◼ ECONOMICS Bloomberg Businessweek July 27, 2020
● Loans from China, combined with Covid-19, are fueling a debt crisis
In Africa, a Pushback
Against Chinese Money
Dipak Patel can still recall the dizzying grandeur of
his 2003 visit to Beijing’s cavernous Great Hall of
the People: the rows of stern guards all the same
height, the state dinner with stewed shark fin and
bird’s nest soup, and the People’s Liberation Army
band playing songs from Patel’s native Zambia. As
minister of commerce at the time, Patel had joined
the delegation to cement ties and—crucially—secure
financing for big-ticket infrastructure initiatives.
While most delegates were eager to accept anything
they could get for projects such as a hydropower
dam and a 50,000-seat soccer stadium, Patel urged
caution. “My view was we needed to build a strate-
gic partnership and think it through,” he says. “But
I was one voice in the cabinet.”
His warning went unheeded, and Zambia started
to take out loans from Chinese banks for airports,
hospitals, housing projects, and the roads connect-
ing them. Chinese credit has grown to about a third
of Zambia’s external debt, which has surged seven-
fold over the past decade, forcing the government
this year to ask creditors to reschedule loans. Patel,
now a real estate investor, is challenging in court the
legality of billions in foreign money Zambia has bor-
rowed without what he says was required consent
from Parliament. “Nobody other than the govern-
ment knows the terms,” he says. The government
says it didn’t need parliamentary approval.
Patel is among a growing number of African
activists and policymakers questioning the deluge
of Chinese credit that’s fueled a debt crisis aggra-
vated by the new coronavirus. Nigerian lawmakers
are reviewing Chinese loans they say were unfavor-
able. Activists in Kenya are demanding the govern-
ment disclose the terms of Chinese credit used to
build a 470-kilometer (292-mile) railway. Tanzanian
President John Magufuli calls an agreement his pre-
decessor made with Chinese investors, to build a
$10 billion port and economic zone, a deal “only a
madman would sign.”
While it will be tough for cash-starved African
governments to win many concessions, loom-
ing defaults pose the biggest test ever for China’s
influence in the region. “This has the potential to
produce the most profound change in relations since
China became a major economic player on the conti-
nent,” says Chris Alden, an international affairs pro-
fessor at the London School of Economics. “African
governments and society are increasingly asking
Chinatocomeupwithanswerstothisproblem.”
ChineselendingtoAfricadatesatleasttothe
1960s,whenMaoZedongchanneledarmstorebels
fighting for independence from European colonial
powers. The support was limited, because China was
as poor as many of the countries, but it’s since grown
into an economic superpower seeking to boost its
global political standing. In the past two decades,
Beijing has handed out loans to developing coun-
triesata speedandscopenotseensincetheU.S.-
financedMarshallPlaninEuropeafterWorldWarII.
InAfrica,Beijingwaseagertofillthevacuum
when U.S. and European interest in the conti-
nentwanedfollowingtheendoftheColdWar.
Governmentswerehungryforloansnottiedto
austerity programs imposed by western financialTies That Bind (or Choke)
AnnualChineseloancommitmentstoAfricangovernments,bysector
◼ Transportation ◼ Energy ◼ Mining ◼ Communication ◼ Water ◼ Other$30b150
2000 2018Belt and Road
formally unveiledinstitutions, and China was quick to approve credit,
with scant concern about regimes accused of cor-
ruption or human-rights violations. From 2000 to
2018, Africa’s debt to China exploded from $100 mil-
lion to some $150 billion, researchers at Johns
Hopkins University say. “For China, as the newest
power on the block, the only region of the world that
was uncontested was Africa,” says Gyude Moore,