ANALYSIS: Africa seeks relief from swelling Chinese loans

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Some African countries are seeking to write off loans obtained from China while others are offering concessions using their natural resources and assets to manage ballooning debts.

A report by US-based Centre for Global Development indicates that China’s loans to Africa, currently standing in excess of $14b, continue to rise, putting pressure on borrowers and posing the risk of default.

South Sudan already indicated it will use its crude oil as payment to China for its roads projects.

Early this month, President Salva Kiir said his country had reached an agreement with Beijing.

“We agreed at the recent Forum on China-Africa Co-operation summit that we will not pay them in cash to do roads but in crude oil. This will help us avoid debt, and also eliminate corruption within our ranks,” President Kiir said.

There has been concern about African countries bingeing on Chinese loans, with widely circulated reports that Beijing was targeting some of the resources of the defaulting states. Early this month Zambia denied reports it was in talks with Chinese companies for a debt-to-public-utility swap as it seeks relief.

“All these reports about China taking over our public assets due to our debt, including our international airport, public electricity firms and state broadcaster are false,” said government spokesperson Dora Siliya.

This past week, Botswana became the second African country, after Ethiopia, to announce that Beijing had agreed to extend its loan repayment period for rail and road infrastructure and write off some of it.

President Mokgweetsi Masisi said they had made a pitch for debt relief to China and got a debt and interest cancellation of $7.2m.

“They also offered us a grant of $31 million and a new loan of $10.2b,” he said. Ethiopia recently announced that China had agreed to restructure a $4b loan for the railway that links its capital Addis to Djibouti. “The loan for the Addis Ababa-Djibouti railway, which was meant to be paid over 10 years, has now been extended to 30 years. Its maturity period has also been extended,” Prime Minister Abiy Ahmed said. In Kenya, the government asked Beijing to consider providing half of the $3.8 billion for the second phase of the Naivasha-Kisumu standard gauge railway as a grant and the other half as a loan.

“The Naivasha-Kisumu phase of the SGR will cost $3.8 billion. And owing to its regional significance, I would request that 50 per cent of its cost be provided as part of grant financing,” President Uhuru Kenyatta reportedly asked Chinese President Xi Jinping at a bilateral meeting on the sidelines of the Forum on China-Africa Co-operation summit. The total Chinese pledge of grants and loans (including commercial rate loans and export credits) has dropped from $40 billion in 2015 to $35 billion this year. Ms Deborah Brautigam, director at the China-Africa Research Initiative at Johns Hopkins University in the US, said China’s debt relief policies have not changed and are limited to interest-free government loans maturing at the end of the year. “In the past 10 years, China has regularly cancelled overdue African interest-free loans, but not for all,” she said.

Foreign aid pledge

China’s foreign aid pledge, which includes grants, interest-free loans and concessional loans, according to Ms Brautigam, has jumped to $15 billion.

This means, she says, that China is now offering $5 billion of concessional assistance to the continent annually, its highest ever.

“We are likely to see China’s new International Co-operation and Development Agency administering these funds,” Ms Brautigam said.