Africa-China Debt Theory By Rodrick Mutale (Zambia)

Africa’s growing public debt has sparked a renewed global debate about debt sustainability on the continent. This is largely owing to the emergence of China as a major financier of African infrastructure, resulting in a narrative that China is using debt to gain geopolitical leverage by trapping poor countries in unsustainable loans.

In Washington DC, Republicans and Democrats generally look at China as a new imperial power in Africa: Bad news for Africa they say? The former secretary of state of USA Rex Tillerson accused China of “predatory loan practices” undermining growth and creating “few if any “jobs on the continent. Hillary Clinton sang the same song, warning Africans to beware of this new colonialism.

The question we should ask ourselves is, can we take this warning as China a real threat to Africa or is it fears of Western countries about China helping Africa? Let’s see what studies say?

What the studies show on FDI in Africa and West

While the hype is that Africa was getting huge amounts of development money from China, studies show the exact opposite is the reality with the West actually getting a huge share of China money. The “Big Three” EU countries, and not Africa, got most of the Chinese money in 2018 alone: the United Kingdom bagged 4.2 billion euros, Germany 2.1 billion euros and France 1.6 billion euros. In fact, the same study from Rhodium Group and Mercator Institute of China studies or MERICS says the two ‘new top recipients’ of huge Chinese money now are still not Africa or from Africa, they are: Sweden and Luxembourg.

A Forbes study shows contrary to popular belief, China’s money is not even as far outspread in Africa as is in the west, with for instance Chinese investment in Africa being lower on average than in other regions away from Africa. Forbes study says Chinese investment in Africa averages 1.78 people for every $1 million compared to 2.24 people for every $1 million in regions other than Africa. “Studies show that more billions in terms of investment from China have currently gone to Europe than to Africa,” 30 billion pounds has been invested in UK alone in recent years by China compared to only USD 60 billion for the entire African continent of 54 countries over the same period.

The Forbes studies also review that U.S. debt from China is $1.13 trillion as of February 2019. That’s 28% of the $4.02 trillion in Treasury bills, notes, and bonds held by foreign countries. And China has the greatest amount of U.S Foreign debt and the truth is that you will never hear or see this on western media platforms. This confirms the concerns of many pundits that feel China’s relationship with Africa regarding debt or investment are often mischaracterized or skewed in western media.

The question is why is the largest economy in the world or the ”Big 3″ EU countries not so worried about its debt from China but so worried about China’s debt to Africa?

Great Business Opportunity for Africa 

In 2001, IMF and World Bank advised Zambian government to privatize the copper mines if Zambia were to attract foreign investors and if Zambia was not to play by their rules, IMF and World Bank vowed not to help Zambia. Even now Zambia is still paying dearly by taking this wrong advice from these institutions. Therefore, China coming on board should be embraced positively by people who really care about Africa because Africa now has many choices to make for it to secure funding for infrastructure development. Infrastructure is crucial for economic and social development around the world-from transportation networks that enable people and goods to move around safely and effectively, to the utility systems providing power and security systems due to high levels of technology and, China has stepped up in this area to help Africa build reliable infrastructure and, this is happening all over the continent.

It is also important to state that this is also a great learning opportunity for Africa. If we look back; Africa has been behind in terms of skills, experience, and knowledge when it comes to infrastructure development, and this is a great opportunity for Africa to step up and enhance their skills and experience.

It is also important to know that Africa does not only import from China, but Africa also exports to China. In 2018, bilateral trade was in excess of USD 5 billion exports to China, Kenya is ranked first and Zambia is the second-largest trade partner with China. Therefore, this shows that it is clearly business between Africa and China.

The irresponsibility of Developing World Leaders?

