Chinese investments and contracts in sub-Saharan Africa amounted to approximately 300 billion dollars between 2005 and 2018, according to the China Investment Global Tracker. At first glance, this could seem like a benevolent gesture on the part of China to help Africa develop and become a player in the global economy. Actually, the picture is more nuanced. This significant Chinese activity in Africa can be interpreted as a means to gain a political and diplomatic foothold on the continent, a strategy that shares many similarities with what is being done in Southeast Asia. But what does China stand to gain by pouring such large amounts of money in Africa?
China: Africa’s biggest creditor
Coupled with its financial strength, China has meticulously wooed African representatives through a soft diplomatic approach. From 2003 to 2013, the former Chinese President, Hu Jintao, visited Africa five times, accompanied by several state ministers. In 2006, more than 40 African heads of state gathered in Beijing for the Forum on China-Africa Cooperation. One key result of this meeting was the creation of the China-Africa Development Fund, otherwise known as the CAD, funded by the Chinese Development Bank. The CAD Fund’s primary purpose is to foster Sino-African relations by offering financing, financial and managerial advice to African institutes and corporations, exploring investment opportunities and connecting important African projects to deep-pocketed Chinese investors. As of 2010, the CAD Fund had invested in 30 projects in Africa worth around 800 million dollars.
Trade between China and Africa has grown to such an extent that China is now Africa’s largest trading partner, surpassing the United States. China proclaims that these ties are assisting Africa in reaching its development targets. Has it really been the case, or is China simply representing its own interests by driving growth through securing a new supply of energy and cheap labour force? On top of being Africa’s largest trade partner, China is currently the continent’s biggest creditor. The long-term loans that the CAD Fund offers will most likely lead to a debt-trapped Africa.
China is omnipresent on the continent today, with a hand in different major port, railroad and bridge infrastructure projects. For example, China has funded and built a $3.6 billion railway between Nairobi and Mombasa, Kenya, which could lead the country to emerge as the premier economy in East Africa. All these projects are financed with Chinese loans that have very low interest rates, and in some cases, no interest at all. Despite this, the chances of default is still extremely high for African countries, with a risk of the assets being seized by the Chinese Development Bank instead of the national government. For instance, 77% of Djibouti’s debt is owned by China. A similar situation concerns Zambia, which had an $8.6 billion national debt as of 2017, ¾ of it owned by China. Africa’s economy as a whole has become increasingly dependent on China. The debt owed by African countries to China has ballooned to $142 billion from around $1 billion between 2002 and 2019, * Angola being the most strained. With the high risks of default already mentioned, there seems to be no logical economic explanation behind China’s large-scale investments in Africa.
Africa’s Interesting resources and Chinese slowing growth
However, a closer look into the situation naturally leads to a fulfillment of its debt obligations through precious natural resources such as oil. A Chinese interest in those resources explains its concentrated investments in resource-rich countries such as Angola and Nigeria. According to Ted Bauman, a senior research analyst and economist at Banyan Hill Publishing, “These projects are designed to lock African countries into a long-term political and diplomatic relationship with China rather than to make money”.
European countries and the USA have criticized China for their involvement in Africa, calling it “debt-trap diplomacy”. But there are also domestic economic motives, China’s growth is slowing down. Given these internal circumstances, the world superpower is now looking for countries with low labour costs to offset its own rising labor costs due to its growing large middle class. The investments in Africa aren’t only public initiatives as private companies have also pivoted towards the continent. For every $100 dollars invested in the energy sector in Africa, a little less than 30% originates from the Chinese government with the largest contributor being private investors. “That suggests that China is using state-funded energy infrastructure projects to open the door to Chinese corporate domination of African energy companies,” explains Bauman. This could be extremely disadvantageous for African nations, because the Chinese government could use its project financing to leverage lower prices for exports of African oil to China. China’s investment in Africa can be seen as a new form of neo-colonialism, one in which China exploits African resources and lower labour costs.
Increasing China’s political and diplomatic clout
China is gaining a lot of political influence in the world by investing in Africa. The country recently opened the first Chinese overseas military base in Djibouti. This means that China has now a strong military presence in Northeast Africa. The country is also gaining diplomatic influence with UN votes. Africa no longer follows the USA; but China’s lead. Chinese have been using soft power, flexing their financial strength by investing heavily in countries that follow their political agenda during UN votes. China only funds the projects of African countries that vote in favor of them in the UN. For instance, this means recognizing China and not Taiwan in the UN assembly.
China also gives loans to all African countries; they don’t care if they are democratic elections or if they respect human rights. China doesn’t mind giving money to African dictators who abuse of their population, whereas the IMF and the world bank fund only democratic African nations that respect human rights. This explains why China has been able to gain significant influence in Africa compared to the West.
Finally, China is also gaining cultural and linguistic influence. Since the early 2000s, there has been an enormous rise in the number of Confucius institutions in Africa. In 2002, there were no institutions, as of today, there are 48. These institutions allow for exposure to Chinese culture and tradition in unfamiliar territory. In most African countries, like Zimbabwe, there is a large demand for African schools to offer Mandarin lessons. This means that China is also attracting African citizens to potentially work in China.
With such astronomical figures of debt originating from China, it might be difficult to reverse the current trend towards economic entrapment at the risk of losing strategic national assets. With economic sovereignty coming into question, this has only led to the erosion of political independence in terms of how the global future is shaped, as shown by the decisions rendered through the UN. In the end, African countries should be able to decide which projects China builds in Africa, and whose interests it really serves. Africa must be careful when accepting funding and not forfeit their sovereignty. China seems to be conducting modern day colonialism in Africa, a kind of “ChinAfrica” policy.
Joshua Santurbano, 5 avril 2020