Charting the future of Chinese infrastructure projects in Africa after a decade of lending

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China is funding the construction of four coal-fired power plants in southern Africa, despite its September climate pledge to stop supporting such infrastructure overseas. But the new facilities taking shape in South Africa and Zimbabwe are just some of Beijing’s massive investments in airports, rail lines and other national infrastructure on the African continent.

Many countries have been eager to invest, but rising debt levels over the past five years are raising doubts about the long-term prospects for more expensive infrastructure projects.

FILE – Motorists drive on Mombasa road beside the ongoing construction site of the Nairobi Expressway, undertaken by Chinese contractor China Road and Bridge Corporation (CRBC), in Nairobi on July 12, 2021.

China has pledged to lend African countries $153 billion between 2000 and 2019, but that pace of lending could slow. Chinese loan commitments fell 30% in 2019 from a year earlier, according to the China-Africa Research Initiative at the Johns Hopkins University School of Advanced International Studies. The research examines loan commitments that are “disbursed to borrowers as projects are implemented”.

In Zambia, for example, Chinese financiers committed $10.3 billion in loans between 2000 and 2010. Since 2000, Zambia has repaid only about $1.2 billion to Chinese lenders.

Uganda now owes China $200 million for its international airport alone, stoking fears China could take over. Both countries dismissed African media speculation of a Chinese takeover.

Loan repayment measures

Neighboring Kenya had received a $4.5 billion loan to build a railway from Nairobi to the port city of Mombasa, and China says it will redefine the terms after a committee in the African country’s parliament ruled found that operating losses and debt to Chinese banks were straining taxpayers.

Some analysts have warned that opaque loan terms mean China could potentially seize infrastructure if countries struggle to meet repayments

US and UK officials say “debt traps”, where countries cannot raise enough money to repay China’s loans, are structured to give Beijing leverage over time. Last month, the head of Britain’s secret service, Richard Moore, in an interview with BBC Radio 4, said that Beijing could acquire “significant ports which have the potential to become naval installations etc.”

Earlier this year, Sri Lanka passed legislation that critics say will give China control of a key deep-sea port funded by Beijing.

But that hasn’t happened so far in Africa, where Chinese diplomats reject seizures that are part of Beijing’s strategy.

“Not a single project in Africa has ever been ‘confiscated’ by China due to non-payment of Chinese loans. On the contrary, China strongly supports and is willing to continue our efforts to improve Africa’s capacity to develop independently,” the Chinese Embassy in Uganda said.

A photo taken on June 23, 2018 shows the pillars of a railway bridge at the Standard Gauge Railway (SGR) construction site in Nairobi National Park.

A photo taken on June 23, 2018 shows the pillars of a railway bridge at the Standard Gauge Railway (SGR) construction site in Nairobi National Park.

Instead of seizing assets, Beijing will likely extend loan repayment terms or rework repayment terms such as interest rates, analysts told VOA. These measures would avoid takeovers of the infrastructure itself and in turn preserve China’s reputation in Africa where trade and loans have beaten its rival superpower in dollar terms.

China “will likely continue to kick the streets” until creditors find ways to settle the loans, Bulelani Jili, who holds a doctorate in African studies, said. candidate at Harvard University, told VOA.

Confiscating all assets, including minerals, “would confirm people’s initial prejudices about China as a neo-colonial actor”, Jili said, and risk disrupting diplomatic relations with “some of the few friends China has on earth”. the world stage”.

“On the Chinese side, it’s about accessing possible new markets and expanding both economic activity and diplomatic relations,” he said.

Concerns over Chinese loans

China encourages lending to Africa in search of high investment returns and a global reputation for supporting poor countries, said Edward Miguel, Oxfam professor of environmental resource economics at the University of California, Berkeley. It is trying “to match the United States” as a donor country, he said.

However, China stands out from other international lenders and donors mainly for its relative lack of transparency which raises questions in Africa as well as in the West, believes Miguel.

Unlike loans from Western governments or international lending agencies like the World Bank, which require labor and environmental guarantees on funded projects, China’s aid and loans to the Africa were described as “unconditional”, which was attractive to many countries.

But African countries, especially with economies in decline from the impacts of COVID-19, are facing growing difficulties repaying their loans, said Hannah Ryder, senior Africa program associate at the US think tank Center for Strategic. and International Studies.

“China and other countries are becoming increasingly sophisticated in their negotiations,” wrote Deborah Brautigam of Johns Hopkins University’s School of Advanced International Studies and Meg Rithmire of Harvard Business School in a joint article.

Senegalese delegates enter the conference hall during the China-Africa Cooperation Meeting (FOCAC) at the Diamniadio in Dakar, Senegal, November 29, 2021.

Senegalese delegates enter the conference hall during the China-Africa Cooperation Meeting (FOCAC) at the Diamniadio in Dakar, Senegal, November 29, 2021.

Residents of Dakar, Senegal, where the 500-person China-Africa Cooperation Forum meeting was held on November 29-30, want more infrastructure funded by China but without debt levels like those of the 1990s, noted Ryder.

Chinese creditors should lend less money to Africa in the future and analyze more carefully the projects these loans support, experts say. Lending has already ‘softened’ [tapered off] from a peak in 2014, Jili said.

Loan and other investment commitments made at the China-Africa cooperation meeting amounted to $40 billion, a third less than the $60 billion made at the same conference in 2018.

Lenders can calibrate loans based on forecasts of a post-pandemic future when African countries have more liquidity, said Yun Sun, co-director of the East Asia program at the Stimson Center in Washington. Another option, she said, is to guarantee Chinese equity from future projects in repayment of older loans, she said in an interview with VOA.

“It’s politically risky, because although it’s not an exchange of stocks for assets, it looks very much like some sort of exchange, and [that] China is exploiting Africa’s weak position so I don’t think that will happen in the immediate future and in fact this debt restructuring also takes some time,” Sun said.

China is growing increasingly confident in establishing international public-private partnerships, although many African countries are still worried about a repeat of the debt crisis in the 1980s and 1990s when nations do not could not repay their debt, says Ryder in a African Affairs remark. International organizations finally canceled this wave of unaffordable debt with conditions such as opening “their economies to international trade, liberalizing their currencies and drastically reducing costs in exchange for loans”, wrote Peter Fabricius of the Institute for Security Studies.

Fast forward to now, with loans from China, African countries, Miguel said, often end up asking “what did we agree to do” and “how much do we owe” China.

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