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  • Writer's pictureDurham Pro Bono Blog

‘Assistance for Development’ or ‘Debt Trap Diplomacy’?

Updated: Feb 20, 2022


By Christine Uwadia

In the last week of November, President Xi Jinping pledged to supply 1 billion doses of COVID-19 vaccines to African countries. Alongside this pledge was a promise of $40 billion in the form of investments for infrastructure, trade finance, and credit lines. In 2016, Africa owed China $29.5 billion, a sum that dropped to $7.6 billion in 2019.[1]


Although President Xi Jinping describes Sino-African contracts as ‘win-win’, the nature of the loans proves otherwise.[2] While China and African countries win in the immediate future, Africa loses long-term. The Senegalese Minister of Economy, Amadou Hott noted during the FOCAC conference that Africa has a lot of debt investments and “needs more in equity”.[3] China seeks preferential access to Africa’s natural assets, such as mineral resources and ports, in exchange for financing and creating the infrastructure that developing nations require.


Case Study: Uganda


It was rumoured just days before the 2021 FOCAC conference that China planned to seize control of Uganda's Entebbe airport if Uganda defaulted on debt repayment. Uganda had received a $200 million loan from China's Export-Import Bank (ExIm) in 2015. Both parties quickly debunked the takeover rumours, proclaiming that "not a single project in Africa has been confiscated by China owing to failure to repay Chinese debts."[4] Although the loan's terms have not been made public, Joel Ssenyonyi, the head of the committee that performed the parliamentary investigation, claims that the contract provides ExIm Bank approval to 'grab' the airport in the event of failure.


Moreover, according to a takeover report cited by the Ugandan newspaper The Monitor, Uganda's Civil Aviation Authority (UCAA) identified 13 articles of the agreement that could expose Uganda's sovereign assets to attachments and takeover in the event of arbitral verdicts in Beijing.[5] Revenues from the airport's operations will be deposited into an escrow account, with all withdrawals subject to ExIm Bank’s approval. The agreement further stipulates that any dispute arbitration or judicial proceedings must take place in China and be conducted following Chinese law. In a nutshell, as Ssenyonyi puts it, "the contract is one-sided."


“Assistance for Development” or “Debt-Trap”?


Despite warning signs such as Uganda and Angola's inability to repay loans, China continues to be the world's largest bilateral lender to developing nations. According to the International Monetary Fund, China controlled 15% of Africa's external debt in 2012, and just three years later, China accounted for almost two-thirds of all additional loans.[6] Critics such as World Bank President Dave Malpas accuse China of not being transparent in its debt dealings.[7] While some analysts are warning about debt traps and even referring to Chinese activities in Africa as "colonisation," others believe it to be a Western illusion devised to push Africa away from China and into the arms of the US.


A tweet by the Chinese Embassy in Uganda quoting the Chinese Assistant Minister of Foreign Affairs, Wu Jianghao reads “why is money offered by Western countries to developing countries considered 'assistance for development’, while the money offered by China is labelled as 'debt trap?'”.[8] In the same light, Akala, a rapper and political analyst, said at the Edinburgh International Book Festival that the fear of China in Africa is rooted in their 'Chineseness.'[9] This is also reflected in the media’s portrayal of China in Africa and lack of business-minded analysis. Akala made a point of contrasting China's reaction to Jamaica's refusal to do business with America's famed response to rejection; whereas the Chinese quietly acknowledged the rejection, America might have cut all aid. The 'debt trap' propaganda, according to Wu Peng, Director-General of the Chinese Department of African Affairs, has no factual basis and is being pushed on malicious grounds.[10]


Many claim that Chinese lenders are merely contracting in favour of their country in this light. While it is true that the contracts benefit China, it is unclear why, as we saw in our Uganda case study, the contracts go so far as to render African governments helpless if their plans fail. Similarly, it is puzzling why African countries are willing to trade the soul of their countries in exchange for short-term relief. In the words of a commentator on the issue, 'African politicians are mortgaging the future of generations.'


Bibliography

[1] D. Pilling, “China Cuts Finance Pledge to Africa amid growing debt concerns,” Financial Times, 2021. [Online]. Available: https://www.ft.com/content/b7bd253a-766d-41b0-923e-9f6701176916

[2] Ibid.

[3] A. Mishra, “China and Uganda’s Entebbe’s International Airport: Reading Between the Lines,” ORF, 2021 [Online]. Available: https://www.orfonline.org/expert-speak/china-and-ugandas-entebbe-international-airport/

[4] Olingo A., “ Africa: China Loan Binge Starts to Bite - the U.S, EU Hope to Gain From Fallout,” All Africa, 2021. [Online]. Available: https://allafrica.com/stories/202111270015.html

[5] M. Basu, “China to seize Uganda’s Entebbe airport after loan default? Viral report officially denied,” The Print, 2021. [Online]. Available: https://theprint.in/world/china-to-seize-ugandas-entebbe-airport-after-loan-default-viral-report-officially-denied/773150/

[6] Shepherd W., “What China is Really up to in Africa,” Forbes, 2019. [Online]. Available: https://www.forbes.com/sites/wadeshepard/2019/10/03/what-china-is-really-up-to-in-africa/?sh=2086d57f5930

[7] Elliot L., “World Bank boss calls for more transparent lending to poor nations,” The Guardian, 2019. [Online]. Available: https://www.theguardian.com/business/2019/apr/11/world-bank-boss-calls-for-more-transparent-lending-to-poor-nations-david-malpass?CMP=Share_iOSApp_Other

[8] Chinese Embassy in Uganda (@ChineseEmd_Uga), ‘THREAD: Assistance for Development,’(Twitter, 26 Nov. 2021), https://twitter.com/ChineseEmb_Uga/status/1464073668338888719?s=20 accessed 12 Jan. 2022

[9] Akala, ‘Akala at the Edinburgh International Book Festival,’(Ebookfest, 2018) https://www.youtube.com/watch?v=U0iiybe5-nA Accessed: 12 Jan. 2021

[10] Ibid., n 8.

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