China in Africa

Himanshu

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OPINION: Africa set to burn as debt soars | IOL Business Report

PRETORIA – It is quite painful and disheartening to hear that China is set to take over the Zambia national power utility Zesco. This comes after Zambia joined a long list of countries who are placed under Chinese “curatorship” for failing to service its debt.

Unfortunately, this story does not end there as Africa Digest predicts that “more Zambian national companies will have to be handed over to China if they continue defaulting.” Indeed the situation is not good. Zambia is overall indebted and Bloomberg latest figures show that Zambia bonds are on a free fall.

Banks including Nomura International say the government may have greater external liabilities than the official figure of $8.7 billion (R132bn). Zambia has now reportedly turned to the International Monetary Fund (IMF) for a $1.3bn bailout. But it is unlikely that it will get this loan due to concerns about foreign borrowings. IMF chief Christine Lagarde has too much on her plate after Argentina also requested a bailout.

To put the Zambian economic dilemma into context. In 2012, China announced a grand economic and infrastructure project, now known as the Belt and Road Initiative (BRI), which it said will “benefit the world economically by connecting consumers to markets and helping improve the movement of goods and services.”

Asia Times estimates that about 70 countries across the world, especially in Africa and Asia, accepted massive cash injections in the form Chinese loans as well as investments under this scheme with a view of developing their domestic economies and capabilities. The total funding available is said to be anywhere between $1 trillion and $8trln.

However, the rising phenomenon is that there is a growing debt trap that comes with the Chinese loans under the BRI scheme.

More and more countries are unable to meet the conditions of the loans. The repayments are becoming a huge burden for small and midsized states, of which Zambia is one of them. There are concerns that China “will use the inability of the host countries to pay back the debt as an excuse to gain increased control of major strategic and economic posts.”

A new form of colonialism

Mahathir Mohamad, Malysia’s 93-year-old new prime minister, calls this “a new form of colonialism.”

Unfortunately, Zambia is not alone in this messy situation. China forgave Botswana a $60 million loan. It is reported that Gaborone has accepted yet another loan from the same Chinese. At end of the Forum on China-Africa Summit, Chinese President Xi Jinping’s declared that a further $60bn will be made available to Africa in the form of different categories such as grants, assistance programs and loans.

Africa is not the first region to feel the heat of the dragon’s breath. The African countries are quickly following Sri Lanka that also fell an “apparent victim of consistent Chinese investment in infrastructure projects”. In December 2017, Colombo leased out its Hambantota Port and land around the port to a Chinese shipping company for 99 years.

African countries should take a leaf from Malaysia’s Mahathir who last month travelled to Beijing to say thanks, no thanks to a $20bn loan for the projects. Mahathir’s showdown with Beijing rolled back the years to the time he introduced the ‘bumiputera‘ programme (affirmative action which favours indigenous Malays over the Chinese bamboo network dominating the Malaysian economy).

Mahathir’s response came as a surprise because “China is not used to recipients of its largesse challenging the terms on which it is offered.” With so many countries almost sinking in Chinese gratuitous lending all over the world, perhaps it is time for a re-think. Even neighbours Laos, Mongolia and Pakistan are in huge distress, as per information from the Centre for Global Development in Washington.

Malaysia’s eagerness to disentangle itself from Chinese-funded ventures serves as a good measure of what Beijing’s likely response is going to be. Mahatir cancelled the loans earmarked for East Coast Rail Link plus two oil pipelines in Sabah province. His reasons for reversing the loans is simple, his country cannot afford them as lovely the projects may be.

Turning up the heat

Mahatir is also reported to be turning the heat on the ever pompous Chinese investors already in Malaysia, and did not have to wait to be called a monkey before asking them to go back home. A Chinese national, identified as Liu Jiaqi, recently President Uhuru Kenyatta a monkey and is now due for deportation. This emphasises the need to compel China and its nationals to tow the line before they insult people where their country is invested.

Mahathir declared that the foreigners would not be given visas to live in a housing scheme in Johor state, which is too expensive for locals to afford. In essence, Malaysia appears to have learnt from Angola’s infamously unaffordable Nova Cidade de Kilamba.

