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US warns Namibia against Chinese loans

Lisa Johnson

The United States (US) government last week announced a new investment initiative ‘Prosper Africa’, which unlocks opportunities to do business in Africa aimed at benefiting companies, investors, and workers both in Africa and the United States.

The Goal of the initiative is substantially to increase two-way trade and investment between the United States and Africa.

The US ambassador to Namibia, Lisa Johnson, has urged Namibia and other African countries to carefully examine whether their relationships with China are aligned to their goals for sustainable development.

Speaking at the announcement of Prosper Africa, Johnson warned African countries to reject financing that is not transparent and creates unsustainable debt or undermines their sovereignty.

These relationships include loans and investments which China is providing to African countries.

The ambassador was answering questions on what makes the US investments different from those of China.

“The US and China are strategic competitors in Africa, but we think we offer a different model of partnership because the ways we do things are different,” she said.

“We are really trying to invest in sustainable investments in Africa’s future, if you look at things like Pepfar, and the Millennium Challenge Corporation that helped Namibia so much; Power Africa, where we are trying to increase access to electricity in connections and feed the future; and now Prosper Africa,” Johnson added.

Johnson emphasised that these are real investments in any country’s sustainable development and future, adding that the decision to partner with China is a sovereign decision that each country will nonetheless take.

“It’s up to every country to choose. It is not either/or, but they need to think about what they are trying to achieve in their country and their goals,” the ambassador added.

In July 2018, figures from the finance ministry showed that Namibia owed the Chinese government N$1,99 billion.

The debt was divided into N$302 million in interest-free loans, and N$1,694 billion in concessional loans.

Namibia’s Finance minister Calle Schlettwein said at the time, the country’s debt to China is provided within a mutual understanding framework between the two governments, and contains concessional terms and conditions, as opposed to market loans of other borrowing institutions.

“The concessionality is achieved through interest rates below those available on the market. The terms for the concessional loans are 2% interest rates, 0,5% commitment fees on the undisbursed balance of the loan, five years’ grace period before the repayment of principal starts, and a 15-year repayment period,” the minister explained.

Schlettwein said then that the servicing of Chinese loans included capital repayments and interest, and in total amounted to N$65 million. As a portion of total debt servicing obligations, the debt servicing of Chinese loans is around 1% of total debt servicing obligations.

He reiterated that the total debt exposure to China is 2,6% of the total debt portfolio, whereas the total debt servicing obligation is only 1%, which is indicative of the concessionality in relation to other debts. This excludes the grants support received from China.






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