnchūkǒu Yínhán known also as the Export-Import Bank of China, local business people are left to fend for themselves.

Zhōngguó Jìnchūkǒu Yínhán

One of Zhōngguó Jìnchūkǒu Yínhán’s objectives is to promote foreign trade and investment as well as development assistance in concessional funding for commercial activities.
Some of the commercial activities are export credits mainly in the infrastructure fields (roads, power plants, oil and gas pipelines, telecom, and water projects) and investment loans for Chinese businesses to establish overseas in the energy, mining and industrial sectors.
The bank also facilitates the export and import of Chinese mechanical and electronic products, complete sets of equipment and new- and high-tech products, assist Chinese companies with comparative advantages in their offshore project contracting and outbound investment, and promote international economic cooperation and trade.
Although the Exim bank does not publish its financial results, between 2009 and 2010, the bank is said to have signed off about US110b loans compared to the World Bank’s US$100b between 2008 and 2010, according to the Financial Times.
It is, therefore, not a secret that the Development Bank of Namibia whose mission is to mobilise investment capital and facilitates national and international co-operation among public and private entities, cannot compete with the Exim Bank.
In her report for 2016, the DBN chairperson Tania Hangula said “the Bank has made notable progress in the ongoing achievement of its goals. Approvals reached a watershed total of N$2,000.8b during the period and, notably, N$1,381.5b was allocated to infrastructure”.
It is also an open secret that the SME Bank that replaced the Small Business Credit Guarantee Trust is struggling with capitalisation. It would not surprise that the bank cannot afford to give small loans even this year.
This situation has created vast opportunities for Chinese companies and business people who are taking advantage of Namibia’s lack of funding.
With the support of a well-funded and heavily capitalized bank, the Chinese are not only enriching themselves but developing their economy back home.
In addition, they are exporting jobs and propping up their retail and manufacturing industries to supply the Namibian market.
Kambala admitted that the Chinese are coming because they have jobs and that the majority of the malls were built by the Chinese.
“They flock to Namibia, because most of them have job contracts with the government and private companies who are inviting them. And, they have skills which our own Namibians do not have,” she said.

Capital flight and secrecy

Chinese are by nature very secretive. But over the years, information has emerged to suggest that Namibia could have suffered capital flight that amounts to N$20b. This figure that was published by one weekly in April last year was not confirmed neither was it denied.
According to the report, the money took flight in 36 months. This means that this happened between 2012 and 2013.
There is secrecy too when it comes to how much China has loaned Namibia.  
The only time such figures were revealed was in 2007 when the former Chinese president Hu Jintao visited Namibia and pledged RMB1b (about N$2b) of concessional loans, US$100m (N$1,4b) preferential export buyer’s credit, RMB30m (about N$60m) of grants and RMB30m of interest-free loans.
Since this was a pledge, it is not clear whether the money was ever delivered or whether the loans came and if they did what they were used for.
What is clear, however, is that these soft loans and lines of credit do not benefit Namibia directly but Chinese companies and businesses in the country.
Since the Chinese know that they are required to have local faces, they have easily found such friends among the desperate but willing Namibians to partner with.
Such partnerships, however, work to the advantage of the Chinese because they will remain with the biggest piece of the tender cake after paying off the local partner, who, in any case, does not have the means to execute the projects.
Once the local partner walks off the project, the Chinese can do whatever they want regarding as to who to employ and manage finances.
With Exim bank’s involvement, it means that machinery, equipment and expertise must be exported from China. That means Chinese industries that manufacture equipment and machinery has a lot of work to do and jobs to create. The money, of course, will come from Namibia. At the same time, Namibia’s industries are not growing because they are underfunded. Even if they want to grow, there is not market. The Chinese provide own materials.
Finance minister Calle Schlettwein was quoted last year saying that the government cannot dictate how local businesses and companies must deal with foreign investors.
“We are pretty much aware of these tenderpreneurship activities and of course if locals enter into businesses with the Chinese, South Africans or any others; it is none of our business. What would be favourable is if such partnerships transfer proper skills to our people to bring about change in what they do and help them become better equipped,” he said then.
What he did not say was whether there have been any skills transferred ever since the Chinese came to Namibia. He did not also say what opportunities have been created so far.

Overcharging

According to Wikileaks, during President Hu Jintao’s state visit to Namibia in 2007, the two governments signed an agreement for a concessionary loan, and a credit line - each valued at approximately USD 130 million.
In July, the Namibian government announced the suspension of its line of credit from the Export Import Bank of China expressing concern that conditions that forbid open tendering for projects and equipment purchases financed by Exim may result in Namibia paying highly inflated prices.
For example, in 2009 the China National Machinery and Equipment Import and Export asked the works ministry to pay N$1,63b for the construction of the 62-kilometre rail way stretch between Oshikango and Ondangwa.
A cabinet memo leaked at the time revealed that this was almost 10 times the normal price some German and South African companies had asked for a few years before.
The construction of the railway line was funded by a N$300m loan extended by the Chinese government on condition that tender procedures should be waivered.
Although the loan was N$300m, the Chinese company then asked for N$770m for laying the rails and N$290m for supplying 13 200 tons of rail.
The memo said that the Chinese had inflated the price by 900%! They quoted N$12 468 per metre for laying the rails while a South African company, Lenning Rail Services, had asked for  N$1,839.00 per metre.
According to the memo, the Chinese company was forced to reduce the price to N$597m after some officials from the directorate of railway in the works ministry had protested.
“Upon informing the Chinese company (CMEC) that the Ministry would now opt for other sources of finance, the Chinese offered to supply rails for US$23m, and thereafter decided to accept to supply the rails and construct permanent way for US$50m, which they initially refused,” the memo said.
President Hage Geingob has also spoken out against companies that inflate prices on capital projects as draining the country’s resources.
He said this last year when he spoke about the Chinese company, Anhui Foreign Economic Construction Corporation (AFECC) that charged N$4b for expanding the Hosea Kutako International Airport about two years ago but this price rose to N$7b.
The bulk fuel storage depot at Walvis Bay too that was initially costed at N$920m in 2015 has now shot up to N$5,5b.

Experts told The Villager that it is not easy to measure Chinese investment in the country because there is nothing on the ground to show it.
Economic Analyst and the Director of Research and Securities at Simonis Storm Purvance Heuer it is difficult to tell whether the Chinese have made an investment in Namibia.
Heuer told The Villager that nobody knows what percentage of the Chinese income stays in the country and what goes out of the country.
According to Heuer, Chinese investment cannot be seen in physical structures too.
He said that while Namibia is going through an economic deficit yet funds that could be invested to create jobs are transferred out of the country.
The Namibia Chamber of Commerce and Industry chief executive officer Tara Shaanika said many Chinese businesses don’t bank with local banks.
This, he said, means that the banks are losing out a lot on revenue because the money is flown out of the country.
Shaanika raised concern that has been observed following reports of chunks of Namibian money found stored in country and destined for China.
He says the competition observed has created an unconducive environment for Namibian businesses to thrive, because Chinese businesses offer cheaper prices on their merchandise and those appeals to the Namibian market.
“For other businesses to succeed, we need to emphasise fair competition in the market otherwise local businesses will continue to suffer or close down,” he said.
According to Shaanika, the Chinese are mostly visible in the construction sector where Namibians lack capacity.
“However, today we still find certain sectors such as retail sector where the Chinese people are also involved,” Shaanika said.