According to Aly-Khan Satchu, a Nairobi-based geoeconomic analyst, PPPs and build-operate-transfer models are the new “yellow brick road” for China-Africa infrastructure financing.

He said African countries had “proven hopeless at forecasting the sustainability of infrastructure projects”, and this model transferred that analysis and economic forecasting into the Chinese domain.

“It is a way to de-risk African projects, and furthermore, a major amount of Chinese capital can clearly be put to work on this basis,” Satchu said.

Under a similar PPP model, Chinese contractors would also build and operate the Rironi-Mau Summit Road, a key route through the Rift Valley to western Kenya. This project was previously awarded to French firms but later cancelled due to cost concerns.

The model has been used for projects such as the 27km Nairobi Expressway, which was financed and built by China Road and Bridge Corporation (CRBC), which will also operate it for three decades to recover its investment before transferring ownership to the Kenyan government.

In Zambia, a consortium of Chinese companies – Macro Ocean Investment Consortium, which consists of AVIC International Project Engineering, Zhenjiang Communications Construction Group, and China Railway Seventh Group – has completed about a quarter of the 327km Lusaka-Ndola dual carriageway, linking the capital to the Copperbelt province.

This US$650 million project, which had faced many years of false starts, uses a PPP model in which Chinese firms finance, build and operate the road via a tolling system for 22 years to recoup their investment.

Nigeria’s Lekki Deep Sea Port and Cameroon’s Kribi Deepwater Port project, which recently unveiled its second phase, were also built using a PPP model.

In the past, African countries typically borrowed from Chinese policy banks such as China Exim Bank and China Development Bank to build mega-projects such as ports, highways, power dams, and railways.

Between 2000 and 2023, China advanced 1,306 loans worth US$182.2 billion to African countries, mostly to bankroll projects across the continent, according to data by Boston University’s Global Development Policy Centre.

However, Chinese overseas bilateral lending peaked in 2016 as policy lenders adopted a more cautious approach to financing infrastructure projects. This coincided with a period of rising debt issues that prompted countries such as Zambia, Ethiopia, Ghana and Chad to seek debt restructuring under the Group of 20 (G20) Common Framework.

Hong Zhang, an assistant professor in the international studies department at Indiana University Bloomington, noted that African governments now favoured PPPs as “off-balance-sheet” financing to ease fiscal pressures.

“Chinese companies are increasingly pursuing this model because they have been pushed by the Chinese government and banks to pay more attention to the long-term economic viability of the projects,” Zhang said.

She noted that this was something the companies did not have enough incentive to do when they served as engineering, procurement, and construction (EPC) contractors for projects financed by bilateral loans.

Zhang said that PPPs relied on “project financing” based on the future revenues of the scheme, so as project sponsors, the companies needed to work hard to convince the banks of the initiative’s commercial value to secure financing.

“The Chinese government and banks have taken the view that by pushing companies to pursue PPP projects, they can avoid some of the ‘white elephant projects’ they have financed with bilateral loans in the past,” she said.

Zhang also said that for Chinese companies, “this shift offers an opportunity to diversify their business activities, expanding beyond their traditional role as EPC contractors into the operation and maintenance of infrastructure projects”.

How China is reshaping its economic ties with Africa

Yunnan Chen, a research fellow in the development and public finance programme at ODI Global, said the increased use of PPPs also reflected a push to share a greater proportion of project risk with the company and to encourage Chinese firms to take on a longer-term stake in the scheme.

“We’re likely to see more of this type of risk-sharing with the commercial sector, including state and private enterprises, going forward, with less reliance on state-backed policy bank funding,” she said.

This approach, in which investors recoup costs through operation, also keeps initial investment off African governments’ balance sheets, particularly when further lending is challenging, according to Lauren Johnston, a China-Africa relations specialist and associate professor at the University of Sydney’s China Studies Centre.

“It essentially functions as a ‘user pays’ system, where road users fund the infrastructure through fees collected by the operating entity,” she said.

However, Johnston cautioned that this model carried risks. It could restrict access for lower-income populations, and private firms sometimes set conditions on nearby infrastructure development to protect their user fee revenue, she said.

“If the duration of the fee system is long enough, this can sometimes mean that useful alternative infrastructure projects are delayed,” she said.

Similarly, Zhang cautioned that “PPPs are not a panacea for African countries’ debt challenges”.

She explained that depending on the specific terms of the PPP agreement, there could be latent costs for the government in the future.

“We need to take a cautious view of this trend towards PPPs in Africa,” Zhang added.