African lessons for Eskom: Watch out for spikes in China loans

EDINBURGH — China is aggressively seeking investments and contracts around the world, and perhaps nowhere is this more visible than Africa, where Chinese companies have won contracts to build dams, roads, stadiums, airports and railways, notes The New York Times. It highlights the conditions attached to taking China's generous loans. Understandably, South Africans are concerned that Eskom is heavily indebted to China – and the government is refusing to divulge the exact amount and the terms of repayment. The New York Times provides a taste of how deals between African governments and China work. – Jackie Cameron

By Thulasizwe Sithole

The Trump administration has accused China of engaging in predatory lending aimed at trapping countries in debt, acquiring strategic assets like ports, and spreading corruption and authoritarian values, says The New York Times. In response, the US has announced an effort to help American businesses compete.

The model, it says, is common across Africa, where loans from Chinese state banks have financed a construction boom, largely by Chinese companies and workers. "These loans generally have tougher terms than World Bank aid packages. Though interest rates can be low, recipients must repay the loans much faster, according to AidData, a research centre at William and Mary, a university in Williamsburg, Va."

That has left some nations at high risk of debt distress, analysts are reported as saying. In Kenya, for example, a Chinese bank could take over a port if Nairobi defaults on a $3.2bn loan for a railway project.

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