Chinese Infrastructure Loans in Africa Represent a Brand-New Type of Neocolonialism

How will African countries repay massive debts to China?

By Xiaochen Su

Amid much fanfare, the Nairobi-Mombasa railway line opened in Kenya on May 31, 18 months ahead of the schedule. 

It represents the second major railway undertaken by China on the African continent recently, after the launch of Addis Ababa-Djibouti Railway in January. 

 Chinese media outlets have spoken glowingly about these African infrastructural investments, often in the context of the One Belt, One Road Initiative that seeks to attain economic development through greater transport connectivity. 

African leaders seem to concur, as many are taking out massive concessional loans from China to fulfill ambitious projects, such as the East African Railway Master Plan, in the coming decades.
But there is strong doubt as to whether African countries have the financial capabilities to put such ambitious plans in action. 

In the case of the Addis Ababa-Djibouti Railway, for instance, its total building cost of roughly $4 billion is almost a quarter of Ethiopia’s 2016 government budget of $12.57 billion. 

Even at concessional rates, servicing and repaying the debt will be a significant burden for the government in the coming years and decades. 

It is unfathomable how the government will be able to undertake other infrastructural projects even if the economy, and the government budget, grow at a steady clip, as it has done in recent years.
Indeed, beyond the headline projects such as cross-country railways, infrastructural spending can weigh even higher as a proportion of the local African economies. 

Anecdotally, I have spent the past two years residing in the rural Iringa region in Tanzania, where Chinese firms have been building various government office buildings and brand-new tarmac roads linking its various townships with major cities across the country. 

While precise numbers are unavailable, given the region’s dependence on the commercial production of maize, lumber, and tea as the economic mainstay, it is conceivable that such constructions can amount to large portions of the local government revenue, in many cases unsustainably so.

It begs the question, then, of how African governments will possibly repay the Chinese for all this infrastructure construction. 

Given the ballooning amount of debt from more and more loans taken on to finance infrastructural developments in the future, African states are likely to require more than just portions of their limited budgets to complete repayment. 

More likely than not, many states will have to resort to payments in kind.
The concept of “in-kind payments” smacks of colonialism in some ways. 

The historical precedent of European colonists comes to mind. 

Europeans built infrastructure in Africa at the turn of the century, purportedly also for local economic development, but in essence the projects were used for natural resource extraction. 

The predecessor of both the Nairobi-Mombasa and Addis Ababa-Djibouti railways can be categorized as such. 

Both connect inland regions with mineral deposits with major ports on the Indian Ocean.
And there is no doubt that some of the same natural resources sought out by European colonists a century or more ago are also desired by the Chinese. 

While building infrastructure, the Chinese have also invested massively in local mines and processing facilities. 

At least part of the cargo to be shipped by the new railways and roads constructed with Chinese financing is expected to be natural resources to feed the Chinese industrial machine.
Yet the active participation of Chinese construction firms in the Belt and Road initiatives across the world cannot mask the fact that the Chinese economy is steadily shifting away from dependence on the natural resource-heavy manufacturing sector. 

The tertiary sector of the Chinese economy already comprises of more than half of the entire economy, and is expected to continue growing in proportion of the total economy at the expense of both primary and secondary sectors. 

And as factor inputs in China become relatively more expensive, low-end, natural resource-intensive manufacturing is expected to continue shifting to more price-competitive neighboring states such as Vietnam.
In other words, if infrastructural developments in Africa associated with the One Belt, One Road project will primarily benefit China by faster and cheaper transportation of African natural resources to the Chinese economy, such benefits, especially when compared to the costs of potentially non-repaid loans, may be much less than anything that European colonists obtained from their ventures in the past.
Viewed in this light, there can be some doubts as to the financial viability of providing loans to African states for building infrastructure. 

However, the public may be underestimating the potential political leverage that the Chinese government gains by holding billions of dollars in sovereign debt across the world. 

By ensuring that these debts are paid in some form or the other, whether it is economic concessions, political agreements, or a combination of both, China may in the long term formulate a new kind of diplomatic relationships with these foreign countries.
This is particularly true in much of the sub-Saharan African region. 

Given the local economies’ low levels of industrialization, weak economic governance, dependence on commodity exports, and unsophisticated financial systems, if the Chinese, through individual and state-level actors, are to seek controlling stakes in these countries’ financial, real estate, and resource management sectors, China may receive amplified benefits from any future economic developments in these countries, much more than can be calculated just in terms of debt repayment.
If almost monopolistic control of Southeast Asian economies by the ethnic Chinese serves as any reference, dominance of the local economic infrastructure through control of banks, real estate, trade networks, and retail space is pivotal for ensuring wealth remains concentrated within Chinese families despite wave after wave of anti-Chinese regulations, protests, and violence. 

