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The Truth: It is good that China Is Investing in Africa’s Energy and Transportation Infrastructure

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The Truth: It is good that China Is Investing in Africa’s Energy and Transportation Infrastructure

Lawrence Freeman

April 8, 2021

Below are two articles examining China’s investment policy in Africa that should be read to learn the truth about China’s lending to the continent. One, is a briefing paper from China Africa Research Initiative (CARI) entitled, Twenty Years of Data on China’s Africa Lending. The second is entitled, “Why Substantial Chinese FDI is Flowing into Africa, by Shirly Yu. Combined, both papers provide a thorough analysis of the positive contribution of Chinese investment in Africa, surpassing the United States in all categories. As  many African leaders know, without China’s contribution to Africa’s development, especially in infrastructure, Africa would be worse off. There is absolutely no indication that the U.S. and the West would fill that void.

It is undeniable that China has invested heavily in the development of Africa over the last two decades. Ignore the claptrap allegations of a deliberate Chinese debt-trap policy to seize control over Africa’s resources. It is nonsense and has not happened; not once, not in a single African nation.

According to CARI’s data base, from 2000-2019, China has made $157 billion in loans to Africa. Of these 1,077 loans, 85% have been in categories of infrastructure, of which 65% have been in energy and transportation. According to CARI, only 13% of Africa’s debt is owed to China. The largest portion of Africa’s debt is owed to multilateral institutions at 32%, followed by loans from private bond holders. Outside of Angola, only 8% of Chinese lending was for resource backed loans. 90% of the contractors in Africa from China are private Chinese companies, not state owned enterprises (SOEs). Also, 90 % of Foreign Direct Investment (FDI) is from private Chinese companies, although SOEs are the largest investors in Africa in total value.

President Biden has recently suggested that the U.S. and Europe should lead a western version of China’s Belt and Road (BRI). If it were to be as productive as China[‘s (BRI), African nations would benefit greatly, especially in this challenging economic period.

Excerpts from Shirly Yu:

“Make no mistake, Chinese state-owned enterprises (SOEs) are still the largest investors in Africa by value and continue to dominate the energy, transportation and resources sectors due to the strategic nature and long-haul return of these investments. For instance, one third of Africa’s power grid and energy infrastructure has been financed and constructed by state-owned Chinese companies since 2010. China is the most significant foreign contributor through SOEs and state-owned banks to Africa’s energy development.

“By 2034, Africa’s labour force is forecast to surpass that of China and India combined. By 2050, the African population is expected to be 2.5 billion, while China’s population will decline to below 1 billion. With these figures in mind, Africa’s young labour force is exactly what China’s labour-intensive manufacturers seek today.”

Read: Why Substantial Chinese FDI Is Flowing into Africa”

Excerpts from CARI:

IN 2000, WE RECORDED ONLY three Chinese lenders, financing 14 projects, with an average value of just US$ 10 million. Over the next 19 years, over 30 Chinese lenders would commit loans to African governments and state owned enterprises. Since 2010, Chinese financiers have financed an average of 71 projects per year, at an average value of US$ 180 million.
The four biggest Chinese banks involved with lending to African countries are China Eximbank, CDB, ICBC, and BOC. China Eximbank–which is China’s official export credit agency, and also the only bank offering government
subsidized foreign aid concessional loans–is the largest and since 2000 accounts for 56 percent of all loans.

Read: “Twenty Years of Data on China’s Africa Lending“

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 blog: 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

 

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

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China’s Belt and Road Initiative

February 17, 2021

This recent article, The Chinese ‘debt-trap’ is a myth, written by Deborah Brautigam, Director of the China-Africa Research Institute (CARI), provides definitive proof that China is not using so called debt-trap diplomacy to Africa’s seize assets. This false narrative, which is been disproved by Brautigam and CARI, time again, was used by the Trump administration to attack China in Africa as a key feature of its geo-political doctrine.

No African nation has been forced to relinquish it natural resources to China in response to late debt payments. No African asset has been seized by China. (See my earlier posts below). Misrepresentation of the case of the Sri Lankan port of Hambantota, which this article refutes, has been used as propaganda to attack the China’s Belt and Road Initiative and malign China’s infrastructure projects in Africa,

China has been a valuable friend in assisting African nations in building vitally needed infrastructure projects. The African continent is suffering today from a massive deficit in infrastructure measured in trillions of dollars. Thus, all nations of good will can contribute to addressing the continent’s huge  infrastructure deficiency, which African nations would welcome. As I have insisted for decades, there is no way to eliminate poverty and bring peace to African nations without electricity, roads, railroads, water management, and port development.

Present Biden would be wise to move beyond Trump’s anti-China policy and initiate a new era of US-Africa policies premised on physical economic development, and join me in my mission to eliminate hunger and poverty in Africa.

