China Poised to Overtake World Bank as Biggest Lender in Africa
By Christopher Swann and William McQuillen
Nov. 3 (Bloomberg) -- China is poised to become the biggest lender to African nations, threatening to undermine efforts by World Bank President Paul Wolfowitz to use overseas aid as an incentive to clean up corruption on the continent.
China has committed $8.1 billion this year to Nigeria, Angola and Mozambique, according to World Bank figures. That compares with $2.3 billion pledged to sub-Saharan Africa by the Washington-based World Bank. China may announce more deals at a Sino-African forum starting today in Beijing, cementing its place as the top official source of finance to Africa, development experts say.
China is bucking the global aid establishment by refusing to impose conditions in return for financing projects that include airports, government buildings and power plants. That allows African governments to borrow overseas while avoiding strictures imposed by the World Bank, such as accounting safeguards and measures to protect workers and the environment.
``There is a risk that some governments in Africa may use Chinese money in the wrong way to avoid pressure from the West for good government,'' said Papa Kwesi Nduom, who heads the Ministry of Public Sector Reform in Ghana, which is seeking a $1.2 billion loan from China for a hydro-electric dam and rural electrification.
China has a more commercial agenda than the World Bank, the U.S. and France, the top Western donors, and terms of some of its loans are less favorable. The U.S. provided a net $3.5 billion in loans and grants to sub-Saharan Africa in 2004, according to the Organization for Economic Cooperation and Development. France extended $3 billion.
Eximbank, China's overseas lending arm, has provided about $12.5 billion in infrastructure loans to Africa since 1994, a figure that excludes mining and oil projects, according to the World Bank.
Access to Resources
China is using loans, export credits and other sources of financing to secure access to resources it needs to fuel its economy, the world's fourth largest and among the fastest growing. China is the world's biggest consumer of zinc, nickel and copper, the second-largest user of crude oil and the top importer of tropical woods.
``The Chinese deals are very opaque but seem often to be long-term mortgages on Africa's resources or mineral deposits,'' says Dan Large, a China specialist at the Rift Valley Institute, a Nairobi-based think-tank that's financed in part by Unicef.
Angola, a nation of 14 million that's recovering from a 27- year civil war, is avoiding pressure to clean up corruption thanks to aid from China, Large says.
Money Disappears
The former Portuguese colony is ranked 151 of 158 countries on Transparency International's corruption index. Global Witness, a London-based human rights group, reckons that $8.5 billion of Angolan public money disappeared between 1997 and 2001.
In 2004, Angola received a $2 billion line of credit from China backed by oil revenue, an amount that was increased by $1 billion this year.
Laurinda Santos, press secretary at the Angolan embassy in Washington, didn't respond to requests for comment. The press office at the Chinese embassy in Washington didn't return telephone calls.
Nigeria, the continent's top oil producer, this year agreed to provide a drilling license to China in exchange for a $4 billion commitment to improve infrastructure. China this year also agreed to lend $2.6 billion to Mozambique to build a dam, a hydroelectric power plant and transmission lines.
Debt Crisis
Such loans raise the prospect of a renewed debt crisis in Africa, just a year after the world's rich nations agreed to forgive as much as $57 billion of debt, Wolfowitz told Chinese news agency Xinhua last week.
``Africans cannot afford to miss the growth opportunities offered by new sources of lending and investment,'' Harry Broadman, an economic adviser in the World Bank's Africa Department, said in a statement yesterday.
China and other new lenders ``will undoubtedly want to learn about the overall debt situation and coordinate with other sources of development finance to avoid some of the mistakes and problems that Western lending and aid has generated in the past.''
Wolfowitz has made his good-government drive a hallmark of his 16-month tenure at the World Bank, arguing that too much of the money intended for schools and clinics winds up in the pockets of corrupt politicians.
One result of his efforts: Chad in July agreed to set aside set aside 70 percent of its oil revenue for anti-poverty programs after the World Bank suspended $124 million in loans to the central African nation of 9 million.
Fight Against Poverty
``The effort to strengthen and improve governance is a key element in the fight against poverty,'' Wolfowitz, 62, said in a speech on Sept. 18.
Some African nations bristle at the World Bank campaign, calling it interference in domestic matters.
``The fact that a country gives you aid makes them think they have a license to tell you how to run your affairs,'' Robert Kabushenga, a spokesman for Uganda's government, said in an interview from Kampala. ``These conditions are probably well intentioned, but they are humiliating.''
To contact the reporters on this story: Christopher Swann in Washington at cswann1@bloomberg.net ; William McQuillen in Washington at bmcquillen@bloomberg.net
Last Updated: November 2, 2006 16:18 EST
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