Back in 1885, to much fanfare, the General Act of the Berlin Conference launched the Scramble for Africa which saw the partition of the continent, formerly a loose aggregation of various tribes, into the countries that currently make up the southern continent, by the dominant superpowers (all of them European) of the day. Subsequently Africa was pillaged, plundered, and in most places, left for dead. The fact that a credit system reliant on petrodollars never managed to take hold only precipitated the “developed world” disappointment with Africa, no matter what various enlightened, humanitarian singer/writer/poet/visionaries claimed otherwise.
And so the continent languished…. until 2012 when what we then dubbed as the “Beijing Conference” quietly took place, and to which only Goldman Sachs, which too has been quietly but very aggressively expanding in Africa, was invited.
As the map below, which we first showed in 2012, in just two years after 2010 China had pledged over $100 billion to develop commercial projects in Africa, a period in which the continent had effectively become de facto Chinese province, unchallenged by any developed nation which in the aftermath of the financial crisis had enough chaos at home to bother with what China may be doing in Africa.
Since then China’s financial colonization of Africa has only accelerated, and according to a study by the China-Africa Research Initiative at the Johns Hopkins School of Advanced International Studies, China had lent a total of $143 billion to 56 African nations facilitated principally by the Export-Import Bank of China and the China Development Bank. By sector, close to a third of loans were directed toward financing transport projects, a quarter toward power and 15% earmarked for resource mining including hydrocarbon extraction. Just 1.6% of Chinese loans were dedicated to the education, healthcare, environment, food and humanitarian sectors combined, confirming that all China interested in was building a giant commodity/trade/military hub.
Just seven countries – the strategically important Angola, Cameroon, Ethiopia, Kenya, Republic of the Congo, Sudan and Zambia – accounted for two thirds of total cumulative borrowing in 2017 from China, with oil-rich Angola alone representing a 30% share, or $43 billion (35% of Angolan 2017 GDP). Ultimately, Angola reached a loans-for-oil settlement, with Beijing tying the country’s future oil production to shipments to China in order to service the country’s burgeoning infrastructure debt. According to an April 2018 IMF study, as of the end of 2017, about 40% of low-income Sub-Saharan African countries are now in debt distress or assessed as being at high risk of debt distress including Ethiopia, the Republic of the Congo and Zambia.
Amusingly, in a September 2018 speech to the triennial Forum on China-Africa Cooperation in Beijing, President Xi Jinping said Chinese investment came “with no strings attached” and pledged a further $ 60 billion of loans for African infrastructure development over the next three years. As it turns out, Xi was only joking because as we reported last month, China was set to take over Kenya’s lucrative Mombassa port if Kenya Railways Corporation defaults on its loan from the Exim Bank of China. The China-built, China-funded standard gauge railway, also known as the Madaraka Express, was plagued by cost overruns, and outside observers questioned its economic viability, but China was not worried: after all, if the 80%-China funded project failed, Beijing would have full recourse. Call it a “debt-for-sovereignty” exchange.
It’s not just Kenya and Angola: other notable examples of China’s debt-funded colonization endgame include Sri Lanka, where difficulties servicing $8 billion of infrastructure-related borrowing from China led to the handing over of a controlling equity stake and a 99-year operating lease for the country’s second-largest port at Hambantota to a subsidiary of a Chinese state-owned
enterprise in December 2017. For Pakistan, more than 90% of revenues generated at the newly developed Gwadar Port at the mouth of the strategically significant Gulf of Oman are collected by the Chinese operator.
And so, as more developing, peripheral countries default on Chinese loans and are forced to hand over the keys to key sovereign projects to Beijing, China will slowly but surely “colonize” not just Africa but many of the Asian nations in the “Belt and Road Initiative” following a popular playbook developed by none other than the original “economic hitmen“…