Has China pushed African countries into “debt traps”?

In the recent past, some Western media outlets and officials accused China of using loans to increase the debts of African countries to such levels that they cannot repay them, in order to lay a “debt trap” for the borrowers.

And after the African countries fail to repay the debts, China will “take over” large-scale infrastructure facilities such as airports and ports in some African nations.

However, after investigation many researchers have come to the conclusion that this accusation is an unfounded myth, which is more about China-US strategic and ideological rivalry than a reflection of the reality and the African perspective.

Firstly, a 2018 study by Jubilee Debt Campaign shows that China owns only 20% of the debt owed by 48 African countries. The rest is owned by multilateral financial institutions (35%), private creditors (32%), and Paris Club members (13%), including the US, the UK, France, etc. The World Bank’s 2022 International Debt Statistics has shown a similar result. Therefore, China is not the main creditor of Africa. If that is the case, how come the accusation saying that China’s lending practices have pushed African countries into “debt traps”?

This misinformation is not only related to the composition of creditors, but also to specific projects. A recent report by a Kenyan media claimed that the Mombasa Port risked being taken over by the Export–Import Bank of China, if Kenya defaulted on the US$3.2 billion Mombasa-Nairobi Standard Gauge Railway (SGR) loans.

However, research by Deborah Brautigam, a prominent professor at Johns Hopkins University, wrote in his recent publication that Kenya’s former auditor-general Edward Ouko had wrongly paraphrased a clause in the Mombasa-Nairobi SGR contract, and that he was mistaken to call Kenya Ports Authority (KPA) a borrower. If the KPA is not a borrower, how come the accusation saying the Mombasa Port risks being taken over by a Chinese bank?

Secondly, some Western media and officials claimed that China’s lending practices in Africa lack transparency, hence bringing uncertainty to the decision-making of the public and private sector lenders. This is a misconception and misrepresentation of facts. Actually, it is a pretext used by Western banks and financial institutions for their reluctance to grant soft loans to African countries.

Different from what China does, these institutions have either applied a narrow assessment criterion of economic viability or attached political strings such as reforms in human rights, law and press freedom to the loans they are about to grant to African countries.

Tarnishing the transparency of China-Africa cooperation is an insult of the governance of African countries and the wisdom of the African people. Responding to the US attack on Chinese investments in Africa in March 2018, African Union Commission Chairperson Moussa Faki Mahamat told the then US Secretary of State Rex Tillerson that “Africans are mature enough to engage in partnerships of their own volition”, implying that Africa does not need outsiders to make irresponsible remarks on Sino-African cooperation. In short, the days of thinking that Africa is still a black continent, embroiled in illiteracy, cannot be masters of its own destiny, and therefore highly vulnerable to bullying, are gone.

Thirdly, China is committed to supporting Africa’s development and helping solve its debt problems. China’s investment portfolio in Africa is very diversified, covering a broad menu of sectors. More importantly, in assessing the feasibility of projects in Africa, China does not apply the narrow Western assessment criterion of economic viability alone, but a much broader cum more comprehensive criterion of socio-economic development. In this regard, it is no wonder that US investments in Africa are a small fraction of those of China.

In the same vein, one needs to recall that, in the 1970s, when Tanzania’s leadership was searching funds to build the TAZARA Railway, Western countries were not ready to finance the project because their assessment found it not feasible economically. However, the Chinese funded the project. Ultimately, the building of TAZARA had not only spearheaded the political liberation of southern African countries, but also facilitated the establishment of Southern African Development Community (SADC) due to the improved connectivity.

As Africa’s good friend and reliable partner, China has always been dedicated to easing Africa’s debt pressure. The Asian country is fully implementing the G20 Debt Service Suspension Initiative: it has put off more debt payments than any other G20 member. In November 2021, at the eighth FOCAC Ministerial Conference, Chinese President Xi Jinping announced the exemption of debt incurred in the form of interest-free Chinese government loans due by the end of 2021 for the least development countries in Africa, and pledged 10 billion US dollars from its share of the IMF’s new allocation of Special Drawing Rights.

To solve Africa’s debt problems requires a comprehensive and coherent plan, which involves both short and long-term measures such as debt relief, and more prudent debt procurement practices aimed at, not only enhancing Africa’s development capacity, but also ensuring that debt levels are sustainable. Truly, China-Africa cooperation has provided a new avenue and opportunity for Africa to finance her socio-economic development and realize her aspirations in employment creation, industrialization, human capacity building and poverty reduction.