Crypto News: Next Africa: A debt bind

Welcome to Next Africa, a weekly newsletter on where the continent stands now — and where it's headed.

As the extent of the debt hole in Africa becomes more apparent, the strategies of (and the competition between) the world's two biggest economies toward the continent are becoming clearer.

The US has characterized China as a predatory lender, luring governments on the continent into debt traps that, in some cases, may result in them forfeiting key infrastructure. The reality may be quite different.

US President Joe Biden, center, participates in a group photograph at the US-Africa Summit in Washington on Dec. 15. Photographer: Oliver Contreras/Sipa

A new study found that an initially naïve approach by the Asian giant to lending may mean it will struggle to get back the billions of dollars doled out to some of the world's least credit-worthy nations.

Already two of its biggest African debtors, Zambia and Ghana, have stopped some payments. Together they are in debt to China for more than $15 billion, according to Chatham House researchers. In total, African nations owe China about $84 billion.

"Profligate Chinese lending in its early phases may have created a debt trap for China – deeply entangling it with obdurate and increasingly assertive African partners," they said.

While the US may have a point in that the terms of Chinese loans are often opaque and the country has been reluctant to work with other creditors, its motives for the criticism may be more simple. China funded an infrastructure boom, gaining influence when the US looked on.

Now, Washington is scrambling to regain the initiative: holding a high profile leaders summit this month and promising visits from officials including President Joe Biden.

African leaders will be wary. Diplomacy is always welcome but words and gatherings don't build bridges, roads and ports.

At a time when the US was preoccupied, China was often the only friend Africa had willing to dig into its pockets to fund desperately needed development.

— Antony Sguazzin

Bouncing Back | Cyril Ramaphosa tightened his grip over South Africa's ruling party after comfortably winning another five years as leader and his allies made up the majority of the African National Congress's top decision-making committee. That comes days after quashing a crisis that almost led to a possible impeachment or resignation as the nation's president.

Click here to read about the game-farm theft that threatened Ramaphosa's presidency and here for a guide to the ANC's new leadership.

Ramaphosa after being re-elected ANC president on Dec. 19. Photographer: Leon Sadiki/Bloomberg

Debt Shock | Ghana suspended interest payments on its external debt, catching bondholders by surprise ahead of restructuring talks aimed at unlocking an International Monetary Fund bailout. This week's move was necessary to prevent a further deterioration of its fiscal situation, the finance ministry said. Its credit rating was cut to default by S&P, while Fitch downgraded it to one level above default.

More Loans | Nigeria's government is seeking lawmakers' approval to restructure debt owed to the central bank and also to take on another loan, which would raise the amount owed to $52 billion and place further pressure on public finances. In addition, Nigeria's President Muhammadu Buhari requested a supplementary budget of $1.8 billion for 2022 to address food security, following devastating floods across the country.

Court's OK | The UK government's flagship immigration policy to deport asylum seekers to Rwanda is lawful, London judges ruled this week. The plan, which involves flying people arriving in Britain some 4,000 miles to the African nation to be processed according to Rwandan laws, spurred several legal challenges from rights campaigners. It's consistent with refugee conventions under UK human rights law, the court ruled.

Protesters outside the Royal Courts of Justice in London on Dec. 19. Photographer: Dan Kitwood/Getty Images Europe

Stopped Plot | Gambia foiled an attempt to overthrow President Adama Barrow, arresting four soldiers in connection with the plot, the government said. While the motive is still being investigated, Barrow, who's been president since 2017, has sought to reform the military, leading to several army personnel being dismissed. The tiny nation was ruled for more than two decades by the now-exiled Yahya Jammeh.

Data Watch

Kenya cut its 2022 economic growth forecast for a second time this year, to 5.3%. The IMF sees the nation's inflation rate peaking at around 10% in early 2023.
Botswana's economy grew by 6.3% in the third quarter from a year earlier, while Rwanda's gross domestic product growth accelerated to 10%.
Ghana's economy expanded 2.9% in the third quarter, the slowest pace in two years, dragged down by a contraction in manufacturing. Despite the slowdown and debt woes, the nation's cedi is the world's best performing currency over the past month, strengthening about 50% against the dollar after an earlier plunge.

Ramaphosa faces tough challenges during his second term as South African ruling party leader that will have to be tackled to help keep the ANC in power after elections in 2024. These include a chronic electricity shortage and an increasing dependence on welfare payments amid unemployment of more than 30%.

Coming Up

Dec. 29 Zambia third-quarter GDP data, inflation for December & trade data for November
Dec. 30 South Africa trade, budget & money-supply data for November, Kenya and Uganda inflation for December, Namibia money supply for November

Germany handed over 20 Benin Bronzes to Nigeria more than a century after they were looted by British colonists — a step that may spur other countries to send back artifacts stolen from Africa. Their return opens a new chapter in deeper cooperation with Nigeria, German Foreign Minister Annalena Baerbock said. The Bronzes — taken from the palace of the former Kingdom of Benin after it was attacked by British colonists in 1897 — are a collection of about 3,000 sculptures and other objects. They were shipped to Europe and later sold off in London to recoup the costs of the military invasion. There are about 1,000 pieces in Germany alone. Nigerian Foreign Affairs Minister Geoffrey Onyeama urged other countries including the UK to return artifacts in its possession. The Smithsonian's National Museum of African Art gave back 29 Benin Bronzes to Nigeria in October under the US institution's new ethical returns policy.