Ghana On The Wrong Path With Recent Chinese Loans

Ghana is obviously on the wrong path with the signing of recent billions of dollars in Chinese loans. While some economic observers hailed it as a major financial lifeline to a country on a continent that is unable to attract such a magnitude of financial support from the international financial centers like Washington, London, and Paris, and their Bretton Woods Institutions, Beijing is fast becoming a reliable alternative to the traditional lenders.

However, an unimpeachable source, who was a member of the delegation that negotiated the deal, is unhappy with some of the elements of the deal. According to him, China, as a result of its fast-paced development, is seeking ways to dispose some of its rickety old trains, built over three decades ago, to make way for the connection of its fast trains across the entire Chinese mainland. As part of the deal, Ghana is to receive these old coaches and tracks which will amount to unspecified billions of dollars.

This reliable source believes the dollar amount for which these coaches are being offered to Ghana could buy the newer or advanced versions of coaches within the European market, a market which is also seeking ways to dispose newer versions of such coaches in order to adopt newer technologies the Chinese have unveiled in the rail market. His fear is that these trains have outlived their usefulness in the Chinese economy and are worth a “scrap” in a couple of years or a few years. “These trains will not only unnecessarily tie the Ghana Railway Corporation to the Chinese manufacturers for parts that may not be available anywhere else, but considering the maintenance culture in Ghana, these trains will become white elephants in a couple of years,” he fumed.

One wonders loudly why Ghanaian leadership never does any critical analysis before jumping on board to sign agreements that have repercussions for the future of the country. According to a member of the delegation that went to China to sign this loan deal amidst pomp and pageantry, any attempt to dissuade the team from some of the elements of the contract was seen by some members of the team who lacked know-how on technical matters as an attempt to stall the progress of government business.

In 2005, Bob Geldof, an Irish Singer, writer and a political activist, brought together celebrities to global audiences in a campaign that culminated in anti-poverty gigs around the world—London, New York, Paris, Los Angeles, among others.

Ghana, a small West African country with a population just under 25 million people, received debt forgiveness of US$4 billion, halving her debt. But in a span of three years, by the time its previous administration—the National Patriotic Party (NPP)—was leaving office, the debts have mounted back to what they were before the debt forgiveness in 2005.

Today, Ghana’s debt has passed the single digit of the 1990s and the first decade of the 21st century. It is now in the double digits without the necessary accompanying economic developments and their reflections in the lives of its citizens. Ghanaian, whether NPP or NDC (the National Democratic Congress, the current Ghanaian administration), must learn to hold their governments accountable for financial transactions in the name of corporate Ghana for which their children and grandchildren will pay the price.

The Ghana government must adopt some level of prudence in the management of loans it contracts from countries like China. A loan is not a freebie. Besides, Bob Geldof may not be strong enough by 2015, a decade after the 2005 anti-poverty campaign, to initiate debt forgiveness for the poor. China is not a Father Christmas and may not subscribe to debt forgiveness, so Ghana should thread carefully!

As we continue to fill political and technical positions with square pegs in round holes we are likely to be descending fast into the abyss of economic doldrums. A simple developmental economic analysis can tell members to the team that buying scrap trains creates a dependency situation. It is like buying a 12 year old car rather than a three year old car.

Let me use the car recent recall of Toyota cars for faulty brakes. How many Ghanaians are able to return their Toyota cars to the manufacturers for a benefit that had accrued mainly to users of Toyota cars in North America, Europe, and elsewhere? So for convenience sake, Ghanaians continue to pay for death traps.

Without in depth analysis, one is tempted to think it is a good deal for Ghana. As usual the non strategic thinking o four leaders whether it is NPP or NDC becomes the core issue. All of a sudden the Chinese are getting foothold in our economy. They have factories in Ghana and are still involved in retail trade of the goods they manufacture in Ghana? …What kind of suicidal industrial or commercial policy do we have as a nation? So the Chinese export hoods to Ghana and now we import their literally “100 years old rail cars” which sooner than later will be unreliable and need spare parts. Since we have bought these rail cars under loan we are now the new owners. So Ghana will have to buy spare parts from China earlier than if we had bought brand new trains. We are creating jobs for the Chinese. Would it not be icing on the cake if the Chinese were asked to transfer that technology of repairs to Ghana with Kwame Nkrumah University of Technology (TEK) Mechanical, Civil and Materials Engineering departments to set up shops with Suame Magazine workers to produce these parts? Can we imagine the amount of JOBS we will create for our citizens? What about spin off industries!!!! Think, Ghana Think.

Carl Miller

Center for Global Watch

London