Follow CGSP on Social Media

Listen to the CGSP Podcast

Amid Plunging Prices, Africa’s Commodity-backed Debts to China Become Perilous

Over the past 15 years, many African countries borrowed tens of billions of dollars from China to build badly-needed infrastructure. Short of cash, these countries instead leverage their natural resources to repay their debts. Ghanaian bauxite, Angolan oil, and Zambian copper, for example, were used to generate the revenue to service these loans.

When commodity prices were high, or even just stable, these deals made a lot of sense. After all, many of these countries really didn’t have any other alternative given that raising money in the private capital markets was too expensive and no other bilateral lender was willing to extend credit lines as large as what China offered.

Then in January of this year, things started to change. The first infections of novel coronavirus, or COVID-19, were reported in China. Within weeks, China was engulfed in a full-blown epidemic that brought the entire country, and its economy, to its knees. Chinese manufacturing, consumer activity, and industrial production all effectively stopped. The Chinese suddenly just stopped buying the oil, gas, minerals, and timber that places like Africa sold and that sent prices for these commodities into a tailspin.

But here’s the catch: regardless of how low commodity prices fall, those loans still need to be re-paid. And that presents a perilous risk to a number of African countries, according to the findings of a new report by the New York-based Natural Resource Governance Institute.

“While these loans have often provided much-needed infrastructure, such as roads and hydro-dams, in many cases they have led to crippling levels of debt and the risk of losing collateral that is itself worth more than the value of the loan,” wrote co-author David Mihalyi, a senior economic analyst with NRGI.

David and NRGI Guinea Country Manager Hervé Lado join Eric & Cobus this week to discuss their new report on the dangers of resource backed lending in Africa and what governments need to do to better manage the current high levels of risk.

Show Notes:

About David Mihalyi and Hervé Lado:

David Mihalyi works on research, data analysis and technical assistance to improve the macroeconomic management of resource revenues and to further the use of open data for policy oversight. He led the development of several data tools, including, economic models for Ghana and Mongolia and the methodology of the Mining Investment and Governance Review.

Prior to joining NRGI, David completed the Overseas Development Institute Fellowship Scheme as an economist in the Budget Bureau of Sierra Leone’s Ministry of Finance. His two years in Freetown coincided with a mining boom in the country and his work focused on the impact of the extractive sector on the economy and public finances. Previously, David was based at the Hungarian Central Bank and the Office of the Fiscal Council in Hungary. In both roles, he focused on fiscal forecasting and evaluating budget sustainability. He holds a M.Sc. from the University of Nottingham.

Hervé Lado is NRGI’s country manager for Guinea. Working in the Companies and Development program at ESSEC Business School, Hervé conducted field research in the Niger Delta from 2010 to 2014 to assess the oil companies’ contribution to local development and the performance of their corporate social responsibility strategies.

In 2014, he joined a leading hydropower plant project in Cameroon to provide technical assistance in environmental and social issues. His team was in charge of drafting the project’s stakeholder engagement plan, supervising the project’s contribution to local development. Before this, Hervé was based in Yaoundé, Cameroon, for eight years in the French economic diplomacy network in Africa.

Hervé is also an experienced teacher on corporate social responsibility, economics, and ethics. He has authored publications on development processes in Africa and the role of corporations, including a book on economic and political dynamics in the history of Nigeria.

What is The China-Global South Project?


The China-Global South Project is passionately independent, non-partisan and does not advocate for any country, company or culture.


A carefully curated selection of the day’s most important China-Global South stories. Updated 24 hours a day by human editors. No bots, no algorithms.


Diverse, often unconventional insights from scholars, analysts, journalists and a variety of stakeholders in the China-Global South discourse.


A unique professional network of China-Africa scholars, analysts, journalists and other practioners from around the world.