Africa Infrastructure Financing and China Financing Presented by
Africa Infrastructure Financing and China Financing Presented by: • Philip J Kelly March 2021
Africa Infrastructure Financing Commitments 2018 • Commitments – not disbursements, expenditure or repayment • Total $100 bn – Governments 38%, China 26%, Infrastructure Consortium Africa (ICA) and Gulf donors 26%, private 12%. • Energy 44%, Transport 33%, Water and Sanitation 13%, ICT 7% • 2018 was 24% higher than $83 bn in 2017 • African Economic Outlook 2018 estimated Africa’s financing requirements at US$130 -70 bn per year • West Africa US$25 bn of commitments, RSA US$18 bn (21 RE projects)
Africa (incl N. Africa) / Nigeria / China • US$2. 6 bn Government Budget Allocation to Infrastructure • 2000 -18 China Loan Commitments to Africa $148 bn 1076 loans • Sectors for China loans: $44 bn transport, $37 bn power, $18 bn mining, Comms $9 bn • 2000 -11 China commitments ≤ $10 bn per year 2017 $19 bn, 2018 $29 bn but it may be slowing (2019 due soon) • 2000 -2019 Nigeria $6. 2 bn 16 loans Transport $3. 4 bn (Lagos Ibadan Railway $1. 3 bn), Power $1. 2 bn • Do Chinese loans have sufficient grant element to be classed as concessional?
OECD ACET Review of Infra Bottlenecks • China timeframes banks / contractors shorter than other partners • Mainstream partners emphasise project preparation, ESG, development of institutions as well as infra • China, SOEs, State FIs / ECA see infra coming before development and institutional development as outcome not start • China paying more attention to ESG in recent times
Obstacles to rapid infra in Africa • Political nature of large projects • Structure and coordination of MDAs • Institutional capacity constraints • Varying regulatory and technical standards • Constrained access to finance • Specific requirements of different development partners • Delays in project development, resettlement, procurement inefficiency, unfavourable to private finance and sub-optimal prioritisation by financing source
China financed projects (not PPP projects) • Little emphasis on Preparation, Financial, Economic and Fiscal Analysis of Projects • No competition for construction / operation / financing • Effectively “Govt” to “Govt” agreements - some natural resource backed • “Bankable” criteria by Chinese entities? ? ? • Affordable? ? ? e. g. Ethiopia railway 25% of budget, power shortages etc. Debt Trap risk • All projects (not just PPP / private finance) have risks, including fiscal risks and contingent liabilities
- Slides: 6