Chinese development finance in Africa today is a small fraction of what it was a decade ago when Beijing’s policy banks provided billions of dollars in loans to countries across the continent.
But while those heady days of easily accessible finance will likely never return, there are indications major Chinese lenders are once again gearing up to extend new financing for badly needed infrastructure projects in Africa.
Tarela Moses and Tim Hirschel-Burns from Boston University’s Global Development Policy Center closely follow the latest Chinese financing trends and join Eric & Cobus to discuss why there’s reason for modest optimism.
Show Notes:
- The China-Global South Project: The African Development Bank and the Role of China in Africa’s Call for Changes in the Global Financial Architecture by Tim Hirschel-Burns and Oyintarelado Moses
- Reuters: Chinese loans to Africa plummet to near two-decade low – study by Joe Bavier and Rachel Savage
- Institute for Security Studies: Navigating the complex terrain of China-Africa debt relations by Jana de Kluiver
About Oyintarelado (Tarela) Moses and Tim Hirschel-Burns:
Oyintarelado (Tarela) Moses is the Data Analyst for the Global China Initiative at the Boston University Global Development Policy (GDP) Center. Her research covers Chinese loans to Africa, finance for development and China’s Belt and Road Initiative and its alternatives. Prior to joining the GDP Center, she worked on the international relations team of the Export-Import Bank of the United States as a policy analyst. She also worked at the China Africa Research Initiative as a research assistant and interned at the U.S. Development Finance Corporation as a political risk insurance graduate assistant. At these institutions, she researched and analyzed political risks, development finance and the global export credit market. Tarela earned a M.A. in China Studies and International Economics from Johns Hopkins University School of Advanced International Studies (SAIS), a certificate in Chinese and American Studies from the Hopkins-Nanjing Center and a B.A. in Political Science and Chinese Language from Duke University.
Tim Hirschel-Burns is Policy Liaison for the Global Economic Governance Initiative at the Boston University Global Development Policy Center. His work focuses on development finance, financial stability and trade and investment. He has written for publications including Foreign Policy, Just Security, The Los Angeles Review of Books and The Yale Journal of International Law, and his analysis has been featured in outlets including The New York Times, The Washington Post, The Guardian and The BBC. Prior to his current role, Tim was a Bernstein International Human Rights Fellow with Oxfam America, working on climate change, taxation and human rights as they intersect with natural resources. He is a trained lawyer with a J.D. from Yale Law School. While in law school, Tim co-founded Law Students for Climate Accountability. He holds a B.A. in Political Science from Swarthmore College and served as a Peace Corps volunteer in Benin.
Transcript:
Eric Olander: Hello, and welcome to another edition of the China in Africa Podcast, a proud member of the Sinica Podcast Network. I’m Eric Olander and, as always, I’m joined by China Global South’s Managing Editor, Cobus van Staden, in Johannesburg, South Africa. A very good afternoon to you, Cobus.
Cobus van Staden: Good afternoon.
Eric: Cobus, it is the month of June, and already we know when the Forum on China Africa Cooperation Summit is going to take place. The Ugandan Ministry of Foreign Affairs, I tend to think that they let it slip, that they put the dates out there. No other government, no other country announced the dates, but the dates for FOCAC are going to be September 3rd through September 8th. The reason why I kind of point this out as being something a little bit unusual is because in previous FOCACs, and, in fact, I have never recalled, in all the years covering FOCAC, that they have announced the dates this early and it’s been a public announcement.
Typically what happens is we get up to one or two weeks before this event and we still don’t know the dates sometimes. And so, it has been one of the best kept secrets in the world, but not this year. So, September 3rd through September 8th. We were talking a little bit internally about why would they pick the month of September, and one suggestion came, well, because the month of October in China is the Golden Week Holiday, so that’s a terrible time to do any big event because the first 10 days of the month are taken up by this huge holiday where everybody leaves. Not a good time for diplomacy. And then the month of November is the U.S. election. And it might be that China wants to kind of lay low during that month. That’s pure speculation on our part.
