Sunday, November 7, 2010

Ghana's New China Deals: What's the Real Story?

Ghana and China presidents toast deal: WSJ photo credit
We've heard a lot recently about the new multi-billion deals signed between Ghana and several Chinese banks, including China Development Bank (US$3 billion) and China Eximbank (US$5.9 billion for 19 infrastructure projects). Yet a lot is still murky, including the actual value of these agreements, and how they are linked to Ghana's new oil and gas resources.

On September 22, 2010, Reuters reported a phone interview with Ghana's deputy finance minister in Beijing, who appeared to put the China Eximbank credit figure alone at US$9.87 billion, A separate story on the Government of Ghana's official website September 22, 2010 reported the Eximbank credit at $10.4 billion and said that it was "concessionary"). Now the story appears to have changed.

Here is a link to the October 26, 2010 Government of Ghana's official press release about these deals.

(1) According to this official press release, the total line of credit amount is less than the  $13 billion we were reading about in the papers:  still $3 billion from CDB but "only" $5.9 billion from Eximbank, or a total of $8.9 billion). [2015 update: the $5.9 billion from Eximbank never materialized, no doubt because Ghana--as we later saw--simply did not have the absorptive capacity for so much debt.]

(2) Interesting capacity-building and knowledge transfer plans are built into the agreement, for example: "The Framework Agreement entered into with the China Development Bank also makes provision for the CDB to share and transfer knowledge to the [Ghana] National Development Planning Commission on the lessons and experience gained in the application of project financing arrangements to the planning and implementation of infrastructure projects through multi-year investment rolling plans."

(3) The large deals are explicitly at commercial, not concessionary, rates, although Ghana also received a separate foreign aid package of a grant, zero-interest loan, and concessional loan/preferential export credit of $250 million at 2%.  This latter package is quite similar to the kind of packages offered to Mauritius, Namibia, and other credit-worthy middle income countries in Africa.
In September I had lunch in Beijing with Roger Nord, a senior adviser to the Africa Department of the IMF, and we talked quite intensely about the structure of these deals. I was pleased to read Roger voicing to Reuters a reassuring "good opportunity for Ghana" take on these deals in Reuters. At the same time, the difference between the September and October figures for China Eximbank, and the delay in the press release, suggest that some behind the scenes negotiating on debt sustainability may have been going on. This also happened, but with much more rancor, in the DRC, where the initial Chinese loan package was reduced from some $9 billion, to some $6 billion.

Ghana's parliament has to approve these deals, and presumably they will receive more information. What we still don't know is just how these deals are linked to Ghana's new oil and gas resources. In the DRC, Chinese loans were used partly to develop new resources and thus new cash flows, which were used to secure/repay separate loans for development infrastructure not connected at all to the mining investment. Yet according to Africa-Asia Confidential, "resource swaps are explicitly barred under the draft Petroleum Revenue Management Framework Bill being debated in parliament." Stay tuned.


  1. There is also a lot of confusion regarding South Korea's deals in Ghana - summarized in several articles at and cited widely on Ghanaian websites, including STX Korea Group's USD 10 billion deal to construct 200,000 housing units (including 30,000 for the military to be built first). The signing of the deal was cancelled at the last moment over confusion regarding the use of Ghana's oil deposits as collateral. It seems South Korea's deals in Ghana also come under the category "whats the real story?"

  2. Sitting here in Accra, Ghana, these deals look much less complex than you seem to assume. You hae to factor in the strategy of Ghana too. We are simply looking for all that we can get to close our infrastructure funding gap.

  3. Many Americans, those that even know or keep track of these multiple China deals across Africa, have been told these are "generous agreements".

    This post suggests more "hard bargaining" is going on than many Americans are led to believe.

    The question the post implicitly raises:

    Are these China deals really "generous agreements" at all?

    Why does it matter?

    Well, the question raises two more questions.

    Is the West getting "cut out" of Africa?

    Will the Chinese come to dominate African resource backed financial relationships in Africa?

  4. Why always interested in the China's 'resources' deals? and what is wrong with Africa paying their loans with resources? no offence, but besides resources, what do you expect africa to pay you back with? more loan? hope to God that China might cancel the debt in the end? a fair trade of resources looks fine to me.

    would you really think that aid should be provided with 'friendship and love' and expecting nothing in return?

  5. Do you think the African are stupid? Only you can see the real story but not them? Instead of looking at the deals with bias, please also look at them at a fair angle. What do these loan bring to Africa? How do the infrastructure building bring to Africa? Is this what the African want? Deals are done on willing basis with no one forcing the other to accept it. If the African willing to trade resources to bring improvement to their country, why did the West oppose to it? Is it just because the party to the deal is China, but not America?