Thursday, 18 February 2016

Who is Funding Africa´s Infrastructure?

Data on lending sources for bank credit to Africa are hard to come by. Notably the People’s Bank of China, the China Development Bank, and the Export-Import Bank of China (Exim Bank of China), have supported large-scale investments in African infrastructure but do not publish up-to-date information (Pigato and Tang, 2015). For other bilateral and multilateral lenders, ECN (2015) lists the World Bank, African Development Bank, Development Bank of Southern Africa, Export-Import Bank of the United States, African Export-Import Bank, European Investment Bank, Agence Française de développement (AFD), Japan Bank for International Cooperation (JBIC), Islamic Development Bank and Kreditanstalt für Wiederaufbau as largest creditors.

Despite steady growth in private sector funding in the past decade, official development finance backs 80% of infrastructure funding,  with China heading the list of investors, according to a report released late 2015 (ECN, 2015). An important source of foreign finance for Africa stems from official creditors, including export credit agencies. According to the Infrastructure Consortium for Africa Report 2013, grants compose around 30% of the funding extended, while 67% are based on bank credit and export credit flows.
 The Infrastructure Consortium for Africa (ICA) acts as a platform to increase infrastructure financing, help remove policy and technical barriers, facilitate greater cooperation, and increase knowledge through monitoring, reporting and sharing best practices. In its annual reports, it provides some evidence on funding commitments for Africa´s infrastructure in four sectors—energy, transport, water, and information and communication technology (ICT). Table 1 provides data for the biggest creditors with annual commitments above USD 1 billion per year reported. The table gives a hint to the sizeable deleveraging by the various bilateral Chinese lenders already in 2014.

Table1. Funding commitments by origin, USD billion
Europe (incl. EIB)
United States
World Bank
Arab Coordination
South Africa (DBSA)
Source: ICA, various years.

Net official credit flows (disbursements minus amortisation) have declined in 2015, mainly due to a heavy amortisation schedule on bilateral liabilities. Amortisation payments to bilateral official creditors jumped to USD 13 billion in 2015 and are projected at that level also for 2016. This compares to much lower amortisation payments in former years during the 2009–14 period, when amortisation to bilateral s averaged USD 5.4 billion. Northern Africa has seen net official bank credit flows curtailed, as bilateral credit to the region has turned negative from 2014, mostly as a result of Egypt´s heavy amortization schedule over recent years. Main borrowers of bilateral loans in Sub-Saharan Africa were Republic of Congo and Côte d´Ivoire, reflecting bilateral loan agreements with China. While in 2013 bilateral official lending (53.7% of total) to Africa outpaced multilateral lending, it fell back below multilateral lending in 2014.

In terms of net official bank credit inflows to Africa, therefore, multilateral development banks currently provide the most significant volume of bank credit resources to Africa (World Bank, 2016). While net bilateral bank credit flows have dropped since 2014, the rise of net multilateral bank disbursements to Sub-Saharan Africa has continued unabated. New gross multilateral disbursements for African borrowers have risen to record levels, USD 17.3 billion in 2015.  They are projected to rise further in 2016 as AIIB lending to Africa´s east coast will start to contribute.

ECN (2015), Spanning Africa´s Infrastructure Gap: How development capital is transforming Africa’s project build-out, London: The Economist Corporate Network, November.
ICA (2015), Infrastructure Financing Trends in Africa – 2014. Infrastructure Consortium Africa 
Pigato, M. and W. Tang (2015), China and Africa: Expanding Economic Ties in an Evolving Global Context, Washington, DC ; World Bank. 
World Bank (2016), International Debt Statistics.

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