“Africa’s debt isn’t mostly to China and many Beijing-financed projects are for clean energy” 19 July 2023

China is neither laying a debt trap nor building a lot of fossil projects in Africa. Rather, it's been relatively generous with debt relief, and in developing Africa’s renewable energy capabilities, argues Kenyan economist Anzetse Were.

The current trajectory of Africa’s economies will be informed by three main factors: the debt crisis, great power competition, and climate change. Debt pressures will dominate in the short to medium term, while global warming and great power competition will inform the long-term economic welfare of the continent. This article will highlight how the combination of these dynamics is informing Africa-China economic engagement and how it will evolve going forward. As usual, the specific articulation of Africa-China economic engagement in individual African countries differs, often informed by the economic and fiscal strength of the country, the perceived strategic importance of countries to different actors, and the specific impacts of climate change and great power competition on local economies. [...]

Composition of Chinese debt and lenders to Africa

Loans from China make up just 12% of Africa’s total debt, financed mainly by the China Eximbank, the China Development Bank (CDB), the Industrial and Commercial Bank of China (ICBC), and Bank of China (BOC). China Eximbank has been the largest creditor since 2000 but Chinese financing has been growing increasingly commercial since 2015, although this has been in the context of declining lending from China.

Lending from China to Africa has been on the decline since 2016. Between 2000 and 2019, Chinese financiers committed $153 billion to African governments and state-owned enterprises. 80% of this was committed in 2010-2019. From 2019 onwards Chinese financiers committed only$7 billion to African borrowers, down sharply from its peak of $28 billion in 2016. [...]

Links between global warming and the Belt and Road Initiative

China’s state financing has long focused on infrastructure, and 43 African countries are countries with the Belt and Road Initiative (BRI) agreements — the highest number in any continent. Between 2000 and 2019, China committed $153 billion to African public-sector borrowers, and at least 80% of those loans went toward transportation, power, telecoms, and water.

At the same time, eight of the 20 countries with the highest expected annual climate-related damage to road and rail assets relative to GDP are in Africa. Beijing should be particularly concerned about hydropower investments given that most Chinese-financed power plants in Africa are in hydropower (60%). [...]

Beijing has signalled its pivot to greening the BRI through high-level guidance notes and policies and principles. The Asian Infrastructure Investment Bank (AIIB, of which China is the largest shareholder) has begun incorporating climate resilience into its road projects. But what is not clear is:

1. Is existing BRI infrastructure in Africa climate-resilient and designed to withstand current and future strikes from climate change?
2. Have African and Chinese governments integrated climate-related insurance into their infrastructure deals?
3. Have the potential impacts of climate change been integrated into financial modeling regarding project viability and/or debt servicing linked to BRI loans?

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