Monday, October 15, 2018

Who Holds Africa's Debt?

Jubilee Debt Campaign, a UK-based charity focused on the connections between poverty and debt, published in October 2018 a study titled "Africa's Growing Debt Crisis: Who Is the Debt Owed To?"

This is an excellent overview of African debt. It looks at 48 of Africa's 54 countries and includes brief case studies on 16 of them. The Jubilee Debt Campaign concludes that about 20 percent of African government external debt is owned to China and 17 percent of African government external interest payments are made to China. By contrast, 32 percent of African government external debt is owed to private lenders, 10 percent to Paris Club members, and 35 percent to multilateral institutions such as the World Bank, IMF, and African Development Bank.

Is China To Blame for Zambia's Debt?

Aljazeera published on 11 October 2018 an article titled "Is China Really To Blame for Zambia's Debt Problems?" by Vito Laterza and Patience Mususa.

Zambia has a staggering $9.4 billion in external debt. China is estimated to hold between a quarter and a third of this debt, making it a major contributor to the problem. The authors argue, however, that the real story is the IMF and its Western allies are scared of losing their grip on Zambia and other African countries, threatened by the parallel economic system that China has created.

Will New US Agency Match China's Financing in Africa?

The New York Times published on 14 October 2018 an article titled "Trump Embraces Foreign Aid to Counter China's Global Influence" by Glenn Thrush.

This is a good account of the new US International Development Finance Corporation (IDFC) that has the authority to provide up to $60 billion in loans, loan guarantees, and political risk insurance to companies willing to invest in developing countries.

It is important to understand that the funding is NOT limited to Africa and will probably be used more frequently in Asia and Latin America. This bipartisan effort won the support of the Trump administration once it was cast as a way to compete with China. While it is a welcome addition to US tools for competing with China and other investors in the developing world, there should be no illusions about its impact in Africa. The $60 billion is a cap covering an undetermined number of years. It doubles the cap of the Overseas Private Investment Corporation (OPIC), which IDFC has replaced. OPIC's global exposure as of 2017 was $23 billion with about $6 billion of this or 27 percent going to Sub-Saharan Africa. OPIC funding favored safe investments; IDFC can be expected to follow a similar policy. China will likely remain a significantly more important source of lending to Africa even with the creation of the IDFC.

Saturday, October 13, 2018

Human Capital Index and the Horn of Africa

The World Bank recently published its global human capital index, which quantifies the contribution of health and education to the productivity of the next generation of workers. It included Ethiopia, Sudan, and South Sudan but excluded Eritrea, Djibouti, and Somalia due to insufficient data. Ethiopia and Sudan had similar scores; South Sudan was notably lower.

Friday, October 12, 2018

How To Secure Somalia

African Arguments posted on 11 October 2018 a commentary titled "After AMISOM: What Will It Take To Secure Somalia?" by Paul Williams, George Washington University.

The author proposes four general steps for securing the situation in Somalia. Put al-Shabaab on its back foot. Strengthen Somali security forces. Reconfigure AMISOM. Keep Somalia's partners focused and coordinated.

Sierra Leone Cancels Chinese Airport Loan

CNN posted on 11 October 2018 an article titled "Sierra Leone Cancels $300 Million Airport Deal with China" by Jenni Marsh and Ben Westcott.

Sierra Leone canceled plans to build a controversial $318 million airport outside the capital of Freetown with a Chinese company and funded by Chinese loans. The newly elected government said the project, which was approved by the former government, is not economical. The cancellation probably does not portend any problem in Sierra Leone-China relations, although the previous government, which was in power from 2007 until 2018, accumulated $224 million in Chinese debt.

Aid to Africa: China and the US

The Diplomat published on 11 October 2018 a commentary titled "Aiding Africa: If Not China, Then Who?" by Grace Guo, Vienna-based researcher.

The focus of the article is the large amount of concessionary loans that China has provided to Africa in recent years and whether there is any alternative to Chinese financing. It is important to understand that collectively, international financial institutions and Western countries provide far more financing to Africa than does China.

The commentary is misleading on several other points. The title suggests that Chinese loans constitute aid. While China's loans are significant and often fill a financing void not met by other sources, it is usually not aid. Most of the loans must be repaid with interest.

In recent years, US aid to Africa has been averaging about $8 billion annually versus about $2.5 billion in aid annually from China. United States' aid is in the form of grants. While the United States does not provide loans to Africa, there is no reason to be defensive about the amount of aid that it offers. In addition, Chinese loans are usually offered in connection with infrastructure projects that are contractually tied to Chinese companies, thus keeping much of the financing in China.

The commentary implies that a new American institution, the International Development Finance Corporation (IDFC), might be the answer to competing with China's loans to Africa. The IDFC replaces the Overseas Private Investment Corporation (OPIC) and several components of USAID. At $60 billion, the IDFC's maximum contingent liability limit is about double that of the former OPIC. The IDFC is a welcome addition to US financial institutions but when it comes to competing with Chinese loans one must be careful. The $60 billion is a GLOBAL cap; this is not an Africa only program. Conventional wisdom suggests that most of the financial support will go to projects in Asia. The portion that is designated for Africa is likely to be well under the amount of new loan activity offered by China.

