Africa’s debt
crisis is crippling the continent. Photo credit: africanexponent.com
Africa's biggest lender, China, has come under fire for forcing bad deals on developing nations.
However, recent research by Oxford and Columbia Universities found that
private Western creditors bear the majority of Africa's external debt rather
than the People's Republic of China. The investigation was conducted in the
midst of global accusations against Beijing for allegedly entangling Africa in
debt.
Since 2000, Beijing has given $150 billion to African nations, and according to the World Bank, the continent owes $427 billion in total external debt. China has come under fire for making appalling promises to underdeveloped nations. For example, this has caused Nigeria's debt to China to rise by 136% in just five years. The experts note that the idea of a debt trap is only a strategy in the struggle between China and the United States for supremacy in the world.
Studies reveal that the whims of the bond market, not China's debt traps, are what keep African leaders awake. Lenders who lend to developing nations risk taking control of their valuable assets if the borrowers are unable to make their payments on time. Those who buy their debt in the form of bonds are mostly responsible for the debt load of African nations. New York, Frankfurt, and London are just a few of the cities where these lenders have operations.
The studies also revealed that pledges have increased more in recent years than in any other African nation. At the end of 2019, the combined national debt of African nations, including Angola, Ethiopia, Kenya, Nigeria, Ghana, and Zambia, owed to China was $78 billion, making up around 8% of the region's total debt and 18% of the continent's total external debt. Similar study findings were validated by the World Bank.
Boston University and Johns Hopkins University scholars claim that since 2000, Beijing has lent more than $150 billion to African nations. Although this sum is substantial, it is insufficient to be the main factor contributing to the growing debt of developing nations. The World Bank estimates that Africa owes $427 billion in total external debt, although rampant corruption has also contributed significantly to the continent's poverty.
According to analysts, the majority of the funds are distributed under the Chinese "One Belt, One Road" program, and the loans are typically from state-owned banks in China and come with hefty interest rates. In 2020, the G7 countries aim to establish a network of infrastructure and trade that links Asia, Africa, and Europe. As a result, they insist that China reduce the debt load of developing nations.
Kenyan officials fear they will lose control of the vital port of Mombasa if they don't fulfill their financial commitments to China. But according to specialists at Johns Hopkins University in April 2022, the port is not a promise made in the agreement. In 2015, Angola had too little crude oil to sell since nearly all of it was used to pay back a Chinese loan, according to Reuters.
International organizations are worried about a wave of defaults in African nations because of difficulties in meeting obligations, especially given the challenging global economic climate. Nigeria's debt to China increased 136% between 2010 and 2015.
Nonetheless, the researchers believe that stubborn private lenders, rather than China, will be a major factor in this, and according to some analysis, default is likely to occur in a number of nations, including Egypt, Ethiopia, and Ghana.
Although several African leaders dispute that China has forced their nations into debt, it is thought that the idea of a debt trap is only a ploy in the political struggle between the US and China.
They believe Beijing has contributed to building the necessary infrastructure on the continent, in contrast to the West. However, according to President Emmerson Mnangagwa, “Chinese companies have invested in Zimbabwe's electricity, aviation, water supply, real estate, industry, and defense.”