The Coronavirus recession is plunging Africa further into debt as demand for commodities falls, along with oil prices.
As the blame-game rages about Chinese culpability for COVID-19, Africans are bracing for a devastating financial crash. Global demand for commodities has sagged and many Africans in lockdown are unable to earn money. Moreover, thanks to opaque loan agreements, some African oil producing nations are paying their Chinese lenders in oil priced at current market rates: that means they could be shipping China five times more oil than when they negotiated the loans. The slump will also have far-reaching geopolitical consequences: in the absence of American leadership, China can count on the continent’s UN representatives to look away as it flexes its muscles in Hong Kong, the South China Sea and Taiwan.
Even before COVID-19, a combination of poor governance and corruption had burdened several African nations with enormous foreign debts. Johns Hopkins University estimates that China lent Africa $143 billion between 2000 and 2017. Angola alone owes $49 billion, giving rise to a local headline, “Every Angolan owes $754 to China”. Forbes magazine estimates Nigeria’s public debt at $85 billion, meaning that each of Nigeria’s 200 million citizens owe China $41.
President Xi’s plan for interlinking global infrastructure projects, the Belt and Road Initiative (BRI), is not a form of aid. The majority of Chinese investment in Africa is for projects funded by loans. The conditions attached to those loans, such as specifying which approved Chinese construction firms must be used, do not necessarily benefit Africa’s citizens.
Noel Mbala , a former transport minister in the Democratic Republic of Congo (DRC), says few African leaders have skilled advisors on hand when negotiating contracts with lenders. This has led to paying loans with commodities such as oil. These contracts are rarely transparent, giving rise to fears that oil-for-loans agreements are subject to the current market price. That was advantageous when oil was $120 a barrel, but not now. The opaque nature of the agreements makes scrutiny difficult.
Anyone working in Africa has noticed the empty conference centers, idle power plants, and roads to nowhere; symbols of the local elite’s grandiose empire-building, funded by Chinese loans. For instance, Nova Cidade de Kilamba in Angola, a city of 750 tower blocks, was built by China’s CITIC group at a cost to Angola of $3.5 billion. Intended to house half a million people, it has an estimated 80,000 residents. The smallest apartments were priced at $125,000 but reduced to $70,000, still beyond the reach of all but a tiny elite.
Part of President Xi’s BRI is the Mombasa-Nairobi-Naivasha railway . Yet, the second section, from the Kenyan capital to Lake Victoria, comes to an inglorious halt in Suswa, a Maasai village. China will not now participate in the third section that would have connected land-locked Uganda with the port of Mombasa. The project’s cost is $3.7 billion, whereas for $205 million, the British colonial era line could have been refurbished. As it is, estimates of cargo traffic on the Mombasa-Nairobi section have proved over-optimistic, to put it kindly.
Critics argue that China often calibrates its support according to the needs of the African elite. For instance, China built the African Union HQ (rumored to be equipped with Chinese eavesdropping devices), the ECOWAS HQ and the new Zimbabwean Parliament for free. Although China denies it vehemently, some African commentators call it neo-colonialist for deciding what Africa needs, rather than consulting local people who might prioritize running water and electricity. Yet, African leaders are not forced to go along with China’s plans: some desire vanity projects to boost their status or kickbacks to pad their off-shore bank accounts.
Yun Sun of the Stimson Center remarks that many African leaders are in China’s pocket at the UN when issues of contested sovereignty such as Hong Kong or Taiwan arise. In an absence of US leadership, there is even debate in China about taking advantage of how distracted the global community is, to further its agendas on Taiwan, stake its claim on the South China Sea and neutralize democracy activists in Hong Kong.
The oil slump is largely due to reduced demand during the lockdown. Yet, China continues to buy oil, taking advantage of falling prices. Yun Sun points out that China’s oil imports rose 5% in March, opportunistically buying crude shipments from tankers that were unable to unload at ports shuttered by the virus. China will store the oil until its economy bounces back.
The G20 moved quickly to suspend African loan repayments until 2021, and there are calls for debt forgiveness. However, it seems unlikely China’s lenders will cancel loans while the Chinese economy is recovering. Meanwhile, the continent will struggle to contain COVID-19 in congested and insanitary cities, with few healthcare resources. Many Africans must go out daily to sell their labor or goods; tourism has evaporated; remittances from relatives working abroad are down; and societies relying on communal solidarity will be tested by the lockdown.
Many Africans do not trust their governments for good reason, so they question the health advice from on high. During the Ebola epidemic, Sierra Leone and the DRC learned that co-opting local leaders as legitimate messengers worked best. But Africa is short on the time and resources necessary to reach every community. According to a health worker in remote northern Uganda (who wishes to remain anonymous), the countries with the best governance will come through COVID-19 with the least devastation. She was not hopeful about the nations where the elite’s credibility does not extend beyond the suburbs of the capital city. Africans will be left to rely on their resilience and resourcefulness yet again.