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Funding Africa’s Infrastructure Gap

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Africa’s Infrastructure Gap

Key to enabling African economies to make the most of their opportunities is developing infrastructure in the region. Across the continent, new laws are being implemented and alternative sources of infrastructure funding are being sought in order to kick-start direly needed infrastructure projects. At the centre of it all is China, which is providing alternative sources financing to countries in Africa that have not been able to access funding in more traditional ways. The benefits are numerous, but African countries are also concerned about their growing dependence on China.

Research released in 2018 from Baker McKenzie and IJGlobal (research) with data drawn exclusively from fully financed projects and excluding recent announcements of government funding commitments, shows that the value of loans from Chinese financing of energy and infrastructure projects in Africa almost trebled between 2016 and 2017, from $3 billion to $8.8 billion..

“As China’s Belt and Road Initiative (BRI), a multi-billion dollar plan to link Asia, Europe and Africa, is actively being implemented, we expect this amount will increase even further in the coming years,” says Wildu du Plessis, Head of Banking & Finance at Baker McKenzie in Johannesburg.

According to the research, Chinese banks have been active lenders to infrastructure projects in 19 different countries in Africa in the past four years. Infrastructure projects in Ethiopia have received $1,8 billion since 2014, Kenyan projects $4,8 billion, Mozambique infra deals $1,6 billion and Nigerian projects $5 billion from Chinese lenders. South African infrastructure projects have received $2.2 billion from Chinese lenders since 2014, Zambia has received $1.5 billion and Zimbabwe has seen $1.3 billion in loans from Chinese policy lenders since 2014.

As one of South Africa’s largest trading partners, China plays an important role in infrastructure investment in this country too. At the BRICS Summit Energy in 2018, China pledged to invest USD 14.7bn in South Africa and to grant loans to state owned enterprises Eskom and Transnet.

Du Plessis notes that even though the South African infrastructure funding gap is not as severe as other countries in Africa, there is a still difficulty in mobilising funds for infrastructure development and related projects because traditional funders take time to decide on whether to get involved.

Stanley Jia, Partner in the Beijing Office of Baker McKenzie, notes, “As part of the mobilisation of different sources of funding to fill the infrastructure gap, there is a big bucket of Chinese funding that can be used for infrastructure projects in Africa. The increasing appetite from China for funding infrastructure projects as part of its BRI means they are happy to partner with local development finance institutions and other international funders.”

According to Kieran Whyte, Head of Energy, Mining & Infrastructure at Baker McKenzie in Johannesburg, “A big attraction of the BRI for both African governments and project sponsors is that it assists the speed of project implementation. Project stakeholders advise that the whole process is a lot quicker than other options.”

Jia notes that, “Chinese policy lenders also assist in providing liquidity in that they are willing to negotiate with countries that have financial constraints that deny them access to traditional capital.”

Du Plessis notes, however, that there is rising concern amongst African sovereigns who are worried about the long term effects on their dependence on China.

“This is even though China has reiterated that it wants to be considered a responsible investor in Africa. It remains to be seen whether this concern has an impact on Chinse involvement in the funding infrastructure projects in future years. African countries have also begun building capacity to correct the imbalance between borrowers and lenders in the negotiation phase so that more balanced agreements can be reached,” he explains.

Senegal and Côte d’Ivoire

Khaled Abou El Houda, Managing Partner of Houda Law Firm in Senegal  and Côte d’Ivoire, notes, “Senegal became a BRI partner with China after the two countries signed bilateral deals during Chinese President Xi Jinping’s West Africa trip in late July 2018.

“In addition to plans for improving infrastructure in Senegal, China promised to support the country with anti-terror, peacekeeping and maintaining social stability. However, while the BRI has provided many opportunities for development, the general consensus is the China-Africa relationship could be placed on more equal footing. The challenge for Africa is in establishing where its interests converge with China’s, where they diverge, and how areas of convergence can be shaped to advance African development priorities,” he says.

Houda explains that in order to help fund the infrastructure gap, the Senegalese government  adopted the Plan Senegal Emergent (PSE) in 2014, with the overall aim of boosting the economy.

“We saw encouraging signs of 6.8% real GDP growth one year after the PSE’s implementation and it has maintained more than 6% growth in subsequent years. Building on this success, the government is continuing its PSE implementation and  related reforms, targeting sectors such as energy, transport infrastructure and agriculture.”

