In late June 2022, almost a decade after China’s Belt and Road Initiative (BRI) started in 2013, the G7 finally launched its counteroffensive: the Partnership for Global Infrastructure and Investment (PGII), which is a 5-year plan to mobilize funds of up to US$600bn in the public and private sectors, from governments, multilateral institutions, development finance institutions, sovereign wealth funds, to banks, insurers and the capital markets. The PGII, which is also primarily a coordination mechanism for the varied development initiatives of G7 countries targeted at Africa and the broader developing world, will focus on 4 key areas: clean energy, digital connectivity, health and gender equality.
The United States, which will facilitate a third of the funding (about US$200bn), has a clear interest in this new strategy, as have the other rich countries of the G7. Over the past decade, China has risen in influence in Africa to rival, sometimes outshine, the West, the costs to which became all too evident from the ambivalence of African leaders towards the West’s mobilization of support for sanctions against Russia, after it invaded Ukraine in early 2022. There is scepticism about whether the PGII is not just another one of many such initiatives already seen in the past, that after all the initial excitement that greets their announcement, sooner than later lose steam, as donor countries move on to new priorities. Until yet another time comes when the clouds gather into a potential storm for global geopolitics that African support could help mitigate.
Figure 1 Africa’s external creditors (2000-2020)
Source: David, M. & Christoph, T. (2022), and World Bank
China’s competition and climate action are key motivations
The focus on infrastructure is particularly instructive, as it is straight out of the playbook of China, which rightly assessed that in spite of the corruption and misgovernance on the continent, there was a genuine desire for infrastructure, a win-win for its leaders’ desire for big symbols and gestures, the kind of populism that they need to remain in power. The PGII, which is a successor programme to the American Build Back Better World (B3W) initiative unveiled at the G7 summit in 2021, will be different from China’s BRI in one key aspect: The infrastructure projects will give the utmost priority to environmental, social and governance (ESG) issues, which is something the Chinese have not been particularly keen on.
Other members of the G7 have since gone on to launch their own development initiatives aimed at Africa and the broader developing world, most of which are themed around climate action goals. The European Union’s €150bn Global Gateway Africa–Europe Investment Package is aimed at accelerating transitions to a green and digital economy, as well as sustainable growth, decent job creation, in addition to strengthening the continent’s health and education systems. Through its Clean Green Initiative, which was launched at COP26 in November 2021, the United Kingdom aims to facilitate green and sustainable solutions in developing countries, many of which are African.
With respect to energy, these initiatives are fundamentally aimed at achieving net zero emission goals. Thus, while on the one hand, the world’s wealthiest countries have a geopolitical imperative to counter China’s rising influence in Africa and the global south, the climate exigency of transitioning the world towards net zero emissions is also a key motivation, especially with respect to energy. Africa is conflicted somewhat, as even as it has not been able to achieve energy sufficiency with fossil fuels thus far, it is now faced with the untimely dilemma of potentially being an outlier with respect to the global drift towards cleaner energy sources, which even for rich countries, are not scalable enough to eclipse fossil fuels as yet.
Figure 2 Chinese loans to Africa (2000-2020), US$m
Source: Boston University Global Development Policy Center (2022)
Work with China
Does the G7 Africa infrastructure plan matter? Will it move the needle on the African infrastructural financing need that the AfDB estimates at more than US$100bn annually? The answer is nuanced. In the first instance, a 5-year plan points to a failure in appreciating the extent of the problem. There has to be a deliberate, consistent and persistent investment in African infrastructure over a sustained period, a decade at least, to make an appreciable impact. Besides, the record of the West on African infrastructure investment is poor. With China having already proved to be a more successful/popular alternative, one where the infrastructure is simply financed and built with no strings attached, even if the costs include overbearing debt burdens, opaque documentation and environmental recklessness, the West has a higher threshold to surpass to charm African leaders on side. Over the past decade of the BRI, there have been infrastructure projects in subject countries of more than US$3trn. While the West can also point to much more substantial and multifaceted support for African countries over many years that precede the Chinese effort (see Figure 1), the depth and effectiveness of the Chinese commitment have not been lost on African governments and their populations. Perhaps pointing to China’s growing maturity as an international creditor, China forgave 23 interest-free loans for some 17 African countries in August 2022, which the Boston University Global Development Policy Center estimates at US$45m to US$610m; albeit, this represents less than 0.5% of about US$160bn in estimated Chinese lending to Africa in 2000-20.
