Debt trap diplomacy: China's presence in Africa-and why it matters
China’s Belt and Road Initiative has led it on a near ten-year trek of investment across the world, and these economic pursuits have largely gone unnoticed by the global community,
until now. Amid the current COVID-19 world health crisis, leaders from many African countries are now imploring China to retract the immense debts they have racked up over the years, and instead of debt relief, they are being met with radio silence.
The Belt and Road Initiative or the New Silk Road is likely one of the most aggressively ambitious infrastructure projects that you have never heard of, and China prefers it that way. It exists in the form of a path of investments from Eastern Asia all the way into Europe, and eventually Africa as well. China has been tactically putting money into Africa for many years, which is indicative as to why they hold a third of its sovereign debt. The BRI has been argued to be a trojan horse for the expansion of China’s economic and political influence, thus its own sovereignty, much like the original Silk Road. It is a carefully crafted plan to invest in countries that will struggle to or be unable to pay back said debts, resulting in China taking over the ports, factories, mines, or any other infrastructure they invested in as a form of repayment, all resulting in a loss of sovereignty for the countries involved. To date, there are over sixty countries, which is about two-thirds of the world’s population, that are in some way involved in Belt and Road Initiative projects, or plan on getting involved to some capacity in the near future, everywhere from Kazakhstan to Italy, Portugal to Laos. Although the United States and western Europe have expressed some concern in recent years over this massive undertaking by China, it has largely fallen under the radar in the global community due to the fact that China’s investments in these nations is structured so that their collection on these failed investments is staggered and conveyed as reaching an agreement, rather than a takeover.
China’s involvement in Africa goes beyond the Belt and Road Initiative, it is a continuous investment that is nearly two decades in the making. Alas, unlike their previous financial ventures, its recent engagement in Africa is garnering considerably more attention from the global community, because China has chosen now, in the middle of a worldwide pandemic, to collect on its stakes in countries across Africa. With COVID-19’s catastrophic effect on the global economy, Africa’s economic growth alone is predicted to shrink by 1.6 percent in 2020 due to more restrictive financial conditions, declining export prices, and disruptions to daily economic activity. The IMF and World Bank as well as several sovereign governments have called for urgent debt relief so to aid with a post-COVID-19 economic recovery, and the IMF has gone so far to approve cancelling six months of debt payments from 25 countries, 19 of those being African nations. However, China has been noticeably silent on this, its Foreign Ministry vaguely saying that the origin of Africa’s debt problem is ‘complex’, and more or less refusing to assert where it stands with the global effort for debt relief.
China’s decision on how it might address Africa is multi-faceted. It could have decided to collect on its investments at any time, but picked now specifically, implying they were cognizant of the probable global pressure to engage in unilateral debt relief measures but could potentially avoid it. If this is the case, it spells immense trouble for the African nations who are expected to pay. Ghana’s finance minister commented that Africa’s debt to China is now over $145 billion dollars, with eight billion due in 2020, an unfeasible amount in the current economic climate. The trap that China sets with these investments lies in the presumed absence of political ties in the capital they lend, in exchange for exploitation of natural resources and channelling the exports to China as a form of repayment. An example of this can be seen in Angola, where China allowed the country to repay its 42.8 billion dollar loan by having it send its oil directly to China, leaving Africa’s second biggest crude producer with vastly less product to put on the market, thus resulting in a shrinking economy and GDP.
Further, this decision to request payment on its debts during such an economically tumultuous time could allow for China to force the hand of these African countries, and engage in renegotiations that facilitate debt-for-equity swaps, as seen in Angola. Although this might be the most sustainable or feasible option for the indebted African nations, it will lead to drastic loss in economic and eventual political sovereignty. China currently makes up more than a third of the external debt service in Ethiopia, Kenya, and Nigeria, three of the wealthiest countries in Africa currently, and assuming they default on their debts and end up in a debt-for-equity agreement, China could more or less control their exports, reap their economic growth, and/or utilize their raw materials and the newly built infrastructure for itself. In essence, the more states China has economic and thus political dominion over that possess valuable resources, the greater its strength in the body politic, as
they functionally become a self-sustaining country that has no reliance on other nations. This could effectively absolve them from their responsibility in the international community and give them ability to operate without the restriction of alliances to other countries based on any essential trade.
It is possible that the blend of COVID-19’s impact on the global economy, China’s timing in requesting African nations to pay off their debts, and the worldwide attention that both these situations have obtained will facilitate an increasingly critical look at the impact that the Belt and Road Initiative has created around the world, as well as spark international organizations and other powerful countries to examine China’s overall investment strategies more closely. Africa is comprised of countries rich in culture, history, resources, and most significantly, promise. States like Ghana, Angola, Ethiopia, and many more fall into this classification, and their status as emergent nations puts them at risk to debt-trap diplomacy. It is in the global community’s interest to keep a watchful eye on China’s continued investment pursuits, as developing countries are crucial parts to the world economy and society. Should the allowance for this modern-day economic imperialism by China
continue, all the so-called international powers who remain as bystanders will be complicit in what comes next.
Banner image courtesy of Stephen Walli via Wikimedia, ©2006, some rights reserved.
