WEBVTT - Why Africa Borrowed Billions of Dollars From China 0:00:10.600 --> 0:00:14.160 Hello, and welcome to another episode of the Odd Thoughts Podcast. 0:00:14.320 --> 0:00:19.000 I'm Tracy Allaway and I'm Joe Wisenthal. Joe, I feel 0:00:19.040 --> 0:00:24.280 like has been such an unusual and crazy year with 0:00:24.320 --> 0:00:26.920 a lot of things going on, that there's actually some 0:00:27.000 --> 0:00:32.120 pretty important news that hasn't gotten as much attention as 0:00:32.159 --> 0:00:35.720 it would normally. If it was any other year, I 0:00:35.760 --> 0:00:37.640 think a lot of people would be reading about this 0:00:37.720 --> 0:00:40.720 and talking about this, at least in this sort of 0:00:40.800 --> 0:00:45.680 investment industry. Yeah, it's kind of like how, uh, you know, 0:00:45.800 --> 0:00:48.600 news you might like put out on a Friday and 0:00:48.640 --> 0:00:51.960 no one really notices it. It's like all of is 0:00:51.960 --> 0:00:54.400 like the Friday news dump because you could put there's 0:00:54.440 --> 0:00:57.640 so much all their stuff to pay attention to, the 0:00:57.760 --> 0:01:01.960 virus obviously, the econ aomic shock on the election, that 0:01:02.160 --> 0:01:05.920 no one really has had the bandwidth for anything else. Yeah, 0:01:06.040 --> 0:01:08.319 that's a really good way of putting it. So the 0:01:08.400 --> 0:01:11.360 event that I'm talking about that I don't think has 0:01:11.400 --> 0:01:14.480 gotten as much attention as it normally would is basically 0:01:14.520 --> 0:01:19.600 a debt crisis in Africa. And this month, let's see, 0:01:19.600 --> 0:01:24.360 we're recording in November, so this month Zambia actually defaulted 0:01:24.600 --> 0:01:27.800 on some bonds and it's the first sort of COVID 0:01:28.000 --> 0:01:32.480 related default by an African nation, and a lot of 0:01:32.480 --> 0:01:35.759 people expect there will be more. Even though we've seen 0:01:36.560 --> 0:01:41.119 some countries, some creditors, the G twenty agree a few 0:01:41.120 --> 0:01:46.040 efforts to try to help indebted countries in Africa. There's 0:01:46.040 --> 0:01:51.000 a G twenty debt service suspension initiative. But even with 0:01:51.280 --> 0:01:56.000 that aid, people are expecting distress in Africa's debt market 0:01:56.080 --> 0:02:00.480 to get probably worse before it gets better. I I 0:02:00.680 --> 0:02:05.680 think you're right, like if a zombiean debt default would 0:02:05.680 --> 0:02:07.280 have been the kind of thing they're like, oh, let's 0:02:07.280 --> 0:02:12.119 do an episode on that much earlier. But in a yes, 0:02:12.560 --> 0:02:15.880 it's certainly gotten less attention than I think it's lost. 0:02:16.520 --> 0:02:17.800 You know, it's one of those things where I'm sure 0:02:17.880 --> 0:02:19.760 even saw the headlines on it, and I meant to 0:02:19.760 --> 0:02:22.000 ask more questions in a meeting one day, and I 0:02:22.080 --> 0:02:24.040 meant to click on it and learn more, and I 0:02:24.120 --> 0:02:27.160 didn't because again I probably had, like, you know, some 0:02:27.280 --> 0:02:29.880 question about what's going on with the presidential transition or 0:02:29.919 --> 0:02:34.160 something that took over my mind for the day. You 0:02:34.200 --> 0:02:37.320 mean you weren't thinking purely of Zambia. Believe it or 0:02:37.360 --> 0:02:40.280 not in a meeting in New York. So in the 0:02:40.320 --> 0:02:44.040 midst of all this debt distress in Africa, there's also 0:02:44.040 --> 0:02:47.680 a lot of attention being paid to China and its 0:02:47.840 --> 0:02:51.480 role in building up that excess debt. But also what 0:02:51.639 --> 0:02:55.480 China is going to do now that Africa is, you know, 0:02:55.560 --> 0:02:59.280 economically stressed. Is China going to let up on some 0:02:59.320 --> 0:03:01.600 of those debt pay amens in the same way that 0:03:01.680 --> 0:03:07.160 maybe multilateral organizations or other creditors are thinking about doing. 