There have been credible reports of talks between the Zambian government and China on handing over the country’s national electricity company, ZESCO to the Chinese due to the inability of Zambia to meet its loan repayment promises. This is expected as China is already in control of the country’s broadcasting company, ZNBC. There are also fears the main airport in Lusaka could be the next target. Obliviously, Zambia is in trouble. And for other African beneficiaries of Chinese loans should possibly prepare for the same fate in the eventuality they couldn’t meet up the loan repayment deadlines.
Debt acceleration was the play all along
China is smart and deliberate about its policy on Africa. It understands the development deficit on African continent and it is strategically using the method to keep Africa’s economic future under its arms.
Africa has what China needs to further propel its economy, specifically crude oil and copper. The best way to ensure and abundance supply of these in the future would be to make the depository countries owe it, which it has excellently done so far.
The play is simple. Give staggering loans to inept leaders and keep the details of repayment from the prying eyes of the public. Eventually, if debtors are unable to service their debts, China takes over their collaterals – which as the world is now seeing, are mostly national assets. But this does not comprehend the severity of the situation Africa finds itself.
Reports show that a substantial number of Africa countries has taken Chinese loans since 2000, totaling a whopping $124 billion by 2016. Of course, there have been more after that. But, Africa is only a victim of its own stupidity as the world had severally warned of China’s end goal.
Just last month, the International Monetary Fund (IMF) and the United States (U.S.) advised African leaders of the bad intentions of Chinese loans, which is a core of the Belt and Road Initiative developed by President Xi Jinping in 2013. However, lack of thought and foresight by African leaders would not let them vet the deal thoroughly before putting the ink on paper.
Africa has bought the play real good
Nearly all major economies in sub-Saharan Africa today are massively indebted to China. What makes this worse is that, most of them have poor economic projections for the next few years and will almost certainly have problems servicing their debts.
For instance, around 72 per cent of Kenya’s $50 billion bilateral debts is owed to China, with the East African country requesting an additional $3.8 billion extension. Nigeria also recently accrued $5 billion in loans from China and Angola is owing some $21.2 billion with a proposal for another $4.4 billion.
South Africa should be getting $14.5 billion in Chinese investment soon and another $2.5 billion loan for its embattled national power company, ESKOM. Weaker economies like Democratic Republic (DR) of Congo, Sudan and Ethiopia have also incurred large debt from China.
The reality in these figures is that, majority of these African countries would not achieve the intended goals for which the loans are meant, primarily because of corruption and poor economic structure. How the beneficiary countries would manage to repay China without ending up like Zambia is yet to be seen, especially now that China is coming hard on them.
Defaulters should not also expect any help like they had from the IMF in 2005, with the Multilateral Debt Relief Initiative that canceled over $100 billion debt for 30 Africans countries. The U.S. has admonished the IMF not to bailout any country from China and it does not seem like any other bloc would be willing to, considering the volume of money involved or risking U.S. sanctions.
Ready-made alternative to loan?
Now that Africa is courting trouble with the Chinese loan, perhaps African leaders would consider advice on prioritizing better financial structure and eliminate corruption.
The African Union (AU) had reported in 2014 that the continent lost $184 billion to corruption annually. Of course, this was only derived from documented figures some three years ago, which logically puts the figure much higher. Whereas, if African countries can plug all leakages, they could generate enough to finance a substantial part of the many development problems they face.
More so, the excessive expectation on governments to provide jobs, infrastructure, education and other needs is a driving force for loan procurement.
It is evident that governments cannot provide all that it requires to make an economy flourish. In fact, the more it consumes itself in this believe, the greater problems it create for the economy.
For instance, transportation and power generation – which accounts for most of the Chinese loans to Africa – can be efficiently provided by private investors. The same reason telecommunication is solving many problems on the continent without government ownership or the need for loans, is the same reason privatization would work for these crucial sectors.
China has made its intentions known; it wants dominate the global economy. This is clear enough for any serious-minded analyst to realize. It knows the enormous potentials Africa possesses and will go extra length to utilize them for its mission, just like Europe did with colonialism. If African countries should make themselves the stepping stones for China and become worse on socio-economic flank afterwards, the consequences would be telling as it would be grim.
- The columnist is a Senior Fellow at AfricanLiberty.org. Tweet at him: @ibrahim_anoba