Hello guys it's @joetunex and @josediccus here again. In today's video, we looked at the effect of the Chinese business model in Africa on individuals' standards of living, and production, the effect on the cost of living, and survivability as well as the analysis of the degree of dominance of Chinese labor over indigenous establishments in African countries.
We started the show by talking about how the Chinese business model looks Symbiotic on the surface to the Nigerian government but looks rather one-sided and unfair to individual persons. @joetunex talked about his personal experience with a Chinese-managed telecommunication business managed by the Chinese in South Africa and how this model has influenced and caused difficult working conditions, especially in the aspect of money.
@josediccus analyzed, how African countries seem dependent on the Chinese from infrastructure to technology because Nigeria as a country isn't a producing economy. Meanwhile, the Chinese pack skills, labor, and manpower especially professional expertise, hence it's easier to exploit the Nigerian market, exploit skilled labor without having any internal control or limitations.
At the end of the podcast, we both agreed that Africa as a whole isn't a manufacturing continent, hence, the government in different places is always liason or deals with the Chinese. We went ahead to analyze the fact that Africa might find it difficult to reduce this dominance but can create a certain limitation in Which it'll be difficult to completely take control of the states, people, and resources at the same time.
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This was interesting. I follow this subject closely. Especially when y'all talked about Debt Trap Diplomacy…
“Debt-trap diplomacy is an international financial relationship where a creditor country or institution extends debt to a borrowing nation partially, or solely, to increase the lender's political leverage. The creditor country is said to extend excessive credit to a debtor country with the intention of extracting economic or political concessions when the debtor country becomes unable to meet its repayment obligations. The conditions of the loans are often not publicized. The borrowed money commonly pays for contractors and materials sourced from the creditor country.”
Some of China's Belt and Road Initiative projects have shown signs of this policy. And this isn't new in human history. The Dutch, British, Germans, Americans…have all done this to varying degrees in the past 500 years. But even further back than that, the Chinese dynasties (Ming), Persians, the Romans, etc...have all done this. The Chinese call it “Paying Tribute.” Many growing empires have done this.
The problem with this though, it's usually not public. Because Debt Trap Diplomacy is very distasteful to most, it's done with little transparency, so it is hard to prove and easy to deny…right up to the point where the creditor country starts building military installations in debtor countries…then it's too late.
Debt is a terrible vulnerability. So it's important that nations choose carefully who their friends are, who they take money from and who they do business with.
Great discussion @jj-finance and @josediccus.
You see, the Chinese seems to be the closest to most African countries and this closeness is how they establish a business relationship. However, most African government knows that debt is a terrible vulnerability yet they go on to borrow continuously because they'll not be in office to pay these money back and they don't care if the Chinese government is actually going to take over the economy of their state.
The Chinese on the other hands knows that most of African government agencies are inept and willing to do anything to borrow money, so what they do is to ensnare them into borrowing money.
There are no nations in the world willing to be close to most African countries the way the Chinese are doing, so I guess this is mainly the reason.
Thank you for watching, it was exciting to talk about this. @joetunex is in south Africa, while I'm in Nigeria.
This is the case, they don't care as long as the deals they are making benefits them and enrich their pockets, after all, theses embezzled funds are used to buy houses and investments in other nations.
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The United States needs to take a more active role in Africa…not just military collaboration through AFRICOM (US Africa Command). Establishing better economic collaboration will be helpful, building infrastructure where both parties benefit, plus higher level trading relationships to encourage African domestic industry.
The Federal Reserve can help as well by establishing closer ties with African central banks, encouraging more favorable debt swaps and credit facilities that are benchmark to individual nation’s GDP and/or project revenue, so if debt is established, the debt service payments can be met with sufficient revenue, even in times of crisis…so it doesn't bury debtor nations in unsustainable debt, and decreases the probability of default.
It's pretty standard practice in the US, where banks benchmark the debt that is lent out to the revenue of the project. This keeps the debt to income ratio at a sustainable level.
Anyway, as you probably noticed, I'm in the US. I do enjoy this topic of conversation :)
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It was another good session, probably the best. It's been two weeks, I'm happy we're back recording, slow growth, slow process.
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Am happy we got back to recording as well. Looking forward to next week.
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This was interesting. I follow this subject closely. Especially when y'all talked about Debt Trap Diplomacy…
“Debt-trap diplomacy is an international financial relationship where a creditor country or institution extends debt to a borrowing nation partially, or solely, to increase the lender's political leverage. The creditor country is said to extend excessive credit to a debtor country with the intention of extracting economic or political concessions when the debtor country becomes unable to meet its repayment obligations. The conditions of the loans are often not publicized. The borrowed money commonly pays for contractors and materials sourced from the creditor country.”
Some of China's Belt and Road Initiative projects have shown signs of this policy. And this isn't new in human history. The Dutch, British, Germans, Americans…have all done this to varying degrees in the past 500 years. But even further back than that, the Chinese dynasties (Ming), Persians, the Romans, etc...have all done this. The Chinese call it “Paying Tribute.” Many growing empires have done this.
The problem with this though, it's usually not public. Because Debt Trap Diplomacy is very distasteful to most, it's done with little transparency, so it is hard to prove and easy to deny…right up to the point where the creditor country starts building military installations in debtor countries…then it's too late.
Debt is a terrible vulnerability. So it's important that nations choose carefully who their friends are, who they take money from and who they do business with.
Great discussion @jj-finance and @josediccus.
What stuck with me while reading your response it the lack of transparency. It does make sense as these agreements between nations are rarely publicized which I find to be unacceptable for a country to enter into an agreement with another on behalf of its people and not make them aware of the deal. When it backfires the ones that suffer the consequences most are the ordinary people.
We are in an advanced age in humanity and our leaders should do better and do better. At the end of the day though corruption is behind these silly agreements at the expense of citizens.
Many thanks for watching.
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I agree, it undermines the democratic systems. That said, enhancing democratic systems is not a priority of authoritarian governments.