The commentary suggests that China's $60 billion financial pledge over three years at the 2018 Forum on China Africa Cooperation (FOCAC) is a "doubling down" of its financial pledge at the 2015 FOCAC. This is misleading. China also pledged $60 billion over three years at FOCAC in 2015. In addition, the financial package for 2018 includes $10 billion whereby China "will encourage" companies to invest in Africa. Chinese companies are routinely investing in Africa, as are American companies. It is difficult to understand why this has been included as part of the new $60 billion package.

Finally, the commentary notes that 70 percent of Kenya's debt is held by China. This repeats a common mistake about Kenyan debt. China does hold 72 percent of Kenya's BILATERAL external debt, but this is only part of Kenya's total external debt. When you include Kenya's debt owed to international financial institutions and commercial banks, China holds only 21 percent of Kenya's external debt.

Wednesday, October 10, 2018

US Diplomatic and Military Operations in Horn of Africa

The Academy of Diplomacy posted on 20 September 2018 a 30-minute podcast titled "Capacity and Capability: US Diplomatic and Military Operations in the Horn of Africa" with former US ambassador to Djibouti, Thomas Kelly, and former commander of Combined Joint Task Force-Horn of Africa, General Kurt Sonntag.

The podcast discusses US policy on key issues in the Horn of Africa and Yemen, US relations with other countries that have military bases in Djibouti, counterterrorism, anti-piracy, refugees, and trade.

China Influences African Media

South Africa's The Globe and Mail published on 9 October 2018 an article titled "China Flexes Its Political Muscles in Africa with Media Censorship, Academic Controls" by Geoffrey York.

The author reported that African governments and businesses, eager for Chinese funds, are increasingly willing to suppress or censor viewpoints that Beijing does not like. Backed by dramatically rising investment and loans, Chinese influence is sharply increasing in African media, academia, politics and diplomacy.

China's Nuclear Diplomacy in North Africa and Middle East

The Diplomat published on 9 October 2018 an analysis titled "China's Nuclear Diplomacy in the Middle East" by Samuel Hickey, Arab Institute for Security Studies in Amman, Jordan.

China Zhongyuan Engineering Corporation is the overseas nuclear project platform of China National Nuclear Corporation and has offices in Egypt and Algeria in North Africa. China's domestic nuclear expansion has stalled since 2016. It must expand to new markets and increase its bureaucratic efficiency to support its massive nuclear industry. China will likely continue to set up nuclear export offices and expand its nuclear presence.

Tuesday, October 9, 2018

Financial Linkages between South Sudanese and Neighboring Countries

The Sentry published in October 2018 an expose titled "'The Profiteers': Documentary Shines New Light on South Sudan's Neighbors' Role in the Conflict."

The report explores the linkages between South Sudan's civil war and the operations of business people, financial institutions, and government and military officials in Kenya, Uganda, and Ethiopia.

Ending Somalia's Current Political Stalemate

The Mogadishu-based Heritage Institute for Policy Studies published in October a policy brief titled "Options To End Somalia's Current Political Stalemate."

The paper identified seven steps that political leaders could take to overcome the current stalemate in Somalia.

Monday, October 8, 2018

Japan Chides China on African Debt

The Nikkei Asian Review published on 7 October 2018 an article titled "Africa Aid Should Factor Debt Sustainability, Japan Says."

As Japan prepares for the 7th Tokyo International Conference on African Development (TICAD) summit in 2019, it is emphasizing that loans to Africa must take into account debt sustainability and suggests China may not have been doing this in recent years.

Friday, October 5, 2018

Micro Study on Power in a South Sudanese Village

The Rift Valley Institute published in 2018 a micro study titled "Wartime Trade and Reshaping of Power in South Sudan: Learning from the Market of Mayen Rual" by Naomi Pendle, London School of Economics, and Chirrilo Madut Anei, South Sudanese researcher.

This study looks at the capture and co-opting of wartime trade in the village of Mayen Rual and the contemporary conflict in the village of Nyinakook in former Warrap state.

South Sudan Delegation Received Poorly in Washington

Foreign Policy posted on 4 October 2018 a report titled "Remember South Sudan? Washington Would Prefer Not To" by Robbie Gramer.

South Sudan is a rare case of the United States midwifing a country into existence, trying to help create a new democracy from scratch. Perhaps nowhere outside South Sudan was there as much optimism about South Sudan's future as in Washington. That optimism crumbled in 2013 following internal political clashes. A recent South Sudan delegation to Washington led by first vice president Taban Deng Gai learned just how much his country has fallen from grace.

Thursday, October 4, 2018

Ethnic Violence in Ethiopia

Ethiopia Insight posted on 4 October 2018 an article titled "Tens of Thousands Flee Benishangul after Oromia Border Dispute Flares" by Ermias Tasfaye, Ethiopia Insight, and Soloman Yimer, freelance journalist.

