$60 billion package of aid investment and loans to Africa

China Pledges $60 billion package of aid investment and loans to Africa at the 2018 FOCAC summit

Chinese President Xi Jinping has announced a $60 billion package of aid investment and loans to Africa yesterday at the FOCAC summit, the same amount the government pledged at the last summit held in 2015.

The Forum on China–Africa Cooperation (FOCAC) held the third summit with all 53 African heads of states and governments yesterday, excluding eSwatini which still holds out in recognizing Taiwan over Mainland China [China’s government does not allow countries to have official ties with both itself and Taiwan, which Beijing considers its own territory].

FOCAC was founded in 2000. It’s become what CNN calls the “Olympics of China-Africa” relations because of the huge investment packages announced by China at the triennial gathering.

The Chinese government in the past few years through its trade partnerships, ‘interest-free loans’, aids, and projects has given the African continent a sum of 130 billion dollars. About $45 billion of the funds pledged in 2015 has come through to a very small group of nations. Curiously, less than $10 billion of this amount is classified as “foreign direct investment,” with the overwhelming proportion being in the form of sovereign-backed, natural resource, securitized loans, Quartz Reports.

China has now surpassed France, India and the United States as Africa’s largest trading partner. But total trade between China and Africa slowed from $220 billion in 2014 to $170 billion in 2017, according to the Chinese Ministry of Commerce.

Addressing leaders in Beijing’s Great Hall of the People, Mr Xi said the $60bn would be made up of both aid and loans. It would be spent on eight initiatives over the next three years, including building more infrastructure and giving scholarships to young Africans.

“China’s investment in Africa comes with no political strings attached,” Mr Xi said at the summit yesterday.

Most of the money China invests in the continent is spent heavily on roads, railways, ports and other major infrastructure projects. Most of the deals are controlled directly by the Chinese government, with their personal interest in mind even with deals involving their private sector. Though China has promised that Chinese companies will invest $10 billion in Africa in the next three years, many an African private operator has been shocked to discover that their counterparts in the Chinese private sector won’t move a muscle unless the former can bring their governments to the table.

What Does 120 Billion Dollars Of Infrastructure Mean To Africa?

In July, President Xi visited Senegal, Mauritius, Rwanda, and South Africa to cement China’s dedication to Africa as well as overseeing a few projects like;
  • A $3.2bn railway line between Kenya’s capital, Nairobi, and the port city of Mombasa. It is supposed to eventually connect landlocked South Sudan, eastern Democratic Republic of Congo, Rwanda, Burundi and Ethiopia to the Indian Ocean.
  • $153 million upgrades of the Robert Mugabe International Airport and the $1.4 billion Hwange coal-fired power plant to the University of Zimbabwe’s supercomputing cluster.
  • Petroleum-related projects worth $22 billion lent to Angola. In 2015, Angola’s state oil company Sonangol, became almost entirely dependent on China’s Development Bank (CDB) to finance its overdrafts.
  • A controversial $1.3 billion port in Cameroon opening the region’s iron ore, cotton and other commodities to world markets.
  • Nigeria has signed a $328 million agreement with China on the National and Communication Technology Infrastructure Backbone (NICTIB) Phase 11. The NICTIB 11 project is aimed at developing information and communications technology in Nigeria.

These are some of the projects China is devoted to currently, but surely the influx of money in the form of foreign aid will eventually take a toll on the emerging nations building their new society on loans and crooked deals.

Scholars from the China-Africa Research Initiative (CARI) at Johns Hopkins University found that Chinese loans were not yet a major contributor to this debt distress for most African nations, it’s still something we should be cautious of in the future. The relationship between the Chinese and African governments financially might seem sensible, but in the long term prove to be unhealthy for the growing economy. You can interpret this as a distress call for us Africans, to be prepared to brace for the impact of all these debts in the foreseeable future.

Adedayo Laketu

Adedayo Laketu is a creative inventor who's interested in curating a New Age for Africa across all mediums.

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