How China Is Changing Its Financing Approach In Africa

Credit: Iwaria

For over two decades China has adopted its ‘own model’ of assisting Africa’s socio-economic development effort with infrastructural-based cooperation. This has seen the massive roll-out of Beijing financed and constructed infrastructural projects across different parts of Africa. 

Some have said this approach is a trap to get African countries into debts for Beijing’s interest. But there seems to be evolving a new Beijing financing approach, “a new way of funding infrastructure like roads and power plants in Africa: through public-private partnerships,” Kenyan journalist Jevans Nyabiage, South China Morning Post’s first Africa correspondent, reveals in an Op-ed.

According to Jevans in the SCMP article, “these long-term deals take various forms and can involve equity investment, but they all see taxpayers repaying the companies that build the projects through fees, like road tolls. For the Nairobi Expressway, state-owned China Road and Bridge Corporation will recoup its investment over 27 years through toll charges from motorists.” Analysts say this type of private project finance can lower repayment risk and help African governments reduce their loans and budget deficits. It is also more profitable.

“Investments made through public-private partnerships are usually backed by state guarantees, such as from the China Export and Credit Insurance Corporation, or Sinosure. Among other African projects agreed under such partnerships, China is involved in toll roads in Mozambique and Uganda. In Nigeria, Chinese banks and Sinosure are funding a US$2.8 billion gas pipeline that is being built by consortiums of Nigerian and Chinese companies,” the article added. 

Some other examples of Chinese companies taking equity stakes under these partnerships include the Hwange coal-fired power station in Zimbabwe, with state-owned Sinohydro Corporation investing about US$176 million – on top of US$1 billion in concessional loans from the Exim Bank of China – representing a 15 percent equity stake.

Javens said these arrangements have been encouraged by Beijing. President Xi Jinping urged private Chinese companies to play a greater role in the continent at the Forum on China-Africa Cooperation in 2018, and to “make at least US$10 billion of investment in Africa in the next three years”.

Hannah Ryder of Development Reimagined said, “Chinese stakeholders are becoming more interested in PPPs because developing countries are asking them to explore them.” Public-private partnerships will make the companies more serious and responsible for their operations in Africa and other countries

This new kind of public-private partnerships, according to Zhou Yuyuan of Shanghai Institutes for International Studies, “will make the companies more serious and responsible for their operations in Africa and other countries.” 

What does Beijing’s ‘new approach’ to financing in Africa mean for Sino-Africa relations?

What do you think? Let us know in the comments.

Have you subscribed to our newsletter yet? Sign up for updates on content and opportunities.

Share your views