Imran Khan, the new Pakistani prime minister, will have to use his batting skills to deal with the impacts of a huge Chinese largesse of about $60bn for energy and infrastructure projects. Beijing has skilful bowlers and fielders – it unlikely that Khan will stay in the crease for too long before massive protests engulf Karachi and Islamabad.

With foreign currency reserves standing at a little as $10bn, Pakistan is soon going to economically implode. The country can only pay for “about seven to eight weeks of imports.” Debt repayments are rising fast, Khan faces a challenge of deciding where the money will come from to avoid a potential default.

But Pakistan has always been an important centre-piece in the geopolitics of the subcontinent, especially as China’s counterweight to India. India is one of the few countries who resisted the temptation of China’s cheap money. So Khan is better positioned to tell Chinese officials that his country cannot afford to pay or ask for the suspension of some projects planned under the present arrangement.

Or, Khan can put an offer that China cannot refuse in order to reduce the burden such as increasing political stakes. Pakistan can help in containing extremists and cushion western China. Failing which, his government will have to deal with public protests against Chinese investments like in Vietnam three months ago. The problem is Pakistan’s ailing economy and appetite for debt – it is in line to get another $2bn from China and about a three-year $4.5bn oil-financing facility from the Islamic Development Bank.

Africa’s situation is even much trickier, and China may not be as tolerant though. Besides the raw materials and market for Chinese products, Africa does not offer much in political terrain as its neighbours. The relationship is not as “brotherly” as we are told but it is strictly transactional. Zambia will soon learn that Beijing is not in a game of smooches and hugs.

Djibouti in line for a Chinese takeover

Even tiny Djibouti is in line for a Chinese takeover. The economic burden comes with the added presence of the Chinese military to safeguard investments. China now has a military base in the small country in the Horn of Africa, as well as in Pakistan, Maldives, Sri Lanka and others are in the pipeline in El Salvador as well as in Afghanistan amid increasing attacks on Chinese engineers and workers in Pakistan for projects under the China-Pakistan Economic Corridor.

With the BRI, China was positioned as an alternative to the traditional global lenders, hence the “Look East” policy which draws African countries closer to China as seen last week with the FOCAC meeting. The more African states believe in FDI-led economic growth it is unlikely that we will their appetite for yuans decreasing. And China cannot wait to pull a Sri Lanka on them. They, in turn, will voluntarily hand over their prized national assets to Beijing.

Judging by what happened to Hambantota and also other places, it is high time for African states to involve their populations before committing to accepting foreign loans and or investments. Also, budgetary processes in most African states are generally considered to notoriously opaque, so an extra measure is required to force the countries to learn to live within its means.

Economist Thandika Mkandawire is correct to point out that Africans aren’t clear on what exactly they want from the Chinese. So, Beijing appears to have a free reign of deciding the nature of relationship it wants to have with forever begging African counterparts. These relations have potential to define already strained political climate within countries.

The reason for frosty relations is that the price to be paid is certainly very high for all countries. Political independence and sovereignty are at stake as they are possibly getting mortgaged for loans which in any event have been said not to be benefitting the entire population. Economic crises will flare up across the continent in no time, and China will become an obvious target.

There is no proof that China demands any form of accountability from states for the loans. It understands that these countries will in any way default their repayments – the intention is to overburden them with debt so as to make them little colonies where it is going to have unhindered access to natural resources. With over 1.4 billion people to feed, Beijing has pressure to push its national interests at all cost.

Chinese capital appears to be no different to the European missionaries in the 1800s who came with a bible in hand and a promise for eternal life and civilization. Africa again opens its hands to receive the guests who have imperial motives and in less than 20 years we will look back and say, “how could we be so stupid to trust them?” Unfortunately, it will be too late, Lusaka will be called Little Guangzhou and Djibouti will be Sichuan.

There are fears that China stands to colonise the continent without firing a single bullet. But my view is that China will collapse the world with its toxic capital. What will happen when everyone owes Beijing and unable to pay? That will be game over for capitalism, I am convinced we are very close to see that happening.

