Zambia risks losing sovereignty to Chinese chequebook diplomacy

Zambia has asked its external creditors for debt-service suspension as the southern African nation edges to default highlighting the limitations of China’s debt diplomacy. Zambia has said it will resist Chinese creditors to make paying arrears, a condition of pursuing debt-relief talks as it battles to restructure $11 billion of external debt. Africa’s second largest copper producer is struggling to balance its payments amid dwindling copper revenues that provide 70 per cent of its export earnings.

If it cannot come to an agreement with the bondholders soon, it is likely to become the first African country to default on its debts as a result of the coronavirus pandemic.

The current debt crisis unfolding in the region poses a number of challenges for dominant lender China, as African governments struggle to finance debt repayments to Beijing. Lusaka is struggling to strike a deal with Chinese creditors that together own more than a third of its debt.

Chinese lenders have put a condition that they will agree to participate in debt-relief negotiations if their share of some $200 million of arrears has been cleared first, disclosed by Zambia’s Finance Ministry.

Zambia borrowed heavily from China over the past decade to fund an infrastructure boom but was struggling even before the coronavirus pandemic hit as copper prices and the economy doomed. Zambia’s government debt stood at $11.1 billion, 88 per cent of GDP in 2019, according to Fitch Ratings. Of this 44 per cent is estimated to be owed to China, according to the China Africa Research Initiative (CARI) at Johns Hopkins University, with the rest owed to multilateral or commercial creditors, or lenders on the international bond markets.

In addition to seeking deals to defer payments of arrears, Zambia wants Chinese lenders to suspend or reschedule another $225 million in payments, out of a total of $426 million due this year, according to the government disclosure. Zambia is vulnerable to defaulting China Export-Import Exim Bank, one of Zambia’s biggest lenders, which is funding the expansion of the Kenneth Kaunda International Airport in the capital Lusaka.

Political class and people at large in Zambia are getting suspicious about the economic coercion tactics being used by China, which may lead to the African country becoming the first Chinese colony. The fear of Chinese taking over Zambia’s airport, national broadcasting network and major road and power projects owing to failure to repay loans. The risk is not limited to economic factors. Beijing has allegedly obtained unrestrained control over the resources, and allegedly carried out rampant infiltration of Chinese nationals in Zambia and tried to recruit citizens in the security forces of Zambia.

The opposition alleges no country in today’s modern world has made such a subversive attempt to encroach upon the sovereignty of other nation. China’s debt-trap diplomacy in Zambia is taking full control of information and broadcasting in order to drive its propaganda. Under the pretext to digitise the broadcast infrastructure, a joint venture was created in 2017, named TopStar Communications Limited, in which Chinese firm Start Times owns a majority 60 per cent while the ZNBC, a Zambian state broadcaster, owns just 40 per cent.

Power utility Zambia Electricity Supply Corporation (ZESCO) is set to fall into the hands of the Chinese thanks to Zambia’s default on the loan repayment. African Confidential, a London based political newsletter has revealed that the ZNBC was already being run by the Chinese and disclosed that ZESCO was also almost taken over by a Chinese company. “The long-term outcome could be effective Chinese ownership of the commanding heights of the economy and potentially the biggest loss of national sovereignty since independence,” reads an excerpt from the African Confidential article.

The International Monetary Fund (IMF) had already warned that Chinese aid could lead to a problematic increase in debt, potentially limiting other spending as the debt service rises. The Brookings Institution has estimated that loans from China accounted for 65.8 percent of Zambia’s external debt. It has raised concerns about national sovereignty and Chinese ownership of key components of Zambia’s infrastructure. There have been concrete reports about China planning to take over the Kenneth Kaunda International Airport should the Zambia Government fail to pay back its debt in time.

African media reported, the economic aid by Beijing led to an increase in the number of Chinese businessmen and workers immigrating to Zambia in the past few years. The frequent instances of exploitation and discrimination against Zambians by Chinese personnel have led to a countrywide uproar.

The interference of the Chinese in the internal security matters of Zambia has scared people. Two years ago, eight Chinese nationals were sworn in as police officials, who shockingly arrested Zambians in Zambia. Also, Zambian security agencies found Chinese secretly giving military training to some Zambians using weapons that were imported from China. All this is giving the impression that Zambia is becoming the property of China..