Multiple African Countries Defaulting on Chinese Debt
January 20, 2022
AFRICA—Over 32 African countries owe China money and nearly all of them are on the verge of default. The list includes Angola ($21.5 billion in 2017), Ethiopia ($13.7 billion), Kenya ($9.8 billion), the Republic of Congo ($7.42 billion), Zambia ($6.38 billion) and Cameroon ($5.57 billion), according to the Economic Times.
The ripple effect will keep the continent in permanent stagnation.
The Ugandan Government lost its only international airport due to its inability to repay a $207 million Chinese loan secured from Export-Import Bank of China in 2015, reports The Whistler.
The Uganda Civil Aviation Authority (UCAA) reportedly used its Entebbe International Airport and other assets as collateral for the loans back in 2015.
Nigeria is one of China’s biggest debtors in Africa, borrowing a total of $3.4 billion in bilateral loans from Exim Bank of China with an open credit line to borrow additional funds for its 2022 budget.
Nigeria used $500 million to construct terminals for five major airports at 2.5% interest.
The airports are the Murtala Muhammed International Airport, Lagos, Nnamdi Azikiwe International Airport, Abuja, Port Harcourt International Airport, Mallam Aminu Kano International Airport, Kano and the Akanu Ibiam International Airport, Enugu. They were all constructed by China Civil Engineering Construction Corporation since Nigeria lacks the engineering capabilities to build it themselves.
Nigeria’s railway system is also in jeopardy of default. The African country borrowed $2 billion for its railway system. Nigeria has only been able to repay $150 million of the $2 billion loan.
Nigeria also lacks the telecommunication technology to enter the 21st century and initially considered South Korea’s Samsung to help build its infrastructure. Samsung currently supplies Verizon Wireless in the United States with its 5G network.
However, Samsung proved too expensive, so Nigeria’s National Information and Communication Technology Infrastructure Backbone Phase 11 decided to go with China’s Huawei Technologies. That project is also on the verge of default.
Nigeria’s Zungeru Hydroelectric Power Project, which was 75 percent funded by China is also on the verge of default.
All Chinese sponsored projects have a Mezzanine Clause, which means China takes over Nigeria’s entire infrastructure in the term of a default, according to The Whistler.
According to analysts, the African continent is at a complete disadvantage for further development. Western countries refuse to invest any substantial amount due to risk and those who do choose to invest (China), demand high interest or other forms of collateral to offset risk.
“It’s like you want to get a job and build your own house. Your neighbors down the street own the company you want to work for, own the bank, own the Home Depot. You want to start your own business but your neighbors own all the intellectual property so you’re drowning in royalty payments even before you start anything. You’re stuck. That’s Africa,” wrote a Sino-Bank analyst.