But we do now know the dates. Cobus, the key question that we have going into FOCAC on September 3rd to the eighth is this question of the infrastructure deficit that exists in Africa and financing. A lot of African governments right now are preparing their pitch decks to go to FOCAC and to request assistance. Some form of development finance. We don’t know what shape that will come in. And I guess the question I have for you is what do you think is going to happen this year given the demands are still quite acute in many African countries, but still the ability to take on more debt is problematic and, at the same time, the Chinese economy is still showing some of the weakness of the past couple of years? And they’re not necessarily in the mindset or the mode to shell out tens of billions of dollars the way they were in the past.
What do you think is going to happen when it comes to these development finance requests for infrastructure that invariably are going to come up when African heads of state go to Beijing in early September?
Cobus: I think it’s going to be quite revealing of China’s determination to position itself in the 2020s as an ongoing like large-scale infrastructure and development bank. So, I think what we’re going to see will reveal I think a lot of what China’s ambitious are in that respect. And I think the scale of the funding is one thing and then the areas where it’s going into would be another. Judging on the Belt & Road forum of October last year, there seem to be pains to position themselves as continuing with this kind of outreach and also signaling that a lot of it is going to happen in fields like green energy and renewables and so on, which I think dovetails with African priorities as well. So, I think, overall, there’s going to be an important and revealing FOCAC this year.
Eric: Well, this is very important. And also, by the way, as we are recording this right now, there is another Africa+1 Summit that’s going on in Seoul, South Korea. And they are going to get into the financing space as well. So that’s something to keep an eye on for next week to see what comes out of the Korea-Africa summit as well. But this question of infrastructure financing is what we’re going to talk about today. And it’s been a hot topic of discussion, oh at least for the past couple of years coming out of the pandemic, in part because as regular listeners of the show will know Chinese development finance, since about 2016, has steadily fallen. All the way to the point that in 2022, according to Boston University’s Global Development Policy Center, it went down to just $922 million. Now, there are some indications that it might start picking up again. And it may not come back in the same way through traditional market-based loans or concessional loans.
We might see a lot of new innovations in how the Chinese finance infrastructure. But the Chinese aren’t going to be alone in this space. And there’s growing demands that other stakeholders step up to do more, including the African Development Bank, which, by the way, just had their annual meeting in Nairobi, Kenya. And so, to mark that annual meeting in Kenya, we published a fascinating article, The African Development Bank and the Role of China in Africa’s Call for Changes in the Global Financial Architecture. It was written by Tim Hirschel-Burns, who’s a policy liaison with the Global Economic Governance Initiative at the Boston University Global Development Policy Center, and our old friend of the show, Tarela Moses, who is a data analyst with the Global China Initiative at BU’s Global Development Policy Center as well. Tim, Tarela — a very good morning to you.
Tarela Moses: Good morning, Eric. Good morning, Cobus.
Tim Hirschel-Burns: Yeah, thanks for having us.
Eric: It’s great to have both of you on. You guys are experts across so much of the development finance space, and that’s why I’d like to cover a lot of ground today in our discussion. But before we get into your article where you talked about the needs in terms of reforming and asking the AfDB to do more in this space and also China as well, Tarela, let’s start with you, and Tim, I’d like to get your take as well, as we go into FOCAC, what do you think is going to come out of it? Are you expecting another $60 billion announcement, big development loan packages coming out of it, or are you seeing something new that might emerge from this?
Tarela: Sure. I mean it won’t be deniable that many institutions, Chinese institutions will want to promote several deliverables at FOCAC given that it’s right after the 10-year Belt & Road Forum. It’s coming at a pivotal time in China-Africa relations where we are emerging from several debt renegotiations that happened in the years of the pandemic. And so I think there will be several new initiatives that will be discussed as well as potential repurposing of existing initiatives that even came out of last year’s BRI forum. So, I think those initiatives, on a high level, will focus more on this idea of sustainable financing within this concept of a high-quality China-Africa partnership that China has been pushing even since the last FOCAC, where whatever is announced in terms of financing amounts will be still focused on risk and quality assessment, social impact assessment.
