“China has become, in twenty years, the main donor of sub-Saharan Africa, holding 62.1% of its bilateral external debt in 2020, against 3.1% in 2000”, reports the direction of the Treasury, in a bulletin of November 2021.
→ ANALYSIS. The debt of African countries arouses appetite
In absolute terms, the country is therefore the region’s leading creditor. For its part, recourse to bilateral financing, from State to State, represents a quarter of the debt of sub-Saharan Africa. The members of the Paris Club, which notably includes the former colonial powers, now represent just under 20% of this bilateral debt.
Targeted investments
Djibouti, the Republic of Congo and Angola have half of their debt in the hands of Chinese donors. In practice, Beijing invests through two state-owned banks: China Eximbank and China Development Bank.
“The Chinese invest if there are significant resources of raw materials, or if there is the possibility of financing large infrastructure projects, as in Ethiopia and Djibouti for example, analyzes Thomas Mélonio, the executive director of innovation, research and knowledge at AFD, the French Development Agency. To carry out infrastructure projects, China was able to use national labor, but there was protest among the local populations. As a result, we observe a decrease in this practice. Moreover, Chinese labor is more expensive. »
Fear of seizure of assets
Another controversy around Chinese loans, the “guarantees” introduced into the contracts in the event of default. “The emblematic – but unique, at this stage – case of the seizure of the port of Hambantota (Sri Lanka) by China due to the non-reimbursement of the loan which enabled its construction regularly fuels suspicions of the seizure of strategic infrastructure on the African continent “, notes the direction of the Treasury in a note of last January.
→ READ. Private creditors complicate African debt settlement
In March 2021, Anglo-Saxon researchers got their hands on one hundred loan contracts signed by China. After comparison with other standard contracts, they noticed very broad confidentiality clauses, which is unusual.
Other guarantees detonate. Debtors “must finance special accounts with income from projects financed by Chinese loans”, they note. These guarantees, combined with the effects of confidentiality clauses, increase the risk for the debtor country of misjudging its ability to repay, and not, if necessary, providing it with an adequate restructuring program.
“A generous lender”
Another notable clause is the ban on restructuring its debt within the framework of the Paris Club, which contrasts with the diplomatic voluntarism displayed by China on the subject. “Overall, the contracts in our sample suggest that China is a strong lender to developing countries,” conclude the authors.
However, this analysis is nuanced by Gregory Smith, a former economist for the World Bank: “China really rose to power from the 2010s: it didn’t ask enough questions about the investments it made, the guarantees it obtained and the solvency of its partners. It is a generous lender, which makes it possible to bring a lot of money quickly to the countries that want it. »
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