African countries with limited access to credit and capital can see resource-backed loans as a way to raise funds for infrastructure and development projects.
The risk, say critics like Adesina, is that without strong regulatory oversight, unfavorable terms and conditions can significantly impact a country’s future revenues and access to credit. This is in part due to a lack of transparency around the agreements, critics claim. “It may make sense if you actually use that money for the right things but in most cases, there are no policy conditionalities,” said Adesina.
As of 2020, up to $66 billion had been loaned to African countries in exchange for resources from Chinese and Russian state-owned institutions, but also private companies like mining giant Glencore, according to the Natural Resources Governance Institute.
Overall, most resource-backed loans have been provided by the China Development Bank (CDB) and the China Exim Bank. Angola, for example, had received up to $21.5 billion in exchange from the CDB in exchange for oil.