China Global

Africa: How China’s Huge Investments Are Sinking The Continent Into Debt

In the past decade, China has been investing billions of dollars in all but one African countries. From constructing parliament buildings in Zimbabwe to mining cobalt in the Democratic Republic of the Congo, the Sleeping Giant is backing almost every sector in Africa.

But what is China’s insight behind these vast investments? How are this funding benefiting African countries? And what do these investments mean for Africa and the world?

African Union Head Quarter Controversy

In January 2017, the IT engineers working in the server department on African Union’s HQ building noticed that the servers connect and send email and audio to an anonymous server in Shanghai every night. On further investigation, microphones were found embedded in numerous furniture, recording and sending data to Beijing. One of the most important buildings of the entire African continent was bugged, and for five straight years, all the confidential emails and conversations were transferred to China. But how was this security impeachment made possible in the Heart of African Union?

The $200 million African Union headquarter building was built in 2012. The Chinese government carried out everything from funds to construction. Every element, including serves and furniture of the building, was designed by Chinese companies.

When the mystery of the security impeachment unravelled four years back, Africa’s focus turned to the mischievousness of the Sino firms. When looked closely, some very alarming data disclosed in front of the world. Chinese companies carried out almost all of Africa’s significant constructions. All the African countries were in huge debts from China’s banks. But what is behind the mysterious rush of China to the dark continent? Are African getting benefited from this endorsement, or are they getting gulled into a debt trap?

China: The Emerging Super Power

In recent times, China has surpassed the US to become the world’s most significant foreign direct investment (FDI). A substantial section of China’s FDI is flowing into African countries. From 2000 to 2014, China has funded 2,390 projects throughout Africa and has loaned more than $121 billion, making up 34.3% of China’s global development Finance.

China’s Huge Investments In Africa

Today, out of 54 African countries, Swaziland is the only nation with no financial help from the Sino government. In the rest, Chinese companies have invested if not designed and constructed the following:

China has constructed mining sites, dams, bridges, and a lot more in Africa. When inspected closely, it is clear that most if not all of these projects have majorly benefited the African countries’ economy. Recently, China has built a luxurious rail system in Kenya named Mombasa-Nairobi Standard Gauge Railway, worth $3.6 billion. The project received 90% of its funding from the Export-Import Bank of China in the form of a loan.

The Chinese government claims that they are helping Africa build itself in the name of friendship and corporation. But Kenya’s expensive railway system created by China has sunk the county into billions of dollars of debt by the Chinese government; Kenya’s 72% of all obligations are owed to China. Exim Bank of China has loaned Nigeria $5 billion for building the country’s biggest damn.

Why Is China Rushing In Rushing Into Africa?

Half a century ago, China was drenched in poverty, and overpopulation resulted in neck-breaking joblessness. But the new government decided to open the country’s economy, offering the world their population as an affordable workforce. Cheap labour and easy access to industrial land invited some of the world’s biggest companies into mainland china. Soon the economy skyrocketed, and today the country is the world’s second-largest economy.

As the country developed, so did the people; labour charges increased, and the land became costly. As China grew rich, it started looking outside to hunt for cheap labour and new growth opportunities. The untapped markets and exponentially urbanizing African countries were the best-emerging economies to invest in. So, China started pouring a massive amount of money into Africa.

China has also offered various gifts to an African country, from building free-of-cost parliament buildings to headquarters of the most important institutions of the continent (ECOWAS). Experts believe that by investing in the African counties, China is investing into itself as a future superpower, which will need support from other nations.

Now, African nations are diving deep into loans from the Chinese government, and how China uses loans for its diplomatic needs is no hidden truth. Sri Lanka’s Hambantota Port is the live example. But astonishingly, China is doing nothing different from what most superpowers do in their beginning stages.

What Future Holds?

There is no doubt that Africa’s countless infrastructure projects are an impressive sight to behold. Numerous projects have helped the locals and the government. But the continuous huge loans and gifts raise troubling questions. African nations are deeply indebted to China and will need to repay this considerable sum, but what happens if they can’t pay it back?