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The geopolitics of debt in Africa

ArticlesThe geopolitics of debt in Africa

Massive exposure of some African economies to Chinese-owned debt is making it difficult for Beijing to sustain official narratives that suggest equality with African countries. Tim Zajontz, Ricardo Reboredo and Pádraig Carmody show that the response of the Chinese government to political “backlashes” over debt has been to emphasise alternative vectors of engagement with the continent. The deepening African debt crisis is directly linked to inter-capitalist competition at the expense of the working people of the continent.

By Tim Zajontz, Ricardo Reboredo and Pádraig Carmody

We are now in an era when many media pundits and international relations experts tell us that geopolitics, conventionally understood as competition between great powers, has returned with a vengeance after the Russian invasion of Ukraine. Yet beyond Russia, concern also runs high in Western policy circles about China’s geopolitical and economic positionality and its revisionist and hegemonic ambitions, particularly in the countries of the so-called developing world, or “Global South”. Two memes have gained traction in relation to this; namely the supposed Chinese “debt trap” and also “Wolf Warrior” diplomacy, the latter referring to a particular type of aggressive, coercive style of statecraft. There are now extensive literatures on these (for example, see Brautigam, 2020; Carmody, 2020; Martin, 2021).

While the myth of “debt trap diplomacy” as a deliberate strategy to entrap countries has now been debunked, China has nonetheless been implicated in substantial debt accumulation in Africa, in some cases leading to or contributing to excessive, unserviceable debts, as in Zambia for example, which became the first African country to default on its external debt early in the COVID pandemic.

China is now the largest lender to low-income countries and some of its loans have been criticised for their opacity, with details often kept secret. Such agreements have made it difficult to keep track of when political elites act irresponsibly, for instance by signing finance agreements with Chinese (or other) lenders without long-term debt management plans or due diligence.

Zambia’s debt-financed “development-through-infrastructure” agenda for example, was made possible by the extensive disbursement of Chinese loans, a number of which were for overpriced projects negotiated in opaque procurement processes. Combined with the proliferation of the “debt trap” meme, there is now widespread suspicion across Africa regarding Chinese-linked loan agreements. In Kenya, a media frenzy erupted in November of last year with the release of three separate loan contracts related to the country’s new Standard Gauge Railway (SGR). Likewise, in Uganda, reports from unreliable sources surfaced in 2021 that China Exim Bank would take over the country’s only international airport (Entebbe) should the country fail to pay back a loan. While government officials from both countries dismissed the reports, in a sense, they proved the staying power of the “debt trap” narrative.

Beyond cases like these, the fact that some of the Belt and Road Initiative (BRI) projects, including the Kenyan SGR, have failed to perform according to expectations has also contributed to substantial resistance or “blowback” from populations and politicians across the continent.

As we have argued in a recent article published by Global Political Economy, the massive exposure of some African economies to Chinese-owned debt has made it increasingly difficult for Beijing to sustain official narratives that suggest horizontality or equality in China’s relations with African countries. However, Chinese foreign policy is multifaceted and adaptive. As we show in the article, the response of the Chinese government to political “backlashes” over debt has been to emphasise alternative vectors of engagement with the continent. Among these are a renewed focus on aid, a push for “soft power” via vaccine diplomacy, educational programmes, people-to-people exchanges and professional training, and a more assertive stance against Western powers that builds on two decades of “South-South” developmental narratives and many more years of anti-colonial and anti-imperial discourses.

These initiatives have kept China’s foreign policy visible across Africa even as trade volumes between the two fell in the commodity price bust, stocks and flows of new Chinese foreign direct investment on the continent plunged, and new lending collapsed. Even as we enter a (perhaps transitory) era of “post-peak China in Africa”, trade flows between Africa and China (which are still tilted in favour of China, both in terms of export-import volumes and value addition) have rapidly bounced back following the pandemic. At the same time, the African continent and its societies are increasingly turning into central arenas of geopolitics again.

This applies not only to intensifying great power intrusions in the traditional security realm, for instance in the Sahel and the Horn of Africa, but also to novel mechanisms and spheres of great power competition. What Lee, Wainwright and Glassman (2018: 417) have argued in the context of China-US rivalry in Asia seems apt for Africa as well: ultimately the geopolitical and geoeconomic “logics of power must be grasped dialectically – i.e. as a unity-in difference – in order to provide a full geopolitical economic explanation”. The current intensification of competition between Western and Chinese political and economic actors across Africa is emblematic of how intricately geopolitical and geoeconomic interests intertwine in a capitalist global political economy.

The scramble between the “West” and China for Africa’s “strategic” resources, such as lithium and cobalt required for e-mobility or renewable energy sources, is well underway and likely to intensify, as decisionmakers in the “West” appear desperate to decrease dependencies on China-controlled global value chains, some of which originate in African mines. Chinese and Western firms also compete to provide the infrastructure and hence set the norms and standards for Africa’s information technology. Broadly then, what we are seeing is the emergence of new forms of great power competition, built on politico-economic landscapes shaped by prior initiatives, engagements and patterns of exploitation. Systems of debt management are one of the novel arenas in which this geopolitical rivalry manifests.

