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Leaders from Europe, Africa and the World Health Organization prepare for a second day of the summit in Brussels on Friday. Photo: AFP

EU makes US$170 billion play to rival China in Africa. But where is the money coming from?

  • Bloc pledges funding for projects ranging from manufacturing to green energy
  • Officials offer few details on who will do the financing and how the investment will be structured
Africa
The European Union made a play to rival China in Africa on Friday, announcing a €150 billion (US$170.5 billion) financing package for projects and development on the continent after a two-day summit with the African Union in Brussels.
The funding will be spread across seven years and account for half of the bloc’s total capital allocated to its Global Gateway plans, pitched as an alternative to China’s Belt and Road Initiative.

It will be pumped into a range of sectors, including manufacturing, transport infrastructure, green energy, sustainable food chains, health and education.

The money will come from both public and private sources, with the EU aiming to invest €20 billion per year in debt, equity and guarantees.

But it was unclear just how much would come from the EU’s own coffers, and how much would need to be coaxed from the private sector. Leaders could not specify how the funds would be structured, or where they would come from.

European Commission President Ursula von der Leyen said that with “regular reporting and accountability”, there would be “pressure on both sides to deliver”. This would provide “checks as to what is still available as financing and what has been allocated already”.

02:41

China pledges 1 billion vaccine jabs for Africa amid growing fear about Omicron coronavirus strain

China pledges 1 billion vaccine jabs for Africa amid growing fear about Omicron coronavirus strain

“We face a constant tension between promoting, overselling, and managing people’s expectations,” an EU official said when asked about scepticism over how much of the money was new. “This is a starting point.”

Speaking on behalf of the African Union, Senegalese President Macky Sall welcomed the infrastructure investment, saying “we needed a new relationship based on a shared vision of partnership rather than aid”.

According to the China Africa Research Initiative, China extended US$153 billion to African governments via loans and state-owned company funding between 2000 and 2019.

It has become the benchmark for foreign direct investment in the continent, but EU officials rarely refer to China directly.

Asked if Europe wanted to compete with and displace China in Africa, a senior EU official said: “Our investment package responds to the needs and demands that we’ve heard from our African partners. We think it’s a positive and a good offer. And I would say beyond that, we are not afraid of a little bit of competition.”

Surveys commissioned by the EU showed that the bloc ranks sixth behind China, the United States, France, the World Health Organization and the United Nations in brand recognition on project investment.

Is this the end of the line for China’s big belt and road funding in Africa?

During the summit, the EU also committed to providing 450 million vaccine doses to Africa by the middle of this year, but no deal was struck on waiving intellectual property rights to produce mRNA shots in Africa.

“What we are not considering is a blanket waiver of patent protection [for vaccine technology] because we think that would have negative consequences for innovation and for research,” an EU official said.

Instead, the EU will donate mRNA technology to Egypt, Kenya, Senegal, Nigeria and Tunisia to make mRNA vaccines in Africa, for African people.

But South African President Cyril Ramaphosa has said the EU should stop “hiding behind” the WTO agreement on Trade-Related Aspects of Intellectual Property Rights.

“It is not acceptable that Africa is consistently at the back of the queue. While we appreciate the donations, they are never a sustainable way to build resilience,” Ramaphosa said.

02:09

Kenya opens massive US$1.5 billion railway project funded and built by China

Kenya opens massive US$1.5 billion railway project funded and built by China

The much-hyped event was met with a mixed response by African commentators. Some welcomed competition to the Chinese investment that has dominated the continent for two decades.

“À few days ago, the Nigerian Minister for Transport Rotimi Amaechi said the country was headed to Europe for long-term infrastructure credit because funding for railways, roads and highways from China was drying up,” said Michael Chege, a political economy professor at the University of Nairobi.

“Actually, most African countries will look to the EU and to this meeting not because China’s belt and road aid is drying up, but because the current Chinese debt burden is unserviceable and some countries like Zambia are in default already.”

Chege said Kenya, for example, was “unable to pay its teachers” due to its overseas debt burden and China seemed reluctant to join multilateral African debt relief initiatives.

“But note this – if the EU wants to fund infrastructure in Africa, it will find that Chinese companies do it faster and comparatively cheaper. African countries should avoid expensive and opaque Chinese loans but invite Chinese contractors to compete with the EU or other multilateral donors providing the credit,” he said.

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Others criticised the vagueness of the scheme – a charge widely repeated in Europe, too.

“It is not yet clear what the EU’s offer via the Global Gateway really is. I am not even sure that it is clear to the EU itself,” said Olumide Abimbola, executive director of the Africa Policy Research Institute.

“There is still a lot of unknown in this equation and it feels like the EU hurried and announced something when the plans on their own end are still taking shape, and without prior consultations with African partners.

“It is like announcing to the world that you want to shave someone’s head without first getting their consent or being sure that you have the implement to do the shaving.”

The summit was billed as a way to reset European-African relations after years of perceived neglect.

“We are the Africans’ best friends,” EU foreign affairs chief Josep Borrell said on the sidelines of the summit. “The biggest investor, the biggest helper, the biggest trade partner. And we have a lot to work with Africa because African problems are our problems.”

The summit had been delayed several times because of the pandemic, but even now has been overshadowed by other geopolitical events.

European leaders met for a hastily convened pre-summit meeting to finalise a sanctions package on Russia in the event of an invasion of Ukraine, and throughout the event, European leaders and officials were asked about the crisis.

Some EU leaders joined calls with Nato and the US before the summit ended.

Leaders from Mali, Burkina Faso and Sudan were not invited to the summit, having been suspended from the African Union after military coups, even as the EU continues to provide military training to Malian forces.

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