What can Africa gain from China’s growing investments?

Over the last twenty years, China has strengthened its relationship with Africa by providing low-interest loans, constructing mega infrastructure projects, buying more oil, bauxite, and natural gas, and of course, exporting cheap manufactured products.

It’s now almost impossible to separate China from Africa. And some African countries like Ethiopia, Zimbabwe, and the Republic of Congo have adopted the Chinese economic model, abandoning long cultivated Western and Soviet Union ties that, their governments say, are filled with many preconditions.

A newly launched report, “Market Power and Role of the Private Sector: Chinese Investment in Africa,” published by the China-Africa Business Council, documents the two-decade economic cooperation between the two partners.
The document launched in Beijing on August 26, not only talks about the opportunities available for both parties but also challenges that could deter Sino-African investment cooperation in the future.

Chinese enterprises have made a significant socio-economic impact in countries such as Nigeria, South Africa, Egypt, Angola, Zambia, Democratic Republic of Congo, Ethiopia, Kenya, Republic of Congo, Ghana, Algeria, and Tanzania. It is bound to get deeper into the continent with the construction of the Belt and Road Initiative which will open ancient international trade routes.

No surprise that Chinese enterprises are eyeing how best to exploit opportunities that will be created by the African Continental Free Trade Area (AfCFTA), a continental trading bloc launched in January 2021. Remember it is China that constructed the African Union (AU) headquarters in Addis Ababa, in what the Communist Party termed as “a gift to Africa.”

But a major question lies. How much does Africa trust China? Considering a growing number of African countries are democratic and have a free press, something at odds with China’s authoritarian one-party system, trade ties will face lots of scrutinies. Chinese projects such as Kenya’s Standard Gauge Railway have been critiqued as white elephants. The project, riddled with allegations of corruption, cost $3.6 billion and has incurred monthly losses of $10 million since its inception three years ago.

A case example of how Africans don’t fully trust China lies in the story of the AU headquarters, China’s so-called “gift to Africa.” The project also included a computer network at the AU that they paid and built, and allegedly inserted a backdoor that allowed it to transfer data. The hack wasn’t detected until January 2017, when technicians noticed that between midnight and 2 am every night there was a peak in data usage even though the building was empty.

After investigating, it was found that the continental organization’s confidential data was being copied onto servers in Shanghai. China’s Ambassador to the AU Kuang Weilin dismissed those accusations at the time.

Trust alone doesn’t define relationships between nation-states in the 21st century. African governments know they need China. Collectively, African countries would need to spend $130-$170 billion per year to meet their infrastructure needs, but, according to the African Development Bank, they are coming up $68-$108 billion short. When Europeans began their colonial conquest of Africa, one key mission was to build infrastructure that could bring light to the “Dark Continent” and now China is next in line to open up the hinterlands with railways, highways, airports and even seaports.

The central players in many of Africa’s biggest ticket infrastructure projects — including the $12 billion Coastal Railway in Nigeria, the $4.5 billion Addis Ababa–Djibouti Railway, and the $11 billion megaport and economic zone at Bagamoyo, Tanzania — are being developed via Chinese partnerships

“Europeans built infrastructure in Africa at the turn of the century, purportedly also for local economic development, but in essence the projects were used for natural resource extraction. The predecessor of both the Nairobi-Mombasa and Addis Ababa-Djibouti railways can be categorized as such. Both connect inland regions with mineral deposits with major ports on the Indian Ocean,” wrote Xiaochen Su on The Diplomat.

It’s not just Africa that values the relationship. China also considers Africa as a key asset. For a government that is fixated on statistics and data, Beijing is aware that Africa’s 1.1 billion population is set to double by 2050, with 80% of this growth taking place in cities thus bringing the continent’s urban demographics to more than 1.3 billion. Lagos, the continent’s largest city, is growing by 77 people per hour and according to McKinsey, by 2025, more than 100 cities in Africa will contain over a million people.

Growing boom in population correlates with a rising housing consumption expected to increase at 3.8% yearly to $2.1 trillion by 2025. Chinese firms will have more market for their manufacturing industry, and trade will surely surpass the $200 billion in exports that the world’s second largest economy sent to Africa in 2020.

China is thus choosing to focus more on Africa. It is already organizing a 2021 Forum on China-Africa Cooperation (FOCAC) to be held in Dakar, Senegal. The upcoming FOCAC will undertake a major audit of the “Ten Major Cooperation Programs” and the “Eight Major Initiatives” jointly formulated and implemented within the FOCAC framework in 2018. These include investments in infrastructure, manufacturing, mining, agribusiness and industrial parks.

The forum follows up on the $1 billion Belt and Road Africa infrastructure development fund China announced in 2019, alongside a whopping $60 billion African aid package.

Private sector players in the continent have also encouraged Chinese firms to participate in the Africa Investment Forum set for November 17. Postponed in 2020 amid coronavirus concerns, this premier business event to be held in Johannesburg will be a showcase of the vast array of business opportunities across the continent.

In the 2019 forum, the African Development Bank says that 57 deals valued at US Dollars 67.7 billion were tabled for discussions, out of which 52 deals worth US Dollars 40.1 billion secured investment interest.

Despite all the talk of China’s growing influence in Africa, the relationship is likely going to be fixated on trade and economics, with no developments on the cultural, political and social front. China doesn’t support civil societies on the continent unlike the West and Gulf countries, and it rarely interferes with the political crises plaguing the continent.

A pragmatic relationship, but business minded.

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