Posts   |   China Loans to Africa Don’t Live Up to the Hype, New Report Finds

April 22, 2016
China Loans to Africa Don’t Live Up to the Hype, New Report Finds

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By Afshin Molavi

Washington – When Chinese President Xi Jinping visited Johannesburg in late December to attend a major forum on China-Africa trade and investment along with more than 35 African heads of state, headlines blared an eye-popping pledge: Beijing would offer $60 billion in new loans and assistance to support the African continent. China, it seems, was well on its way to reaching the $1 trillion dollar mark of loans and assistance to the Africa continent by 2025, as reported widely.

Not so fast. The Johns Hopkins University School of Advanced International Studies (SAIS) China-Africa Research Initiative (CARI) has consistently demonstrated that China’s loan amounts to Africa are far lower than oft-published reports. On April 21, the group unveiled their latest report written by Jyhjong Hwang, Deborah Brautigam, and Janet Eom and demonstrated with meticulous research that Chinese government, bank, and contractors loans to African governments and state-owned enterprises from 2000-14 amounted to $86.9 billion – a far cry from the breathless numbers often reported in media.

Well on their way to a trillion? Hardly.

Still, make no mistake: the $86.9 billion in loans are still significant and, as Deborah Brautigam, Director of SAIS CARI noted in a presentation of the initiative’s latest findings at SAIS, China’s robust infrastructure loans mean that “the Chinese are powering Africa” more than the U.S. Still, the dazzling numbers reported in the media often fail to match reality.

In the latest installment of the SAIS CARI program, researchers from the initiative examined 1,223 reports of Chinese loan financing to Africa from 2000-14 and found that “only 56% actually materialized and are being used.” The report noted that “the rest turned out to be mistakes, hopes, rumors, cancelled, or real loans – but not from China.”

The top recipient of Chinese loans has been oil-rich Angola with $21.2 billion over 15 years, the report entitled “How Chinese Money is Transforming Africa: It’s Not What You Think,” notes. In second place is Ethiopia at $12.3 billion over the same time period, followed by Sudan at $5.6 billion, Kenya at $5.2 billion, and DRC at $4.9 billion. As the report noted, “these top 5 countries constitute over 50% of Chinese loans to Africa; Angola received roughly a quarter of all Chinese loans to Africa.”

The report also debunked an oft-told myth that China’s Eximbank has eclipsed the World Bank as the major lender to Africa. In 2011, Fitch Ratings reported that “between 2001 and 2010, EXIM loans to SSA reached $67.2 billion, overtaking World Bank lending of $54.7 billion for the same period.”

So, the report asks: is this true? “Our data say definitely not. With even the most generous figures, CARI’s estimate of Eximbank’s lending to Sub-Saharan Africa between 2001 and 2010 is only $30.5 billion; Fitch’s figures are more than twice that of CARI’s.”

In a panel discussion accompanying the launch of the latest report, Deputy Division Chief of the IMF’s Africa Department, Oral Williams, reminded the audience of the importance of accurate data. “Getting the data wrong is what got Greece into trouble.” Williams also noted that “we are seeing debt levels rising,” though he noted that “we are not in the red zone yet.”

SAIS CARI Director Deborah Brautigam, who is also Bernard L. Schwartz Professsor in International Political Economy at SAIS, and author of two noted books on China’s engagement with Africa, also reminded the audience that “Robert Mugabe [President of Zimbabwe] often comes back empty-handed from Beijing,” and, on a recent visit by Nigerian President Muhammadu Buhari to Beijing, he only received pledges, but not hard cash aid.

Brautigam still underscored the importance of China’s loans to Africa. She simply emphasized the importance of right-sizing them.¬†Another panelist, Daniel Runde, Director of the Project on Prosperity and Development at CSIS, compared China’s engagement in Africa with the U.S by recounting a comment made to him by an African health minister, who said: “you guys [the U.S} are software. China is hardware.”

President Obama’s announced plans to double access to power in Sub-Saharan Africa underscores this point. It has got off to a glacial start. Indeed, two years after the initiative was launched, the U.S had not added a single watt of electricity to a continent in dire need of power. The U.S is largely absent in providing financing for the hardware in Africa, instead focusing on the software of health, Aids, tuberculosis and malaria protection and the like.

Readers of this site will know that this author believes profoundly in the importance of infrastructure development as a key to prosperity. Thus, China’s $86.9 billion should not be dismissed lightly even if it falls short of advertised numbers. Still, right-sizing China’s loans to Africa and identifying the key recipients and sectors is important, and SAIS CARI has demonstrated the best of what academic researchers can do when given the time and resources.

Ultimately, however, all would benefit if SAIS CARI researchers did not have to work so hard and China’s Eximbank and other major donors began publishing more detailed and transparent accounts of their loans to Africa.