I think there’ll be more discussions about sustainable development goals focused lending and investment. There’ll be more discussions about multilateralism in financing. So, financing to Africa’s regional institutions, co-financing together with multilateral institutions to address some of the financing gaps and demands coming from African countries. And then, lastly, I think there will be more of a discussion of value-added investment. So, think about investments that will go into not just, you know, the extraction of resources per se, but maybe the refining or processing stage of several commodities that Chinese companies are involved in when it comes to investing on the continent.
Tim: Yeah, I think Tarela gave a great overview there, and she’s the real expert on Chinese development finance. I think one important piece of context to think about here is that it’s going to be a really busy fall in terms of diplomatic events, especially with a development focus. In September, you’re going to have the UN General Assembly, including the summit for the future. There’s the World Bank and IMF annual meetings in October. There’s the BRICS summit financing coming in November. You have COP and the G20 Summit. So with FOCAC coming in early September, I think it could play an important role in sort of setting the tone for this series of major events to come up in the next few months.
Cobus: So Tim, following up on that, the infrastructure gap in Africa remains massive, but, at the same time, interest rates in the global north still remain high, African currencies remain relatively weak. And we haven’t really shifted conclusively from the inability of many African countries to absorb a lot more debt. So, I was wondering, just in your coverage of the African Development Bank meetings and the larger conversation around this financing, which options do you think are emerging to finance African infrastructure?
Tim: Yeah, I think like you’re saying, it’s a really challenging environment for African countries. They’ve had several shocks that have hit them very hard in the last few years. And if you look at the different sources of finance on the market, rates are really high. If you look at sort of traditional lenders and financiers in the Paris Club and OECD, there isn’t a lot of finance forthcoming. We’ve talked about China and we’ll continue to talk about it. But so in the midst of all this, multilateral development banks are really emerging as one source of finance where the outlook is potentially towards expansion rather than contraction. And I think you can see some of the appeal of this from the shareholder side, that multilateral development banks get a lot of money out of what you put in.
And they’ve been, especially the evolution process in the last few years has been focused on getting more out of what multilateral development banks already have. So, I think that has clear appeal for shareholders and for borrowers. Generally, it is still debt. That is a challenge. But the terms are quite a bit better than what you’d get on the market. So, I think you see these trends coming together, with the African Development Bank starting to play a bigger role or seeking to expand its role in providing development finance. And a lot of this is coming from sources of finance that don’t just come out of traditional donors’ budgets, but are looking at some more innovative financial mechanisms that can get more out of the resources that are already there. That’s not going to close the financing gap by any means, but it is progress.
Eric: Tim, when you talk about these non-traditional sources of finance, what comes to my mind is the PGII. That’s the Partnership for Global Infrastructure Investment, Global Gateway, the U.S. Development Finance Corporation, the Japanese Development Financial Corporation. And so these sources of funds, now you hear the rhetoric coming out of the U.S. and Europe and it sounds like they’re going to solve every infrastructure problem in the world with all this money flowing, and yet we’re not seeing a lot of that money actually get to places like Africa. What’s your take on Global Gateway and PGII and all these initiatives coming out of the G7 countries?
Tim: Yeah, I think there has certainly been a major trend of coming up for a new name for the same sources of finance and there isn’t really money to back it, but you have to have something that sounds good. You want to make an announcement at a diplomatic summit and so that you come up with all the names of these initiatives and there isn’t really money to back it. So, I think there’s…
Eric: So, it’s kind of BS is what you’re saying.
Tim: I’d say for those types of initiatives, yes, you should have very healthy skepticism. But I think one area where there actually has been changes despite not getting as much news coverage is in the multilateral development banks. And it’s the same story there. Shareholders don’t want to put more money in, G7 countries are slow to put in more money, but the multilateral development banks, including the African Development Bank, are, at the same time, able to expand their lending. So, one thing they’ve been doing is just stretching their balance sheets, taking on a bit more risk, lending more for the existing equity they have. And so that is meaningful, that is real new without requiring shareholders to put more in. Another major development that came recently was the IMF approved the rechanneling of special drawing rights to multilateral development banks. So, in 2021, the IMF and its members approved an issuance of $650 billion of special drawing rights.
