China’s traditional resource-backed lending model in Africa is drawing increasing criticism from experts and development authorities. This model, linking loans to future commodity exports like oil, copper, and cobalt, has been commonly used to fund infrastructure projects across the continent. However, concerns about its sustainability are now being raised, as reported by Daily Monitor.
The African Development Bank (AfDB) has expressed worries about this approach, with President Akinwumi Adesina labeling the loans as “asymmetrical” and “non-transparent.” He has called for an end to resource-backed lending (RBLs) in African countries. Critics point out that China’s transition from lending to debt extraction is straining national budgets and jeopardizing economic stability, according to the report.
While Chinese financing has fueled an infrastructure boom for more than two decades, the slowdown post-COVID and a decrease in new loans have revealed vulnerabilities. Countries like Venezuela and Angola find themselves trapped in a “creditor trap” due to repayment being tied to volatile commodity markets, forcing increased resource exports to repay debts, as highlighted by Daily Monitor.
The lending model’s framework also fosters corruption and mismanagement, as loans are linked to Chinese state-owned contractors through non-competitive bidding processes, often resulting in substandard infrastructure. For instance, Ecuador’s Coca Codo dam failed to deliver the anticipated economic benefits.
