Opinion

Reality Check: Is China burdening Africa with debt?

Africa is facing a looming debt crisis, say leading development economists.

“Almost 40% of sub-Saharan African countries are in danger of slipping into a major debt crisis” according to the Overseas Development Institute, ahead of a major conference on debt being held in London this week.

And the relationship between African nations and China is often seen as a significant part of the problem.

Its critics say that major infrastructure projects carried out by Chinese companies in Africa are too expensive, and burden the host countries with enormous debts they can’t hope to repay.

The Chinese government is adamant that its economic relationships with African countries are mutually beneficial and rejects suggestions that it is using debt to expand global influence.

So is China really responsible for Africa’s growing debt burden?

Africa’s debt burden

The International Monetary Fund (IMF) has recently warned that Africa is heading towards a new debt crisis, with the number of countries at high risk doubling over the past five years.

The World Bank now classifies 18 countries as at high risk of debt distress, where debt-to-GDP ratios surpass 50%.

The total amount of external debt for the continent is estimated at $417 billion.

Around 20% of African government external debt is owed to China, says the Jubilee Debt Campaign, a charity which campaigns for the cancellation of poor countries’ debt.

This makes China the largest single creditor nation, with combined state and commercial loans estimated to have been $132 billion between 2006 and 2017.

A further 35% of African debt is held by multilateral institutions such as the World Bank, with 32% owed to private lenders.

There’s one important caveat: this data is hard to verify. “China is not a member of the OECD (Organisation for Economic Cooperation and Development) and they do not participate in the OECD’s Creditor Reporting System,” said Christina Wolf, an economics expert at Kingston University. But China has pledged to invest $60bn in Africa by the end of this year.

Most of China’s loans to Africa go into infrastructure projects such as roads, railways and ports.

In 2015, the China-Africa Research Initiative (CARI) at John Hopkins University identified 17 African countries with risky debt exposure to China, potentially unable to repay their loans.

It says three of these – Djibouti, Republic of Congo and Zambia – remain most at risk of debt distress derived from these Chinese loans.

In 2017, Zambia’s debt amounted to $8.7 billion – $6.4 billion of which is owed to China.

For Djibouti, 77% of its debt is from Chinese lenders. Figures for the Republic of Congo are unclear, but CARI estimates debts to China to be in the region of $7bn.

Should Africa be wary of Chinese debt?

Fewer strings attached?

Compared to institutions such as the IMF, World Bank and Paris Club (a group of 22 creditor nations not including China,) loans from China are seen by some as much quicker, cheaper, and come with fewer strings attached.

The United States in particular has been highly critical of China’s approach.

Earlier this year, ahead of a visit to Africa, the then US Secretary of State, Rex Tillerson, said China’s lending policy to Africa “encouraged dependency, utilised corrupt deals and endangered its natural resources”.

China’s response was forthright. Its ambassador in South Africa, Lin Songtian, said China was proud of its influence in Africa and that Mr Tillerson’s comments were part of a smear campaign by the United States.

“China is just like any other lender,” says Gyude Moore, a former Liberian Government official, and “China’s strategic interest is in African countries paying back debts.”

There are many examples of China supporting programmes to help with debt repayments, says Mr Moore, who’s currently a visiting fellow at the Centre for Global Development.

And ultimately, it is up to African nations themselves to accept or reject Chinese loans.

But a severe lack of infrastructure, and the desperate need for modern transport links in many of the poorest countries, make China’s ready offer of substantial loans for such projects often difficult to turn down.

And what’s clear is that Africa’s debt problem is far wider than its relationship with China.

However, China’s increasing involvement with the continent and its commitment to providing loans for large-scale projects, mean that any solution to Africa’s debt problems must address its relationship both with Beijing and with private Chinese companies operating on the continent.

