Horror Awaits African Leaders As China Withdraws Debt Funding

Speculation about a failed trip to China is rife in Kenya after President Uhuru Kenyatta disappeared for ten days. A government spokeswoman sought to reassure the public: Mr Kenyatta had been in his office “meditating”.

After an impressive run of a good relationship with China, scooping up at least $9.8bn between 2006 and 2017, making it Africa’s third-largest recipient of Chinese loans, the good "friendship" between the two countries seems to have come to a snag.

Beijing’s "generosity" to Africa has sometimes seemed limitless reaching a peak of $30 billion in 2016. In September China promised another $60bn in aid and loans to the continent. Xi Jinping, its president, promised the money would come with “no political strings attached”. John Magufuli, Tanzania’s strongman president, was delighted. The West, he griped, made its money dependent on “strange conditions”, such as insisting that Tanzania should not lock up gay men. “China is a true friend,” he enthused. Its assistance comes “free of charge”.

Social media was filled with speculation that Kenyatta returned empty-handed on his last trip to China. Kenyatta must have assumed that his railway project, on which he has staked much political capital, was going to be financed by Xi's deep pockets. 

This has been one of China's high profile projects in Africa receiving up to $4.7bn for the first two sections to date.  An almost 500km stretch between the port of Mombasa and the capital, Nairobi, is up and running. The second is nearly completed. 

Kenya had assumed that China would fork out the $3.5bn needed for the penultimate section, to Kisumu on Lake Victoria. If China’s had bought into the ultimate vision of a railway network connecting resource-rich inland states to Indian Ocean ports, why abruptly stop funding the project halfway through?

Accusations have started flying around that China deliberately lends countries more than they can repay in order to seize strategic assets when they default. They point to the Chinese-financed port at Hambantota in Sri Lanka. The port was favoured for its strategic position as a naval base for Chinese ships patrolling the Indian Ocean.

In Africa, China's influence through lending to countries such as Djibouti has also raised some eyebrows. The country's ports now being under Chinese operational control. And yes, this is home to China's first overseas military base as well.

“The situation that Sri Lanka got itself into may not turn out to be unusual,” says Mutula Kilonzo, a prominent Kenyan senator in an interview with The Economist. “It is going to happen to African countries, too. The conditions of many loans are...a debt trap.”

Deborah Brautigam at Johns Hopkins argues that Hambantota is an exception. She looked at more than 3,000 projects overseas financed by China and found that it was the only example of such an asset being seized to cover a debt.

African leaders have been increasingly unsettled as debt talks with China are becoming increasingly difficult. Magufuli, who once claimed the Chinese as "true friends", had to indefinitely suspend construction at Bagamoyo, balking at demands from the project’s Chinese partner for a 99-year lease and a ban on port development elsewhere in Tanzania. Utter absurdity.

The cheerleader turned critic, accused the firm of setting “tough conditions that can only be accepted by mad people”. Last year Sierra Leone scrapped a Chinese-funded project to build a new international airport for fear that it would involve too much debt.

Analysts have accused China of plotting o turn the Indian Ocean into a Chinese lake. In Kenya, public debt has tripled since Kenyatta assumed power in 2013. The biggest lender, the Chinese. As a result, the risk of debt distress has been raised from low to moderate by the IMF.

China’s hesitation also reflects the uneven performance of past projects. A railway between Djibouti and Addis Ababa, completed in 2017, cost China’s state-owned insurer Sinosure $1bn in losses, its chief economist said last year. Africa's lack of governance has been driving up the costs of most projects. Pipe dreams are brought to the table !and at times hit by political risks. Bagamoyo’s port was expected to handle more containers than Rotterdam, Europe’s biggest freight terminal. Kenya's railway and dry port dream was threatened by the border dispute between Uganda and Rwanda.

According to an aide on Kenyatta's last trip to China in May, the atmosphere that greeted them was unfamiliar to the China of old.  Questions were raised about corruption as well as the figures and sums they had proposed. Mr Kenyatta was asked how he would afford a census and a referendum on constitutional change. 

As if that was not enough, the Chinese even wanted to know if he planned to stand for office again (he is obliged to stand down in 2022). “It was like talking to the World Bank,” grumbled another aide.

Header Image Credit: Public Cultural Diplomacy