Masaryk university faculty of social studies

Official Development Assistance

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5.4 Official Development Assistance

In spite of its stable democracy and economic rise, Ghana is still reliant on exports of primary resources and 80% of Ghanaian population live with less than $2 per day (OXFAM 2009, 2). Ghana aims to reach the middle-income status with $1,000 income per capita by 2015. The strategy is to enhance the exports of non-traditional commodities, increase the agricultural productivity, develop the information and communications technology and support the industrial base (Idun-Arkhurst 2008, 5-6). The Chinese ODA from 2001 through 2005 valued at $100.5 million and was used for projects involving police, military and irrigation facilities. In 2006, six agreements valuing $66 million were ratified committing China to provide medical assistance, professional training and scholarships (Fabricius 2006, 7). In 2008, the Ghanaian, Chinese government and China Exim Bank signed seven agreements which focused on education, health system and construction of the Bui Dam. China obliged to provide loans and grants worth of $1 billion (CCS 2008e, 13). By 2008, China had trained 700 Ghanaian public sector functionaries. In 2009, China and Ghana signed Agreement of Economic and Technological Cooperation worth $4.4 million (Dullabh and Cosani 2010, 42). In 2010, President Mills and Chinese President Jintao signed a Chinese $3 billion agreement comprehensive project, which was based on development of health, railways, road and energy sectors (CCS 2010e, 14). An additional $10.4 billion agreement was ratified by President Mills and China Exim Bank. In 2010, the total value of contracts signed was $15 billion (CCS 2010f, 16).

5.4.1 Official Development Assistance and Other Official Flows

Chinese development finance includes ODA and other official flows (OOF). While the purpose of ODA is to increase welfare of the recipient country and its development, the OOF aims at securing private investments (Brautigam 2011b). The Chinese ODA comes in three different forms – grants, zero-interest loans and concessional loans. The OOF provided by China’s policy banks constitutes the majority of Chinese aid (Brautigam 2011a, 205). It includes preferential export credits, market-rate export buyers’ credits and commercial loans. All diplomatic allies of China are recipients of Chinese grants and zero-interest loans (Brautigam 2011c, 755). It is important to note that the figures of the Chinese ODA estimated by Chinese resources are often exaggerated. It is due to the inconsistency of Chinese and Development Assistance Committee (DAC) standard reporting categories (Brautigam 2010b).

5.4.2 Sectoral Analysis of Chinese ODA in Ghana

Energy Sector

The Chinese government granted more than 50% of ODA to the energy sector in the period 1972 to 2009. The ODA was directed towards rural electrification, oil and gas infrastructure and the Bui Dam. In 2007, CADFund provided 40% of funding to Sunon Asogli Power Plant (ACET 2009, 19). In 2010, China Development Bank (CDB) provided a concessional loan of $3 billion for oil and gas industry and $400 million for Kpong Water Project (CCS 2010e, 13). In 2010, China Tianchen Engineering was licensed for the extension of Tema Oil Refinery (CCS 2010f, 18). In 2012, the Ghanaian government and CDB inked $1 billion loan agreement on development of pipelines and surveillance technology of processing plants (China Analyst 2012, 33).
In 2007, the Ghanaian Government signed a loan agreement with China Exim Bank for construction of Bui Dam. The dam is expected to provide Ghana and neighbouring countries with 400 MW and enable fisheries and eco-tourism (CCS 2007d, 20). China Exim Bank granted $562 million which consisted of a concessional loan worth $269 million in 2007 and $293 million worth of commercial export buyer’s credit in 2008 (ACET 2009, 19). The Ghanaian government financed the remaining $60 million. In 2011, the Ghanaian government asked the China Exim Bank for an additional $168 million loan (CCS 2011f, 12). The loans provided by China Exim Bank in 2007-8 can be specified as tied aid because they combine ODA and OOF. As a consequence of the construction, Bui Gorge was flooded and 1,000 people were transferred to Bui Township, which lacked sufficient access to water and electricity. The project has negative impacts on the environment, as it flooded 20% of the Bui National Park (Frontani and McCracken 2012, 280). The Chinese engineering firm Sinohydro has been accused of abusing the environmental and social regulations. It must be noted that the decisions, whether the regulations would be included, lay in the hands of the Bui Dam Authority and the Ghanaian President (Hensengerth and Scheumann 2011, 6).

