A new report on the impact of China’s Belt and Road Initiative (BRI) in Africa paints a troubling picture – but there is more than one side to the story. Felicity Landon reports.
A new “Issue Brief” from the Observer Research Foundation (ORF) takes a differentiated look at the nature of the Belt and Road Initiative (BRI) on the African continent and its advantages and disadvantages for the host countries.
As the report’s author, Dr. Venkateswaran Lokanathan, points out, China has built a significant economic presence in most African countries over the past two decades.
“The lucrative economic investment package, the flexible political approach and the focused, large-scale development projects within the framework of the BRI offer the African countries an allegedly huge opportunity,” he writes in his report. “However, the one-sided nature of the initiative, the lack of transparency and accountability towards African countries and the lack of projects that directly benefit the locals have aroused suspicion and fueled resentment on the ground.”
Dr. Venkateswaran says African countries are becoming increasingly concerned about a “rising debt trap.” According to his report, Djibouti owes China the equivalent of 75 percent of GDP, while China owns 72 percent of Kenya’s external debt of US $ 50 billion.
In the next three years, Kenya alone is expected to pay $ 60 billion to China Exim Bank. The story of the port of Mombasa and the standard gauge railway (SGR) to Nairobi attracted a lot of attention – as reported by Port strategy Last year the Kenyan government donated Sh 227 billion from the bank. borrowed to fund the rail project and is under tremendous pressure to keep the repayments going.
According to the ORF report, Kenya’s General Court of Auditors has warned that the country runs the risk of losing control of the port of Mombasa if it no longer receives the SGR loans from China Exim Bank.
The professor for maritime economics and logistics, Dr. Hercules Haralambides, who teaches at Dalian Maritime University and Sorbonne University, sees it differently, however.
DEBT TRAP DIPLOMACY
“Part of the Western concern about BRI consists of what is known as ‘debt trap diplomacy’,” he says. “The Sri Lankan port of Hambantota has often been used as an example. However, this practice is not unfamiliar to some Western “financiers” and, in short, consists of lending to borrowers, usually on difficult terms, knowing that they will not be able to repay.
“The solution is often an exchange of debt for equity, ie in this case the lender takes control of the port. Whether this is the case with BRI investments or not remains to be seen. But loans to Sri Lanka (Hambantota) were rather concessional (two percent), while the country owes the largest debt to Japan and not to China. “
Decisions made in the context of BRI, be it project selection or investment and financing cooperation, are all based on extensive consultation between the parties, says Dr.
“China and another 27 countries have jointly adopted the Guiding Principles for Financing the Development of the BRI, which highlight the need to ensure debt sustainability in project finance. China claims that in cases where its BRI partners have difficulty servicing debt, China will adequately address the problem through friendly advice and will never press partners to pay off the debt. “
REVOCATE CHINESE LICENSES
In the ORF report, Dr. Venkateswaran that there have been increasing cases of cancellation or postponement of BRI projects by African countries due to rising debt concerns – and cites examples such as the Zambian government, which is withdrawing the license to operate coal mines from a Chinese company due to inadequate safety and environmental regulations Ugandan government postpones construction of KampalaEntebbe Expressway and Sierra Leone government cancels US $ 318 million Mamamah International Airport project under the BRI. Similarly, the Tanzanian government has pushed back planned lending from China for its new port project in Bagamoyo.
Ports and supporting road and rail infrastructure are a big part of the BRI picture. The ORF report explains the main trends emerging from China’s BRI projects in Africa: “China is investing in ports and port areas along the coast from the Gulf of Aden via the Suez Canal to the Mediterranean. Of the 49 countries that China claims to have signed Memorandums of Understanding (MOUs) officially supporting the BRI, 34 (nearly 70 percent) are along the coast of Africa – 16 in the west and eight in the north and east, and two in the south. “
These include, it is said, Djibouti Port, three Egyptian ports – Port Sudan, Port Said-Port Tewfik, Port Ain Sokhna – Zarzis Port in Tunisia and El Hamdania Port in Algeria.
