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How African Countries are in Debt to China

Updated: Dec 7, 2023

By Liz Calvo

Graphic Credit to Pexels

In failure to repay debt, at least a dozen African nations are facing grave repercussions at the hands of their debtor China.

The country of Uganda lost the Entebbe International Airport to China on November 17, 2015, reporting it as part of the repayment conditions. Following this event, reports have been released, exploiting China’s tacit of weaponizing the use of loans since 2018.

Originally the Ugandan loan was meant for the expansion of the international airport. It included a 20-year payback schedule and a seven-year grace period. However, international media like Africa’s Business Insider and India Today reported that the Ugandan government waived off the clause for international immunity to secure the loan. This helped the Chinese lender take possession of the airport without any international arbitration.

After trying to renegotiate, Chinese authorities refused to alter the original terms of the deal. Uganda’s Finance Minister, Matia Kasaija apologized to parliament for the “mishandling of the $207 million loan.”

But this issue is one of many that was revealed by the African government.

According to Wayne M. Morrison, a specialist in Asian Trade and Finance, as of 2009, China became the biggest trade partner for African countries, however, in recent years, China’s leading portfolio has started to decline. By 2019, new Chinese loan commitments amounted to only $7 billion to the continent, down 30 percent from $99 billion in 2018. The large loan amounts are becoming unbearable for the poor African nations to repay.

Photo Credit to Pexels

Some of China’s largest companies were building roads and railways, pharmacies, trading furniture, and buying land in many central African countries.

In the twentieth century, China had drastically changed the continent’s economic landscape. According to Bradley Thayer, a writer for The National Interest, “it’s estimated that 12 percent of African industrial production, or $500 billion annually, nearly half of Africa’s internationally contracted construction market is carried out by Chinese firms.”

Now, several African countries have cancelled contracts with Chinese companies for mediocre construction work.

Ghana, for example, cancelled the contract for the China-led Everyway Traffic and Lighting Tech Company Limited. This $100 million project was intended to develop an intelligence traffic management system and help improve security.

This tension has led other African nations to call for a review of contracts bagged by Chinese firms.

The President of Democratic Republic of Congo (DRC), Felix Tshisekedi, called for a review of mining contracts, reporting he was unhappy with “China’s exploitative tendency” and wants better deals for his country.

“Those with whom his country signed contracts are getting richer while DRC people remain poor,” stated Tshisekedi.

African countries have now become conscious to China’s predatory nature in loan diplomacy.

Right now, China owns around 72 percent of Kenya’s external debt which stands at $50 billion. Over the next few years, Kenya is expected to pay $60 billion to the China Exim bank alone.

Additionally, Chinese leaders are trying to claim the Port of Mombasa from Kenya if they do not pay the debt. However, the Kenyan government is in the process of proving the port to be excluded from the deal since it was previously not including any assets in the contract.

Photo Credit to Wikipedia

Between 2010 and 2015, Nigeria’s debt to China has also grown from $1.4 billion to $3.3 billion and the country had to spend $195 million in 2020 as debt repayment to China.

In failure to pay, the Nigerian government may lose various rail systems, internet infrastructures, and the Zugeru powerplants, all of which were built using loans from China, according to Naira Metrics.

In Djibouti, China has supplied $1.4 billion in funds which is more than 70 percent of the country’s gross domestic product, according to Economic Times.

Having learned their lesson, at least 18 African countries have been renegotiating their debts while 12 others are in talks with China for restricting an approximate $28 billion in loans.

Unfortunately, African countries can only hope to spread awareness of China’s endeavor by targeting underdeveloped countries and being wary of any future contracts. Short-term relief will be expected but massive debt forgiveness cannot fix the suffering these countries have endured.

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