Zimbabwe

In Zimbabwe, Thomas Chagudumba, of Atherstone & Cook notes that the infrastructure funding gap is being addressed in various ways. Funding comes through government floating infrastructure bonds, Public Private Partnerships (PPPs) and off-budget loan funding. Khumalo notes that policy consistency, particularly in respect of currency convertibility, exchange control regulations on repatriation of funds and improved transparency and accountability are all essential to encourage infrastructure funding in Zimbabwe. Further, he explains that it is important to ring fence resources, including foreign currency, for critical inputs in support of ongoing works. This can be done via undertakings from the Reserve Bank of Zimbabwe and government guarantees.  Construction and performance bonds could also be used to curb poor project implementation, mismanagement and corruption in the infrastructure sector.

Chagudumba notes that  Zimbabwe has also benefited from the BRI with major projects in Zimbabwe including the Kariba South Hydro Power Station and the Victoria Falls International Airport.

“For Zimbabwe, the benefits of the BRI include that it aids in infrastructure development, which in turn benefits economic expansion. The transfer of information and expertise and employment creation are further benefits.”

Mauritius

Mauritius does not have a large infrastructure funding gap as compared to other jurisdictions in Africa, explains Moorari Gujadhur, a barrister at Madun Gujadhur Chambers in Mauritius. “Infrastructure projects in Mauritius tend to focus on either improving current infrastructure (ie large grid separated flyovers) or to introduce new projects (ie light rail transport). These tend to be government to government,” he says.

He explains, “India has provided Mauritius with a grant and loan to fund the development of a light rail transport project, whilst China is making investments in the ports. The new Mauritian airport terminal was entirely funded by China.”

Ethiopia

In Ethiopia meanwhile, bridging the infrastructure gap is more complicated. Mehrteab Leul, Principal of Mehrteab Leul & Associates Law Office in Ethiopia, explains, “In February this year, Ethiopia enacted a new proclamation facilitating PPPs called the Public-Private Partnership Proclamation. According to the proclamation, it is within the powers of the PPP Board to approve PPP projects  as well as instruct public bodies/enterprises to carry out a certain project as a PPP.

“According to the policy document, one of the main objectives for PPP projects is to increase the financial resources available for the development of infrastructure services in Ethiopia. All of the 17 recently approved under the PSE centre around the delivery of infrastructure services,” he notes.

Leul says that China and Italy are the prime role players infrastructure investment in Ethiopia. They have made a significant impact on the sector including via developing electricity generation capacity, supplying drinking water in urban and rural areas, developing road infrastructure and building hospitals and other infrastructure investments.

“Since 1957 the Italian contractor Salini Impregilo has completed 20 major projects in Ethiopia, worth a total of €9 billion. Chinese infrastructure investment in Ethiopia totalled $4.7 billion between 2009 and 2012.”

Leul says that in terms of the BRI, a strong win- in situation has developed for both China and Ethiopia.

“In particular, the country has benefited from infrastructure development funding, as well as technological transformation from China to Ethiopia and job creation. In general, it will enable both countries to optimize the benefits from the global market. The Addis Ababa-Djibouti Railway project is a working example of benefits of the BRI,” he says.

Leul cautioned however, that the BRI, “might leave the country open to the risk of troubled debt pressure and increasing dependence on China.”

Tunisia

Omar Besbes of United Advisers in Tunisia notes that all North African countries have signed the Belt and Road Initiative with China. However, the benefits received from this initiative are divergent. While in Tunisia it is only focused on studies of infrastructure projects so far, in Algeria and Morocco some infrastructure projects are already implemented such as seaports and desalination plants.

For North African in countries, the benefits of the BRI are that it allows recipient countries to not have to depend on traditional donors, and gives them the opportunity to benefit from China’s growth. Besbes says that countries other than China that have played a substantial role in infrastructure investment in North Africa include the European Union, Japan  France and Germany. As a result on their funding, roads, bridges, ports, airports, electricity production stations and desalination plants have been built in the region.

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

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Trump’s Tariffs, Russia and Africa Trade Cooperation in Emerging Multipolar World

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Trump's Tariffs

By Kestér Kenn Klomegâh

With geopolitical situation heightening, trade wars are also becoming increasingly prominent. The 47th United States President Donald Trump has introduced trade tariffs, splashed it over the world. China, an Asian trade giant and an emerging economic superpower, has its highest shared.

