Can Africa really afford China’s largesse?

When the nuclear deal was still a possibility, there was a story going around that the whole purpose of it was for the Russians to get their hands on SA’s uranium deposits.

No-one was ever able to give credence to this conspiracy, but the premise was simple enough to believe. By providing a loan to SA to buy something it didn’t need — and one it would never be able to repay — the Russians would be able to take what they wanted. It’s Geopolitics 101.

As the nuclear deal and the Russians have faded from the limelight, the geopolitical baddies have had to change. I heard the latest version of the conspiracy theory at a function last week: “That’s the whole reason the ANC is pushing so hard for expropriation without compensation: the Chinese want land, and this is the only way the government can get their hands on it.”

I don’t know what the Chinese government would want with millions of hectares of South African farmland (unless they, too, have designs on our mineral resources), but what I do know is that there is no such thing as a free lunch.

While the Russians were trying to palm off overpriced nuclear reactors on a fiscally challenged kleptocrat, the Chinese government took a different approach to “deepening relations” with African governments. Through its ambitious Belt and Road scheme, the Chinese government has lent around $100bn (R1.536-trillion) to African governments to finance large infrastructure projects. As a result of their efforts, Chinese exports to Africa more than doubled between 2009 and 2015, and today China is Africa’s largest trading partner.

Although the rapid growth in bilateral trade was initially viewed as largely positive, the Belt and Road scheme started to attract criticism when it became clear that these relationships were much less mutually beneficial than they first appeared. Since late 2014, Africa as a whole has started to run a significant trade deficit with China, and, as of 2017, only five African countries had a trade surplus with it.

Jeremy Stevens, China economist at the Standard Bank Group, says Kenya is a case in point. He says Kenya shipped just $166m of goods to China in 2017 but imported $5bn of goods in return. This included the steel and equipment used to build the $4bn Chinesefunded railway in the country.

There are also concerns around rising external debt obligations and the ability of these countries to finance that debt. Chinese debt accounts for about 14% of the stock of total debt contracted by sub-Saharan

African countries, excluding SA, and this is likely to rise. At the Forum on China-Africa Co-operation this week, Beijing pledged another $60bn in new development financing to Africa over the next three years.

Stevens says one of the problems with these loan agreements is that they often contain clauses that lock up new markets for capital goods and equipment as well as employment opportunities for Chinese labour — limiting opportunities for local growth and development.

With this in mind, one has to wonder how altruistic these loans really are and if there really are “no political strings attached”, as promised by Chinese President Xi Jinping. Xi has already said that heavily indebted and underdeveloped countries don’t have to worry about paying back the loans, but can anyone really be that nice? Seeing as the terms of the SA-China loan agreements signed this week — and earlier this year — have not been made public, we will just have to wait and see.