Will China’s Lending Behavior Change With Scrutiny From Africa

By Amodani Gariba

Hand holding Africa and hand holding money
Credit: Observer Research Foundation

As China’s trade increased in Africa, so did its loan commitments to countries on the continent. These loans funded multitudes of infrastructural projects in Africa. Others too funded many joint ventures between Chinese businesses and their African counterparts. Despite the fact that these loans are helping to tackle Africa’s huge infrastructure deficit, criticisms about them are becoming abound. IMF, World Bank, African CSOs, and political parties in opposition have all preached about the dangers associated with Chinese Loans, citing the debt trap. Others have extended the debt trap to mean ceding of sovereignty to China, as has been the case recently in Nigeria’s House of Representatives. There are also fears that these criticisms could have consequences, as they are likely to influence the behavior of Chinese creditors going forward. This article, however, discusses how China is unlikely to alter its lending behavior, despite growing criticisms from Africa.

Uproar In Nigeria’s House Of Representatives Over Clause In Chinese Loan

Earlier on in the year, Ossai Nicholas Ossai, a member of Nigeria’s House of Representatives, who doubles as the chairman of the House Committee on Loans Treaties and Protocols, caused a storm during one of the House’s proceedings. The member alleges that the sovereignty clause in clause 8(1) of the loan agreement, which will have China advance Nigeria with $400 million of ICT infrastructure, cedes Nigeria’s sovereignty to China. On the backdrop of these allegations, the House has called for the commencement of investigations into Chinese loans the country has taken since the year 2000. Some have called for heads to roll in Nigeria’s government over Chinese loans. Nigeria’s Transport Minister Rotimi Amaechi has decried how increasing scrutiny could derail Nigeria’s chances of securing loans from China in the future. However, contrary to popular perception, analysts have shown that nothing in the loan document actually cedes Nigeria’s sovereignty. 

Assessing African Opposition To Chinese Loan

Ever since China’s foray into Africa’s debt space, it has faced countless criticism. The Bretton Wood twins have not relaxed with their criticism of China’s growing loans to Africa. Reading Deborah Brautigam’s book, ‘The Dragon’s Gift’, one can properly contextualize IMF/WB’s opposition to Chinese creditor behavior on the continent. The much-touted Debt trap is actually a façade used by the Bretton Woods institutions. Deborah Brautigam explains that China broke the monopoly of the two institutions when it waded into Africa’s Debt Market at the turn of the century. Not only did it break the monopoly, but it is also on the verge of taking over as well. In less than two decades, China has become Africa’s most important bilateral lender. According to 2018 details from Jubilee Debt Campaign, China’s share of Africa’s total debts is now 20%, while the World Bank’s stood at 32%. No one who enjoys monopoly likes it broken. 

Most of the Chinese loans in Africa are resource-backed loans. As such, servicing of Chinese loans takes precedence over loans by default. This is so because monies intended for debt servicing of Chinese loans never pass through the national budgets of these African nations. The Chinese get it directly. This largely undermines the IMF/WB’s position as privilege lenders. This issue, more so than any other, influences the view of IMF/WB on Chinese loans in Africa. 

The views held by the twin institutions cause a chain effect when international mainstream media amplify them. This then sets the agenda for many stakeholders in Africa. Policy Think Tanks and Civil Society Organisations, especially those within Africa, reference these international media for analyses. These analyses also get referenced by other political actors, such as opposition political parties in national debates concerning Chinese loans. Many times, errors not filtered by the IMF/WB are featured in national discourses on Chinese loans. With the exception of e-Swatini, no African government has come openly against Chinese loans. But until that happens, no one should take those oppositions seriously, because it will not change a thing. I explain more in the next section.

China Will Not Push The Brake Pedals On Loans

In 2006, stakes were high in Zambia. It was yet another election. Michael Sata and Hakainde Hichilema closely contested the incumbent president, Levy Mwanawasa. Michael Sata aka ‘King Cobra’ was a vitriolic critic of Chinese engagement in Zambia. Being the shrewd and populist politician he was, he played on the sentiments of the people by taking on the Chinese who was by then considered infamous. Not only did he lose the elections, however, but he also did so with a considerable margin, coming 4 percent lower than the incumbent. Following Mwanawasa’s death in 2008, Sata ran again in the Presidential by-elections but lost to Rupiah Banda. However, five years later, Michael Sata became the president of Zambia, after defeating the incumbent Banda. Given his record, observers anticipated he would do worse: break off relations with China and recognize Taiwan. Instead, he continued where the previous government left off with the Chinese. 

Members of the opposition PDP caused the eruption in Nigeria’s House of Representatives over Chinese loans. The irony is that China did not just start giving out loans to Nigeria under President Muhammadu Buhari. Nigeria signed off loans deals with China under ex-Presidents Olusegun Obasanjo and Goodluck Jonathan, both of whom were from the PDP. The House’s attempt at scrutinizing Chinese loans now does not go beyond inter partisan politics. It is a bid to reining in on the prevailing mood against China, especially after the Guangzhou incident, to make the President and APC unpopular and boost the electoral chances of PDP during the next election. This has been the trend. Opposition parties make issues out of China’s presence but when they get the nod to serve, they abandon the cause. 

In some other African countries, like Ghana, China has never become a political issue between the two dominant political parties. When the governing NPP signed a $2 billion infrastructure for bauxite deal with Chinese state-owned Sinohydro, the opposition did not make much fuss about it. The talking point for this deal has been the environmental impacts of destroying the Atewa forest, under which all the bauxite lay. 

The Chinese are taking notice of all these. They will not necessarily reconsider their lending behavior just because of some banter in an African parliament. Beyond the partisan politics, they know Africa’s political elite hold no issue against it.

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