Development, Deposits, And Debts: A Decade of BRI in Africa
On October 18, 2023, Chinese President Xi Jinping opened the Third Belt and Road Forum for International Cooperation (BRFIC) in Beijing, a decade after the initial Belt and Road Initiative (BRI) was first announced. Stretching westward from China, across Central Asia into Europe, and spreading throughout Africa, the BRI’s impact has been staggering. With much-needed improvements to infrastructure in order to boost development, the BRI has been seen as a welcoming gesture in Africa, where 44 Sub-Saharan countries have signed onto the project. A decade later, results have been mixed. Boston University’s Global Development Policy Center reported that China has financed over $91 billion USD in loans for projects, improving economic growth, but issues with debt financing have caused members to struggle. Although BRI funding into Africa is likely to continue, its future benefits will depend on the development of a mutually beneficial relationship between Africa and China.
First announced in 2013, the BRI is China’s international infrastructure plan to connect China with the wider world through extensive development projects and trade routes. The increasing need in China for natural minerals for manufacturing is driving the push for deeper connections and access to mineral-rich countries, while the opportunity to finance direly needed projects is often too hard for African states to pass up. In a speech about China’s lending practices in Africa in 2018, President Xi stated that “inadequate infrastructure is believed to be the biggest bottleneck to Africa’s development.”
Since 2000, China has provided over $170 billion USD in loans to 53 African nations, excluding Eswatini due to its recognition of Taiwan. Much of this has gone to the energy and transportation sectors, which play a major role in the BRI. Despite the potential benefits, China has been accused of repressive security issues, the use of its own workers over the local workforce, and “debt-trap diplomacy,” where predatory lending practices lead to unfinished projects without the ability to repay their debts, which can be used as leverage by the lending country. This can be seen through three case studies: Ethiopia, Kenya, and Zambia.
Ethiopia
With China’s need to gain a strategic presence in maritime trade along East Africa, and landlocked Ethiopia’s need to access the sea, the Addis Ababa–Djibouti Railway has been one of the BRI’s flagship projects. As the first modern electrified rail line in Africa, it has cut down a three-day travel time from the inland capital to the Red Sea to ten hours and has allowed for greater trade between Ethiopia and Djibouti. Multiple Chinese construction companies won contracts for the project and employed over 25,000 Ethiopian and Djibouti workers from the start of construction in 2011 to its opening for commercial operation in 2018.
Although Ethiopia only signed the Memorandum of Understanding (MOU) in 2018 to officially join the BRI, the country has been borrowing from China for a while. Boston University’s Chinese Loans to Africa Database documented that Ethiopia has been taking out transportation development loans since at least 2001. For the railway project, approximately $2.5 billion USD was lent to Ethiopia and another $500 million USD to Djibouti from the Export-Import Bank of China (CHEXIM), covering 70 percent of the total cost, with both countries financing the remaining 30 percent.
With this in mind, Ethiopian Prime Minister Abiy Ahmed has turned toward further relations and interaction with China. At the third BRFIC, the two issued a joint statement reaffirming their 30-year relationship as an “all-weather partnership” in the joint participation in the protection of sovereignty, security, and safety on all levels. Nevertheless, the importation of further Chinese technologies within the country has generated some human rights concerns. China has implemented security systems, such as facial recognition technology to protect Chinese assets and investments, which critics fear could allow African governments to increase surveillance, persecute those for differing political views, and provide China with training data to use back home.
With its recent civil war causing further security and economic concerns, Ethiopia has leaned into the IMF, making recent requests to restructure its ballooning debt.
Kenya
Kenya’s need for better infrastructure has led to similar projects as Ethiopia, but it has caused greater debt issues. The standard gauge railway (SGR) connecting the port city of Mombasa to Nairobi - the biggest investment in the country since its independence - was funded through the borrowing of $3.6 billion USD from the CHEXIM bank for the construction of the main line and another $1.4 billion USD for an extension farther inland to Naivasha. While the train line has decreased travel times and benefited the country, its construction did not happen without controversy. Local communities protested the building of the railway through Nairobi National Park, which paused its construction, and frustration over low pay by Chinese contractors led to a brief strike.
In comparison, funding for another rail line connecting Mombasa to Uganda was abruptly cut by China before the project could be completed, leaving the unfinished railway nearly 475 km away from the Kenya-Uganda border and forcing Kenya to turn toward a Turkish company to finish the project. China claims that its loans were meant to be less burdensome to avoid debt issues, but there are increased worries about Kenya’s ability to pay back its debts and future economic prospects. As of March 2023, China owns approximately 64 percent of the country’s external debt, and through debt servicing requirements, Kenya had to pay over $800 million USD to the PRC within an eight-month period. Fears grew after a government letter leaked to the public in 2018 over the possibility of utilizing the Mombasa Port as collateral if they defaulted on their loans, echoing a similar situation at the time, where Sri Lanka signed away one of its major ports in a 99-year lease with China following struggles with debt servicing. Despite this, President Ruto requested a further $1 billion USD from China at the BRFIC for further projects.
Furthermore, Kenya’s export market has declined in comparison to the spread of Chinese goods within the region, as during the construction of the SGR, an increased supply of Chinese cement caused imports of Kenyan cement to decline amongst other East African countries, while states like Tanzania and Uganda have moved toward Chinese imports of manufacturing materials over Kenya’s.
Zambia
Zambia became the first African nation to default on its debt following the start of the COVID-19 pandemic in 2020 and after stepping back from a $42.5 million USD Eurobond repayment. The country, which has struggled with debt servicing after copper prices plummeted, has borrowed approximately $9.1 billion USD from China for infrastructure projects over the past two decades. With much of its debt owned by Chinese financial institutions, a key example of its focus on economic development in the nation dating back to the 1970s, great attention was placed on China’s positions as Zambia underwent debt restructuring. However, the lack of clarity on the details of loans, economic decision-making concentrated among a few Zambian leaders, and the absence of tracking systems, led to mismanagement and ultimately default.
China claims they consider loan issues on an individual basis and permit forgiveness on interest-free loans. However, it is very difficult to find information on loan contracts, such as the amount lent, its terms, what companies have been contracted, and any potential impacts. Furthermore, loans are not reported clearly to the IMF or World Bank, making it difficult to understand any pitfalls for countries seeking Chinese payments for much-needed improvements.
Zambia’s initial restructuring request was approved by the IMF in 2021, but the U.S. has been concerned that relief from global organizations would simply aid Chinese lenders. Despite these criticisms, Zambia has continued to negotiate, reaching a $6.3 billion USD deal in June of this year with the IMF, China, and other creditor nations, in which the nation would pay back its loans over a 20-year period, with hopes that it will end the country’s debt crisis and restart economic growth.
Conclusion
Throughout the next decade of China’s BRI, lending practice transparency is unlikely to change. However, due to the mixed results and increased financial issues experienced by member states, Beijing has begun to focus on “small but beautiful” projects tied to smaller loans to prevent the overburdening seen in the previous decade. Additionally, some believe China may heavily invest in the telecommunications sector, hoping to expand digital infrastructure within the continent. Nevertheless, African countries will need to protect and project their domestic interests in the face of a long-term Chinese plan to gain a foothold in the region, and the potential benefits and economic growth of foreign investments will depend on their ability to effectively seize the best opportunities while staying financially sound.