A New Chapter Beyond Debt? – The Diplomat

Zambia’s President Hakainde Hichilema has simply returned dwelling from virtually every week in China, throughout September 10-16. Previous to the go to, journalists speculated that debt decision have to be the primary precedence for the go to, however that displays a really shallow understanding of the dynamics in China-Zambia (and certainly China-Africa) relations.

Hichilema is the fifth African head of state to go to a post-pandemic China, following high leaders from Tanzania, Algeria, Eritrea, and Benin. Previously, analysis by Improvement Reimagined has discovered a long-term optimistic correlation between visits from African leaders to China and extra Chinese language funding and cooperation. Such visits are when offers are cemented. Zambia ranks among the many most energetic African nations in the case of Chinese language engagement, with 9 visits to China of its leaders since 2003, matching nicely with its rank because the third largest vacation spot for Chinese language overseas direct funding (FDI) on the continent.

This pattern isn’t new. China and Zambia cooperated throughout anti-colonial struggles, and shut diplomatic ties had been established quickly after independence in 1964. The long-lasting Tanzania-Zambia Railway (TAZARA) was raised by Zambia’s founding President Kenneth Kaunda with China’s first-generation leaders throughout his first go to in 1967. By connecting Zambia’s Copperbelt province to the seaport of Dar es Salaam, the so-called “liberation mission” had a robust financial goal that the multilateral and different bilateral monetary organizations discovered it laborious to acknowledge and justify on the time: it materially lowered Zambia’s dependence on nonetheless colonized Rhodesia (now Zimbabwe) and apartheid South Africa. 

China stepped in to offer funding as an alternative. The railway thus got here to represent Chinese language assist for Pan-Africanism and was the place to begin of intensive infrastructural assist that has since characterised China’s improvement cooperation with Africa extra broadly.

The final in-person assembly between the presidents of Zambia and China occurred throughout the 2018 Discussion board on China-Africa Cooperation (FOCAC) Summit in Beijing. It was a delicate time, when the notion of “debt entice diplomacy” had simply surfaced, and Zambia was depicted as a serious sufferer. Though Zambia’s then-President Edgar Lungu had hit again laborious in opposition to these accusations, such narratives continued to plague the connection, regardless of China and Zambia being “all-weather mates.” (By the way, this frequently-used time period in Chinese language diplomacy was first coined by Kaunda). 

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The COVID-19 pandemic exacerbated the debt situation. In 2020, Zambia grew to become the primary African nation to default on debt when it didn’t make a Eurobond fee. Zambia then grew to become the primary nation to use to the G-20 Widespread Framework, an initiative designed to coordinate debt-restructuring efforts by each conventional and rising lenders. Doing so enabled Eurobond holders to get their funds from the Worldwide Financial Fund (IMF) by way of arrears, which Zambia must pay again to the IMF in some unspecified time in the future. Nonetheless, internationally the blame for Zambia’s challenges in debt decision thereafter was pinned on China – though not it’s price noting that the Zambian authorities itself has by no means expressed this view.

On the time, 30 p.c of Zambia’s whole loans had been owed to China, however these had been largely concessional loans, channeled by coverage banks just like the China Exim Financial institution. In 2020, the yr of Zambia’s default, Zambia paid $436 million in curiosity on exterior debt inventory, with China accounting just for 5.3 p.c of this (a ratio that dropped to simply 2.1 p.c in 2021). Traditionally, China had additionally offered debt reduction to Zambia on request a number of occasions – in whole price $259 million since 2000, which tops all sovereign collectors. 

Therefore, amid the debt disaster Hichilema has been pragmatically avoiding selecting one facet as a tactic to press the opposite for compromise. He made efforts to refute the stigmatization of China’s function within the multilateral settlement to mitigate the distrust among the many totally different collectors.

However, dealing with an deadlock after virtually two years, and with China lastly opening up post-pandemic, Zambian Treasury and Central Financial institution officers traveled to China previous to the 2023 IMF and World Financial institution spring conferences. Their proposals that paved the best way for a breakthrough deal for all bilateral collectors to increase compensation of $6.3 billion in loans to twenty years with a three-year grace interval. (It needs to be famous that no progress has been made to this point on partaking non-public lenders and multilaterals in Zambia’s debt reduction, regardless of the protracted negotiations.)

So, if Hichilema’s week-long journey to China was not about debt, what was it about?

The reply is progress. 

