African nations mend and make do as China tightens Belt and Road
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[November 22, 2021] By
Duncan Miriri
NAIROBI (Reuters) - Deep in Kenya's Great
Rift Valley, members of the National Youth Service tirelessly swing
machetes to clear dense shrubs obscuring railway tracks more than a
century old.
It's a distinctly low-tech phase for China's Belt and Road drive in
Africa to create the trade highways of the future.
There's not enough money left to complete the new 1,000-km super-fast
rail link from the port of Mombasa to Uganda. It ends abruptly in the
countryside, 468 km short of the border, and now Kenya is resorting to
finishing the route by revamping the 19th-century colonial British-built
tracks that once passed that way.
China has lent African countries hundreds of billions of dollars as part
of President Xi Jinping's Belt and Road Initiative (BRI) which envisaged
Chinese institutions financing the bulk of the infrastructure in mainly
developing nations. Yet the credit has dried up in recent years.
![](http://archives.lincolndailynews.com/2021/Nov/22/images/ads/current/charrons_bch041713.png)
On top of the damage wrought to both China and its creditors by
COVID-19, analysts and academics attribute the slowdown to factors such
as a waning appetite in Beijing for large foreign investments, a
commodity price crash that has complicated African debt servicing, plus
some borrowers' reluctance to enter lending deals backed by their
natural resources.
"We are not in the go-go period anymore," Adam Tooze, a Columbia
University historian, said about China's overseas investment projects.
"There is definitely a rebalancing from the China side," said Tooze,
whose new book Shutdown examines how COVID-19 affected the world
economy, adding that Beijing's current account surplus was "dwindling
somewhat".
Chinese investments in the 138 countries targeted by BRI slid 54% from
2019 to $47 billion last year, the lowest amount since the BRI was
unveiled in 2013, according to Green BRI, a China-based think-tank that
focuses on analysing the initiative.
In Africa, home to 40 of those BRI nations, Chinese bank financing for
infrastructure projects fell from $11 billion in 2017 to $3.3 billion in
2020, according to a report by international law firm Baker McKenzie.
This is a blow for governments who were anticipating securing Chinese
loans to build highways and rail lines linking landlocked countries to
sea ports and trade routes to Asia and Europe. The continent is facing
an estimated annual infrastructure investment deficit of around $100
billion, according to the African Development Bank.
"The pandemic has actually made things worse. Those numbers will go up,"
said Akinwumi Adesina, the president of the bank, citing the need for
additional infrastructure to support health services.
Hold-ups have hit some other BRI projects across the continent, such as
a $3 billion Nigerian rail project and a $450 million highway in
Cameroon.
China's ministry of foreign affairs did not respond to a request for
comment.
Beijing officials have said that the two sides have a mutually
beneficial and cooperative relationship and that lending is done openly
and transparently.
![](http://archives.lincolndailynews.com/2021/Nov/22/images/ads/current/stclara_lda_SPONSOR_090519.png)
"When providing interest-free loans and concessional loans, we fully
consider the debt situation and repayment capacity of the recipient
countries in Africa, and work in accordance with the law," Zhou Liujun,
vice chairman of China International Development Cooperation Agency told
reporters in late October.
Another Chinese official, who declined to be named as they are not
authorised to speak to the media, said Beijing always intended to
implement BRI gradually to manage debt default risks by countries or
projects.
'RAILWAY WILL BE BUILT'
Officials in Kenya said its rail route were long-term projects that
would be seen through over time, without giving any specific timeframe.
The COVID-19 has presented the world with unforeseen and unprecedented
challenges, they added.
"Eventually, this standard gauge railway will still be complete because
it is part of what we call the Belt and Road Initiative," said James
Macharia, Kenya's transport minister.
The government has already spent about $5 billion on its new rail link,
and can't currently afford the additional $3.7 billion needed to finish
it. The last station hooked up is only accessible by dirt roads.
Hence engineers in the Rift Valley are no longer building new
infrastructure, but rather shoring up colonial-era viaducts and bridges
in an operation that the government estimates will cost about 10 billion
shillings ($91 million).
There are knock-on effects and, over the border in Uganda, construction
on a modern railway line has been delayed because it's supposed to link
to the Kenyan one.
That has been one factor in the hold-up in a $2.2 billion loan from the
Export-Import Bank of China (Exim Bank), David Mugabe, spokesperson for
Uganda's Standard Gauge Railway project, told Reuters.