Where there is no enemy within, an enemy from the outside can do you no harm. Abraham Lincoln once said “America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves”. This statement is true also for Africa, and the question is, do Africans hold accountable their leaders when it comes to corrupt deals they make? The answer is NO! There are over one million Chinese in Africa right now, and all these have come to Africa as investors but yet they end up in the market selling vegetables, chicken, etc. They are taking simple jobs that should be done by Africans and many of them come to our land and they go back to China leaving young African girls with mixed children without any child support! And yet the African governments do nothing! A friend of mine who studied engineering in China once told me that “Many of the Chinese nationals come to Africa are former inmates.” And the question should be is this really the wrath of China, the answer is a Big No! African governments are the reckless ones here because things are getting out of hand and African governments are quiet instead of coming with policies that are in the interest of their people. Chinese companies violate the labor laws and they mistreat African employees in African land and yet the governments do nothing about it. An African may commit the same offense with a Chinese here in Africa but yet the Chinese may walk free because of the corrupt justice system. Chinese are buying land in many African nations through bribes and corruption yet governments does nothing? In Zambia, it is a law that foreign contractors who get a contract in Zambia have to give 30% of the contract to a local contractor yet Chinese violate this law and the government does nothing about it because there is corruption involved? I think the major debate should be the failure of executing leadership by African leaders.

The Media, Political Leaders and Fellow Citizens 

The media in Africa has a major role to play in order to take Africa forward. Right now there is a lot of fake news going around, for instance, there were reports of talks between the Zambian government and China on handing over the country’s national electricity company (ZESCO) to the Chinese due to the inability of Zambia to meet its loan repayment promises. There were also reports that the main airport in Lusaka could be the next target, the media stated. All of these were fake news. As I live in Lusaka, Zambia I can verify that. We are living in a world where someone can just wake up and suggest something unreal and then the media picks it without credible evidence.

This also goes to opposition political leaders who use false information to damage the image of the continent. I think youths should learn from this evil terror and focus on the common goal of making the African continent great. The world will be a better place if politicians would focus on solving the problems people are facing instead of fighting their colleagues so that they can get in power. It is a high time for youths to learn that you can’t get on top by holding or destroying other people down.

Leadership is the Common Denominator

Where there is a poison, there is a remedy. Everything falls and rises on Leadership. Leadership is key to creating a better world for the people because nothing happens, changes, improves, corrected and transforms until you have great leaders. The developing countries need to embrace a leader who sees more, see farther and sees before others see. True leaders make a distinction between an opportunity and a distraction, and between what is good and what is right for the people and countries they serve. Leadership is not an easy job because sometimes you have to make decisions not based on what the media says but based on the right thing even if it is criticized by many people. Great leadership means that the leader doesn’t only believe the big story he/she sees in the media but also you look for the story they are trying to distract him/her from.

Every country or public company in the world have what is called an Audit Committee and the purpose of the Audit Committee is to evaluate operational procedures, risk management, control functions, credit policy, and governance processes. This means that any country with strong governance has to assess whether the country is able to pay the loans and the payment terms and risks of that loan it intends to get, and the review then it passes to the cabinet members for further discussion. Therefore, for those who say that China is using debt to trap Africa, are they saying that Africa has no Audit Committees? In my country Zambia we have a Public Financial Management (PFM) Act which states that the government can postpone the contracting of all new non-concessional loans, cancel some committed but some undistributed loans and enhance control and Management of disbursement of foreign-financed loans, and must strictly adhere to public financial management.

Africa has many more mineral resources than any other continent in the world and with great leadership, skills and experience the continent will be a better world. For instance, Zambia is the second-largest producer of copper in Africa and, electric cars consist about 70% copper, but I don’t usually see electric cars around and the electric cars market aims to hit US $912 billion by 2026. Everything falls and rises on Leadership. Africa can do more by implementing strong governance system with no loopholes for corruption and mismanagement of resources and most importantly by seeking partners rather than investors.

One of the characteristics of great leaders is curiosity. You have to be curious to study and always look at what is happening in an external environment. You also need to develop critical thinking to tap into knowledge as well as the competence to analyze issues and make sense of the information by putting facts in their proper perspective. With a lot of false information surrounding us everywhere, we need to be critical thinkers to discern the false to truth, unreal to real and fiction to reality. Therefore, this means that you do not only make decisions based on the media but must also look for the story the media is trying to hide.

In conclusion, China investments in Africa must be embraced positively because China is giving Africa low-interest loans compared to any other nation or financial institution. As we are all aware. China’s investments in Africa largely focus on key areas such as utilities, telecommunications, port construction, and transportation. However, this should be a wake-up call for African leaders to also learn how China does business. For instance, China does not criticize bribery and in Africa bribery must be criticized at any cost necessary because it brings about corruption. Africa must create strong institutional governments and embrace transparency of its debt management. Like I said, everything rises and falls on Leadership. With great leadership on board, Africa will be a great Continent!