G7’s $600bn infrastructure plan aims to compete with China in Africa

The Partnership for Global Infrastructure and Investment (PGII) aims to mobilise $600bn in public and private funds through 2027 to fund infrastructure projects in developing countries, namely in Africa. About a third, or $200bn, would be raised by the US.

Biden has championed a more collaborative approach than his predecessor Donald Trump, and has been mindful not to tell Africans that they had to choose between China and the US. Still, the President’s remarks on Sunday 25 June at Schloss Elmau in Germany left little doubt that the new fund is meant as a counter-weight to Beijing, which the US and its allies accuse of saddling developing countries with debt.

“What we’re doing is fundamentally different because it’s grounded on our shared values of all those representing the countries and organisations behind me,” Biden said. “It’s built using the global best practices: transparency, partnership, protections for labor and the environment.”

The G7 countries, Biden added, are offering “better options for countries and for people around the world to invest in critical infrastructure that improves … all of our lives.” The grouping is comprised of the United States, Canada, France, Germany, Italy, Japan and the United Kingdom, along with the European Union (EU).

Focus on Africa

Sunday’s unveiling follows the US announcement of the similar Build Back Better World (B3W) initiative at last year’s G7 meeting in Cornwall, England. Since then, however, the EU has announced its own infrastructure fund, the €300bn ($320bn) Global Gateway, while the United Kingdom launched its Clean Green Initiative at last year’s COP26 summit, prompting the leaders of industrialised democracies to work more closely together.

“We’re here today because we’re making this commitment together as a G7 in coordination with one another to maximise the impact of our work,” Biden said.

The relaunched initiative focuses on four key areas: health and health security; digital connectivity; gender equality and equity; and climate and energy security.

Of the dozens of projects already in the pipeline, many are in Africa. These include :

• A partnership between two US firms, AfricaGlobal Schaffer and Sun Africa, and the government of Angola to invest $2bn in building new solar projects in four southern Angolan provinces;
• $14m in grant financing (including $3.3m from the US International Development Finance Corporation) to develop an industrial-scale vaccine manufacturing facility in Senegal;
• A $600m contract for New Jersey-based telecommunications company SubCom to build a 17,000km submarine telecommunications cable stretching from South-east Asia, through the Middle East and the Horn of Africa, to Europe;
• The World Bank’s new $200m global Childcare Incentive Fund to help countries build infrastructure that makes it easier for women to participate equally in the labour force;
• More than $183m in public-private investments in the Uhuru Growth Fund I-A, which provides growth capital for small and medium-sized enterprises in West Africa;
• And a $3.45m in State Department and US Agency for International Development (USAID) funding to mobilise up to $335m in private capital to supply secure network equipment in Africa, Asia and Latin America.

Closer cooperation?

Meanwhile, existing project developers say closer coordination between the G7 countries could help them scale up their investments.

John Nevergole, CEO of Philadelphia-based project development company ABD Group, was able to obtain $320m in financing to build or renovate more than 100 hospitals and clinics across Côte d’Ivoire after Prime Minister Patrick Achi visited Washington in March. Nevergole tells The Africa Report that the new initiative could help unlock the financing needed to replicate the project across the continent.

“If they’re able to actually break down the silos to where it’s a whole-of-government approach,” Nevergole says, “where you’re actually able to blend the different buckets of money, that the US government and these G7 governments have and bring them together into a project, that can be where you have the game-changing effect of funding projects in Africa.”

Right approach?

The African Development Bank estimates the continent could need up to $170bn per year for infrastructure by 2025, with the estimated annual shortfall at around $100bn.

But some critics of the Western approach say going head-to-head with Beijing is wrong.

“Framing it as competition with China, frankly, isn’t very helpful,” says Scott Morris of the Center for Global Development in Washington. “The developing countries themselves would be much better off if this was struck in a more cooperative frame. One that is not about competition with China’s but is more about how do we work together on promoting infrastructure investment in countries that desperately need it?”

Morris co-authored a piece in Foreign Affairs magazine with his colleague Charles Kenny days before the G7 to argue that the Biden administration should not copy China’s Belt and Road Initiative given the US’s lacklustre record of investing in infrastructure, including domestically. Better, they wrote, to invest in multilateral institutions, including the World Bank and the African Development Bank.

Details, details

In a follow-up interview with The Africa Report, Morris says he was as skeptical of the $600bn announcement as he was of the $8trn figure China bandied about back in 2016 when talking about the Belt and Road Initiative. Likewise, he adds, details are lacking save for a handful of projects.

“These are press releases,” Morris says, “they’re not really operational plans.”

Morris adds that it was “little odd” to frame the G7 investments as alternatives to China while at the same time promoting cooperation with multilateral financial institutions. Indeed, while national export credit agencies such as the US Export-Import Bank may promote domestic companies, global groups such as the World Bank rely heavily on the Chinese construction giants to build infrastructure.

Still, Morris says, the broad focus of the G7 announcement was welcome.

“I think all of these things need attention,” he says. “In terms of how we’re defining infrastructure, it’s a pretty expansive definition. Having childcare in the same category as roads and bridges – you’re casting a wide net. I think these are certainly high-value investments, depending on how they’re done.”