Chinese Model of Infrastructure Development in Africa
Infrastructural development, which is a key step in providing a competitive business environment for African economies, provides the backbone for poverty reduction strategies and programmes designed to improve the livelihood of the poor. The absence of quality infrastructure on the African continent holds back per capita economic growth by 2 percentage points each year and depresses firm productivity by as much as 40 percent. Estimates suggest that around USD 90 billion is required to close Africa’s infrastructure gap annually until 2020. The Chinese resource for infrastructure (RFI) loans presents the most promising source of funds for infrastructure development in Africa, given the constraints on the traditional Western sources of infrastructure finance. The emerging role of China as a major infrastructure financier can be understood in the context of the trade complementarity that exists between African countries and China: Africa is saddled with a huge gap in infrastructure, whereas China’s fast-growing manufacturing economy requires crude oil, mineral inputs and agricultural raw materials abundant in Africa.