0:03:07.280 --> 0:03:10.960 So we're going to get into that side of the 0:03:11.000 --> 0:03:14.560 African debt crisis quite a bit as well. But more 0:03:14.639 --> 0:03:17.040 than that, we're going to talk about how that debt 0:03:17.080 --> 0:03:20.040 build up actually happened, and we're going to do it 0:03:20.360 --> 0:03:24.720 in a slightly different way. We have someone um who 0:03:24.960 --> 0:03:28.679 obviously comes from Africa, from Liberia, and who had an 0:03:28.680 --> 0:03:33.160 official role in the Librarian government and a lot of 0:03:33.160 --> 0:03:36.800 that role involved, you know, being involved in infrastructure projects 0:03:36.840 --> 0:03:39.360 for which you would incur debt you take out a 0:03:39.400 --> 0:03:41.640 loan so you could build a bridge or a road 0:03:41.800 --> 0:03:44.360 or a railway or something like that. And so we're 0:03:44.360 --> 0:03:50.560 going to get a different perspective on Africa's debt problem. Excellent, 0:03:50.640 --> 0:03:55.560 really looking forward to this. Okay, great, so uh without 0:03:55.560 --> 0:03:57.880 further ado, then I want to bring in our guest, 0:03:58.240 --> 0:04:01.400 JUDEA More. He's a scene your policy fellow at the 0:04:01.480 --> 0:04:06.240 Center for Global Development. He previously served as Liberia's Minister 0:04:06.520 --> 0:04:10.440 for Public Works and was also Deputy chief of Staff 0:04:10.480 --> 0:04:13.040 to the President. So, like I said, a lot of 0:04:13.080 --> 0:04:16.600 experience in a government position within Africa, and it's going 0:04:16.640 --> 0:04:19.880 to be fascinating to hear his perspective. Judy, thanks so 0:04:19.960 --> 0:04:24.000 much for coming on h morning, guys, and thanks for 0:04:24.080 --> 0:04:27.159 having me. It's a pleasure to be here. So I 0:04:27.240 --> 0:04:30.480 remember the first time I ever went to Africa. I 0:04:30.800 --> 0:04:33.880 went to Mozambique back in two thousand and ten, and 0:04:33.960 --> 0:04:36.400 one of the things that really struck me, and that 0:04:36.520 --> 0:04:39.960 I found quite weird at the time was if you 0:04:40.000 --> 0:04:46.240 were in Maputo, the capital, everything was Chinese. The cars 0:04:46.240 --> 0:04:49.520 were Chinese, the trucks were Chinese, the stadium was built 0:04:49.680 --> 0:04:53.599 by the Chinese. There were Chinese characters all over the place. 0:04:54.320 --> 0:04:58.159 It's really really striking the extent to which China has 0:04:58.279 --> 0:05:05.440 become involved in the Africa market. Why has that happened? Yeah, yeah, 0:05:05.920 --> 0:05:08.920 And if you had gone to say Ethiopia, you're going 0:05:09.000 --> 0:05:10.880 to add is you would have saying the same thing, 0:05:11.080 --> 0:05:14.080 and across the continent and to a large extent, especially 0:05:14.480 --> 0:05:17.400 even in Zambia that you spoke about, you just saying 0:05:17.400 --> 0:05:20.440 the same thing. There's been an extensive growth in terms 0:05:20.440 --> 0:05:23.960 of Chinese presence and the deepening of Chinese relationship with 0:05:24.000 --> 0:05:27.120 African countries. A part of that, I guess it's historical. 0:05:27.839 --> 0:05:30.800 One is that, um, you know, at the turn of 0:05:30.839 --> 0:05:34.600 the century, when you know, would worried about why two 0:05:34.680 --> 0:05:40.680 K China is entering the w t O. But and 0:05:41.040 --> 0:05:45.719 China also on veils is first going out strategy and 0:05:46.279 --> 0:05:49.720 the only uncontested region in the world in which Chinese, 0:05:49.800 --> 0:05:52.240 because they weren't as powerful as they are now, could go, 0:05:52.800 --> 0:05:54.560 was the region of the world in which, you know, 0:05:54.680 --> 0:05:58.240 most Western policy toward Africa at the time was filtered 0:05:58.680 --> 0:06:02.760 through the lenses of humanitarian assistance and development. Africa wasn't 0:06:02.800 --> 0:06:05.120 seen as a place to go and do business, and 0:06:05.200 --> 0:06:10.640 for China it worked out perfectly because there wasn't a 0:06:10.680 --> 0:06:14.320 peer competitor there. I mean, there were some European engagement, 0:06:14.400 --> 0:06:17.080 but it wasn't to the extent that the Chinese would do. 0:06:17.520 --> 0:06:19.640 The second thing was just the need