Partner with democracies, get share of E10.2 trillion
MBABANE – It favours Eswatini!
With 53 African countries eligible for loans under China’s Belt and Road Initiative, Eswatini does not qualify for the loans and grants from PRC.
This is due to the fact that the Kingdom does not have diplomatic ties with the People’s Republic of China, known as PRC.
On June 27, 2022, seven countries dubbed G7, consisting of wealthy democracies, launched a US$600 billion scheme to help emerging economies. This is the equivalent of E10.2 trillion.
Eswatini has been listed with economies classified as emerging.
President of the United States of America (US) Joe Biden made it clear that the plan would deliver returns for everyone.
China’s multi-trillion Dollar infrastructure initiative is criticised for hitting nations with too much debt. “I want to be clear. This isn’t aid or charity,” Biden said of the G7’s PGII scheme.
He added: “It’s an investment that will deliver returns for everyone.”
The US president said the scheme would allow countries to see the concrete benefits of partnering with democracies.
WHAT DOES THAT MEAN?
For instance, the White House has announced a few early projects, including US companies taking the lead on a solar power project in Angola, a vaccine manufacturing facility in Senegal, a modular reactor in Ro
mania, and a 1 000-mile submarine telecommunications cable that will connect Singapore to France through Egypt and the Horn of Africa.
A project themed Just Energy Transition Partnerships is being rolled out in South Africa. Others are under discussion in India, Indonesia, Vietnam and Senegal.
German Chancellor Olaf Scholz said Berlin’s contribution to South Africa would amount to €300 million, the equivalent of E5.1 trillion.
It has been said that the new partnership unveiled will provide a structure for the G7 nations to combine their resources in offering emerging economies cash to turn off their coal plants.
ESWATINI’S THERMAL PROJECT
Eswatini has planned to embark on the Lubhuku Thermal Power project to supplement energy sourced from South Africa. The country’s contract with Eskom in South Africa expires in 2025.
Political analysts said it was probable that G7 launched the programme to counter China’s push to exert political and commercial influence in poor countries through massive investments.
The G7 is an informal grouping of seven of the world’s advanced economies: Canada, France, Germany, Italy, Japan, the United Kingdom, the US and the European Union (EU).
It must be said that the UK, United States and France are great allies that are also members of the United Nations (UN)’s Security Council – with the right to veto.
Notably, China and Russia are not members of the G7.
In 2020, the group of the wealthiest democracies accounted for over 50 per cent of global net worth (US$418 trillion), 32 to 46 per cent of global gross domestic product and approximately 770 million people or 10 per cent of the world’s population.
In terms of political and economic clout, these seven countries are a serious threat or competitor to China whose allies are not as strong as they have been over a couple of years.
President Joe Biden was joined by other G-7 leaders in unveiling the group’s counterstrike at a summit in the German Alps.
According to Politico, Biden declared that; ‘our nation and the world stand at a genuine inflection point in our history’, and added that the choices made in developing countries today, would gird them against future shocks, from climate change and pandemics and prepare them for the digital age.
It has been reported that the United States will aim to leverage a total of US$200 billion, the equivalent of E3.4 trillion for the programme over the coming five years through a combination of federal financing and private sector investments.
That adds to €300 billion, about E5.1 trillion, already announced by the EU. Along with contributions from the other members, the overall target is to build a US$600 billion scheme (E10.2 trillion).
CHINA DEBT THEORY
Biden never used the word ‘China’, but the rival on the other end of the race for global reach was clear, with the president declaring that when ‘democracies do all that we can offer’, they would triumph over autocracies.
“We’re offering better options for people around the world,” he said.
European Commission President Ursula von der Leyen said the aim was to present a positive powerful investment impulse to the world to show their partners in the developing world that they had a choice.
The infrastructure plan was first unveiled a year ago, at last year’s G7 in Britain, but little progress was made and the programme has been renamed.
In 2021, it was dubbed ‘Build Back Better World’ after Biden’s legislative push, but the implosion of his domestic agenda has led to a new moniker: the ‘Partnership for Global Infrastructure’. That will also be the umbrella term that captures the EU and UK’s own programmes, Politico reports.
The publication further reports that the plan is meant to compete with China’s ‘Belt and Road Initiative’, which has tried to strengthen ties with the developing world, especially in Asia and Africa, by offering financing for large-scale projects such as roads, railways and ports.
USA officials have consistently claimed that the nations that went into business with China ended up with punishing debt.
They are now offering the West’s plan as an alternative.
Political analysts feel that much of the funding behind the new plan appears aspirational and seemed to fall short of its lofty goals.
Biden’s initial plan had significant climate change goals that, while still present, have taken a backseat to an effort to combat the fuel cost crisis exacerbated by the war.
Politico mentioned that many of the nations were reversing plans to stop burning coal while looking for oil and — to the delight of fossil fuel companies — were looking to spend billions to build terminals for liquified national gas.
Both Italy and German have argued within the negotiations leading up to the meeting for the G7 to back shortterm investments in gas. “Our work on promoting infrastructure globally is also affected by the current geopolitical situation,” said Scholz.
“We have therefore discussed how our investment globally in climate-neutral and low carbon energy including gas can help us as a temporary response to Russia’s use of energy as a weapon.”
Positive reports coming from the West suggest that plans are underway to bring down the price of oil and gas, taking priority over reducing emissions that cause global warming. This is one of the issues the G7 discussed at length during their meeting in Germany.
Manqoba Khumalo, the Minister of Commerce, Industry and Trade, said he was aware of the G7’s investment scheme. He described it as a good development for a foreign direct investment (FDI).
Khumalo said the country was optimistic that some of the investment would flow to the country, especially because Eswatini is a nation that isn’t self sufficient on energy.
The minister said his desire was for local companies to embark on these renewable energy projects to address the country’s needs and also export energy to the Southern African Power Pool.
Khumalo said the scheme by the G7 should, therefore, serve as a source of funding. For big projects, he said international companies must partner with local firms.
He welcomed this development as it would assist local investors to understand it better and ensure requirements for access to the scheme are well understood.