EU wants to rival China’s belt and road in Africa, but will deeds match words?

Jevans Nyabiage, South China Morning Post

Posted at Feb 07 2022 01:47 PM

With less than two weeks to go until the sixth EU-African Union summit, European Union members remain split on how to come up with a financial package able to rival China’s multibillion-dollar Belt and Road Initiative.

EU plans for the February 17-18 summit in Brussels include the launch of “an ambitious Africa-Europe investment package, taking into account global challenges such as climate change and the current health crisis”.

In December, the 27-member bloc announced it would mobilise up to €300 billion (US$343.5 billion) in public and private investments around the world by 2027. Working out to €60 billion a year, the funds would be used to help emerging economies heal from the coronavirus pandemic, which has pushed many African countries into debt distress.

Dubbed the Global Gateway, the plan is a response to China’s growing economic and political clout in Africa via its transcontinental belt and road infrastructure and investment strategy, with European Commission President Ursula von der Leyen pitching it as a “true alternative”.

The European Union – with the backing of French President Emmanuel Macron, holder of the EU’s six-month rotating presidency until June – had proposed an initial annual investment package worth €20 billion for African infrastructure.

However, observers say that agreeing on member states’ financial commitments and deciding on the projects that will receive the funding has become problematic.

There is quite some debate and a wide divergence of interests among EU members behind the scenes, according to Dr Tim Zajontz, political science lecturer at the University of Freiburg in Germany.

He said Spain wanted to see more projects in North Africa, the Germans doubted that all the projects were carefully thought through, while Hungary, Finland and Portugal pointed out that they first had to budget for the additional development projects.

But commitments should be expected at the Brussels edition of the triennial EU-African Union summit, hosted the last time by the Ivory Coast in 2017. The event had to be postponed in 2020 over coronavirus disruptions such as flight suspensions and border shutdowns.

“Despite obvious internal squabbles over the EU’s strategic reorientation towards Africa, the EU will propose a bundle of projects at the summit to add credibility to its claim that Europe offers a viable alternative to China’s Belt and Road Initiative,” Zajontz noted.

For nearly a decade, China has funded and built mega projects, including ports, highways, power plants and railways in Africa, Asia and parts of Europe under its belt and road plan. However, such investments, especially in Africa, have drawn criticism from the US and other Western nations that claimed China’s lending practices were luring poor states into debt traps.

As criticism grows over African debt, Chinese lenders have become more cautious – especially over mega infrastructure projects. Last week, Nigerian Transport Minister Rotimi Amaechi said Chinese loans had been delayed and the country was now looking to Europe for funding to complete infrastructure, especially its railways.

Aside from the size of the financing package, the terms of funding will also affect how likely African countries are likely to take it up.

The EU’s renewed interest in Africa also comes amid growing criticism of how it handled the coronavirus pandemic, by closing its borders without consultation, especially after South African scientists discovered the Omicron coronavirus variant late last year.

African countries at the summit may push for deals to manufacture vaccines locally and also seek concessional loans to fund projects.

However, it remains to be seen whether the EU presents a financing package approaching China’s massive outlays on infrastructure in Africa, according to W. Gyude Moore, senior policy fellow with the Washington-based think tank Centre for Global Development and a former public works minister in Liberia.

“One can be cautiously optimistic,” Moore said, but pointed out that The Economist recently described the EU’s Global Gateway as largely “a mixture of existing commitments, loan guarantees and heroic assumptions about the ability of the club to ‘crowd in’ private investment rather than actual new spending”.

“If this is indicative of what is to come, it is not promising,” Moore said.

At the 2021 Forum on China-Africa Cooperation (FOCAC) in late November, Chinese President Xi Jinping promised US$40 billion of investments into Africa, including exports and credit line support.

According to the Centre for Global Development, with the African Union-EU Summit having stalled repeatedly, African leaders have strengthened ties with other global powers – including China.

“[The December FOCAC] not only demonstrated the impressive depth and breadth of China’s relationships with Africa but crucially signalled a new approach based on ‘soft’ assets, very much stepping on the EU’s toes and their €300 billion worldwide connectivity strategy,” Moore co-wrote in an analysis for the think tank.

Moritz Weigel, founding director of the Germany-based firm China ­Africa Advisory, said that so far the unveiling of financing packages under the Global Gateway had been limited to relabelling of existing commitments or lofty announcements on mobilising investment.

“It will be interesting to see whether the EU-Africa Summit results in any more concrete pledges for new and additional finance, or if existing allocations for bilateral cooperation and potential EIB [European Investment Bank] co-financing simply get an EU-Africa branding,” Weigel said.

The EU is not alone in wanting to counter China’s belt and road plan. The G7 nations led by the US last year unveiled their Build Back Better World (B3W) initiative, framed it as “a values-driven, high-standard and transparent infrastructure partnership led by major democracies”.

A brainchild of US President Joe Biden, the B3W plan aims to invest US$40 trillion by 2035 in developing nations, including in Africa – where China is the largest financier and infrastructure contractor.

Moore at the Centre for Global Development said funds from European lenders would be extended on commercial terms, which is why the Nigerians initially sought Chinese loans – since China’s Export-Import Bank rates are cheaper than commercial rates.

“Borrowing from other sovereigns allows for wiggle room that is not available from commercial borrowers. It is also unclear if Nigeria will be deemed creditworthy or safe by commercial lenders for the size of the loan required for these projects,” Moore said.

“Either way, borrowing commercially for development projects is usually a last resort.”

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