China’s One Belt initiative could pile up Africa’s debt

Last week, China announced a plan to build a vast global infrastructure network linking Africa, Asia, Europe and the Middle East into ‘One Belt, One Road’.

China plans to spend up to $3 trillion on infrastructure in an effort that seems to be centred more on linking 60 countries in the world with China, not necessarily each other.

This One Belt initiative is perhaps part of China’s determination to position itself as the world’s leader in the context of Donald Trump’s insular United States. This initiative has two-fold implications for Africa: the opportunities and potential problems that it creates.

In terms of opportunity, obviously African needs continued financial support in infrastructure development. The Africa Development Bank (AfDB) estimates that Africa’s infrastructure deficit amounts to $93 billion annually until 2021. In this sense any effort to support the development of Africa’s infrastructure is welcome.

In addition, this is an opportunity for Africa to negotiate the specifics of the type of infrastructure the continent requires and create a win-win situation where Africa leverages Chinese financing to not only address priority infrastructure gaps, but also better interlink the continent.

Pushback

However, there are multiple challenges the first of which is that Europe, India and Japan seem edgy about this initiative and have distanced themselves from it.

According to India’s Economic Times, India and Japan are together embarking upon multiple infrastructure projects across Africa and Asia in what could be viewed as pushback against China’s One Belt initiative.

The countries have launched their own infrastructure development projects linking Asia-Pacific to Africa to balance China’s influence in the region.

Europe is also edgy because the initiative has not been collaborative and comes across as an edict from China; countries in the initiative were not consulted.

Europe is also uneasy with the lack of details and transparency of the initiative seeing it as a new strategy to further enable China to sell products to the world.

Analysts have pointed out that from an Africa perspective, the One Belt seems to continue the colonial legacy of building infrastructure to get resources out of the continent, not interlink the continent.

Will the initiative entrench Africa’s position as a mere raw material supplier to China and facilitate the natural resource exploitation of the continent?

Additionally, there are concerns with how the financing will be structured and deployed. Will financing be debt or grants? It can be argued that China needs to increase its free aid toward Africa in order to build its image as a global leader.

Further, who will build the infrastructure? Africa has grown weary of China linking its financing to the contracting of Chinese companies.

Will this infrastructure drive employ Africans and use African companies? If not, then it can be argued that Africa will merely be borrowing money from China to pay itself back.

Linked to the point above, is the fact that Africa is already deeply indebted to China. In Kenya, China owns half of the country’s external debt. Kenya will pay Sh60 billion to the China Exim Bank alone over the next three years. 

Kenya and Africa do not need more debt from China, and if this initiative is primarily debt-financed (in a non-concessionary manner), it will cause considerable concern in African capitals.