Or, the story of Chinese debt merely captures the zeitgeist of the rise of a forceful dragon?


China places strategic ground to air missiles in Zimbabwe

COLOGNE - In what all but amounts to turning Harare into a satellite outpost of Beijing, China has reportedly deployed and installed a dreaded new generation of surface-to- air missiles (SAM) in Zimbabwe, in what is seen as direct preparation for defending her vast economic interests in the country, with a possible signal of ratcheting up future gunboat diplomacy against the competing West, as foreign powers scramble to move into Zimbabwe for business, under the newly elected President Emmerson Mnangagwa administration, Spotlight Zimbabwe reported.

Diplomatic and military sources in the capital yesterday said the SAM technology is similar to the one, which the Asian powerhouse has deployed to the South China Sea on Woody Island, comprising of her latest HQ-9 missiles.

Woody Island, also called Yongxing Island in China and Phu Lam Island in Vietnam, is the largest of the Paracel Islands in the South China Sea, with an area of 2.1 square kilometres. Controlled by Beijing, it is also claimed by Taiwan and Vietnam, and has since been turned into nearly a no-fly Zone due to the missiles.

The revelations, certain to raise a red flag with many Western capitals, come on the backdrop of President Xi Jingping sending his special envoy, Su Hui, to attend Mnangagwa's inauguration held on Sunday, with Mnangagwa himself set to visit China next month to attend the Beijing Summit of the Forum on China-Africa Cooperation (FOCAC).

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In June China hosted military chiefs from 50 African nations for a three- week security forum, as part of preparations for the launch of a strategic and military cooperation between Beijing and Africa. It was not clear if Zimbabwe was represented at the forum by the time of sending the paper to bed last night.

"This is a very serious and sensitive issue," said one Asian diplomat who requested not to be named. "They (China) are deploying HQ-9 missiles in your country at strategic locations nationwide, and the Zimbabwe military seems to have signed up to the agreement, which will strengthen it's ability to defend this country by default with China's help."

"The missile system is very advanced and similar to what they are using to protect the South China Sea Islands. This country has become very important to Beijing otherwise, they would not be moving heavy military equipment here. The former leader (Mugabe) was holding back against the idea of strong Chinese military presence in Zimbabwe, but a few months before he was removed from office last year, new and revised military cooperation agreements had been signed, therefore explaining the greenlight given to the deployment of the HQ-9."

A senior military officer with the defence ministry said it was not possible to disclose the location of the Chinese missile system, but confirmed it existed and was a top secret national security matter.

"I can confirm about the SAM technology from China. It is there but I'm not authorised to disclose the location of such weapons, it is a state secret and national security matter. The army press department is also unlikely to help your publication further. They will not comment on matters requiring the highest security clearance."

According to Army Recognition, a military magazine that covers technology and news from around the world, the HQ-9 is a medium-to-long range air defense missile system designed and manufactured in China by the Defense Company CPMIEC (China Precision Machinery Import & Export Corporation).

"The HQ-9 system is designed to track and destroy aircraft, cruise missiles, air-to-surface missiles, and tactical ballistic missiles," reads an article in the magazine on China. "The system was unveiled for the first time to the public during the military parade for the 60th anniversary of the founding of the People's Republic of China. The HongQi 9 development began in the early 1980s, initially based on the U.S. Patriot air defence missile system that China obtained via an unknown third-party country. Like the Patriot, the HongQi 9 uses a ‘Track-Via-Missile' (TVM) terminal guidance system and was originally designed to be launched from a Patriot-style slant-positioned box-shape container launcher."

The missile is a two-stage missile. The first stage has a diameter of 700 mm and the 2nd stage 560 mm, with a total mass of almost 2 tons and a length of 6.8m, the magazine further states.

"The missile is armed with a 180 kg warhead, has a maximum speed of Mach 4.2. and has a maximum range of 200 km up to an altitude of 30 km. The missile has a proximity fuse with an effective range of 35m, which goes active when the missile is 5km away from its target. The HQ-9's guidance system is composed of inertial guidance plus mid-course uplink and active radar terminal guidance systems."

