Africa: China's Belt and Road Forum - Does Africa Need New Funding Options?

Photo: GCIS
President Xi Jinping of China inspecting a guard of honour in South Africa.

African leaders attending a Road and Belt forum in China are looking for new funding and to renegotiate existing debts. China already invests widely in African infrastructure. Do the gains outweigh the risks for Africa?

Several African leaders were among nearly 40 world leaders who travelled to Beijing for China's second Belt and Road forum. They included Kenya's President Uhuru Kenyatta and representatives from Ethiopia, Mozambique and Djibouti. They went with the intention of pressing Beijing to reduce the debt burden caused by the initiative (BRI) through the building of ports and other trade-related infrastructure.

Critics say BRI is an effort to cement Chinese influence around the world by financially binding countries to Beijing through "debt trap diplomacy." James Shikwati, a Kenyan economist, singles out two aspects of the critique against China's ambitious initiative. "One of them is that African political leaders (.....) are forgetting that it is African citizens who will have to pay the Chinese, or the debt." The second aspect is that western countries are traditionally the ones who have been using debt diplomacy on African countries. "Now they can see the Chinese trying to edge them out."

Eric Olander, managing editor of the non-partisan China Africa Project website and podcast, is convinced that President Xi will use the summit to prove the opposite. "He talks about transparency and greening the Belt and Road and he wants to reassure partners on the Belt and Road that he's not engaged in debt trap diplomacy as everyone thinks."

Piling on the debt 'doesn't make sense'

Where Africa is concerned, there is a more important question to ask, says Olander: "China has funded 3,116 projects under the Belt and Road worldwide. If this is some grand plan to bury countries in debt, it's not really working out very well. You have to ask yourself the question: Why would China want to crush Africa in debt?" Africa itself may not be rich in terms of cash, Olander says. "But it is a very rich continent when it comes to 54 votes at the United Nations, at the World Health Organization, the IMF or at the World Bank. Those votes are very important to the Chinese who are also selling a lot of products to Africans. Crushing Africa in debt so that they can't buy anything that the Chinese make simply doesn't make a lot of sense."

In a meeting on Wednesday, Xi told Prime Minister Abiy Ahmed of Ethiopia that Beijing had written off interest due on loans owed by Ethiopia through the end of 2018, the prime minister's office announced on its Facebook page. It gave no financial details. China's Belt and Road Initiative involves underwriting billions of dollars of infrastructure investment in 71 countries along the old Silk Road - an ancient trade route - linking it with a network of countries in Europe, Asia and Africa.

Funding and renegotiating

Olander says there are two main reasons for African leaders to join the meeting. "We're talking about getting new funding and renegotiating some of the existing loans. Those are the key priorities for African leaders." Beijing has given some borrowers more time to repay or made other concessions. Ethiopia reached an agreement in September to extend repayment for a $4 billion railway linking the country with neighboring Djibouti from 10 to 30 years.

Despite debt concerns, Ethiopia and other governments express support for the Belt and Road initiative and went to Beijing to negotiate for more Chinese financing. Kenyan President Uhuru Kenyatta planned to pursue a $3.7 billion loan from Beijing to extend a Chinese-built railway, the Kenyan ambassador to Beijing, Sarah Serem, said. The 962-kilometer (597-mile) project is intended to link Kenya with central Africa and Congo.

Kenya owes Chinese banks $3.2 billion for its first 472-kilometer link from the Indian Ocean port of Mombasa to the capital, Nairobi. For the full project, Kenya will need to borrow almost $10 billion from Beijing. Since the Belt and Road initiative was launched more than 5 years ago, Africa has added four new railways built by China: the Mombasa-Nairobi railway, Addis Ababa- Djibouti (759 km), Abuja- Kaduna (186km) and Angola's Benguela railway (1,866 km).

Win-win for China and African countries?

Now that China is much more engaged in Africa, western powers should wake up and give African countries more funding choices. "The Chinese have really helped Africa develop its options and you can see people like President Kenyatta really playing the United States and the Chinese very effectively so that he can maximize his interest for his country. There's a lot to be learned from what Kenya is doing", Colander told DW. He thinks that China has made solid contributions to African development. "Look at the number of roads, railways, hospitals, ports, bridges and telecommunications infrastructure that they have built over the past 10 years, funded by Chinese money."

Shikwati disagrees on this aspect. "One would say, yes, infrastructure normally has that longterm effect that will transform their continent. But under the current political dispensation, you notice that it is China that is winning because they build the infrastructure there, they are making use of debt diplomacy. Therefore they are trying to influence how things are done in Africa, specifically how to win business and project tenders."

At the end of the day, Colander says, the Chinese went to Africa with more money and more engagement than other countries. "And I think that made a sizable impact on the continent." It all comes down to the situation in which African leaders find themselves at the moment, namely, seeing themselves confronted with a demographic boom that will put another billion people on the continent by 2025. "On the one hand African leaders have to gamble with their children's future, they have to borrow vast amounts of money in order to build the infrastructure that will create the jobs and the industrialization that will then power their economies for this demographic boom that is coming down the line in Africa." Global and private markets would charge interest rates up to seven times what the Chinese are charging. "At the end of the day, these African leaders are recognizing that they don't have a lot of choice." There is a lot of criticism of African leaders for borrowing too much from China, Colander agrees. "But that does not answer the question "If not China, then who?"

Jane Nyingi and Sylvia Mwehozi contributed to this article

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