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![](../images/112221pics/busine89.jpg)
Workers are seen on site during the construction of the Nairobi
Expressway, undertaken by the China Road and Bridge Corporation (CRBC)
on a public-private partnership (PPP) basis, along Uhuru Highway in
Nairobi, Kenya October 20, 2021. Picture taken October 20, 2021.
REUTERS/Thomas Mukoya
![](http://archives.lincolndailynews.com/2021/Nov/22/images/ads/current/brandt_sda_FFARM_2020.png)
In Nigeria, the government turned to London-headquartered Standard Chartered
Bank this year to finance the $3 billion railway project https://www.reuters.com/article/nigeria-railway-funding-idUKL5N2OE43A
initially slated to receive Chinese backing. Standard Chartered declined to
comment on the deal, citing confidentiality agreements.
In Cameroon, the $450 million highway linking the capital Yaounde and the
economic hub of Douala, whose funding was secured from China's Exim Bank in
2012, stalled in 2019 as the bank stopped disbursing further tranches of the
loan.
Exim Bank did not respond to a request for comment on its loans to Uganda and
Cameroon.
MALAYSIA TO BOLIVIA
Zhou Yuyuan, Senior Research Fellow at the Centre for West Asian and African
Studies at the Shanghai Institutes for International Studies, said the COVID-19
crisis had strained Chinese lending institutions and African finances alike.
In future, he added, Beijing was likely to encourage more corporate Chinese
investment in the continent, to fill the role of state-backed financing. "Once
the pandemic is over, Africa's economy is likely to recover," he said. "That
could drive China's corporate investment."
The pandemic has added to the obstacles facing President Xi's self-described
"project of the century". After peaking at $125.25 billion in 2015, Chinese
investments into BRI nations have dropped every year, apart from 2018, when they
edged up 6.7%, the Green BRI data showed.
![](http://archives.lincolndailynews.com/2021/Nov/22/images/ads/current/debbiesflora_lda_111921.png)
In 2018, Pakistan
https://www.reuters.com/article/us-pakistan-silkroad-railway-insight-idUSKCN1MA028
balked at the cost and the financing terms of building a railway. The previous
year, there were signs of growing problems for BRI, after China's push in Sri
Lanka
https://www.reuters.com/article/
us-sri-lanka-china-insight-idUSKBN15G5UT sparked protests.
AidData, a research lab at the College of William and Mary in the United States,
said in a study
https://www.reuters.com/world/
china/chinas-belt-road-plans-losing-momentum-opposition-debt-mount-study-2021-09-29
at the end of September that $11.58 billion in projects in Malaysia had been
cancelled over 2013-2021, with nearly $1.5 billion cancelled in Kazakhstan and
more than a $1 billion in Bolivia.
"A growing number of policymakers in low and middle-income countries are
mothballing high-profile BRI projects because of overpricing, corruption and
debt sustainability concerns," said Brad Parks, one of the study's authors.
China's foreign ministry said in response to the AidData report that "not all
debts are unsustainable", adding that since its launch the BRI had "consistently
upheld principles of shared consultation, shared contributions and shared
benefits".
'RESOURCES ARE FINITE'
A key problem is debt sustainability.
Copper producer Zambia became Africa's first pandemic-era sovereign default last
year after failing to keep up with payments on more than $12 billion of
international debt, for example. A recent study suggested more than half of that
burden is owed to Chinese public and private lenders.
In late 2018, Beijing agreed to restructure billions of dollars in debt owed by
Ethiopia.
Some African governments are also growing more reluctant to take out loans
backed commodities such as oil and metals.
"We can't mortgage our oil," Uganda's works and transport minister Katumba
Wamala told Reuters, confirming the country had refused to pledge untapped oil
in fields in the west to secure the railway loan.
![](http://archives.lincolndailynews.com/2021/Nov/22/images/ads/current/farmers_bank_sda_FHI_2021.png)
The finance squeeze means African governments must make more strategic
investment decisions in terms of debt sustainability, said Yvette Babb, a
Netherlands-based fixed income portfolio manager at William Blair.
"There is no infinite amount of capital," she said.
($1 = 110.2500 Kenyan shillings)
(Additional reporting by Joe Bavier in Johannesburg, Elias Biryabarema in
Kampala, Kevin Yao and Ella Cao in Beijing; Editing by Katharine Houreld, Karin
Stohecker and Pravin Char)
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