Vantage | Why loan sharks like China are Africa's new colonisers

When we think of colonization, our minds often drift to historical narratives of empires like the British expanding their territories across the globe. However, colonization isn’t just a relic of the past; it persists in different forms today.

Colonization, at its core, entails the exploitation of resources by a foreign power, often leaving the colonized region depleted and its people impoverished. While the methods have evolved, the essence remains the same: a powerful entity enriches itself at the expense of a weaker nation.

China’s role in African colonization

China has emerged as a prominent player in modern colonization, particularly in Africa. Unlike traditional colonial powers, China adopts a different tactic—resource-backed loans. Instead of military occupation, China offers financial assistance to African nations, purportedly for development projects. However, these loans come with strings attached: African countries must repay them with natural resources including oil, gas, copper and cobalt.

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Akinwumi Adesina, President of African Development Bank, highlighted the challenge of pricing natural assets under such loan agreements. “First and foremost, because you can’t price the asset properly. If you have minerals, oil, metals, and gas under the ground, it’s not actually being marketed, so how you actually come up with a price of that for a long-term contract? It’s a challenge,” he said.

Debt trap

While these loans may seem beneficial initially, they often plunge African nations into a cycle of debt dependency. China’s asymmetric negotiation tactics and undervaluation of natural resources result in unfavourable terms for African countries. Moreover, corruption further exacerbates the situation, with reports of Chinese bribes to officials in exchange for favourable deals.

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Adesina further elaborated on the power dynamics in negotiations. “Second, is that the negotiation is very asymmetric. Most countries that want to do asset-natural resource-backed loans are probably dealing with bigger countries, bigger commercial banks that want to give them a loan and say, ‘Well, look, it’s urgent, we need it. But this is what you have to sign.’ But it is those that actually want to give the loan that have the upper power, not the person who wants or the country that wants to receive the loan,” he said.

Western complicity

China isn’t the sole perpetrator of neo-colonialism in Africa. Western companies, like Glencore and Trafigura, have also engaged in exploitative resource-backed loans. For instance, Glencore’s loan to Chad in exchange for oil revenue significantly benefited the Swiss company, leaving Chad economically strained.

While both China and Western firms engage in exploitative practices, China’s approach appears more insidious. Unlike Western countries, China disregards international courts and diplomatic norms, making it difficult for African nations to seek legal recourse against unfair agreements.

The resurgence of colonization through resource-backed loans poses a significant threat to African sovereignty and development. African nations must remain vigilant and assertive in safeguarding their interests against predatory lending practices. The fight for independence continues, albeit in a different form—a struggle against economic exploitation and neo-colonialism in the 21st century.

Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.