A popular Kenyan broadcaster, Dr Mumbi Seraki, has also spoken and confirmed that China has indeed deployed ground to air missile systems in Zimbabwe, during one of her latest shows published on her YouTube channel yesterday. Readers can skip to 10:55mins of the 13min video clip to hear her take below:

In 2014, this reporter for the first time revealed China's plans to set up an underground military base in the Marange diamond fields area in Manicaland, with our then sister publication, The Telescope News.

The disclosures sent shivers running down the spine of many officials in the country who were in the dark on the matter, forcing then minister of defence, Sydney Sekeramayi, to deny the existence of the military station. China herself has neither confirmed nor denied the alleged plans to construct the base near Mutare.

China's influence in Zimbabwe, is set to grow stronger under Mnangagwa's term and his deputy, Rtd General Constantino Chiwenga, is also moving to crystallise military partnership with Beijing, our sources said.

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[A CCTV screen capture shows the model for a new parliament building in Zimbabwe. Photo: Handout] Proposed new parliament building, to be built in Mt Hampden, Zimbabwe's soon to be new capital city.

"Your VP (Chiwenga) is the main actor moving things militarily with China, with the blessing of Mnangagwa," said a former envoy from Scandinavia who was based in Harare a few years ago.

"Beijing is continuing to build her influence and power in Zimbabwe through five ways, which are: military facilities, power plants, new parliament building, a supercomputer centre and medical help."
 
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There should be a law against that. A foreign entity shouldn't be allowed to take over utilities companies just because it lent money foolishly.
 
China gets closer to its dream of a blue-water navy with rapid expansion of African base

From laser-dazzling US pilots to the construction of a new navy pier, the country has done a lot at its Djibouti base in Africa over the last year.

New Delhi: China’s footprint in Africa is expanding.

Just last week, Chinese President Xi Jinping spoke to leaders of African nations, welcoming them on his “development express”. This strategy has seen China’s exports to Africa increase by 55 per cent in the last five years. Beijing is also increasingly exporting weapons systems to African countries.

A key element of China’s geostrategic investment in Africa is its military base in Djibouti, the country in the Horn of Africa. This is China’s only overseas base in Africa and its details were first reported by ThePrint last year.

New satellite imagery analysed by ThePrint shows that this base is expanding at a rapid pace, taking China closer to its dream of a blue-water navy.

China’s strategic importance in Africa is reflected in its visible military might in Djibouti, even though the country also hosts French and US bases. India has access to Djibouti through the French base.

Laser activity
The US Federal Aviation Administration had issued a notice to airmen (NOTAM) regarding laser dazzling of its pilots from this Chinese overseas base. The NOTAM was issued in mid-April and was valid up to mid-June.

During the cold war, similar incidents were reported by the US Air Force from Russian naval vessels and bases abroad.

Satellite imagery from the April-June period showed an interesting vehicle parked inside the Chinese base.

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Satellite image of the vehicle parked inside the Chinese base in April-June | Col. Vinayak Bhat (retd) /ThePrint.in

The vehicle featured an unknown instrument, and was purposely kept outside, in the vicinity of other support vehicles and a dish antenna.

This vehicle possibly carried the laser dazzling equipment, and the Chinese PLA was trying out its efficacy on different aircraft flying over it.


It was a possible warning from China to US aircraft not to fly overhead or take aerial pictures of its base.

Supply of military equipment
China has been steadily supplying military equipment for this overseas base. The equipment has generally been supplied by newly-commissioned Type 71 LPDs (Landing Platform Docks) like Jinggangshan hull No. 999.

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Newly-commissioned Type 71 Landing Platform Docks (LPD) | Col. Vinayak Bhat (retd) /ThePrint.in

The LPDs, also called amphibious transport docks, are naval ships that are capable of embarking, transporting and landing expeditionary forces along with requisite equipment.

The Type 71 LPDs provide China’s PLAN (People’s Liberation Army-Navy) with a blue-water capability to land forces away from its borders.

The docks have been observed supplying military equipment to the Chinese base in Djibouti numerous times. Earlier ground photos indicated troposcatter communications equipment being lifted from the ship. The same equipment was seen on display during a Victory Day parade in Beijing in 2015.

