Zambia could become Africa’s first casualty in China’s takeover after defaulting on loan repayment. Zambia is reportedly in talks with China over acquiring its main power company after defaulting on loan repayment.
It is reported that Zambia is in talks with China over a possible takeover of the country’s electricity company, ZEWASCO, after defaulting on loan repayment. In case Zambia defaults on loan payments, China has to take over the Zambian electricity company, ZAWESCO.
According to Business Insider, Zambia risks losing its sovereignty to China which is bound to seize its national assets once the government defaults on loans.
The report also indicates that a number of projects in Zambia are financed by China even though the amount of debt has been piling over the years.
WHY IT MATTERS: China has been considered a good partner by many African countries even though there is worry that its loans are burying some of these countries under massive debt. According to the Taiwan news website, China’s economic strategy of predatory lending to indebt poor nations and then take over critical infrastructure once a country defaults on its loans is on full display in many African countries.
China debt trap diplomacy?
China has been accused of lending huge sums of money to poor countries especially African ones and traps these countries when they default on these loans repayments to China, and this is some have called “China debt trap diplomacy”.
However, China, the East Asian nation has denied engaging in “debt trap” diplomacy adding that it continues lending to Africa on the grounds that the continent still needs debt-funded infrastructure development.
Business Insider reports that ‘a major worry of the IMF and the US is that China ’s strategy is first to encourage indebtedness, and then to take over strategic national assets when debtors default on repayments. The state electricity company ZESCO is already in talks about a takeover by a Chinese company’.
Taiwan news reports that ‘if ZESCO comes under Chinese leadership, then China will not only own a majority stake over the country’s most lucrative export (copper, cobalt), but it will also control eighty percent of the country’s electrical power supply, giving China open access to a significant energy source in the heart of southern Africa’.
BOTTOM LINE: Even if China recently pledged to give Africa the 60 billion on development, it should be considered as if there is ‘strings attached” to what this so-called China ‘interest’ in Africa. Africans have to be careful when it comes to partnership with China in projects involving loans from China if they do not want to be ‘enslaved’ by huge unpaid loans.
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