Opting Out: Botswana’s Limited Negotiating Power on Chinese Finance

Since 2013, a downward trend in lending by China’s state-owned policy banks, which are mandated to help finance overseas projects executed by Chinese companies, has been observed in Africa. This article reveals that in Botswana this development started markedly earlier. The country has not borrowed from Chinese policy banks since 2006. Furthermore, overall Chinese lending to Botswana peaked in 2009 and came to a complete halt thereafter. Botswana has nonetheless continued to benefit from grants as well as debt cancellation from China. This shift from borrowing to an exclusive reliance on aid seems counterintuitive for an upper middle-income country with a relatively strong credit rating like Botswana. However, the paper shows that the downgrading of Botswana’s economic co-operation with China came about as a result of the principle of maximisation of national benefit that Botswana’s policy elites uphold in their interactions with foreign lenders, including China. The paper contributes to the literature on African agency as a key variable shaping Africa–China relations but, crucially, also highlights the limitations thereof. Botswana was able to shift to other lenders when it became dissatisfied with the Chinese loan offering. However, it could not get China to change its offering because of structural incompatibilities between Botswana’s demands and China’s approach to foreign lending. The paper also offers a study of Botswana–China economic relations, which have received limited scholarly attention thus far.