Debt-trap diplomacy: Can Africa reject China’s easy money?

2018/24/10 – A massive Ethiopian dam is plagued with allegations of mismanagement, corruption and even murder.

The Botswanan air force is taking delivery of a fleet of fighter jets it doesn’t need. And in Zimbabwe, an infamous ‘spy school’ stands as a monument to the dictator it couldn’t keep in power.

What connects this herd of white elephants? The Chinese loans which financed them.

China is pumping money into Africa at a furious rate, having forked over nearly US$150 billion in loans since the turn of the millennium.

This Chinese cash is only exacerbating corruption in Africa, fuelling a culture of kickbacks that is scaring Western investors away. Observers such as former US Secretary of State Rex Tillerson worry that China is laying a series of debt traps with its “predatory loans”, which Africa’s tinpot dictators are blindly bumbling into.

China’s debt diplomacy has already gobbled up a number of prize assets, notably the Indian Ocean port of Hambantota, surrendered by an impecunious Sri Lankan government last year.

But Xi Jinping’s government insists its investment strategy is simply part of the Belt and Road Initiative, its US$1 trillion plan to build a new trade network. African governments, facing a US$170 billion investment gap, are happy to swallow the lie: China offers low interest rates and its lack of oversight leaves plenty of opportunity for graft: almost 87 percent of Chinese contractors admit to bribing African officials.


000_Par1832928  Trucks are loaded with rocks at the world’s richest by production value open pit diamond mine, Jwaneng, 160km south west of Gaborone in Botswana. Source: AFP Photo/Alexander Joe

Botswana is the quintessential example of the damage this kickback culture can wreak.

Once a poster child of economic development, the country has slid ever deeper into malfeasance under the weight of Chinese loans.

Last year, President Ian Khama agreed to pay US$200 million for a fleet of Gripen fighter jets, even though his 50-year-old country has yet to fight a single war. Meanwhile, his brother bought his own private jet – using US$4.7 million in public money.

This graft and rampant bribery has caused investors to flee Botswana en masse, despite its immense mineral riches. BP and Anglo-American have both pulled out of the country, while Russian miner Nornickel has been forced to take legal action over unpaid debts.

The exodus has forced new Botswanan president Mokgweetsi Masisi to go cap-in-hand to Beijing, where he recently secured a fresh loan and the cancellation of some existing debt.

Will Xi eventually call time on the remaining loans and snap up Botswana’s mines?

While Chinese officials stress the two countries’ “time-honoured friendship”, this hasn’t stopped Xi’s government baring its teeth to keep Gaborone in line. In 2016, China shuttered its embassy when Botswanan officials dared to criticise its territorial claims in the South China Sea, and nixed a visit from the Dalai Lama.

Given this history, one wonders whether China is simply waiting for the right time to spring the debt trap it has set.

Across the border in Zimbabwe, the trap is already sprung. Last year, Robert Mugabe admitted he had traded platinum licences with China for weapons, and put his country’s mineral deposits up as collateral for Chinese loans.

Mugabe had counted China as an ally ever since the 1970s, but during his final years in power, as Western powers ostracised him one by one, Beijing became an ever more important partner. Chinese companies (including those blacklisted internationally) were handed key construction contracts, and in return, Chinese loans bankrolled a series of vanity projects, notably a defence institute which was dubbed the ‘Robert Mugabe national school of intelligence’.

China’s influence is so great that Mugabe’s opponents reportedly sought Xi’s blessing before removing the long-time strongman last year.

In any case, the brutality and economic chaos orchestrated by ‘the Crocodile’ left Zimbabwe with few other international friends. Nearly a year on from the coup, Western observers have yet to return, forcing new president Emmerson Mnangagwa to urgently seek fresh funding from Beijing.

000_18046D  Former Zimbabwean President Robert Mugabe speaks to the press in July 2018. Source: Jekesai Njikizana/AFP

US fears

Further north, Beijing’s fingerprints are all over the construction boom taking place in Ethiopia and Djibouti.

Chinese cash has been used to build a string of major projects in the two countries; perhaps unsurprisingly, both have been blighted by high-profile scandals.

In July, the man charged with building the Chinese-funded Grand Renaissance Dam near Ethiopia’s Western border died—reportedly by suicide, though there were rumours of foul play.

Yet perhaps China’s most significant involvement in the Horn of Africa is at Doraleh, Djibouti’s huge container port.

China has already financed and built a free trade terminal there; there are now suspicions that Djibouti’s president Ismail Omar Guelleh will simply hand over the entire facility to Xi’s government as a gift. Djibouti has already made efforts to eject the port’s legitimate operator, Dubai’s state-run DP World.

Given that up to 20 percent of global trade passes through the neighbouring Bab-el-Mandeb strait, Doraleh has the economic potential to become a lynchpin of China’s ‘Maritime Silk Road’.

But Beijing has political motivations as well: China recently built a military base near Doraleh, directly threatening America’s own military installation in Djibouti, Camp Lemonnier, which is the only permanent US base in Africa. US politicians are concerned that China will snap up the port and use it to squeeze American forces out of Djibouti.

It’s easy to understand their concern. Guelleh, a de facto dictator whose corrupt administration has lasted nearly 20 years, has had no qualms about pushing Djibouti’s debt-to-GDP ratio to near 100 percent, principally owed to Xi’s financiers.

Republican lawmaker Mo Brooks highlighted this link in a recent letter to US Ambassador to the UN Nikki Haley, warning that Guelleh’s regime was “fuelled by a steady flow of Chinese cash, palaces and gifts.”

Brooks went on to affirm that the US must take firm action against Guelleh.

But if the West wants to address China’s growing influence in Africa, they must persuade African governments to eliminate the corrupt practices which have sapped Western businesses’ confidence. Because while Africa’s dalliance with China may be jeopardising Western interests, its own people will suffer most in the long term.

Asian Correspondent/Sahel-Elite



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