China steps in as Zambia runs out of loan options

The Guardian

Published By: Anonymous

Zambia’s capital, Lusaka, was having a power cut, so the only light in the restaurant was from Fumba Chama’s mobile phone. The rapper, better known as PilAto, had just finished uploading a new track to Twitter. The bitter-sweet lyrics (in Bemba) of Yama Chinese describe the concerns of many Zambians: “They put on smart suits and fly to China to sell our country. The roads belong to China. The hotels are for the Chinese. The chicken farms are Chinese. Even the brickworks are Chinese.”

PilAto (an acronym for “people in the lyrical area taking over”) is a voice for Zambia’s voiceless. In May 2018 he returned from six months’ self-imposed exile in South Africa, where he had fled after death threats over another rap, Koswe Mumpoto (Rat in the Pot), denouncing corruption in President Edgar Lungu’s government.

Resentment of China is growing, especially in the copperbelt region, which generates 70% of Zambia’s export earnings. The government is widely criticised over its social policies. Cosmas Mukuka, secretary general of the Zambia Congress of Trade Unions, told me that some private Chinese companies operating in Zambia, hiding in the shadow of the mining multinationals, “are not following the recommendations of the International Labour Organization”.

In December 2018 John Bolton, then US national security adviser and responsible for revealing Washington’s new Africa strategy, claimed that China planned to take over some state-owned enterprises if the Zambian government defaulted on its debt. This was a reference to an article published three months earlier in the Africa Confidential newsletter, claiming that the state electricity company, Zesco, was “in talks about a takeover by a Chinese company”, which raised concerns about “national sovereignty and Chinese ownership of key components of the country’s infrastructure”.

Zambia’s external debt, currently estimated at 35% of its GDP, has soared: according to official figures it reached nearly $10bn in 2018, up from $1.9bn in 2011. As southern Africa’s third-largest economy and Africa’s second-largest producer of copper, Zambia is a textbook case of the Chinese debt trap that affects 15 African countries, including Djibouti and the Democratic Republic of the Congo.

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At a conference on China’s Belt and Road initiative in Beijing in April 2018, Christine Lagarde, then the International Monetary Fund’s (IMF) managing director, recognised that Chinese aid could help with Africa’s pressing need for infrastructure and finance, but noted that intergovernmental partnerships “can also lead to a problematic increase in debt, potentially limiting other spending as debt service rises”. The IMF rejected Zambia’s request for a loan of $1.3bn, since “the borrowing plans provided by the authorities continue to compromise the country’s debt sustainability and risk undermining its macroeconomic stability”.

The Zambian government accuses the IMF of disinformation. Bowman Lusambo, minister for Lusaka province, which is twinned with China’s Sichuan province, said that the US, obsessed with its trade war with China, is smearing Zambia with the support of international financial institutions. Government data confirms that China controls 30% of Zambia’s external debt, while most of the rest is in the hands of multilateral or commercial creditors, or on the international bond markets.

But according to Joseph Mwenda, editor of independent daily newspaper News Diggers!, “the official figures reflect only part of reality: some loans granted by China haven’t been taken into account, because work on the projects they finance has not yet started”. Moreover, many contracts with foreign operators are thought to have been overbilled. The US-based Brookings Institution estimated in September that loans from China accounted for 65.8% of Zambia’s external debt, an African record. 

Reference: https://www.theguardian.com/global-development/2019/dec/11/china-steps-in-as-zambia-runs-out-of-loan-options