The geopolitical deadlock in the Common Framework

African sovereign debt has arguably become the most “geopoliticised” current affair in the continent’s external relations. Multilateral debt restructuring efforts have hitherto failed to deliver substantial reliefs for highly indebted African nations, mostly because of starkly diverging interests among Western and Chinese (state) capital. The G20 Debt Service Suspension Initiative (DSSI) has essentially postponed the problem.

While the initiative suspended $12.9 billion in debt-service payments of participating countries, it gave private creditors a free pass, with even the World Bank remarking that “[r]egrettably, only one private creditor participated”. Already during the DSSI which ended in December 2021, Chinese and Western lenders squabbled about whether certain Chinese loans (for instance non-concessional loans from China Development Bank which are widespread in some African debt portfolios) should be treated as official or private lending.

Negotiations over debt restructuration under the so-called Common Framework, the DSSI successor instrument under which countries like Chad, Ethiopia, Zambia and most recently Ghana are seeking assistance, are charged with even more geopolitics-cum-geoeconomics, as lenders are now urged to accept “haircuts” on their debt investments. No longer is it only Chinese top officials engaging in “debt diplomacy” across Africa. In January, US Secretary of Treasury Janet Yellen toured Senegal, Zambia and South Africa, calling Beijing a “barrier” to the resolution of Zambia’s debt conundrum. The Chinese reaction was prompt and not very diplomatic: The Chinese embassy in Lusaka called upon the US government to “act on responsible monetary policies, cope with its own debt problem, and stop sabotaging other sovereign countries’ active efforts to solve their debt issues”.

In a sense the debt squabble highlights contradictions that have emerged in the wake of the BRI. As Breslin (2009: 822) noted, during the 2000s, Chinese state actors largely sought to portray the country as a “responsible great power”, in essence constructing a reputation as a “good global citizen”. However, China’s more assertive stances and emphasis on bilateral engagement and “club diplomacy” in the Xi Jinping era (manifesting via the BRI and the Forum on China-Africa Cooperation [FOCAC]) have now made prior narratives impossible to sustain. Even countries outside of the “West” that support China on a number of other issues have taken notice. India’s representative at the G20, for example, recently pressured Beijing to change its position, stating: “You can’t settle the debt bilaterally. You have to sit together with the IMF and other creditors”.

Meanwhile African governments and societies are left in limbo by these geopolitics of debt – at real human costs, considering that ever more portions of public budgets are used on debt service. African presidents, finance ministers and treasury secretaries are engaged in a “multi-level negotiation game” to manoeuvre different interests among the IMF, the Paris Club, private creditors, various Chinese lenders and ordinary citizens.

Growing increasingly impatient over deadlocks in the G20’s Common Framework, in February the finance minister of Ethiopia, which owes no less than $13.7bn to Chinese lenders, travelled to China to demand concessions from Beijing. There have been repeated demands from the political opposition in Lusaka calling on President Hichilema to travel to China to discuss Beijing’s role in Zambia’s debt restructuring at the highest possible level. China owns about a third of Zambia’s debt.

Yet, the problem is not solely to be found in China but is rather systemic, as we have previously argued in the Review of African Political Economy. Deborah Brautigam rightly points out that across the 73 countries that qualify for debt restructuring under the Common Framework, the World Bank and other multilateral lenders remain the biggest source of debt (holding 41 percent of debt in these countries), followed by bondholders and private lenders (23 percent), with China holding 21 percent and Paris Club members 11 percent. Hence, current African debt crises and their geopoliticisation are directly linked to inter-capitalist competition for what is left after the 2010s, which has been a decade of reckless lending by a diverse set of external creditors that was motivated by raking in profits – at the expense of ordinary African citizens.

Tim Zajontz is a lecturer in Global Political Economy at the Technische Universität Dresden, Germany, a Research Fellow in the Centre for International and Comparative Politics at Stellenbosch University, South Africa, and a Research Associate in the Second Cold War Observatory, a global collective of scholars committed to understanding how great power rivalry will influence societies, economies, and ecologies worldwide. Ricardo Reboredo is a lecturer in International Relations at the Metropolitan University, Prague, Czech Republic. Pádraig Carmody is a Professor in Geography at Trinity College Dublin, Ireland and Senior Research Associate at the University of Johannesburg, South Africa.

Featured Photograph: The First China-Africa Economic and Trade Expo held in Changsha, Hunan, China (29 June 2019).

Works cited

Brautigam, D. (2020). A critical look at Chinese ‘debt-trap diplomacy’: the rise of a meme. Area Development and Policy, 5(1), 1-14.

Breslin, S. (2009). Understanding China’s regional rise: interpretations, identities and implications. International Affairs85(4), 817-835.

Carmody, P. (2020). Dependence not debt-trap diplomacy. Area Development and Policy 5(1): 23-31.

Lee, S.-O., Wainwright, J. and Glassman, J. (2018). Geopolitical economy and the production of territory: The case of US-China geopolitical-economic competition in Asia. Environment and Planning A: Economy and Space 50(2): 416-436.

Martin, P. (2021). China’s Civilian Army: The Making of Wolf Warrior Diplomacy. Oxford and New York: Oxford University Press.

Source:ROAPE

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