The myth of the "China model" perpetuated among African leaders



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Forbes' top economic commentator in Asia speaks to thought leaders about his ideas about the evolution of Asia's economic order.

Martyn Davies is simply a man of the world. In addition to his constant international travel as Managing Director of Deloitte responsible for emerging markets in Africa and beyond, education, training and the subsequent career of Davies are an example of today's global professionals. His family immigrated to South Africa from the United Kingdom when he was young. He was a college student when Apartheid fell. It was a time of great enthusiasm, hope, uncertainty and fear. He recalls having accompanied a Chinese academic in March 1994 to observe the election. They passed the headquarters of the African National Congress in Johannesburg, the House of Shell, where, just moments ago, 19 people were shot and killed in a shootout between different factions of the ANC.

Davies is no stranger to political convulsions and violence, and has had many direct encounters with events that change the world. For annual family vacations, your parents send the children to visit a different country every year. When Martyn was 17 years old in 1989, he and his brother met in Berlin shortly after the fall of the Berlin Wall. He left a powerful impression on him, which later motivated him to study law, international relations, and economic history in University of the Witwatersrand, where he completed a Ph.D. at age 25.

Martyn Davies

Davies was fascinated by Asia after a visit to Singapore in 1990. This was followed by a trip visiting Hong Kong, Shenzhen and Guangzhou, and then Taiwan. It was there that he had another encounter with the story. Deng Xiaoping was making his famous southern tour to restart China's economic reform. Davies visited the new special economic zone in Shenzhen and was extremely impressed by the stupendous scale and speed of development. The liberation of the enterprising energy and drive of a country long suppressed by communist ideology was immensely edifying.

So there was no turning back. He was captivated by East Asia. When he was offered a postgraduate scholarship abroad, he chose South Korea and arrived in Seoul in 1996, just in time to have his next meeting with history, the 1997 Asian financial crisis. in the midst of a society shaken at its core. Seemingly omnipotent business clusters, known as chaebols, suddenly became insolvent. The exchange value of the currency has dropped. The finance minister was in jail. Ordinary citizens lined up to hand over their gold jewelry to the government to help support the country's foreign reserves. It was all very disconcerting and an incredible experience for Davies.

Despite the Asian financial crisis of 1997, Davies is one of the few who saw early on that the future of Africa is with Asia. He studied Chinese in Taiwan; and continued to visit the region extensively, building a formidable network of business and professional contacts. Back in Johannesburg, he launched a highly successful consulting firm, Frontier Advisory, to work with governments and the private sector, which quickly became the ideal spot for insights into the economic development and business potential of sub-Saharan Africa , especially in relation to trade. and investment ties with Asia. In a short time, Davies was named # 1 analyst in South Africa by the prestigious Annual Financial Mail Award; and was selected by World Economic Forum as Young Global Leader. & nbsp; Davies is undoubtedly one of the few Africans who first connected the rise of Asia with the emergence of radically different perspectives for Africa.

Recently I was able to meet Davies for dinner, despite his frenetic travel schedule. We met at the Flames, a restaurant on the outdoor terrace of the fabulous Four Seasons Hotel in Westcliff which has a magnificent view of Johannesburg. During a dinner of lamb Karu (for me) and ostrich steak (for Davies), we talked about the future of Africa in the context of the rise of Asia.

Johannesburg & nbsp;(Getty)

Davies is deeply concerned that globalization as we know it in the last few decades is coming to an end. Investment and global trade are slowing in recent years. Cross-border sales of multinational companies have stagnated in many cases. Politics has become bitterly divisive and bitter in the US and Europe. But Davies also sees something darker and menacing, the return of tribalism. Despite the spread of democracy and globalization in much of the world in the last half century, tribalism, or in its modern incarnation as identity politics in Western countries, has never been completely gone. Like some inactive virus, it manifested itself on the backs of discriminatory populism.

The problem, Davies emphasizes, has been decades under construction. It has to do with the fact that globalization has created winners and losers, while providing more economic growth and prosperity to the world at large. Many of these losers are in developed, high-income countries, and their difficulties have been ignored by their political and business elites. When his anger and resentment became politicized, he paved the way for the rise of the far right in many Western countries. Davies cunningly notes that mass movements against established elites typically do not come from those who are trapped in the bottom of extreme poverty. Instead, they take root among those who best find their declining conditions relative to others. Thus, while globalization has left behind the losers in both high-income developed countries and poor developing countries, anti-globalization movements are found mainly in Western democracies. In a region like Africa, the situation is very different.

