Photo Credit: Reuters/Noor Khamis
The week of Sept. 3, incredibly, 49 out of 55 heads of African states attended the Forum on China-Africa Cooperation (FOCAC) in Beijing. At this year’s FOCAC, China committed to provide $60 billion in loans, foreign aid, special funds, and private investment to help African states develop over the next three years (read Deborah Brautigam’s breakdown of the types of funding mechanisms). While these commitments represent a tremendous opportunity for African states, they also underline the need to strengthen the procurement and project management capacity of African governments.
The news of China’s continued high-dollar commitment to African states raised concerns of a growing debt trap for African states, or even that China’s investment strategy is a new form of Neocolonialism. Experts worry about the performance and cost of Chinese funded infrastructure projects, as well as the opportunities for corruption. For example, back in August, Kenya arrested two top officials involved with the massive $3+ billion Nairobi-Mombasa railway financed by China.
Public procurement in general presents risks to governments. The OECD estimates that public procurement outlays account for around 12% of the GDP of their members and that 57% of foreign bribery cases which constitute violations of the OECD Anti-Bribery Convention involved bribes to win public contracts. “Stadium diplomacy,” loans given by outside countries to support economically unimportant infrastructure projects that are politically symbolic—such as soccer stadiums—can lead to mounting debt that does not yield proportional long term economic benefits.
At the same time as Chinese loans present major risks, however, they also represent great opportunities for African states. African countries have infrastructure deficits and governments need to invest in infrastructure to meet the future needs of a young and growing population.
The actors best-positioned to reduce the risks posed by Chinese loans and aid are the African states themselves. African states can negotiate the terms of the loans and aid while also leveraging other investors when taking out large loans. How states procure and manage new infrastructure projects can help reduce corruption, waste, and long term debt risks. The problem is the states lack capacity to do so, leading to huge risks.
Strong public procurement systems and management of infrastructure projects can help reduce these risks. For example, Ukraine’s new ProZorro e-procurement system saved government agencies over $233 million in its first year and a half of operation. Now each procurement is open for outsiders to observe, and so journalists and CSOs report suspicious contracts. Taxpayers receive better public services, businesses compete for contracts on a more even playing field, and the government reduces expenses.
Major gatherings like FOCAC underscore the importance of strong public procurement systems and project management capacity. CIPE works to help bring these issues to the fore through its anti-corruption and governance programs.
Peter Glover is an Assistant Program Officer with the Anti-Corruption and Governance Center (ACGC) at the Center for International Private Enterprise (CIPE)