With the sixtieth anniversary of their diplomatic relations and the subsequent FOCAC Summit arising in 2024, Hichilema’s go to led to an upgrading of China-Zambia bilateral ties to a “complete strategic and cooperative partnership,” the very best classification to this point utilized to China’s companions on the African continent. The joint communique pointed to synergies between Zambia’s Eighth Nationwide Improvement Plan and the Belt and Highway Initiative (BRI), crucial for China’s worldwide popularity. This all indicated a willpower from Hichilema and Chinese language chief Xi Jinping to flip over to the subsequent web page to debate long-term improvement and financial progress – not debt.

A selected spotlight of the go to was China’s dedication to assist Zambia’s ambition to rework into an industrial hub, capitalizing on its useful resource endowments. In accordance with the China-Africa and Commerce Relations Report 2023, China’s imports from Africa are dominated by mineral imports, which accounted for 57 p.c ($67.09 billion) of whole imports in 2022, with Zambia being the second largest supply. This implies Zambia is without doubt one of the few African nations that has a optimistic commerce stability with China. Nonetheless, the Zambian authorities desires to diversify the commerce sample, particularly in value-addition and manufacturing. 

Earlier than he arrived in Beijing, Hichilema’s six-day go to began in Shenzhen, China’s tech hub. There, Hichilema invited tech giants together with Huawei, ZTE, Tencent, and BYD to leverage Zambia’s sources for key part manufacturing. MoUs had been signed with ZTE for a smartphone meeting plant and with Huawei to enhance ICT infrastructure.

Throughout Hichilema’s journey to Jiangxi Province, the Zambia Improvement Company attained two funding commitments: Pingxiang Huaxu Expertise will construct a wind and photo voltaic hybrid energy technology mission price $800 million, and Jiangxi Particular Electrical Motor Firm will make investments $290 million for a lithium battery manufacturing plant in Zambia’s Southern Province.

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This all makes robust financial sense. Copper sources, current processing bases, and a clear energy-driven electrical energy system make Zambia extremely aggressive in producing renewable vitality elements and programs throughout the continent. Earlier this yr, throughout his attendance on the Mining Indaba in Cape City, South Africa, Hichilema offered regulatory readability (similar to on taxation) to get the sector again on observe from useful resource nationalism. He additionally underlined a robust will to work with overseas buyers to faucet the nation’s potential within the crucial minerals for inexperienced transition. These offers made throughout the China journey are concrete steps that may flip the federal government’s imaginative and prescient into actuality. 

Hichilema was additionally in a position to extract dedication from China to finance previous and new giant infrastructure tasks – regardless of continued worldwide hypothesis that China is now not lending on this means. The TAZARA Railway community is anticipated to be rehabilitated within the first quarter of 2024. New tasks – together with the Ndola-Lusaka twin carriageway (which was halted earlier as a result of a mortgage cancellation as a part of Zambia’s debt administration), the Lusaka-Livingstone-Kazungula bridge freeway, and the Kabwe photo voltaic photovoltaic energy plant – are all on the horizon as nicely. 

Final however not least, Hichilema additionally secured commitments from China to import extra agricultural merchandise from Zambia, similar to blueberries, constructing on a soybean export settlement made in 2022, whereas boosting funding in agro-processing, fertilizers, pesticides, and agricultural equipment. 

These offers all assist key Zambian priorities: job creation, lowered reliance on imports, and the purpose of accelerating Zambia’s potential to export both to China or to neighboring nations. The objective is to bolster Zambia’s progress, rising incomes and strengthening the nation’s monetary sustainability in the long run. And naturally, China sees an curiosity in doing so, not solely to make sure that Zambia’s future loans are repaid, but in addition to diversify its personal sources of financial progress and provide chains. 

These agreements are as vital for the 2 nations as debt reduction itself, if no more. They create a stronger path for debt sustainability. 

So what does this imply for different African nations, particularly these dealing with debt fee challenges, however who additionally nonetheless need to generate post-pandemic progress? 

Zambia’s lesson in engagement with China at the very least is straightforward: should you don’t ask, you don’t obtain.

Zambia actively pursued each bilateral and multilateral debt decision, and ultimately it was – opposite to studies by others – not IMF advocacy however Zambia’s personal initiative that paved the best way for a deal. And Hichilema’s go to to China has demonstrated that Zambia is now taking the initiative to make use of debt and different sources to set a brand new progress path that emphasizes increase its manufacturing capability. 

Different African leaders visiting China can do the identical. Approaching the tenth anniversary of the BRI, China can be looking for to construct a popularity as a supplier of public items and supporter of sensible improvement to companions on the continent. As Zambia did, African nations ought to go away negotiations on debt reduction and phrases to their finance ministers and central financial institution governors, and as an alternative put together a realistic but bold agenda – together with pitches for brand new funding, new loans for infrastructure, and new commerce – and showcase their strategic significance. That’s the actual prize.