Money awaits Africa projects, say finance experts

As China continues helping Africa to develop its infrastructure with a view to industrialization, finance experts have encouraged African governments and enterprises to use the financial tools provided to serve China-Africa cooperation.

According to Wang Yong, chairman of GuangHe Culture and Tourism Holding Co Ltd, Africans should take advantage of the $60 billion pledge for China-Africa development that was announced during the 2015 Forum on China-Africa Cooperation Summit in Johannesburg, South Africa.

The funding includes $5 billion of free aid and interest-free loans and $35 billion in preferential loans, export credit and concessional loans. Additionally, $5 billion was allocated for the China-Africa Development Fund, a private equity and venture capital investment arm of China Development Bank.

The package also includes a $5 billion special loan for the development of African small and medium-sized enterprises, a financial vehicle implemented by China Development Bank that operates on a commercial basis. This is in addition to a China-Africa production capacity cooperation fund with initial capital of $10 billion.

"Enterprises should pay attention to the various financial packages from the funds and choose the ones that suit them. The financial support is aimed at helping Africa to realize sustainable self-development," he says.

Wang says better use of funds will enhance China-Africa economic cooperation, as well as increase the Asian country's investment in the continent.

Brahim Banjelloun, group executive managing director of BMCE Bank Group and president of the Bank of Africa, Morocco, says it is good news that there is a global framework for financing Africa through the Belt and Road Initiative. Projects to be developed through the initiative include roads, railways, ports and integration of maritime trade.

Last year, President Xi Jinping pledged $124 billion for the Belt and Road Initiative in an effort to forge a path for peace, inclusiveness and free trade.

"African countries should build on the funds that have been made available by China to grow their economies," Banjelloun says.

Banjelloun says the financial community should capitalize on the use of risk reduction tools to develop African finance and Sino-African cooperation.

"When it comes to guarantee products, it's essential to mitigate risks. Mitigating these risks calls for documenting contracts within jurisdictions that are easily recognizable through the transparency that can provide a framework for arbitration," he says.

Minafou Fanta Kone, CEO of the African Guarantee and Economic Cooperation Fund, says small and medium-sized enterprises should take advantage of the available funds to grow their businesses.

"The growth of Africa will truly take off when SMEs are able to play their role fully. Hence, they need to be financially supported. Believing in Africa is committing to SMEs, and I believe that is the key to development," she says.

Zhao Lei, president of Lion Fund Management, says African countries should consider asset securitization of public-private partnership projects in an effort to attract private capital to the projects.

Asset securitization is the practice of pooling various types of contractual debt and selling their related cash flows to third-party investors as securities, which may be described as bonds, pass-through securities or collateralized debt obligations.

Zhao says his company has been doing this in China and is considering doing the same in Africa.

"Asset securitization can provide long-term stable returns for capital market investors," he says.

China is also planning to promote the use of public-private partnership contracts in countries involved in the Belt and Road Initiative. The Asian powerhouse plans to work with countries along the route to finance and deliver the projects, with a focus on energy and transportation infrastructure.

Sun Yangdong, general manager of Tenergy China, says public-private partnerships are the best structure for cooperation in infrastructure development.

"Chinese companies are looking for investment opportunities in Africa, and PPP could be one of the best investment methods. The Chinese government is taking advantage of the PPP model to alleviate poverty and Africa should take a leaf from the country," he says.

(China Daily Africa Weekly 01/12/2018 page27)