By Barney Jopson in Nairobi
Published: August 18 2009 20:47 | Last updated: August 18 2009 20:47
China and the Democratic Republic of Congo have agreed to amend the terms of the biggest Chinese investment deal in Africa, which had been blocking Congo’s access to much-needed debt relief, the International Monetary Fund has said.
The changes to a minerals-for-infrastructure deal initially valued at $9bn should allow Congo to push ahead with a request for debt relief from western donors, said Brian Ames, the IMF’s country chief, at a press conference in Kinshasa, the capital.
Under the original deal, a consortium of state-owned Chinese companies agreed to build roads, railways, hospitals and universities in return for the right to develop a copper and cobalt mine.But pressure to alter it had come from western donors that refused to offer Congo relief on historic debt of $11bn because of concerns over state financial guarantees the deal contained, which could threaten Congo’s ability to manage its debt.
“During our visit, the authorities … told us that the partners have accepted the amendments in the project of the Sino-Congolese agreement, including the removal of the government’s guarantee on the mining project,” Mr Ames said.
Congo is eager to take advantage of a debt relief scheme for poor countries and to access new forms of western development aid, but it cannot do so until the IMF approves a new programme for the country, which it had not been ready to do.
The $9bn financing was split into three tranches of $3bn: one for setting up the mining operation and two for nationwide infrastructure investments, including more than 3,500km of roads and nearly 3,000km of railways.
But Jean-Claude Masangu, governor of Congo’s central bank, told the same press conference that the second $3bn infrastructure part of the project, which had also raised IMF concerns, had been suspended.
The IMF and the Paris Club of creditors had led western opposition to the state guarantees in the overall deal, which earmarked government revenues and made China a privileged creditor.
The Paris Club represents many of the lenders behind Congo’s existing external debt, some of which stems from the era of Mobutu Sese Seko, a kleptocratic dictator and cold war ally of the west who ruled for 32 years until 1997.
Their opposition put the cash-strapped government of president Joseph Kabila in an awkward position, because while China is Congo’s only viable source of multi-billion dollar loans, it did not want to alienate western donors.
Congo had to turn to the IMF for a disbursement of $195m, released in March from a separate emergency facility, which exists to help poor countries manage shocks such as those caused by sharp falls in commodity prices and the global downturn.
Congo has 10 per cent of the world’s copper reserves and hopes the China deal will help the country, still recovering from a debilitating civil war, to translate its mineral wealth into tangible development.
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BoC to lead power funding
Bank of China is to be lead arranger for $500m in funding for CIC Energy Corp's Mmamabula power station project in Botswana, writes Michael Bleby.
The appointment on Tuesday means the bank joins two South African banks, Absa Capital and Standard Bank, in raising funding for the coal-fired power station, which has an estimated $3bn infrastructure and construction cost.
In March, CIC awarded the construction contract for the power station to Shanghai Electric. The 1,200MW station is due to begin supplying power in early 2013.
