Africa, China and debt: let there be no mistake as to what is at issue here

President XI Jinping has definitely spent his 2018 summer working on Africa. In July, the Chinese president chose Africa as the first international destination since his re-election to a new five-year term, with different stages in Senegal, Rwanda and South Africa – on the occasion of the BRICS summit – and in Mauritius. And this Monday marks the start of the 7th edition of the Forum on China-Africa Cooperation (FCAC) in Beijing which many African heads of state are due to attend.

Some people do not shrink from talking about the “ChinAfrica” summit with the full pejorative connotation the term entails. For several years now, China-Africa relations have been the subject of a dense literature, presenting China as an economic ogre which needs African raw materials to sustain its economic growth. For close to 10 years now, China has overtaken the United States as the African continent’s first trading partner, with nearly $ 170 billion in two-way trade in 2007(four times the trade volume with the United States). Often accused of neo-colonialism, China now faces criticism long directed at Western powers.

Today, the focus is on the debt of African States to China. According to the China Africa Research Institute, African States have at least borrowed $ 132 billion since 2000. This figure must be put into perspective on a continental scale, but scrutinized closely from one country to another, especially as a significant share of the bilateral debt is owed to China. Thus, some statistics clearly point to China’s share of the debt owed by a few countries: 70% in Cameroon, 72% in Kenya and over 80% in Djibouti. Like some Asian countries that are too heavily indebted to Beijing such as Sri Lanka, some African governments are worried about the risk their countries run of losing their sovereignty.

Believing, however, that African leaders are unaware of the problems that may arise from too much financial dependence on Beijing would be naive. It is also important to note that even though many investors are knocking on Africa’s door, African States may still have difficulties borrowing, and China’s financing conditions often remain very attractive. But all countries of the continent need to invest heavily to develop. Each State must find a fair balance among its donors, so as not to be too dependent on a particular country or international institution.

Take Ghana for example.At present, President Akufo-Addo is negotiating a $ 2 billion credit line with China to finance the country’s infrastructure, including roads. At the same time, Ghana is looking for innovative financing mechanisms, choosing to sign a contract with China’s Sino hydro Corp. to provide $ 2 billion in cash to the Ghanaian State in exchange for refined bauxite products. While the opposition denounces this agreement, it has chosen to seek the IMF’s expert opinion or to rely on this Washington D.C. institution’s advice on the impact such a deal could have on Ghana’s debt. Even the Ghanaian State, whose rescue programme ends next April, has chosen to continue working with the IMF to benefit from its supervision. The diversification of donors and maximum use of external advice to continue consolidating public finances is a balanced way for African States to have the most cards in their own hands.

The real issue is therefore not so much the debt owed China as it is the way African countries manage these funds, based on investment decisions that respond to development priorities. For some years now, the African public debt has been upbeat, especially with the commodities crisis. At the end of 2017, the average public debt in sub-Saharan Africa reached 57% of GDP, almost doubling since 2012. Some would still say African countries have a much lower debt than the Western countries, but they are blind to the fundamental differences between their economies and ours, which are often characterized by low tax revenue and lower borrowing rates mobilizing capacity. We owe future generations as we strive to ensure the long-term development of our countries by using a wide range of financing tools. This not only calls for rigorous financial management, but also a minimum political consensus on the type of societies we want to build. The debt we owe China must remain within the scope of our sovereignty.

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