While China, Europe, and the United States have been intensifying their competition in Africa over the last decade, the next decade is likely to see other players making more prominent moves. Among them, India, Russia, and major actors in the Middle East are already shifting resources and attention to the promising continent.
Chinese Financing Begins to Show Downsides
China’s comparative advantage has laid in the large financial resources at its government’s disposal and its state-backed economic engagement model. Although Beijing has indicated a desire to increase private equity investment in Africa, it is unlikely to abandon its overall priority on infrastructure development financed by Chinese loans. But as the frenzy over the large Belt and Road Initiative infrastructure projects in Africa subsides with the existing projects’ loan payments due, African governments have to deal with the sobering financial consequences of projects such as the Addis-Djibouti railway and the Mombasa-Nairobi railway.
The Chinese financing model has been widely criticized by observers, and the debt sustainability problem does not only affect African government borrowers, but also the Chinese banks as creditors. As the Second Belt and Road Forum in April 2019 ushered China into a stage of more stringent and responsible lending mechanisms, the hope is that Chinese financing to Africa will become more disciplined. But this also requires African governments to be more disciplined and cautious in their economic cooperation with China. Instead of indulging in what appears to be easily available funding, African governments will have to recognize and prepare for the consequences of debt to China, both economically and in terms of security and other strategic implications.
Read the full op-ed in Brookings.