China has reinforced its position as Africa’s biggest lender for infrastructure financing. The Export-Import Bank of China (China Exim) has committed to major projects with the African Export-Import Bank (Afreximbank) and with the Tanzanian government.

A co-operation agreement with Afreximbank aims to create a US$1bn China-Africa investment and industrialisation programme to facilitate the construction and creation of industrial parks and special economic zones on the continent and to provide Africa with the capacity for light manufacturing and primary processing of raw materials and commodities.

The two organisations also commit to support logistics and infrastructure that facilitate intra-regional trade and improving trade finance flows into Africa, through risk participation arrangements, cross-referral of business contacts, and indirect funding of China Exim to obligors through Afreximbank.

China Exim’s commitment to infrastructure projects in Africa was recently confirmed by a US$7.6bn concessional loan the bank is providing Tanzania to finance construction of a railway line.

What makes China the leading financier of infrastructure projects in the African continent is a mix of expertise and state-support financing. “China has done industrial park all over the country very effectively. It is building its own railway and has a lot of excess capacity in state-owned entities to do it” says Aubrey Hruby, co-founder of the Africa Expert Network and non-resident senior fellow at the Africa Centre at the Atlantic Council. “The structure of infrastructure lending that happened in between China and Africa is basically bilateral. It shouldn’t be called FDI but government to government financing of infrastructure,” she adds.

Afreximbank will also be working with the Made In Africa Initiative to develop and operate industrial and agro-processing parks, as well as facilitating investment flows into Africa by working with African governments to create, develop, and improve the infrastructures required for industrialisation. The two organisations will also work on establishing a pan-African equipment leasing platform to supply heavy duty and manufacturing equipment to various sectors of the African economy.

According to Hruby, for the industrial programme to succeed in developing a competitive manufacturing sector, the biggest challenge will the policy certainty associated with the industrial projects in various countries. The involvement of the Made in Africa Initiative should make a big contribution in streamlining the trade and investment flow. “What the Made in Africa Initiative has shown is an ability to co-ordinate the right parties to make some of these investment and export growth happen,” says Hruby.