Africa-China Loans Facts

This is from a CGD paper by Scott Morris, Brad Parks, and Alysha Gardner:

The World Bank’s portfolio is more concessional than China’s portfolio in every region of the world, and sometimes dramatically so. The overall concessionality of China’s portfolio demonstrates less variation from region-to-region, hovering between 15%-22% in all regions except Europe and Latin America. By contrast, the overall concessionality of the World Bank’s portfolio varies widely — from a low of 15% in Latin America to a high of 60% in Sub-Saharan Africa (which is also the region where Chinese lending volumes are highest). The differences between China and the World Bank are most stark in Sub-Saharan Africa. Whereas the overall concessionality of the World Bank’s portfolio in Sub-Saharan Africa is nearly 60%, China’s portfolio concessionality in the same region is only 22.5% All three measures of lending terms contribute to these differences in portfolio concessionality rates: China consistently has higher interest rates, shorter maturity lengths, and shorter grace periodsconcessionality

Notice that China is neck and neck with the World Bank across Africa, unlike in other regions where Bank lending dominates. What proportion of Chinese lending in Africa are concessional loans?

Whereas the overall concessionality of the World Bank’s portfolio in Sub-Saharan Africa is nearly 60%, China’s portfolio concessionality in the same region is only 22.5% .

Recall that, overall, China is the single largest creditor to developing countries:china creditor

What we should make of African states’ indebtedness to China? A lot of people have opined that China is engaging in debt diplomacy — intentionally trapping African countries with high interest non-concessional loans, after which it will demand all manner of concessions from them (perhaps UN votes, or other forms of assistance in aid of Beijing’s geo-strategic objectives). I have two thoughts on this.

First, the Chinese debt bonanza seen on the Continent over the last two decades was driven, in part, by local demand for infrastructure and other visible and attributable forms of “development.” And yes, intra-elite distributive politics and over-pricing was also involved. And Chinese firms, which often competed against each other, played along, too — perhaps because of the reasons Yuen Yueng Ang describes in her latest book (highly recommended). With this in mind, it is not entirely true to claim that Beijing pushed loans on African states. While it is true that some of the projects were driven more by the quest for kickbacks than for economic reasons, the fact is that individual country dynamics drove the demand for loans and projects. Some of those fit into China’s global geopolitical ambitions (like the Belt and Road Initiative). Others did not. 

Second, let’s think through the debt diplomacy game. Is the idea that China would ruin dozens of African states’ fiscal positions so much so that they would turn to Beijing for bailouts? How many Hambantota’s can China run across Africa? Does Beijing have the fiscal, military, or administrative capacity to do so?

The simple fact is that the use of gunboat diplomacy to settle sovereign debts is no longer kosher within the international system. My guess is that while Beijing certainly was out to buy influence with loans and other commercial relations, it also wanted to make money. Chinese officials were not running around peddling cheap concessional loans (see above). They were out looking for business for Chinese firms and banks. And so to the extent that African countries mismanaged their debt or invested in economically unviable infrastructure projects (even if in collusion with Chinese firms), that is on them.

Moving forward, it is clear that it will be in China’s best interest to make sure that its commercial relations in Africa do not stray too far from general economic viability. A strategic coddling of poor and weak allies will be very costly in the long run (see France in the Sahel). It will also likely turn African public opinion against China. For a long time, majorities of African publics have reported net favorable views of China. But this will most likely change if China morphs from a largely likable development partner building roads, power lines, and water works, to little more than a banker of tinpot tyrants in the business of building white elephants and saddling future generations with debt.

What Obama’s re-election means for US Africa Policy

On the 14th of June this year President Obama outlined his policy for Sub-Saharan Africa. Included in the policy statement were four key strategic objectives: (1) strengthen democratic institutions; (2) spur economic growth, trade, and investment; (3) advance peace and security; and (4) promote opportunity and development.

In my view, of the four aspirational goals the one that will receive the most attention in the near future will be the third (especially security).

US strategic security interests in Africa mainly involve two key concerns: (1) China’s growing economic presence in the region and (2) the spread of Al-Qaeda linked groups in the region, stretching from Somalia to Mauritania (This is why Mali featured more prominently than the EU in the Presidential foreign policy debate). Before talking about China, here are my thoughts on the US campaign against  al-Qaeda in Africa.

While I don’t foresee any success in the creation of an African base for AFRICOM, the US will continue to cooperate with AU member states in fighting Islamist extremism in the region. The “successful” AU mission in Somalia could provide a blueprint for future operations against potential terror groups. The biggest lesson from Somalia is that the US cannot just pick one nation (in this case Ethiopia) to fight its wars in the region, and that a collaborative effort with the blessing of the regional umbrella organization (the AU) and others such as IGAD can deliver results.

Having helped (both directly and indirectly) in the ouster of Al-Shabaab from strategic locations in Somalia, the next big task will be dealing with the mushrooming Islamist extremism in the Sahel (especially in northern Mali but also in Niger and Nigeria).

The problem of extremism in the Sahel is further compounded by the link of some of the groups to the drug trade flowing from Latin America and into Europe. There is significant evidence that drug money has financed the activities of separatist groups in northern Mali. The fight against these groups will necessarily involve dealing with this crucial source of finance. This means that for the operation to succeed the US will have to engage in capacity building and the strengthening (and clean-up) of security institutions (especially the armies) in states like Guinea, Guinea-Bissau, South Africa, Kenya, among others, in which officials in the security sector have been implicated in the drug trade.

The Sahelian challenge might yet prove more formidable than Somalia. The latter case had relatively stable neighbors that served to contain the anarchy. The Sahel (Sahelistan, if you will) is much larger and includes some of the least governed spaces on the planet.