True, China has lately significantly slowed its largesse (see Figure 2), owing to problems at home that range from a slowing economy, Covid-19 and an internalization policy drift to immunize itself from potential and increasingly likely armed conflict with the West. But as the burden on African countries from these Chinese loans, some for infrastructure that were clearly costed outrageously, has come to the fore, as these countries struggle to repay or simply default on their loans, China’s restraint in extending new loans is understandable. While this buttresses the point of the West about the sustainability, the lack thereof, that is, of unrestrained Chinese debt and Chinese-financed infrastructure that barely meet basic environmental, social and governance (ESG) standards, the influence that China now has over many African governments has not been lost on western countries. A raft of imminent African debt restructurings, which are necessarily co-led by China, points to a significant change to the hitherto Western-dominated geopolitics of African countries. Still, the West’s competitive drift on the African continent owing to China’s growing influence has been criticized. Instead, a win-win cooperative stance between Africa’s Eastern and Western development partners is advised, which in any case was increasingly inevitable, as the ongoing African debt restructuring negotiations being led by G7 countries and China show.
Channel efforts through African DFIs
A better approach might be for the West to channel its developmental financing initiatives through existing development finance institutions (DFIs) like the World Bank and International Monetary Fund (IMF). The biggest potential change is that all such funding, whether directly through the World Bank and IMF or indirectly via IMF special drawing rights (SDRs), would be channeled through African DFIs like the African Development Bank (AfDB) and African Export-Import Bank (Afreximbank), which are better equipped to then finance infrastructural projects across the continent, and will do so objectively with Western and Eastern partners alike. There are plans by the AfDB to lever these various financing pools into an even bigger pot to enable even wider coverage. Already, the AfDB has offered to leverage about US$8.5bn of EU funding to South Africa to lower its coal usage by as much as five times to US$41bn. Individual G7 countries are also pushing their own African infrastructure developmental initiatives in tandem. Japan held the latest TICAD summit in Tunis in August 2022, the 8th since its launch in 1993. Clearly in light of the Chinese example, there was a palpable shift in drift at the 8th TICAD towards infrastructure as well, even as Japan has also now committed to supporting a permanent seat for Africa at the UN Security Council.
What is clear is a resurgence in support for African countries by the rich world which are nonetheless self-interested realizations of the importance of the continent, as the Covid-19 pandemic, migration trends and an increasingly diffused international geopolitical environment prove. Climate change exceptionalism by the US and the West may weigh on their attempts to regain influence, however, especially as the hypocrisy of rich countries was exposed during the forced gas shortages owing to the ongoing Russia-Ukraine war. America and Europe did not hesitate to resort to fossil fuels, from coal, gas, to nuclear power, to make up for supply gaps forced by Russia’s stoppage of gas supply. Incidentally, the conflict also made writ large the foolishness in stopping fossil fuel financing in African countries, as they have been the rich world’s fallback option in the face of Russia’s punitive energy measures. Besides, the US$600bn initiative pales in comparison to an estimated US$40trn infrastructure gap between the rich and poor worlds. But as BRI investments have been slowing of late, every little bit helps. It certainly raises the question about whether there should not be a more proactive cooperative approach between the G7 and China, instead of the forced circumstances of debt restructurings. It is also abundantly clear that the conditional financing approach of the West has to be better structured to avoid the perception of control and neocolonialism that it engenders, something which the Chinese have masterfully avoided, even as they have been able to maintain tight control of extended financings with robust liens, asset swaps arrangements and so on. Chinese financing is not entirely unconditional, for instance. But they are structured in such a way that African leaders do not feel their dignities are being slighted, even as they are clearly tethered, judging from the difficult restructurings that are now afoot. What seemed like unconditional, opaque Chinese financing are now coming home to roost, though, as circumstances are now forcing their hitherto hidden and ambiguous terms to be disentangled with less than salubrious consequences.
Win-win
The G7 plan comes along with a new American approach to African development that clearly copies from the Chinese playbook, with emphasis on how the goal is not at all a desire to force African leaders to choose between East and West. Incidentally, China does not appear particularly averse to a cooperative approach. But it does seem that a potential joint effort would have to be facilitated by a third party, a role Europe is particularly equipped for. Concerns about neocolonialism, whether from China or the G7, are not unfounded. These fears can be assuaged in the structures and modes of engagements.
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