Seven Countries Trapped in China’s Exploitive Loans-Debt Trap Diplomacy

By Soko Directory Team / Published September 7, 2018 | 6:30 am

China has been taking control of economies in a number of African countries with research data revealing that it has overtaken the United States as Africa’s economic powerhouse.

The number of loans, totalling to 130 billion dollars, China has given Africa is worrying given previous cases of the country taking over major companies of countries that failed to repay.

China’s population has on a number of occasions been ranked as the highest in the World at 1,384,688,986 by 1st July 2018, with the numbers increasing rapidly. This large number of China’s population need jobs and living space and China’s government is doing right by its people, irrespective of what the consequences for Africa might be.

For any loan to be recovered, the finances need to be put into projects with high economic returns, Africa is drowning in corruption and these loans cannot be an exception especially in Kenya where almost half the budget results into scandals that are forever unsolved. Kenyan leaders therefore don’t seem to have a favourable exit plan which is likely to lead us to what the countries below have had to experience.

Sri Lanka

Sri Lanka has experience on just what could happen to Kenya if it fails to pay up its loans.

Sri Lanka officially handed over its strategic Hambantota port to China on a 99 year lease, last year after it failed to repay a debt of 8 billion dollars to Chinese firms that are state-controlled. This gave China a crucial access to Indian Ocean’s sea lanes which greatly alarmed New Delhi.

Africa countries signing off so much of African assets risk taking us back to colonialism after our fore-fathers sacrificed their lives to deliver our countries.

Zimbabwe

Chinese companies offered strict terms for Zimbabwe to secure loans four years after it had defaulted in paying in 1990 under President Mugabe.

China requested to be exempted from the local labor laws and be prioritized in mineral exploration. Zimbabwe almost sold off mineral rights to China due to the loan.

Djibouti

China formed a relationship with Djibouti and finally got to set up a full scale military base in the country despite the U.S. also having a base there. The Chinese military allegedly fired lasers at U.S. aircrafts from the base further escalating tension between the two countries.

China’s influence on Djibouti could not allow the country to take any action on the Chinese militants given China owned 82 percent of Djibouti’s foreign debt, according to Center for Global Development.

Djibouti is now at the edge of handing over control of a significant port to state controlled Chinese firms following defaulting in Chinese loans.

Angola

Angola, in 2000 took loans from China totaling to 21.2 billion dollars. The loan, currently, is estimated to be around a quarter of cumulative Chinese loans to those of the rest of the continent.

Angola’s loan with China is however not financially serviced but is paid back with oil since the country is the second largest producer of the product in Africa. Angola’s ability to repay China is hence pegged on the price of the oil leaving very little oil for Angola to export to other partnering countries.

Namibia

According to statistics from Namibia’s Finance Ministry, the country owes China N$1,99 billion.

This debt is broken down in two categories, N$302 million for the interest free loans and N$1,694 billion for the concessional loans.

China has gone further to provide grants to Namibia’s government totaling to N$1,340 billion which all totals to N$3,336 billion.

Zambia

Zambia has not been spared too from China’s debt trap diplomacy and despite its declining economy; its borrowing appetite has not subsided.

China’s loans to Zambia date back to the year 2011 running into more than 8.5 billion dollars. Chinese state controlled firms have since taken control of Zambia’s strategic assets for around 30 years. Lusaka Airport, East Park mall and tollgate plazas and east park mall are just a few examples. Lusaka airport is under a 360 million dollar expansion with the loan coming from Exim Bank of China.

Kenya

China is the leading external debtor to Kenya, currently with its trade deficit with Beijing growing alarmingly.

Not less than 70 percent of Kenya’s foreign debt is by China, which is estimated as more than 557 billion dollars, with Kenya joining the Asian Infrastructure Investment Bank.

China prides for majorly financing, the Standard Gauge Railways connecting Mombasa to Nairobi and the Nairobi Thika Superhighway. Loans taken for the above projects are yet to be repaid with loans still being taken up by the Government.

China’s citizens, however, seem to have comfortably fit in Kenya, owning property and holding offices. The most current show of Kenya having sold its soul to China being that of Liu Jiaqi, after a recording of him insulting the presidency and Kenyans went viral and instead of him facing prosecution, the Government chose to deport him which we can only hope at least shall actually be done.

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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