Recently, on 27 July 2018, another Type 71 LPD was seen docked at the pier very close to the base. It was unloading vehicles. The accurate identification of military vehicles is difficult because of the low resolution of satellite images, but it can be assessed that some armoured/mechanised vehicles and some fire support systems have been disembarked at the port.

Ammunition point
The ammunition point saw activity in May 2017.

Then, after 27 July 2018, a number of large containers were observed in front of hardened shelters. These were possibly delivered by the Type 71 LPD docked at the port on that date.

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Type 71 LPD unloading equipment in China Djibouti base | Col. Vinayak Bhat (retd) /ThePrint.in

The ammunition point would be able to hold more than 2,500 tons.

Naval pier
The construction of a new jetty-like structure was first reported by this writer on 20 May 2018.

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The length of the pier has extended to more than 600m | Col. Vinayak Bhat (retd) /ThePrint.in

Work had started on 2 May, and within the first 20 days, the structure was jutting 500m into the sea.

This probably is the beginning of the new naval pier, which may link up with an existing facility to its east. There is hectic activity at the site. The length has increased to more than 600m, and its tip continues to expand eastward.
 
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Juncker unveils EU's Africa plan to counter China

By Andrew Harding BBC News, Johannesburg

Jean-Claude Juncker said Africa was Europe's "twin"
The European Commission President Jean-Claude Juncker has proposed a new alliance with Africa to deepen economic relations and boost investment and jobs.

The proposal could help create up to 10 million jobs in Africa in the next five years alone, Mr Juncker said.

The vision involves what he calls a "continent-to-continent" free-trade agreement.

It is part of the European Union plan to deepen ties with Africa to counter the growing influence of China.

Europe has a complicated message for Africa.

On the one hand, European Union leaders are still preoccupied by the challenge of uncontrolled immigration and its political consequences.

Hence the call from Jean-Claude Juncker for 10,000 more guards to prevent Africans, and others migrants, from crossing Europe's borders.

And with more guards, more old-fashioned aid money too, to support weak and impoverished African states and to encourage their citizens to stay at home, rather than joining those heading to Europe.

But increasingly, Europe is emulating China's approach to Africa - focusing on trade, and on partnerships - not conflicts and charity.

"We have to stop seeing this relationship through the sole prism of development aid," Mr Juncker acknowledged.

Right now, the EU imports as much from Switzerland as from the entire African continent.

EU proposals:

  • Facilitate African students to study at European universities
  • Help Africa to improve the climate for business and increased financial assistance
  • Provide a total of $46bn (£35bn) in grants over the seven years from 2021
So there is enormous opportunity for growth, and job creation - crucial for Africa's booming population.

Indeed Mr Juncker, pointing out that by 2050 a quarter of the world's population would be African, sketched out a plan, or an aspiration, to create up to 10 million jobs in Africa in the next five years alone.

Mr Juncker said Africa was Europe's twin - a supportive nod to this continent's attempts to build its own version of the European Union.

He predicted that these twins would eventually form one giant free-trade zone - "a partnership between equals."


But although the African Union agreed on a free-trade zone in March, it will take years, maybe even decades, to reach EU levels of economic integration.

Still, there will be support in Africa for any overtures towards a more balanced, mutually respectful, relationship with Europe. And the timing is good.

In recent years there has been something of a backlash here against what some perceive as China's neo-colonial approach to Africa - draining the continent of its raw minerals in return for cheap loans, huge but sometimes shoddy infrastructure projects, and a strategic reluctance to look too closely at high-level corruption.

Europe, which points out that already 36% of Africa's trade is with the EU, compared with just 16% to China, is keen to exploit its geographical advantage in terms of proximity to the continent at the same time as it confronts the politically divisive issue of uncontrolled migration.

Juncker plans big EU border guards boost


Europe cannot compete with China in Africa. Europe have a tendency of intervening in the internal political matters of Africa for quite long time and African leaders have a huge resentment toward it. Chinese policy on the other hand is not caring about politics of African nations and do business .Along with its big pocket, it give china a huge advantage.
 
