Perspectives on Africa-China Infrastructural and Industrial Cooperation: Empirical Findings and Conceptual Implications (Africa-East Asia International Relations) 303138394X, 9783031383946

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Africa-East Asia International Relations

Bhaso Ndzendze David Monyae   Editors

Perspectives on Africa-China Infrastructural and Industrial Cooperation Empirical Findings and Conceptual Implications

Africa-East Asia International Relations Editorial Board Jiyoung Kim, Poli Sci/International Relations Soongsil University Seoul, Korea (Democratic People's Republic of) Series Editor Sabella Abidde, History and Political Science Alabama State University Montgomery, AL, USA Editorial Board Angela Ju, Dept of Political Science St. Edward's University Austin, USA Guanie Lim, Southeast Asian Studies National Graduate Institute for Policy S Tokyo, Japan Andrea Azizi Kifyasi, History University of Dar es Salaam Dar es Salaam, Tanzania Maria Adele Carrai, New York, NY, USA Lawrence Mhandara, Governance and Public Management University of Zimbabwe Harare, Zimbabwe Cassandra Veney, Cleveland, OH, USA

The primary purpose of this series is to broaden the frontiers and widen the scope of research and publication on Africa’s interaction with countries in East Asia. Volumes in this series critically examine African countries’ engagement with East Asia (China, South Korea, Japan, Mongolia, North Korea, and Taiwan), exploring issues rarely examined in the mainstream academic literature. The resultant books will represent a multiplicity of voices within and outside of the continent. The aim here is not just a convergence of voices, but an ample divergence of scholarly voices and critical debates that adds to our understanding of Africa’s international relations in East Asia. In furtherance of these objectives, case studies and comparative and historical analyses are encouraged and welcomed. This series publishes research monographs, edited volumes, and handbooks.

Bhaso Ndzendze  •  David Monyae Editors

Perspectives on Africa-China Infrastructural and Industrial Cooperation Empirical Findings and Conceptual Implications

Editors Bhaso Ndzendze Department of Politics and International Relations University of Johannesburg Johannesburg, South Africa

David Monyae Department of Politics and International Relations University of Johannesburg Johannesburg, South Africa

Centre for Africa-China Studies University of Johannesburg Johannesburg, South Africa

ISSN 2731-5126     ISSN 2731-5134 (electronic) Africa-East Asia International Relations ISBN 978-3-031-38394-6    ISBN 978-3-031-38395-3 (eBook) https://doi.org/10.1007/978-3-031-38395-3 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland Paper in this product is recyclable.

Acknowledgements

This project has been sustained and accomplished through the generosity of many persons and organizations. We wish to thank them here. We wish to acknowledge the contributors, spanning much of the continent, for entrusting us with their intellectual ideas. We are also thankful to research funding from the University of Johannesburg (UJ), which enabled us to conduct research on the continent and collect much-needed data in 2019. The innumerable interviewees were very welcoming and open with their knowledge and experiences. For their indispensable assistance in organizing the research trips and the two-day special conference in which these ideas were tested for the first time, we would like to thank colleagues Lebo Mosebua and Zizipho Masiza at the UJ Centre for Africa-China Studies. In that conference, inputs were received from a number of policymakers, including now-United Nations University rector Professor Tshilidzi Marwala, Senior Minister in Ethiopia Dr Arkebe Oqubay, and former South African ambassador to the United Nations Mr Baso Sangqu, in addition to many specialists critically observing the Africa-China/China-Africa relationship. We are also grateful to the anonymous peer reviewers, whose many helpful points have vastly improved the manuscript. We have been counselled and patiently guided by Professor Sabella Abide (series editor) and Lorraine Klimowich at Springer throughout the development of this manuscript. For this, and for their incredible patience, we are immensely grateful. Finally, we wish to thank each other as editors for conceiving of this project and working together in seeing it through to completion. Any remaining flaws within the work are ours and ours alone! Johannesburg, South Africa Bhaso Ndzendze David Monyae

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Contents

 Introduction: Putting Africa First in the Analysis of Africa-China Cooperation – A Conceptual and Policy Conundrum����������������������������������    1 Bhaso Ndzendze and David Monyae Part I Infrastructural Cooperation The Emergence of Railway Diplomacy in Africa: The Cases of South Africa and China������������������������������������������������������������   13 Lebohang Makekeng  China-Ethiopia Relations: Comprehensive Economic Cooperation (2000–2019)������������������������������������������������������������������������������������������������������   35 Messay Mulugeta, David Monyae, and Bhaso Ndzendze Chinese Investment in West African Infrastructural Development: Selected Case Studies��������������������������������������������������������������������������������������   59 Oluwaseyi Ebenezer Olalere Partnership for the Development of Africa’s Telecommunications Sector Under Agenda 2063: African and Chinese Telecommunications Companies in Africa����������������������������������������������������������������������������������������   73 Daouda Cissé Egypt-China Relations After Egypt’s 2011 Revolution: A Focus on Physical Infrastructure����������������������������������������������������������������   99 Emmanuel Matambo Part II Industrial Cooperation  Agriculture in African Industrialisation and the Role of China������������������  115 Gedion Jalata  ‘Made in Uganda by China’: Chinese Industrial Parks in Uganda������������  135 Bhaso Ndzendze and Messay Mulugeta vii

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 Kenya-China Relations in Augmenting Kenya’s Infrastructural and Industrial Needs: A Multidimensional Assessment of Perception ��������������  151 Emmanuel Matambo and David Monyae Part III Industrial Cooperation The Regional Infrastructural Imperatives of the AfCFTA for Development in Southern Africa��������������������������������������������������������������������  169 Nakubyana Mungomba, Mwanda Phiri, and Malindi Chatora  China and the BRI in Africa: A Focus on Rwanda��������������������������������������  189 Charles Matseke China’s Africa Debt Trap Question: Ethiopia and Kenya Infrastructure Case Studies����������������������������������������������������������������������������  209 David Monyae and Ken Chapotera The Belt and Road Initiative and the Build Back Better World: Implications on Africa’s Infrastructure Development����������������������������������  229 Sizo Nkala and Ekeminiabasi Eyita-Okon

Introduction: Putting Africa First in the Analysis of Africa-China Cooperation – A Conceptual and Policy Conundrum Bhaso Ndzendze and David Monyae

1 The Landscape The study of the relations between African countries and China often takes the shorthand form of ‘China-Africa studies’.1 In this simple, seemingly innocuous phrasing we get a snapshot of the underlying assumptions about the relationship and who is in ‘the driver’s seat’ in its progression and character; as a result, an opportunity to conceptually put Africa first is missed. Indeed, until recently, literature on these ties has tended to view the relationship as one so asymmetrical as to preclude any real agency on the part of countries numbering more than fifty (Zajontz, 2020: 1). Infrastructural and industrial cooperation (in this book conceived of as large-­ scale and long-term investment by entities of one country in the territory of another) is especially prone to this perception. (To some degree, the same may be said of security cooperation, although that is beyond the focus of this book). On one end of the spectrum, many studies operate with research questions that inevitably portray China as an ‘all-weather friend’ benevolently eager to help Africans uplift themselves, with some writers even trying to determine how Africa may learn to emulate China’s model. On the other end are studies that infer nefarious intentions on the  A major exception in this regard is Alden and Large’s 2019 edited work, New Directions in Africa-­ China Studies which consists of an interdisciplinary and richly empirical chapters with cases touching on all the continent’s regions. 1

B. Ndzendze (*) Department of Politics and International Relations, University of Johannesburg, Johannesburg, South Africa Centre for Africa-China Studies, University of Johannesburg, Johannesburg, South Africa e-mail: [email protected] D. Monyae Centre for Africa-China Studies, University of Johannesburg, Johannesburg, South Africa © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Ndzendze, D. Monyae (eds.), Perspectives on Africa-China Infrastructural and Industrial Cooperation, Africa-East Asia International Relations, https://doi.org/10.1007/978-3-031-38395-3_1

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part of Beijing, who is perceived to have both a hegemonic master plan and a means to centrally direct the over 10,000 Chinese enterprises operating in Africa (The Economist, 2022), despite the extent of China’s foreign-policymaking apparatus being deemed to be much more vast and therefore less coherent than commonly assumed (Sun, 2017: 419). China’s apparent interest in infrastructure cooperation with countries in Africa, and the developing world more broadly, has been characterised in some analyses as exemplary of ‘debt trap diplomacy’ (Brautigam, 2020). Although no single definition of this phenomenon exists, it is essentially the theory that China’s infrastructural and industrial investments in poorer states, under the umbrella of the Belt and Road Initiative (BRI) is a long-term ploy to occupy strategic assets of the vulnerable counterparts once they default on their payments (Lai et al., 2020: 109). When it comes Africa, partially out of internal political competition and partially as a result of western propaganda (with American Chinese studies still shaped by its Cold War origins for example [Hirono & Suzuki, 2014: 446]), countries such as Angola, Kenya, and Zambia have been described as either already or soon to be having their strategic and economic key points permanently taken over by China. In truth, this has never materialised once – making the phenomenon nothing more than a meme generated by think-tank speculation (Brautigam, 2020). No doubt such expectations stem from these vast projects being seemingly exclusively carried out by Chinese companies, with African countries passively playing along and availing their territory to Beijing’s grand strategizing (see the chapter ‘The Belt and Road Initiative and the Build Back Better World: Implications on Africa’s Infrastructure Development’ in this volume). Upon empirical observation, however, this grand narrative is found lacking. Most pressingly is the fact that Africa has a long-standing need for infrastructure and manufacturing industries, a fact which has made it the prime mover in the infrastructural and industrial projects with China instead of the other way around. Indeed, of Africa’s developmental bottlenecks, infrastructure is either at the top or very near the top of the list in a variety of studies (see Rodney, 1972; African Union, 2013; AfDB, 2018). In 2018, the African Development Bank (AfDB) prognosticated that the continent is faced with an infrastructural deficit that would require an annual funding injection of more than US$100 billion for at least the next decade. Earlier studies drew from the World Bank to show that freight charges in Africa were, on average, 200% higher than the rest of the world (Mills, 2010: 195). At the earliest, the recognition of Africa’s backfooting in infrastructure and industrialisation goes back to at least Walter Rodney, whose book (How Europe Underdeveloped Africa) presents a scathing critique of the causes of the continent’s underdevelopment, finding it to be partially the product of the intentional failure of colonialism to create viable infrastructure and industries for the long-term benefit of the local populations (Rodney, 1972: 247–257). Instead, as Rodney shows, the railways were built for the purposes of carrying extracted minerals from the inland territories to the coasts (see the chapter ‘China’s Africa Debt Trap Question: Ethiopia and Kenya Infrastructure Case Studies’ in this volume). Following the end of colonialism, the industries and infrastructure therefore failed through a combination of mismanagement by the governments, but also because their locations and trajectories had no moorings with the population – in

