What China’s belt and road initiative means for Africa

At the second belt and road forum, it is clear that China is the country that is building, connecting and benefitting. Belt and road initiative will not promote Africa’s industrial development, will not industrialize Africa and it will make Africa to depend more on Chinese goods. It is about global connectivity to Chinese economy to […]

At the second belt and road forum, it is clear that China is the country that is building, connecting and benefitting. Belt and road initiative will not promote Africa’s industrial development, will not industrialize Africa and it will make Africa to depend more on Chinese goods. It is about global connectivity to Chinese economy to export industrial goods. The initiative will take away more raw materials and jobs away from Africa. Belt and road cooperation will not facilitate Africa development in this era of 4th industrial revolution. The initiative will not transfer technology to Africa. I am worried that China is not building industries around the world but using belt and road initiative to connect the world to Chinese industries. But China’s efforts abroad do not stop there. Belt and Road also means that Chinese firms are engaging in construction work across the globe on an unparalleled scale. Beijing’s multibillion dollar Belt and Road Initiative (BRI) has been called a Chinese Marshall Plan, a state-backed campaign for global dominance, a stimulus package for a slowing economy, and a massive marketing campaign for something that was already happening – Chinese investment around the world. Education under belt and road is not well defined.

While the British expanded the empire through conquest, China understands a subtle approach, which is sovereign debt. It is now the ammunition of choice for China to penetrate developing countries and get them to suit its expanding economic and military interests.

Some worry expanded Chinese commercial presence around the world will eventually lead to expanded military presence. Last year, China established its first overseas military base in Djibouti. Analysts say almost all the ports and other transport infrastructure being built can be used for commercial and military purposes.

The Belt and Road initiative is expected to cost more than $1tn (£760bn), although there are differing estimates as to how much money has been spent to date. According to one analysis, China has invested more than $210bn, the majority in Asia. To date, Chinese companies have secured more than $340bn in construction contracts along the Belt and Road.

However, China’s dominance in the construction sector comes at the expense of local contractors in partner countries. Critics worry China could use “debt-trap diplomacy” to extract strategic concessions – such as over territorial disputes in the South China Sea or silence on human rights violations. In 2011, China wrote off an undisclosed debt owed by Tajikistan in exchange for 1,158 sq km (447 sq miles) of disputed territory.

Over the five years since President Xi Jinping announced his grand plan to connect Asia, Africa and Europe, the initiative has morphed into a broad catchphrase to describe almost all aspects of Chinese engagement abroad. From South-east Asia to Eastern Europe and Africa, Belt and Road includes 71 countries that account for half the world’s population and a quarter of global GDP.

Under belt and road initiative loans from China are irresistible because they come with less strings attached on matters such as governance, democracy or human rights.

China’s billion dollar loans to Africa will not transform the manufacturing sector of the continent. It is not a new argument that these Chinese loans to Africa will not bring good institutions, infrastructure, human capital and technology. The loans will not drive manufacturing-led growth in Africa. This is debt diplomacy between China and Africa.

What Africa needs is a manufacturing renaissance, with more local value-addition that would create more and better-paid jobs, and contribute to fulfilling the aspirations of the Agenda 2063. Chinese loans for Africa cannot make African countries become more resilient to economic shocks and less dependent on natural resource exports. Africa can achieve ambitious goal if it taps into available opportunities, while mitigating the challenges it faces.

It’s tempting for European countries and Americans to think this is not our problem. But as African countries sink deeper and deeper into Beijing’s carefully laid debt trap, the United States could pay a steep cost in reduced cooperation on counterterrorism and job creation.

Chinese debt has become the methamphetamines of infrastructure finance: highly addictive, readily available, and with long-term negative effects that far outweigh any temporary high. This is particularly true in sub-Saharan Africa, where China has become the largest provider of bilateral loans. Forty percent of sub-Saharan African countries are already at high risk of debt distress; by having so much debt concentrated in the hands of a single lender, they are dangerously beholden to their supplier.

Why does this matter? Because in Africa and elsewhere, governments have secured massive loans from Beijing using strategic assets-such as oil, minerals, and land rights- as collateral. If borrower nations find themselves unable to repay the loan, China can claim the strategic asset. Sri Lanka recently learned this the hard way and handed over control of the port of Hambantota, giving China a strategic foothold along a busy trade waterway.

While Chinese debt diplomacy may not seem relevant to most Americans, it is a serious threat to US national security. Most directly, China’s crafty negotiations and seizure of strategic assets can limit US influence and access overseas.

More broadly, unsustainable levels of debt can destabilize African states, which also compromise American security interests. Over-leveraged governments can get caught in a downward spiral of credit downgrades, reckless economic policies, and reduced spending on social services. With economic stagnation comes fewer opportunities for Africa’s fast-growing and young population. And the toxic brew of economic hopelessness and political disillusionment can drive disaffected youth toward violent extremism. That can threaten Americans abroad and, potentially, even at home.

In Africa and around the world, much more needs to be done to confront Chinese debt diplomacy. If not, the US will pay a heavy price in its commercial and national security interests.

If not tamed, the loans from China will continue to subject poor nations into new rounds of dependency, and therefore, will lead them down a path to more underdevelopment.

 

Donald, a public affairs analyst can be reached at: [email protected]