THE EIGHTH TRIENNIAL Forum on China and Africa Cooperation (FOCAC) was held today and yesterday in Dakar, Senegal.
President Xi Jinping kicked it off on Monday via video backing up the obligatory mention of a ‘shared future in the new era’ by announcing a donation of 600 million vaccine doses to the continent and promised to make 400 million more available for purchase.
The less-feel-good items on the agenda include better balancing the continent’s trade with its largest trade partner by increasing the share of African manufactured goods bought by China.
African manufacturing capacity is a significant constraint. Although Africa accounts for only 4% of China’s imports of manufactures, that is 70% of African manufactured products (2019 data).
Thus, Beijing promises to increase its investment, particularly in manufacturing, to facilitate the continent’s industrialisation. It also will increase tariff exemptions for some $300 million worth of imported African goods, extend $10 billion in credit facilities to African financial institutions, and promote RMB-denominated trade.
Yet that is all small beer by the scale of these things, as is Xi’s offer on debt. He did not offer debt forgiveness, only to write off the interest due on some of the loans to Africa’s poorest countries which fall due at the end of this year. It was not clear if that was the African part of the $1.9 billion in payments due this year to China that it has agreed to suspend under the G20’s debt service suspension initiative for loans to the world’s 73 poorest countries, or the $11.5 billion due this year not covered by the G20 programme, of which Angola, Kenya and Ghana own almost half.
Africa is already heavily indebted to Chinese lenders due to Beijing’s drive to secure commodities, farmland and infrastructure construction contracts. China has become the largest bilateral lender to the continent over the past two decades, racking up a tab of some $150 billion to governments and state-owned companies.
One of every five dollars borrowed by African governments is owed to a Chinese lender. The Covid-19 pandemic is raising questions in Beijing about Africa’s capacity to repay, and even stay current on the interest payments on that debt.
This debt dilemma is the flip side of the commercial diplomacy that has advanced China’s national interests in Africa. Beijing’s past willingness to lend without conditionality and stay out of domestic politics has let it charge high interest rates with low transparency.
Getting its money back and the damaging reputational risks of high debt and incomplete infrastructure projects may lead Beijing to offer less onerous terms for its latest aid and investment.