Between them, Presidents Festus Mogae and Ian Khama borrowed a combined total of P9.3 billion from China to finance infrastructure projects between 2000 and 2017.
As the rest of the continent, Botswana has an enormous infrastructure deficit and one too many times, finds itself turning east rather than west to get funding for vital mega infrastructure projects. China is the third biggest global net lender in the world, with a net international investment position of US$2124 billion, corresponding to about 15 percent of its nominal GDP in 2019. Chinese loans provide a 15–20-year maturity with 5-7 years grace period. The interest rates are either a fixed 2 percent or a Euribor (Euro Interbank Offered Rate) or LIBOR (London Interbank Offered Rate) rate plus a spread of about 3 percent. The loans in the 2000-2017 period were mostly provided by the Export-Import Bank of China (Eximbank, 55.3 percent of the total funding) and the China Development Bank (CDB, 25.2 percent), with the rest by other Chinese commercial banks and contractors. This funding was primarily invested in transport and power infrastructure (55.6 percent of the total funding) and the mining sector (13.3 percent).
Between 2000 and 2017, Botswana borrowed US$90 million from Eximbank and $841 from other Chinese commercial banks and contractors, racking up a combined total of $931 million. This information has been provided by the African Development Bank (AfDB) which Botswana is a member of. Mogae was president between 1998 and 2008 and was replaced by Khama whose own 10-year term ended in 2018.
In August 2018, after Khama had stepped down and been replaced by President Mokgweetsi Masisi, then Minister of Finance and Economic Development, Kenneth Matambo, and the Ambassador of the People’s Republic of China, Zhao Yanbo, signed an agreement in terms of which China exempted Botswana from payment of three interest free loans amounting to P80.4 million.
While they do a good job of closing developmental gaps that exist in a Third World countries, Chinese loans are seen by some as a debt trap. Indeed, China has confiscated property from countries (like Zambia) that failed to repay their loans. Data compiled over three years by AidData, a United States research lab at the College of William & Mary shows that the secretive terms of China’s loan deals with developing countries require borrowers to prioritise repayment of Chinese state-owned banks ahead of other creditors. Some other research has found that China doesn’t distinguish between official development assistance (ODA) and more commercially-oriented types of financing. The latter results in a situation where what was supposed to be a ODA ends up being a loan that has to be repaid.
However, Masisi has refuted such claim, writing on his Facebook page in 2018 that such fears were unfounded. He has expressed intent to use Chinese loans to diversify Botswana’s economy. Loans secured during his tenure are not part of the AfDB dataset.