ECONOMIC UPDATE | South Africa Rejects Notion of Chinese Debt Trap in Africa Following $51 Billion Chinese Pledge to Africa Over 3 Years

The remarks come amid a rejuvenated debate on the nature of foreign activities on the continent. For instance, several African countries are taking steps to protect their economies from the impacts of the United States dollar, which is a key evidence of the idea of western hegemony over the continent.

kodzilla··3 min read

South African President Cyril, Ramaphosa, has rejected the notion that Chinese investments are pushing African countries into a debt trap.

This comes after China pledged $51 billion in new funding to Africa over the next 3 years at the recent China-Africa summit in Beijing. The Asian giant also promised to triple infrastructure projects across the continent.

 

“I don’t necessarily buy the notion that when China [invests], it is with an intention of, in the end, ensuring that those countries end up in a debt trap or in a debt crisis,” Ramaphosa said.

 

The remarks come amid a rejuvenated debate on the nature of foreign activities on the continent. For instance, several African countries are taking steps to protect their economies from the impacts of the United States dollar, which is a key evidence of the idea of western hegemony over the continent.

While China is committing $51 billion dollars over the next three years, the U.S committed $55 billion over a similar period to the continent during its own U.S.-Africa Leaders Summit in December 2022. According to the White House, in 2023 alone the U.S supported and helped close 547 new deals for a total estimated value of $14.2 billion in new two-way trade and investment between the United States and African countries.

Still, African leaders and experts have pointed to the U.S dollar as one of the reasons for poor economic performances over the last 3 years. This has contributed to sky-high inflation being recorded during and after the pandemic.

Zambia is one of the countries affected by a rampant dollar in its economy, and it recently said it was banning the use of the U.S. dollar in local transactions to avoid distortions in the economy.


Similar moves to reduce dollar influence have been announced in Zimbabwe and Tanzania.


Moreover, other African countries, notably Kenya and Eritrea, have made similar calls to establish a new global financial architecture, one that is not controlled by the U.S dollar or the Euro.


China, on its part, has faced significant criticism for indebting African countries as a way of gaining their control, hence the term ‘debt trap diplomacy’ coined by Indian academic, Brahma Chellaney, in 2017. An often cited example is Kenya’s Standard Gauge Railway, a landmark $5 billion project by China in Kenya under the auspice of China’s vast Belt and Road Initiative.

According to a BBC article titled Kenya, China and a Road to Nowhere, the project is not bringing as much money as was hoped, while Kenya is left servicing loans totalling around $4.7bn (£3.9 billion), mainly borrowed from Chinese banks.

Nonetheless, at the recent summit, Kenya secured another commitment from China to fund further construction of the railway project foll.

China also pledged a $1 billion upgrade of the TAZARA railway, which will link mineral-rich, landlocked Zambia with Tanzania’s coast.

See also

South Africa also reached a deal with China to support its energy sector saying they could learn a lot from China in reforming the sector.

 

“Modernization is an inalienable right of all countries,” said President Xi Jinping to more than 50 African leaders at the summit.

“But the Western approach to it has inflicted immense sufferings on developing countries.”

 

 

 

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