By Duncan Miriri
According to a recent independent study, Chinese lenders granted loans totaling $4.61 billion to African countries last year, representing the first annual increase since 2016. This surge in lending comes after a significant decline in loans at the onset of the COVID-19 pandemic in 2020.
Between 2012 and 2018, Africa received over $10 billion in loans from China, largely due to President Xi Jinping's Belt and Road Initiative (BRI). However, last year's substantial increase in loans indicates China's efforts to manage risks associated with highly indebted economies.
The study conducted by Boston University's Global Development Policy Centre revealed that China has become the top bilateral lender to many African nations, providing a total of $182.28 billion in loans between 2000 and 2023. The majority of these funds have been directed towards Africa's energy, transport, and ICT sectors.
While China initially played a prominent role in Africa's infrastructure development through the BRI, the country began to reduce its lending activities in 2019, a trend that was further accelerated by the pandemic. This shift was influenced by China's domestic pressures and the growing debt burdens of African economies like Zambia, Ghana, and Ethiopia.
Despite the decrease in overall loans, Chinese lenders allocated a significant portion of the 2023 funds to regional and national financial institutions, indicating a new risk mitigation strategy. Additionally, a notable portion of the loans went towards renewable energy projects, signaling China's interest in transitioning away from coal-fired power plants.
However, the study highlighted that the trends in last year's lending activities did not provide a clear indication of China's future financial engagement with Africa. Chinese institutions continued to extend loans to struggling economies like Nigeria and Angola, raising questions about the sustainability of these partnerships.
In conclusion, the evolving landscape of Chinese lending to Africa has significant implications for the continent's economic development and debt sustainability. As Chinese lenders adjust their strategies and priorities, African countries must carefully navigate their borrowing practices to ensure long-term financial stability and growth.