Information and Communications Technologies Sector

The Ghanaian information and communications technologies sector (ICT) market is an attractive sector for Chinese ODA. In 2006, Ghana signed a $30 million concessionary loan with the Chinese government for the National Communication Backbone Project and obtained $150 million in 2008 (Tsikata et al. 2008, 24). The project started in 2006 and aims at providing easier public access to ICT facilities and spreading knowledge of information technologies among the population (Idun-Arkhurst 2008, 9). In 2007, the Ghanaian government obtained $30 million loan agreement from China Exim Bank which was used for Dedicated Communications Project for Security Agencies (CCS 2007c, 18). As National Information Technology Agency (2013) asserts, the Chinese assistance will enable accomplishment of the policy objective to connect 170 districts to Internet and develop the national e-Government network.

Infrastructure Sector

In 2000, Ghana signed $7.25 million agreement with China for construction of military barracks (Frontani and McCracken 2012, 279). In 2002, China provided $30 million interest-free loan for construction of Ofankor-Nsawam stretch of Accra-Kumasi Highway (Tsikata et al. 2008, 25). In 2010, the Ghanaian government decided to invest $2.85 billion into a road improvement project (CCS 2010g, 21). In 2011, the Ghanaian Parliament inked a Chinese credit facility worth $3 billion with CDB. The agreement was denoted illegal and the government opposition argued that it violated Petroleum Revenue Act (CCS 2011c, 18). Otchere-Darko reported that the $3 billion credit facility consisted of two commercial loans of $1.5 billion. The first commercial loan re-paid in 15 years will come from crude oil exports. Such arrangement breaches Petroleum Revenue Act which allows annual budget funding amount to be repaid in a maximum of 10 years. The second commercial loan repaid from an off-shore escrow account violates the obligation to save 100% of Ghanaian oil revenues in Petroleum Holding Fund. Nonetheless, the first trench of the loan facility was disbursed in 2012. The amount of $850 million was used for gas infrastructure development and the remaining $150 million for ICT surveillance technologies (Modern Ghana 2011).

Construction Sector

In 2002, the China State Hualong Construction Company built Burma Hall Complex and Burma Camp (Idun-Arkhurst 2008, 21). In 2006, Ghana received a $3.2 million grant and a $4.8 million interest-free loan for the construction of the National Theatre and the Office Complex for the Ministry of Defence, the establishment of Kumasi Youth Centre, and the rehabilitation of the Peduase Presidential Lodge (Tsikata et al. 2008, 25). The Chinese company Yanjin Group completed the construction of Ghanaian Ministry of Foreign Affairs in 2013 worth of $13.6 million (Ghana Business News 2013). In 2008, Students’ Dormitory of Organisation of African Trade Union Unity was constructed with Chinese financial assistance, as well as construction of Police and Military Barracks (MFA 2008, 2011).

Industry and Agriculture Sectors

The Chinese government devotes less attention to the Ghanaian industry sector, which received only $20.2 million between 1972 and 2009. In the same period, Ghana received $10.4 million for agricultural infrastructure, technology, irrigation and agro-processing (ACET 2009, 20). Chinese aquaculture experts provided training to Ghanaian fishery officials and graduate students. The Ashaiaman Aquaculture Demonstration Centre and the Kona Odumasi Hatchery were reconstructed with Chinese financial assistance in 2007. Other projects included the Aferi Irrigation Project, the Nobewam Farmland Irrigation Project and the Ghana Vocational and Technical Training Centre (Tsikata et al. 2008, 25).