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addition to anti-competitive market practices and structural adjustment programmes (SAPs) enforced on Africa by the global North. Africa’s contemporary infrastructural deficit has implications for economic development, including the ability to sell goods to the international market in a costeffective way, and to thereby attract growth-inducing investment. The emergence of China in the early 2000s, and its comparatively exponential cooperation with the continent around this time – in the wake of the Global Recession in which other potential investors were becoming fiscally conservative and withdrawn – should be considered. That is, a number of factors have coincided to explain Africa’s preponderant cooperation with China for its infrastructural and industrial development: the continent’s own needs, China’s unmatched capacity in infrastructure (Allison [2017] observes, for example, that in the 2000s China built the equivalent of Rome every two weeks) and lack of risk aversion, China’s pursuit of resource security through Africa (Liu, 2018: 79–80), and decline in the economic performance of Europe and the United States in the wake of the 2008 global recession (from which China remained immune (Monyae & Ndzendze, 2021). Putting Africa first in the analysis of Africa-China relations means not only conceiving of the projects being undertaken as indicative of the continent’s own agency. It also means understanding the complexity of the domestic political landscape of any given African state. That is, the People’s Republic of China and enterprises of Chinese origin and ownership are major role players in the continent’s attainment of the twinned outcomes of industrialisation and infrastructure development but in so doing, however, it displaces or threatens to displace numerous other actors with interests at home. Far from being exclusively powerful western governments and corporations, these include more local ones as well: regional hegemons as well as small and major business interests to mention only a few. In this way, then, China’s collaboration with African governments engages with distinct sets of political economies. This is surely exacerbated by the lack of an open database on Africa-China commercial data that is maintained by both sides. Such a database would help dispel myths, while also encouraging rigorous analysis that enables case-specific critique. Moreover, and in relation to this, the advantage of putting Africa first in the analysis is in helping observers understand the risk posed by the cooperation from the African perspective, namely the concerning lack of a framework for skills transfer. This, we venture to suggest, is the real medium- and long-term Achilles’ heel of the relationship far exceeding any hypothetical debt trap. In a continent of young people, it behooves African governments to amplify skills and technical transfers as a condition of infrastructural and industrial cooperation. Against this backdrop, the chapters in this book seek to empirically showcase the dynamics of the relationship ‘on the ground’ and to highlight African ownership of the major infrastructural projects and industrial activity, as well as African ownership of the narratives about China’s malfeasance. To advance the academic discourse on the relationship, each chapter in the book distils the conceptual implications of the findings and explores probable future developments in the relationship.

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2 Summary of the Book’s Empirical Findings and Their Conceptual Implications The book deals primarily with infrastructural cooperation and industrial cooperation between China and African countries in Africa. Although chapters are cognizant of where there are overlaps, the book treats these distinctly in two parts. Each chapter ultimately provides a treatment of what it means when referring to either of these terms, but for our purposes, and drawing from the common elements across the chapters, we conceptualise them in the following ways. Infrastructural cooperation broadly refers to the laying out of infrastructure in the territory of one country using the technical expertise, oversight and/or equipment owned by firms based in another country. This process commonly takes place following the awarding of a contract in an (nominally) open bidding process with the understanding that the projects are to be for the long-term development of the receiving country. On the other hand, industrial cooperation, which is related to the concept of infrastructural cooperation, can be defined as the presence and operation of foreign companies in the territory of another country with the workforce being mostly drawn from the local population. The chapters in this book detail the strengths of these models when implemented with Chinese partnership – but they also highlight some crucial weaknesses and failures, the lack of skills and technical transfer being the most glaring. This, we conclude, creates the risk not of debt trap, as commonly criticised, but instead that of a technical dependency. Therefore, the book asks several questions and provides solutions drawn from extensive empirical research. First, in what way, if at all, does China’s infrastructural cooperation with African countries impact that of the existing regional leaders on the continent? Second, it asks what are the determinants of success or failure in Africa-China infrastructural and industrialisation cooperation, not just in traditional but also emerging (digital) infrastructure and industries? Third and finally, it reviews how grand initiatives such as the BRI and Agenda 2063 understood on ‘on the ground’ on the continent, and, specifically, what are the touchpoints for both sides? The chapters deal with numerous countries across the continent, covering nearly all regions: China’s relations with countries in East, North, Southern and West Africa are engaged with in turn. While not operating from a single conceptual framework, the chapters make a number of conceptually overlapping observations with implications for scholarship and policymaking. The first of these is the opaque nature of the relations (with information either missing, distorted or incomplete), and thus the need for more empirical observation, such as presented by the chapters themselves following months of fieldwork. The second is that the grand initiatives of both sides – Agenda 2063 and BRI by China – have yet to penetrate fully ‘on the ground’ – being either misunderstood or retroactively fitted into what is already taking place. This includes many high-ranking actors on both sides. Additionally, again despite high-level commitments, there is limited cooperation in practice by the African side, as evident from the dozens of interviews held. On the other hand, Chinese entities closely cooperate through chambers of commerce, and across

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borders. Nonetheless, we make the third argument: China has become an indispensable partner to countries on the continent, replacing not only the West but also former regional players, such that their economies are disproportionately dependent on Beijing. At the same time, however, they hold considerable agency; at the behest of their civil society, the international community and their governments’ shrewdness, Chinese actors are aware that they are under constant scrutiny and this appears to influence their behaviour towards labour and the environment. Indeed, close relations with governments are critical for each entity (leading to perceptions of corruption). Fourth, the investments by both sides are long-term oriented. This is evident both historically and in the amount of new structures, organisations and investments being set up. But this is where the cooperation is most lacking and filled with paradoxes. Worryingly, there is not much evidence of skills and technical transfer taking place at any significant magnitude among the countries studied; indeed, in many of them, it is not even being examined or insisted upon by governments. For this reason, civil society organisations, communities and academia have for some time rightly raised this question. Many find their governments to be corrupt, or in the ‘pocket of the Chinese’ (whereas the Chinese themselves often see themselves as being less favoured by the governments and restricted by laws that they see as tilting towards locals). This is why governance is an important factor in infrastructure. As each of the chapters show, African governments, individually and collectively, need to be more long-term oriented and make use of their agency in ensuring a more equitable and mutually beneficial engagement with China. The chapter ‘The Emergence of Railway Diplomacy in Africa: The cases of South Africa and China’ makes the case that before there was China, there was South Africa. It traces the history of Pretoria’s transport diplomacy on the continent, its underpinning motives, and how South Africa gradually gave way to China. The chapter presents a compelling comparative analysis of African states, particularly in Southern Africa, cooperating with regimes vastly different from theirs and very different from their own. It is also the story of missed opportunity by post-Apartheid South Africa, however, to retain the market and represent ‘home-grown’ infrastructural and industrial cooperation with its near and distant neighbors on the continent. As the chapter concludes: it cannot be denied that the continent’s railway sector is a ‘battleground’ between South Africa and China (who also happen to be BRICS associates). However, the latter contender will likely emerge on top by virtue of its financial brawn and strong diplomatic support. The chapter ‘China-­Ethiopia Relations: Comprehensive Economic Cooperation, 2000–2019’ is an analysis of the comprehensive economic cooperation between China and Ethiopia between 2000 and 2019. Since the late 1990s, strong economic cooperation has developed between China and Ethiopia and it has resulted in unprecedently substantial trade partnership for the latter. It has also brought about enormous investment projects, infrastructural development and emergency aid to Ethiopia, from an insignificant base less than two decades ago. This chapter presents the infrastructural cooperation between China and Ethiopia and the major projects developed therein. The cooperation has provided Ethiopia with a great opportunity to benefit from China’s rapidly growing economy and technologies.

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Ethiopia managed to develop and upgrade its road networks, railway systems, telecommunications and power grids through the cooperation it secured from China. Given that the African Union is based in Addis Ababa, the China-Ethiopia cooperation has major favourable economic and diplomatic implications for Africa as well. On the African/Ethiopian side, the chapter cautions that relevant leaders and government institutions should bear in mind that getting the best out of its cooperation with China and the opportunities on offer will require effective, efficient and accountable planning and governance. Like others to follow it, the chapter observes the urgent need to build in skills and technical transfers into the cooperation with China for the long-term sustainability and development of the African side. The chapter ‘Chinese Investment in West African Infrastructural Development: Selected Case Studies’ is an examination of China’s role in infrastructural development in West Africa. It examines West African country’s decisions to partner with China’s for their infrastructural developments. Relevant information was extracted from various relevant documents and reports. The study reveals that the major characteristic of Chinese investment in West Africa is its concentration in a few sectors that are of strategic interest to China, especially in infrastructural development, manufacturing, and services which are becoming important although oil, energy and other raw materials represent the most attractive business opportunities in the past. The cooperation of China with West Africa is found to be targeted toward long-­ term development projects such as the construction of ports, roads, refineries, railroads, power generation and establishment of special economic zones to enhance trading, (e.g. Bui Dam in Ghanaʼs Brong Ahafo region, Abuja-Kaduna railway, Lekki Free Trade Zone in Nigeria, and Soubre Hydropower Project 275  MW in Cote d’Ivoire, among others). The strategic relevance of the China-West Africa relations is quite evident as well. The opportunities abound and the challenges are enormous in establishing a developmental framework with the options for a country-specific or a region-wide approach. This chapter has the benefit of investigating the relationship from an in-depth perspective, locating it within its long-term historical context. The chapter ‘Partnership for the Development of Africa’s Telecommunications Sector Under Agenda 2063: African and Chinese Telecommunications Companies in Africa’ looks at African and Chinese telecommunications companies in Africa. The research is partly based on qualitative interviews conducted with employees and managers at Huawei and ZTE in South Africa and Senegal between 2012 and 2015 alongside the author’s numerous observations on the engagement between African and Chinese telecom companies in the South African and Senegalese telecom markets. By studying the expansion of Chinese telecommunications companies abroad, with a particular focus on Africa in the case study, the chapter aims to explore the relationship (i.e. partnership or/and competition) between African and Chinese telecommunications in Africa and to draw out future directions for Africa’s telecommunications industry towards the realisation of Agenda 2063. The chapter ‘Egypt-­China Relations After Egypt’s 2011 Revolution: A Focus on Physical Infrastructure’ looks at Egypt-China relations after Egypt’s 2011 revolution with a focus on physical infrastructure. If infrastructure is political, Egypt

