As China’s influence grows in Africa, so does the controversy. Depending on whom you
ask, you’ll either get excitement about all the new infrastructure, or accusations
of ‘neo-colonialism’. I’m Larry Madowo –
and I’m Vincent Ni. We’re going to tell you how this relationship
became so significant… … and what China’s economic slowdown might
mean for the future of African nations.
Let’s start with the basics. Which countries
in Africa have an economic relationship with China? Well, it would be easier to say which
country doesn’t trade with China, and that is eSwatini.
Yes, China isn’t keen on doing business with countries that recognise Taiwan as a
nation state, but that’s a topic for another video. And we should totally do that, Vincent!
Can you explain why exactly China has started investing so heavily in Africa?
Why now?
Well, it’s not coming out of the blue. China
has been building up its investment in Africa
for about two decades now. For China,
Africa is more than just a massive market for its goods.
It’s home to vast natural
resources, which China wants to invest in. The Communist Party also has a strategic policy
to gain ‘soft power’, which is right at the heart of the Party’s leadership.
OK, so it should come as no surprise to any of us that China has become the continent’s
greatest trading partner. It actually surpassed the United States 10 years ago, in 2009. China’s
main exports are machinery, electronics and textiles, but like you said - it’s not just
a one-way relationship. China imports crude oil, iron ore, cotton and other natural resources
from African countries. This has never happened on such a huge scale. What’s making China’s
presence felt even more is the fact that the US has decreased its involvement in the continent,
even more after Donald Trump’s administration
came to power.
So where’s most of the trade happening? South Africa, Ethiopia, Angola and Nigeria
are China’s biggest trading partners on the continent. There are also countries like
Côte d’Ivoire, at the very beginning of developing a relationship and partnership with China.
Overall China-Africa trade volumes amounted to 170 billion U.S. dollars in 2017, which
is a huge increase from just over 10 billion dollars in 2000.
Yes, and the Chinese government estimates that this will grow even faster,
to over 300 billion dollars next year.
Of course more investment usually means more debt,
at least in the short term.
Let me give you an idea of scale of the money owed:
in 2017, Zambia's total debt amounted to 8.7 billion dollars,
almost three quarters of which is owed just to China.
For Djibouti, 77% of its debt is to Chinese lenders.
So why are African countries so keen to do
business with China rather than other lenders? Well, it’s often said that China’s loans
are cheaper and come with ‘fewer strings attached’.
What that actually means is that,
unlike the USA or the World Bank, China doesn’t really mind if you have human rights issues,
other outstanding debts, or aren’t transparent enough when it’s lending you money.
That being said, this doesn’t make the loans any easier to repay. In 2015, a prominent
research group identified 17 African countries that would be potentially unable to repay
their loans, and that Djibouti, Republic of Congo and Zambia are most at risk. Some countries
Some countries are relying on gradually repaying their debts to China
by shipping specific quantities of oil.
But if the price of oil drops drastically again, that might make it all the more difficult
for the debt to be paid back.
What does this mean? Well, the contracts for
the projects aren’t public so we don’t know – but it is feared that some public
resources might be used as collateral.
Meanwhile, cracks are starting to appear in
China's economy, with signs of weakening growth and trade tensions - especially with the United States.
In fact, China's stock market was the world's worst performer last year,
ending with a loss of 28% - so that is just adding to the worries.
China hasn’t talked about what it means
but it is assumed that if there’s less to spend, they may give fewer loans, and fewer
extensions of projects such as railways.
In other words, China is likely to start tightening the purse strings.
What does the rest of the world think of China’s involvement in Africa?
UK and other countries criticise China’s ‘predatory’ work in Africa,
calling it ‘debt trap diplomacy’. But analysts like Joseph Stiglitz say this line
of thinking is just ‘sour grapes’ – China is making tangible changes for people who
live in these countries, bringing affordable goods into the market at a fraction of the costs.
Policy makers and governments may be critical
of the money being poured into Africa, but the average African isn’t.