Resource for Infrastructure Deals

“Resource for infrastructure” deals refer to those in which loans for infrastructure development are repaid with natural resources. On one hand, resource for infrastructure deals have been criticized for not providing a fair deal for the host country, but on the other hand, it is recognized that they enable the financing and development of infrastructure that African countries critically need. This research stream looks at the different resource for infrastructure deals in Africa, and assesses the advantages, drawbacks, and lessons learned from such deals. It aims to assess how governments can ensure they are getting a fair value for their resources under such schemes, for which auditing and valuation may be much more difficult. Moreover, it looks at whether these deals can include technology transfer in infrastructure building to host countries.

As part of this research stream, CCSI, in collaboration with the Carter Center, developed two economic models for the Sicomines mine in the Democratic Republic of the Congo (DRC) to compare the financial flows under the resource for infrastructure deal with a ‘traditional’ contract under the mining code of the DRC. The Sicomines agreement between the Congolese Government and a consortium of Chinese companies is one of the most prominent resource for infrastructure deals, with the Chinese Government-owned bank providing a concessional loan of US$3 billion for infrastructure investments that are unrelated to the mining project and US$3 billion for the copper-cobalt mine itself. The loan is to be repaid through the profits of the mining project, which is set to start operations in 2015.

Apart from providing insights into the balance of benefits between the parties to the agreement, the fiscal models will serve as a tool for local NGOs in the DRC to oversee the project. The models will also serve as a template to assess similar resource for infrastructure deals in the future.