This is the IMF’s Reserve Asset. So again, it’s not money that legislatures are appropriating in terms of traditional aid or that, but it is a real reserve asset that countries can exchange. The problem is that they were appropriated in line with the IMF’s very unequal quota formula. So, many of them were just sitting on the balance sheets of rich countries that didn’t need to use them, sitting there idle. And what this change does is it allows them to be channeled to multilateral development banks as hybrid capital. The African Development Bank led on this and they’re looking at an initial contribution in the range of two to $3 billion. And they say that’s for each $1 of rechannel special drawing rights they get, they can lend $4. So, you’re looking at something in the range of 8 to 10 million, or eight to $10 billion initially. And that’s real money.
The African Development Bank, last year, it had financing of around $10 billion. So, that is something that is real money, but, again, it’s not going to close the financing gap, but it is progress.
Eric: Tarela, in the last FOCAC, if you recall, the Chinese pledge that they were going to reallocate $10 billion of their $40 billion special drawing right allocation to Africa. Do you happen to know, and I know I’m throwing you a curve ball here, if the Chinese actually fulfilled that promise and $10 billion of SDRs made it to Africa since the last FOCAC?
Tarela: This is something I haven’t looked into as much Eric, so yeah, I’m not aware.
Eric: Okay. It might be something for all of us to look into to measure up what the commitments were at the last FOCAC compared to whether they delivered on. But you haven’t heard anything on that, have you?
Tarela: No, I have not.
Eric: Okay. Yeah, I didn’t mean to put you on the spot there, but when Tim was talking about the slow pace of SDRs making it only 2 billion, I remember that the Chinese pledged 10 billion. And as far as I know, that hasn’t made it. But again, someone more knowledgeable than me will probably be able to look into that. But Cobus, it does bring up this question of is China following through on the big pledges that it makes at FOCAC? Remember also they were going to pledge a billion dollars of vaccines last time. That never happened either. $300 billion of African exports to China. That too did not happen. So, to Tim’s point, I think there’s reason to be a little bit skeptical even about the Chinese promises as well.
Cobus: Yes, I think so. And it’ll be very again revealing to see what they commit to this time and whether we will get any kind of insight into why some of these issues didn’t hit the targets that they intended, for example, around increasing agricultural trade from Africa. So Tarela, finding financing for African infrastructure is one big problem and the use of special drawing rights as a form of hybrid capital seems to be one possible solution there. The other challenge is making sure that the projects that are funded actually have an economic impact. So, I was wondering, from your perspective, as the African Development Bank is moving forward to try and kind of fold more infrastructure financing into African countries, which kinds of projects do you think they should fund? Or maybe more specifically, how should they go about it to make sure that actually these projects are sustainable and actually have economic impact?
Tarela: I think what we’re seeing in terms of the trends of how regional institutions are thinking about prioritizing projects is by looking at what some of the priorities are of the United Nations through their sustainable development goals and kind of attaching those goals as well as the social impact of a project to the evaluation of that project. So, when we think about financing coming from China or the African Development Bank, at least what I’m seeing more of, is this financing fitting into SDGs or is it even fitting into Africa 2063 goals as well? This comes under sectors related to energy access related to digital connectivity, poverty alleviation, sectors where there could be more of a contribution to structural transformation where we’re moving from low productivity sectors to more of the manufacturing sectors.
I think those are some of the areas that the African Development Bank could prioritize in the future and, frankly, are already prioritizing. In terms of what China actually is doing as well, I did want to highlight one piece of news that came out of the China Development Bank recently that kind of answers this question about how China will be thinking about which projects to pick and what areas that they will fall into. So, around two weeks ago, actually on the China Development Bank website, there was a press release about this new fund called the Global Development Initiative Special Fund. And it emerged out of a memorandum of understanding that was signed between the China Development Bank and China’s International Development Cooperation Agency, which is China’s aid agency, also known as CIDCA.
