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US, China in scramble for African infrastructure



The US and China are locked in a scramble for the African infrastructure space

By Tajudeen Hamzat, with agency reports


According to the current logic of economics, underdevelopment is up for sale and Africa is a sizzling piece of cake in the infrastructure financing arena today. And ‘super-powers’ are responding. While China is offering what it calls a ‘Belt and Road’ initiative, the US is putting forward its own alternative Build package.

In the process, the US is warning African nations over the risk of being laden with unsustainable debt through large-scale infrastructure projects that are not economically viable.

The criticism was issued this week by the head of the U.S. Overseas Private Investment Corporation (OPIC). At the same time, the Americans also unveiled plans to raise their current quantum of development finance to the continent, in the face of China’s global ambitions.

Unveiled in 2013, the Chinese “Belt and Road” initiative aims to build an infrastructure network connecting China by land and sea to Southeast Asia, Central Asia, the Middle East, Europe and Africa.

Already, China has pledged $126 billion for the plan, which is invariably been seen as a source of vital financing for infrastructure-starved partners in the developing world.

However, OPIC CEO Ray Washburne warned that the Chinese strategy created a debt trap for many poor nations.

“Just look at any project in these countries and they’re overbuilding the size,” he says. “We try to have countries realise that they’re indebting themselves to the Chinese.”

Washburne is not the first to counsel of the Trojan Horse dimensions of growing debt linked to Chinese-backed infrastructure projects.

International Monetary Fund Managing Director Christine Lagarde had in April cautioned China’s Belt and Road partners against considering the financing as “a free lunch”.

Indeed she knows what she is talking about as the South East Asian nation of Sri Lanka was forced a few months back to formally hand over commercial activities in its main southern port in the town of Hambantota to a Chinese company in December as part of a plan to convert $6 billion of loans that Sri Lanka owes China and which it is presently unable to pay back, into equity.

Back to Africa, U.S. officials have warned that a strategic port in the tiny Horn of Africa nation of Djibouti could be the next that the Chinese loan sharks would be moving to take over.

Equally, Washburne also raised his own concern over a $360 million expansion of the airport in Zambia’s capital Lusaka that is currently being carried out with financing from the Exim Bank of China.

“The local economy isn’t benefiting from that. It’s a much too large airport. They’ll have too much debt on it. At some point, someone’s got to pay. Pay or the Chinese take control,” he opined.

In the alternative, lawmakers in the United States are advancing a new law – the BUILD Act – through Congress that Washburne says should bolster private U.S. investment in developing nations by doubling OPIC’s access to U.S. Treasury credit to $60 billion.

As part of its initiatives, OPIC this month launched an Africa-focused initiative that will earmark more than $1 billion over the next three years for projects supporting transportation, information and communications technology and value chains.

“Instead of giving them a fish, we want to teach them how to fish,” Washburne said. “They’ll have to stand on their own two feet. So we’re not in making loans or doing projects that don’t make economic sense.”

Washburne added that many investments would focus on the kinds of infrastructure projects Chinese firms are currently dominating, including ports, railroads and highways.

Nigeria is also in the middle of executing some infrastructure projects that are being funded with finance from China.


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