East African economies have in the past 10 years borrowed $29.42 billion to grow their transport, communication, manufacturing and energy sectors.
The region’s economies are now spending almost eight per cent of their revenues to service these loans, which analysts say are becoming a burden, especially given that their impact is yet to be seen on the growth.
The latest data from the China-Africa Research Initiative (CARI) at John Hopkins University shows that Ethiopia owes Beijing $13.73 billion, followed by Kenya at $9.8 billion. Uganda owes $2.96 billion and Tanzania $2.34 billion.
Rwanda, South Sudan and Burundi owe China the least amounts $289 million, $182 million and $99 million respectively.
CARI director Deborah Brautigam said that the risk for the African borrowers relates to the projects’ profitability.
It is always important to look at whether these projects will generate enough economic activity to repay these loans, as opposed to being seen as merely ribbon-cutting opportunities, Ms Brautigam said.
Mega projects.
Ethiopia’s biggest intake of the Beijing loans was in 2013, coinciding with the launch of its joint standard gauge railway project with Djibouti.
Addis took up more than $6.62 billion from Beijing for its mega projects, which also included the setting up of manufacturing zones.
The data also shows Kenya’s new railways line accounted for the highest debt intake from Beijing at $3.7 billion in 2014.
China Exim Bank has been the go-to financier for the region’s governments, giving out more than $16.3 billion.
The China Development Bank advanced East African economies more than $6.9 billion, while other Chinese lenders are currently owed $6.1 billion, data shows.
In terms of sector funding, Ethiopia invested the bulk of its funds in the transport sector ($4.37 billion), which was used for both the Addis Ababa light railway project and the Addis-Djibouti 700km railway. This was followed by communications at $3.16 billion and power projects at $2.54 billion.
Its manufacturing sector, which supports its fledging special industrial zones, including the Eastern Industry Zone and Huajian International Shoe City, received $2.02 billion.
Kenya’s transport sector took in $5.55 billion, largely driven by the new railway line from Mombasa to Naivasha.
Nairobi also took a $597 million loan for its power projects, including the $135 million for the 55 MW solar power plant in Garissa funded by the China Exim Bank.
South Sudan has received $158 million for its transport sector to date, and a further $24 million for its energy projects.
Tanzania’s energy sector remains the top financed sector funded by Chinese money, at $1.16 billion.
Dar es Salaam, which has not taken up any Chinese debt under President John Magufuli, has received $552 million for its communications sector.
Uganda, on the other hand, has seen its energy sector receive the highest funding from Beijing, at $1.92 billion, while its transport sector has absorbed $762 million.
Rwanda’s China debt for transport amounts to $151 million.
But the region’s countries seem to have slowed down bingeing on Chinese debt, with only Kenya and Ethiopia going to Beijing for loans.
Ethiopia borrowed $652 million last year, down from $926 million in 2016, while Kenya took $64 million, down from $1.09 billion in 2016.
In 2016, Kigali took $70 million and Kampala $85 million.
Debt roll over
Last month, Ethiopia became the first country to get its Chinese debt rolled over announcing that Beijing had agreed to restructure its $4 billion loan on the railway linking its capital Addis with neighbouring Djibouti.
Ethiopia’s Prime Minister Abiy Ahmed said that the country’s loans will now receive a further 20-year extension, which will see its annual repayments narrow to an affordable level.
In conversations with our Chinese partners, we had the opportunity to enact limited restructuring of some of our loans.
Kenya also sought to get a grant as part of the package for its $3.8 billion loan for its continuing railway projects, as it seeks to manage its debt burden.
The Naivasha-Kisumu phase of the SGR will cost $3.8 billion. And owing to its regional significance, I would request that 50 per cent of its cost be provided as part of grant financing, President Uhuru Kenyatta said at the Forum on China-Africa Co-operation in Beijing in August. This request was not granted.
Tim Jones, an economist at the Jubilee Debt Campaign, said that the continent debt problem could worsen, especially given the opaque nature in which they are signed.
Burden
Last month, China’ s special envoy to Africa, Xu Jinghu, denied claims that Beijing was burdening Africa with debt, noting that China was Africa’s main creditor.
Indeed, data shows that the continent owes more to private lenders than to China.
It is baseless to shift the blame onto China for these African countries debt problems. Their debt position has been built over time even before we came in.
We have to look at the fluctuations in the international economic situation vis-a-vis the price of minerals, their key exports. This is where the problem is, and not Chinese loans, Mr Xu said.