that was on 0:06:19.720 --> 0:06:23.279 the continent and what China could provide um so, even 0:06:23.360 --> 0:06:26.680 up to today, Africa still lags every other region of 0:06:26.720 --> 0:06:29.960 the world in terms of the provision of infrastructure, mainly 0:06:30.040 --> 0:06:33.240 paved roads and power. More than six hundred million people 0:06:33.240 --> 0:06:36.800 in the continent still lack access to electricity, and so 0:06:37.000 --> 0:06:41.680 China had this excess capacity in providing infrastructure and and 0:06:41.800 --> 0:06:47.640 normally provide infrastructure at costs. Right. So, before the arrival 0:06:47.640 --> 0:06:50.400 of the Chinese, the infrastructure space in Africa had been 0:06:50.440 --> 0:06:55.000 dominated by European firms. We're talking about your your breed, 0:06:55.400 --> 0:07:01.400 your if I've the large Vincy, the larger French, spanishi 0:07:01.440 --> 0:07:07.039 and and to certain extents extent Italian firms. But the 0:07:07.279 --> 0:07:10.440 cost of of infrastructure from those firms tended to be high. 0:07:10.520 --> 0:07:13.560 And the Chinese came and were able to First, Chinese 0:07:13.560 --> 0:07:17.320 firms where state sponsored um and so the state owned 0:07:17.640 --> 0:07:21.200 firms and could therefore they had access to capital that 0:07:21.320 --> 0:07:24.960 was much cheaper and could provide infrastructure um so at 0:07:25.560 --> 0:07:28.040 cost that they were competitive in terms of costs. The 0:07:28.080 --> 0:07:31.720 second reason was simply because they brought money with them. 0:07:31.920 --> 0:07:34.080 In a lot of instances, there were African countries who 0:07:34.080 --> 0:07:37.240 couldn't afford um to pay for this upfront, and the 0:07:37.320 --> 0:07:41.120 Chinese were willing to extend loans to them. Uh and 0:07:41.200 --> 0:07:44.280 so for for a lot of African countries which at 0:07:44.280 --> 0:07:46.880 the time didn't have access to international financial markets to 0:07:46.960 --> 0:07:51.160 issue sovereign bonds and stuff for home development, financing from 0:07:51.200 --> 0:07:56.440 the model lateral institutions was just not enough, especially concessional financing, 0:07:56.920 --> 0:07:59.480 and and so with nowhere else to go, they were 0:07:59.520 --> 0:08:02.680 happy for a partner who seemed not to worry too 0:08:02.760 --> 0:08:06.760 much about public financial management, who seemed not to care 0:08:07.320 --> 0:08:10.840 about the quality of governance in terms of corruption, and 0:08:10.960 --> 0:08:14.160 who said those things were internal and they had nothing 0:08:14.160 --> 0:08:17.680 to do with that. And so there was this a 0:08:17.720 --> 0:08:20.400 confluence of interest between what China wanted to do at 0:08:20.400 --> 0:08:22.640 the time and what Africas did were and so because 0:08:22.720 --> 0:08:26.119 of that we saw a huge ramp up in terms 0:08:26.120 --> 0:08:28.840 of African debt. The final thing I would say to 0:08:28.880 --> 0:08:32.280 that also was that it coincided with this huge build 0:08:32.320 --> 0:08:35.680 up in terms of a boom for commodity exports, and 0:08:35.800 --> 0:08:42.120 most African economies were growing at you know, seven two, two, 0:08:42.800 --> 0:08:46.800 nine percent and and and China seemed to have an 0:08:46.840 --> 0:08:50.200 insatiable appetite for for African commodities, and so it's like 0:08:50.400 --> 0:08:53.560 everybody was invited to the party, and the party went 0:08:53.760 --> 0:08:57.240 really well for a while, So lots of things came 0:08:57.280 --> 0:09:00.960 together in sort of an ideal manner for both parties 0:09:01.080 --> 0:09:04.800 or for multiple parties. What years, just to help us 0:09:04.840 --> 0:09:07.120 frame the conversation, we talked about this boom, and we 0:09:07.200 --> 0:09:10.080 talked about this build up, this eventual debt build up. 0:09:10.520 --> 0:09:13.920 What years are we talking about in terms of when 0:09:14.000 --> 0:09:16.080 this really got going and when the sort of really 0:09:16.160 --> 0:09:20.439 hit it hit it transactional pig Yeah, So I would 0:09:20.480 --> 0:09:23.800 say it started in two thousand at the first FORKAK. 