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Senegal is getting addicted to Chinese loans as France’s hold loosens

Reuters/Minoru Iwasaki/Poo
Chinese president Xi Jinping shakes hands with Senegalese president Macky Sall in 2016
By Ilaria Maria Sala
Published Last updated This article is more than 2 years old.

Dakar, Senegal

When China’s president Xi Jinping stops over in Senegal for his first State visit to the country it will be the third time since 2012 Xi and Senegal’s president Macky Sall will meet. And while China sees Dakar in a way not so different from how it approaches the rest of Africa, Sall has a lot at stake and has talked of a “special relationship” that bonds the two countries.

It is the first overseas trip of Xi’s second term as president and will also take in Rwanda on his was to South Africa for the BRICs summit.

Under Sall, elected in 2012, the country has engaged in an ambitious Plan for an Emerging Senegal, which wants to see a major economic and infrastructural overhaul by the year 2035—encompassing everything form transport and industry to education, urbanization, agriculture, healthcare and employment.

For this, China’s loans have been decisive: “Chinese loans are quite flexible, and have convenient terms for us,” said Thierno Ba Demba Diallo, co-ounder of the Institute for Applied Negotiation and a government advisor: “It is true that the IMF has been cautioning Senegal on how much debt it’s taking on, but we have solid growth, and lots of resources, oil among them,” he said.

Senegal isn’t alone in being cautioned by IMF about mounting debt, more than a few African countries are believed to have become significantly indebted to China’s convenient loans in a bid to tackle an infrastructure deficit problem rampant across Sub Saharan Africa. For example it was recently revealed that over 70% of Kenya’s external bilateral debt  is owed to China alone.

It is however hard to come by complete statistics of how exposed Senegal has become to Chinese loans, with a certain level of opacity on the total amounts involved. China is building a highway linking Dakar to Touba, its second city, and part of an industrial park in Diamniadio, as well as many other projects, for a partial total of $1.6 billion being loaned and invested by China in Senegal (French), making China the first investor of the country, and its second international commercial partner (up from 24th in 2012), after France.

While China’s economic importance for Senegal is paramount, “for China, what really matters is political,” said Thierry Pairault, of the French National Scientific Research Centre. Africa represents only 4% of Chinese international trade, Pairault said, while China’s presence has allowed Africa to become more dynamic and to diversify the pool of its economic partners. “The main interest remains political, though, in terms of counting on African support in the various international fora, and also to absorb China’s overcapacity problems by creating exterior demand,” he said.

As Sall lays out the red carpet for Xi, it’s worth remembering China is a relatively new partner for Senegal—Dakar only resumed diplomatic ties with Beijing in 2005, switching allegiances from Taipei. It helps diversify its reliance on its other “special relationship” with France, the former colonizer and still the most important foreign political and commercial presence in Senegal.

For example, Senegal uses the Francophone West African version of the common currency CFA. The CFA and its structure, in which the 14 countries, through two regional central banks, deposit 50% of foreign exchange reserves at the Bank of France in exchange for fixed-rate euro convertibility, are facing their most significant criticism in decades.

China has been courted by Senegal with success, together with Turkey, which has been investing heavily in the country, closing in on the privileged relationship France thought was a historical given.

While Senegal has a clear strategy of obtaining more loans and expertise to finance its development, China is also using its more recent African foray to gather more experience in unfamiliar terrains. “China is eager for regional connectivity, and doesn’t discriminate on where it wants to be. It can be quite experimental, adding more investments and projects in tranches: but both sides may need to be more careful going forward,” says Janet Eom of the China Africa Research Initiative.

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