US warns African nations that Chinese loans could threaten sovereignty

US warns African nations that Chinese loans could threaten sovereignty

By Luke Vargas   
Published
U.S. Secretary of State Rex Tillerson participates in a joint press availability with Ethiopian Foreign Minister Workneh Gebeyehu in Addis Ababa, Ethiopia on March 8, 2018.
U.S. Secretary of State Rex Tillerson participates in a joint press availability with Ethiopian Foreign Minister Workneh Gebeyehu in Addis Ababa, Ethiopia on March 8, 2018.

Secretary of State Rex Tillerson is in Africa this week, and he’s sounding the alarm about the increasingly apparent risks caused by Chinese investment on the continent:

“We are not in any way attempting to keep Chinese investment dollars out of Africa; they are badly needed. However, we think it’s important than African countries carefully consider the terms of those investments.”

Tillerson said China rarely hires local workers for infrastructure projects, offers few job training programs for locals, and he warned that the terms of Chinese loans are often so bad that the sovereignty of African countries can come under threat in the event of default.

Joshua Meservey is a senior policy analyst for Africa at the Heritage Foundation:

“About a third of these debts or loans are collateralized with natural resources. So that means either that they have to pay back in natural resources or, in the event of a default, they might have to surrender control of a strategic asset.”

Making matters worse, Meservey said there’s increasing evidence China may be targeting financially-unsteady African countries in a cynical play to attain strategic assets through defaults.

Given the economically dubious nature of many Chinese infrastructure projects, Meservey said it’s unlikely the U.S. or many global banks will offer better loan terms to Africa, but he applauded Tillerson for sounding the debt alarm nonetheless:

“I think Tillerson is doing pretty much all the U.S. can do at this point, which is to speak as a friend to these African countries and say, ‘hey, China is offering you all this easy money and these loans, and that’s appealing in the short term, but you have to look 10, 15, 20 years down the road and think about what this means for your sovereignty, think about, can you actually repay these loans? And if you can’t, the Chinese have you over a barrel.’”

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