0:09:24.280 --> 0:09:27.319 So the FORECACH is the Forum of China Africa Cooperation. 0:09:27.880 --> 0:09:31.560 Is this UM is held every three years when and 0:09:31.640 --> 0:09:34.120 the first one, I think forty three African has a 0:09:34.200 --> 0:09:37.000 state in governments arrived in China and it's been held 0:09:37.080 --> 0:09:39.520 every three years, and this is when China says, over 0:09:39.559 --> 0:09:42.000 the next three years we're going to invest you know, 0:09:42.679 --> 0:09:46.680 UM five billion, twenty billion. It went up at the 0:09:46.760 --> 0:09:52.319 last two forecascas China pless to spend up to sixty 0:09:52.400 --> 0:09:55.760 billion dollars in Africa. So the ramp up starts maybe 0:09:55.840 --> 0:09:58.880 around two thousand and six. In terms of the numbers 0:09:58.920 --> 0:10:02.040 begin to increase around and then, but the Chinese arrival 0:10:02.240 --> 0:10:06.559 in this form that we're seeing begins around two thousand 0:10:07.000 --> 0:10:11.640 and then the financial crisis of two thousand and AID 0:10:11.800 --> 0:10:16.120 basically left China unchallenged. Uh. I mean, I think a 0:10:16.160 --> 0:10:19.240 lot of the global recovery was driven by the Chinese 0:10:19.400 --> 0:10:23.439 uh spending on capital projects and and at the end 0:10:23.480 --> 0:10:26.719 of that, China was left with this exx capacity that 0:10:26.880 --> 0:10:29.120 had to go somewhere, and I think a lot of 0:10:29.120 --> 0:10:31.800 that is what drove even the Belt and Road initiative. 0:10:31.920 --> 0:10:35.480 But with that excess capacity, we saw an even significant 0:10:35.559 --> 0:10:38.160 ramp up of Chinese spending. So you go back and 0:10:38.160 --> 0:10:41.400 look at Zambia as a debt profile in terms of 0:10:41.440 --> 0:10:44.600 the accumulation of death in a place like Zambia, well, 0:10:44.760 --> 0:10:49.000 most African countries were beneficiaries first of the debt debt 0:10:49.040 --> 0:10:53.959 waivers on the hippoc right and did jubilie the activity 0:10:53.960 --> 0:10:59.760 around waiving debt and so come around, a lot of 0:11:00.000 --> 0:11:03.080 the countries suddenly have significant space to borrow a gain. 0:11:03.440 --> 0:11:08.760 And so with China left with this excess capacity, we 0:11:08.880 --> 0:11:13.520 see this significant ramp up of Chinese lending for infrastructure 0:11:13.600 --> 0:11:33.880 on the company. So this is one thing I always wondered, 0:11:33.960 --> 0:11:36.600 But well, actually, okay, I have two questions. So first 0:11:36.640 --> 0:11:38.920 of all, could you maybe describe a little bit more 0:11:39.800 --> 0:11:44.040 what uh what these Chinese infrastructure deals actually look like 0:11:44.160 --> 0:11:47.240 and how they work. So you had things operating under 0:11:47.760 --> 0:11:52.280 official state sanctioned banners like the Belt and Road Initiative, 0:11:52.640 --> 0:11:56.240 but you also had private Chinese companies who would come 0:11:56.240 --> 0:12:01.079 in and tender offers alongside European and American companies or 0:12:01.160 --> 0:12:04.640 companies from anywhere in the world. How did those actually work? 0:12:04.679 --> 0:12:09.040 And then secondly, if China was financing a lot of 0:12:09.040 --> 0:12:15.320 this infrastructure build, Africa is still enormously behind on infrastructure obviously, 0:12:15.360 --> 0:12:19.560 Like why didn't it make more of a difference. Why 0:12:19.640 --> 0:12:24.720 aren't there you know, bridges and railway railways and airports 0:12:24.720 --> 0:12:29.920 and things like that all over everywhere. I think, first 0:12:30.320 --> 0:12:32.319 I have to really good question. I think first, it's 0:12:32.400 --> 0:12:36.640 just the baseline I mean we're coming from. You have 0:12:36.760 --> 0:12:43.200 to remember towards end between and say the year two thousand, 0:12:43.760 --> 0:12:46.600 that the country, the continent is ravaged about a number 0:12:46.640 --> 0:12:49.319 of crises. Right first, there are a significant amount of 0:12:49.360 --> 0:12:52.839 civil