South Africa, struggling with its fragile foreign alliances, is seriously navigating the new United States economic policy and trade measures, at least to maintain its membership in the African Growth and Opportunities Act (AGOA) which is going to expire in September 2025.

It is a well-known fact that AGOA waived duties on most commodities from Africa in order to boost trade in American market. The AGOA also offers many African countries trade preferences in the American market, earning huge revenues for their budgets. Financial remittances back to Africa also play mighty roles across the continent from the United States.

That however, the shifting geopolitical situation combined with Trump’s new trade policies and Russia’s rising interest in Africa, the overarching message for African leaders and business corporate executives is to review the level of degree how to appreciably approach and strengthen trade partnership between Africa and Russia.

The notion of a new global order and frequently phrased multipolar world, indicating the construction of a fairer architecture of interaction, in practical terms, has become like a relic and just as a monumental pillar. Even as we watch the full-blown recalibration of power, the geopolitical reshuffling undoubtedly creates the conditions for new forms of cooperation.

In this current era of contradictions and complexities we are witnessing today, we must rather reshape and redefine rules and regulations to facilitate bilateral and multilateral relations between African countries and Russia, if really Russia seeks to forge post-Soviet strategic economic cooperation with Africa.

In fact, post-Soviet in the sense that trade is not concentrate on state-to-state but also private – including, at least, medium scale businesses. The new policy dealing with realities of the geopolitical world, distinctively different from Soviet-era slogans and rhetorics of ‘international friendship and solidarity’ of those days.

Bridging Africa and Russia, at least in the literal sense of the word, necessitates partial departure from theoretical approach to implementing several bilateral and multilateral decisions, better still agreements reached at previous summits and conferences during the past decade.

Understandably Africa has a stage, Russia termed ‘the struggle against neo-colonial tendencies’ and mounting the metal walls against the ‘scrambling of resources’ across Africa. Some experts argued that Africa, at the current stage, has to develop its regions, modernize most the post-independence-era industries to produce exportable goods, not only for domestic consumption. Now the emphasis is on pushing for prospects of a single continental market, the African Continental Free Trade Agreement (AfCFTA).

This initiative, however, must be strategically and well-coordinated well, and here I suggest integration and cooperation starting at country-wide basis to regional level before it broadly goes to the entire continent, consisting 54 independent states.

These are coordinated together as African Union (AU), which in January 2021 initiated the African Continental Free Trade Agreement (AfCFTA). With this trading goals in mind, Africa as a continent has to integrate, promote trade and economic cooperation, engage in investment and development. In that direction, genuine foreign partners are indiscriminately required, foreign investment capital in essential for collaboration as well as their entrepreneurial skills and technical expertise.

For instance, developing relations with Asian giants such China and India, the European Union and the United States. A number of African countries are shifting to the BRICS orbit, in search for feasible alternative opportunities, for the theatrical trade drama. In the Eurasian region and the former Soviet space, Kazakhstan and Russia stand out, as potential partners, for Africa.

Foreign Affairs Minister Sergey Lavrov has said, at the podium before the staff and students at Moscow State Institute of International Affairs in September, that trade between Russia and Africa would grow further as more and more African partners continued to show interest in having Russians in the economic sectors in Africa. This provides greater competition between the companies from Western countries, China, and Russia. With competition for developing mineral resources in Africa, it is easier and cheaper for African colleagues to choose partners.

As far back in October 2010, Russian Foreign Affairs Ministry posted an official report on its website that traditional products from least developed countries (including Africa) would be exempted from import tariffs. The legislation stipulated that the traditional goods are eligible for preferential customs and tariffs treatment.

Thereafter, Minister Sergey Lavrov has reiterated, in speeches, trade preferences for African exporters, but terribly failed to honour these thunderous promises. Notwithstanding the above granting trade preferences, there prevailing multitude of questions relating to the pathways of improving trade transactions, and removing obstacles including those Soviet-era rules and regulations.

Logistics is another torny hurdle. Further to this, Russian financial institutions can offer credit support that will allow to localize Russian production in Africa’s industrial zones, especially southern and eastern African regions that show some stability and have good investment and business incentives.

