16 November 2018 : Moody’s released a report earlier this week titled “ Sovereigns – Africa, China's lending supports growth, exacerbates fiscal and external pressures in Sub-Saharan Africa” studies the impact of Chinese lending in African markets, and which countries are the most in trouble. Moody’s says much of the lending are expected to support economic growth but with credit risks for countries with already high debt burdens.

In the last 6 years Chinese lending towards Sub Sahara African countries has skyrocketed, and shot up to $10 billion / year, which is 10 times the $1 billion lending in 2001.  This lending is being focused on infrastructure projects, including power, transport, and communication sectors, thereby supporting economic growth. Although this lending would go some way to addressing the region’s financial gap, it also rises a massive credit risks for countries which already posses humongous debts. 

According to Moody’s Angola, Republic of the Congo and Zambia are among the most indebted to Chinese creditors. Ghana, Angola, Zambia, and Nigeria  are already feeling the heat where interest payments on those loans absorb more than 20% of their revenue.

Zamibia in particular is in the high risk zone, owing to its low foreign exchange reserves. 

David Rogovic, a Moody’s Assistant Vice President-Analyst and co-author of the report, said, “Unless African investment financed by Chinese loans generates substantial economic gains that boost debt servicing capacity of Sub-Saharan African governments, the credit implications of such lending include higher debt burdens, weaker debt affordability and weaker external positions.”

“China's willingness to renegotiate existing loans and the terms of these renegotiations will influence credit trajectories in Sub-Saharan Africa in the coming years.”

Although, the biggest loophole is the lack of transparency over the conditions attached to Chinese lending and a lack of reform and governance requirements, and this could seriously limit the long-term benefits.

Reporting for EasyKobo on Friday , 16 November 2018 in Lagos, Nigeria