US Exim Bank out to displace China after record loan in Africa

Washington, D.C

THE Export-Import Bank of the United States opened a new front in the trade war between America and China with its biggest loan yet in sub-Saharan Africa, as it plans to compete more aggressively on the continent.

The lender has just provided US$4.7 billion to fund a Mozambican gas project - the largest share of about US$15 billion raised for the development. The deal helped secure US jobs and displaced earlier financing efforts by China and Russia, according to Stephen Renna, Exim's chief banking officer.

"China is our competitor and one that we want to compete with to win," he said. "We do have a mandate from Congress to emphasise what we can do in sub-Saharan Africa so we're clearly open for business there."

The investment comes as tensions between Washington and Beijing escalate amid a bruising trade war and President Donald Trump's orders to end Hong Kong's special status and sanction Chinese officials responsible for clamping down on dissent in the city.

China is Africa's biggest trading partner, with two-way flows totalling more than US$180 billion - almost four times that of America. Over the past decade, Exim has authorised about US$12.4 billion for US exports to sub-Saharan Africa, the lender said in February.

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Exim became fully functional again after being reauthorised in December, with the mandate to offer loans that rival rates and terms offered by China. At least US$27 billion of the agency's total financing has been directed toward this purpose. The bank's board quorum was also re-established in May last year after more than three years during which it was unable to approve transactions greater than US$10 million.

Exim first approved the loan for the Mozambique liquefied natural gas project when it was led by Anadarko Petroleum Corp. Though it was later sold on to French oil major Total SA, the project will still support US companies that have been awarded contracts worth billions of dollars to help build the facility that by the bank's count could back 16,700 American jobs.

Beating Chinese banks outright may not always be so clear cut. Exxon Mobil Corp is planning to develop a facility next to Total's, with China National Petroleum Corp as one of its partners.

The participation of the state-owned Chinese company may not prohibit Exim from supporting the project, even though the goal is to "push back" against China, Mr Renna said. Exim has provided financing for a rural electrification project in Senegal. Solar and storage projects could also see funding, though Mr Renna notes the bank is not the policy arm of the government and doesn't choose the projects pro-actively.

"A number of African governments have reached out and said: 'We want to turn away from China, we're concerned about the security of the information in our system,'" he said. "Alternatives have to bring financing and so that's where we're trying to step up and step in." BLOOMBERG