The Chinese Model of Infrastructure Development in Africa

Infrastructural development is a key step in providing a competitive business environment for African economies. It provides the backbone for poverty reduction strategies and programmes designed to improve the livelihood of the poor. Africa is in dire need of infrastructural development. The absence of quality infrastructure in the continent holds back per capita economic growth by 2 percentage points each year and depresses firm productivity by as much as 40 percent (Escribano et al., 2008 and Kelly, 2012). Estimates suggest that around USD 90 billion is required to close Africa’s infrastructure gap annually until 2020 (AICD, 2010).

Date of Publication: January 2015

Volume Number: 1 Issue 10

Document Size: 12 pages

Within the past decade, China has financed infrastructure projects worth USD 28 billion in Africa (World Bank, 2013). In fact, from 2001 till the end of 2011, around 10 major RFI deals were either completed, or at the implementation stage in eight African countries: Angola, Congo-Brazzaville, Democratic Republic of Congo (DRC), Ethiopia, Gabon, Sudan, Nigeria and Zimbabwe, with a combined financial value of approximately USD 22 billion (Davies, 2010; China-Africa Economic and Trade Cooperation 2013; and Konijn, 2014). 

The most attractive attribute of Chinese RFI loans for African countries is the competitive interest rates and ‘no-strings attached’ conditions provided by RFI swaps. On the part of China, RFI loans provide a way to secure export markets for Chinese goods and services, given that the approval of RFI loans by China’s EXIM bank is tied to the purchase of around 70 per cent of Chinese goods and services. Thus, the use of RFI loans in Africa actualizes China’s economic objective of export promotion and the foreign policy of non-interference.