“When troubles come,” Claudius in William Shakespeare’s Hamlet said, “they come not single spies but in battalions.”
The People’s Republic of China, where Communism killed ancient wisdom and turned the great people psychologically rudderless, mentally bankrupt, and civilizationally orphan, maybe realizing this. Not only has Covid-19 cornered Beijing in the world, its multiple organ failures—Alibaba, TenCent, Evergrande—are turning its erstwhile economic miracle into a nightmare. And troubles, like debts, keep mounting on a monthly basis.
Now, several African countries are, like intrepid ants apportioning with small cuts a much larger creature, Beijing increasingly finds itself pushed into a corner on investment-related matters. Some of these countries, having woken up to the Dragon’s carefully laid debt-traps via the projects under its grandiose, multi-continental Belt and Road Initiative (BRI), have even canceled their contracts with Chinese companies, and others are forcing China to re-negotiate deals.
They also drew inspiration from a similar experience of the South and South Asian countries who have now woken up to the Chinese threats.
Of the 42 African countries which signed up with the BRI, at least 18 are reportedly renegotiating their debts while 12 others are in talks with China for restricting nearly USD 28 billion worth of loans. In Nigeria, members of parliament have been demanding a probe into the lending practices in the country and review their sovereign guarantee clauses in loan agreements with China.
Initiated in 2013, the BRI is President-for-Life Xi Jinping’s grandiose plan to connect Asia with Africa and Europe via land and maritime trade networks to create new routes for China’s global trade, geopolitical aims, and influence. The gargantuan projects, numbering around 1,800 across the three continents, are billed at over USD 3 trillion, including the flagship, USD 65 billion worth of the China-Pakistan Economic Corridor (CPEC). They would have made China the Dragon Emperor.
But the beast’s still-born chicken are coming home to roost even before they could really hatch.
In a recent article, the Singapore Post said some African countries had canceled contracts as the “shoddy” work of the Chinese firms had triggered tension for the ruling dispensations.
After Ghana’s cancellation of the contract of the Beijing Everyway Traffic and Lighting Tech Company, entrusted with developing an intelligent traffic management system, Congo also followed suit. Its President, Felix Tshisekedi, sought a review of mining contracts signed with China in 2008. He said he wanted to get fairer deals for his country. Unhappy with China’s exploitative tendency, he said, “Those with whom our country signed contracts are getting richer while Congo’s people remain poor.”
In 2008, Congo’s then-President Joseph Kabila (2001 to 2019) had signed deals with Chinese state-backed firms Sinohydro Corp and China Railway Group, envisaging the building of roads, hospitals, and bridges in exchange for a 68 percent stake in the country’s Sicomines venture. A lack of transparency shrouded those China-led projects in Congo.
Earlier, Ghana had also canceled the project outright because they found Everyway’s work unsatisfactory.
In July 2020, a Kenyan High Court ordered the cancellation of a USD 3.2 billion contract between Kenya and China for the construction of the Standard Gauge Railway. The court termed the whole project “illegal”, stating the state-run Kenya Railways failed to comply with the country’s law in the procurement of the Standard Gauge Railway.
According to a report by the John Hopkins University School of Advanced International Studies’ China-Africa Research Initiative, between 2000 and 2019, Beijing had signed 1,141 loan commitments worth USD 153 billion with the African governments and their state-owned enterprises.
Such mounting loans became unbearable for the poor African countries. Also, due to the Covid-19 pandemic’s adverse impact on their economies, African countries found it difficult to service loans they had taken from China. With the limited choice to manage debt burdens, these countries preferred to suspend projects which are anyway controversial, burdensome, financially unviable, or cut sorry figures on the accountability front. Most of these would have benefited China alone.
In fact, the 2020 pandemic came as a reverse gear for the Chinese economy. Due to lockdowns and recession, demand for Chinese products plummeted in many countries. It diminished the flow of finances for ongoing infrastructure development projects. Fearing default on payments, many African countries decided to scrap the projects altogether or began re-negotiating loan terms with Chinese entities, including deferment of interest payments and suspending the unviable projects.
As per the estimates of the International Monetary Fund (IMF), additional financing of up to USD 285 billion would be required during 2021-25 by the African countries to step up their spending response to the Covid pandemic. They can do so only by minimizing domestic developmental works so as to divert funds to keep the people healthy. In other words, they will have to rethink the projects they wanted China to develop in their countries.
China’s total loans to Africa from 2000 to 2018 amounted to USD 148 billion, mostly in large-scale infrastructure projects. Since 2016, nearly 66 percent of the loan amount has been given to the transportation and energy sectors.
Since 2010, the Chinese financial institutions started funding an average of 70 projects, worth about USD 180 million, every year. Among them, the resource guarantee infrastructure financing has been focused on minerals and hydrocarbon-rich African states including Zambia (copper), Kenya, Nigeria, Ghana, Angola, Algeria, Mozambique, Egypt, Sudan (oil and gas) South Africa, and Tanzania (gold), media reports said.
These natural resources were supposed to be driving, one-way, the resource-and-energy hungry Chinese economy in the 21st century.
At present, Beijing is a leading bilateral lender in 32 African countries and the top lender to the continent as a whole. The list includes Angola (USD 21.5 billion in 2017), Ethiopia (USD 13.7 billion), Kenya (USD 9.8 billion), the Republic of Congo (USD 7.42 billion), Zambia (USD 6.38 billion), and Cameroon (USD 5.57 billion), according to media reports.
These huge debts have often triggered a repayment crisis. For example, China owns around 72 percent of Kenya’s external debt, worth USD 50 billion. Over the next few years, Kenya would have to pay USD 60 billion to the China Exim Bank alone, or, in case of a default on loan repayment, it can lose control of Mombasa port, Kenya’s own auditor-general said.
In 2015, Angola faced widespread discontent because of oil repayment against loans from China, leaving the poor country with little crude oil to export and earn precious foreign currency.
From 2010 to 2015, Nigeria’s debt to China ballooned by 136 percent, from USD 1.4 billion to USD 3.3 billion. It had to spend USD 195 million in 2020 as debt repayment to China. In Djibouti, China provided nearly USD 1.4 billion in funds which are 75 percent of the country’s GDP.
Nigeria has to repay USD 400 million against a loan provided by China for the Nigerian National Information and Communications Technology Infrastructure Phase – II Project, signed in 2018.
The Ugandan government postponed the construction of ‘Kampala-Entebbe Expressway after the political opposition raised concerns over the rising debt trap.
Clearly, the Dragon had not factored in the danger posed by ants!