In Africa, Davies sees two distinct phases of globalization in the last decades. The first was the commodity boom in the 2000s, driven mainly by Chinese demand. It was a dizzying time for many African countries, especially for oil producers like Nigeria. At one point, Goldman Sachs was predicting an oil price of $ 200 per barrel and many expected to believe in the hypethat Nigeria would soon become the first $ 1 trillion economy in Africa. For a time, it seemed that all of Africa's economic challenges could be eliminated with a wave of money from the export of oil and mineral resources. The narrative of the rise of Africa has become popular and many Africans have come to believe it. Then all stopped in 2014 when the price of oil collapsed.

Since 2014, Davies believes that Africa has entered a new and more challenging phase in its globalization. Serious deficits in logistics and infrastructure, skills and education, law and order, governance and state capacity, which were seriously problematic before the commodity boom once again created their ugly heads. Without the boom, the way economic development is hampered by these deficits can no longer be covered today. If anything, complacency and neglect during the boom years made the problem worse. A deeper structural reform is needed for the development of Africa to progress.

It is in this context that Asia is rapidly becoming the new hope of the future for Africa. The fact is that Africa's trade and investment relations with Asia have grown tremendously. Geographically, Davies sees a huge economic sub-region being formed connecting Africa through the Middle East and the Indian subcontinent with East Asia. The eastern regions of Africa can be more accurately described as "close to Asia" as the region leans toward Asia.

There is no doubt that China is a key player in the connection between these two continents. Media attention has focused on China's Belt and Road Initiative (BRI) and on major associated state investment schemes, such as special economic zones and transport megaprojects. BRI is indeed critical as it directly addresses Africa's deep infrastructure deficits. Without better infrastructure and more efficient logistics, Africa simply will not be able to take off economically. From this perspective, BRI is a potential factor of change for many African countries.

But Davies sees an even deeper transformation underway in Africa. In the wake of investment led by China's government and large state-owned enterprises are tens of thousands of Chinese entrepreneurs. No one knows the exact numbers, Davies believes there are at least several hundred thousand private Chinese entrepreneurs across sub-Saharan Africa, ranging from retailers to manufacturing, consumer services and commercial agriculture. They have populated the special economic zones established by African governments in partnership with China and use them as a beach boss to expand their local markets. In contrast to large government-sponsored projects, companies run by these private entrepreneurs are more job-intensive and more likely to introduce innovations that are more appropriate to local needs. In industry and agriculture, they are also more export-oriented, leveraging their connections in Asia. Similar to Southeast Asia, these Chinese entrepreneurs are having a considerable impact on the economies of sub-Saharan Africa.

South Africa's President Cyril Ramaphosa, accompanied by Alibaba's Jack Ma, visits Alibaba headquarters one day after the conclusion of the 2018 China-Africa Cooperation Forum Summit on September 5, 2018 in Hangzhou, the province Chinese Zhejiang. (VCG / VCG via Getty Images)

Davies is quick to point out that while Chinese entrepreneurs dominate in numbers, Korean and Indian entrepreneurs are also in Africa in force, and are thriving in different economic and market niches. Korean companies that export and assemble consumer electronics for cars generally dominate their market segments in South Africa. Indian entrepreneurs, on the other hand, have the advantage of being able to tap into the vast Indian diaspora networks in Central and Eastern Africa , and also in South Africa, which go back many generations. Confidence and connectivity across the Indian diaspora is undoubtedly facilitating economic integration between Africa, the Middle East and the Indian subcontinent. They are the catalysts that are accelerating Africa's business development locally, while quickly tracking trade and investment connections with Asia. Davies sees a widespread Guajarati and Muslim diaspora as India's counterweight to the BRI strategy led by the state of China.

