EIB repeats concerns over Chinese lending in Africa

26 February 2007

At a recent press conference in Brussels, the head of the European Investment Bank (EIB) reiterated his apprehensions about increased competition from Chinese banks in Africa. As reported in the Financial Times, President Philippe Maystadt expressed his concerns that Chinese banks “apply lower ethical and environmental standards” to their investments in Africa, and that they are effectively undermining good governance and undercutting competitors.

President Maystadt suggested that the EIB engage in dialogue with Chinese banks on the issue of loan conditions, stressing that “abandoning conditionality would be a serious mistake.” This proposal was seen by some observers as a retreat from his previous, more confrontational position on how to address growing competition from China. In November, Maystadt drew a storm of criticism when he suggested that the EIB lower its environmental and social standards on lending to Africa in order to better compete with the Chinese.

After stating its intention to prioritize energy sector spending at its annual press conference, the EIB last week announced that it has entered negotiations with the government of Zambia to finance a hydropower project aimed at addressing the country’s energy shortage. Some observers, however, have charged that the EIB has ignored the priority sectors for the country identified by the EU, and has instead focused on Zambia’s lucrative mining sector.

At a recent mining conference in Lusaka, the EIB’s director for southern Africa candidly told Reuters that the Bank’s support for the energy sector in Zambia was “aimed at improving availability of electricity to shore up industrial growth and also mining activities in the region.” Such statements have fuelled questions about who will ultimately benefit from the EIB’s involvement in the country’s power industry. Previous EIB-financed mining projects in Zambia have led to serious environmental and social consequences for local communities without delivering many tangible benefits.

Resources

• EIB 'losing out to Chinese banks' by Andrew Bounds and Sarah Laitner, Financial Times, February 8, 2007 (FT website)
• EIB seeks talks on China’s Africa lending spree by Marcin Grajewski, Reuters, February 8, 2007 (Reuters website)
• Press Release: Some unfortunate facts behind the numbers by CEE Bankwatch et al, February 7, 2007 (Bankwatch website)
• European Investment Bank to finance Zambia’s hydropower extension program, Xinhua, February 16, 2007 (Peoples Daily Online website)
• EIB urges looser environmental and social standards for loans to Africa, Bank Information Center, December 7, 2007 (BIC website)