The Managing Director of the African Development Bank, Dr. Akinwumi Adesina, is calling for an end to loans given in exchange for the continent\u2019s rich supplies of oil or critical minerals used in smartphones and electric car batteries, deals that have helped China gain control over mineral mining in places like Congo and have left some African countries in financial crisis.<\/p>\n\n\n\n
\u201cThey are just bad, first and foremost, because you can\u2019t price the assets properly,\u201d Dr. Adesina said in an interview with The Associated Press in Lagos, Nigeria.<\/p>\n\n\n\n
\u201cIf you have minerals or oil under the ground, how do you come up with a price for a long-term contract? It\u2019s a challenge.\u201d<\/p>\n\n\n\n
Linking future revenue from natural resource exports to loan pay downs is often touted as a way for recipients to get financing for infrastructure projects and for lenders to reduce the risk of not getting their money back.<\/p>\n\n\n\n
The shift to renewable energy and electric vehicles has caused a spike in the demand for critical minerals, driving these kind of loans. That includes a China-Congo deal that strengthens Beijing\u2019s position in the global supply chain for EVs and other products as it taps into the world\u2019s largest reserves of cobalt, a mineral used to make lithium-ion batteries(link is external), in the impoverished central African country.<\/p>\n\n\n\n
Dr. Adesina, whose Abidjan, Ivory Coast-based institution helps finance development in African countries, said these arrangements come with a litany of problems.<\/p>\n\n\n\n
He highlighted the uneven nature of the negotiations, with lenders typically holding the upper hand and dictating terms to cash-strapped African nations.<\/p>\n\n\n\n
He said this power imbalance, coupled with a lack of transparency and the potential for corruption, creates fertile ground for exploitation).<\/p>\n\n\n\n
\u201cThese are the reasons I say Africa should put an end to natural resource-backed loans,\u201d Dr. Adesina said.<\/p>\n\n\n\n
He pointed to a bank initiative that helps \u201ccountries renegotiate those loans that are asymmetric, not transparent and wrongly priced.\u201d<\/p>\n\n\n\n
He continued that loans secured with natural resources\u00a0pose a challenge for development banks\u00a0like his and the International Monetary Fund, which promote sustainable debt management.<\/p>\n\n\n\n