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proves that diplomacy goes a long way too in infrastructure cooperation. Egypt is notable for the first country in Africa and the Arab world to establish formal diplomatic relations with the People’s Republic of China, in May of 1956. The chapter’s more contemporaneous analysis is focused on Egypt’s relationship with China following the 2011 revolution in Egypt that led to the downfall of longtime leader Hosni Mubarak. Focus is placed on the current government of Abdel Fattah El-Sisi because in the aftermath of Mubarak’s ouster, it is El-Sisi’s government that has led for more than a term in office and which exhibits the most engagement with Beijing. Through the BRI, China is involved in augmenting Egypt’s infrastructure in construction, energy, transport, trade and industry. This is a positive response to Egypt’s Vision 2030, an ambitious plan tailored towards making Egypt one of the leading global economies by 2030. The chapter ‘Agriculture in African Industrialisation and the Role of China’ turns to agriculture in African industrialisation and examines partnerships with China by a number of African countries (Ethiopia, Mozambique, and Ghana). Africa is endowed with abundant natural resources. The continent has about 12% of the world’s arable land, of which 60% is uncultivated. Only 7% of the continent’s arable land is irrigated, compared to 40% in Asia. This chapter provides an in-depth analysis of the role of the agriculture sector in Africa’s industrialisation, and how China is supporting this agenda. The chapter notes that Chinese development assistance to Africa’s agriculture is marginal in comparison with assistance provided to other economic sectors, it is however, on the increase. The trend indicates a deepening of relations between China and Africa. The chapter ‘“Made in Uganda by China”: Chinese Industrial Parks in Uganda’ examines Chinese industrial parks in Uganda. It reviews the growth of Chinese economic activity in Uganda and presents findings from a field study involving 10 Chinese industrial parks in Uganda, as well as interviews with Chinese businesses operating in that country. Significant within the study is the notion of Made in Uganda by China, which has seen the country achieve import substitution in some product sets, particularly light manufacturing. Chinese commercial sentiment is long-term oriented and optimistic about their prospects in the country and the region. The Chinese also utilise strategies involving proximity to the government (with the government sometimes seen by the Chinese as being too biased towards the local workers to their own [Chinese’s] detriment), along with collective cooperation through the Chamber of Commerce of Chinese Enterprises in Uganda, strict adherence to Ugandan regulations and avoidance of social pushback through philanthropic initiatives. Local sentiment towards Chinese businesses operating in Uganda by local experts and businesses is, however, mixed, ranging from complete embrace to ambivalence to rejection. These are also deeply intertwined with misgivings about the Ugandan government, which is seen as corrupt and benefitting in underhanded dealings with the Chinese. The chapter ‘Kenya-­China Relations in Augmenting Kenya’s Infrastructural and Industrial Needs: A Multidimensional Assessment of Perception’ turns to Kenya, analysing the country’s relations China with an emphasis on how the cooperation has went about augmenting its infrastructural and industrial needs. Based on field

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research and interviews, it presents what it terms a ‘multidimensional assessment of perception’. The main findings made in the research show a sense of Kenyan optimism about China’s contribution to meeting its infrastructure needs. It was also established that China manifests itself through both public and private entities and that both have been seemingly going beyond their economic interests to tend to the needs of the communities in which they operate. This, notwithstanding, the chapter argues that there is opacity that surrounds agreements between the Chinese government and its African counterparts. This fact rightly makes the relationship questionable and can be easily corrected by openness. The chapter ‘The Regional Infrastructural Imperatives of the AfCFTA for Development in Southern Africa’ examines the infrastructural imperatives for the AfCFTA in the development of Southern Africa. It looks at infrastructure and its importance for boosting economic development by particularly facilitating intra-­ African trade. The analyses the infrastructure financing needs of Africa, with a particular focus on China’s increasing role in bridging Africa’s infrastructure financing gap, honing in on Southern Africa. The authors ask two pertinent questions: What are the infrastructure imperatives in Southern Africa necessary for the region to actualise the full potential of the AfCFTA and regional development? Second, what are the infrastructure financing needs required to meet these infrastructure imperatives and how has China helped fill this financing gap? The chapter argues that through China’s increased participation in infrastructure development in Africa, the country could ‘underwrite’ some of the infrastructure projects required to improve regional integration within Southern Africa. The chapter ‘China, BRI and the 4IR in Africa: A Focus on Rwanda’ examines the interconnectedness between China, BRI and the 4IR in Africa using Rwanda as a case study. China’s BRI initiative has been viewed by government as a catalyst for infrastructure development for both Rwanda and Africa at large, and this has extended into even deeper ties between Rwanda and the PRC. The modern infrastructure of East Africa is substantially attributable to cooperation with China and the BRI initiative in the region, especially in key projects such as the standard gauge railways, highways and power plants, is expected to be a further boost for landlocked Rwanda. In 2018, both President Xi and Kagame signed approximately 15 agreements in Kigali on trade, infrastructure, investment, e-commerce, human resource, culture, science and technology, aviation, mining, law enforcement, visa exemption for diplomatic and service passport holders, among others. Rwanda has also begun to champion a model of insistence on skills transfer that could be emulated across the rest of the continent. The chapter ‘China’s Africa Debt Trap Question: Ethiopia and Kenya Infrastructure Case Studies’ looks at the debt trap question and asks whether this is valid or it is a mere campaign by the west to amplify anti-China sentiments within developing world, especially Africa. Focusing on Ethiopia and Kenya, the chapter concludes that infrastructure financing from FOCAC and BRI and China’s flexibility in repayment methods, and debt distress relief efforts contradict the current narrative of debt trap diplomacy.

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The chapter ‘The Belt and Road Initiative and the Build Back Better World: Implications on Africa’s Infrastructure Development’ presents a side-by-side critique of the degree to which the BRI and the US-led Build Back Better (B3W) complement and compete against each other in light of the geopolitical tussle between the West and China. It argues that the zero-sum competition may see Africa having to choose one and drop the other. However, it also highlights potential areas of complementarity between the two programmes from which Africa can benefit. There are questions that the present book cannot answer or answer adequately, either due to data limitations or excess of scope from the aims of this volume. These include a more upfront interrogation of human rights, democracy and rule of law as variables in industrialisation and economic growth. Doubtless, these are important, especially when we consider the role of external partners and the governments they cooperate with. The book’s findings nonetheless shine light on issues of importance to the well-being and sustainability for ordinary Africans working for Chinese firms: wages, skills transfers, experiences of working for Chinese firms and organised labour, among others. The importance of some of these sustainability markers has been noted at various points, including in the context of the Belt and Road Initiative by Chinese President Xi Jinping (Cao et al., 2021: 344); the question of implementation is one in need of future, and methodologically rigorous, examination. Existing literature notes particular human rights allegations in the DRC, Kenya, Uganda and Zimbabwe (Mureithi, 2021). Indeed, after the Asia-Pacific, ‘Africa has the second highest number of allegations of human rights abuses, with 26.7% of the claims recorded against Chinese companies operating abroad from 2013 to 2020’ (Mureithi, 2021). As this book has made evident, however, these are concerns that should be of exclusive responsibility for African governments, given their growing urgency. In turn, it is evident that external players do not exercise determinative influence on governance transformation on the continent, particularly as they tend to find strategic partnership with the very countries whose human rights record they are rhetorically critical of, for example Rwanda’s relationship with both the West and China, or the US’s security cooperation with Uganda. Existing theoretical frameworks also moderate our optimism about the transformative power of infrastructure. In this regard, Candice Gartner’s empirically developed critical acquisition framework demonstrates that a citizen’s will to access an infrastructure system is dependent on their power to access, which is conditioned by ‘the match between their existing capabilities and the institutions that regulate access’ (Gartner, 2016: 387–388). Other data and scope limitations particularly stem from the recent COVID-19 pandemic and the Russia-Ukraine War  – two events that have long-term significance for the global order in ways still to be studied, and from which Africa-China relations will not be immune. There is also much stock-taking to be done regarding the effects of the Trump-era Trade War. Paradoxically, infrastructure has been looked to as a source of stimulus (‘building back better’ being a concept of near-­ universal purchase, despite different meanings derived from it) but, inevitably, they will have a depressing effect on Chinese outgoing foreign direct investment, disrupt the BRI, exacerbate supply chain shortages and inflation. But just as well, they may

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present African countries with leverage points with which to rewrite the terms of engagement with China. The same may be said about the announcement of the Global Gateway by the EU in December of 2021 (possibly to counter the BRI according to some analyses [Ndzendze, 2022: 186]), although here too, it is too soon to tell and the Russia-Ukraine War may have a dampening effect. These considerations no doubt present a puzzle for future research and are beyond the scope of the present volume.