In addition, “the Navy of the People’s Liberation Army in Djibouti built its first military base abroad, which has been in operation since 2017. In order to serve its strategic interests, China could use its influence on these ports for economic purposes (raw material transport, finished goods transport) and work) and military (monitoring and blocking of overseas and deep sea traffic) in the future. “
Dr. Haralambides points out that many other nations, including the US, UK, France, Germany and Italy, also have naval bases there, while the Gulf of Aden is the global hub for the illegal arms trade. The implications of the “one-stop-shop” approach are also up for debate.
According to the ORF report, China is using its connectivity projects, which account for 20 percent of its total projects in Africa, to connect its industrial and energy projects in the hinterland with its infrastructure projects along the coast.
For example, there is an oil refinery in northern Sudan near the railway line between Port Sudan and Dakar Port. Gabes, a hub for the petrochemical and phosphate industries in Tunisia, was connected to the port of Zarzis by rail. An industrial park in Ethiopia is located near the Addis Ababa-Adama highway, which connects to the Addis Djibouti railway line, which connects to the port of Djibouti.
“This enables China to transport raw materials such as phosphate, copper, cobalt, gold, iron ore, cocoa, bauxite, coal, lithium, steel, granite and marble as well as finished goods and Chinese workers back to the mainland by sea.”
WHO benefits – LOCAL COUNTRIES OR CHINA?
The report asks: “Does the BRI really support the participating countries on the ground or does it just serve to increase China’s economic advantages? The local population only occasionally benefits from Chinese investment, and often loses it – through resettlement, damage to the local environment, or the loss of homes and facilities that “stand in the way” of development, from mines and power plants to railways and ports .
The conclusion is that “BRI so far remains a largely unilateral Chinese exercise with only a few cases of cooperation with third countries in Africa”.
Dr. However, Haralambides rejects that China’s investment strategy in Africa does not bring any local benefit and emphasizes: “For reasons of credibility, reports like this one should be subjected to an independent peer review by the ORF and at the same time full referencing of their claims and sources.”
He says: “China is not only investing in the African infrastructure, but is also shifting manufacturing activities there. By the end of 2015 – 128 industrial projects in Nigeria, 80 in Ethiopia, 77 in South Africa, 48 in Tanzania and 44 in Ghana. It seems that developing Africa is much easier than developing China’s own northwest areas, and this trend will continue in line with rising labor costs in China. “
Dr. Venkateswaran there. “Financing by Western countries or institutions is usually linked to strict conditions; an inconvenience for poorer African countries. In comparison, China’s financing strategy – through a combination of grants, aid and loans (free or low-interest) with a generous repayment plan, especially for infrastructure projects – is an attractive option for African countries. “
China takes a practical rather than a value-based approach to dealing with political regimes across the continent, he adds: “Unlike Western countries that prefer to deal with transparent and accountable democracies, China is taking an ‘all-inclusive’ approach and deals with regimes without set conditions. “
Dr. Haralambides points to a review mechanism proposed by the European Commission in 2017 and approved by the European Parliament in February 2019. The mechanism, which reflects similar procedures in the US Senate, is intended to ensure that “strategic infrastructure” such as ports are not predatorily attacked by foreign investors.
“The ‘mechanism’ is seen as a co-ordination tool at EU level that does not intend to replace national mechanisms or to question the prerogative of Member States to decide on investments,” he says.
“The screening mechanism has resulted in Chinese investments in the European Union falling by 40 percent to around 17.3 billion euros in 2018 compared to 2017. In 2016, Chinese investments reached a record level of 37 billion euros. This ‘success story’ was over-advertised in Brussels, but in my opinion the decline in Chinese investment is due to the slowdown in the Chinese economy since 2016 and not a (rather tepid) screening mechanism. “
He also asks when it comes to sensitive financial matters, development aid or foreign direct investment: “Are other countries like the USA, Great Britain, France, Germany less opaque?”