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Kenya Risks Losing Port of Mombasa to China

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Port of Mombasa (file image courtesy KPA)
BY MAREX2018-12-20 16:08:19

Kenya runs the risk of losing control of the Port of Mombasa if it should default on loans from state financial institution China Exim Bank, according to a new report from Kenya's auditor general. The terms of a $2.3 billion loan for Kenya Railways Corporation (KRC) specify that the port's assets are collateral, and they are not protected by Kenya's sovereign immunity due to a waiver in the contract.

KRC accepted the multi-billion-dollar loan in order to build the Mombasa-Nairobi standard gauge railway (SGR), with construction services provided by China Roads and Bridges Corporation (CRBC), a division of state-owned conglomerate China Communications Construction Company (CCCC).

"The payment arrangement agreement substantively means that the Authority's revenue would be used to pay the Government of Kenya's debt to China Exim bank if the minimum volumes required for [rail] consignment are not met," auditor F.T. Kimani wrote. "The China Exim bank would become a principle over KPA if KRC defaults in its obligations."

In addition, any dispute with China Exim Bank would be handled through an arbitration process in China, not in Kenyan courts. The auditor general expressed concern that the port authority had not disclosed these arrangements in its financial statements.

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John Githongo / Twitter

In a social media post, the Auditor General's office emphasized that it had not released the report, which was leaked to the public via unofficial channels. A source within the office told Kenyan outlet Daily Nation that "the issues raised are not conclusive."

In an interview with Kenyan media, KPA managing director Daniel Manduku expressed confidence that the contract clauses would not cause difficulties. "There is no risk of losing the port. In fact, we will pay this loan ahead of time," he said. "We can even take another loan and pay it on time."

The SGR, also known as the Madaraka Express, is a diesel-powered passenger and freight rail service connecting Nairobi and Mombasa. Its construction was plagued by cost overruns, and outside observers have questioned its economic viability. 80 percent of the project was financed by China.

Last month, Kenya's Ethics and Anti-Corruption Commission (EACC) arrested seven China Roads and Bridges Corporation executives on allegations of bribery. The company officials - four Kenyans and three Chinese nationals - allegedly tried to influence investigators who are conducting a corruption probe of the SGR rail project. Separately, two Kenyan officials were charged in August for allegedly corrupt acts in connection with the land acquisition for the rail line.

Kenyan concerns about the transfer of a strategic seaport to China have precedent elsewhere. In December 2017, Sri Lanka handed control of the newly-built port of Hambantota to a Chinese operator in order to satisfy part of its significant debt to Chinese lenders.
 
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China’s massive underwater blasts at Djibouti military base pose huge risk to environment

Satellite images show a blast with a diameter of 110m on 6 Dec 2018, which may have badly damaged the environment in the Red Sea/Gulf of Aden area.
COL. VINAYAK BHAT (RETD) Updated: 11 April, 2019 11:35 am IST

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Satellite imagery showing an underwater blast | Col. Vinayak Bhat (retd) /ThePrint

New Delhi: China’s first overseas military base, in the east African nation of Djibouti, is a mega fortress that has been in the works for some years now.

The main base is now complete, with a heliport, ammunition depot and an automated chain supply system in place.

But now, the People’s Liberation Army Navy (PLAN) is trying to build seven piers to the north-west of the base, with one to be exclusively used by the navy. In the process, it has conducted underwater blasts and possibly caused massive damage to the environment.

Over the years, China has acquired a reputation for showing scant regard for the environment when it comes to construction and reclaiming land from the sea — especially in the way it has constructed artificial islands for military purposes in the South China Sea.

Satellite imagery accessed by ThePrint shows what China is up to in Djibouti and the Red Sea/Gulf of Aden region.

Beginning of the process
The work to build the new piers began in May 2018, and continued at a very fast pace for almost a month. But then, it slowed down, possibly because of the sea and weather conditions in the area.

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Col. Vinayak Bhat (retd) /ThePrint

Then, in September-October, the reclamation work gathered pace. Hectic activity of engineering trawls and ships has been observed since.

