I wrote a few days ago that the World Bank should allow the African Development Bank the freedom to run its playbook.
The African Development Bank (AfDB) which I hope empties its vault to help develop Africa rebuts World Bank whose president dropped those unfortunate lines: you have a tendency to lend too quickly and in the process, add to the continent’s debt problems. The World Bank president is wrong and he should be told that: AfDB is not adding to any problem.
Africa needs to incur debts over the next two decades to have any chance of advancement because its tax credits are so small to organically fund developments. Largely, the problem is not the debt BUT what the politicians do with the borrowed money. World Bank should focus on that second part, helping to ensure there is an improved governance.
We appreciate the World Bank; it wrote a cheque of US $20.2 billion for Africa in 2018. But that is nothing and at that rate, nothing will happen. Dangote raised close to $15 billion only for his empire a few years earlier. Time has come for respect and I expect the World Bank president to show that: AfDB is as important as the World Bank on this mission of developing Africa, and should be respected as it runs its own playbook!
But that does not mean Africa should not be concerned about the debt we are packing from China. I personally do not have much issues with AfDB, but I do have concerns when it comes to China. Yet, that does not mean that the World Bank should be the police. The reason we have China in African capitals is largely due to decades-long failures of IMF and World Bank, along with the African leaders, to fix the continent.
So when the World Bank president writes, “One of the practical problems we’re dealing with right now is some of the new lenders, the non-Paris Club lenders—and so I guess when we say that, people should sometimes read China into that.. They’ve escalated their lending, which is good in a way. We want more lending into developing countries. But…oftentimes their contracts have a nondisclosure clause that prohibits the World Bank or private sector from seeing what the terms of the contract are,” you will feel the pains arising from the disintermediation China is causing. But China did not get into Africa uninvited: the West created the vacuum which China is mining!
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Both institutions [Word Bank and IMF] are also worried about the impact of China which, while still not the largest lender, has become a hugely influential source of capital in African countries that have few options due to their weak economic balance sheet. This is particularly true because China offers a convenient package of funding and execution through its state-owned enterprises for much-needed infrastructure projects across the continent. The problem, said World Bank president David Malpass, is the lack of transparency.
“One of the practical problems we’re dealing with right now is some of the new lenders, the non-Paris Club lenders—and so I guess when we say that, people should sometimes read China into that,” said Malpass. “They’ve escalated their lending, which is good in a way. We want more lending into developing countries. But…oftentimes their contracts have a nondisclosure clause that prohibits the World Bank or private sector from seeing what the terms of the contract are.”
The World Bank will not have any luck here as the politicians prefer the Chinese playbook, as less transparency breeds the spirit of corruption, which many of them hold multiple captain-ships. My only recommendation to the World Bank is thus: boost your private sector investment in Africa via IFC, your private investment arm, to $200 billion risk capital. If you do that over ten years, China may not have valuable things to fund. But if you stay around the current $20 billion yearly number, nothing will change. China gives cash and projects, most times, the World Bank gives lines of credits; African politicians prefer cash!
Source: Quartz
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Does China actually give cash? What China does is more or less like holding the cash on its right-hand, then passing it to its left-hand, by supplying both manpower and equipment. So at the end, the money returns them, with little value in terms of job creation for the locals; while the debt is ticked up!
The idea of boosting private lending by World Bank could do the trick, that way, we can at some point – have local companies with the capacity to fund and build multibillion dollar projects; leaving China out of the equation.
But as always, the political leadership has other ideas, which differs greatly from development and sustainability; so they keep looking for easy options, with China aiding corruption in the continent…