This special fund is going to be $5 billion that will be specifically allocated to projects that address UN sustainable development goals. So, in areas that I mentioned before, they highlighted poverty alleviation, general financing for development, climate change-related financing, and even digital connectivity. Some of the principles around this fund will include it being, again, development-oriented but also market-oriented in terms of its risk assessment and making sure that there is some sort of social impact element to these projects. And lastly, the third principle is to have more diversity in terms of this fund being able to co-finance with other Chinese institutions, regional institutions and the like. And in terms of the product it’ll provide, I think it’s quite revealing about the type of financing we may see in the African region this year at FOCAC but also in years to come.
They do highlight that loans up to a 30-year maturity, which is, I mean highly concessional, but with varying interest rates will be some of the products that could be provided. These are export credit loans, project finance loans, syndicated loans. And they also mention equity investment with up to a 10-year horizon. But this equity investment is specific to African countries through the China Africa Development Fund. And no other region is singled out under this Global Development Initiative Special fund that CDB and CIDCA are putting together. Yeah, so, overall, borrowers will be able to submit their application to the CDB. CIDCA will evaluate whether these projects will be classified as GDI projects. And then from there, this fund will be providing this type of concessional blended finance that African governments frankly have been calling for. So, I think this is an interesting development that we have seen in a level of transparency that we haven’t seen from China’s policy banks coming out.
Eric: Well, it’s interesting because this fund seems to bring together five or six different trends that we’ve been talking to you and your colleagues at the Global Development Policy Center for a number of years. So, there’s the Global Development Initiative which is integrated with the SDGs. So, we can tick that box. There is the small but beautiful, the Xiao Er Mei, that is these projects that are aligned with ESG objectives. We can tick that box. There’s this creative financing. I remember we were speaking to you last year on the program, and you were talking to us about how the Chinese are moving to de-risk some of their financing by going to Singaporean capital markets, working with private banks, and using much more creative sources of financing. It sounds like that’s in there as well.
And then the equity stakes is a trend that we’ve seen over the past few years. The Port of Lekki being a great example, which was Nigeria’s largest, in fact, West Africa’s largest port, where China Harbor Engineering took a large equity stake in the project rather than using loans and whatnot. So, it sounds like, Tarela, all of these trends kind of congeal in this new package. The things that we’ve been looking at separately come together here.
Tarela: Absolutely, which is why I think the information coming out about this fund is coming at an interesting time, which is right before FOCAC, right after Belt & Road Initiative Forum, but also after some of the commitments that were announced under this Global Development Initiative that there would be a $10 billion fund set aside specifically for GDI. And it seems like this is an example of what that implementation could look like moving forward. But at the same time, there’s no indication of oh, this is a BRI or FOCAC-specific type of fund with the exception of this highlight that the China Africa Development Fund will be there for Chinese enterprises that are engaging in Africa. So, I think it’s quite revealing, and like you said, it brings things together in a way that it shows that maybe Chinese institutions are listening and finding ways to provide even more sustainable financing.
Cobus: Tim, I was wondering whether you’re seeing a broader kind of alignment of Chinese talking points or priorities with those from Africa. Like in the piece you mentioned, cooperation between the two international taxation reform, which countries like South Africa has been pushing for a long time, and which most countries in the global north opposed. So, I was wondering what you made of that cooperation and whether you’re seeing a closer alignment between them. And obviously Tarela also jump in if you’d like to add anything.
Tim: Yeah, I think on the diplomatic level, there often is alignment. I don’t think it’s perfect, and I certainly don’t think it’s a narrative where African countries are taking direction from China. But I think when you’ve seen a more unified, more vocal push from African countries, so for example to have a seat at the G20, Western countries did ultimately support this, but China supported that, and that is one of the major successes of Africa’s push to reform the global financial architecture is winning this G20 seats last year. And there you ultimately had major G20 countries come behind it. Where has been less unanimity is the tax discussions as you’ve mentioned. And I think the important context there for people who are not tax nerds is that the existing forum for global discussions, especially around corporate tax, corporate taxation, countering tax havens and tax avoidance, the existing major forum is the OECD, which is more or less a rich country club.
