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Low-interest rate loans from China are attractive to African countries, says Senegalese president

DAKAR, (The Southern African Times) – Loans from China are attractive to African countries due to the long-term financing with low-interest rates that they cannot get elsewhere, Senegalese President Macky Sall told US investors and Trump administration officials.

Speaking at the Investing in Africa’s Future conference on Friday, Sall said Beijing has often been the only source of long-term financing for African countries that they could not get through the private markets to finance big infrastructure projects.

“When we have long-term loans over 25, 30 or even more years with interest rates that are not over 2 per cent, yeah, we will accept that,” said Sall at the virtual event hosted by the think tank Atlantic Council and the US International Development Finance Corporation (DFC), the US$60 billion revamped agency aimed to invest in public and private ventures in developing economies, mostly in Africa.

However, he would not want the American friends to “see China’s intervention and China as a threat to the partnership with them, no”.

“Chinese people give us long-term loans. And I think that the other partners will gain a lot in listening – listening deeply to Africa and Africans.”

He said Africa has never received a US Marshall Plan like Europe, where the United States provided aid to reconstruct western Europe following the devastation of World War II. The Marshall Plan enabled western Europe to build infrastructure.

The Senegalese president was responding to US National Security Adviser Robert O’Brien, who said during the event that the US’ approach to Africa “stands in stark contrast to [the values] of the Chinese Communist Party”.

O’Brien argued that China uses massive long-term loans to create dependencies that can be exploited to service their geopolitical interests.

“Whereas Beijing promotes a journey to China dependence, the US promotes a journey to self-reliance,” O’Brien said. “Whereas the United States government provides grants and transparent financing, the CCP pushes unsustainable and opaque loans. The result is the erosion of national sovereignty.”

“I can assure you that we are keen, our sovereignty is dear to us, and in any case, the projects that we implement with our partners will not suffer from any encroachment on our sovereignty,” Sall said.

There was uproar in Nigeria recently when lawmakers questioned a clause in a loan agreement the country had signed with Export-Import Bank of China which talks about waiving immunity on grounds of sovereignty. They feared that it exposed the West African nation to asset seizure if it defaulted on its loans.

However, analysts say what should worry countries is not the loss of assets, since no Chinese asset seizures for sovereign lending in Africa has ever happened, but the loss of control like what happened in Sri Lanka’s Hambantota port.

Experts said the clause is common in many commercial loan contracts. Laure Deron, a Paris-based lawyer working on Sino-European infrastructure partnerships with a particular focus on China’s Belt and Road Initiative, explained that if a decision has been made to offer an asset as collateral, then it is common to waive immunity and it is standard practice for such loans.

“The way the political debate in Nigeria played was indicative of confusion or misunderstanding of the contractual clause,” she said.

Deron said the “real threat is not loss of assets but the loss of control and decision making power over the assets”.

China has denied it had plans to use loans as a way to seize strategic assets. China has poured US$148 billion between 2000 and 2018 in loans to Africa, according to figures from the China Africa Research Initiative at the Johns Hopkins School of Advanced International Studies in Washington, which has gone into the building of power dams, ports, railways and roads.

Sall and Chinese President Xi Jinping co-chair the Forum on China-Africa Cooperation (FOCAC), a platform that has seen trade between Africa and China grow 20-fold in two decades.

In past FOCAC meetings since 2015, Xi had pledged about US$120 billion in total, most of it going into the Belt and Road Initiative.

To counter Chinese influence on the continent, the Trump administration in 2018 unveiled the Prosper Africa initiative that involved the creation of Africa-targeted programmes such as revamping the Export-Import Bank of the United States and the formation of the US International Development Finance Corporation, which was previously known as Overseas Private Investment Corporation.

US Congress overhauled the Export-Import Bank of the United States, which in the last year and a half authorised more than 40 deals in Sub-Saharan Africa. The lender received Congress approval to provide loans that can match interest rates offered by Chinese financial institutions, including the Export-Import Bank of China.

In May, Export-Import Bank of the United States authorised a US$4.7 billion direct loan to support the development and construction of an integrated liquefied natural gas project in Mozambique.

“The project helped displace Chinese and Russian financing as expected to boost Mozambique’s economy and support close to 17,000 jobs here in the US alone,” O’Brien said.

According to Boehler, Congress has committed to DFC a doubled funding base from US$30 billion to $60 billion and the ability to invest in “reinsurance, debt, and equity”. He said the DFC is aiming to invest nearly US$25 billion in the next five years around the world and currently has invested in 300 projects in total valued at more than US$8 billion.

“And I will tell you that the African continent represents over half of the Development Finance Corporation’s investments,” Boehler said.

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