References AfDB. (2018). Africa’s infrastructure financing reaches an all-time high in 2018, surpassing $100 billion – ICA. AfDB.  URL: https://www.afdb.org/en/news-and-events/press-releases/ africas-infrastructure-financing-reaches-alltime-high-2018-surpassing-100-billion-ica-32728 African Union. (2013). Agenda 2063. African Union. Allison, G. (2017). Destined for war: Can America and China escape Thudycides’ trap? Scribe Publications. Brautigam, D. (2020). A critical look at Chinese “debt-trap diplomacy”: The rise of a meme. Area Development and Policy, 5(1), 1–14. Cao, X., Teng, C., & Zhang, J. (2021). Impact of the Belt and Road Initiative on environmental quality in countries along the routes’. Chinese Journal of Population, Resources and Environment, 19(4), 344–351. Gartner, C. (2016). The science and politics of infrastructure research: Asserting power, place, and agency in infrastructure knowledge’. Journal of Human Development and Capabilities, 17(3), 377–396. Hirono, M., & Suzuki, S. (2014). Why do we need “myth-busting” in the study of Sino–African relations?’. Journal of Contemporary China, 23(87), 443–461. Lai, K.  P. Y., Lin, S., & Sidaway, J.  D. (2020). Financing the Belt and Road Initiative (BRI): Research agendas beyond the “debt-trap” discourse. Eurasian Geography and Economics, 61(2), 109–124. Liu, H. (2018). Africa and China: Winding into a community of common destiny’. In D. Nagar & C. Mutasa (Eds.), Africa and the World: Bilateral and multilateral international diplomacy (pp. 71–94). Palgrave Macmillan. Mills, G. (2010). Why Africa is poor and what Africans can do about it. Penguin. Monyae, D., & Ndzendze, B. (2021). The BRICS order: Assertive or complementing the West? Palgrave Macmillan. Mureithi, C. (2021, August 18). ‘China’s business operations in Africa may have a human rights problem’, Quartz. URL: https://qz.com/africa/2049284/ do-­chinas-­operations-­in-­africa-­have-­a-­human-­rights-­problem Ndzendze, B. (2022). The political economy of Sino-South African trade and regional competition. Palgrave Macmillan. Rodney, W. (1972 [2018]). How Europe Underdeveloped Africa. Verso Books. Sun, J. (2017). Growing diplomacy, retreating diplomats – How the Chinese foreign ministry has been marginalized in foreign policymaking. Journal of Contemporary China, 26(105), 419–433. The Economist. (2022, May 20/26). How Chinese firms have changed Africa. The Economist. URL: https://www.economist.com/special-­report/2022/05/20/ how-­chinese-­firms-­have-­changed-­africa Zajontz, T. (2020). The Chinese infrastructural fix in Africa: A critical appraisal of the SinoZambian “road bonanza”. Oxford Development Studies, 50(1), 14–29.

Part I

Infrastructural Cooperation

The Emergence of Railway Diplomacy in Africa: The Cases of South Africa and China Lebohang Makekeng

1 Introduction South Africa’s railway sector has evolved and undergone tremendous refinement over the past decades as a result of numerous defining moments. The politics and the scramble for railway lines across the Cape Colony and the Transvaal, have created a complex mosaic of railway tracks, which upon the establishment of the South African Railways and Harbours, formed a seamless line across the Union of South Africa. Equally important, Cecil John Rhodes’ abortive Cape-to-Cairo project which stretches as far as the Port of Lobito in Angola, has established ‘iron highways’ that have stimulated ‘network integration’ across Southern Africa. Despite South Africa’s historical involvement in this infrastructure project and other related initiatives, its role in the continent’s railways is eclipsed by the draconian apartheid policies and has over the years received little mention in contemporary International Relations literature. Instead, China takes centre stage as a protagonist of the continent’s railway development, owing to its completion of the 1975 TAZARA (Tanzania Zambia Railway Authority) line. In recent years, China has also played a critical role in the construction of the Mombasa-Nairobi Standard Gauge Railway line, the Addis Ababa-Djibouti Railway line and the Lagos-Ibadan railroad connection in Nigeria. This chapter reviews South Africa’s participation in the continent’s railway transport and presents a case that this country has in fact played an important role in the development of this transport sector in Africa. The chapter is divided into three parts: first, it reviews the railway development antecedents in South Africa. It does so by examining the concept of ‘transport diplomacy’ and its application in South L. Makekeng (*) Centre for Africa-China Studies, University of Johannesburg, Johannesburg, South Africa e-mail: [email protected]

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Ndzendze, D. Monyae (eds.), Perspectives on Africa-China Infrastructural and Industrial Cooperation, Africa-East Asia International Relations, https://doi.org/10.1007/978-3-031-38395-3_2

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Africa’s historical and contemporary foreign policy. Second, it probes China’s early involvement in Africa by focusing on the construction of the TAZARA line. Third, it brings to the fore the internationalisation of Transnet and of state entities such as the China Railway Rolling Stock Corporation (CRRC) and examines their cross-­ border activities in Africa. This chapter, therefore, seeks to unlock a novel research avenue, particularly for International Relations students and scholars with an interest in railway infrastructure as an instrument of foreign policy promotion. The chapter is not in any way a panacea of the China and South Africa railway activities in the continent. This work is rather a scholarly initiative to stimulate academic thinking and the production of more papers in this regard. Perhaps a follow-up study that incorporates some of the omitted aspects of the internationalisation thrust by Transnet and CRRC will be considered in the near future.

2 South African Railways: Past and Present The conceptualisation of South Africa’s railway system initially occurred in the Cape Colony following the establishment of the Cape Town Railway and Dock Company in 1853.1 Even so, Natal would become the first colony to complete a line from Durban to the Point in 1860, as a result of the Cape’s poor construction workmanship, which resulted in it only commissioning a track three years later. In the neighbouring Transvaal, the discovery of gold around 1886 in the Witwatersrand meant that Paul Kruger, the president of the colony, sought to construct an independent ‘iron road to the sea’,2 particularly after defeating the English in the First Anglo-Boer War in 1881. This saw him founding the Nederlandsche Zuid-­ Afrikaansche Spoorwegmaatschappij (NZASM) and later requesting Delagoa Bay (Maputo Bay) to serve as a natural port for Transvaal’s commerce to avert reliance on the Cape ports.3 In parallel with Kruger’s ambition of a railway line, Cecil John Rhodes, an English businessman and a Cape Colony parliamentarian, sought to construct a line from Cape Town to Egypt, through what came to be known as the Cape-to-Cairo project. Although this line was never completed, it still stands up until today and constitutes an important transport artery for the conveyance of freight across Southern Africa. The railway line pushes from Kimberley through to Mahikeng and penetrates Botswana in the south-east and later embraces Zimbabwe  Janse van Rensburg R.A (1996), ‘The History of the Rail Transport Regulatory Environment in South Africa’, available at https://scholar.sun.ac.za/handle/10019.1/85556; Transnet Freight Rail (2019), ‘History Overview’, available at http://www.transnetfreightrail-tfr.net/Heritage/Pages/ Overview.aspx. 2  Transnet Freight Rail (2019), ‘Railway Country: 150 Years of Rail in South Africa’, available at http://www.transnetfreightrail-tfr.net/Heritage/150years/150YearsRail.pdf. 3  Nock O.S. (1971), ‘Railways of the World: Railways of Southern Africa’, London, Adam and Charles Black; Transnet Freight Rail (2019), ibid., p. 5. 1

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via Bulawayo. The same line extends to reach the Mosi oa Tunya National Park4 in Livingstone in Zambia. It then runs across the heart of the same country and arrives in Lubumbashi in the Katanga region of the Democratic Republic of Congo (DRC) where it shoots westwards to the Port of Lobito in Angola, where it then becomes known as the Caminho de Ferro de Benguela or the Benguela Railway line. In Egypt, the Cape-to-Cairo railway line stretches from Alexandria to Cairo and Aswan, although it was never extended to reach the border with Sudan. In the latter country, tracks ran from Wadi Halfa in the north through to El Obeid, although they were not expanded further to the south of this country.5 On the other hand, the Second Anglo-Boer War that ended in 1902, culminated in the Boer republics of Transvaal and the Orange Free State conceding defeat to Britain and consequently signing the Treaty of Vereeniging that formed the Union of South Africa in 1910. Under this new bureaucratic arrangement, the NZASM, the Orange Free State Railways, Natal and the Cape Government Railways were merged to form the South African Railways and Harbours (SAR&H), which later became the South African Transport Services (SATS) in 1981. Eight years later, the Legal Succession of the South Africa Transport Services Act of 1989 was ratified, making way for what we refer today as Transnet.6 This novel entity would comprise operating divisions such as Spoornet (called Transnet Freight Rail today), Portnet (Transnet Port Terminals), Petronet (Transnet Pipelines), Autonet (Autopax) and the South African Airways, which although independent today, still retains this name.7 In broad terms, this synoptic historical account draws forth South Africa’s involvement in railways in the continent and the evolution and refinement of its expertise in this sector. Particularly, the Cape-to-Cairo railway project has created an interlocked mosaic of ‘iron highways’ across Southern Africa and has promoted the ‘network integration’8 of railway lines in the sub-continent. As a result of this regional infrastructural interface, a soda ash cargo train from Botswana Railways (BR) and chrome ore consignment from the National Railways of Zimbabwe (NRZ), for example, can move seamlessly from one country to another, as if there were no borders in Southern

 Also referred to as the Victoria Falls National Park.  Raphael L (1936), ‘The Cape-To-Cairo Dream’: A Study in British Imperialism, New  York, Columbia University Press; Heritage Portal (2019), ‘The Cape to Cairo Railway Dream’, available at http://www.theheritageportal.co.za/article/cape-cairo-railway-dream; Mocheregwa B (2016), ‘Underdevelopment in Eastern Bechuanaland: The Dynamic Role of the Mafikeng-Bulawayo Railway, From The Late 1800s to 1960’, Master’s Thesis, Ontario, Trent University. 6  Janse van Rensburg R.A, op. cit., p. 18; Transnet Freight Rail (2019), op. cit. 7  Transnet Annual Report (1992). 8  African Development Bank (2015), ‘Rail Infrastructure in Africa: Financing Policy Options’, p.  50, available at https://www.afdb.org/fileadmin/uploads/afdb/Documents/Events/ATFforum/ Rail_Infrastructure_in_Africa_-_Financing_Policy_Options_-_AfDB.pdf; Railway tracks in Africa are generally classed into three categories: the narrow gauge, the standard gauge and the Cape gauge. South Africa uses a Cape gauge railway system which is 1067 mm in length. 4 5

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Africa.9 It is as the result of the Cape-to-Cairo project that the sub-region’s railway network is vast and more integrated than of any other region in Sub-Saharan-Africa and moves about 74% of its total cargo traffic.10 The following section invites a closer examination of the concept of ‘transport diplomacy’ as Pretoria’s foreign policy tool. The section explores South Africa’s drawing of railway infrastructure into the ‘concentric circles’ of foreign policymaking and its leveraging as an instrument of building rapport with the region.

