The letter bearing the reference "MC/19/3" represents a novelty in Chinese-African relations. Kabineh Kallon, Sierra Leone's Minister for Transport and Aviation, explains in sober tones that, after careful consideration, no new airport in the capital city of Freetown will be built.
China had promised a loan and construction works worth $318 million. But Freetown already has an airport that, according to the minister, is "grossly under-utilized." Building a new one would make no economic sense. "I do have the right to take the best decision for the country," Kallon told the BBC.
Chinese leaders quickly tried to play down the incident. The project was merely in an exploratory phase, a Foreign Ministry spokesman insisted, adding that, as with any activity in Africa, those in Sierra Leone are always based on "win-win cooperation." This particular project should, therefore, not "be overblown as an indication of problems between the Chinese and Sierra Leonean governments."
Still, this was the first time an African country has terminated an already announced deal of this dimension. The incident reflects a growing and long overdue skepticism towards the often largely unconditional loans that arrive from Beijing.
The International Monetary Fund (IMF) currently classifies six African countries in debt distress: Chad, Mozambique, São Tomé and Príncipe, South Sudan, Sudan and Zimbabwe. Nine others are at high risk of debt distress. Since the end of 2017, the IMF has increasingly warned of rising debt in Africa. Over the past two years, governments' average external debt payments from African countries have doubled, the British activist group Jubilee Debt Coalition recently calculated, growing from an average of 5.9% of government revenue in 2015 to 11.8% in 2017. Some 32% of that debt is owed by African governments to private lenders, of which 20% is owed to China, so "its relative importance is less than often stated," according to the report.
But unlike most Western countries and institutions, China does not transmit its loans to the usual reporting systems, such as the OECD's Creditor Reporting System or the International Aid Transparency Initiative. Research from the Johns Hopkins University has shown that between 2000 and 2017, China granted loans amounting to $136 billion.
But unlike most Western countries and institutions, China does not transmit its loans to the usual reporting systems.
The reasons for Africa's rapidly rising debt are obvious. Most African economies are primarily dependent on commodity exports and urgently need investment in infrastructure. When commodity prices fell after the boom in the years 2005 to 2007, foreign exchange earnings also declined. Many countries made up for this gap with new debt (in dollars), the burden of which grew as the dollar appreciated against their own currencies. Investment in infrastructure, however, didn't lead to the calculated recovery. In some cases, because one effect occurs only in the long term, in others, because the projects didn't always make sense — like the airport in Sierra Leone.
The 2005 debt cancellation by the G8 for 18 highly indebted developing countries instantly made Africa interesting for profit-hungry investors in the private sector. This indeed creates the hope that international financial institutions will step in when states go bankrupt.
"I would have expected the IMF and the World Bank to point out the dangers of a new debt crisis earlier," says Christine Hackenesch, a researcher at the German Development Institute in Bonn. "The discussion about the high level of new debt caused by China's loans has been going on among experts since the beginning of the 2010s. Especially in small economies, questions must be asked about the sustainability of projects that cost hundreds of millions of dollars."
Djibouti President Ismail Omar Guelleh landing in Beijing on Sept. 2, 2018 to attend the Forum on China-Africa Cooperation — Photo: Xing Guangli/Xinhua via ZUMA
Meanwhile, it is becoming increasingly obvious that China's supposedly generous Africa strategy is not always producing the promised winners on both sides. The agreements for the construction of roads, airports, railways, dams and other infrastructure projects are often notoriously lacking in transparency, and the arrangements in the event of a national bankruptcy remain hidden. A look at Sri Lanka reveals how tough China's clauses can be. There, Beijing has taken control of a port for 99 years through a lease agreement.
Similar concerns are increasingly being voiced in Africa, where countries like Angola have long since had to repay their debts with a substantial share of their oil production — 90% of the country's foreign debt is held by China.
The respected magazine Africa Confidential reported that China had proposed to highly indebted Zambia to take over the international airport of its capital city Lusaka, as well as the state-owned electricity company. The governments of Zambia and China vehemently rejected this statement.
