Chinese banks are the leading providers of infrastructure finance in Sub-Saharan Africa. But the US is upping its game.
“China has changed the narrative of Africa,” says Wale Shonibare of the African Development Bank (AfDB). “China wants to invest and transact for mutual benefit: it needs natural resources and new export markets and African countries require investment to develop their infrastructure.”
According to a report by Baker McKenzie, Thought Leadership Consulting and IJGlobal, the numbers speak for itself: From 2008 to 2017 China Exim Bank, the state-owned export-import bank, pumped $9.2 billion into Sub Saharan Africa infrastructure, three times the amount the International Finance Corporation (IFC) provided. And the US? Its Overseas Private Investment Corporation, OPIC, invested $1.3 billion.
“Until [China] came along, the West focused on aid and issues like corruption; they didn’t see the business opportunities,” AfDB’s Shonibare says.
But Chinese engagement on the African continent is no longer going unnoticed.
“Of course we’ve also looked to see what China is doing,” German chancellor Angela Merkel said in a speech to African presidents and prime ministers at the Compact with Africa conference in October 2018. “China approaches your countries with very compact investment offers.”
The same day, Germany announced a new €1 billion ($1.3 billion) fund to support investment in Africa.
The US also remain engaged. Since its inception five years ago the US Power Africa programme has funded 80 transactions valued at more than $14.5 billion that are now either online, under construction,or have reached final close.
In a survey of 434 executives from the development finance community, conducted by Thought Leadership Consulting for Baker McKenzie, a small but clear majority thought that US-based development finance institutions (DFIs) and export credit agencies (ECAs) will be more active than their China-based counterparts over the next ten years.
As if to prove the the point, the US announced soon after survey closure plans to turn OPIC into the International Development Finance Corporation and double its lending ceiling to $60 billion.
The decision is widely seen as a counter to Chinese largesse in Africa and other emerging markets. The US is reportedly concerned about the security implications of China gaining control of strategic assets as a result of unsustainable borrowing by some developing countries.
The full report “A Changing World: New trends in Emerging market infrastructure finance” by Baker McKenzie in collaboration with Thought Leadership Consulting and IJGlobal is free to download.