Africa weighs up how to safeguard its autonomy amidst wave of Chinese financing
The Democratic Republic of Congo has formed a commission to reassess its $6 billion infrastructure-for-minerals deal with Chinese investors. The review comes amidst concerns that the agreement may not be fair enough to Kinshasa, whose sizeable mining sector is roughly 70% controlled by China.
Regardless of the outcome of the Congolese review, Beijing still maintains a robust presence across Africa in keeping with its economic and geopolitical ambitions. Nonetheless, the DRC’s announcement could prompt other African countries to seek more favourable partnerships with Beijing which allow them to protect both their autonomy and relationships with other foreign investors.
Deal of the century falters, but Chinese interest in Africa does not
The DRC initially penned a mammoth agreement with two Chinese firms to build roads and railways in the country in 2007, in exchange for cobalt and copper mining rights. Billed the “deal of the century” at the time, the Sinomines deal has not quite been the boon that Kinshasa expected. Unexpected costs and infrastructure delays have popped up, while tax exemptions included in the deal mean that the DRC is unlikely to receive much income from the agreement in the near future.
It’s not surprising, then, that President Felix Tshisekedi wants to revisit the mining accords inked by his predecessor to determine whether they’re fairly benefiting the Congolese people. “It is not normal,” Tshisekedi recently declared, “that those with whom the country has signed exploitation contracts remain rich while our people remain poor”.
While the re-examination of what was once the most significant Chinese investment project in Africa is noteworthy, Beijing’s economic interests in Africa have ballooned in recent years. China is one of Africa’s biggest financiers and partners, responsible for some 16.4% of Africa’s trade with the world. 50 African countries have signed up to China’s Belt and Road Initiative (BRI), making the continent the single largest bloc in Beijing’s flagship scheme. Analysts have recently speculated that Beijing will be the true beneficiary of the African Continental Free Trade Area, encompassing over 1.3 billion people with a cumulative income of $3.4 trillion.
Djiboutian debt influencing foreign policy?
Nonetheless, Tshisekedi’s rethink is an indication that African policymakers may be waking up to the troubling consequences of relying too heavily on Chinese trade and investment. Tiny Djibouti, for instance, is the archetypal example of an African nation falling under Beijing’s thrall due to its escalating levels of debt. At the last count, China held more than 70% of Djibouti’s GDP in debt, with the Doraleh port and its surrounding infrastructure a major beneficiary of Chinese financing. The port is both Djibouti’s biggest employer and its largest source of revenue, but some eyebrow-raising decisions by the Djiboutian authorities suggest that China may have its hand on the tiller.
The controversy began in 2018, when Djibouti’s port company Port de Djibouti S. A. (PDSA) unilaterally terminated its agreement with international port operator DP World, nationalised the port terminal and apparently awarded a 20% stake to China Merchant Holdings.
Unsurprisingly aggrieved, DP World has taken its case to international tribunals, winning several verdicts in the company’s favour. Most recently, the London Court of International Arbitration (LCIA) ordered PDSA to honour its agreement with DP World and cover court costs of $2.34 million. PDSA and the Djiboutian government’s repeated failure to comply with the international verdicts has caused understandable skittishness amongst other foreign investors. Djibouti may have solidified its relationship with Beijing by expropriating Doraleh, but at the cost of its dreams of becoming an international trade hub.
Nigeria another cautionary case study
The Doraleh affair is far from the only concerning case study. Nigerian debt levels have also come under scrutiny of late, with the latest figures suggesting that the country’s debt to revenue ratio currently stands at a staggering 98%. Given that Abuja owes Beijing some $3.121 billion – over 10% of its total external deficit – it’s no surprise that many view the current situation as unsustainable. In fact, the Chinese embassy in Nigeria was even forced to issue a statement pledging that Beijing did not have designs on taking over Nigeria or its assets.
While the statement might sound unnecessary, China does have precedence for seizing assets of debtors who cannot pay. Most infamously, China took control of a Sri Lankan port it helped to build after the island nation found itself unable to meet repayments. Closer to home, there have been rumblings that Zambia may have to part with state-owned utility ZESCO and that Kenya may even cede control of its highly profitable Mombasa port in order to appease Chinese lenders. While neither rumour has yet come to fruition, the potential for tumbling into a debt trap is clear.
Negotiating for the long haul
It’s not hard to see why African nations are turning almost in unison towards China for commerce, capital and investment. Indeed, in the five-year window between 2014 and 2018, Chinese companies invested a total of $72.2 billion in African countries—double the amount their American counterparts could muster.
Given that China offers plentiful investment with no political strings attached, accepting the influx of cash is a carrot too tempting for many African leaders to turn down. But while that capital can be put to good and immediate use in countries across the continent, African leaders must also be mindful not to hand over the keys to critical assets to China in exchange for Beijing’s monetary support. Insisting on terms that are more equitable and even handed for all parties is sure to benefit Africa both now and in the future, firstly by safeguarding African nations’ autonomy – and secondly preserving their reputation as a reliable destination for other investors all over the world.
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