In order to operate more effectively, Russians have to risk by investing, recognize the importance of cooperation on key investment issues and to work closely on the challenges and opportunities on the continent. On one hand, analyzing the present landscape of Africa, Russia can export its technology and compete on equal terms with China, India and other prominent players. On the other hand, Russia lacks the competitive advantage in terms of finished industrial (manufactured) products that African consumers obtain from Asian countries such as China, India, Japan and South Korea.

Compared to the United States and Europe, Russia did very little after the Cold War and it is doing little even today in Africa. On 27th–28th July 2023, St Petersburg hosted the second Russia-Africa summit. At the plenary session, President Vladimir Putin underscored the fact that there was, prior to the collapse of the Soviet, there were over 330 large infrastructure and industrial facilities in Africa, but most were lost. Regarding trade, Putin, regrettably, noted Russia’s trade turnover with the African countries increased in 2022 and reached almost US$18 billion, (of course, that was 2022).

Arguably, Russia’s economic presence is invisible across Africa. It currently has insignificant trade statistics. Until the end of the first quarter of 2025, Russia still has a little over $20 billion trade volume with Africa. Statistics on Africa’s trade with foreign countries vary largely.

For example, the total United States two-way trade in Africa has actually fallen off in recent years, to about $60 billion, far eclipsed by the European Union with over $240 billion, and China more than $280 billion, according to a website post by the Brookings Institution.

According to the African Development Bank, Africa’s economy is growing faster than those of any other regions. Nearly half of Africa is now classified as middle income countries, the numbers of Africans living below the poverty line fell to 39 percent as compared to 51 percent in 2023, and around 380 million of Africa’s 1.4 billion people are now earning good incomes – rising consumerism – that makes trade profitable.

Nevertheless, there is great potential, as African leaders and entrepreneurial community are turing to Russia for multifaceted cooperation due to the imperialist approach of the United States and its hegemonic stand triggered over the years, and now with Trump new trade tariffs and Washington’s entire African policy.

China has done its part, Russia has to change and adopt new rules and regulations, pragmatic approach devoid of mere frequent rhetorics. It is important discussing these points, and to shamelessly repeat that both Russia and Africa have to make consistent efforts to look for new ways, practical efforts at removing existing obstacles that have impeded trade over the years.

Sprawling from the Baltic Sea to the Pacific Ocean, Russia is a major great power and has the potential to become a superpower. Russia can regain part of its Soviet-era economic power and political influence in present-day Africa.

Certainly, the expected superpower status has to be attained by practical multifaceted sustainable development and by maintaining an appreciably positive relations with Africa. We have come a long way, especially after the resonating first summit (2019 and high-praised second summit (2023), several bilateral agreements are yet to be implemented. The forthcoming Russia – Africa Partnership summit is slated for 2026, inside Africa and preferably in Addis Ababa, Ethiopia.

Kestér Kenn Klomegâh is a frequent and passionate contributor. During his professional career as a researcher specialising in Russia-Africa policy, which spans nearly two decades, he has been detained and questioned several times by Russian federal security services for reporting facts. Most of his well-resourced articles are reprinted in a number of reputable foreign media.

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Tariff War Threatens Global Economy, US-China Goods Trade By 80%—WTO DG

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Okonjo-Iweala

By Adedapo Adesanya

The Director General of the World Trade Organization (WTO), Mrs Ngozi Okonjo-Iweala, has said the US-China tariff war could reduce trade in goods between the two economic giants by 80 per cent and hurt the rest of the world economy.

President Donald Trump raised tariffs on China to 125 per cent on Wednesday as the world’s two largest economies fought over retaliatory levies.

The American President earlier ramped up duties on Chinese goods to 104 per cent, only to hike them further when China retaliated by raising tariffs on US imports to 84 per cent.

In a social media post announcing the moves, President Trump said China had been singled out for special treatment because of “the lack of respect that China has shown to the world’s markets.”

In her reaction to the development, the WTO DG said in a statement that, “The escalating trade tensions between the United States and China pose a significant risk of a sharp contraction in bilateral trade. Our preliminary projections suggest that merchandise trade between these two economies could decrease by as much as 80 per cent.”

She said the United States and China account for three per cent of world trade and warned that the conflict could “severely damage the global economic outlook”.

