African governments need to do proper feasibility studies and due diligence before getting into business with the Chinese. They need to do this to better determine what project is beneficial for their economies.
Chinese investment in developing countries has been met with a backlash — domestically and internationally — given the growing debt levels. Before his visit to Africa in March, former US secretary of state Rex Tillerson accused China of predatory loan practices, which undermined growth and created few jobs on the continent. Additionally, China’s investment in the region is seen by many, including Hillary Clinton, as neo-colonialism with China being accused of constructing infrastructure in the region to exploit Africa’s natural resources.
Now, here is where we go wrong. We are quick to blame China for being “predatory” and “exploitative” and we forget the role of African governments.
China, just like any state with its own interests, is pushing its own agenda through the Belt and Road initiative and Africa is just a piece of the puzzle. With this in mind, countries need to also put their own interests first as they negotiate with China. Instead of just taking cheap loans for mega-infrastructure projects, governments should be actively conduct feasibility studies and due diligence before signing a contract. Additionally, they should make sure that proposed projects align with their own vision and agendas.
At the end of a 5-day visit to Beijing, Malaysian new Prime Minister, Mahathir Mohamad, halted two major Chinese-linked projects, which includes construction of East Coast Rail Link worth around $20 billion and $2.5 billion agreement for an arm of a Chinese energy giant to construct gas pipeline. Mr. Mohamad explained that he was not against Chinese companies but against borrowing money from outside and having projects which are not necessary and very costly. He blamed his predecessor for the large debt accumulated and vowed to get his country out of its suffocating debt — roughly $250 billion, some of it owed to Chinese companies.
The case of Sri Lanka selling off its Hambantota port after it struggled to pay off its debts, provides a learning lesson for most developing countries. The $1.3 billion port, which was opened eight years ago using Chinese loans, failed to bring in business and was handed over to Beijing on a 99-year lease. Though the deal erased roughly $1 billion in debt for the port project, Sri Lanka is now in more debt to China than ever, as other loans have continued and rates remain much higher than from other international lenders.
My argument (based on my past article on China in Africa: Loans or No Roads) still stands: African governments should take advantage of the B&R initiative or any Chinese loans to build their infrastructure or any other projects that they deem necessary. What should, however change, is how they negotiate their terms with the Chinese.
African governments need to do proper feasibility studies and due diligence before getting into business with the Chinese. They need to do this to better determine what project is beneficial for their economies. They, not the Chinese companies, should be more proactive in ensuring technology and skills transfer to make sure that they are less dependent and more sustainable. Some of these things are not for the Chinese government and companies to think about — it is up to African governments to push for their own agenda and interests as well. We need to hold our governments accountable not the Chinese government.