For over two decades now, the Chinese government has been providing African governments with large amounts of loans for things such as infrastructures as part of their Belt and Road Initiative. African governments have been, in turn, more than willing to take on these to fund various infrastructure projects, due to the less stringent conditions that come from Chinese lenders compared to those of Western lenders.
According to the China Africa Research Institution from 2000 to 2018, the Chinese government, banks, and contractors signed US $148 billion worth of loan commitments with African governments and their state-owned enterprises (SOEs). With Angola being the top recipient of Chinese loans in comparison to other African nations with around $43 billion worth of loan commitments that have been made over two decades, from the year 2000 to 2018.
Western nations concerns
The debate around the rise of China’s influence in Africa has been raging over the past two decades. Western countries are often eager to warn African nations to proceed with extreme caution when dealing with China. They would typically contend that Chinese government aims in Africa are only self-serving. Western politicians and analysts have warned that the Chinese government and Chinese businesses are only looking to exploit Africa’s natural resources, rather than work in the best interest of Africans.
They would point towards the huge sums of money China, through its Belt and Road Initiative, has loaned to African countries for infrastructure projects as a major example of China’s ambitions to exploit African countries (and the Third World more generally). They argue that these large sums of money have been loaned to African governments, typically with the knowledge that it would be very unlikely they would be able to be paid back.
Western nations argue that Chinese lenders are taking advantage of the corruption and lack of transparency in many African governments to trap their nations in debt, in order for them to be exploited and forced to work in Chinese interests. Therefore, after nations cannot pay back their debts, the Chinese can swoop in and take control of critical infrastructure within African countries such as: ports, mines, etc. They argue that this practice, dubbed debt-trap diplomacy, has been in full effect throughout Africa over the past few decades.
Does debt-trap diplomacy exist?
On the other hand, there are those who see the concerns raised by Western nations as disingenuous. They would argue Western nations are more concerned about their influence over Africa (and the third-world broadly) being diminished as the Chinese take greater interest in the region.
Likewise, there are those who argue that debt-trap diplomacy is not even real. They contend that the practice of taking out loans to fund infrastructure projects is not anything new. Every country takes out loans to fund their projects; in fact developed nations often have much larger amounts of debt compared to African nations.
Opponents of the theory of debt trap diplomacy would also point to the fact that African nations have for many decades been taking loans from Western lending institutions such as the World Bank and the International Monetary Fund (IMF). Western nations, on the other hand, would argue that countries frequently need to meet specific conditions to qualify for loans from their lending institutions, unlike Chinese loans, which typically have less stringent requirements.
Similarly, the IMF and the World Bank have been accused of taking part in predatory lending practices, as governments are often forced into taking these loans as a last resort to avert an economic crisis in their countries. This has meant that these lending institutions can typically demand major structural adjustments in these countries as a condition for their loans, such as forcing governments to take on extremely unpopular austerity measures.
Should African Countries Take Chinese loans?
The debate of whether or not African countries should take Chinese loans or not tends to miss the issue entirely. Rather than question which lending institution is more reputable or offers better loan conditions is beside the point. Our primary concern regarding loans obtained by African nations should revolve around the projects financed by these loans and the transparency regarding the allocation of funds.
We should be more concerned about whether or not the projects that will be financed by these loans are actually going to benefit our countries economically. Similarly, in order to prevent under-the-table deals or potential corruption, there must be complete transparency regarding the allocation of funds from these loans.
Regardless of whether Chinese lenders are engaging in debt-trap diplomacy or not. Our concerns regarding any loan should focus on their effectiveness and transparency, rather than the nationality of the lender.