Even as he slapped further tariffs on China, Mr Trump paused higher tariffs on the rest of the world for 90 days, claiming that dozens of countries reached out for negotiations.

Mrs Okonjo-Iweala warned that the world economy risked breaking into two blocs, one centred around the United States and the other China.

“Of particular concern is the potential fragmentation of global trade along geopolitical lines. A division of the global economy into two blocs could lead to a long-term reduction in global real GDP by nearly seven percent,” she said.

She urged all WTO members “to address this challenge through cooperation and dialogue.”

“It is critical for the global community to work together to preserve the openness of the international trading system.”

“WTO members have agency to protect the open, rules-based trading system. The WTO serves as a vital platform for dialogue. Resolving these issues within a cooperative framework is essential,” she added.

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AFC Tops $1bn Revenue in 2024 Financial Year

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Africa Finance Corporation

By Adedapo Adesanya

Africa Finance Corporation (AFC), the continent’s top infrastructure solutions provider, has announced its strongest financial performance to date, with total revenue for the year ended December 31, 2024 surpassing $ 1 billion for the first time in its history.

This record performance marks a significant milestone in AFC’s mission to close Africa’s infrastructure gap through scalable, de-risked investments that attract global capital and deliver tangible development outcomes.

The corporation posted a 22.8 per cent increase in total revenue to US$1.1 billion and a 22.3 per cent rise in total comprehensive income to $400 million, up from $327 million in 2023.

AFC’s earnings growth was driven by improved asset yields, prudent cost-of-funds management and sustained traction in advisory mandates.

Further significant financial highlights include net interest income up 42.5 per cent to $ 613.6 million; fee and commission income rose to $109 million, the highest in over five years; operating income climbed 42.7 per cent to $709.7 million; total assets reached a record $14.4 billion, a 16.7 per cent year-on-year increase; liquidity coverage ratio strengthened to 194 per cent, providing over 34 months of cover; and cost-to-income ratio improved to 17.3 per cent from 19.6 per cent in 2023.

According to a statement, AFC said throughout 2024 it continued to scale its impact by mobilising capital for landmark projects across energy, transport, and natural resources.

These included the Lobito Corridor – a cross-border railway development spanning Angola, the Democratic Republic of Congo (DRC), and Zambia. AFC led the initiative to secure a concession agreement within one year of the initial Memorandum of Understanding (MoU), an unprecedented achievement for a project of its scale. In the DRC, AFC also invested $150 million in the Kamoa-Kakula Copper Complex, Africa’s largest copper producer and one of the most sustainable globally, thanks to its high-grade ore and renewable-powered smelter.

Other milestones transactions included financing support for the commissioning of the Dangote Refinery, the largest in Africa, and continued progress on AFC-backed Infinity Power Holding’s 10 GW clean energy ambition, with power purchase agreements secured in Egypt and South Africa.

AFC also invested in the 15GW Xlinks Morocco-UK Power Project, providing $14.1 million to support early-stage development of a transcontinental renewable energy pipeline between North Africa and Europe.

AFC strengthened its capital base and expanded its investor network through several landmark funding initiatives. These included a $ 1.16 billion syndicated loan – the largest in its history, a $500 million perpetual hybrid bond issue, and the successful execution of Nigeria’s first-ever domestic dollar bond, which raised $900 million at 180 per cent oversubscription.

AFC also returned to the Islamic finance market after eight years, closing a $400 million Shariah-compliant facility.

The year also saw strong momentum in equity mobilisation, with $181.8 million in new capital raised from ten institutional investors. These included Turk Eximbank – AFC’s first non-African sovereign shareholder – the Arab Bank for Economic Development in Africa (BADEA), and several major pension funds spanning Cameroon, Seychelles, Mauritius, and South Africa. Ratings agencies affirmed AFC’s robust credit profile, with AAA ratings from S&P Global (China) and China Chengxin International, and a stable A3 Outlook from Moody’s.

Speaking on the result, Ms Samaila Zubairu, President & CEO of AFC said, “These results send a clear message that strategic investment in African infrastructure creates lasting value for both beneficiaries and investors.”

“In 2024, we exceeded the billion-dollar revenue mark, delivered game-changing projects, and reinforced our financial resilience—demonstrating the scalability of our unique model that blends purpose with performance to accelerate Africa’s economic transformation,” she added.

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