Time to End Clap-Trap About ‘Debt-Trap Diplomacy’ in Africa!

While China is Africa’s biggest bilateral creditor, most of the continent’s debt is due to private Western holders of African debt, according to a new study. Photo: PowerChina

June 14, 2022

Africa’s Bigger Worry Is Western Bondholders-Study Finds, an article in the South China Morning Post (see below), is yet another refutation of the baseless ‘debt-trap diplomacy.’ Western propaganda accuses China of  deliberately driving African nations into debt, in order to seize their assets upon default on their loans. These charges have been disproved again, and again, including by the China-Africa Research Institute-CARI, Johns Hopkins University Washington DC. Not to overlooked: not one African asset or project involving China has been seized!

“Contrary to the debt-trap narrative, if a wave of African defaults materializes in the near future, as IFI officials have been fearing since at least 2015, it will be catalyzed more by private-sector maneuvering and intransigence than by Chinese scheming,” the study said

These false allegations against China and its Belt and Road Initiative, have been repeated without a scintilla of evidence, by leaders of  Western governments including several U.S. Presidents, members of Congress, and State Department officials. The motivation for the mindless repetition of what is a blatant falsehood, is the perverted geopolitical doctrine. The followers of this geopolitical mindset insist that for the U.S. led West, to maintain their supremacy in the world, they must suppress and weaken other superpowers, to prevent them from challenging the U.S.-West hegemonic status. Sadly, from the ideology of western geopolitics, the African continent is seen as a mere chess board with African nations as mere chess pieces to counter China’s emergence. To China’s credit they have collaborated with African nations to build vitally necessary infrastructure, while for the last fifty years, the West has refused to make these long term investments.

 As I have documented on this website for years, Africa’s infrastructure is so huge, that the demand for capital investment cannot be satisfied by one nation alone.

There is a harmony of interest for the U.S. and China to cooperate with African nations to eliminate poverty and hunger, which I know can be done within one generation. Let us jettison the relic of geopolitics and adopt a mission that is in the shared-common interest of humankind.

Africa’s Bigger Worry Is Western Bondholders-Study Finds

Chinese debt traps in Africa? The bigger worry is bondholders, study finds

•China is the continent’s biggest bilateral creditor but most of the debt is due to private Western holders of African debt, according to a new report

•Private-sector manoeuvring rather than Chinese scheming more likely to induce a wave of defaults, researchers say

Jevans Nyabiage, June 6, 2022

The rise in African debt due to Chinese lending pales in comparison with the debt burden created by private creditors in the last decade, according to a new report taking aim at accusations that Beijing engages in “debt-trap diplomacy” on the continent.

The study – by Harry Verhoeven from the Centre on Global Energy Policy at Columbia University, and Nicolas Lippolis from the department of politics and international relations at the University of Oxford – says the debt-trap narrative is a function of China-US strategic and ideological rivalry rather than a reflection of African realities or perspectives.

“What keeps African leaders awake at night is not Chinese debt traps. It is the whims of the bond market,” the report says.

Debt-trap diplomacy involves extending loans to countries and taking control of key assets if the debtor defaults on repayments.

While China is the continent’s biggest bilateral creditor, most of the debt is due to private Western holders of African debt, according to the researchers. Capital, in the form of debt repayments, thus continued to flow from Africa to Europe and North America, the study said.

Verhoeven said the percentage of African debt owed to China was less compared to that borrowed from private creditors.

“[Chinese debt] is not the most rapidly growing segment of debt. Other credit lines have grown a lot more in recent years, especially those towards commercial creditors,” said Verhoeven, co-author of the report “Politics by Default: China and the Global Governance of African Debt”.

“These are bondholders, people from London, Frankfurt and New York who are buying African debt. That segment in the last couple of years has grown much faster than any liabilities that African states owe other creditors.”

The report cited confidential estimates of international financial institutions (IFIs) that showed sub-Saharan Africa’s government debts to Chinese entities at the end of 2019 totaled around US$78 billion. This was about 8 per cent of the region’s total debt of US$954 billion and 18 per cent of Africa’s external debt.

