Tanzania has suspended a $10 billion port project given unfair financial conditions in the biggest blow yet to China’s Belt and Road ambitions in Africa.
The port, to be built in Bagamoyo and operated by China Merchants Holding International, would have been the largest in East Africa, dwarfing the Mombasa port in neighbouring Kenya.
Plans also included an industrial zone, with rail and road links to a new region for oil and gas exploration.
But financing terms presented by the Chinese were “exploitative and awkward,” said John Magufuli, Tanzania’s president.
“They want us to give them a guarantee of 33 years and a lease of 99 years, and we should not question whoever comes to invest there once the port is operational,” said Mr Magufuli. “They want to take the land as their own but we have to compensate them for drilling construction of that port.”
China is facing mounting backlash over its ambitious Belt and Road initiative, a $1 trillion infrastructure investment plan to strengthen trade links around the world and increase its global influence.
It comes at a delicate time for Xi Jinping, China’s president, as he heads into the G20 summit in Osaka this weekend – Beijing is also dealing with a protracted trade war with the US and huge protests in Hong Kong where city residents are upset over a proposal that would extradite suspects to face trial in the mainland where the Communist Party controls the courts.
Beijing first announced Belt and Road to great fanfare in 2013, with developing countries around the world enthusiastically signing on for loans to fund big projects looking toward a better tomorrow.
But six years in, as new leaders take the reins, governments are starting to cancel and re-negotiate contracts given the weight of Chinese debt, affecting projects in Malaysia, Mongolia and others.
Sri Lanka’s Hambantota port was a cautionary tale for many. After the country struggled to pay up on billions in debt, Beijing used hardball tactics to acquire a 99 year lease to the port in exchange for loan forgiveness.
The case was a stunning example of what critics had long feared – that the Belt and Road project amounted to a debt trap for weak countries around the world. It sparked worries China would again leverage similar defaults elsewhere to acquire key infrastructure assets; last year, the Zambian government even had to deny rumours it was planning to hand over control of major public assets.