Health Sector

Among the challenges that Ghana faces are: reduction of high infant mortality, control of malaria, prevention of communicable diseases, lack of skilled personnel and inefficient infrastructure. Apart from the hospital construction, Chinese ODA in health sector is insignificant (ACET 2009, 21). In 2008, a contract on construction of general hospital and Malaria Research Centre in Accra was signed by the Ghanaian and Chinese governments (CCS 2008c, 14). In 2010, China provided the Ghanaian Ministry of Health with health equipment (CCS 2010c, 17). The $15 billion package signed by President Mills on his visit to China also included a construction of two hospitals in Ghana (CCS 2010e, 15). In 2011, the Korle-Bu Teaching Hospital in Ghana received medical equipment and instruments worth of $134 million (CCS 2011b, 15).

5.4.3 Analysis of ODA

Zheng (2010, 271) and Caniglia (2011, 169) point out that China is interested in feeding its growing economy with raw materials but not concerned about Africa’s development. The Chinese motivation to provide ODA to Ghana is unknown but there are presumptions that China wants to access natural resources, strengthen political ties and open up Chinese market for exports (ACET 2009, 16). ‘Although the Chinese support the MDGs, the fact that none of the goals directly addressed infrastructure, employment or economic development cannot be lost on them’ (Brautigam 2011c, 763). Similarly, Chinese development priorities in Ghana focus on sectors such as energy, communications, industry and infrastructure (ACET 2009, 18).
Nkrumah claimed (1965, 8) that aid was a revolving credit which increased profits of the neo-colonial power. As a consequence of loan provision in 2011, the Chinese companies Sinopec and UNIPEC ‘entered the Ghanaian oil sector downstream’ (Alves 2013, 12; Akli 2012). Sinopec started constructing an off-shore pipeline, while UNIPEC stepped into marketing Ghana’s crude oil. Chinese companies often take advantage of ODA, and in exchange for providing the country with a turnkey infrastructure project they demand access to natural resources. Chinese ODA, in form of tied-aid, reveals profit making and promotion of Chinese businesses (Idun-Arkhurst 2008, 21-5). Reuters (2007) reported that Ghana’s state-run institution Ghana Cocoa Board would export cocoa to China in exchange of the construction of Bui Dam. An agreement with Genertec Corporation of China was signed to export 40,000 Mt of cocoa beans for the next 20 years. The obligation to sell primary commodities in exchange of products is a neo-colonial economic mechanism (Haag 2011, 10). ACET (2009, 16) contends that Chinese ODA reveals interest in natural resources.
China provided a $66 million debt relief in 2003 and a $24 million in 2007 (Tsikata et al. 2008, 6). Nevertheless in 2008, the Ghanaian debt to China accounted for 32.8% of Ghana’s total debt (Davies et al. 2008, 41). The Chinese ODA does not support country’s budget and contributes to increased indebtedness. The maintenance of indebtedness and its increase though provision of loans is a neo-colonial mechanism (Sappor 2009). Ghanaian media reprehend the Ghanaian Government for accepting Chinese loans. Evidence shows that currently Ghana’s debt is being paid off by oil exports.
Agriculture is the motor of Ghanaian development because it contributes 40% to the GDP and employs 50% of the working population (ACET 2009, 20). Enhanced cooperation could support Ghana’s food security, reduce malnutrition and increase the export revenues (Frontani and McCracken 2012, 283). The agriculture, industry and health sectors are undervalued whereas more profitable sectors are prioritised. Similarly, the construction of military, police, ministry and presidential buildings contributes little to the country’s development. These construction projects are prestigious, not poverty-reducing (Brautigam 2011c, 761).
Overall, the Chinese ODA contributes to the development of energy, infrastructure and ICT sectors, job creation, educational and technical training (Idun-Arkhurst 2008, 24-5; ACET 2009, 23; Tsikata et al. 2010, 19). The Ghanaian government profits from Chinese ‘no strings policy’, as it can invest through ODA flexibly. Chinese ODA represents a welcome alternative from conditional aid provided by DAC donors, IMF and WB (ARB 2012, 19522).

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