However, the fact that millions in British aid funds were embezzled in Zambia does not encourage trust. The news agency AFP also reported that the IMF had postponed payments for a billion-dollar loan because it feared that the country's debt level was higher than the officially reported $10.6 billion. In 2016, another country, Mozambique, admitted it had hidden billions in debt.
In countries such as Zambia, there's a spreading sense that they have become Chinese property.
In countries such as Zambia, there's a spreading sense that they have become Chinese property. In September, Kenyan scientist Patrick Lumumba was refused entry to the country. He had been invited by a University for a lecture on Chinese-African relations. A government spokesman explained the decision was due to "security considerations'. The state broadcaster is cautious in their reports of the incidents — 60% of it belongs to Chinese companies.
The West is also concerned about the growing debt level in the strategically important Djibouti, home since 2017 to China's only foreign military base. But Djibouti also houses army bases of the U.S., France, Italy, and Japan. If China, thanks to its debt policy, were to obtain preferential treatment in the use of the country's important infrastructure, a conflict could erupt.
For the time being, China is trying to preserve the image of an Africa policy negotiated on equal terms. Still, Beijing is well aware that the great euphoria on the continent has suffered a setback. Kenya has also rejected a free trade agreement with China because of its already enormous trade deficit. It should nevertheless be noted that at a major China-Africa summit in Beijing, which included 51 African states, new loans were secured worth a total of $60 billion.
With loans and solar panels from China, the massive solar park has been opened a year and is already powering the surrounding areas. Now the Chinese supplier is pushing for an expansion.
CAUCHARI — Driving across the border with Chile into the northwest Argentine department of Susques, you may spot what looks like a black mass in the distance. Arriving at a 4,000-meter altitude in the municipality of Cauchari, what comes into view instead is an assembly of 960,000 solar panels. It is the world's highest photovoltaic (PV) park, which is also the second biggest solar energy facility in Latin America, after Mexico's Aguascalientes plant.
Spread over 800 hectares in an arid landscape, the Cauchari park has been operating for a year, and has so far turned sunshine into 315 megawatts of electricity, enough to power the local provincial capital of Jujuy through the national grid.
It has also generated some $50 million for the province, which Governor Gerardo Morales has allocated to building 239 schools.
Abundant sunshine, low temperatures
The physicist Martín Albornoz says Cauchari, which means "link to the sun," is exposed to the best solar radiation anywhere. The area has 260 days of sunshine, with no smog and relatively low temperatures, which helps keep the panels in optimal conditions.
Its construction began with a loan of more than $331 million from China's Eximbank, which allowed the purchase of panels made in Shanghai. They arrived in Buenos Aires in 2,500 containers and were later trucked a considerable distance to the site in Cauchari . This was a titanic project that required 1,200 builders and 10-ton cranes, but will save some 780,000 tons of CO2 emissions a year.
It is now run by 60 technicians. Its panels, with a 25-year guarantee, follow the sun's path and are cleaned twice a year. The plant is expected to have a service life of 40 years. Its choice of location was based on power lines traced in the 1990s to export power to Chile, now fed by the park.
Chinese engineers working in an office at the Cauchari park
Chinese want to expand
The plant belongs to the public-sector firm Jemse (Jujuy Energía y Minería), created in 2011 by the province's then governor Eduardo Fellner. Jemse's president, Felipe Albornoz, says that once Chinese credits are repaid in 20 years, Cauchari will earn the province $600 million.
The Argentine Energy ministry must now decide on the park's proposed expansion. The Chinese would pay in $200 million, which will help install 400,000 additional panels and generate enough power for the entire province of Jujuy.
The park's CEO, Guillermo Hoerth, observes that state policies are key to turning Jujuy into a green province. "We must change the production model. The world is rapidly cutting fossil fuel emissions. This is a great opportunity," Hoerth says.
The province's energy chief, Mario Pizarro, says in turn that Susques and three other provincial districts are already self-sufficient with clean energy, and three other districts would soon follow.
- Green Is Ugly: Style Problems Plague Clean Energy Push ... ›
- Solar Power: Researchers Map Out Colombia's Sunshine Hotspots ... ›
- EVs Start Moving Latin American Cities To Sustainability ... ›