wars, the Liberian Civil War, the Syrian Union Civil War, 0:12:53.440 --> 0:12:58.400 UM the rewinding general side mulga tissue, even Mozambique. We 0:12:58.440 --> 0:13:01.200 talked about this significant amount of wars and a lot 0:13:01.240 --> 0:13:05.400 of infrastructure is either not built or destroyed during these 0:13:05.400 --> 0:13:09.840 wars right and then, and because of those those wars, 0:13:09.880 --> 0:13:14.080 we saw a lot of humanitarian crisis right and and 0:13:14.160 --> 0:13:17.840 but at the same time, we had an AIDS pandemic 0:13:18.080 --> 0:13:21.640 that was wiping out a significant number of the population 0:13:21.720 --> 0:13:24.920 across Center and Southern Africa, and so a significant amount 0:13:24.960 --> 0:13:27.960 of money that was available went towards the health crisis, 0:13:28.360 --> 0:13:31.880 went towards just basically beating needs, and not a lot 0:13:32.040 --> 0:13:35.000 was done in terms of infrastructure. And so the baseline 0:13:35.040 --> 0:13:37.440 from which we come means that in spite of all 0:13:37.480 --> 0:13:40.880 the ramp up we did, we only just scratch the surface. 0:13:40.920 --> 0:13:45.040 The African development back now puts the gap in terms 0:13:45.040 --> 0:13:48.000 of infrastructure finance into around up to a hundred and 0:13:48.040 --> 0:13:50.840 three billion dollars a year. So so you can imagine 0:13:50.840 --> 0:13:52.960 how how deep the whole was in terms of what 0:13:53.120 --> 0:13:56.000 was available and the way it worked. You're right, there 0:13:56.000 --> 0:14:00.760 were like three UM nodes of Chinese engagement where your 0:14:01.080 --> 0:14:04.040 large state owned companies UM that were owned by the 0:14:04.080 --> 0:14:07.439 central government UM and then there were your provincial companies, 0:14:07.960 --> 0:14:10.520 and then finally you had these like quais that profit 0:14:10.840 --> 0:14:16.120 private companies. Each of them came with the promise of 0:14:16.320 --> 0:14:18.800 the back end of Chinese policy banks. So they were 0:14:18.800 --> 0:14:21.840 always promised that they could get you access to financing 0:14:22.200 --> 0:14:24.920 once the government. I mean, what the required was a 0:14:25.000 --> 0:14:29.480 sovereign guarantee. They needed the government to back that loan 0:14:29.520 --> 0:14:31.960 and if the government did. And because you have so 0:14:32.000 --> 0:14:35.040 many actors, it would seem to me, you know, I 0:14:35.480 --> 0:14:38.280 don't know that as much about how the Chinese system 0:14:38.320 --> 0:14:41.320 works on their side. But for example, if I went 0:14:41.360 --> 0:14:43.840 to the World Bank, UH said the Ministry of Public 0:14:43.840 --> 0:14:46.440 Works engaged the Work Bank. Most of that engagement would 0:14:46.480 --> 0:14:48.920 happen through the Ministry of Finance the Work Bank. We 0:14:49.040 --> 0:14:51.320 didn't look at like the areas that portfolio and be 0:14:51.400 --> 0:14:54.920 able to say you can't afford this. Right on the 0:14:55.040 --> 0:14:58.120 Chinese side, it just seemed not to work like that. 0:14:58.400 --> 0:15:01.680 So you had multiple Chinese pinis that are competing. So 0:15:01.840 --> 0:15:07.920 there's a provincial company, construction company that is access in finance. Somehow, 0:15:08.120 --> 0:15:10.120 it has a line of credit that it can extend. 0:15:10.720 --> 0:15:13.600 UH it's working through the local the provincial branch of 0:15:13.640 --> 0:15:15.720 the X and bank, and then you have the large 0:15:15.720 --> 0:15:18.560 Stadia company, and it seemed as if there were in 0:15:18.640 --> 0:15:22.960 some sort of a central node that process all of 0:15:23.000 --> 0:15:24.680 it to be able to say no, it looks like 0:15:24.800 --> 0:15:26.640 Zambia has taken a lot more debt than the ZIM 0:15:26.720 --> 0:15:28.640 that can afford you see what I mean? Like that 0:15:28.640 --> 0:15:30.600 that didn't seem to be if they're were, it was 0:15:30.680 --> 0:15:34.960 almost maybe it was ignored or it just didn't exist. Whatever, 0:15:34.960 --> 0:15:38.520 the reason was a lot of countries, as