Opinion: Museveni – “China might be a problem in the future” – it will be if you default on your debt

Africa has been having problems for the last 600 years due to the slave trade, colonialism, neocolonialism — and none of it was from China” (…) not seen any serious problem, because their approach is different” (…) “They do not impose their offers if you do not want them, so we have not seen a problem for now. Maybe a problem in the future, but not now” – President Yoweri Kaguta Museveni (Sinan Tavsan – ‘Uganda leader says China-style diplomacy ‘better than’ the West’s’ 17.03.2022, Asia Nikkei).

President Museveni had an exclusive interview with a journalist from Asia Nikkei and it was published today. These few quotes are from there and it is striking. The former donor darling of the West. The President who has pandered to the interests of the United States and their allies for ages. Who has eaten of the buffet of aid, grants and all sorts of prepositions, which has given him a larger than life persona.

That man is now blaming the West for if all. He is right in going after the colonial past of the West and the neocolonial structures, which are hampering development and continues the cycle of rich versus poor. This is justified, but he also shows a little nativity in concern to China.

It is just like he don’t think the monies, the funds and the China Exim Bank, which works like this:

The China Exim Bank is increasingly making use of a deal structure – known as the “Angola mode” or “resources for infrastructure” – whereby repayment of the loan for infrastructure development is made in terms of natural resources (for example, oil). While this approach is by no means novel or unique, and follows a long history of natural resource – based transactions in the oil industry – China has taken its implementation to a higher level. By providing preferred lines of credit to Chinese state-owned enterprises and foreign governments wishing to purchase Chinese made goods, the China Exim Bank supports the overseas expansion of Chinese firms in line with the country’s “Go Global” strategy, whose long-run goal is to increase the productivity and competitiveness of these enterprises vis-à-vis their global competitors. The arrangement is used for countries that cannot provide adequate financial guarantees to back their loan commitments and allows them to package natural resource exploitation and infrastructure development” (Institute of Developing Economies – Japan External Trade Organization (JETRO) – ‘China in Africa’ October 2009).

What Museveni is not saying is what the costs of the debt and the structure of the Chinese support to Uganda or anywhere else. It is like Museveni haven’t seen what has happened when Republics or Nations defaults or fail to pay on the debts. Since, the Chinese Banks or Funds are coming with strings, which isn’t always public. That’s why we have seen what has happened to Sri Lanka and Tonga, which both has to give up key infrastructure to be licensed. The same has been told to happen Zambia and there are already fear of what could happen to Entebbe International Airport.

President Museveni should consider all of this, as it is next generation that will cover the debt he has been accumulated during his reign. There will be more than the Toll Road on the Entebbe Express-way to secure revenue for the added debt. It is like Museveni isn’t concerned about this and the threshold for repayments are coming closer. Therefore, at one point or another… if there is lacking domestic revenue… the Chinese companies or China can cease or capture collateral.

So, Museveni is right… China could become a problem. Especially, for all the nations who has eaten loans for the infrastructure projects in the Belt Road Initiative (BRI), which will pass the grace period and the debt of these has to be repaid. It wasn’t free money to build roads, buildings or rail-roads. No, it was an investment, which the Chinese plans to get profits out of. They didn’t give away this money. The first loaned the money, got a Chinese developer and Chinese Engineering company to build it and now later the debtor has to repay it with interests.

That is the brutal truth… I am not saying the loans are a problem, but they could easily become it. Especially, if the debtor doesn’t pay on time or in a fashion, which the creditor accepts. If they defaults or fails to repay. This gives the creditor leverage and possible freedoms or liberties to ensure collateral. Therefore, it could easily become a huge problem…

Museveni should also study how this happened to others. As sooner or later, this could happen in Uganda or anywhere else in Africa. The Chinese is right in doing this. The debtors signed the agreements and the stipulations on the loans are giving it legal binding rights to get it repaid. That is why … they might not use colonial techniques to get resources, ownership or have influence. They just borrowed money and with that has the upper-hand of their poorer states. It is a wise move, because the Chinese knows greed is an easy way of corrupting minds and get them into the fold. The same ways happens here. They don’t come with guns or war, but they are financially binding, which can easily be triggered.

In this instance, Museveni is partly outsmarted. Both are getting their interests nurtured, but at one point he could easily get into real trouble. It would be a huge problem and the state has to find currency or liquidity to actually cough up funds to pay on old loans. This is on the horizon and evidently, people are speaking to soft-heartedly about it. Peace.

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