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The risks and rewards of resource-for-infrastructure deals: Lessons from the Congo's Sicomines agreement

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  • Landry, David

Abstract

Resource-for-infrastructure (RFI) deals generate upfront infrastructure investments that are to be repaid via future resource extraction revenues. However, much can change in the meantime. This paper explores the Democratic Republic of Congo's Sicomines agreement, a critical RFI case that has proven to be highly contentious, and highlights the role played by risk from its inception a decade ago until now. Drawing on the Sicomines agreement, this paper employs financial modeling techniques to highlight the pitfalls of attempting to identify winners in RFI deals before they reach their conclusion. As this paper demonstrates, the expected benefits of RFI deals can change swiftly and unpredictably. In fact, the model presented in this paper estimates that Sicomines’ NPV has dropped from USD 10 billion to minus USD 150 million since its inception.

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  • Landry, David, 2018. "The risks and rewards of resource-for-infrastructure deals: Lessons from the Congo's Sicomines agreement," Resources Policy, Elsevier, vol. 58(C), pages 165-174.
    • Handle: RePEc:eee:jrpoli:v:58:y:2018:i:c:p:165-174
    DOI: 10.1016/j.resourpol.2018.04.014
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    References listed on IDEAS

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    1. Brautigam, Deborah, 2011. "The Dragon's Gift: The Real Story of China in Africa," OUP Catalogue, Oxford University Press, number 9780199606290.
    2. Johanna Jansson, 2013. "The Sicomines agreement revisited: prudent Chinese banks and risk-taking Chinese companies," Review of African Political Economy, Taylor & Francis Journals, vol. 40(135), pages 152-162, March.
    3. John Beardsworth & Havard Halland & Bryan Land & James Schmidt, 2014. "Resource Financed Infrastructure : A Discussion on a New Form of Infrastructure Financing [Infrastructures financées par des ressources naturelles : Examen d'un nouveau mode de financement des infr," World Bank Publications - Books, The World Bank Group, number 18554.
    4. Malancha Chakrabarty, 2016. "Growth of Chinese trade and investment flows in DR Congo – blessing or curse?," Review of African Political Economy, Taylor & Francis Journals, vol. 43(147), pages 116-130, January.
    5. Stephanie Matti, 2010. "Resources and Rent Seeking in the Democratic Republic of the Congo," Third World Quarterly, Taylor & Francis Journals, vol. 31(3), pages 401-413.
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    Cited by:

    1. Sebastian Purwins, 2023. "Same Same, but Different: Ghana’s Sinohydro Deal as Evolved ‘Angola Model’?," Insight on Africa, , vol. 15(1), pages 46-70, January.
    2. Bridget Tawiah Badu Eshun & Albert P.C. Chan, 2021. "An Evaluation of Project Risk Dynamics in Sino-Africa Public Infrastructure Delivery; A Causal Loop and Interpretive Structural Modelling Approach (ISM-CLD)," Sustainability, MDPI, vol. 13(19), pages 1-24, September.
    3. Mihalyi,David & Hwang,Jyhjong & Rivetti,Diego & Cust,James Frederick, 2022. "Resource-Backed Loans in Sub-Saharan Africa," Policy Research Working Paper Series 9923, The World Bank.
    4. Tom Ogwang & Frank Vanclay, 2021. "Resource-Financed Infrastructure: Thoughts on Four Chinese-Financed Projects in Uganda," Sustainability, MDPI, vol. 13(6), pages 1-22, March.

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