However, to fully realize the potential of Africa's connections with Asia, Davies firmly believes that a profound transformation of how government is administered and how the economy is run in Africa is needed. In this context, Davies is concerned about the risk that many African governments misinterpret China's development experience. There is a myth of a "Model of China" perpetuated among certain African leaders and governments. Supposedly, China's success has to do with its large state-owned enterprises and the active role of the government in "commanding" the economy. Not surprisingly, such a "Model of China" has a tremendous appeal to many aspiring African statists and autocrats.

As a keen student of the Chinese economy, Davies does not see such a "Model of China." For him, China exemplifies experimentation and pragmatism in the way it manages its economic development. Behind its (empty) ideological rhetoric, China's economic development is an incessant process of trial and error, learning from mistakes, fast-track corrections when things are not working out, and replicating successes whenever possible. Davies argues that government is powerful in China not in the sense of controlling the economy, but in having the institutional capacity to direct policies to adapt to changing circumstances and to effective implementation. As for Davies, this must be China's real model for Africa – an effective and pragmatic state, focusing almost obsessively on development success.

In this context, leadership is of paramount importance in Africa for Davies. Given the more challenging global economic environment, Africa needs more than ever leaders who are pragmatic when it comes to pursuing economic development policies, which are visionary when it comes to uniting disparate communities in society to embrace a common and are true builders of nations when it comes to making public institutions accountable for better governance.

While Davies is generally optimistic about Africa's prospects, especially in terms of the potential for economic integration with Asia, he is also inflexibly realistic. Africa needs to continue to globalize in a world where economic risk is increasing and countries now need to work hard to grow. And that is a very high order. Given that a prerequisite for success is effective and adaptive leadership, there is no escape from the conclusion that in many parts of Africa there are huge gaps between what is and what should be.

On a personal level, however, Davies is determined that he and his family will continue to globalize. He is married to a South African of Muslim descent, with three adorable children. Davies's family is well-traveled, multilingual, multiracial, multi-religious and multinational. His children attended the Jewish kindergarten, an Anglican elementary school and madrassa classes at weekends. & nbsp; Davies' professional career encompasses academia and business; and has forged an admirable ability to work seamlessly across Africa, Europe, USA and Asia. This is an African family that will thrive regardless of whether Africa can succeed in its attempts to develop and globalize progressively.

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Forbes' top economic commentator in Asia speaks to thought leaders about his ideas about the evolution of Asia's economic order.

Martyn Davies is simply a man of the world. In addition to his constant international travels as managing director of Deloitte, responsible for emerging markets in Africa and beyond, Davies' education, training and subsequent career are an example of today's global professionals. His family immigrated to South Africa from the United Kingdom when he was young. He was a college student when Apartheid fell. It was a time of great enthusiasm, hope, uncertainty and fear. He recalls having accompanied a Chinese academic in March 1994 to observe the election. They passed the headquarters of the African National Congress in Johannesburg, the House of Shell, where, just moments ago, 19 people were shot and killed in a shootout between different factions of the ANC.

Davies is no stranger to political convulsions and violence, and has had many direct encounters with events that change the world. For annual family vacations, your parents send the children to visit a different country every year. When Martyn was 17 years old in 1989, he and his brother met in Berlin shortly after the fall of the Berlin Wall. He left a powerful impression on him, which later motivated him to study Law, International Relations and Economic History at the Witwatersrand University, where he completed his doctorate. at the age of 25.

Davies was fascinated by Asia after a visit to Singapore in 1990. This was followed by a trip visiting Hong Kong, Shenzhen and Guangzhou, and then Taiwan. It was there that he had another encounter with the story. Deng Xiaoping was making his famous southern tour to restart China's economic reform. Davies visited the new special economic zone in Shenzhen and was extremely impressed by the stupendous scale and speed of development. The liberation of the enterprising energy and drive of a country long suppressed by communist ideology was immensely edifying.

So there was no turning back. He was captivated by East Asia. When he was offered a postgraduate scholarship abroad, he chose South Korea and arrived in Seoul in 1996, just in time to have his next meeting with history, the 1997 Asian financial crisis. in the midst of a society shaken at its core. Seemingly omnipotent business clusters, known as chaebols, suddenly became insolvent. The exchange value of the currency has dropped. The finance minister was in jail. Ordinary citizens lined up to hand over their gold jewelry to the government to help support the country's foreign reserves. It was all very disconcerting and an incredible experience for Davies.

