NAIROBI, KENYA, JULY 24 ― The African Development Bank (AfDB) has dismissed concerns that continued borrowing from China by African States for infrastructural developing is exposing the continent to exploitation by the East.
The regional multilateral development bank says it views China as a partner in bridging the infrastructural development gap in the continent.
According to AfDB, the continent has an annual infrastructure funding gap of about US$108 billion where at least US$170 billion is required annually to fund infrastructural projects.
“China is a friend of Africa. We see them as partners and we do welcome funding from partners from all over the World,” AfDB President Akinwumi Adesina told journalists in Nairobi, adding “The investment gap in Africa is big so we need investors.”
He said AfDB is working closely with the China Development Bank among other global entities to support projects in the continent.
AfDB has a US$200 billion investment kitty from China for projects across the continent.
However, he said though African states continue to borrow from foreign markets, they must play a lead role in ensuring they get quality projects that fit their needs.
“We welcome partners to come work with us. However, we need to be on the lead in these projects,” Adesina noted.
He was responding to concerns over increased borrowing from China with African states being turned into puppets by their foreign lenders, who easily arm twists and manipulate them to their benefits.
Among countries that have continued to borrow from the East is Kenya, which has heavily borrowed from China to fund its multi-billion Standard Gauge Railway among other projects.
Kenya’s public debt recently surpassed the $50 billion (Ksh5 trillion) mark raising questions over the government’s borrowing spree. China accounts for over 70 per cent of the country’s foreign debt.
Chinese companies have been blamed for the downfall of local contractors who have been pushed out of business as a result of conditions that come with the lending.
Majority of the loans come with a clause that requires their own (lender country) companies to implement the projects.
The deep-pocketed Chinese rivals are also said to lower bids for lucrative state tenders, a move that has driven local firms out of business.
Apart from this, the companies are said to discriminate locals with Kenya recently being in the news where China Road and Bridge Corporation (CRBC), the Chinese firm that operates the standard gauge rail (SGR) was accused of nepotism.
The firm which is operating the Mombasa-Nairobi SGR was accused of discrimination and oppression of local staff, leading to investigations by the government.
Adesina was addressing journalists at the just concluded Africa50 General Shareholders Meeting held in Nairobi last Thursday.
Kenya’s National Treasury Cabinet Secretary Henry Rotich said the government has no option but to partner with the private sector and lenders to develop the country’s infrastructure. Kenya has an infrastructure funding deficit of US$2 billion.
“We can’t meet this alone. We have to work with development partners and the private sector,” Rotich said.
A large number of African countries have continued to sink deeper into debts from foreign markets as they seek to fund infrastructure development and bridge their budget deficits.
AfDB is however keen to build a strong continental infrastructure funding platform under the Africa50 initiative.
The fund was established by African governments and the AfDB to bridge the continent’s funding gap by mobilising public and private sector finance and facilitating project development.
With an investor base composed of about 26 African countries, the fund which also has the backing of the Central Bank of West African States (BCEAO) and Bank Al-Maghrib, focuses on medium to large- scale projects(with a total value of overUS$100 million), that have a significant development impact while offering an appropriate return to investors.
Total capitalization at Africa50 currently stands at around US$819 million, according to CEO Alain Ebobisse.
Speaking during the GSM, Ebobisse said the fund is ready to work with governments and shareholders to grow infrastructure development in Africa.
“We are getting ready to start our fundraising with institutional investors from within and outside Africa,” Ebobisse said.
Kenya’s President Uhuru Kenyatta announced that his government would double its contribution to Africa50 to support infrastructural development in the continent.
AfDB has since called on governments, key institutions and the private sector to support growth of the fund which has a capitalization target of US$3 billion in the medium-term.
This would help bridge the financing gap and reduce over reliance on loans from Asia, Europe and America among other sources.
“Infrastructure is key for Africa’s development. We need support from governments and the private sector to invest in infrastructure,” Adesina said.
AfDB has invested about US$3.1 billion in Kenya, with 70 per cent of the funds going to infrastructure mainly on roads and the energy sector.