On China, the US (and for that matter, the rest of the West) has to change its present approach of total freak-out overt suspicion over Chinese involvement in Africa. Africans need protection from China only as much as they need protection from the West. China is not out to “exploit” Africa any more than the West has. Nobody should expect China to engage Africa more benevolently than the West did for the better part of the last 60 years (Mobutu and Bokassa were not that different from Bashir and Mugabe).

A constructive approach ought to include policies designed to strengthen African states so that they can engage China on their own terms. It is ultimately African leaders who mortgage their resources and sovereignty to China (or the West). Instead of focusing too much on China, a better approach might be one that creates strong regional organizations (like the SADC or the EAC) that can improve the bargaining power of African states.

The other policy objectives outlined by Obama appear to fall in the business-as-usual category. Democracy promotion will not yield much in the face of other more pressing priorities (notice how security has triumphed over democracy in Mali). And unless the US is willing to get involved in massive infrastructure projects like China has (last time I checked they were in 35 African states), I don’t see how it can help spur economic growth in the region (AGOA was great, but Africa needs something better). Plus the US continues to be hampered in its development-promotion efforts by its aversion to state industrial policy. It’s about time Foggy Bottom realized that it is really hard to have a thriving private sector and American-style free enterprise in places with bad roads, very few (and bad) schools, and governments that are run by personalist dictators. In these instances some corruption-laden developmental state policies may be the best way to go.

child-bride index

African states dominate the Economist’s child-bride index, with the Sahelian states of Mali, Niger and Chad in the top three. They also have the lowest literacy rates among their female populations.

This is one of those problems associated with “culture” that most development experts shy away from. My take on this is that the cultural defenses of such practices is a lot of horse manure.

There is nothing African about marrying off a 12 year old girl.

Most child marriages have deep-rooted economic motivations. In most cases it boils down to the bride-price. Solving the problem will therefore require not just laws that throw “human rights” at young African girls, but a concerted effort that also includes development practitioners to provide alternative income to men who marry off their 12 year-olds in exchange for goats.

the political economy of food aid

Aid Watch has a piece on this very important subject, check it out.

Other stories worth checking out this Friday include Jina Moore’s and the IRIN piece on the food situation in the Sahel.

great idea

African nations have finally woken up to the threat of the ever advancing Sahara. The “great green wall of Africa” will be several kilometres wide and stretch from Senegal to Djibouti. Whoever is funding this project should condition cash transfers on need level (aridity, terrain and what not) so we can have a way of measuring state capacity (and thus name and shame the laggards) across the many Sahelian states that will be planting this wall.

chadian ban on charcoal ludicrous


On January 16th the government of Chad banned the use of charcoal in the country – without providing any sensible alternatives. Worried about desertification in the arid Central African state, the government announced that it was banning all charcoal making from freshly cut trees. Chadians can still make charcoal from dead wood.

While I appreciate the need to stop the southward spread of the Sahara, I think the government went too far on this one. It is ridiculous that the governmnet of Chad (of all countries) can suddenly wake up and decide that it is time to stop using charcoal fuel and switch to propane – or whatever other alternative for that matter. Banning charcoal use will not stem desertification. Planting trees, having a decent irrigation plan and being serious about population control and smart ways of using scarce water resources will. Merely banning people from using charcoal or firewood will not cut it. The truth of the matter is that the vast majority of Africans still depend on woodfuel for their daily energy needs. Switching to more environment-friendly fuel sources will take time.

I know that the Chadians and the other countries in the Sahel are especially on heightened alert with regard to desertification but this was surely not the way to go. How many Chadians can afford propane? How many Chadians have gas burners? How many Chadians have viable alternatives to charcoal? These are the questions the men in N’djamena should have asked before unilaterally banning the use of charcoal in the country.

chadian rebels finally routed

Chad, like most of central Africa, is a sad story. After days of fighting, reports indicate that the government of Idriss Deby – possibly with some help from the French – has managed to to repel rebels from the capital and gain “total control.” The question is, for how long? This was the second time in a few years that the rebels had marched into the capital and threatened to topple Deby. This was also a confirmation that the government of Chad remains weak and unable to provide security, let alone development programmes, for its own people.

The story of Chad is a story that is repeated many times on the continent of Africa. You always have very weak governments that are unable to provide the most basic of public goods to their people but that are propped up by the West- the French being the number one culprits here. The French were friends with Bokassa and Mobutu, among other francophone-African dictators who brought much suffering to their own people while maintaining strong ties to Paris and having frequent state visits to the Elysee. The opposition to these weak governments is also just as weak. The many rebels movements fighting silly wars of greed devoid of any ideological significance are too weak to win. Instead they put their countrymen through wars of attrition that keep them forever stagnant in pre-modern subsistence existence. The same applies for Political opposition parties. Think of Zimbabwe. Everyone wants Mugabe out, except Tsvangirai and Mutambara – the two men who have refused to join forces within the MDC in order to unseat Bob.

More than two decades after Achebe wrote about it in Nigeria, the trouble with Africa still remains simply and squarely a problem of leadership. There is nothing inherently wrong with Africa or the African people. The only strange thing about Africa is its ability to keep churning out more Mobutus, Bokassas and Amins and very few Mandelas.

Going back to Chad…… may be it is a good thing that Deby is still president. However, deep down I think that that Africans should think hard about their many weak and unviable states. The DRC, Somalia and many states in the Sahel some to mind. If these countries cannot get their act together they should be left to the mercy of “evolution of states” so that in the end we can have states that are viable and able to provide for their people and not kleptocracies that only benefit their leaders’ kinsmen and a few multinational corporations.