AIIB Membership for African Countries: Drawcards and Drawbacks
| DOI | http://doi.org/10.1111/1758-5899.12734 |
| Author | Cyril Prinsloo |
| Date | 01 November 2019 |
| Published date | 01 November 2019 |
AIIB Membership for African Countries:
Drawcards and Drawbacks
Cyril Prinsloo
South African Institute of International Affairs (SAIIA)
Abstract
The Asian Infrastructure Investment Bank’s (AIIB) establishment was inspired by the significant infrastructure investment needs
that Asian countries will experience over the coming decade. African countries face an equally daunting challenge: the esti-
mated infrastructure finance deficit is between $68 and $108 billion annually. Several African countries have already joined
the AIIB (Egypt, Ethiopia, Madagascar and Sudan), some have been approved to join (Benin, Djibouti, Guinea, Ivory Coast,
Rwanda and Tunisia), and select others are designated as ‘prospective founding members’of this new bank, but are yet to
join (Algeria, Ghana, Kenya, Libya, Morocco and South Africa). AIIB membership offers an alluring proposition for African
economies: low-cost finance from a new source. Yet its limited support for technical capacity-building and financial instru-
ments for low-income countries, outside of Asia, makes membership less desirable for many African countries. This brief essay
analyses the primary motivations, and the benefits and challenges for African countries in joining the AIIB. It surmises that
middle-income African countries are more likely to benefit from AIIB membership than their low-income peers.
The Asian Infrastructure Investment Bank’s (AIIB) establish-
ment was inspired by the $26 trillion infrastructure invest-
ment need that Asian countries will have over the next
decade (Asian Development Bank, 2018). The AIIB swiftly
took on this challenge by extending loan approvals of $7.94
billion since launching in 2015 (AIIB, 2019a). But that Bank’s
ambition extends beyond Asia: at the AIIBs Annual Meeting
in July 2019, AIIB President Jin Liqun intimated that the AIIB
wants to ‘become the Bank that connects Asia to the world’
(AIIB, 2019i).
African countries face an equally daunting challenge
compared to their Asian peers: the estimated infrastruc-
ture investment deficit is between $68 and $108 billion
annually (AfDB, 2018). A number of African countries were
eager to join the AIIB, hoping to leverage financing from
this new institution, to address their own shortfall. Egypt,
Ethiopia, Madagascar and Sudan are members of the AIIB,
and together represent 0.79 per cent of capital contribu-
tions to the bank (AIIB, 2019b). Ivory Coast, Guinea, and
Tunisia’s memberships were approved at the AIIB’s Board
of Governors meeting in April 2019, while membership for
Benin, Djibouti and Rwanda were approved at the AIIB’s
Annual Meeting in July 2019. Membership for these coun-
tries is contingent on completion of domestic processes
and deposit of their capital contributions (AIIB,
2019c,2019h). Algeria, Ghana, Kenya, Libya, Morocco, and
South Africa are ‘prospective founding members’, but their
pledged financial contributions are still pending, and they
have yet to participate in the Bank as project borrowers
(Figure 1).
What has been the experience of the African members
of the AIIB so far? The main finding of this essay is that
there are a range of potential benefits for the African
countries which have joined the AIIB. The Bank can offer
lower cost finance that helps bridge their infrastructure
financing deficits and stem burgeoning debt-costs; signifi-
cant returns can be reaped from capital contributions via
future lending; it can foster industrial development through
linkages with Asian markets; and can enhance cross-border
connectivity. To date, Egypt is the only African member
country to have benefited from its membership in the new
Beijing-based bank as a project borrower, as it has received
loans that exceed $500 million. Ethiopia, Sudan and Mada-
gascar are considering project loans from the AIIB. How-
ever, the Bank has limited financial instruments that are
geared for low-income countries (LICs), and has a number
of provisions or conditions that limit the benefit for African
countries, especially the LIC members. The AIIB’s provision
that non-regional borrowing cannot exceed 15 per cent
over a 3-year rolling share of loan approvals by the Bank
(AIIB, 2019d) is dampening the enthusiasm of some of the
African countries that have already joined or in the process
of joining the new Beijing-based MDB, and is a disincentive
to other potential African countries to seek to join. As of
April 2019, the threshold for non-regional borrowing is
roughly $1.2 billion. Considering that loans to Egypt alone
(exceeding $500 million), it becomes apparent that, so far,
the funding opportunities for other non-RMCs in Africa are
limited.
Moreover, compared to other multilateral development
banks (MDBs), the AIIB is one of the youngest MDBs, along
with the BRICS-led New Development Bank (NDB), and the
AIIB has yet to build its institutional development knowl-
edge and technical capacity, especially in regards to
regions outside of Asia. In contrast, the World Bank and
the African Development Bank (AfDB) offer their clients
Global Policy (2019) 10:4 doi: 10.1111/1758-5899.12734 ©2019 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 10 . Issue 4 . November 2019 625
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