Writing: The writing doesn’t need to be polished, but it does need to tell a story. What is your topic? Why does it matter to sustainable finance? What actionable insights did you find? Why is it interesting?

My topic is the role of U.S. development finance in Africa, specifically in regard to 1) how financial flows have changed since OPIC became DFC in 2019, and 2) the ways in which U.S. development financing differs from that of China.

I’m interested in exploring changes in overall financial flows by the U.S. International Development Finance Corporation (DFC) since the U.S. Overseas Private Investment Corporation (OPIC) became DFC in 2018 (effective December 2019). The BUILD Act, which created the U.S. DFC, increased DFC’s annual spending cap to $60 billion.

My topic is relevant to sustainable finance because it deals directly with development finance flows to Africa. There are probably stakeholders within and outside the agency who are interested to know the extent to which DFC’s investments have changed since the days of OPIC. Furthermore, these same people would likely be interested in seeing a direct comparison between U.S. DFC and CDB using quantitative evidence. Although I expect to see that the U.S. is lagging in terms of transaction size, perhaps there is a particular sector where U.S. investment dominates or falls significantly behind. The data and resulting analysis could inform DFC investment decisions. It would also be interesting to the larger public, and potentially Congressional staff members or members of Congress who work on the Foreign Relations/Affairs committees who oversee DFC and would like to see it increase or decrease spending in certain areas.

My first finding is that there has not been a clear difference in the amount committed since OPIC became DFC in 2019. As shown below, 2019 and 2020 spending were on par with previous spending levels, after 2017-2018 saw a large drop in spending compared to 2016. However, we see that total amount committed did increase substantially in 2021 to almost $7 billion. This is likely because it took time for the new agency to get its bearings and start to make changes in line with its new spending power and capabilites.

Interestingly, since 2000, DFC has made the highest amount of investment in Latin America, with over $25bn committed. Africa is a close second, however, with almost $20bn committed over the same time period.

Let’s dive deeper into spending in Africa. On which sectors does DFC spend the most money? According to the data, most loans to Africa are supporting utilities, finance and insurance, and mining, quarrying, and oil and gas extraction.

To which country in Africa does DFC spend the most money? The answer would be none in particular: most spending goes to region-wide projects. However, South Africa, Ghana, Nigeria, Mozambique, and Kenya receive the bulk of DFC spending.

How does this compare to spending by China’s Development Bank? Unlike DFC, China only began investing in Africa in 2007-2008, with most projects beginning around 2011. There was a huge spike in spending in 2016, almost $20bn in one year alone - the equivalent of all DFC spending in Africa throughout its history. This speak to the major differences in terms of the scale of DFC vs. CDB spending.

Now what about country differences? We see that almost all of China’s spending has gone to Angola, likely on oil projects. This is very different from DFC’s country allocation. However, South Africa and Ghana appear to be priorities for both agencies.