NAIROBI (Reuters) – Deep in Kenya’s Great Rift Valley, members of the National Youth Service tirelessly swing machetes to clear dense shrubs obscuring train tracks more than a century old.
This is a much less technological phase for the Chinese “Belt and Road” campaign in Africa to create the trade highways of the future.
There is not enough money left to complete the new 1,000 km high-speed rail link between the port of Mombasa and Uganda. It ends abruptly in the countryside, 468 km from the border, and now Kenya is resorting to finishing the route by redeveloping the 19th century British colonial tracks that once passed through it.
China has loaned African countries hundreds of billions of dollars under President Xi Jinping’s Belt and Road Initiative (BRI), which provided for Chinese institutions to finance most of the infrastructure in mainly public areas. developing countries. Yet credit has dried up in recent years.
In addition to the damage to both China and its creditors from COVID-19, analysts and academics attribute the slowdown to factors such as Beijing’s waning appetite for large foreign investment, a crash in prices of commodities that has complicated Africa’s debt service, as well as some borrowers’ reluctance to enter into loan agreements backed by their natural resources.
“We are no longer in the go-go era,” Columbia University historian Adam Tooze said of China’s overseas investment plans. “There is definitely a rebalancing on the Chinese side,” said Tooze, whose new book Shutdown examines how COVID-19 has affected the global economy, adding that Beijing’s current account surplus was “kind of down. “.
Chinese investments in the 138 countries targeted by the BRI fell 54% from 2019 to $ 47 billion last year, the lowest amount since the BRI unveiled in 2013, according to Green BRI, a group China-based think tank that focuses on initiative analysis.
In Africa, home to 40 of these BIS countries, Chinese bank financing for infrastructure projects has increased from $ 11 billion in 2017 to $ 3.3 billion in 2020, according to a report by the law firm. Baker McKenzie International.
It is a blow to governments that were planning to secure Chinese loans to build highways and railways connecting landlocked countries with seaports and trade routes to Asia and Europe. The continent faces an annual infrastructure investment gap estimated at around $ 100 billion, according to the African Development Bank.
“The pandemic has actually made matters worse. These numbers will increase, ”said Akinwumi Adesina, president of the bank, citing the need for additional infrastructure to support health services.
Heists have hit other BRI projects across the continent, such as a $ 3 billion Nigerian rail project and a $ 450 million highway in Cameroon.
China’s Foreign Ministry did not respond to a request for comment.
Beijing officials said the two sides have a mutually beneficial and cooperative relationship, and loans are made in an open and transparent manner.
“When we provide interest-free loans and concessional loans, we take fully into account the debt situation and the repayment capacity of recipient countries in Africa, and work according to the law,” Zhou Liujun told reporters. , vice president of the China International Development Cooperation Agency. end of October.
Another Chinese official, who declined to be named because he is not authorized to speak to the media, said Beijing had always intended to gradually implement the BIS to manage the risks of debt default by countries or projects.
“THE RAILWAY WILL BE BUILT”
Kenyan officials have said its rail route is long-term plans that will be completed over time, without giving a specific timeline. COVID-19 presented the world with unforeseen and unprecedented challenges, they added.
“Ultimately this standard gauge railway will always be completed because it is part of what we call the Belt and Road initiative,” said James Macharia, Minister of Transport of Kenya.
The government has already spent around $ 5 billion on its new rail link and currently cannot afford the additional $ 3.7 billion needed to complete it. The last station connected is only accessible by dirt roads.
As a result, Rift Valley engineers are no longer building new infrastructure, but instead are strengthening colonial-era viaducts and bridges in an operation that the government says will cost around 10 billion shillings ($ 91 million ).
There are ripple effects and, beyond the Ugandan border, the construction of a modern railway line has been delayed as it is supposed to be linked to that of Kenya.
This was one of the factors in the blocking of a $ 2.2 billion loan from the Export-Import Bank of China (Exim Bank), David Mugabe, spokesperson for the Ugandan project, told Reuters. Standard Gauge railway.
In Nigeria, the government turned to London-based Standard Chartered Bank this year to fund the $ 3 billion rail project https://www.reuters.com/article/nigeria-railway- funding-idUKL5N2OE43A which was initially to receive support from China. Standard Chartered declined to comment on the deal, citing confidentiality agreements.
In Cameroon, the $ 450 million highway linking the capital Yaoundé and the economic hub of Douala, for which funding was obtained from the Chinese bank Exim Bank in 2012, stagnated in 2019, the bank having stopped disbursing funds. ‘other installments of the loan.
Exim Bank did not respond to a request for comment on its loans to Uganda and Cameroon.
MALAYSIA IN BOLIVIA
Zhou Yuyuan, a senior researcher at the Center for West Asian and African Studies at the Shanghai Institutes of International Studies, said the COVID-19 crisis had strained Chinese lending institutions and African finances.
In the future, he added, Beijing will likely encourage more investment from Chinese companies on the mainland, to fulfill the role of state-backed financing. “Once the pandemic is over, the African economy is expected to recover,” he said. “It could stimulate investment by Chinese companies. “
The pandemic has added to the obstacles facing President Xi’s self-proclaimed “project of the century”. After peaking at $ 125.25 billion in 2015, Chinese investment in BIS countries has fallen every year except for 2018, where it edged up 6.7 percent, according to data from the Green BRI.
In 2018, Pakistan https://www.reuters.com/article/us-pakistan-silkroad-railway-insight-idUSKCN1MA028 backed down from the cost and terms of financing the construction of a railroad. The year before, there were signs of growing problems for the BIS, after China’s push into 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 worth of projects in Malaysia had been canceled over 2013-2021, with nearly $ 1.5 billion canceled in Kazakhstan and over $ 1 billion of dollars in Bolivia.
“A growing number of policymakers in low- and middle-income countries are putting large-scale BRI projects on the back burner because of overpricing, corruption and debt sustainability issues,” said Brad Parks, one of the authors of the study.
China’s Foreign Ministry said in response to the AidData report that “not all debt is unsustainable,” adding that since its inception, the BIS has “consistently upheld the principles of shared consultation, shared contributions and shared benefits” .
“THE RESOURCES ARE FINISHED”
A key issue is debt sustainability.
Copper producer Zambia last year became Africa’s first sovereign default in the era of the pandemic after failing to meet payments of more than $ 12 billion in international debt, for example . A recent study suggested that more than half of this burden is on Chinese public and private lenders.
At the end of 2018, Beijing agreed to restructure billions of dollars in debt owed by Ethiopia.
Some African governments are also increasingly reluctant to take out loans backed by commodities such as oil and metals.
“We cannot mortgage our oil,” Ugandan Minister of Works and Transport Katumba Wamala told Reuters, confirming that the country had refused to pledge untapped oil in western fields to secure the rail loan.
The financial crisis means African governments need to make more strategic investment decisions in terms of debt sustainability, said Yvette Babb, Netherlands-based fixed income portfolio manager at William Blair.
“There is no such thing as infinite capital,” she said.
(1 $ = 110,2500 shillings kenyans)
(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)