3 ‘Transport Diplomacy’ in South Africa’s Foreign Policy State-owned enterprises sit at an important crossroad as contributors to their nations’ foreign policy positions and as instruments for promoting the government’s image abroad. Their participation within this sphere is a paragon of the global political changes and mirrors the extent to which non-orthodox state actors have gone in embracing international relations and diplomacy. Fundamentally, the fall of the Westphalian state has precipitated ‘epistemic communities’11 that are completely devoid of traditional global affairs actors, or are somewhat, less dependent on them. To add to the debate, Professor Kanishka Jayasuriya submits that ‘just as the public power is fragmented so are diplomatic functions which are now not just concentrated in a traditional Ministry of Foreign Affairs but is dispersed amongst a wide array of independent sites of public power’.12 Thus, the technical and operational expertise possessed by Transnet, positions the company as an instrument for shaping and influencing railway policies in Africa. To contextualise this viewpoint, it is plausible, therefore, to throw some light on a concept called transport diplomacy. Transport diplomacy is defined by Dr. Jacobus Loubser, the erstwhile General Manager of SAR&H, as ‘the art of applying the transport potential of the country to perform a maximal role in its relations with other countries for its benefit as well as that of others’.13 Therefore, within the realm of international relations, transport diplomacy postulates that physical railway infrastructure such as diesel locomotives or jumbo grain wagons, for example, can be merged with foreign policy objectives

  Transnet (2020) Integrated Report, available at https://www.transnet.net/InvestorRelations/ AR2020/Transnet%20IR%202020.pdf. 10  Transnet (2016), ‘Africa Transport Infrastructure Planning’, p.  435, available at https://www. transnet.net/BusinessWithUs/LTPF%202017/LTPF%20Chapter%207%20Africa%20 Transport%20Infrastructure%20Planning.pdf. 11  Haas P (1992), ‘Introduction: Epistemic Communities and International Policy Coordination’, International Organisation, Vol. 46, No. 1. 12  Jayasuriya K (2004), ‘Breaking the “Westphalian” Frame: Regulatory State, Fragmentation and Diplomacy’, No. 90, Netherlands Institute of International Relations ‘Clingendael’, The Hague, p. 6. 13  Loubser J.G.H (1980), ‘Transport Diplomacy: with Special Reference to Southern Africa’, Sandton, Southern African Editorial Services (Pty) Ltd., p. 5. 9

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to attain a nation’s global interests. This category of diplomacy finds expression in two important fields of study: Transport on the one hand, and International Relations on the other hand. International Relations celebrates diplomacy as a catalyst of cordial relations between states and as ‘glue’ that binds the community of nations together. Transport, on the other hand, comprises vast professions such as those of pilots, urban and regional planners and air traffic controllers. However, let us consider state civil engineers as an example, whose profession requires that they design transport infrastructure that can sustain a government enterprise’s revenue drive. Without the civil engineers’ ability to utilise the competencies of the country’s diplomats in international missions; the nation’s expertise in transport manufacturing ‘would in the long run be of little use’.14 Transport diplomacy, therefore, convergences the competencies of both civil engineers and diplomats at a focal point. In simple terms, perhaps, one can say that a civil engineer constructs transport hardware in local workshops and diplomats market their country as a hub for transport infrastructure manufacturing and an important global player within this realm.15 South Africa’s apartheid foreign policy is well documented and will not be meticulously discussed in this paper. A case can be made, however, that South Africa’s foreign policy under apartheid was spurred by the need to promote Pretoria’s hegemony in the region and to foster the country’s policy of self-­ determination. What Die Groot Krokodil16 or Prime Minister Pieter Willem Botha promoted as a Constellation of the Southern African States (CONSAS) served as a final nail to the coffin, so to speak, for the apartheid regime. In broad terms, this policy celebrated the notion that upon its implementation, South Africa, Botswana, Lesotho, Swaziland, Rhodesia and Namibia, as well as the independent homelands of Transkei, Bophuthatswana and Venda, would all be members of the CONSAS configuration.17 Additionally, membership became open to ‘any state in the sub-­ continent which recognised the existing economic and other interrelationship between itself and other states in Southern Africa, and wished to cooperate in the regional context’.18 The 1980 establishment of the Southern African Development Coordination Conference (SADCC) by South Africa’s neighbours became ‘the most shattering regional defeat since the foundation of the modern Afrikaner Republic in 1961’.19 As a consequence, South Africa became the most isolated state

 Ibid., p. 3.  Ibid., pp. 3–4. 16  Prime Minister Pieter Willem Botha was nicknamed Die Groot Krokodil, English for ‘The Big Crocodile’. 17  Geldenhuys D (1981), ‘The Constellation of Southern African States and the Southern African Development Coordination Council: Towards a New Regional Stalemate’, Johannesburg, South African Institute of International Affairs. 18  Address by PW Botha at a Summit Meeting in Pretoria, May 1980. 19  Evans M (1984), ‘The Front-line States, South Africa and Southern African Security: Military Prospects and Perspectives’, available at http://pdfproc.lib.msu.edu/?file=/DMC/African%20 Journals/pdfs/Journal%20of%20the%20University%20of%20Zimbabwe/vol12n1/ juz012001002.pdf. 14 15

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in Southern Africa and had come to realise that its future is now ‘inextricably linked with that of Africa, and not primarily with that of the West’.20 South Africa’s railway assets, therefore, sat at an important cross-road as the country’s diplomatic mouth-piece and as an instrument of forging cordial relations with the region. In the absence of diplomatic affairs with the sub-region, jumbo grain and bulk gondola wagons, as well as XPLJ21 fuel tankers, for instance, ceased to possess a single mandate of conveying commodities for mercantile purposes, but also assumed centre stage as important foreign policy agents. By leveraging railways to do the talking, South Africa, therefore, ‘shifted the diplomatic activity to those sites with a concentration of expertise and knowledge’.22 This phenomenon connotes that SAR&H, and not the foreign and defence ministries, became a key player in shaping and contributing to the country’s international relations and diplomacy and thus assumed a role in opening up the communication channels between Pretoria and Southern Africa. It can therefore be argued that because of railways, South Africa’s future ‘multistakeholder diplomacy’23 approach was starting to take shape. In the absence of cordial relations between Pretoria and the region, South African railway technicians, engineers and general managers became what Professor Brian Hocking refers to as ‘gatekeepers’ of international relations since they relegated Pretoria to being a mere ‘boundary spanner’24 of global affairs. Railway rolling stock,25 therefore, had to be leveraged in a manner that encouraged communication between regional leaders and with the intention of positioning South Africa as a transport solutions provider. Strategically, Pretoria had already calculated that most of her neighbours are landlocked, have raw material-based economies and have over time not invested in developing their railway assets.26 In comparison to its neighbours, for example, South Africa’s railway assets far superseded those of any country in the sub-region and the continent. To cite an example, South Africa during this era, had an estimated 23,244 km railway network within its borders, in comparison to Zimbabwe and Botswana at 2745 km and 705 km, respectively. Additionally, South Africa had an estimated 448 steam locomotives, 2350 electric locomotives and about 165,348 wagons. NRZ only had about 30 electric locomotives and about 16,476 wagons; while on the other hand, BR had a mere 12

 Loubser J.G.H (1980), op. cit., p. 27.  Jumbo grain wagons are used to transport commodities such wheat, maize or rice. Bulk gondola wagons are used to ferry bulk cargo such as copper ore or coal, while XPLJs or fuel tankers are utilised to convey flammable fuels such as petrol, diesel or kerosene. 22  Jayasuriya K (2004), op. cit., p. 6. 23  Hocking B (2006), ‘Multistakeholder Diplomacy: Forms, Functions and Frustrations’ in Multistakeholder Diplomacy: Challenges and Opportunities, Malta and Genva, Diplofoundation. 24  Ibid., p. 19. 25  Also referred to as railway infrastructure. 26  Moolman A (1989), ‘Railways and Harbours in Southern Africa’, Interview with Kotie van Heerden of Global News; Loubser J (1977), ‘South Africa: A Leader in the Field of Infrastructure’, paper presented at the International Conference on The Marketing of the International Image of South Africa. 20 21

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Krupp diesel-electric locomotives and 60 wagons.27 Overall, a point can be made that railway assets became an anvil upon which South Africa hammered and forged its foreign policy towards Southern Africa. It is imperative, therefore, to cite the rolling-out of transport diplomacy in Zambia as an epitome of Pretoria’s railway-­ laden foreign policy in Africa, and a milestone that somewhat positioned South Africa as the continent’s transport ‘centre of excellence’. Zambian Railways served as South Africa’s ‘dress rehearsal’, so to speak, and a platform for SAR&H to demonstrate its railway transport expertise to Africa.

