Tuesday, May 9, 2017

Guest Post: Desert Mirage: Fact-checking China in Namibia

This guest post is by Jyhjong Hwang, the Senior Research Assistant at the China-Africa Research Initiative at Johns Hopkins SAIS.

On Sunday, The New York Times Magazine published an extremely well-written article by Brook Larmer, a human interest story on the Chinese in Africa, with a focus on Namibia. The title, “Is China the World’s New Colonial Power?,” piqued our interest. This title might have looked original in 2005, but why did the NYT use this title in 2017?! 

Time for the China-Africa Research Initiative at Johns Hopkins SAIS (SAIS-CARI) to fact-check.

“A $60 billion Chinese infrastructure fund established in 2016?” 
CARI says: “No way.”

First off, the article states: "Last year, China established a new $60 billion fund to finance infrastructure projects in Africa, mostly with Chinese lending." Nothing like this exists. The article could be referring to the combined "pledges" made by China during the December 2015 Forum on China-Africa Cooperation (FOCAC) in Johannesburg, South Africa. This is how FOCAC officially described the pledges: "Of the total 60 billion dollars, 5 billion is offered as aid gratis and interest-free loans, 35 billion of concessional loans and export credits, with increased preference; 5 billion of investment augmentation into the China-Africa Development Fund and Special Loans for Development of Small and Medium Enterprises in Africa, respectively, and the initial 10 billion for foundation of the China-Africa Capacity Cooperation Fund [for industrial investment]."[i] Thus, the US$60 billion does not constitute a single fund and it is not focused on infrastructure. It includes a host of financial instruments, including loans, grants and investments.

“Chinese loans have saddled Namibia’s economy with debt.” CARI says: “No.”

The article also states that “infrastructure is welcome, but as projects made possible by loans — financed by the Chinese — they have saddled the economy with debt.”  Of Namibia’s US$6.24 billion external debt stock (for more on this see Academic Appendix below), how much of it can be attributed to China? CARI’s database on Chinese loans to Africa indicates that between 2000 and May 2017 all Chinese loans from the Chinese government and from Chinese companies to Namibia totaled US$729 million, about 12 percent of Namibia’s total external debt stock. It is a bit of a stretch to say that Namibia's economy is “saddled” with Chinese loans.

Major Loans from China to Namibia (US$707 million)

  • US$250 million Preferential Export Buyer’s Credit (PEBC) from China Eximbank for Namibia to purchase locomotives and train carriages from China (2005)
  • US$100 million PEBC from China Eximbank for Namibia to purchase customs X-ray scanners from China (2007)
  • US$135 million Concessional Loan from China Eximbank to upgrade the MR67 and DR3602 roads (2012)
  • US$222 million Commercial Loan offered by the Chinese company Swakop Uranium to the Namibian state-owned company Epangelo to purchase a 10 percent stake in the Husab Uranium Mine (2012)

The NYT article does hedge with the following:

“Is China the savior for developing nations, the only world power investing in their future — or is this the dawn of a new colonial era? The question itself, however, is misleading. In Namibia, as in much of the rest of the world, the narratives live uncomfortably side by side, impossible to disentangle.”
We at CARI agree. So much that we recommend putting this paragraph up front and making sure grandiose statements are 1) researched, and 2) in context.

Academic Appendix: More on Namibia’s total debt:

“Chinese loans have saddled Namibia’s economy with debt.”
CARI says: “It’s not China.”

The article states that “as sluggish growth and other foreign loans pushed Namibia’s debt to over 40 percent of its G.D.P., the government suspended all new loan tenders.” According to the IMF's 2016 Article IV reported published in December 2016, Namibia's 2016 projected external debt is about US$6.29 billion: “In 2015, Namibia's gross external debt increased as the public sector returned to the international market. The stock of public and publicly guaranteed (PPG) external debt (including SOEs) increased by 6 percent of GDP, reaching 15.6 percent of GDP at end- 2015, due to new rand-denominated issuances in the JSE and the November 2015 Eurobond [...] The external debt-to-GDP ratio is expected to rise from 51 percent in 2015 to about 60½ percent of GDP in 2016."[ii] The IMF is referring to a US$750 million ten-year Eurobond issued in 2015, and rand-denominated bonds that were first made available on the Johannesburg Stock Exchange in 2012 and have since issued R1,550 million (about US$115 million) worth of bonds at the time of the IMF report.[iii] Thus, the recent increase in Namibia's external debt is mostly due to their issuance of sovereign bonds, not because they borrowed more loans from bilateral or multilateral partners.

