The third Belt and Highway Discussion board (BRF), which doubled as a celebration of the tenth anniversary of the Belt and Highway Initiative (BRI), was hosted in Beijing, China from October 17-18 2023. As with the earlier BRF, Africa was effectively represented, with 5 heads of state or authorities attending from Kenya, Ethiopia, Republic of Congo, Mozambique, and Egypt, together with the vp of Nigeria. 5 prime leaders from African international locations attended the second BRF in 2019.
There was a lot speak of a perceived slowdown in Chinese language lending globally, and to Africa particularly, over the previous few years, and of the BRI’s supposed pivot away from giant scale infrastructure tasks. But African leaders haven’t been content material to swallow this narrative and as an alternative proceed to take alternatives to immediately reinforce African improvement priorities with China, one in all their key improvement companions. The BRF was one other such alternative, providing seemingly promising outcomes however with extra work forward for African international locations.
With the mud now settled on the discussion board, have been the priorities of African leaders taken under consideration?
To reply this query, you will need to first overview the important thing BRF outcomes. Three stand out.
First, the cash will hold flowing however will grow to be extra focused, and inexperienced.
In his opening speech, President Xi Jinping indicated that China would proceed to finance “signature tasks,” however the BRI would additionally develop its focus to incorporate “smaller but smarter” tasks, with higher emphasis on decrease danger and extra socially and environmentally impactful tasks. The renewed dedication to signature tasks particularly was accompanied by an announcement of over $100 billion in new funding for BRI cooperation tasks from Chinese language Improvement Finance Establishments (DFIs). Each the China Export and Import Financial institution and the China Improvement Financial institution will obtain a brand new financing window of roughly $50 billion whereas the Silk Highway Fund, additionally part of the BRI financing mechanism, will obtain a capital infusion of $10 billion.
The truth that the BRI’s pivot to “smaller however smarter” tasks won’t come on the expense of signature infrastructure tasks, coupled with a brand new capital infusion for BRI tasks, is a hopeful signal for African international locations. With an estimated annual infrastructure financing hole of over $100 billion, funding for infrastructure improvement stays essential for the continent’s development prospects.
Second, small and medium enterprises (SMEs) are getting a lift. On the discussion board, China Improvement Financial institution signed a Time period Facility Settlement with the African Export-Import (Afrexim) Financial institution for a mortgage of $600 million to assist SMEs in Africa. This funding seeks to advertise financial cooperation between Afrexim Financial institution member states and China, in addition to enhance Africa’s export manufacturing capability. That is essential as a result of there are an estimated 44 million SMEs throughout Africa, which drive financial development and supply an estimated 80 p.c of jobs throughout the continent.
Third, though hardly publicized, on the BRF China agreed to fund a number of infrastructure tasks in a variety of African international locations. As an illustration, China will finance two main railway tasks in Nigeria – the Abuja-Kano and Port-Harcourt-Maiduguri railways – at a price of roughly $3 billion. A facility settlement was additionally signed for China to finance building of a 25MW photovoltaic solar energy plant in Burkina Faso. China additionally dedicated to fund the enlargement of the Sagana-Marua freeway in Kenya, the Niayes street, and enchancment of the Dakar street community in Senegal (by way of China Improvement Financial institution), and, by way of the Silk Highway Fund, China will make investments within the Africa Funding Fund IV below the Previous Mutual Fund based mostly in South Africa.
Nonetheless, though these seem like promising outcomes for Africa, there may be nice print to pay attention to, and it is going to be essential to proceed to trace post-BRF progress.
First, the pivot towards “smaller but smarter” tasks implies that Chinese language lenders will intention for extra inexperienced improvement and digital connectivity tasks, in addition to place higher emphasis on noneconomic points of tasks, akin to environmental and social impacts. Thus, to progress additional African international locations could effectively must suggest extra of a majority of these tasks to credible Chinese language stakeholders and localize them. Panda Bonds, issued in Chinese language capital markets and focusing give attention to local weather financing and sustainable improvement tasks, may also be an choice to discover. Egypt not too long ago grew to become the primary African nation to challenge a Panda Bond.
Second, Xi additionally acknowledged that the brand new funding for the BRI tasks will probably be based mostly on “enterprise and market rules.” This language – China’s model of the “leveraging the non-public sector” rhetoric that’s in style in improvement finance circles – sounds enticing, but it surely additionally means going ahead, Chinese language lenders are prone to emphasize industrial rules akin to a low-risk urge for food and choice for public-private partnerships (PPPs) relative to sovereign lending. However non-public sector financing – particularly of primary utilities – can create vital issues for populations. Given fiscal area challenges, it might be higher for African international locations to work more durable and extra well to barter for long run, and extra concessional financing from China to fulfill their improvement wants.
Final however not least, this higher emphasis on industrial rules additionally signifies that Chinese language lenders are prone to be extra danger averse and require intensive due diligence for proposed tasks than has been the case prior to now. This isn’t to say that previous tasks financed by Chinese language banks on the continent have been white elephants (we’ve got not seen robust proof for this), but it surely may imply more durable work for African governments to show challenge viability.
On this regard, and as we’ve got beforehand argued, robust emphasis needs to be placed on tasks that promote regional integration, akin to these below the African Union’s Program for Infrastructure Improvement for Africa (PIDA). General, regional, cross-country infrastructure tasks are prone to have higher industrial viability as they make the most of economies of scale supplied by regional financial blocs in addition to the broader African Continental Free Commerce Space (AfCFTA). The Mombasa-Nairobi Commonplace Gauge Railway, acknowledged as an present “flagship challenge” of the BRI, as an example, would have higher industrial viability whether it is prolonged to Uganda, Rwanda, Tanzania, and South Sudan as initially conceived below the East-African Commonplace Gauge railway plan. Moreover, given the present fiscal area challenges confronted by many African international locations, regional tasks present a possibility for particular person African international locations to pool collateral for vital regional infrastructure.
General, the third BRF carried some optimism for African international locations and their improvement aspirations with China’s new funding commitments for BRI cooperation tasks in addition to China’s renewed dedication to “signature tasks.” Nonetheless, and maybe partly attributable to China’s personal financial concerns in addition to (pointless) calls from the G-7 and others for China to lend “extra responsibly,” it appears African international locations could effectively must work more durable to make sure the alternatives offered by the BRF improve the continent’s financial development and improvement.
