Chinese authorities have issued a rare warning over the misuse of Chinese funds in building vital infrastructure in Africa, telling construction companies to do proper risk management and consultation before embarking on projects.
The warning came from Wang Wen, head of China Export and Credit Insurance Corporation, known as Sinosure. Mr Wang told the Hong Kong based South China Morning Post that China has lost over $1 billion because some Chinese construction companies did not identify, assess and control threats or risks to the projects before taking on the projects.
He point among several projects the case of Chinese built Ethiopia-Djibouti railway line, he said the company did not have a robost risk management process to ensure Ethiopia had the infrastructural and managerial know how to support the project. “Lessons should be drawn from the poorly executed US$4 billion Addis Ababa-Djibouti freight railway that was inaugurated early this year but has already had to restructure its debt because of underuse caused by power shortages; Wang told a belt and road infrastructure financing forum in Hong Kong earlier this month.
‘“Ethiopia’s planning capabilities are lacking, but even with the help of Sinosure and the lending Chinese bank it was still insufficient”’ he told the paper.
China is the largest foreign financier of infrastructure projects in Africa, according to report published by McKenzie in 2017. Chinese companies are popular in Africa for the fast design-building- handover model, which is different from the west. Chinese built roads, railways, and hydro power stations are helping to cover Africa’s huge infrastructure gap.
However, some critics believe some projects are not economically profitable, and are calling on China to do more consultation and evaluation of economic viability of projects before taking on projects which can end up costing the host African country billions of dollars as debts repayment.