Read my earlier posts on alleged debt-trap. Chinese ‘debt-trap’ Propaganda Exposed-Time to End Ignorance & Prejudice Against China in Africa;  No More Lies, No More Anti-China Propaganda: There is No China-Africa ‘Debt-trap’

 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 blog: lawrencefreemanafricaandtheworld.com

Belt and Road Infrastructure Contributes to Africa’s Development: No ‘Debt-trap’

Lawrence , , , , , , , , , , , , , , , ,
CGTN published my article below:  Belt and Road Infrastructure Contributes to Africa’s Development: No ‘Debt-trap’ on December 26 , 2020. In this article, I expose the fraud of the anti-China “debt-trap” slander being used to impede China’s and Africa’s collaboration to build vitally needed infrastructure across the African continent.

December 30, 2020

Belt and Road Initiative is not debt-trapping Africa

Editor’s note: 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 blog: lawrencefreemanafricaandtheworld.com.] The article reflects the author’s opinions, and not necessarily the views of CGTN.

Over the last three years, a new type of groupthink has emerged among many Western media and policy think tanks in their geopolitically motivated efforts to malign China. They’ve claimed that China is practicing a new type of colonialism, which is coined “debt-trap diplomacy.” China is charged with deliberately luring developing nations into borrowing-lending arrangements, primarily for infrastructure projects, with the intention of entrapping them into unpayable loans. It is alleged that once the borrowing nation defaults on “excessive debt,” China seizes the project or collateral assets of valuable mineral resources.

There is only one problem with this supposition. None of it is true. There has been no takeover of any project and no seizure of assets of any kind in Africa by China. There is no evidence of an intentional effort to trap African nations into owing debt to China.

To give an example of how manipulation of words is used to disparage the Belt and Road Initiative (BRI) in Africa, just look at Heather Zeiger’s article “China and Africa: Debt-Trap Diplomacy?” The article recognizes that Kenya is suffering from COVID-19 related financial stress and cannot fulfill the terms of the loan for the Standard Gauge Railway (SGR). However, she then attempts to make the case for debt-trap diplomacy by slyly using a conditional sentence: “If Kenya defaults on payments, China might be able to receive revenue from the Port of Mombasa as collateral, although the Chinese government has said it does not intend to do this.”

The truth is, neither happened.

Johns Hopkins University’s China-Africa Research Initiative (CARI) has extensive data on Chinese lending in Africa. After reviewing over 1,000 loans, it reports that “we have not seen any examples where we would say the Chinese deliberately entangled another country in debt, and then used that debt to extract unfair or strategic advantages of some kind in Africa, including ‘asset seizures’.”

However, this has not prevented U.S. elected officials and representatives of Democratic and Republican parties from ignorantly reciting this debt-trap mantra. This propaganda is so pervasive that even some Africans have been repeating this disinformation.

Aerial photo shows trains at the Nairobi railway station in Nairobi, capital of Kenya. /Xinhua

African nations require infrastructure

China through the BRI is helping to finance and construct vitally needed infrastructure in Africa. Nothing is more critical or more urgently needed to industrialize Africa and end poverty and hunger than infrastructure. The United States, whose foreign policy is increasingly vectored at countering China’s rising political and economic power in the world, has no strategy or intention of making a similar commitment to the African continent.

W. Gyude Moore, a senior policy fellow at the Center for Global Development and Liberia’s former Minister of Public Works, has said that China’s investment in infrastructure in Africa is unsurpassed. And given the West’s history and operations in Africa, it is “frustrating that in its complicated, enmeshed, centuries-long history in Africa, there has never been a Western proposal for continental-scale infrastructure building … It was the Chinese who sought to build a road, rail and maritime infrastructure network to link Africa’s economies with the rest of the world.”

China helped finance and construct Kenya’s SGR, the only new railroad in 100 years since the British empire occupied Kenya at the beginning of the 20th century. The first phase of this ambitious project, from the port city of Mombasa to the capital Nairobi, is already completed. It is intended to connect to Uganda, Rwanda, South Sudan and Ethiopia. This has the potential to become the eastern leg of the long overdue East-West railroad across the girth of Africa, which would transform the continent.

China has contributed to the welfare of nations through the BRI. And for this, it should be supported, not pilloried.

