China’s 60 Billion Dollars Aid Too Good a Deal that Could Revert Africa Back to Colonialism

By Soko Directory Team / Published September 5, 2018 | 7:01 am



What you need to know about China’s Belt and Road Initiative

Xi Jinping, the Chinese President on Monday pledged 60 billion US dollars with “no strings attached” to support projects in Africa in the form of loans, investment, and aid as China seeks to extend its economic prospects to the continent.

The money offered by President Xi comes on top of the previous financing of the same amount offered by Beijing in 2015. It is to be spent for the next three years.

Speaking at the start of a two-day China-Africa conference, Mr. Xi, said the financing consists of 20 billion dollars in credit lines, 15 billion dollars in grants, 10 billion for “development financing”, 5 billion to buy imports from Africa alongside other interest-free loans and concessional loans.

The president also added that China will encourage its companies to make investments in Africa of at least 10 billion dollars for the next three years.

While China seeks to build trade, foster investment and uphold political ties with the continent, through its massive Belt and Road project, their involvement and deep penetration into Africa could be a cause to worry about, others warn.

Critics claim that the China is subtly burying some poor nations under huge debts. This is probably where Kenya is headed next considering its massive loan it has taken from China since the Standard Gauge Railway Project (SGR) began.

Recently, Kenya went for another 380 billion loan to fund the second phase of the SGR even before the first loan has matured. That Kenya isn’t getting value for money from the project is true since the SGR financial results started off with a loss.

Kenya is among those countries that will sink from China’s debts and already the citizens are feeling its effects owing to the politics surrounding fuel prices and inflated prices of commodities.

African heads of state seem thrilled by the idea of “free” funds from China unaware of the domino effect it might cause. The loans that come without demands or restrictions against environmental damage, corruption or waste, may just be too good a deal that could breed trouble.

According to a study done by a US organization, the Center for Global Development, shows that eight Asian, European and African nations utilizing the Belt and Road funds have serious concerns in terms of the sustainability of sovereign debt.

In fact, Mahathir Mohamed, the Malaysian prime minister cancelled majority Chinese-backed projects worth 22 billion US dollars and issued a warning against “a new version of colonialism”

But China has refuted claims that it is engaging the African countries in a debt trap diplomacy. South African president Cyril Ramaphosa came out strong in support of China saying that the gathering “refutes the view that a new colonialism is taking hold in Africa, as our detractors would have us believe”.

Rallying behind China’s involvement in the African continent if the Chairman of the African Union, Rwandan President Paul Kagame.

President Kagame told the summit that Africa is not a zero-sum game and its growing ties with China “do not come at anyone’s expense.”

For a continent with a combined GDP close times less that of China, Africans have a cause to worry when outside countries get too much involved. Even the Chinse and other Western countries projects can barely do enough to reduce the unemployment rate.

Since the Cold War, China has always been at the forefront in providing aid to the African countries, but its presence in some countries is becoming more pronounced than before.

According to data released a while ago for foreign direct investment in Africa from 2011 to 2016, China’s funding grew 150 percent. At the top is United States, followed by Britain, then France. China comes the fourth.

Visits by high ranking government officials from countries outside Africa, like the recent visit by Britain’s prime minister, Theresa May to Kenya, South Africa and Nigeria, for instance, coupled with the Chinese involvement and the US is construed by some Africans as the new scramble for Africa.

The western holds key control of mining resources all over Africa, and as it would seem, efforts like what China is doing could be of such interests.

It is undeniably true that the West the West has choked the African continent with onerous debt administration that has forced many countries to up to pay more in interest on debts to international lenders than on health care, education, infrastructure, and other vital services combined. Subsequently, these countries have passed the burden to its citizens who are forced to pay more in terms of taxes for increased revenue.

Moussa Faki, the African Union Commission affirmed that debt concerns have been expressed and that the risks need to be weighed as “Africa’s financing needs are such that it must seize every opportunity offered to it.”

A look at the major projects funded by the Chinese government has Chinese workers doing much of the work leaving locals unimpressed. The gains only go to the Chinese, and this is exactly what is happening in Kenya. The SGR trains are operated by the Chinese, the construction by the same individuals, yet Kenyans pay heavily for maintenance.

Some might even argue that the SGR is not a Kenyan project but a Chinese one because eventually, the locals are suffering.

China has an overseas military base in Djibouti, a country which has become heavily dependent on Chinese financing. Soon, the same could be realized in other parts of Africa, it may or may not be the Chinese but it could happen.

African heads of states should have, during the summit, asked important questions about the benefits of the China-Africa relationship and why it is banking on a subtle way of exploiting the continent just like other Western countries before it.

Although president Xi said poor African countries will have their debts written off, the “no strings attached” deal still seems too good!




About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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