African Development Bank Raps Opaque Loans Tied To Natural Resources

The head of the African Development Bank (ADB) is calling for an end to loans given in exchange for the continent’s oil or critical minerals used in smartphones and electric car batteries.

The deals supposedly help China gain control over mineral mining in places like Congo and have left African countries in financial crisis. I Photo: Citizen59 Wikimedia Commons

These deals have helped China gain control over mineral mining in places like Congo and have left African countries in financial crisis, Taiwo Adebayo reported for the Associated Press (AP).

“They are just bad, first and foremost, because you can’t price the assets properly,” Akinwumi Adesina said in an interview with the AP in Lagos, Nigeria, last week.

“If you have minerals or oil under the ground, how do you come up with a price for a long-term contract? It’s a challenge.”

Linking future revenue from natural resource exports to loan paydowns 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.

The shift to renewable energy and electric vehicles (EVs) has caused a spike in the demand for critical minerals, driving these kinds of loans.

That includes a China-Congo deal that strengthens Beijing’s position in the global supply chain for EVs and other products as it taps into the world’s largest reserves of cobalt, a mineral used to make lithium-ion batteries, in the Congo.

Adesina, whose Abidjan, Ivory Coast-based institution helps finance development in African countries, said these arrangements come with huge problems.

He highlighted the uneven nature of the negotiations, with lenders typically holding the upper hand and dictating terms to cash-strapped African nations. This power imbalance, coupled with a lack of transparency and the potential for corruption, creates fertile ground for exploitation, Adesina said.

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