FINANCE – Financing the future as debt begins to bite

What economic risks and benefits are associated with increasing Chinese investment, and how might East African governments use digital technologies to more effectively raise revenue?

Chapter Contents:

As debt-to-GDP ratios soar across Africa, borrowing challenges could mount

  • As debt levels continue to rise and the structure of debt becomes more commercial, the cost of servicing is now placing a significant strain on public budgets in many African countries.
  • China has become Africa’s largest creditor and remains committed to financing infrastructure on the continent, pledging a further $60 billion in loans in 2018.

China is fast becoming the dominant source of foreign direct investment in East Africa and Chinese investors are diversifying their portfolios

  • There are now some 10,000 Chinese firms operating in Africa that employ several million people. While Chinese
    investors have historically taken an interest in manufacturing, natural resources and infrastructure, they are now exploring opportunities in housing, transport, digital and agriculture.
  • Countries in the region are having contrasting experiences with Chinese investors.

New thinking plus evolving incentives and political pressures are changing aid flows to Africa

  • In an age of populism, aid agencies are under increasing pressure to serve national interests.
  • Aid is increasingly being used as a means of mobilising private finance in less developed countries.