China’s leveraging of sovereign debt stemming from infrastructural investments may greatly accelerate this process and deepen the economic control to one less politically toxic than the Southeast Asian case.
Either way, it is still a little too early to say that African infrastructure projects are money-losing ventures. 

Yes, impoverished countries where investments will be received will not be able to repay loans in cash even decades down the line. 

But to equate success with financial returns is shortsighted. 

The Chinese government and its arsenal of state-owned firms certainly do not think in this manner. Historical experiences have equipped them with the expertise to leverage economic positions for political gains that will prove much more important than money in the long term.

Chinese Neocolonialism in Africa

By Erik Agbleke
December 2018 will mark the 3rd anniversary of the 6th Ministerial Conference of the Johannesburg Summit of the Forum on China-Africa Cooperation (FOCAC), where Xi Jinping pledged to strengthen an already steady relationship with the African continent. 

With a promising speech to the African Union leadership and Heads of State, Xi promised to deliver a $60 billion package over the next 3 years that will include aid, interest-free loans, and capital.
To the 53 African countries that were in attendance, this was a welcome gift as Africa was just coming out of the ebola outbreak which left devastating effects in its path. 

It seems that China has found a way to expand its sphere of influence in the globalization race of the 21st century. 

Moreover, it is on the way to surpass the United States in terms of relevance and impact within the area. 

So, how and why does this matter, given the United States’ interest in the African region?
It is no secret that foreign aid can be used as a bargaining chip, where it goes a long way in facilitating international relations. 

For instance, the Marshall Plan of post-World War II was not initiated just out of the good heart of the US government. 

It was rather erected as a roadblock to the spread of communism in Western Europe. 

In the same way, China’s willingness to pour money and resources into the continent of Africa is not motivated by some form of sincerity towards the people, but rather to further its own agenda.
This financial sponsorship has ironically gained popularity with African leaders who welcome with open arms the gifts that Zhongnanhai come bearing to them. 

This allows China to bring businesses to the continent and build much-needed infrastructure, such as railroad tracks for transportation and commerce while instituting their ‘one belt one road’ initiative. However, this form of investment turns out not to be mutually beneficial to the African people. 

It buries the continent in insurmountable debt that the Chinese government maintains as leverage, a boon for them in terms of strategy. 

Case in point, the establishment of the first Chinese Naval base in Djibouti, which enables them to gain quick access into the Indian and Atlantic Ocean.
The West has a history of turning a blind eye towards Africa and its citizens, and Africans have come to accept such western indifference. 

Despite many clearly botched and stolen elections, including evidence of human right violations and overt dismissal of the rule of law, western powers have refused to hold many leaders accountable for their actions, no matter how vile they may be.
The silence from these countries who are typically quick to speak up and take actions when their interests are being threatened has emboldened some of these African leaders and empowered them to continue governing as they see fit. 

In the end, the collateral damage becomes the people they have sworn to lead and protect. 

China striving to be the biggest supporter and financier on the continent should be something that we should be concerned about; given the fact that they themselves are a substantial perpetrator of human rights violation and governmental intimidation. 

China’s waxing power on the continent may lead to an even greater disregard of human rights violations.
For the United States to regain a strong foothold within Africa and further advance its agenda of peace, power, prosperity, and principle, it must be willing to be the biggest stakeholder in terms of aid and financial support of the continent by investing in its growth and development. 

However, monetary support is not the only path to winning hearts and minds. 

Up until the Trump administration was handed control of the government, the U.S. was the best destination for education and business ventures. 

To some, the American Dream was still alive and attainable if they worked hard and played by the rules. 

This is no longer the case as the current administration sees fit to walk a hard line against immigration.
Programs such as the Temporary Protected Status (TPS) or the Deferred Enforced Departure (DED), which gave a way for multitudes of individuals that fled the atrocities in their civil war-torn countries to find refuge in America are being terminated. 

Families that have spent most of the past two or three decades building a new life here are being urged by a deadline to return to a country that is no longer theirs.
These more dismissive and closed policies can lead to a drop in foreign influence for a country such as the U.S., whose popularity has been on the decline over the last ten years due to the conflicts in the Middle East and elsewhere in the world. 

The policies being pushed by the Trump administration could, in turn, make it hard for the U.S. to gain support on the African continent while trying to curb the rise and effectiveness of terrorist groups that are operating in the area and threatening its interests.
The U.S. which has always championed itself as the vanguard for human rights around the world owes it to itself and for the success of its foreign policy to stand up to China’s expansion strategy. 

It will help tremendously in deterring terrorism and radicalization in Africa. 

However, the work should not solely rest on the Americans’ shoulders. 

The leadership in African countries must first recognize the neo-colonial practices that China is indirectly imposing on them and then stand against such unfair practice. 

To break free from dependency on outside actors and grow, there must be a willingness among the consortium to take responsibility for the development of the African continent which should be done in-house.