The Pitfall in Africa-China Financial Relations
The theme of the just concluded 7th ‘Forum on China-Africa Cooperation’ (FOCAC) at Beijing was “China and Africa;Towards an even stronger Community with a shared Future through Win-Win Cooperation”.In his address to the Forum that had brought together over 48 African Heads of States and Governments,President Paul Kagame of Rwanda in his Capacity as the
The Inaugural October 2000 Forum on China-Africa Cooperation in Beijing
Chair of the African Union stated that Africa’s growing ties with China is not a Zero-sum game and does not come at anyone’s expense.
I wish to bring to light a Critical issue in our Financial relations with China that if unchecked is a time-ticking bomb.
Since inception of FOCAC 18 years ago at Beiing,Africa has borrowed over $ 150 Billion from China.In 2009 FOCAC,China cancelled some free interest loans owed to it by over 30 African Countries that it described as Poor,least developed and heavily indebted.These were debts that could have matured by the end of 2009.This came after its 2006 FOCAC resolution to double it’s Finance to Africa from $5 Billion in 2006 to $ 10 Billion in 2009.In a move least expected,China again doubled its Finance to Africa from $10 Billion in 2009 to $ 20 Billion at the 2012 FOCAC.Fast-forward to the immediate-previous FOCAC in 2015,China again without much elaboration cancelled some debts owed to it by an unspecified number of African Nations that it described least developed and heavily in debt.These again were interest free loans that could have matured by end of 2015.Surprisingly,China during that 2015 FOCAC tripled its Funding to Africa to $ 60 Billion.
On Monday September 3,2018 during the 7th FOCAC in a striking similarity of events,China has again promised to Cancel some debts owed to it by some African Countries that are staggering in development and heavily in debt.These are debts that could have matured by the end of this year 2018.Amidst these shortfalls,China has maintained it’s funding to Africa at $60 Billion.
This begs questions;isn’t the deal getting too “good” for Africa,Isn’t it time for Africa to ponder and perhaps rethink its Financial relations with China.Is this this really a Zero-sum game as President Kagame stated or it’s a ploy by the Chinese Government to tactically enmesh Africa in debt-trap Diplomacy.
As China keeps doubling and tripling it’s loans to Africa,the International Monetary Fund has raised a red flag on Africa with over 40% of low income and low middle income African Countries already in debt distress.Africa must now get its act together.Africa can develop itself without external aid and if it must borrow then it must only bite what it can chew;loans that it can comfortably service and invest the same in prudent,strategic projects with quick high return on investment.It must also firmly deal with Corruption that continues to bedevil its very foundation and course of development.
The just-concluded 7th China-Africa Cooperation Forum in Beijing;September 2018
African Nations must stay woke and wary with the rapidly increasing China debts and ask themselves what is it that they can surrender if China asks or even weaponizes these debts to demand something in return for debt relief. These are critical issues that African Nations must consider with dire urgency as they seek to deepen their ties and cooperation with China.