a few countries, 0:15:38.600 --> 0:15:40.800 not a lot of them, like Ya, Zambia as your 0:15:41.440 --> 0:15:45.720 UH South today and and and and Angola were allowed 0:15:45.760 --> 0:15:49.440 to ramp up significant amount of debt UH that was 0:15:49.520 --> 0:15:53.160 tight and to be honest to UH, commodity exports that 0:15:53.200 --> 0:15:55.320 seemed to be going up and up and up. And 0:15:55.360 --> 0:15:59.320 so I would like to add though that beyond the 0:15:59.520 --> 0:16:04.440 just huge infrastructure deficits, there was another thing driving Africa's 0:16:04.480 --> 0:16:08.320 need to borrow from China to finance this. Everywhere else 0:16:08.400 --> 0:16:12.080 in the world, as a population has either stabilized or 0:16:12.440 --> 0:16:17.080 its declining, right except in Africa, where the population continues 0:16:17.120 --> 0:16:20.160 to grow, where more than fifty percent of the population 0:16:20.200 --> 0:16:23.920 I think is on the nineteen and because this of 0:16:24.040 --> 0:16:27.600 this huge increase in the population, governments are under significant 0:16:27.600 --> 0:16:31.200 pressure to provide both you know, hard physical infrastructure and 0:16:31.240 --> 0:16:34.640 social infrastructure for for these and so they are all 0:16:34.680 --> 0:16:37.720 of these. And then Africa's exports tend to be largely 0:16:38.120 --> 0:16:42.880 on processed natural resource UH products and because of that, 0:16:42.920 --> 0:16:47.240 there's were so low down the value chain that what 0:16:47.400 --> 0:16:50.400 accrues to us as value from our exports it's just 0:16:50.480 --> 0:16:53.800 not enough to be able to finance our infrastructure. And 0:16:53.840 --> 0:16:57.280 so because of that, like all of these pressures on 0:16:57.480 --> 0:16:59.520 governments and the faint I thing I would say to 0:16:59.560 --> 0:17:02.280 that is all. So it seems kunto intuitive, but it 0:17:02.360 --> 0:17:05.639 was like the more the more democratic a country became, 0:17:05.960 --> 0:17:08.840 the closer it came to China. Why because when we 0:17:08.920 --> 0:17:12.240 ran our elections, we you know, promised people that we 0:17:12.280 --> 0:17:15.480 would build infrastructure because that was the largest need. And 0:17:15.520 --> 0:17:18.159 so when the election has ended and we needed to 0:17:18.200 --> 0:17:20.560 deliver on the promises we made, China was one of 0:17:20.600 --> 0:17:23.800 the few who had both the appetite for our risk 0:17:23.960 --> 0:17:26.720 and the resources to be able to lend us money 0:17:26.760 --> 0:17:29.640 to build the infrastructure we needed. And so all of 0:17:29.680 --> 0:17:34.119 these I guess all of these forces and and factors 0:17:34.600 --> 0:17:38.600 sort of just created this perfect I don't want to 0:17:38.600 --> 0:17:41.760 call it a store. We just created a perfect circumstances 0:17:42.400 --> 0:17:46.480 m for for for this Chinese lending to to Africa 0:17:46.760 --> 0:17:50.639 and UH and in Africa borrowing from from China. So 0:17:50.720 --> 0:17:55.040 there was no entity, whether it's on the provincial or 0:17:55.160 --> 0:18:00.639 policy bank side in China or the government of the 0:18:00.720 --> 0:18:04.400 various African countries that were the recipients of this UH 0:18:04.720 --> 0:18:08.560 loan money and infrastructure capacity, no one had an incentive 0:18:08.840 --> 0:18:12.480 to do any sort of meaningful UH debt sustainability. And 0:18:12.560 --> 0:18:15.639 now it sounds like that, doesn't it. It just seems 0:18:15.680 --> 0:18:18.159 it seems that well, on our side in Liberia, we 0:18:18.240 --> 0:18:21.879 really didn't have We didn't really have the option to 0:18:22.000 --> 0:18:24.600 do that because you see, we we just come out 0:18:24.640 --> 0:18:27.240 of war and almost five billion dollars of our debt 0:18:27.440 --> 0:18:30.240 had been waived. But that meant we had to enter 0:18:30.240 --> 0:18:33.440 an IMF program, which meant at the Ministry of Finance 0:18:33.480 --> 0:18:35.600 in Liberia there was a person there from the i 0:18:35.760 --> 0:18:39.159 m F who reviewed our debt