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Infrastructure Projects Mount as Africa Readies for Belt and Road

East Africa clearly plays a key role in China's Belt and Road Initiative, with its clear endgame of accessing new markets and additional natural resources, but many nations across the continent are now asking what exactly is in it for them…

Photo: China: On track to revolutionise Africa’s rail network.
China: On track to revolutionise Africa's rail network.
Photo: China: On track to revolutionise Africa’s rail network.
China: On track to revolutionise Africa's rail network.

In 1896, the British colonial government began construction of a narrow-gauge railway line from the Kenyan port city of Mombasa to Nairobi. Back then, it took three decades to extend the line to Uganda. The initiative, however, did establish a transport corridor, allowing the landlocked British protectorate's natural resources to be shipped out for the good of the Empire.

Today, the railway builders are back. This time, though, it is China's economic integration strategy in East Africa that is behind the construction of a new rapid rail link between Mombasa and Nairobi. The new line, due to reach the Kenyan capital by 2018, will eventually extend to Uganda, Rwanda, Burundi and South Sudan. This is where China's Maritime Silk Road ends and where its trade connectivity with the East African region begins.

The Maritime Silk Road, part of the mainland government's Belt and Road Initiative, will change the way China engages with its trading partners in East Africa – particularly Kenya and Tanzania and, to a lesser extent, Uganda and the Horn. Africa, in general, is a growing consumer market for Chinese products and, at the same time, a prime source of essential mineral commodities.

Developing closer trade ties with Africa, via the Belt and Road, underpinned by investment in new regional infrastructure, is clearly a priority for China. It forms a key part of its broader international drive to restore momentum to its slowing economic cycle, primarily by deriving greater efficiency from its trade links.

Tellingly, a number of China's current infrastructure projects are focussed on East Africa. There are also clear indications that China is prioritising infrastructure investments in the region. In terms of enlightened self-interest, this will provide it with more efficient trade connectivity in the region and allow it to take advantage of Africa's improving economic conditions.

In addition to the East Africa Railway, China is also financing a number of essential port developments, including a US$10 billion deepwater harbour in Bagamoyo on the eastern coast of Tanzania. With many African ports already approaching capacity, China sees port upgrades across the continent as a critical part of its strategy of cementing further trade agreements and opening up trade lanes.

Although the funding sources for specific projects are not always clear, China is financing many of these facilities through a small number of institutions – the Asian Infrastructure Investment Bank, the Silk Road Fund and, specific to Africa, the Forum on China-Africa Co-operation (FOCAC) and the China-Africa Development Fund (CAD Fund). At times, projects are funded from a combination of sources and it's unclear as to the extent to which any such agreements are bilateral or continental in nature.

A number of analysts and scholars believe, however, that there is a direct connection between China's maritime trade strategy and its military plans for the region. It has been widely reported, for example, that China is considering setting up a naval base in Djibouti – already home to the only US naval base in Africa. It is also believed to have plans for Walvis Bay in Namibia.

Assessing the likelihood of this covert agenda, Yu-Shan Wu, a researcher with the South African Institute of International Affairs, said: "Understandably, as Chinese economic engagement expands in Africa, it will inevitably intersect with security issues. The question is whether China's presence could create areas for co-operation on peace and security issues in Africa, or whether it will be perceived as competition. At present, it is too soon to tell."

Photo: Huajian Shoes: Sino-African co-operation at work.
Huajian Shoes: Sino-African co-operation at work.
Photo: Huajian Shoes: Sino-African co-operation at work.
Huajian Shoes: Sino-African co-operation at work.
Photo: Redeveloped by China: The Bagamoyo Port.
Redeveloped by China: The Bagamoyo Port.
Photo: Redeveloped by China: The Bagamoyo Port.
Redeveloped by China: The Bagamoyo Port.

As its economy slows, China may also be looking to Africa as a cheaper manufacturing base for its more labour-intensive industries. In 2012, the Chinese-owned Huajian Shoes opened a factory in Ethiopia, a country keen to boost its level of industrialisation and attract foreign investment in manufacturing. The project is now often cited as a case study of China's interest in offshoring elements of its production to Africa. Over recent years, there has been a notable increase in the number of funding sources for Chinese businesses looking to expand abroad. In Huajian's case, it was the CAD Fund that backed its Ethiopian venture.

The successful implementation of Chinese offshore manufacturing projects would very much depend on the development path adopted by the African countries concerned. It would be influenced, for example, by whether individual nations were looking to move away from a resource-intensive growth model to more of a manufacturing-based economy. Certain African countries, it could be argued, need the necessary environment and investment that China is willing to provide in order to facilitate such industrialisation. The long-term impact of all these projects, however, will need to be assessed by all of the participants.

It is clear that East Africa is a key part of China's ambitious integration strategy and its bid to engage its Belt and Road trading partners. What is less clear, however, is the particular emphasis that China will place on Africa in the long term or the degree to which its economic drive in Kenya and the region will be of benefit to the wider continent.

Seeing it as a two-way process, Yu-Shan Wu said: "Regional integration is a priority for Africa, and China seems to be addressing those concerns. It is up to individual African countries, however, to determine just what they want from China's engagement. There could, for example, be potential for collaboration between Africa's own regional initiatives – such as the North-South Corridor, an integrated continental transport programme – and the Belt and Road Initiative."

It could, indeed, be argued that while China knows what it wants from Africa, Africa doesn't know what it wants from China. Addressing a conference in Cape Town earlier this year, Nkosazana Dlamini-Zuma, Chair of the African Union, however, left delegates in no doubt as to her stance on the benefits of China's greater economic integration with Africa, saying: "China is putting its relationships with Africa at a different level."

Speaking at the same event, Dlamini-Zuma, a pan-Africanist with a hugely ambitious vision of an economically integrated, connected continent, clearly welcomed China's greater participation. She said: "African states are benefiting from their partnership with Chinese companies in a number of areas, including transport infrastructure integration, energy, broadband technology, and healthcare and disease control."

This kind of ambitious Sino-African co-operation has also been reflected in an agreement between the African Union and China, signed earlier this year. This aims to connect Africa's capital cities through a vast network of road, rail and air transport routes – all of which are to be built by China. The deal has been hailed as the "most substantive project the African Union has ever signed with a partner".

Professor Lin Jiang, Chair of the Department of Public Finance and Taxation at Hong Kong's Lingnan University, believes that both parties can benefit from China's activities in Africa. He said: "The African component of the Belt and Road Initiative offers a new type of opportunity. This is not just open to Chinese private enterprises, but also those African countries that are able to collaborate when it comes to infrastructure development and manufacturing."

China's greater economic integration with Africa, though, is not without its challenges. Many of the countries in the region are among the poorest in the world, raising the question as to whether China will ever be able to make a return on its investment.

Photo: Will Chinese investment rewrite the trade map in Africa?
Will Chinese investment rewrite the trade map in Africa?
Photo: Will Chinese investment rewrite the trade map in Africa?
Will Chinese investment rewrite the trade map in Africa?

Nonetheless, if China's policy solely succeeds in developing infrastructure in the region, it will still make a clear impact. A number of these initiatives – notably the East Africa Railway, which will see high-speed freight trains replacing a 120-year-old colonial railway line and massively reducing the cost of regional transport logistics – will undoubtedly help to support economic growth and trade. For China, and Africa, it could well be a strategic win-win outcome.

Mark Ronan, Special Correspondent, Cape Town

Content provided by Picture: HKTDC Research
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