This article first appeared in my weekly column with the Business Daily on September 9, 2018
Last week African leaders attended the Forum on China Africa Cooperation (FOCAC), an event that has become the symbol of strengthening ties between China and Africa. In his speech, Xi Jinping stated that China will extend USD 60 billion of financing to Africa, a combination of grants, interest-free loans and concessional loans, credit lines, development financing, and a fund for financing imports from Africa. There are three key takeaways I think are important for African governments and Africa’s fiscal engagement with China.
Firstly, Xi Jinping indicated an intention to ensure Sino-African cooperation delivers real benefits to both China and Africa perhaps indicating and awareness of the concern as to the economic viability of some of the projects financed by China on the continent. Some analysts are of the view that there will be an increase in China monitoring deals agreed to with African governments. The signalling of China perhaps having a keener eye to ensure real benefits accrue through Sino-African engagement is likely to be welcomed by African citizens, not so much African governments. I am of the view African governments enjoy the fiscal opacity that has defined deals made between them and China. If Sino-African deals undergo more scrutiny going forward, this would be welcome and perhaps push African governments to better demonstrate the intended and actual use of Chinese debt and financing.
Secondly, Xi Jinping announced plans for debt relief with a focus on Africa’s least developed countries, heavily indebted and poor countries, landlocked developing countries and small island developing countries that have diplomatic relations with China. He stated that the debt incurred in the form of interest-free Chinese government loans due to mature by the end of 2018 will be exempted. This was a smart diplomatic move on the part of China given the fearmongering in some media circles that argued China was using debt to trap and control African governments and unilaterally seize China-financed assets.
Finally, alongside FOCAC was a clear push of the debt trap diplomacy narrative, particularly by European and US media. The debt trap diplomacy narrative is part of a long history of Sinophobic narratives by EuroAmerica, focused on Sino-African relations. The narrative argues China is luring African governments into debt in order to control African governments and assets. The reality is starkly different. Debt appetite is coming from African governments, debt is not being pushed onto Africa by China; Kenya owes more to the World Bank than it does to China for example. Further, the West’s Sinophobic narrative on Chinese debt in Africa seems more rooted in a dislike, fear and paranoia about China rather than a genuine concern for Africa. The priority for most African citizens is a focus on African governments to ensure the debt deals make sense for the country, and that they’re sustainable and used properly, no matter the source of debt. Thus FOCAC in my view, signalled a divergence between EuroAmerica’s paranoid obsession with China, and the real concerns Africans have with regards to growing public debt.
Anzetse Were is a development economist; firstname.lastname@example.org