New prefabricated blocks of 30m x 15m have been placed to further extend the pier.

China seems to have gone against international conventions of responsible behaviour by using heavy and strong explosives to dig into the sea bed for the construction of the extended pier.

The latest available satellite imagery clearly shows an underwater blast on 6 December 2018.

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Col. Vinayak Bhat (retd) /ThePrint

The diameter of the blast is approximately 110m. The sea floor thrown is almost 40m in diameter.

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Col. Vinayak Bhat (retd) /ThePrint

Ripples have been observed on the water surface up to 250m from the centre of the blast location. Such a huge underwater blast, visible on satellite imagery, indicates that a large number of blasts must be regularly carried out at this location.

Damage to the environment and sea lines
The high-intensity underwater blasts could pose serious danger to marine life in that area.

Besides, they could also be dangerous for sea traffic, as the location is very close to the main sea lines of communications (SLOC) for civil and military vessels.

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Looks like they are extending the South China Sea quite considerably doesn't it.

How long before the sub bases and air defence sites?
 
China to take over Kenya’s main port over unpaid huge Chinese Loan
Kenyan government risks losing the lucrative Mombasa port to China should the country fail to repay huge loans advanced by Chinese lenders.

In November, African Stand reported on how Kenya is at high risk of Losing strategic assets over huge Chinese debt and just after some few month the Chinese are about to take action.

The loans have been granted for the development of the Standard Gauge Railway (SGR).

Also at stake is the Inland Container Depot in Nairobi, which receives and dispatches freight hauled on the new cargo trains from the sea port.

Implications of a takeover would be grave, including the thousands of port workers who would be forced to work under the Chinese lenders.

Management changes would immediately follow the port seizure since the Chinese would naturally want to secure their interests.

Further, revenues from the port would be directly sent to China for the servicing of an estimated Sh500 billion lent for the construction of the two sections of the SGR.

Precedent
In December 2017, the Sri Lankan government lost its Hambantota port to China for a lease period of 99 years after failing to show commitment in the payment of billions of dollars in loans.

The transfer, according to the New York Times, gave China control of the territory just a few hundred miles off the shores of rival India.

It is a strategic foothold along a critical commercial and military waterway.

“The case is one of the examples of China’s ambitious use of loans and aid to gain influence around the world and of its willingness to play hardball to collect,” says the New York Times of December 12, 2017.

In September 2018, Zambia lost Kenneth Kaunda International Airport to China over debt repayment.

SGR Losses
In the likely scenario that China takes over the port, Kenya would be joining Sri Lanka -another debt-distressed nation- in losing a strategic asset.

It is possible because the SGR –operated by the Chinese, is a hugely loss-making venture, meaning it cannot generate enough money to repay loans.

SGR reported a near Sh10 billion loss in its first year of operations.

The Auditor General has warned that the eventuality is likely because of a lopsided loan agreement that greatly favours the China Exim Bank, who advanced Kenya the loan.

Specifically, Kenya got the short end of the stick in the agreement where any disputes arising from the debt servicing would be arbitrated in China.

An audit completed last month indicates that Kenya Ports Authority’s (KPA) assets, which include the Mombasa port, could be taken over if the SGR does not generate enough cash to pay off the debts.

“The China Exim Bank would become a principle in (over) KPA if Kenya Railways Corporation (KRC) defaults in its obligations and China Exim Bank exercise power over the escrow account security,” the audit reads in part.

Escrow account
An escrow account is a contractual arrangement in which a third party receives and disburses money for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacting parties.

According to the loan agreement, funds generated from the SGR were to be deposited in an escrow account – controlled by an unknown third party on behalf of KRC and China Exim Bank.

At the current estimates, KPA generates Sh50 billion a month or Sh600 billion a year in revenues.

F.T Kimani, the auditor, cited in his report that KPA’s exposure is linked to a requirement that it feeds sufficient cargo to the Chinese-built railway project.

Failure to provide the requisite cargo would mean Kenya has gone against a critical clause in the loan agreement of guaranteeing specified “minimum volumes required for consignment”.

It is also indiscernible how KPA signed the loan agreement as a borrower, in one of the toxic clauses subsequently exposing its assets to the Chinese clamp.

