Africa recovering from loan slumber, asking for concession from China

Controversies surrounding China-Africa
partnership have staring Africa in the face, forcing some countries have
started seeking to write off their loans from China.

 

Some other countries are offering concessions using their natural resources and assets to manage their ballooning debt.

 

A new report by the US-based Centre for
Global Development shows that China’s loans to Africa, currently
standing in excess of $14 billion, continue to rise, putting a strain on
borrowers and posing the risk of default.

 

South Sudan has said that it will use its crude oil as payment to China for its roads projects.

 

On September 2, President Salva Kiir said that his country had reached an agreement with Beijing.

 

“We agreed at the recent Forum On
China-Africa Co-operation (Focac) summit in Beijing that we will not pay
them in cash to do the roads but in crude oil. This will help us avoid
debt, and also eliminate corruption within our ranks,”

 

President Kiir said, citing some of the roads targeted in this arrangement as Nadapal to Torit, and Juba to Rumbek and Wau.

 

There has been concern about African
countries bingeing on Chinese loans, with widely circulated reports that
Beijing was targeting some of the properties of the defaulting states.

 

On September 3, Zambia denied media
reports that it was in talks with Chinese companies for a
debt-to-public-utility swap as it seeks relief.

 

“All these reports about China taking
over our public assets due to our debt, including our international
airport, public electricity utility firms and state broadcaster are
false,” said chief government spokesperson Dora Siliya.

 

This past week, Botswana became the
second African country, after Ethiopia, to announce that Beijing had
agreed to extend its loan repayment period for rail and road
infrastructure and write off some of it.

 

President Mokgweetsi Masisi said that
they had made a pitch for debt relief to China and got a debt and
interest cancellation of $7.2 million.

 

“They also offered us a grant of $31 million and a new loan of $10.2 billion,” the president added.

 

Ethiopia was the first African country to
have its debt restructured. Addis announced that China had agreed to
restructure a $4 billion loan for the railway that links its capital
Addis with neighbouring Djibouti.

 

“The loan for the Addis Ababa-Djibouti
railway, which was meant to be paid over 10 years, has now been extended
to 30 years. Its maturity period has also been extended,” Prime
Minister Abiy Ahmed said.

 

In Kenya, the government asked Beijing to
consider providing half of the $3.8 billion for the second phase of the
Naivasha-Kisumu standard gauge railway as a grant and the other half as
a loan.

 

“The Naivasha-Kisumu phase of the SGR
will cost $3.8 billion. And owing to its regional significance, I would
request that 50 per cent of its cost be provided as part of grant
financing,” President Uhuru Kenyatta reportedly asked
Chinese President Xi Jinping at a bilateral meeting on the sidelines of
the Focac summit.

 

The total Chinese pledge of grants and
loans (including commercial rate loans and export credits) has dropped
from $40 billion in 2015 to $35 billion this year.

 

Deborah Brautigam, director at the
China-Africa Research Initiative at Johns Hopkins University in the US,
said that China’s debt relief policies have not changed and are limited
to interest-free government loans maturing at the
end of the year.

 

“In the past 10 years, China has regularly cancelled overdue African interest-free loans, but not for all,” Ms Brautigam said.

 

“China’s foreign aid pledge, which includes grants, interest-free loans and concessional loans, has jumped to $15 billion.

 

“This means that China is now offering $5
billion of concessional assistance to the continent annually, its
highest ever. We are likely to see China’s new International
Co-operation and Development Agency administering these funds,”
Ms Brautigam said.