As African leaders get ready to leave the Chinese capital of Beijing after the third Summit of the Forum on China-Africa Cooperation (FOCAC), they may be smiling and looking forward to accessing the $60 billion pledged by Chinese leader, Xi Jinping. There was a $50 billion pledge he made three years ago.
But the pledges and lending from China to Africa are believed, will ensnare the continent and increase its debt burden.
Speaking to ghanabusinessnews.com in a telephone interview, Eric LeCompte, Executive Director of Jubilee USA Network, a coalition of religious, development and advocacy groups that works on debt, tax, trade and transparency policies that help end poverty, says Chinese lending lacks the level of transparency that other lending agreements have. This lack of transparency he says will “increase Africa’s debt burden.”
He points out that the situation is driven by the lack of what he calls “responsible lending rules in the international system.”
“China is benefiting from the lack of rules now,” he said.
The pledge of $60 billion includes $15 billion of aid, interest free loans and concessional loans, a credit line of $20 billion, a $10 billion special fund for China-Africa development, and $5 billion special fund for exports.
Meanwhile, since the year 2000, African countries have borrowed about $130 billion from China.
LeCompte made reference to the period from 2001 to 2005, noting that during that period, growing lending led to debt forgiveness and “debt forgiveness led to economic growth in Africa, but lately the debt burden is growing. You have problems when countries cannot pay,” he said.
According to him, the Chinese are taking advantage of the debt situation to take natural resources from these countries.
“It is absolutely imperative that we find other means to finance African countries,” he added.
LeCompte called for laws to tackle tax avoidance and illicit financial flows from which African countries are losing billions of dollars.
Even though some steps have been taken to deal with illicit financial flows in Africa, the continent in 15 years from 2000 to 2015 has lost an amount of $73 billion to illicit financial flows, a new study by the Economic Commission for Africa (ECA) says.
“The most up-to-date estimates by the ECA during the period 2000 to 2015 of net illicit financial flows between Africa and the rest of the world averaged $73 billion at 2016 prices per year from trade misinvoicing alone,” the study released in May 2018 in Addis Ababa, Ethiopia, says.
“We need laws for responsible lending and borrowing. We need to look at new creative processes for debt relief. We need laws to curb tax evasion and global bankruptcy rules,” he said.
By Emmanuel K. Dogbevi
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