4 ‘Transport Diplomacy’ and Zambia Railways There are numerous historical accounts where South Africa has leveraged railway infrastructure as a foreign policy instrument in the region. In fact, it is plausible to first consider as an example the commercial agreement entered into by SATS and Zaïre’s28 Société Nationale des Chemins de Fer du Congo (SNCC). At its core, this accord saw South Africa agreeing to lease about 12 diesel-electric locomotives, to sell spare parts and refurbished wagons, as well as to make available passenger coaches to SNCC.29 Additionally, South Africa signed a business agreement with Mozambique’s Direcção Nacional dos Portos e Caminhos de Ferro (DNPCF) on 26 February 1979, effectively permitting the two countries to share railway information in areas related to the maintenance of rolling stock and traffic flow. In Swaziland (Eswatini today), South Africa entered into an agreement with Swaziland Railways, following the construction of a line between Phuzumoya and Golela, essentially implying that Swaziland would have access to the ports of Durban and Richards Bay.30 These are but a couple of cases where South Africa has leveraged railways in an attempt to build a conducive environment for bilateral relations with the region. However, to effectively understand Pretoria’s transport diplomacy in Africa, let us now turn our attention to the relations between SAR&H and Zambia Railways. Zambia’s liberation in 1964 and neighbouring Rhodesia’s unilateral declaration of independence in the subsequent year, hastened Lusaka’s ambition of obtaining an independent line that would be devoid of the white-ruled regimes in the south of the continent. In ensuring a seamless flow of its copper exports which by then accounted for an estimated 95%31 of the country’s total exports, Lusaka sought alternative transport outlets to the sea. While acknowledging that Zambia had access to the

 Allen G (1989–1990), Jane’s World Railways, Jane’s Information Group.  The Democratic Republic of Congo (DRC) today. 29  Loubser J, op. cit., pp. 13–17. 30  Loubser J, op. cit., pp. 13–17. 31  Loubser J, op. cit., p. 15. 27 28

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Tan-Zam highway and the Great East Road through Malawi and Mozambique,32 these corridors will not be explored further since the paper’s focus is exclusively on railway transport. As such, Zambia had a number of railway outlets at its disposal, and these were some of them: the Benguela Railway line to the Port of Lobito in Angola; the Botswana transport route via Francistown and the TAZARA line to the Port of Dar es Salaam in Tanzania. Given Lusaka’s route alternatives, an important question comes to mind: were these transport outlets reliable for the conveyance of Zambian freight? To unearth a response to this question, let us first consider the outlet to the Atlantic Ocean via Angola. The Benguela Railway line, part of Cecil John Rhodes’ Cape-to-Cairo project, was in fact Zambia’s natural transport artery for many years. However, the 1975 Angola Civil War obliterated this railroad and rendered it an impractical alternative for ferrying Zambian cargo. This meant that Zambia had the route through Botswana as an option, although the same corridor would later prove to be unprofitable. Consider receiving cargo from the Far East to the port of Maputo as an example. From Maputo, the received consignment would be loaded onto trains and conveyed to Francistown in Botswana, where it would again be loaded into trucks and on the Kazungula Ferry to traverse the Zambezi River before reaching Zambia.33 Certainly, this was an expensive business proposition which was compounded by the fact that ‘the promised trucks did not materialise and the rate of unloading at Francistown was far below target’.34 Lastly, another option for Zambia, which is discussed in greater detail later on in the chapter, is the China-built TAZARA line, which given its serious capacity constraints and financial difficulties, could not handle cargo traffic from Zambia to the Port of Dar es Salaam.35 The TAZARA logistical constraints caused some merchants to warn that their ‘ships be allowed to discharge at any South African port, or the fertiliser would be taken back to the United States where most of it had been bought’.36 This played out on the eve of the Zambian elections and left President Kenneth Kaunda with limited options but to consider opening the trade corridor running through Rhodesia. The sentiment underlying the re-opening of this route was captured by the Daily Mail of Zambia in this manner: ‘the politics involved in the decision to open the southern route are the politics of survival, brought about by the fact that all the people we

 Central Intelligence Agency (1975), ‘The Tan-Zam Railroad –Approaching Full Operational Status’, available at https://www.cia.gov/library/readingroom/docs/CIA-­ RDP79T01098A000600060001-­4.pdf. 33  Loubser J (1979), ‘Speech by Dr. Loubser at South African-German Chamber of Trade and Industry’. 34  Loubser (1979). 35  Dongai Y, ‘Why the Chinese Sponsored the TAZARA: An Investigation about the People’s Republic of China’s African Policy in the Regional Context, 1955–1970’, State University of New York; Monson J (2009), ‘Africa’s Freedom Railway: How a Chinese Development Project Changed Lives and Livelihoods in Tanzania’, Indiana University Press, Indiana; Central Intelligence Agency (1975), op. cit.; Loubser J (1980), op. cit. 36  Loubser (1979). 32

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counted upon as allies have decided to abandon us’.37 This corridor opening witnessed the signing of a commercial agreement between SAR&H and Zambia Railways and shone positive light on Pretoria as Africa’s potential railway solutions provider.38 Transport diplomacy not only encouraged the flow of Zambian freight, it also stimulated the opening up of Southern Africa to South Africa’s railway expertise. The efficacy of transport diplomacy encouraged Transnet to found Transtrade (Pty) Ltd. in 1991 to promote Transnet Group’s transport capabilities across Africa, Eastern Europe and Central America.39 The fall of apartheid three years later opened up business opportunities across the continent for South African multinational corporations (MNCs) such as Shoprite, Sasol and Truworths.40 Particularly for Transnet, the readmission of South Africa into the global economic community post-1994 was arguably an opportunity to gain inroads into the continent and to position itself as an important African railway player.

5 Transnet’s Post-Apartheid Africa Strategy The dawn of the Transnet post-1994 Africa strategy should be understood against the context of the railway transport quandaries confronting the continent and the willingness by the Union Buildings to leverage this entity as an agent of assisting in these challenges. To comprehend Transnet’s cross border activities in the continent, it is pertinent, therefore, for one to familiarise themselves with the African National Congress (ANC) policy resolutions, particularly those pertaining to the 2012 Mangaung and 2017 Nasrec conferences. These twin policy conferences arguably carved out a roadmap for Transnet’s global activities and underscored in clear terms the role that it should play in African railways. Broadly, these policy conferences shared the sentiment that ‘South Africa’s economic diplomacy should serve as a tool of foreign policy, including the utilisation of state-owned enterprises in the development projects on the African continent’.41 Needless to say, Transnet cannot dissociate itself from Africa’s historical and economic background and the dominant transport position that it enjoys in the continent. In its current state, Africa’s railway network is fragmented, underdeveloped and an impediment to the continent’s intra-­ regional trade; these challenges are compounded by the different rail gauges, lack of

 Daily Mail in Loubser J (1980), op. cit., p. 17.  Loubser J (1979), op. cit., p. 17. 39  Transnet Annual Report (1992). 40  Dakora E, Bytheway A, Slabbert A (2010), ‘The Africanisation of South African Retailing: A review’, African Journal of Business Management, Vol. 4 (4). 41  African National Congress, ‘Economic Diplomacy’, 53rd National Conference Resolutions, p.  46, available at https://www.sahistory.org.za/sites/default/files/resolutions53r.pdf. This economic diplomacy policy resolution is reflected in both the 2012 and 2017 ANC Policy Conferences held in Mangaung in the Free State and in Nasrec, Johannesburg. 37 38

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funds and the erstwhile political instabilities.42 As such, the post-apartheid mantra that South Africa should not be ‘an island of wealth in a sea of poverty’;43 at least from a transport vantage point, connotes that Transnet should disseminate its railway technical and operational knowledge across Africa and be an oasis of knowledge in this regard. Beyond the twin ANC conferences, the Transnet 2012 Market Demand Strategy (MDS)44 provides an important reference point for understanding the enterprise’s international business activities. According to Transnet, the MDS was instituted to resolve South Africa’s lack of historical investment in railways, ports and pipelines and to ensure efficiency in the movement of domestic cargo.45 When Transnet implemented the MDS, it projected that this policy would focus on rehabilitating the country’s transport infrastructure for seven years. The challenge, however, is that the MDS was inward looking in a sense that it only focused on revamping local infrastructure. This means that after the seven years had passed and after the MDS had reached its objectives, the South African market would long be saturated and revenue for Transnet would as a result be constricted. Given this risk to profit generation, Transnet was left with little choice but to forge a plan that would ensure that the company is able to generate revenue long after the decommissioning of the MDS. As such, the company noted that ‘given the expected growth in the economies of African countries, coupled with the geographic proximity to the countries, expanding into the region is a sensible next step for Transnet’.46 Today, this entity’s internationalisation ventures are expressed in the Transnet 4.0 Strategy which outlines ‘a framework for Transnet’s growth and diversification within the context of the fourth Industrial Revolution’.47 The central premise of this strategy is to accelerate Transnet’s footprint across the continent and to converge its expertise with cutting-­edge technology to position the company as an original equipment manufacturer.48 Apart from South Africa, however, China had long demonstrated interest in tapping into the African railway market share, for many strategic reasons which were not necessarily driven by mercantile ambitions.

 African Development Bank (2015), op. cit., pp. 50–53.  Mbeki T (2002), ‘Address, Thabo Mbeki, At the Opening for the World Summit for Sustainable Development’, available at https://www.sahistory.org.za/archive/ address-thabo-mbeki-opening-world-summit-sustainable-development-johannesburg-26-august. 44  Transnet Market Demand Strategy (2012), available at http://www.transnet.net/InvestorRelations/ Documents/20120409%20MDS%20launch%20presentation.pdf. 45  Transnet, ‘Strategy and resource allocation: From MDS to Transnet 4.0’ (2018), available at https://www.transnet-ir-2018.co.za/from-mds-to-transnet-4-0.php. 46  Transnet Africa Strategy (2014), p. 23. 47  Transnet Integrated Report (2018), p. 15, available at https://www.transnet.net/InvestorRelations/ AR2018/Integrated%20Report.pdf. 48  Ibid. 42 43

