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One thing is clear for those who follow Africa’s economic and political ordeal: China is interested in Africa’s natural wealth, while showing utter contempt for it's people.
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China’s predatory lending started to pick up pace in 2013, after President Xi announced the Chinese Belt and Road Initiative (BRI). This is equivalent to a beltway around the globe, meant to signify China’s unsettling rise to global prominence.
The predatory lending focused on two groups of countries — those with strategic seaports located along the BRI’s path (Kenya, Djibouti), and those with oil reserves and rare earth mineral deposits (Nigeria, Angola, South Sudan, Sudan, and Zambia, among others).
China’s predatory lending is not unique to Africa, though. For example, Sri Lanka in Asia had to hand China a 99-year lease over the strategic port of Hambantota, along with 15,000 acres of land around it, after it failed to service its loan.
In November 2019, the headline “China to take over Kenya’s main port over unpaid huge Chinese loan” was heralded in many international newspapers. The Maritime Executive revealed "The terms of a $2.3 billion loan for Kenya Railways Corporation specify that the port’s assets are collateral, and they are not protected by Kenya’s sovereign immunity due to a waiver in the contract.“
What is common between Kenya’s and Sri Lanka’s experiences is that their respective China-financed projects were found infeasible from financial and economic standpoints by independent analysts. In both cases, China offered to conduct its own feasibility study free of charge, then deemed the projects sound and provided predatory loans to build them using Chinese state-owned construction companies without opening the bids to international competition. In the case of Kenya, the project ended up costing the African nation four times more than was budgeted.
Once it traps vulnerable nations, China takes advantage of Africa’s extensive economic woes, seeking new collaterals as a condition to restructure debts that are at risk of defaulting. When Zambia owed China over $6 billion and had difficulty servicing its payment, China wanted the nation’s mining assets as new collateral to restructure its loans. As The Financial Times noted, the Zambian government was "alleged to have diverted donor funds meant for social sector spending to make debt repayments.”
China’s debt-trap strategy has four signature schemes that make it different from other bilateral or multilateral loans that developing countries rely on.
First, China’s loans to developing countries are kept confidential. They are neither reported to nor recorded by international institutions such as the International Monetary Fund (IMF); the World Bank; or the Paris Club, an organization of creditor nations.
Second, China’s preferred clients are countries with rampant corruption. A study by the Brookings Institution shows that of the 50 most indebted countries to China, 25 are from Sub-Saharan Africa (SSA). A closer look at the data indicates, of the 25 SSA countries, 23 are listed in the top half of Transparency International’s corruption ranking, including South Sudan, the Republic of the Sudan and Angola — ranked second, fourth, and fifth most corrupt nations in the world, respectively.
Third, the limited data available from the IMF shows that China’s loans are geared toward countries that have historically been vulnerable to debt crises. Of the 50 countries in the Brookings’ above-noted list, a large majority of them were countries who suffered debt crises in the 1990s and received international debt forgiveness.
Fourth, Chinese loans are based on market rates with short repayment periods, leading to larger annual repayments and resultant defaults. By contrast, traditional loans by institutions such as the World Bank, IMF, and members of the Paris Club carry near-zero interest rates and are further buttressed with generous grace periods and long repayment plans of up to 30 years — all designed to make them easier for cash-strapped governments in developing countries to service.
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China’s behavior has put American and European countries in a conundrum. They know that providing billions of dollars in debt relief to SSA countries is the right thing to do as part of the global campaign to arrest the coronavirus pandemic and help save millions of African lives. They also know that their generous financial support will end up indirectly supporting Chinese predators as desperate African countries divert such funds to service the payments they owe to China.
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https://patriotpost.us/opinion/70690...-19-2020-05-15
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