When British Guiana born Walter Anthony Rodney argues in his award winning 1972 book “How Europe Underdeveloped Africa” that Africa was deliberately exploited and underdeveloped by European colonial regimes, several people disapproved his view, even though it is a bitter fact.
Rodney argues that a combination of power politics and economic exploitation of Africa by Europeans led to the poor state of African political and economic development evident even till this century. Though, he did not intend “to remove the ultimate responsibility for development from the shoulders of Africans but he believes that every African has a responsibility to understand the capitalist system and work for its overthrow wherever possible, and that to fully appreciate and understand the effect of European exploitation on Africa, four distinct issues need to be addressed: a reconstruction of pre-European Africa’s developmental condition, that of pre-expansionist Europe, and their contributions to each other’s present condition, developed or otherwise.
This system of underdeveloped Africa is still in practice in a new dimension today.
For example, the loans presented as friendly gift have been used as weapon of underdeveloped the continent of Africa in the past by the likes of International Monetary Fund (IMF), World Bank and others. The present loans from the China to Africa appeared irresistible because it is coming with less strings attached on matters such as governance, democracy or human rights. Bureaucrats too can easily get a cut without much accountability. Yet, the loans are like the Trojan horse, its consequence is far-reaching.
While the British expanded their empire through conquest in 18 century, China is today appearing to understand a subtle approach, which is sovereign debt. It is now the ammunition of choice for China to penetrate the developing countries and get them to suit its expanding economic and military interests.
China hosted leaders from across Africa for a summit in Beijing. The last summit in the series was held in December 2015 in Johannesburg, South Africa, where Chinese President Xi Jinping announced the sum of $60 billion funding support for infrastructure development in Africa. The Forum on China-Africa Cooperation included an eye-popping announcement of billions of dollars more in Chinese financing to build infrastructure across the continent. But these massive loans can come with steep and opaque conditions if looking into with investigative microscope. China’s billion dollar loans to Africa will never transform the manufacturing sector in Africa. It is not an argument that these Chinese loans to Africa will not bring good institutions, infrastructure, human capital and technology the continent is yawning for. The loans will not drive manufacturing-led growth in Africa. This is debt diplomacy between China and Africa. So far, the structural transformation that shifts productive resources from agriculture and mining to manufacturing – which has helped many countries achieve greater prosperity – has bypassed most African countries. The limited structural transformation in Africa has not translated into more jobs, because the manufacturing sector itself requires extensive reform. Therefore, what Africa needs is a manufacturing renaissance, with more local value-addition that would create more and better-paid jobs and contribute to fulfilling the aspirations of the Agenda 2063 the continental union (African Union) is agitating for. Chinese loans for Africa will not make the continent more resilient to economic shocks and less dependent on natural resource exports. Africa can achieve ambitious goal if it taps into available opportunities within, while mitigating the challenges it faces. It’s tempting for European countries and Americans to think this is not our problem. But as African countries sink deeper and deeper into Beijing’s carefully laid debt trap, the United States could pay a steep cost in reduced cooperation on counter-terrorism and job creation. Chinese debt has become the methamphetamines of infrastructure finance: highly addictive, readily available and with long-term negative effects that far outweigh any temporary high. This is particularly true in sub-Saharan Africa, where China has become the largest provider of bilateral loans. Forty per cent of sub-Saharan African countries are already at high risk of debt distress; by having so much debt concentrated in the hands of a single lender, they are dangerously beholden to their supplier.
President Xi Jinping told African leaders on September 3 that China’s investments on the continent have “no political strings attached”, pledging $60 billion in new development financing, even as Beijing is increasingly criticised over its debt-heavy projects abroad.
Why does this matter? Because in Africa and elsewhere, governments have secured massive loans from foreign countries in the past, using strategic assets such as oil, minerals, land rights, etc as collateral. If borrower nations find themselves unable to repay the loan, China can claim the strategic asset. Sri Lanka recently learned this the hard way and handed over control of the port of Hambantota, giving China a strategic foothold along a busy trade waterway. According to Professor Brahma Chellaney at the New Delhi-based Center for Policy Research, “several other countries, from Argentina to Namibia to Laos, have been ensnared in a Chinese debt trap, forcing them to confront agonising choices in order to stave off default.” While Chinese debt diplomacy may not seem relevant to most Americans, it is a serious threat to US national security. Most directly, China’s crafty negotiations and seizure of strategic assets can limit US influence and access overseas. For instance, the tiny country of Djibouti is home to the most significant American military base in Africa. Thanks to Chinese loans, Djibouti’s debt-to-GDP ratio surged from 50 to 85 per cent between 2014 and 2016. If Djibouti were to default and relinquish the port that resupplies the US base, American military capability in Africa and the Middle East could be seriously threatened. More broadly, unsustainable levels of debt can destabilise African states, which also compromises American security interests. Over-leveraged governments can get caught in a downward spiral of credit downgrades, reckless economic policies, and reduced spending on social services. With economic stagnation come fewer opportunities for Africa’s fast-growing and young population. And the toxic brew of economic hopelessness and political disillusionment can drive disaffected youth toward violent extremism. That can threaten Americans abroad and, potentially, even at home.
China’s debt diplomacy shuts out opportunities for US and other European nations businesses. Not only do Beijing’s cheap infrastructure loans come with conditions to employ Chinese companies in Africa, they also set out technical specifications for projects like high-speed railways and wireless networks in a manner that favours Chinese firms. The combined effect of these efforts “would push the United States away from its current position in the global economy and move China toward the centre,” according to Jonathan Hillman, a fellow at the Centre for International and Strategic Studies.
China already earns $180 billion annually from its investments in Africa; if its debt diplomacy remains uncontested, it’s likely that even more revenues and jobs will flow to China, instead of the US. But this outcome is far from inevitable. The US has plenty of good options, but it needs to dramatically step up its game and support alternatives to Beijing’s aggressive finance initiatives. Perhaps, most fundamentally, the US needs to focus on boosting African economic growth. Helping African states to strengthen investment climates and economic governance will help them attract more private sector capital and provide more entry points for US companies. A key component is assisting African efforts to increase transparency, so that all the costs and benefits of project finance options are openly known. Fully staffing US embassies and offering more technical assistance to evaluate loan agreements and investment contracts would be a good start. To date, the Trump Administration’s Africa policy has been adrift, defined more by racial epithets than any cohesive strategy or results.
By comparison, China has a clear vision that will yield long-term benefits. In Africa and around the world, much more needs to be done to confront Chinese debt diplomacy. If not, the US will pay a heavy price in its commercial and national security interests. If not tamed, the loans from China will continue to subject poor nations into new rounds of dependency, and therefore, leading them to the path of deep underdevelopment.