Considering China’s proposed debt relief for Africa, the key question is whether that relief will apply to concessional loans (concession loans executed in exchange for Africa's precious raw earth materials and commodities). Indeed, commercial loans will hardly be considered for relief due to their commercial nature and commercial lenders. At the same time, concessional loans have made up a significant portion, if not the majority of China’s lending to Africa in the past two decades.
A review of China’s Forum on China-Africa Cooperation (FOCAC) financial commitments confirms this belief: In China’s 2006 FOCAC financial pledges, 50 percent of the financing is concessional in nature: concessional loans ($3 billion) and concessional buyers’ credit ($2 billion). In the 2009 FOCAC financial pledges, China’s commitment of $10 billion was all in concessional loans and was 10 times larger than the Special Loan for the African Small- and Mid-Sized Enterprise. In the 2012 FOCAC financial pledges, concessional loans made up more than 50 percent of the total $20 billion committed. In 2015, the percentage of concessional loans and export buyers’ credit jointly ($35 billion) made up around 60 percent of the total $60 billion committed. Notably, the percentage of the concessional loans did drop in the 2018 FOCAC arrangement, where grants, zero-interest loans, and concessional loans jointly made up 25 percent of the $60 billion China committed.
Given the widespread and devastating health and economic impacts of the COVID-19 pandemic, Africa will likely need continued debt relief beyond December 31, 2020. Importantly, that situation will require a whole new negotiation that must take into account multiple factors, including the development/resumption of African economies and the continued health and economic impacts of COVID-19, as well as matching or similar relief efforts by multilateral creditors and private creditors, in order to achieve a comprehensive and holistic solution.
What China has committed to under the G-20 framework so far does not go beyond the scope of the eight-month suspension of payment. In other words, bigger, broader, and longer-term debt relief is not yet on the table.
China's hustle-manipulation of gullible African leaders, many of whom were only interested in lining their own pockets, now have numbers of African Nations strapped with overpriced and underperforming infrastructure projects that are financial goose eggs. And the resultant debt, is a financial albatross hanging around the necks of their nation's GDPs.
Over the past 15 years, much was astutely written about, why African leaders should "Beware" of China's too good to be true, "bargain economic deals"... See Financial Times, Reuters and Bloombergquint.
However, far too many African leaders were too immersed in negotiating time bomb, bargain economic deals, with China, to take notice of the quick sand upon which these awful deals were structured.
By Doc Lee
Council of African Partnerships
Botswana - Ghana Africa