China is extending its access to Africa’s raw materials with a new deal in which it will provide some $7.2 billion in financing to the de-facto government in Guinea, the world’s largest bauxite producer and an important producer of uranium, iron ore, diamonds and other minerals. Assistance will be provided through the China Investment Fund in exchange for commitments to purchase Chinese goods and pay Chinese companies. The move provides a lifeline for the Guinean military junta, which killed 150 pro-democracy activists in late September and is being threatened with sanctions from both the European and African unions unless it holds democratic elections.
At the other end of the economic spectrum, Nigeria is considering creating a sovereign wealth fund using its international reserves, currently at $42 billion. The proposed fund will help the country boost government revenues and diversify its revenue base. The finance ministry and the central bank are reportedly in talks with National Assembly members to design the fund.
Zambian finance minister Situmbeko Musokotwane says the government will increase domestic borrowing to 3% of GDP in the current fiscal year from a 1.8% target, with additional funds used to finance the country’s budget deficit. Borrowing will decline to 2% next year. The budget gap continues to expand as a result of lower donor funding, which accounts for 25%-30% of the budget, amid long-standing charges of corruption. The Zambian economy is expected to grow by 4.3% in 2009, however, and by 5% in 2010.
Eskom, the South African energy giant, announced it will seek to triple electricity rates. If approved by the country’s energy regulator, rates will be hiked by 45% a year for three years on the heels of two other rate increases since last year that have already raised rates by an average 59%. Eskom needs the money to build new power stations to meet mounting demand and to reduce the possibility of an encore of this year’s harmful blackouts. Eskom is already building a 4,800 megawatt coal-powered power plant, with a first phase expected to come online in 2012.