By: Qiqing He
Possessing one-fifth of the world’s land area and sixteen percent of the world’s population, Africa, armed with the youngest and most enthusiastic generation, is playing a more and more important role in the global economy. In recent years, the People’s Republic of China has built stronger ties with African nations increasingly and is becoming Africa’s largest trading partner.
In 2013, a global development strategy called “Belt and Road Initiative (BRI)” was proposed by China. Aiming to facilitate global infrastructure development, BRI was warmly welcomed and supported by Africa and many parts of the world. Until September 2019, 40 of 55 African countries had signed some sort of memorandum of understanding or other agreement on the BRI. Burdened by its heavy debt deficit in infrastructure, BRI can be an opportunity to boost Africa’s economy.
Before proceeding to show the opportunity that BRI presents to African countries, it is imperative to address one of the most critical questions in the BRI diplomacy: Is BRI really a “debt trap” for African countries?
Correcting Misconceptions About Africa’s Debt to China
Burdened by its colossal debt deficit, African countries are thirsty for more economic support and investment opportunities besides what the IMF and The World Bank provides. The BRI is exaggerated as a “debt trap” by some Western countries such as the USA and is just another way for them to complain about China’s role in global leadership.
While 80% of the overall debt of Africa is from the West, only 20% of the debt held by Africa’s governments is owed to China. In fact, most of the debts from China come from the private sector, often flexible and negotiable through bilateral agreements based on friendly principles, with lower interest rates and a relatively long period for repayment.
“Before BRI came up, IMF and World Bank were the main vehicles for borrowing funds. If BRI is called the debt trap then this terminology can also be associated with IMF and World Bank”, says John Duke, the South Sudan ambassador to China during an interview with TalkAfrica. Mr. Duke also believes that any efforts trying to hinder Africa from developing its infrastructures by denouncing BRI are unacceptable. In fact, contrary to causing more debt figures, BRI helps Africa to boost its economy by developing critical infrastructures.
Indeed African countries can win, as their infrastructures see improvement. As the old adage says: “If a country wants to be rich, build a road first.” Infrastructures like railways are crucial for the country’s economy today as it can significantly facilitate trades. Owning abundant natural resources, African countries have vast potential for international trade, but their poor infrastructures make it almost impossible. Lack of roads also imposes a heavy financial burden on local residents. For instance, in some African countries, products are 75% more expensive due to the severe transportation conditions and the absence of proper manufacturing equipment and technologies, which makes prosperity even more distant.
BRI is forging economic, political, and security linkages between China and Africa. The road map will connect African countries internally and with the outside world. Some of the African countries have witnessed significant improvement as new railways, ports, and economic zones have been completed.
Already, East Africa, through China’s funding of ports, roads, and railways, has developed into the center of the maritime Silk Road. In the north, Egypt’s economic zones have integrated with China’s Belt and Road initiative to boost connectivity and global trade. China’s fund for the Addis Ababa-Djibouti railway is connecting Ethiopia to the maritime trade route of the Gulf of Eden and the Red Sea. “Belt and Road is a mechanism (that is ) very important for Senegal because it is developing highways and links between regions, as we build the railway from Dakar to Touba”, says Lieutenant colonel Biriane Dieye, a Senegalese Official.
The maritime Silk Road will establish economic passages through chains of seaports from the South China Sea to Africa, and allow direct trade to and from China. China continues to be an essential partner for the African continent to date. And the One Belt One Road Initiative offers an opportunity to deepen Sino-Africa relations and should be explored further by the leadership of both China and Africa.
However, challenges are still in the way. Potential risks are associated with all large projects and investments. Before most of the infrastructures are completed and put to work, Africa will see a growth in its debt deficit. Therefore, African countries must shape their development by prioritizing infrastructures to build the long road to prosperity. It is estimated that Africa will need 10 billion dollars annually and consecutively for ten years to meet its infrastructure needs. It is therefore crucial for African countries to obtain sustainable foreign direct investments. African governments must therefore promote more bilateral conversations with investors from the Chinese government and the private sectors, making sure the projects benefit all stakeholders. The Forum on China–Africa Cooperation (FOCAC) is an excellent example of a successful communication medium that can facilitate BRI between China and Africa.
More summits like FOCAC will significantly contribute to the successful cooperation with African countries. The Chinese government should establish a special committee to analyze and record progress about BRI supported programs in Africa, hosting periodic conferences and discussions, assisting the identification of potential risks and problems in the ongoing projects.
Qiqing He is an International Finance Student at China’s Foreign Affair University