Despite the Asian financial crisis of 1997, Davies is one of the few who saw early on that the future of Africa is with Asia. He studied Chinese in Taiwan; and continued to visit the region extensively, building a formidable network of business and professional contacts. Back in Johannesburg, he launched a highly successful consulting firm, Frontier Advisory, to work with governments and the private sector, which quickly became the ideal spot for insights into the economic development and business potential of sub-Saharan Africa , especially in relation to trade. and investment ties with Asia. In a short time, Davies was named # 1 analyst in South Africa by the prestigious Annual Financial Mail Award; and was selected by the World Economic Forum as Young Global Leader. Davies is undoubtedly one of the few Africans who first connected the rise of Asia with the emergence of radically different perspectives for Africa.

Recently I was able to meet Davies for dinner, despite his frenetic travel schedule. We met at the Flames, a restaurant on the outdoor terrace of the fabulous Four Seasons Hotel in Westcliff which has a magnificent view of Johannesburg. During a dinner of lamb Karu (for me) and ostrich steak (for Davies), we talked about the future of Africa in the context of the rise of Asia.

Davies is deeply concerned that globalization as we know it in the last few decades is coming to an end. Investment and global trade are slowing in recent years. Cross-border sales of multinational companies have stagnated in many cases. Politics has become bitterly divisive and bitter in the US and Europe. But Davies also sees something darker and menacing, the return of tribalism. Despite the spread of democracy and globalization in much of the world in the last half century, tribalism, or in its modern incarnation as identity politics in Western countries, has never been completely gone. Like some inactive virus, it manifested itself on the backs of discriminatory populism.

The problem, Davies emphasizes, has been decades under construction. It has to do with the fact that globalization has created winners and losers, while providing more economic growth and prosperity to the world at large. Many of these losers are in developed, high-income countries, and their difficulties have been ignored by their political and business elites. When his anger and resentment became politicized, he paved the way for the rise of the far right in many Western countries. Davies cunningly notes that mass movements against established elites typically do not come from those who are trapped in the bottom of extreme poverty. Instead, they take root among those who best find their declining conditions relative to others. Thus, while globalization has left behind the losers in both high-income developed countries and poor developing countries, anti-globalization movements are found mainly in Western democracies. In a region like Africa, the situation is very different.

In Africa, Davies sees two distinct phases of globalization in the last decades. The first was the commodity boom in the 2000s, driven mainly by Chinese demand. It was a dizzying time for many African countries, especially for oil producers like Nigeria. At one point, Goldman Sachs was predicting an oil price of $ 200 per barrel and many expected to believe in the hypethat Nigeria would soon become the first $ 1 trillion economy in Africa. For a time, it seemed that all of Africa's economic challenges could be eliminated with a wave of money from the export of oil and mineral resources. The narrative of the rise of Africa has become popular and many Africans have come to believe it. Then all stopped in 2014 when the price of oil collapsed.

Since 2014, Davies believes that Africa has entered a new and more challenging phase in its globalization. Serious deficits in logistics and infrastructure, skills and education, law and order, governance and state capacity, which were seriously problematic before the commodity boom once again created their ugly heads. Without the boom, the way economic development is hampered by these deficits can no longer be covered today. If anything, complacency and neglect during the boom years made the problem worse. A deeper structural reform is needed for the development of Africa to progress.

It is in this context that Asia is rapidly becoming the new hope of the future for Africa. The fact is that Africa's trade and investment relations with Asia have grown tremendously. Geographically, Davies sees a huge economic sub-region being formed connecting Africa through the Middle East and the Indian subcontinent with East Asia. The eastern regions of Africa can be more accurately described as "close to Asia" as the region leans toward Asia.

There is no doubt that China is a key player in the connection between these two continents. Media attention has focused on China's Belt and Road Initiative (BRI) and on major associated state investment schemes, such as special economic zones and transport megaprojects. BRI is indeed critical as it directly addresses Africa's deep infrastructure deficits. Without better infrastructure and more efficient logistics, Africa simply will not be able to take off economically. From this perspective, BRI is a potential factor of change for many African countries.