And for tax discussions they created something called the Inclusive Forum to include non-OECD members, but African countries did not feel very included. So that led to this push for making the UN the forum for tax discussions where all countries are members, all countries have a voice. It’s a much more equal forum than the OECD. And that’s something where OECD members, Western countries, they did not support that resolution. China did. And I think that’s a notable contrast. China is not an OECD member. So, I think that was a notable stance in the diplomatic world. At the same time, I think there are some tensions that can emerge and I think especially Western countries would like to see more differentiation amongst developing countries. And China often positions itself as amongst developing countries. This is a hot issue in climate finance, climate finance negotiations.
And so, while often there is alignment between China and African countries, I think that can be tense. Whereas the entirety of deals can be challenged by the fact that Western countries are much more ready to agree to initiatives that target and support African countries will expand their representation, but when China is grouped as part of a larger group developing countries, that’s where Western countries get much more hesitant.
Cobus: Tarela, all of this discussion and this year’s FOCAC is happening against the background of an ongoing debt crisis in some African countries and particularly a very protracted process of trying to renegotiate debts. Do you foresee that playing into the FOCAC conversation at all? And where are we in trying to kind of move beyond the current difficulties that countries like Zambia have been stuck in for years?
Tarela: Sure. So, I do think it will play into the current FOCAC in terms of what new commitments are made. I do think that these negotiations have caused Chinese institutions to rethink in what ways they will provide new financing. And so, we know that 21 African countries are currently in debt distress or at high risk of debt distress according to the IMF. And most of these countries are in central and East Africa. Some of them are in South Africa as well. So, for me, this tells me that a lack of a capacity to borrow more from the African side for some countries as well as this renewed Chinese institutional aversion to the risk of non-repayment will lead to financing that has a diversification of African borrowers in the future as well as a diversification of financing sources.
So, in the last past year, in the last version of the Chinese loans to Africa database policy brief that we released, we identified that West African borrowers seemed to be borrowing more compared to their East African and Southern African counterparts, which were regions that had received more loan commitments in the past. And so I think there will be more of a fixture on certain regions that have not borrowed as much in the past. So, this could be West Africa, north African countries that want to borrow, have capacity to borrow. I think there will also be a potential return to borrowers that are now out of debt distress, that have come out of those negotiations.
But more importantly, I think there will be more of a focus on African regional institutions. In 2023 we have at least identified at least three instances of financing coming from the China Development Bank and the Export Import Bank of China to the African Export Import Bank, the African Finance Corporation. And these are loan financing in the $300, $400, $600 million amounts for small medium enterprises and trade finance and investment financing to these regional institutions. So, I think there is this greater focus on de-risking but through on lending to regional institutions.
And then lastly, I think these debt negotiations has now led to this focus on diversifying the financing sources that are coming out of China. For example, in one of our recent publications of the China-Africa Economic Bulletin, we identified equity investment coming from China in the form of Greenfield and mergers and acquisitions investments. That appears to be increasing at least from 2021 to 2022. And based on new reports coming out of other institutions such as the Carnegie Endowment for International Peace that came out with a piece recently where they talked about trade and investment. They identified that Chinese companies are increasing their investments, particularly in the refining and processing sectors for several commodity related investments. So they identified three projects that were announced in 2023 in Zimbabwe, Nigeria and Morocco.
So, these are examples of the types of financing I think that will be highlighted that cater to some of these African country demands to move up value chains, to offset the debt that they’ve already accrued, and to look at new ways to finance their development that won’t lead to these same very public, very slow debt negotiations restructurings that took place during the COVID-19 years and continue to take place now.
Eric: Okay, so Tim, Tarela, I’d like to close our discussion with just kind of a more macro view. The African Development Bank said that this year alone, African countries collectively are going to spend $75 billion on debt servicing costs. And that is an enormous amount of money for a continent that has such a large infrastructure deficit and other needs as well. So, keeping that figure in mind, and then Tim, all of the events that you talked about that are going to happen this year, it’s a big year. We talked about FOCAC as well. And then Tarela, you talked about these very creative innovations that the Chinese are doing with the China Development Bank and their new fund. Let’s kind of bring all of this together, and I’d like to get your reflections. Do you actually think there’s going to be substantive change? Because we have heard about the G20, G21 if you want to call it that now.