profile and UH and 0:18:39.240 --> 0:18:42.200 in Liberia we have something called the Debt Management Committee 0:18:42.520 --> 0:18:47.520 that reviewed every application for for debt from say an 0:18:47.600 --> 0:18:52.040 agency of government ministry and measured that against our death 0:18:52.080 --> 0:18:54.600 stock and and this death servicing, and we just come 0:18:54.640 --> 0:18:57.280 back to say we just couldn't afford this. It doesn't 0:18:57.359 --> 0:19:01.600 seem that that kind of infrastructure and that kind of 0:19:01.680 --> 0:19:06.480 you know, institutional arrangement existed across the continent, and instances 0:19:06.560 --> 0:19:09.280 where it did, it just seemed like the incentives were 0:19:09.280 --> 0:19:11.639 in alligned for people to actually give it the power 0:19:11.680 --> 0:19:14.960 to operate at its shoot. Then on the Chinese side, 0:19:15.400 --> 0:19:19.520 it just um, you know, um, there didn't seem to 0:19:19.680 --> 0:19:23.480 be a significant effort. It looks like that's changing now 0:19:23.560 --> 0:19:27.360 that it started to change around the eighteen FORCAC, when 0:19:27.480 --> 0:19:31.439 the sum being began talking about you know, we're no 0:19:31.520 --> 0:19:34.119 longer going to finance you know, advantage of projects or 0:19:34.160 --> 0:19:39.399 political projects called them. I think something started to change 0:19:39.480 --> 0:19:42.000 about it. It might have been because of domestic reason. 0:19:42.040 --> 0:19:44.840 It might have been China's own position in terms of 0:19:44.840 --> 0:19:47.800 how much capital it had to be able to expand overseas. 0:19:47.840 --> 0:19:50.679 Something began to change. But in those you know, in 0:19:50.720 --> 0:19:53.480 the heyday of of borrowing that has us in the 0:19:53.520 --> 0:19:55.919 crisis that we're in now. In a number of African countries, 0:19:55.960 --> 0:19:59.120 I would say maybe like seven in which Chinese debt 0:19:59.240 --> 0:20:03.000 is actually a either of debt distress, um that that 0:20:03.080 --> 0:20:05.480 didn't seem to be on the Chinese side, and some 0:20:05.560 --> 0:20:08.040 sort of coordination to be able to take And the 0:20:08.400 --> 0:20:10.080 final thing I would say on that is that we 0:20:10.200 --> 0:20:13.720 know that China has been sort of like a reluctant multilateralists. 0:20:14.119 --> 0:20:16.520 That China was not a member of the Paris Club, 0:20:17.080 --> 0:20:20.199 and the Paris Club of Rich countries had had des 0:20:20.280 --> 0:20:23.280 sustainability rules, and because China wasn't a part of it, 0:20:23.280 --> 0:20:27.960 it wasn't really subject to this rules. Reluctant multilateralist is 0:20:27.960 --> 0:20:30.239 a great way of putting it. UM. I want to 0:20:30.320 --> 0:20:34.480 I want to talk more about how China's approach might 0:20:34.520 --> 0:20:38.480 be changing, especially the summer during the debt crisis. But 0:20:38.560 --> 0:20:40.720 before we do, I mean, I think we have to 0:20:40.760 --> 0:20:42.720 talk a little bit more about the loans. So there 0:20:42.800 --> 0:20:47.040 is a perception that China's loans tend to be or 0:20:47.080 --> 0:20:50.720 its financing tend to be unfair in some way, or 0:20:50.760 --> 0:20:53.960 they come with a lot of strings attached, and that 0:20:54.080 --> 0:20:58.760 you know, China maybe doesn't necessarily care about debt sustainability 0:20:58.880 --> 0:21:03.199 because it's trying to um, how do I put it, 0:21:03.280 --> 0:21:07.200 like it's trying to get a hook into a particular 0:21:07.240 --> 0:21:12.560 country or into a particular resource or a strategic port 0:21:13.000 --> 0:21:16.240 or something like that. So it's not necessarily worried about 0:21:16.240 --> 0:21:21.119 getting paid back. So how much is that reputation deserved 0:21:21.600 --> 0:21:25.080 in your view? So I think it was First it 0:21:25.200 --> 0:21:28.400 was an Indian writer writing an outfit in an Indian 0:21:28.560 --> 0:21:34.120 paper who coined the phrase dead trapped diplomacy. And then 0:21:34.359 --> 0:21:38.840 the US in its uh great power competition with the 0:21:39.240 --> 0:21:42.320 with the Chinese simpler ramp ramp that up. And thing 0:21:43.200 --> 0:21:46.000 my understanding of the narrative of that trap diplomacy is 0:21:46.040 --> 0:21:50.280 that the whole plan is for China to ensnare is 0:21:50.359 --> 0:21:55.360 as um is putitive partners in this unhealthy relationship as 0:21:55.359 --> 0:21:58.200 a means of being able to take over flagship infrastructure 0:21:58.440 --> 0:22:00.800 like ports and airports just off like that. And the 0:22:00.880 --> 0:22:05.520 example that gets bandied about is Humbun data, you know, 0:22:05.560 --> 0:22:09.280 in in the UH is Sri Lanka, Yeah, in Africa. 0:22:10.040 --> 0:22:13.360 So there's been a lot of studies. They China Africa 0:22:13.640 --> 0:22:18.119 Research Initiative at the Johns Hopkins University has done a 0:22:18.160 --> 0:22:20.640 study on this, and there's no real there's no evidence 0:22:20.640 --> 0:22:23.280 for this. It gets repeated often, but there's no real 0:22:23.359 --> 0:22:25.639 evidence for this. The second thing I would say on 0:22:25.680 --> 0:22:29.080 this question is that about seven countries in Africa, seven 0:22:29.160 --> 0:22:34.879 or eight the dead crisis they have currently, the dead distress, 0:22:35.359 --> 0:22:38.440 China plays a role, right, so in terms of Africa's 0:22:38.440 --> 0:22:42.480 student deaths that China is responsible for about UM about 0:22:43.240 --> 0:22:46.960 of it. So it's sort of seems like we we've 0:22:47.000 --> 0:22:50.439 become so consumed we're talking about and not focused on 0:22:50.480 --> 0:22:55.560 the right. A significant portion of the debt UH is 0:22:55.600 --> 0:23:01.199 old to domestic UM creditors and to private creditors, and 0:23:01.240 --> 0:23:05.360 then the rest of it is UH the multilateral UH 0:23:05.680 --> 0:23:10.760 lending agencies, and so I it's worked really well to 0:23:10.800 --> 0:23:14.280 the US is advantage in terms of painting China as 0:23:14.320 --> 0:23:18.720 this irresponsible lender who's out to take over UM. The 0:23:18.760 --> 0:23:22.240 infrastructure of the countries is supposedly UH it is working 0:23:22.280 --> 0:23:25.400 with that that it hasn't really borne out in terms 0:23:25.480 --> 0:23:29.000 of the evidence that this is what the Chinese. But 0:23:29.040 --> 0:23:33.919 the question is, I think the critique of Chinese lending 0:23:34.560 --> 0:23:38.359 at a scale and pace that was just completely sustainable, 0:23:38.480 --> 0:23:42.760 especially for for economies who were dependent on commodity exports, 0:23:42.920 --> 0:23:47.720 knowing the fluctuations of commodity exports. I mean, I think 0:23:47.800 --> 0:23:50.800 COVID nineteen simply ended up being an excellerent of a 0:23:50.880 --> 0:23:54.520 crisis that was coming anyway, right, and and so we 0:23:54.600 --> 0:23:56.800 just didn't expect it to be this shock, but it 0:23:56.920 --> 0:24:00.280 was coming anyway, and and and Zambia had all has 0:24:00.320 --> 0:24:02.640 been there. I would also like to point out that 0:24:02.720 --> 0:24:06.120 Zambia is a bit different right from from other countries 0:24:06.160 --> 0:24:09.240 in terms of how quickly the debt ramped up in 0:24:09.320 --> 0:24:12.080 Zambia and how much that it actually had, and how 0:24:12.160 --> 0:24:17.040 dependent it is on a single export um copper. I 0:24:17.080 --> 0:24:20.800 think we were fortunate enough that the picture out of 0:24:20.880 --> 0:24:24.640 Africa after the Zambian debt default is going to be mixed. 0:24:24.960 --> 0:24:28.959 So on Friday, at a Thursday of Friday called Devoir 0:24:29.160 --> 0:24:33.399 went to the market, becoming the first African country I 0:24:33.440 --> 0:24:37.040 have since COVID to issue your bonds and it was 0:24:37.160 --> 0:24:41.639 five times oversubscribed. So it appears that the market is 0:24:41.920 --> 0:24:45.880 being really nuanced and sophisticated about the risk that African 0:24:45.880 --> 0:24:49.240 countries present. And there still seems to be some sort 0:24:49.280 --> 0:24:53.320 of appetite for for African debt. And so I think 0:24:54.119 --> 0:24:57.880