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, they should prepare for the same possibility in the eventuality that they aren’t able to repay China.
Debt Acceleration was the Plan
China is smart and deliberate about its policy in Africa. It understands the development deficit on the continent and it is strategically using this 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 an abundant 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 its collateral which is mostly in national assets. But this does not comprehend the severity of the situation Africa finds itself.
Reports show that a substantial number of African countries have 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 ignorance as the world had severally warned of China’s end goal.
Just last month, the International Monetary Fund (IMF) and the United States advised African leaders of the imperial intentions of China. A core of the Belt and Road Initiative developed by President Xi Jinping in 2013. However, the lack of thought and foresight by African leaders will not let them vet the deal thoroughly before putting ink on paper.
Africa bought the Play
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 percent of Kenya’s $50 billion bilateral debts are owed to China, with the East African country requesting an additional $3.8 billion extension. Nigeria also recently accrued some $5 billion in loans from China, and Angola still owes about $21.2 billion with a pending 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 the Democratic Republic of Congo, Sudan, and Ethiopia have also incurred large debt from China.
The reality in these figures is that the majority of the beneficiary countries will not achieve the intended goals of the loans. This primarily because of corruption and poor economic structure.
How the beneficiary countries will manage to repay China without ending up like Zambia is yet to be seen, especially now that China is responding hard.
Defaulters should not also expect any help as they had from the IMF in 2005, with the Multilateral Debt Relief Initiative that canceled over $100 billion debt for 30 Africans countries. The US has admonished the IMF not to bail out any country having debt servicing troubles with Chinese loans.
It also does not seem like any other bloc will be willing, too, considering the volume of money involved, or in light of risking the US consequences.
A Ready-Made Alternative to Loan?
Now that Africa is having trouble with China, perhaps African leaders could consider prioritizing better financial structuring and eliminate corruption.
The African Union reported in 2014 that the continent lost $184 billion to corruption annually. This was only derived from documented figures three years ago, which logically puts the figure much higher. Whereas, if African countries can plug all leakages, they could generate enough money 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 is required to make an economy flourish. In fact, the more it consumes itself in this belief, the greater the problems it creates for the economy.
For instance, transportation and power generation that accounts for most of the spending of Chinese loans 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 to dominate the global economy clear enough for any serious mind to realize. It knows the enormous potentials Africa possesses, and it will go the extra length to utilize them for its selfish mission. Just like Europe did with colonialism.
If African countries should make themselves the stepping stones for China and worse-off afterward, the consequences would be theirs to bear, alone.
Ibrahim B. Anoba is a Senior Fellow at AfricanLiberty.org. Follow his tweets on Africa:@ibrahim_anoba.