We’ve heard so much about all these forums, you know, they go to all these meetings. William Ruto said he wasn’t going to go to all these Africa plus one meetings. Guess where he is right now? In Seoul, South Korea. So, what do we make of all of this? Try to wrap this up for us to say, should we be optimistic that change is going to happen this year or should we have that level of skepticism, Tim, that you alluded to that it might be more of the same?
Tim: Yeah, I think, as with a lot, this depends on how much people value incremental progress, and I think there is scope or incremental progress in terms of using existing resources more efficiently, integrating climate stretching, multilateral development banks’ balance sheets, changing policy advice towards value addition, and structural transformation. So, there are all these things you can do with the existing set of resources to make them better. But ultimately, what we are talking about, what is our reality is that developing countries, including African countries, need to embark on a structural transformation of their economies that’s virtually unprecedented in its speed and its scale if they’re to meet development goals and if they are to meet climate goals.
And there’s a very young population in African countries. So, there are these huge investment needs in the trillions of dollars. So, there are things you can do with existing resources, but, ultimately, something that is so profound in its implications requires money. That costs money. And right now that money is not available to African countries and, in general, developing countries with some exception. So yes, I think there is reason to be skeptical about the scale of financing that is needed, especially concessional grant resources. There’s reasons to be skeptical that that’s going to emerge in the coming months.
Tarela: Yeah, I’m going to take a slightly different take here and say I think there’s reason to be optimistic about some of these announcements that are coming out and as well as all these forums that are happening this fall. And I say this because I think in recent years we’ve just seen way more attention go to the needs of several countries that are needing to go from where they are now and fast-track their structural transformation. I think China has played a huge role in this kind of moving attention to focus on the needs of these countries. And I think specifically African governments are capitalizing on this attention through these plus one summits, through just speaking out more when there is this platform when platforms are provided for them to be able to express demands.
And so we know that based on the African Development Bank’s African economic outlook, they identified that $402 billion is needed per year in order for African countries to fast-track their structural transformation to bring about more development. But they identify that it’s going to take a combination of domestic funds as well as financing from multilateral and regional institutions and bilateral investors or countries in general. So, to me, the fact that FOCAC is going to happen, they’re probably going to put out a commitment. I won’t be surprised if there’s reactions from Europe, from the U.S., from Korea even, and Japan that want to outplay or out-commit China so to speak. And I’m hoping that the more that happens on a public scale, the more we will see actual implementation of that financing over time that could address at least a portion of this gaps that we’re discussing.
Eric: That is fantastic to get these contrasting views. The article is The African Development Bank and the Role of China in Africa’s Call for Changes in the Global Financial Architecture, written by Tim Hirschel-Burns, who’s a policy liaison with the Global Economic Governance Initiative at Boston University’s Global Development Policy Center, and also at the Global Development Policy Center, Tarela Moses, who is a data analyst there in the Global China initiative. And thank you both for joining us on the show. I’ll put a link to the article in the show notes. We really appreciate it and just so glad to have the chance to speak with you about this.
Tim: Thanks so much for having us.
Tarela: Thanks for having us.
Eric: Okay, Cobus, we got a split card there at the end. Tim, a little bit more skeptical. Tarela a little bit more optimistic. Where do you fall?
Cobus: I’m always hoping for change. I do feel it’s an important moment. It’s a kind of a pivotal moment in order to get to some of these huge challenges that we’re facing, that Africa particularly is facing, the overlap of a development under climate crisis together with the financing crisis. So, the time is definitely right. Whether the political will is there, particularly in the different parts of the richer world, that is a different question, particularly because this is such a pivotal political year as well. I think I fall a little bit between the two. Now, I wouldn’t say I’m, I’m super pessimistic or gloomy, but at the same time I also see some significant barriers.