Continue reading the entire article: Africa’s Bigger Worry Is Western Bondholders-Study Finds

Read my earlier posts:

Africa’s ‘poverty trap’ more dangerous than so-called debt trap

Chinese ‘Debt Trap” is a Myth-Biden Would be Wise Not to Continue Trump’s Attacks on China in Africa 

Lawrence Freeman is a Political-Economic Analyst for Africa, who has been involved in economic development policies for Africa for over 30 years. He is the creator of the 0blog: lawrencefreemanafricaandtheworld.com. Mr. Freeman’s stated personal mission is; to eliminate poverty and hunger in Africa by applying the scientific economic principles of Alexander Hamilton.

Big Plus for Africa: Belt & Road, BRICS, and Africa-China Summit, Converging for Development

{Heading into the 7th  Forum On China-Africa Cooperation-(FOCAC) we are already witnessing significant changes in the physical infrastructure of Africa as a result of China’s One Belt and Road Initiative, the BRICS and previous FOCAC summits. Next week’s China-Africa Summit portends greater cooperation for investment in infrastructure and manufacturing, leading to the long over due industrialization of the continent. Thus finally liberating Africa from the effects of 500 years of slavery and colonialism. In addition to China, many nations are investing in Africa in constructive ways, but unfortunately not the United States, which is retreating from Africa. President Trump can and should reverse this trend by joining China’s Belt and Road development of this great continent, which in less than two generations will be the population center of world. Please review the articles below.}

Chinese Envoy to FOCAC: `Twin-Engines’ of BRI and FOCAC Will Transform Africa

Aug. 29, 2018 –Zhou Yuxiao, Chinese Ambassador to the Forum for China-Africa Cooperation (FOCAC), spoke of the historic impact of the Sept. 3-4 FOCAC summit, in an interview with Xinhua yesterday. His observations come as many African heads of state are already arriving in Beijing, even before the Sept. 3-4 formal sessions of the Forum take place. Founded in 2000, FOCAC has had two previous heads-of-state meetings, one in 2006 and one in 2015.

Zhou said that the China-Africa collaboration had proceeded in small steps, but successfully over the years. All the while, China’s ability to “walk the walk,” and Africa’s success in collaborating, made things work, to the point of widespread trust and effectiveness. At the 2015 FOCAC meeting in South Africa, China pledged financing in the range of $60 billion for implementing ten cooperation plans announced at the time. Now financing is also coming from the Silk Road Fund, the BRICS New Development Bank, and private Chinese firms.

Xinhua summarized, “A key aspect to watch, Zhou said, will be how China and Africa link the Belt and Road Initiative (BRI) with the UN 2030 Agenda for Sustainable Development, the African Union’s Agenda 2063, and African countries’ development plans.” This year, diplomatic relations were established between the African Union Commission (currently headed by Rwanda) and FOCAC. Zhou referred to the the BRI and FOCAC being “twin engines” for driving cooperation further in Africa. Many African leaders and experts are forecasting what lies ahead.

Lesotho’s Prime Minister Thomas Motsoahae Thabane, said in an Aug. 22 Xinhua interview, that the upcoming summit, “is a landmark in the world aiming to improve itself for the survival of the human race, which faces multiple challenges today … the commitment is not only to specific countries in Africa, but to Africa in general.” China is a “true friend” of Lesotho, not “by word of mouth … but through actions, actions that push us to go from the situation of being underdeveloped to a situation of being developed. What more can you wish for from a friend than to stretch a hand of friendship in order to raise you up when you were flat on your stomach?”

Thabane further pointed out that relations with China are “mutually beneficial.” In the past, for Western countries, the benefit was “always for what they call `the Mother country.’ Now, China is not like that, that is why we feel like we have a true and loyal friend in China.”

Hisham AbuBakr Metwally, an Egyptian researcher with the Ministry of Foreign Trade and Industry, wrote an Aug. 21 opinion article for CGTN, reviewing accomplishments in rail, agriculture, energy, education, and other areas in Africa, thanks to work with China to date. {“FOCAC — Unprecedented Successful Mechanism, Reshaped Africa”} But he forecast more and bigger projects and a bright future. “After the completion of all mega infrastructure projects and industrial zones, the continent will change completely.”

