30 November 2012

East Africa: China Seeks Larger Pie in EAC Project Financing

CHINA is seeking a higher role in the financing of East African infrastructure projects as the second biggest economy in the world entrenches itself in the continent.

This was evident yesterday after China requested and was allowed to make a presentation at a high level meeting bringing together all the six heads of state of the East African community.

China was the only individual country that was allowed to present at the EAC infrastructure retreat. The European Union, a block of 27 countries, also made a presentation but the United States, also a key player in the EAC, had no presentation.

"China attaches great importance to its partnership with the East African Community," said Lin Zhiyong, the chief representative for China in Tanzania.

China said it is in process of disbursing over Sh1.7 trillion ($20 billion), more than Kenya's current budgetary allocations, in the next three years to Africa. China agreed this with African governments in July this year with most of the funds earmarked for infrastructure development and integration efforts.

By end of August this year, Chinese investments in the EAC will amount to Sh127.5 billion ($1.5 billion) spread across sectors such as roads, energy and power. China for instance helped Tanzania build an Information Technology infrastructure backbone at a cost of Sh14.4 billion ($170 million). China has also pledged to release a further Sh34 billion ($400 million) to help Tanzania set up broadband connectivity.

On its part, the European Union said it is moving away from financing projects through grants. An EU representative said infrastructure financing going forward would be on concessional terms. The EU told the community not to rely so much on cheap loans but to adopt design, build and operate mode of project financing.

Uganda President Yoweri Museveni said EAC countries should consider concessional loans as the best option for project finance as well as obtaining cheap financing from nations such as China.

President Kibaki said the region needs to come up with innovative financing solutions that will fund the ongoing and planned massive infrastructure projects.

"This will involve reforming our capital markets and putting in place the required legal framework for public-private partnerships," Kibaki, who is the chair of the EAC heads of state summit said. "There has been a shift towards new approaches of provision, operation and financing of infrastructure.

Kibaki said Kenya has been approached by "credible and serious investors" who intend to construct major highways and other infrastructure provided the policy and legal frameworks are in place.

The EAC secretary general Richard Sezibera said the East African Development Bank will issue an infrastructure bond next year to support projects in the region. The amount of money to be raised from the bond has not been announced.

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