Investing in Africa Without Creating Debt Traps

Employees at work at a diamond cutting and polishing company in Gaborone, Botswana (Monirul Bhuiyan/AFP/Getty Images)

Investing in Africa without creating debt traps

Leigh Hartman - September 19, 2018

What do mobile networks across Africa, a local diamond industry in Botswana and a rebuilt tea processing facility in Rwanda have in common? They, and more than 120 other projects across sub-Saharan Africa, are made possible by the United States’ Overseas Private Investment Corporation (OPIC).
OPIC is a U.S. government agency that helps American businesses invest in emerging markets around the world without ensnaring countries in long-term debt. The companies OPIC works with create jobs, provide training and build infrastructure, using local workforces. Specifically, OPIC:

• Provides financing to startups or expanding businesses.
• Offers insurance to encourage companies to work in potentially risky areas.
• Advocates on behalf of businesses with local governments.
• Partners with private equity investment fund managers to drive investment and capital.

Employees at work at a diamond cutting and polishing company in Gaborone, Botswana (Monirul Bhuiyan/AFP/Getty Images)

OPIC in Africa

Source: OPIC

Currently, OPIC has invested $6.1 billion in projects across sub-Saharan Africa, more than a quarter of the agency’s $23 billion active portfolio.
And that is only the beginning. In July, OPIC launched its Connect Africa initiative, which will invest more than $1 billion in projects in Africa over the next three years that support transportation, communications and “value chains,” in which workers take raw materials and add value through various processes to create a final product.
“Africa is home to many of the world’s fastest-growing economies and presents both a great need for investment and a great opportunity for American businesses,” OPIC President and CEO Ray Washburne said. “But too many barriers remain to the flow of goods and services. By focusing on connectivity, we’re not only helping build means for economic development, but also laying the foundation for future trade partners.”

The benefits of a public-private approach

By using public-private partnerships and encouraging private-sector investment, OPIC provides transparent, bottom-up development — not  predatory loans that lock countries in a cycle of dependency.
“OPIC’s investments are improving lives, creating economic growth and helping to foster stability around the world,” OPIC’s Washburne said, calling the agency’s approach “a robust alternative” to debt-trap diplomacy, in which creditor countries use debt to obtain their strategic goals.