Eric: I think what I’m going to say is going to surprise you. I’m actually a little bit more on the optimistic side this year. I mean, that’s usually not where I land on these things, and I didn’t have that on my bingo card tonight, to be optimistic. But I think what Tarela was talking about in terms of the innovations by the China Development Bank in this new initiative, this $5 billion initiative is absolutely fascinating because it reveals to me that there’s an enormous amount of learning. I can’t tell you over the past three or four weeks how many conversations I’ve had with international media outlets who’ve asked me the same question — “Is Chinese Global Development Finance anchored in the Belt & Road dead? Is the belt and road finished?” And I keep saying, “No, it’s not. It’s evolving.” And this fund in particular, I think, is the best example of the evolution of Chinese development finance, but it’s happening so far out of view
I’ll be honest with you, I follow this space as closely as anybody does literally on a daily basis, and I hadn’t heard of this fund that she’s talking about. It’s absolutely fascinating. You have to be really deep in the weeds, as she is, to be able to find out about these things. So, it’s not out there for everybody to see. But the fact that they’re combining so many different things, they have elements of what the Development Finance Corporation is doing is by taking equity stakes in early-stage startups. That’s interesting. They are bolting this onto the SDGs. That’s interesting. All of these new innovations in development finance coming out of China I think are something absolutely fascinating. And I’m hoping that someone like Tarela is going to do a big paper on it so we can better understand it.
Cobus: Yeah, me too. Like, I think these are really interesting and innovative developments. It’ll be also very interesting to see then whether they are echoed from other donors and development partners too. If so, that’d be a great development I think.
Eric: Yeah, but I thought you were going to go somewhere else with that. The key question is, okay, so the Chinese are changing the way they approach development finance in Africa. The question is, are African governments and African Development Banks and African stakeholders, are they keeping up with the pace of change as well so that when they sit down with the Chinese, they can engage them on these different plans? I don’t say that as a leading question. I genuinely want to know, and I’m not sure, you know, but that is an open question as to whether or not the China literacy on these evolutions is keeping pace with the change.
Cobus: I think there one might have to draw a distinction between individual African governments and people who work in multilateral financing world in Africa. I think they are driving a lot of these changes or they’re definitely advocating for a lot of reforms. I think it’s on the African government level. And as we know, frequently these negotiations do come down to bilateral negotiations in the end. So, capacity, China capacity and keeping up with these changes is really key I think for African governments.
Eric: And that ties in with the work that’s scholars like Folashade Soule are doing in terms of working with African governments on capacity strengthening their China negotiating skills. And that, as she said over the years, has improved considerably from FOCAC three, four, five, six years ago. So that’s really something interesting to watch. I guess we’ll get a sense a little bit on the negotiating prowess at FOCAC this year to see what comes out of this and see if we do get something more tangible. I think it would be worthwhile, though, and I’m not sure if a researcher has done this, to go back through all of the China pledges over the years — how much was committed, how much was spent, how much was unfulfilled. That is a piece of data that I think is missing in the discourse and I think would be quite useful for us to have. Hard to track a lot of this. Hard to track, though.
Cobus: Very useful. It’s missing because it’s frequently very hard to track. These announcements frequently they’re not broken down into which particular projects are going to do, and then afterwards, it’s very difficult to track what actually got implemented and where and how and what the success rate was. Very little of that data is actually published conclusively by either side. And so for researchers, that is sometimes a bit of a black box I think.
Eric: Yeah. Well, let’s leave it there. What a great conversation. My head is always spinning after talking with the folks from the Global Development Policy Center. And by the way, every Tuesday, GDBC publishes a column in our site and on our newsletter. And so, if you would like to read these insights fresh before everybody else does, go to chinaglobalsouth.com/subscribe and sign up for a subscription. It’s the best way that you can support the important work that Cobus and the rest of the team are doing in Asia, Africa, and the Middle East. Independent news organizations like ours are all struggling, and we have a donate button now on our homepage. And I have to tell you, Cobus, it is so heartwarming that people are actually using it. We’ve gotten our first donations this week. And for all of you, thank you so much.
You have no idea how much this means to us. We’re also very grateful to our Patreon supporters and, of course, to our subscribers. If you are a student or a teacher and you would like to sign up for our service, just email me, eric@chinaglobalsouth.com, and I will send you a discount link for 50% off the usual subscription rate. That means that subscriptions start at $10 a month. So that’ll do it for this edition of the China in Africa Podcast. For Cobus van Staden in Johannesburg, I’m Eric Olander, until next week, thank you so much for listening.
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