Is Africa falling into a Chinese debt trap?
More countries seek relief as rumours swirl of debt swaps
All these reports about China taking over our public assets ... are false.” Dora Siliya, Zambia chief government spokesperson
Some African countries are now seeking to write off their loans from China while others are offering concessions using their natural resources and assets to manage their ballooning debt.
A new report by the Us-based Centre for Global Development shows that China’s loans to Africa, currently standing in excess of $14 billion, continue to rise, putting a strain on borrowers and posing the risk of default.
South Sudan has said that it will use its crude oil as payment to China for its roads projects. On September 2, President Salva Kiir said that his country had reached an agreement with Beijing.
“We agreed at the recent Forum On China-africa Co-operation (Focac) summit in Beijing that we will not pay them in cash to do the roads but in crude oil. This will help us avoid debt, and also eliminate corruption within our ranks,” President Kiir said, citing some of the roads targeted in this arrangement as Nadapal to Torit, and Juba to Rumbek and Wau.
There has been concern about African countries bingeing on Chinese loans, with widely circulated reports that Beijing was targeting some of the properties of the defaulting states. On September 3, Zambia denied media reports that it was in talks with Chinese companies for a debt-to-public-utility swap as it seeks relief.
“All these reports about China taking over our public assets due to our debt, including our international airport, public electricity utility firms and state broadcaster are false,” said chief government spokesperson Dora Siliya.
This past week, Botswana became the second African country, after Ethiopia, to announce that Beijing had agreed to extend its loan repayment period for rail and road infrastructure and write off some of it. President Mokgweetsi Masisi said that they had made a pitch for debt relief to China and got a debt and interest cancellation of $7.2 million. “They also offered us a grant of $31 million and a new loan of $10.2 billion,” the president added. Ethiopia was the first African country to have its debt restructured. Addis announced that China had agreed to restructure a $4 billion loan for the railway that links its capital Addis with neighbouring Djibouti.
“The loan for the Addis Ababa-djibouti railway, which was meant to be paid over 10 years, has now been extended to 30 years. Its maturity period has also been extended,” Prime Minister Abiy Ahmed said.
In Kenya, the government asked Beijing to consider providing half of the $3.8 billion for the second phase of the Naivasha-kisumu standard gauge railway as a grant and the other half as a loan.
“The Naivasha-kisumu phase of the SGR will cost $3.8 billion. And owing to its regional significance, I would request that 50 per cent of its cost be provided as part of grant financing,” President Uhuru Kenyatta reportedly asked Chinese President Xi Jinping at a bilateral meeting on the sidelines of the Focac summit.
The total Chinese pledge of grants and loans (including commercial rate loans and export credits) has dropped from $40 billion in 2015 to $35 billion this year.
Deborah Brautigam, director at the China-africa Research Initiative at Johns Hopkins University in the US, said that China’s debt relief policies have not changed and are limited to interest-free government loans maturing at the end of the year. “In the past 10 years, China has regularly cancelled overdue African interest-free loans, but not for all,” Ms Brautigam said. “China’s foreign aid pledge, which includes grants, interest-free loans and concessional loans, has jumped to $15 billion. This means that China is now offering $5 billion of concessional assistance to the continent annually, its highest ever. We are likely to see China’s new International Co-operation and Development Agency administering these funds,” Ms Brautigam said.