Is Africa fall­ing into a Chi­nese debt trap?

More coun­tries seek re­lief as ru­mours swirl of debt swaps

The East African - - FRONT PAGE - By AL­LAN OLINGO The Eastafrican

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.

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