U.S. Investment in African University Fails as China Advances

When the U.S. government’s private-investment arm teamed with New York-based real-estate investor

W.P. Carey
Inc.


WPC -1.27%

to finance the expansion of a prestigious university in Ghana, it was meant to demonstrate a novel for-profit funding model for development projects in Africa.

Instead, it left a wasteland of unfinished lecture halls, dormitories and a pile of litigation. And it marked a high-profile setback for U.S. government efforts to counter China’s growing investment influence on the continent.

The project at the University of Ghana was a public-private partnership including the U.S. government’s Overseas Private Investment Corp., known as OPIC, and W.P. Carey, owner of the New York Times headquarters. Launched in 2015, it was meant to provide accommodation for 984 students and facilities to teach science, technology, education and humanities.

OPIC provides loans and insurance for projects in developing countries. It usually partners with American companies. But some of the biggest American investors, including private-equity firms

KKR

& Co. and

Blackstone Group
Inc.,

are stepping back from Africa, a priority region for OPIC and China. OPIC’s partners in the Ghana project don’t have a record of completing African projects.

President Trump and Congress last year doubled OPIC’s funding capacity to $60 billion. The goal: to help OPIC compete with China’s $1 trillion Belt and Road program to build infrastructure including universities, railroads and power plants world-wide.

OPIC wants to build “the greatest development force in the history of the world,” Chief Executive David Bohigian said in a March interview. The agency provides alternatives to Chinese funding for Indonesian banks, Pakistani wind farms, Indian hospitals, Nigerian power plants, Middle Eastern private-equity funds and Vietnamese fish farmers. It has earned annual profits since 1974.

But OPIC’s reliance on private companies as partners means its foreign-policy objectives must usually align with their profit targets. By contrast, Chinese President Xi Jinping has state-controlled companies and banks that are able to help enact foreign policy. Chinese investment in Africa is rising, more than doubling to $43.3 billion between 2011 and 2017. U.S. investment in Africa fell 12% to $57 billion over that period.

In African higher education, China is racing ahead. It committed $671 million between 2000 and 2014, more than double the U.S., according to data from the Organization for Economic Cooperation and Development and AidData, a research group at the College of William & Mary. In November, China completed a multimillion-dollar university library in Tanzania. Confucius Institutes teach Chinese across Africa. More Africans study in China than in the U.S.

Unfinished buildings at the University of Ghana, and a new China-funded library at the University of Dar es Salaam in Tanzania.


Photo:

University of Ghana; University of Dar es Salaam

The Ghana project was meant to be the biggest expansion since the U.K. built the university in 1948 in its Gold Coast colony. It was touted as a model for the continent with the youngest population and lowest access to higher education.

“West African universities, like the University of Ghana, are unable to expand enrollment due to the lack of long-term funding needed to construct new academic facilities,” OPIC said in 2015. “This is contributing in part to the migration of educated West Africans to Europe and the U.S.”

American businesswoman Andrea Pizziconi started the project. She founded Africa Integras LLC in 2008 to compete with Chinese developers. She hasn’t yet completed a university project in Africa.

W.P. Carey invested, expecting a high financial return to compensate for the risk, people familiar with the deal said. OPIC agreed to lend $41 million and provide political risk insurance. The loan wasn’t drawn.

The announced cost was $64 million. Developers stood to earn more. They planned to lease the buildings to the university for 25 years for more than $600 million, according to a copy of the agreement. Tax breaks could have reduced the rent, project documents show.

Construction began in 2015, but the project soon unraveled. A new vice chancellor installed in 2016 opposed the deal and was quoted in Ghanaian news media saying it “enslaves” the university. Construction halted. The university and developers blamed each other. OPIC tried to intervene but the project was terminated in 2017.

Across campus, students can access a $37.5 million computer system. A Chinese company installed it with cheap funding. Export-Import Bank of China provided a 19-year loan with a five-year grace period and an annual interest rate of 2% thereafter.

Failure didn’t prevent W.P. Carey from profiting. A London-based lawyer determined a $165.8 million termination fee for the aborted project in 2018. Instead of pursuing payment, W.P. Carey, which says it has a core principle of “doing good while doing well,” claimed a $45.6 million insurance policy from OPIC and Chubb, resulting in a gain of at least $10 million. Whether to enforce the termination fee is up to the insurers, a W.P. Carey spokesman said.

Tanzanian President John Magufuli shakes hands with Chinese Ambassador to Tanzania Wang Ke at the library handover ceremony in Dar es Salaam.


Photo:

Xinhua/ZUMA Press

The university said it would “vigorously defend itself against all claims, using all legal avenues,” in a July 9 statement.

“The U.S. government is working extensively with the parties to resolve these issues,” an OPIC spokeswoman said. Chubb declined to comment.

“W.P. Carey’s conduct was extremely callous and disrespectful to every stakeholder,” said Ms. Pizziconi, who has offered to complete the buildings. “They terminated a project that had the potential to educate hundreds of thousands of students over decades and left stakeholders including Africa Integras with millions in losses, except for W.P. Carey whose outsized profits are a matter of public record.”

W.P. Carey “was excited about the opportunity,” the company spokesman said, and “disappointed that the university ultimately decided not to move forward.”

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Write to Simon Clark at simon.clark@wsj.com

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