The head of the African Development Bank is advocating for a halt to loans secured by Africa's oil and critical minerals, citing concerns over pricing and transparency. These loans, often used to finance infrastructure projects, have led to China gaining control over mineral mining in countries like Congo and have left some African nations in financial distress.
The surge in demand for critical minerals due to the shift towards renewable energy and electric vehicles has fueled these types of loans. Notably, a China-Congo deal has bolstered Beijing's position in the global supply chain for electric vehicles by tapping into Congo's vast cobalt reserves.
African Development Bank President highlighted the unequal nature of negotiations, with lenders dictating terms to cash-strapped African countries, leading to potential exploitation and corruption. He emphasized the need to end natural resource-backed loans and mentioned a bank initiative to renegotiate problematic loans.
Loans tied to natural resources pose challenges for development banks and the IMF, hindering sustainable debt management. Countries like Chad, Angola, and Republic of Congo have faced financial crises after securing oil-backed loans, with the IMF pushing for loan renegotiations.
China is a major source of funding for these loans, along with Western commodity traders and banks. The African Development Bank is launching an initiative to mobilize $10 billion for sustainable infrastructure projects to reduce reliance on problematic financing.
Congo is seeking to review its infrastructure-for-minerals agreement with China, aiming to increase benefits from the deal. The African Development Bank's Alliance for Green Infrastructure in Africa aims to finance sustainable infrastructure projects in energy and transport sectors to mitigate the risks associated with natural resource-backed loans.