[i] "60 billion USD: China-Africa Cooperation Aims High". Forum on China-Africa Cooperation.  January 13, 2016. http://www.focac.org/eng/zfgx/t1331126.htm

[ii] Namibia 2016 Article IV Consultation - press release; staff report; and statement by the executive director for Namibia. IMF Country Report No. 16/373. International Monetary Fund, December 2016. http://www.imf.org/external/pubs/ft/scr/2016/cr16373.pdf.

[iii] "First Namibian government Bond lists on JSE", Press Release, Johannesburg Stock Exchange, November 19, 2012. http://ir.jse.co.za/phoenix.zhtml?c=198120&p=irol-newsArticle&ID=1762774

Friday, April 21, 2017

Join us on April 26: Prospects for U.S.-China-Africa Relations in the Trump Era

The China-Africa Research Initiative (CARI) at Johns Hopkins SAIS is hosting the following event in Washington DC next week:

Policy Roundtable:

Prospects for U.S.-China-Africa Relations in the Trump Era

Wednesday, April 26, 2017, 11:00 AM – 2:00 PM

Johns Hopkins SAIS – Nitze Building, Kenney-Herter Auditorium

1740 Massachusetts Avenue Northwest, Washington DC 20036


 Please make sure to register via Eventbrite: http://bit.ly/2osQ4iA

At the start of Barack Obama’s presidency in 2009, China surpassed the United States as Africa’s top trade partner. As Chinese engagement in Africa continued to diversify, President Obama ushered in an Africa foreign policy that included events such as the U.S.-Africa Leaders’ Summit as well as commitments under Power Africa and Trade Africa. Now, how will the respective roles of the United States and China in Africa change during the Trump administration? Will existing opportunities for constructive trilateral collaboration remain, or will they need to be modified? How will African countries respond to these shifts? This roundtable will draw on the public and private sectors to explore the future of U.S.-China-Africa relations in an evolving geopolitical landscape.

Keynote Address
Peter Lewis

Vice Dean for Academic and Faculty Affairs, Johns Hopkins SAIS

Yun Sun

Senior Associate, East Asia Program, Stimson Center

John Goodman

Associate Director, Conflict Resolution Program, The Carter Center

Mima Nedelcovych
President and CEO, Initiative for Global Development

Bobby Pittman

Managing Partner, Kupanda Capital

Leocadia Zak

Former Director, U.S. Trade and Development Agency

A light lunch will be served from 11:00 am to 12:00 pm. The roundtable discussion will take place from 12:00 pm to 2:00 pm. 
This event is free and open to the public.

Wednesday, March 1, 2017

China, Djibouti, and the New York TImes: How Much Debt?

The New York Times had a front page article on China and Djibouti this past weekend: "U.S. Wary of its New Neighbor in Djibouti -- a Chinese Naval Base." Like many observers, the NYT seems to have been misled about the scale of Chinese engagement, and Chinese lending to Djibouti in particular. Here's what they said:
Beyond surveillance concerns, United States officials, citing the billions of dollars in Chinese loans to Djibouti’s heavily indebted government, wonder about the long-term durability of an alliance that has served Washington well in its global fight against Islamic extremism.
Here at the China Africa Research Initiative we specialize in tracking and confirming Chinese loans in Africa. We have not been contacted by the US government, and we wonder where they are getting their "data"? In this instance, we were able to interview top ranking officials in Djibouti's Ministry of Finance to confirm Chinese loan financing.

Signed Loans/Debts Owed by Djibouti to Chinese Government (past decade). All in US$

1. Goubet/Ghoubet Salt Port Expansion:                                    64 million
2. Addis-Djibouti Railway (Djibouti share):                             492 million
3. Djibouti-Ethiopia Water Pipeline:                                         322 million
4. Doraleh Container Terminal/Multipurpose
Port Expansion (the endpoint of the Ethiopia-Djibouti Railway)
and Damerjog Livestock Export Port:                                        405 million

TOTAL                                                                                      $1283 million, or $1.3 billion

We also have a confirmed report of $596 million in Chinese finance for two new airports, but this appears to be either a Chinese company suppliers' credit or a public-private partnership investment, not a Chinese government loan. However, even if we add this, the total comes to $1.9 billion. While several other projects--most prominently a toll road highway to the border--have been in the news, we confirmed that they are all still under discussion. Yes, $1.3 billion or even $1.9 billion is a large figure, but it seems inaccurate to call it "billions of dollars in Chinese loans".

Undue alarmism? Another case of "alternative facts"? More reason to support an increase of $58 billion in the US defense budget? From what we can see, China's main rival in Djibouti has not been the US, but Dubai Ports World, which had a number of public-private partnership (PPP) port contracts in Djibouti, and had also arranged financing to build and operate ports in this important gateway to land-locked Ethiopia, one of Africa's most populous and dynamic countries.

As always, if someone has better information, please comment here or contact us directly at SAIS-CARI at Johns Hopkins University.