“…any proceeding(s) against its assets (KPA) by the lender would not be protected by sovereign immunity since the Government waived the immunity on the Kenya Ports Assets by signing the agreement,” the auditor wrote.

Repayments for the loans are slated to start mid next year on expiry of a five-year grace period.
China to take over Kenya's main port over unpaid huge Chinese Loan | African Stand
 
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What Africa Can Learn From India In Dealing With China By Bishoy Sadek
The recent standoff between the two Asian nuclear powers, India and China, spawned 20 dead Indian soldiers alongside a shackled prime minister in Delhi seeking to save face. As a retaliatory measure, seemingly nothing short of charade though, India’s Modi mandated banning 50 Chinese mobile applications including TikTok and WeChat. Considerable number of analysts recount India’s response as sheer symbolic for it cannot go any further in sanctioning the Chinese economy, for instance, that Beijing’s tentacles are well entrenched in the Indian economy.

The ubiquitous Chinese presence in the global market did not exclude the African continent. However, the Sino-African partnership has not yet culminated in a conflict for the actual imbalances or political leverage to be revealed.

Even more significant has been the process of interlocking the continent’s economy with that of China, consequently leading to enacting pro-Chinese policies serving the long sought-after goal of reining the world order.

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As part of the Chinese debt-trap diplomacy, China is exerting unprecedented investment schemes in various sectors including construction, technology and communications. Edging past European and American investors who previously got the lion’s share in the African market revenue. China has elevated from a minor investor to becoming Africa’s biggest economic partner with over 10,000 Chinese state-owned and private enterprises operating across the continent.

For example, Chinese presence in Africa’s construction market accounts for 50 percent as well as 12 percent of the industrial production and manufacturing. Chinese mega infrastructure projects include a $4.5 billion Addis Ababa to Djibouti Railway, $11 billion mega port and economic zone in Bagamoyo in Tanzania, and a $12 billion coastal railway in Nigeria.

In terms of communications and technology, Chinese ZTE and Huawei, have rapidly maintained considerable presence on the continent despite being late-comers. Their newly acquired leadership role in Africa could be traced to indomitable political and economic support from the Chinese state. State support, consequently, enabled both tech giants to provide low interest loans to customers alongside other prerogatives that rendered competition subverted.

On top of this, the booming market of smartphones is now so attractive that it allowed the Chinese company, Transsion to gain a strong foothold and dominate over the market providing cell phones of Tecno and Itel. In 2018, the company’s share in the market stood for 50 percent. Its low prices and customization of products exclusively pertained to the African customer—introducing Amharic fonts for instance—has underpinned its unmitigated success in subduing any local competition.

Why target Africa?
Although the Chinese expansion in Africa could have promising features, such as boosting employment, introducing know-how techniques in the aforementioned sectors, and providing innovative products and services, it might take a special toll.

As the world’s factory that is jockeying for global domination, myriads of raw materials and natural resources are needed to fuel the rapidly rising Chinese economic commitments globally. Africa already accounts for 90 percent of the global supply of cobalt and platinum, a 50 percent of global gold supply, and 35 percent of the global stock of Uranium. What is more interesting is that 75 percent of the world’s coltan, which is key to Chinese smartphone production, happens to be African.

What’s the lesson from India?
Ranging from failed retaliatory measures in India to seizing control over the newly-erected port of Hambantota in Sri Lanka, in 2017, due to defaulting on paying off the Chinese debt, the breakneck Chinese expansion in Africa, and interlocking the African economy with the Chinese could be reckoned to be a neo-colonial project of economic facet. In other words, shackling Africa’s economy with overwhelming Chinese debts as well as flooding African markets with Chinese products eliminating any sort of competition will ensure the following: an easy flow of the above mentioned resources to an ever demanding Chinese economy; gravitating more allies toward the Chinese camp, culminating in boosting global political influence; fulfilling China’s beloved new Silk Road project.

It is time that Africa’s Chinese policies shifted from passive-aid-loan relations to reinvigorating local production in order to circumscribe the growing Chinese encroachment.