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6 China in Africa: ‘Socialism on Rails?’ China’s international relations and deepening diplomatic engagement in Africa in the twentieth century cannot be dissociated from the politics of the Cold War and the struggle against apartheid in South Africa. In evaluating China’s entry into Africa and the subsequent extension of its ‘great arm of steel’49 across Zambia and Tanzania, it is compelling to notice how a country with no prior diplomatic relations with Africa, nor any industrial footprint in it, successfully leveraged railways to promote its foreign policy objectives. As argued earlier, an independent transport artery to the Indian Ocean was vital for Zambia’s economic survival and somewhat converged with the principles of the 1955 Bandung Conference, that the Afro-Asian nations should unite against colonial forces.50 It is not surprising, therefore, that Beijing decided to pledge a US$400 million loan for the construction of a 1860 km Cape gauge line from Kapiri Mposhi in Zambia to Dar es Salaam in Tanzania.51 Yet, even before China’s 1967 financial commitment for a railroad, Presidents Kenneth Kaunda and Julius Nyerere had previously approached the World Bank, the Soviet Union and the United States (US) for monetary support. However, these latter players viewed a railway line as an unprofitable business venture that would in the long-­ run result in financial loss. Particularly for Washington, the construction of railways was at variance with its principle of ‘free flowing commerce’52 which could only be achieved on tarmac where ‘goods could be shipped according to one’s own timetable, with stops anywhere along the way where market forces supported commercial activity’.53 In the US, the construction of mega highways and the general use of road transport received great support from the American multinational companies such as General Motors and Firestone Tires. These enterprises pursued ‘the American dream of freedom on wheels’54 with much vigour and could not have financially supported the TAZARA project since it in any case epitomised ‘socialism on rails’.55 Far from merely being a gesture of the Sino-Africa amity or the ‘fellow have-­ nots’56 in coalition, China’s construction of a railroad in Africa should be read with careful consideration as it bears numerous important connotations. Primarily, Beijing understood that railway rolling stock is an agent against oppression and that  Monson J (2009), op. cit., p. 2.  Donghai Y, op. cit., p. 4. 51  Chinese Posters (2019), ‘The TAZARA Railway’, available at https://chineseposters.net/themes/ tazara-railway.php. 52  Monson J (2009), op. cit., p. 2. 53  Monson J (2009), op. cit., p. 2. 54  Von Baldegg K (2012), ‘A Classic 1950s Propaganda Film Makes the Case for Super Highways’, available at https://www.theatlantic.com/video/ archive/2012/03/a-classic-1950s-propaganda-film-makes-the-case-for-superhighways/468177/. 55  Kynge J, Peel M, Bland B (2017), ‘China’s railway diplomacy hits the buffers’, available at https://www.ft.com/content/9a4aab54-624d-11e7-8814-0ac7eb84e5f1. 56  Loubser J (1979), ‘Speech by Dr. Loubser at South African-German Chamber of Trade and Industry’. 49 50

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the construction of a line would serve to liberate Zambia from the logistical shackles of the white-controlled regimes in Southern Africa. The TAZARA railroad, therefore, sat at an important cross-road as an ‘anti-apartheid’57 line and a vital artery through which Zambia could by-pass the Rhodesian route and South African ports. The TAZARA railway line, also referred to as the ‘Uhuru Railway’,58 therefore symbolised freedom for Africa’s transport infrastructure and victory over western imperialism and apartheid. Second, the laying of sleepers and ballast stones for the line took place during the fierce grip of the Cold War. To forge inroads into global politics and to attenuate hegemonism and imperialism of the US and the Soviet Union, and arguably, to position itself as an important centre of power, China built what became its biggest construction project in the third world.59 Lastly, the TAZARA railway project should also be understood against the context of China’s need for recognition and international support within the United Nations, particularly on the political status of Mainland China and the Republic of China (Taiwan). The pledge for a railway line from Kapiri Mposhi to Dar es Salaam served as a drawcard for numerous African countries who had fraternised themselves with China and viewed it as a potential sponsor of their future developmental projects. As such, numerous African countries voted in the United Nations General Assembly in 1971, to render the People’s Republic of China (PRC) as the only true representative at the United Nations and a permanent member of the Security Council.60 Overall, although the TAZARA line became an infrastructural feat for Africa and a hallmark of liberation, it later faced serious capacity constraints because of numerous factors. On the one hand, it encountered poor management because of the lack of local technical and operational expertise. Although Beijing had availed a Chinese Railway Expert Team on a five-year agreement to assist in managing the TAZARA operations, the exodus of this team at the end of this arrangement exposed the deeply entrenched management fissures within this railway authority. Specifically, its management echelon was constituted by former construction workers with basic education and no administration experience to operate the company. Additionally, the ‘Made in China’ railway infrastructure was of low quality and necessitated frequent maintenance which TAZARA could not afford to pay for.61 As a result of these operational predicaments, Zambia rerouted its cargo traffic flow through Rhodesia to the South African ports. Consequently, Pretoria arranged that Zambian freight be conveyed up north by ‘two trains per day, one each from Komatipoort and East London, via Beit Bridge and Mafikeng’.62

 Monson J (2009), op. cit., p. 2.  Uhuru is a Kiswahili word for freedom. 59  Ibid., p. 3. 60  ‘United Nations General Assembly Resolution 2758’, available at https://china.usc.edu/sites/ default/files/legacy/AppImages/1971-UN-China-seating.pdf; Donghai Y, op. cit., p. 7. 61  Donghai Y, op. cit., pp. 16–17. 62  Loubser J (1980), op. cit., p. 17. 57 58

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Today, China’s railway diplomacy in Africa finds expression in the 1999 ‘Zou Chu Qu – Go Abroad Strategy’ which was introduced by Beijing to, among other things, position state-owned multinational corporations63 (SOMNCs) such as the China Railway Rollingstock Corporation (CRRC) as key transport global players. The ‘Go Abroad’ policy was further intended to expose the Chinese SOMNCs to new markets and natural resources and to allow them access to global railway technology.64 To build on the foundation of the ‘Zou Chu Qu – Go Abroad Strategy’,65 China launched in 2013, the Belt and Road Initiative (BRI) aimed at developing infrastructure along the economic corridors of Asia, Europe, Oceania and East Africa. Beijing aims to utilise the BRI to promote its High-Speed Rail (HSR) amongst other objectives, which it has successfully developed in less than a decade. This infrastructural feat places the Chinese railway competencies on par with the Japanese Shinkansen (bullet train) and the French Train à Grande Vitesse (TGV).66 It is because of this competency that in Turkey, China went into a joint venture with two Turkish companies to successfully construct a portion of the Ankara-Istanbul high-speed line, making this the first project of its kind outside of China.67 Even so, the financial landscape for a high-speed rail is somewhat complex for Sub-Saharan Africa given the high cost involved and the economic challenges confronting the continent. However, being a ‘global salesman’68 of railways, China has introduced flexible rail deals as a drawcard for diverse global markets. What it offers to the US in terms of railway technology, for example, may differ significantly when compared to a commercial package for Nigeria or Djibouti. To echo this sentiment, Dragan Pavlicevic and Agatha Kratz submit that China is willing to oscillate ‘between high-speed and medium-speed railways to fit the desired budgets and preferences of the host country’.69 It is axiomatic, therefore, that the haulage of copper by a diesel locomotive from Kapiri Mposhi to Dar es Salaam in the 1970s was a harbinger that China would in future be active in African railways. China is in Africa to stay and its dynamism in the continent’s railway sector should be of particular  State-owned multinational corporations are defined as ‘legally independent firms with direct ownership by the state that has value-adding activities outside of their home countries’. Transnet meets the requirements of an SOMNC because it operates across Africa. It is an independent company that is entirely owned by the government. Cuervo-Cazurra A, Inkpen A, Musacchio A, Ramaswamy K (2014), ‘Governments as Owners: State-Owned Multinational Companies, Journal of International Business Studies, Vol. 45, Issue 8. 64  Pavlicevic D, Kratz A (2016), ‘China’s High-Speed Rail Diplomacy: Riding a Gravy Train?’, available at https://www.researchgate.net/publication/318224439_China’s_High-­Speed_Rail_ Diplomacy_Riding_a_Gravy_Train; Centre for Chinese Studies (2006), p. 11. 65  Alon I, Wang H, Shen J, Zhang W (2014), ‘Chinese State-Owned Enterprises Go Global’, Journal of Business Strategy 35(6). 66  Pavlicevic D, Kratz A (2016), ‘China’s High-Speed Rail Diplomacy: Riding a Gravy Train?’, available at https://www.researchgate.net/publication/318224439_China’s_High-Speed_ Rail_Diplomacy_Riding_a_Gravy_Train. 67  Kose O (2014), ‘China exports high-speed rail technology to Turkey’, available at https://sinosphere.blogs.nytimes.com/2014/07/28/china-exports-high-speed-rail-technology-to-turkey/. 68  Pavlicevic D, Kratz A (2016), op. cit., p. 2. 69  Ibid., p. 6. 63

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concern to South Africa, at least if Transnet seriously wants to be a key player in African railways. China’s BRI blueprint is a particular risk to Transnet’s 4.0 Strategy, notably, the element that speaks of the need for geographical expansion, bearing in mind that China is doing so at an alarming rate. The BRI stands to gnaw at Transnet’s potential markets in east and west Africa and seriously compromises Transnet’s ambition of being the ‘leading logistics service provider in Sub-Saharan Africa’.70 The ‘scramble for African railways’ is thus underway and involves two protagonists: on the one hand, is China, with vast financial resources to fund railway projects. On the other hand, there is South Africa which internationalised Transnet in 2018 but somewhat, still adopts a ‘go at it alone’ approach of Africa (Table 1). Table 1  South Africa and China’s involvement in African railways SOMNC

South Africa Transnet International Holdings (TIH)

Strategic intent ‘To accelerate efforts to extend the company’s, and indeed South Africa’s commercial footprint in the fast-growing regions of our continent, the Middle East and Asia’1 Global Traditional markets are in Southern Africa, operations although there is a confined clientele in other regions of the continent Railway Railroad from Kimberley entered Botswana development in 1889 Funding Self-sufficient company with possible financial assistance from the DBSA, IDC and other related institutions Foreign policy Somewhat still utilises the pre-1994 alignment ‘transport diplomacy’ model, although this is not emphatically pronounced in its strategies Challenges Selling ‘Brand Transnet’ requires an ‘SA Inc. African approach’. This is currently not discernible Strengths Arguably the biggest railway company in Africa with support from the African Union, to be a railway manufacturing hub for the continent Similarities Utilised railways as a foreign policy instrument to build relations with Southern Africa after regional isolation

China China Railway Rolling Stock Corporation (CRRC) ‘To be the world’s leading provider of high-end equipment system solutions’2

Operates in 102 countries on six continents3 Construction of the TAZARA line started in 1970 African projects are subsidised by the China Exim Bank, IAAB, China Construction Bank Corporation and others Leverages High Speed Rail Diplomacy in line with its BRI blueprint Quality of rolling stock is questioned at times Biggest railway producer in the world

Foreign policy towards Africa was stimulated by railways (TAZARA)

Transnet Company brochure (2019), ‘Company Overview’ CRRC (2020) ‘Company profile’, available at https://www.crrcgc.cc/g5141.aspx 3 ‘China Railway Rolling Stock Corporation wants to increase business in Mozambique’ (2016), available at https://macauhub.com.mo/2016/07/06/china-­railway-­rolling-­stock-­corporation-­wants-­ to-­increase-­business-­in-­mozambique/ 1 2

