Policy Brief & Alerts

June 5, 2015

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 Africas infrastructure gap annually until 2020 (AICD, 2010).

Download Label
March 13, 2018 - 4:00 am
application/pdf
382.70 kB
v.1.7 (stable)
Read →


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 Chinas
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 Chinas economic
objective of export promotion and the foreign policy of non-interference.




Related

 

Nigeria Economic Update (Issue 25)

Crude oil price continued to increase in the period under review, reaching its 2016 peak at $50.30 on June 2, 2016. Specifically, OPEC weekly basket price increased by 1.43 percent from $44.65 on May 27, 2016 to $45.29 on June 3, 2016. Brent was sold for $49.96 on June 3, 2016. The present rise in crude oil price can be attributed to oil production shocks in several oil-exporting countries, and the general expectation of a further cut in output following the OPEC meeting in Vienna on June 2, 2016. However, the OPEC meeting ended with no agreement on production quotas. In Nigeria, oil production level increased in the period under review, following repairs on some of the damaged oil and gas facilities. Precisely, Nigerias output increased by 200,000 barrels on June 3, 2016 to 1.6 million barrels.

Nigeria Economic Update (Issue 7)

External reserve dropped slightly by 0.6 per cent from $28.35 billion in January 22 to $28.19 billion in January 295. Considering the continuous decline, government has stepped up efforts towards financing the deficit in the proposed budget through borrowing. At the forex market, the official exchange rate remained unchanged at N197/$ while the naira depreciated at the parallel market by 2.36 percent from N297/$ to N304/$ between January 22 and 296. Despite the huge spread between the official and parallel market exchange rates, the monetary authorities maintained its fixed exchange rate regime at the official forex market. It is expected that if the demand pressure for dollar persists, the value of naira may decline in the near term.

Nigeria Economic Update (Issue 17)

Activities in the manufacturing sector remained at levels recorded in 2016Q3. Specifically, manufacturing capacity utilization (a measure of potential manufacturing output that is actually realized) remained at 48.46 percent in 2016Q4 below average. During the quarter, structural bottlenecks such as epileptic power supply (average of 2, 548 Megawatts) in addition to forex constraints, hampered manufacturing activities. As such, high cost of raw materials and cost of production subdued activities in the short term. Recent efforts by the monetary authority to increase forex access to the manufacturing sector as well as improvement in gas supply and electricity generation would help minimize production costs and enhance production process.