Read: news.cgtn.com Belt-and-Road-Initiative-is-not-debt-trapping-Africa

 

No More Lies, No More Anti-China Propaganda: There is No China-Africa ‘Debt-trap’

Lawrence , , , , , , , , , , , , , , , , ,

June 20, 2020

China-Africa Research Initiative-(CARI) presented an interesting and useful webinar entitled : Debt Relief with Chinese Characteristics, using research presented from a Working Paper #39 and Policy Brief #46. View: CARI: Debt Relief With Chinese Characteristics

In response to China’s growing economic and political influence in the world, especially on the African continent, various propaganda outlets located in the West have launched a new assault on China. Their line of attack is to malign China and African leaders with the false narrative that China is intentionally luring African nations into a ‘debt-trap’ in order to seize control of their natural resources. This cynical view of China’s alliance with African nations flows from the age old doctrine of “geo-politics” that only perceives nations as either winners or losers in a fixed zero-sum view of the world.  In this evil world view, stronger powers, hegemons believe they can only maintain their supremacy by having their foot on the neck of weaker nations. The “geo-political” doctrine rejects the notion that all nations share a common interest.

Misinformation or Disinformation

As Deborah Brautigam, director of CARI has stated before, there is no evidence, none, not one single case of China using debt to seize control of an African nation’s assets. “We found no “asset seizures” and despite contract clauses requiring arbitration, no evidence of the use of courts to enforce payments, or application of penalty interest rates.” Despite no substantiation of China using debt as a weapon against African nations, the ‘debt-trap’ mantra is repeated by either misinformed individuals, including Africans, or by those who are deliberately disseminating disinformation with malice.

The CARI working paper reports the following:

“The rating agency Moody’s warned that countries ‘rich in natural resources, like Angola, Zambia, and Republic of the Congo, or with strategically important infrastructure, like ports or railways such as Kenya, are most vulnerable to the risk of losing control over important assets in negotiations with Chinese creditors.’ These assumptions of a malign China were repeated in publications like The New York Times, which contended that Chinese loans “frequently use national assets as collateral” and require refinancing ‘every couple years’ (our Africa data supports neither of these statements).” (emphasis added)

If there is any honesty or integrity left in our duplicitous culture, all claptrap about China’ alleged ‘debt-trap’ as a nefarious attempt to gain control of Africa’s wealth should cease immediately! If one examines the long history of China’s relationship with Africa and the more recent twenty year period, it is clear that China desires to resolve issues with African nations through consultation. China may choose other means of responding to payment difficulties, but there is no evidence that they want to take over African holdings, contrary to prevalent popular opinion. Read: Chinese ‘debt-trap’ Propaganda Exposed-Time to End Ignorance & Prejudice Against China in Africa

Debt Cancellation

As COVID-19 spreads in Africa, nations are struggling to survive economically and simultaneously defeat the deadly virus.  Debt service is onerous and must be suspended indefinitely or cancelled, as leaders of many Africans nation have rightly insisted. According to Dr. Brautigam, from 2000-2018, China has made loan commitments of $152 billion, and of Africa’ total external debt, China holds 17%, while the World Bank hold 18%, and private lenders 31%.  Thus, China will and has already engaged in debt relief, but will do it differently than western institutions like the Paris Club and World Bank.

“Our [CARI] study found that between 2000 and 2019, China has cancelled at least US$ 3.4 billion of debt in Africa. There is no “China, Inc.”: for interest-bearing loans, treatment for inter-governmental debt and Chinese company loans are negotiated separately, and often loan-by-loan rather than for the entire portfolio. While rescheduling by increasing the repayment period is common, changes in interest rates, reductions in principal (“haircuts”), or refinancing are not. We found that China has restructured or refinanced approximately US$ 15 billion of debt in Africa between 2000 and 20190…Chinese lenders prefer to address restructuring quietly, on a bilateral basis, tailoring programs to each situation.”   

China, up this point has only cancelled zero interest loans, which represent only 5% of loans from China, and are issued from China’s Ministry of Commerce. It is unlikely that there will be unilateral debt suspension.  Thus, we can expect that China will negotiate debt relief bilaterally with each nation, and each loan reviewed separately.

Even if debt cancellation is continued into 2021, which has not yet been agreed to, it will be insufficient. The level of investment required to meet Africa’s’ minimal infrastructure needs is in the trillions of dollars, which belies the “geo-political” nonsense of zero-sum assumptions.  Debt relief must be accompanied by issuance of credit for infrastructure and related sectors of production, otherwise Africa and the world will suffer from the spread of COVID-19 and future zoonotic diseases. Poverty is a co-factor for all diseases. Lack of electricity is a co-factor for the spread of disease and hunger, as is the lack of clean water, and inadequate transportation.

China’s Belt and Road Initiative over recent years has begun to address Africa’s infrastructure deficit, but much, much more is required. Collaboration between the U.S. and China on the development of Africa would be consequential for the continent.

I have addressed this issue in earlier posts: World Needs New Economic Platform to Fight COVID-19, New Economic Order Required to Combat COVID-19 in Africa

View: CARI: Debt Relief With Chinese Characteristics

Lawrence Freeman is a Political-Economic Analyst for Africa, who has been involved in the economic development policy of Africa for 30 years. He is the creator of the blog: lawrencefreemanafricaandtheworld.com