(Source: BBC)

22 Comments

  1. KELVIN.W.LUNGU

    Why Zambia is falling to pay Chinese ….u says let’s build our country with chip things but still u are falling to to pay sorry to say we forget when white people says chip is expeseve …have u now believe it????Africa please workup from deep sleep

    Reply
  2. Lameck

    China is just doing business in Africa like any other business dealer and as the article said Chinese loans are quicker and have fewer strings attached, can be accessed for bigger projects. Who then in his right mind can refuse to deal with Chinese? The problem is IMF, World bank and the so called Paris Club have lost business to China and now view Chinese as enemies who are debt burdening Africa. Zambians open your eyes, China is saying use the money to whatever project you deem fit while IMF and others they give conditions on how to use the money. Is that a loan? All we need are true and selfless leaders, Chinese loans are OK and not a problem

    Reply
  3. leon

    We are like a landlord renting in there own house also failing to feed while the house is being beautified and all you had to pay is finished and the more you staying your own house the more the debt

    Reply
  4. Kas win

    China will be soon taking over has thy World’s Richest, no wonder Europeans and the United States are spear heading this Propaganda to try if African’s can isolate themselves from Thy Great CHINA which has full control over itx self,and willing to help African Countries.
    Itx forward with China.

    Reply
    • Kampeni

      Thank you Kas win for the info.

      Maybe what you have to tell the anti-China prophets of doom is that the Americans owe China trillions of dollars.
      If the money that is coming in is used well I can assure you that Zambia will not be the same again.

      Reply
  5. Mr Zambia

    a salute u China giving a poor lady like Zambia loans without conditions unlike the IMF and wb

    Reply
  6. BWALYA'$

    The question is how wise is the money spent?…China is the key to help money counties but the problem is how the country is going to spend their money

    Reply
  7. Evil mind Khalifa zaff

    We are not going to pay you,bcoz yuh normally say Zambia is a dumping country.Can you collect what is dumped??????

    Reply
  8. Ngoma

    Zambia and other African countries most know that China is business,and the purpose business is to make profits.now when they fell to pay back what will happen? Forgiveness or what?

    Reply
    • chidyamakanda

      Failure to pay loan will lead to seize most government assets such as Zesco, znbc, zaffico just to mention a few.these could be taken for years & years to double up their profits back.

      Reply
  9. Zambia

    China oils Africa President’s hand and are at liberty to what ever they want.An Africa President (some) loves money

    Reply
  10. Grace Nachula

    Zambia should wakeup because it is in deep sleep

    Reply
  11. Shagi

    The West adulterated the African continent, by plundering and enslaving her wantonly and they want to pretend that they care today because China has beaten them at their own game, making them look yellow in the face with envy. Gimme an all weather friend and I’ll show you a Chinese development partner. Go to hell Yankees!

    Reply
  12. One king Jambo

    I support you on this one,Chinese loans have no strings attached compared to IMF and world bank whose loans come with conditions which end up ravaging our African economies.

    Reply
  13. PILATO

    Chinese loans are not an issue but how the money is being used is our many concerned , we don’t want to learn that there are other individuals benefiting from this indirectly…

    Reply
  14. PILATO

    Chinese loans are not an issue but how the money is being used is our main concerned , we don’t want to learn that there are other individuals benefiting from this indirectly…

    Reply
  15. kinako

    Zambian problems ,nkongole mwachilamo

    Reply
  16. Sims

    Good pilato if we can build indastries where we can be making our goods like the making Zambian phones,cars,tyres TV sets, clothes and also foods like coffee in to finished iven the copper we need to be exporting in finished one so that we add value my brother there many things we can do if we can build indastries. thanks

    Reply
  17. Sims

    We still have Chinese in our country, let’s take this opportunity of learning what they are doing so that when they are gone we can do them all on our own . thanks

    Reply
  18. Foxx

    Time is coming when our copper is going to be using one route that’s chana it will control prices like never before.. People we call leaders are just riders to poverty.. The have been left with less option to handle the issues ,toll gates are giving them enough money roads rehabilitation is just a story on its on.am sure these people have bigger pockets than ours cause they are stealing for the people ,the government is the people..

    Reply

Leave a Reply