But Davies sees an even deeper transformation underway in Africa. In the wake of investment led by China's government and large state-owned enterprises are tens of thousands of Chinese entrepreneurs. No one knows the exact numbers, Davies believes there are at least several hundred thousand private Chinese entrepreneurs across sub-Saharan Africa, ranging from retailers to manufacturing, consumer services and commercial agriculture. They have populated the special economic zones established by African governments in partnership with China and use them as a beach boss to expand their local markets. In contrast to large government-sponsored projects, companies run by these private entrepreneurs are more job-intensive and more likely to introduce innovations that are more appropriate to local needs. In industry and agriculture, they are also more export-oriented, leveraging their connections in Asia. Similar to Southeast Asia, these Chinese entrepreneurs are having a considerable impact on the economies of sub-Saharan Africa.

South Africa's President Cyril Ramaphosa, accompanied by Alibaba's Jack Ma, visits Alibaba headquarters one day after the conclusion of the 2018 China-Africa Cooperation Forum Summit on September 5, 2018 in Hangzhou, the province Chinese Zhejiang. (VCG / VCG via Getty Images)

Davies is quick to point out that while Chinese entrepreneurs dominate in numbers, Korean and Indian entrepreneurs are also in Africa in force, and are thriving in different economic and market niches. Korean companies that export and assemble consumer electronics for cars generally dominate their market segments in South Africa. Indian entrepreneurs, on the other hand, have the advantage of being able to tap into the vast Indian diaspora networks in Central and Eastern Africa , and also in South Africa, which go back many generations. Confidence and connectivity across the Indian diaspora is undoubtedly facilitating economic integration between Africa, the Middle East and the Indian subcontinent. They are the catalysts that are accelerating Africa's business development locally, while quickly tracking trade and investment connections with Asia. Davies sees a widespread Guajarati and Muslim diaspora as India's counterweight to the BRI strategy led by the state of China.

However, to fully realize the potential of Africa's connections with Asia, Davies firmly believes that a profound transformation of how government is administered and how the economy is run in Africa is needed. In this context, Davies is concerned about the risk that many African governments misinterpret China's development experience. There is a myth of a "Chinese model" being perpetuated among certain African leaders and governments. Supposedly, China's success has to do with its large state-owned enterprises and the active role of the government in "commanding" the economy. Not surprisingly, such a "Chinese model" has a tremendous appeal to many aspiring African statists and autocrats.

As a scholar of the Chinese economy, Davies sees no such "Chinese model." For him, China exemplifies experimentation and pragmatism in the way it manages its economic development. Behind its (empty) ideological rhetoric, China's economic development is an incessant process of trial and error, learning from mistakes, fast-track corrections when things are not working out, and replicating successes whenever possible. Davies argues that government is powerful in China not in the sense of controlling the economy, but in having the institutional capacity to direct policies to adapt to changing circumstances and to effective implementation. As for Davies, this must be China's real model for Africa – an effective and pragmatic state, focusing almost obsessively on development success.

In this context, leadership is of paramount importance in Africa for Davies. Given the more challenging global economic environment, Africa needs more than ever leaders who are pragmatic when it comes to pursuing economic development policies, which are visionary when it comes to uniting disparate communities in society to embrace a common and are true builders of nations when it comes to making public institutions accountable for better governance.

While Davies is generally optimistic about Africa's prospects, especially in terms of the potential for economic integration with Asia, he is also inflexibly realistic. Africa needs to continue to globalize in a world where economic risk is increasing and countries now need to work hard to grow. And that is a very high order. Given that a prerequisite for success is effective and adaptive leadership, there is no escape from the conclusion that in many parts of Africa there are huge gaps between what is and what should be.

On a personal level, however, Davies is determined that he and his family will continue to globalize. He is married to a South African of Muslim descent, with three adorable children. Davies's family is well-traveled, multilingual, multiracial, multi-religious and multinational. His children attended the Jewish kindergarten, an Anglican primary school and madrassa classes during the weekends. Davies' professional career encompasses academia and business; and has forged an admirable ability to work seamlessly across Africa, Europe, USA and Asia. This is an African family that will thrive regardless of whether Africa can succeed in its attempts to develop and globalize progressively.

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