Africa Finance Corporation (AFC), an infrastructure development financier, has acquired a US$300mn facility from the Export-Import Bank of China (Cexim), its first loan from China.
The facility includes a US$200mn five-year loan and a US$100mn five-year standby facility for general corporate purposes.
In a statement, AFC says the facility marks “the first step into what will be a long and beneficial relationship with Cexim”.
It comes as the African institution says it is putting strategic focus on expanding its investor base by diversifying its fundraising activities to include all sources of institutional capital in East Asia, in addition to its existing partners in Europe and North America.
Apart from the medium-term liquidity that the facility will provide, it will also offer contingent funding support for liquidity risk management as well as for opening up other financing routes and relationships with Chinese entities.
In turn, AFC will support Cexim’s Africa strategy and advise on how to optimise its loan book on the continent.
Samaila Zubairu, president and CEO at AFC, says: “This facility is not only a milestone for the corporation and its strategy for the Far East, but also marks a natural evolution in the growing financial sophistication of China in Africa, a necessary development required to accelerate Africa’s journey towards closing the infrastructure deficit.”
The agreement comes amid an intensifying debate about China’s growing influence on the African continent. China is now the largest bilateral financier of infrastructure in Africa, exceeding the African Development Bank, European Commission, European Investment Bank, IFC, World Bank and G8 countries combined.
While China’s financial support is generally appreciated as a necessity for economic growth, it is not always deemed good for the continent, with criticism mounting that Beijing is tangling African governments in a debt trap.
These are claims that China has denied, while continuing to up its stake in the continent. Last month, China’s President Xi Jinping pledged another US$60bn for African development over the next three years, which will go towards agricultural modernisation, infrastructure connectivity, green development and healthcare projects.
Meanwhile, Sierra Leone became the rare example of an African country turning down a Chinese-funded infrastructure project when it last week cancelled a US$400mn project to build a new airport outside the capital Freetown. The IMF and World Bank had previously warned that the loan agreement would impose a heavy debt burden on the country.