Note that CGTN has prepared a five-episode documentary entitled “A New Era of China-Africa Cooperation,” to show the development of African countries and to present the achievements of China-Africa cooperation.

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China-Africa Research Initiative-(CARI) at Johns Hopkins in Washington DC, provides a useful report on the progress of China-Africa collaboration. It also dispels the myth that Chinese loans are bankrupting all Africa nations. Many decades before China started investing in Africa, the continent had been suffocated by hundreds of billions of dollars of parasitic debt from Western institutions.

Excerpt from its conclusion highlight:

“Belt and Road. The language of the 2018 FOCAC will likely include more mentions of the Belt and Road Initiative, given that it is a priority of President Xi Jinping. Chinese contractors are keen to win Chinese finance for infrastructure projects desired by African governments, many of whom have been inspired by China’s industrialization and infrastructure capacity. Chinese-financed infrastructure projects in Africa such as the standard gauge railway transport projects in Kenya and Ethiopia, and new trade and industrial zones in Djibouti, Egypt, and Morocco, have been marketed as part of the Belt and Road Initiative.”

Read the complete report: The Path Ahead: The 7th Forum on China-Africa Cooperation

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This article discusses the “deepening relations” with Africa by the rest of world, and appropriately asks: “Where does this Leave the United States?” Read: The World is Coming to Sub-Saharan Africa. Where is the United States?

 

Who Owns Africa’s Debt: China or Western Nations & Institutions?

Some Western media and politicians have recently created the phrase “debtbook diplomacy” to accuse China of “miring nations in debt” and “undercutting their sovereignty.”

According to CNN, a new report presented to the US State Department claims the “Chinese government is leveraging billions of dollars in debt to gain political leverage with developing countries.”

“This phrase ‘debtbook diplomacy’ shows the West is nervous of China-Africa cooperation. ‘Debtbook diplomacy’ is what they did to Africa for decades, but now China is actually helping African nations rid themselves of ‘the debt trap’ set by the West,” said Wang Yiwei, director of the Institute of International Affairs at Renmin University of China in Beijing.

The West left African countries with a heavy debt on projects and failed to support their sustainable development, or to increase productivity and help them realize self-reliance, Wang noted. “Western countries wanted Africa to become their raw materials supplier while maintaining their post-colonial influence over the continent. This prevented African countries from realizing their own industrialization, Wang said.

China, on the other hand, is helping the nations move toward self-reliance and industrialization. The West doesn’t like that and this is why it is attempting to slander China, Wang added.

Xu Weizhong, deputy director of the China Institutes of Contemporary International Relations’ Institute of West Asian and African Studies, said that “Africa needs a lot of investment to build infrastructure, and China’s loans, which have increased African countries’ debt, are necessary for their development.”

China’s assistance to Africa differs from what the West offers. China has a “crucial principle,” which is to respect African countries’ will and conditions. China has never forced African countries to accept loans on large infrastructure projects beyond their ability to pay, Wang said.

“China and Africa have walked an extraordinary path in developing relations and cooperation, and our peoples have benefited greatly from it,” Assistant Foreign Minister Chen Xiaodong said at the opening ceremony of the Seventh China-Africa Think Tank Forum in Beijing on July 4.

“A minority of Westerners are blinded by their ‘pride and prejudice’ and choose not to see this… maybe that is what they call ‘sour grapes’?” Chen said.

West is largest debt holder

Data shows that Western countries and West-led organizations are the largest owners of African debt, not China, Shen Shiwei, a research fellow at the Charhar Institute and former government relations and business consultant for Chinese enterprises in Africa, said in an article published on CGTN’s website.

Research from SAIS and the China Africa Research Initiative at Johns Hopkins University shows that China has provided loans worth $114.4 billion to Africa from 2000-2016, which accounts for 1.8 percent of Africa’s total external debt. 

“The IMF and World Bank own 36 percent of African debt. These multilateral financial institutions and other giant investors in Europe and the US have far stronger leverage [than China],” Shen noted in his article.

“For historical reasons, the West has many interests in Africa. Those that are reasonable should be respected when we cooperate with Africa. But for those that are unreasonable, should China and African countries continue to respect them? Before accusing China, the West should think about this carefully,” Xu said                   (emphasis added)