Africa: double debt risk for African countries turning to China

Kenya owes more to China than it does to Western lenders, the traditional source of loans to Africa. While Beijing opens its credit line to Africa, badysts warn of the risk of a double stranglehold on debt.

China has become a generous, ready and easy lender for African countries and a key investor. The researchers say that its line of credit to the continent has stretched considerably since 2000 and that money is flowing faster.

Chinese President Xi Jinping, currently visiting Africa, has signed a few loan agreements with Senegal and Rwanda. In South Africa, China's largest trading partner in Africa, Xi has unveiled a $ 14.7 billion (17 billion euros) investment in its national energy company Eskom and its company railway, port and gas pipeline

. $ 124 billion by 2016, according to figures compiled by the Sino-African Research Initiative (CARI) at the Johns Hopkins University School of Advanced International Studies in the United States. United

"Half of these loans have been awarded in the last four years," Janet Eom, a research badociate at CARI, told DW. "Thus, Africa's debt to China is becoming more and more worrying".

Angola, Ethiopia, Sudan, Kenya and the Democratic Republic of Congo were the first recipients of these loans. Angola's oil loans, which total $ 21.2 billion since 2000, account for about a quarter of China's cumulative loans across the continent.

Where is the money going?

Kenya received $ 5.2 billion. Its public debt would be $ 50 billion, of which 72% belongs to China. The East African state has the reputation of borrowing from Paul to pay Paul

The slippage of Western international lenders' debt towards China in Kenya has fueled the perception that Africa is heavily indebted to China. Analysts say this is hardly the case, though.

In the decades following independence, African countries struggled to secure loans for infrastructure and industrial development. Loans granted by the former colonial powers and the World Bank or the International Monetary Fund (IMF) have been subject to high interest rates and numerous restrictions.

China intervened with less restrictive loans. Analysts say only part of Africa's overall debt is held by China.

"African debt is not as high with China as with industrial countries like France, Britain or France, the United States," said William Gumede, professor Public Management at the University of the Witwatersrand and President of the Democracy Works Foundation in South Africa.

"More than 50% of African countries have debts to former colonial powers or multilateral organizations such as the World Bank and the IMF."

Chinese direct foreign direct investment in Africa still outweighs its loans, said Eom, citing a CARI estimate of $ 210 billion. "But this figure is less reliable," she said

in part because Chinese loans are routed to African governments and public enterprises via a complex matrix of financing the development of Chinese banks, enterprises and entrepreneurs.Transactions do not always involve the disbursement of absolute cash sums.

"Most loans are for transport infrastructure, such as roads, railways and ports, "Eom said, not all beneficiaries are resource-rich countries

Certain conditions attached

When African countries seek a loan or financing, they often want it quickly because they may have an emergency or an immediate problem. It can take up to two or three years for lending institutions to approve a loan.

"It seems faster to get a loan from China Chinese say their loans are cheaper than loans from the World Bank or developed countries They do not ask that African countries follow their policies, although they demand immediately that African countries support mainland China and not the Republic China regards Taiwan as a secessionist province, while Taiwan sees itself as a sovereign state

It is increasingly common in countries like Angola, Mozambique or Ghana, which benefit from Chinese loans for China. "The Chinese often insist that their equipment be used, and often for their own people, but workers in rural areas China, who otherwise would be unemployed in China, now come "If African countries do not pay attention, over time, the debt they owe China will be the same." slow, or even more, of China's debt, "he added. "If they do not use the loans for these purposes, Africa will fall into double debt to China and the colonial powers."

There have already been cases where African countries have failed to meet their obligations to China, says Eom. But Beijing is more likely to renegotiate the terms of a loan than to cancel it altogether.

"Kenya may find it harder to get a refund because Chinese banks are waiting for the loans to be repaid". the example of Zimbabwe

It took years for China to consider granting more loans to Zimbabwe under the presidency of Robert Mugabe after the bankruptcy of the country of southern Africa in the end in the 1990s. And when he decided in favor, the restrictions were tough: Chinese companies wanted to be exempted from local labor laws and gave the first rights to mineral exploration. "Certain mineral rights have almost been sold to the Chinese under the loan," said Gumede.

The experts agree that the ability of African countries to repay their debts is highly dependent on economic performance and the money that has flowed. in is used for infrastructure and projects that can stimulate new business or generate revenue.

25.07.2018