Benishangul-Gumuz is Ethiopia's latest region to experience ethnic violence as the Gumuz community reportedly attacked Oromo and Amhara residents. Tens of thousands have been displaced.

Preventing and Countering Violent Extremism in East Africa and Somalia

The Institute for Security Studies (ISS) published in September 2018 a study titled "Preventing Extremism in the Horn of Africa: Preliminary Findings from Kenya, Somalia, Tanzania and Uganda" by Denys Reva, Cheryl Frank and Isel van Zyl, all with ISS.

The study constitutes preliminary research on how the ideas behind preventing and countering violent extremism policy are being translated into practical projects and how these projects are being designed. The goal is to better understand the effectiveness of these projects.

Wednesday, October 3, 2018

China's Salami Slicing in Africa

The Institute for Security Studies posted on 3 October 2018 a commentary titled "China's Salami Slicing Takes Root in Africa" by Ronak Gopaldas, director at Signal Risk, a company that specializes in risk management in Africa.

Salami slicing involves the slow accumulation of small changes which add up over time to a substantial change in the strategic picture. This incremental strategy has been employed with considerable success for territorial gains in the South China Sea. It also explains how China has been able to make significant gains in Africa without generating widespread public outrage. A case in point is the construction of a naval base in Djibouti. The author argues that China is using salami slicing to achieve both geo-strategic leverage and economic penetration in Africa.

World Bank Reaches Out to Somalia

The World Bank issued a press release dated 25 September 2018 titled "World Bank Group's First Strategy for Somalia to Support Inclusive Growth and Resilience."

In an important change of policy, the World Bank endorsed the first four-year Country Partnership Framework (CPF) for Somalia and approved two investment programs worth $80 million. As the country's first development strategy since the early 1990s, the CPF reflects the progress of economic reform and institution building since 2013 when the Bank reengaged with Somalia.

Can Ethiopia's EPRDF Be Saved?

Ethiopia Insight published on 3 October 2018 a commentary titled "The Old EPRDF Is Dead, Can Its System Be Saved? Five Steps To Save the Federation" by Mehari Taddele Maru, consultant to IGAD, AU and UN.

The author explains why the EPRDF federal system is in danger and suggests a way to avoid a drift towards majoritarian rule and worsening instability.

African Students Forsake US for China

Foreign Policy posted on 2 October 2018 an article titled "Forget Stanford, Tsinghua Beckons: America Is Losing African and Asian Students to China" by Cheng Li and Charlotte Yang, MA candidate at the Harvard Kennedy School.

Since 2014, the total enrollment of African students in China has surpassed that of the United States. The Fulbright Program, a hallmark of U.S. cultural diplomacy since 1946 has faced calls for funding cuts since the Obama administration. In the meantime, China has employed a number of policy tools to promote higher education, with a special focus on attracting students from Africa and Asia.

Tuesday, October 2, 2018

Ethnic Violence Challenges Ethiopia

The Conversation posted on 1 October 2018 a commentary titled "How Ethnic Violence Is Destabilizing Ethiopia's Reform Gains" by Yohannes Gedamu, George Gwinnett College.

Ethnic conflict is breaking out in a number of Ethiopian regions. The author argues that as long as the Abiy Ahmed government remains fixated on a group rights agenda these problems will continue. This approach privileges division over national unity.

Monday, October 1, 2018

China and African Agency

The South African Institute of International Affairs (SAIIA) published in September 2018 a paper titled "In the Driver's Seat? African Agency and Chinese Power at FOCAC, the AU and the BRI" by Cobus van Staden, SAIIA, Chris Alden, London School of Economics and Political Science, and Yu-Shan Wu, PhD candidate at the University of Pretoria.

This paper argues that for Africa to increase its agency--that is, its ability to make independent decisions and strengthen its bargaining power--the continent first needs to unpack the nature of African decision-making in the China-Africa relationship. It then explores how African agency has been conceptualized in the past by comparing those ideas of agency with China's relationship with the African Union, and Africa's relationship with China's Belt and Road Initiative.

African Debt, Agency, and Chinese Loans

The South African Institute of International Affairs published in August 2018 a paper titled "Debt Trap? Chinese Loans and Africa's Development Options" by Anzetse Were, weekly columnist for Business Daily Africa.

The paper explains why African debt is rising and why Chinese loans are particularly attractive from the viewpoint of African governments. It concludes that the debt trap narrative underestimates the decision-making power of African governments. However, there are important caveats for African governments. These include the impact of China's Belt and Road Initiative on African development agendas, the possible impact of spiralling debt on African sovereignty, and the complex impact of corruption.

China, Africa and Debt

South Africa's Sunday Times published on 23 September 2018 an article titled "'Say No To China': Anger Mounts in Zambia over Beijing's Presence." Zambia's main opposition political party has put the country's debt to China at the forefront of its campaign to unseat the current government.

Kenya's Daily Nation published on 23 September 2018 an article titled "Are China's Financial Dealings in Africa a Debt Trap or Bailout?" by Aggrey Mutambo. The article looks at the positive and negative side of China's loans to Africa without reaching a conclusion.