 Railway Technology (2012), ‘Transnet: laying tracks for South Africa’s rail future’, available at https://www.railway-technology.com/features/featuretransnet-south-africa-rail-network/. 70

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7 Not a ‘Train Smash’? Transnet and China Railways in Africa Railways will in the foreseeable future be positioned as the mainstay of African economies and the preferred mode of transport for the conveyance of bulk commodities and passengers over long distances. In recent years, the debate on railway rolling stock has gained traction and momentum within various transport and policy development quarters in Africa, justifiably so, because of the positive economic dynamics across the continent. The discovery of new mines and oil fields, the continent’s rapid urbanisation and its galloping population growth rates, corroborate the thesis of railways as a ridgepole that sustains African economies.71 To further lend support to the railway prominence, the African Union’s Programme for Infrastructure Development in Africa (PIDA) has called for a High Speed Rail Project as part of its Agenda 2063, which once commissioned, will facilitate the movement of freight and people across the continent.72 The continent’s untapped railway industry, particularly in the eastern, central and western regions, has stoked a putative ‘scramble for African railways’ between Pretoria and Beijing. On the South African front, this phenomenon is mirrored by the contemporary internationalisation thrust by post-­ apartheid Transnet and the subsequent establishment of Transnet International Holdings (TIH) in 2018, which is mandated to ‘facilitate multiple rail, port and pipeline projects in the rest of Africa’.73 As already noted, China’s Africa railway strategy is anchored in the BRI blueprint, that should in the long-term position Chinese enterprises such as CRRC, as stewards of HSR diplomacy. With that background set aside, let us then commence the debate by paying close attention to China’s railway expansion model in Africa. From that perspective, it is important to mention that China’s railway strategy is weaved together by strong political backing and immense financial resources from its government.74 This state-­ centred support, therefore, allows it to present to Africa, a holistic commercial package that positions CRRC as a ‘one-stop shop’ for the continent’s railway needs. Even so, the Chinese SOMNCs are internationalised with a sheer mercantile objective of generating as much revenue as possible from the continent’s railway industry. Based on this logic, therefore, it remains unlikely that China will invest in projects where it will not reap any financial benefits. To put this expansion model into context, CRRC for example, is better placed to bid and win the supply of

 African Development Bank (2015), ‘Rail Infrastructure in Africa: Financing Policy Options’, op. cit., pp. 50–53. 72  Programme for Infrastructure Development in Africa (2019), ‘Update on Africa’s Integrated High Speed Railway Network Project’, available at https://www.au-pida.org/news/update-onafricas-integrated-high-speed-railway-network-project/. 73  Njobeni S (2018), ‘Transnet launches new company to facilitate projects in Africa’, available at https://www.iol.co.za/business-report/companies/transnet-launches-new-company-to-facilitateprojects-in-africa-13564189. 74  Pavlicevic D, Kratz A (2016), op. cit., pp. 6–7. 71

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SDD20 diesel locomotives75 to an African country because of subsidies and political favour from Beijing. Within the same bid, China can offer to finance the locomotives by adding lower repayment terms and longer grace periods76 and also offer to maintain the same rolling stock and supply the requisite training for the operation of these assets. This expansion model, as it will later be seen, is at variance with Transnet’s ‘go at it alone’ approach of Africa which results as a consequence of policy uncertainty between the Department of International Relations and Cooperation (DIRCO), Department of Public Enterprises (DPE) and Transnet. It is useful to note that the effectiveness of China’s railway strategy in Africa is nourished by the advocacy of its diplomats and the political buy-in from the Zhōngnánhǎi.77 Professor Loubser reminds us that a country’s inability to effectively leverage diplomacy to inform the world of its expertise would be rendering great injustice to itself, since this would lead to its capabilities not being known by its peers.78 Furthermore, Pavlicevic and Kratz equally submit the view that the strength of China’s railway policy is expressed by the firm government and diplomatic backing. They corroborate this stance by articulating that ‘in addition to the continued promotion of High-Speed Rail through bilateral channels and during Chinese high-level overseas visits, Beijing also uses China-led multilateral initiatives to promote ambitious cross-border projects’.79 To flesh out this viewpoint, consider as an example the 2015 signing of a Memorandum of Understanding (MOU) between China and the African Union. In its crudest form, the MOU is in line with the African Union’s Agenda 2063 and intends to ‘promote cooperation in railway, road, regional aviation networks and industrialisation fields’.80 The University of Stellenbosch’s Centre for Chinese Studies, on the other hand, expands on this argument by submitting that ‘political support from the Chinese government has undoubtedly played a critical role in facilitating the entry of Chinese companies’81 into the global market. Generally, China has drawn its diplomats within the ambit of its railway strategy; this policy inclusivity has served to position its diplomats as true ‘global salesmen’82 and stewards of its railway transport ambitions in Africa. In addition to the aspect of diplomacy and political support, China’s ability to effectively bid in Africa’s railway projects finds expression in the CRRC’s state-backed financing model which is largely buttressed by subsidies and favourable repayment terms. This monetary support includes packages from institutions such as the China Export Import Bank (Exim Bank), the Asian Infrastructure Investment Bank (AIIB)  ‘SDD20 Diesel Locomotives’ specifications, available at https://www.crrcgc.cc/g3794/s7393/ t224103.aspx. 76  Pavlicevic D, Kratz A (2016), op. cit., p. 6. 77  Headquarters of the Communist Party of China. 78  Loubser J (1980), op. cit. 79  Pavlicevic D, Kratz A (2016), op. cit., p. 7. 80  African Union (2016), ‘African Union signs Agreement on Africa’s High Speed Rail Network’, available at https://au.int/pt/node/31462. 81  Centre for Chinese Studies (2006), op. cit. 82  Pavlicevic D, Kratz A (2016), op. cit., p. 2. 75

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and the BRICS Bank. This is also achieved through China’s ability to obtain stakes in overseas banks, such as its acquisition of a 20 per cent stake in South Africa’s Standard Bank in 2007.83 In broad terms, such an acquisition promotes the cross-­ fertilisation of banking expertise between China and the locally-based Standard Bank. Additionally, factors such as cheap labour and building materials have also played in the CRRC’s favour, thereby facilitating its ability to construct trains rapidly and cheaper than any of its competitors around the world. China’s engineering efficiency is underscored by a CRRC manager that ‘delivery time for a train set takes 12 months, versus the 18 to 22 months for foreign manufacturers, due to a higher labour efficiency in China’.84 Another key factor to consider is its access to the state-of-the-art railway technology. China’s ability to power its locomotives and wagons with cutting-edge technology is predicated on what it has termed ‘technology transfer for market access’.85 This policy position postulates that in obtaining a share of the Chinese railway market, foreign companies should cede their technological capabilities to China by either entering into joint ventures with the local Chinese companies or by training their engineers.86 This manoeuvre has allowed the CRRC to draw technological know-how from global companies such as Rolls-­ Royce Power Systems,87 Alstom and Bombardier and to reverse engineer the same technology to benefit the Chinese rolling stock.88 In retrospect, China’s dynamic diplomatic representatives, its finance machinery and the country’s access to leading global technology, have positioned it as a dominant player in Africa’s railway industry, to an extent that railway development in the continent has become ­synonymous with this country. In East Africa, for example, China successfully launched in 2017, the Mombasa-Nairobi Standard Gauge Railway line which will in the foreseeable future, play a role in linking Kenya with Uganda, Burundi, Rwanda and South Sudan. In the same region, China commissioned the Addis Abba Light Rail project in 2015, followed by the 752 km Ethiopia-Djibouti line in the subsequent year. In West Africa, China completed the Lagos-Ibadan Railway project in 2020, together with the 186 km Abuja-Kaduna railway line in 2016.89 Further north, in Libya, China halted a 172 km high speed line between Tripoli and Sirte as

 Institute of Developing Economies: Japan External Trade Organisation, ‘China in Africa’, available at https://www.ide.go.jp/English/Data/Africa_file/Manualreport/cia_11.html. 84  Ker M (2017), ‘China’s High-Speed Rail Diplomacy’, US-China Economic and Security Review Commission, Staff Research Report. 85  Lin Y, Qin Y and Xie Z (2017), ‘Technology Transfer and Domestic Innovation: Evidence from the High Speed Rail Sector in China’, available at https://qinyurain.weebly.com/ uploads/4/7/2/8/47280099/hsrtt_april17.pdf. 86  Pavlicevic D, Kratz A (2016), op. cit., p. 5; Centre for Chinese Studies (2006), p. 7. 87  Railways Africa (2017) ‘Rolls-Royce and China Railway Rolling Stock Corporation Strategic Partnership’, Issue 6. 88  Pavlicevic D, Kratz A (2016), op. cit., p. 5. 89  Xinhua (2017), ‘Chinese-built railways improve transport in Africa’, available at http://www. xinhuanet.com/english/2017-12/28/c_136857657.htm. 83

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a consequence of the political instability in that country.90 In South Africa, the China South Rail and China North Rail’s91 involvement in the construction of 1064 locomotives, formed the epicentre of the public inquiry that came to be known as the ‘Zondo Commission into State Capture’. The acquisition of these locomotives is currently being linked to tender irregularities and compromised procurement processes.92 To further enrich the insights of the African railways discussion, it is useful, therefore, to draw Transnet into the centre of the debate. Particularly, Transnet’s Africa expansion model is a subject of close scrutiny as it somewhat bears erratic contours that expose policy fissures between itself, DIRCO and the DPE. In this debate, it is of course a seductive proposition to juxtapose Transnet’s potential support from institutions such as the Development Bank of Southern Africa (DBSA), with financial support given to CRRC by Beijing. Similarly, one can also spend time fixating on the rudimentary foreign policy and political economy knowledge required by some Transnet envoys to Africa. To a larger degree, Transnet’s envoys to Africa are engineers and business administration personnel, who at times enter countries with no clear understanding of South Africa’s foreign policy position towards different countries in the continent. In addition to this, one can also draw out Transnet’s scorecard and appraise its commercial performance in the Francophone countries, as opposed to its dynamism in the traditional English-­ speaking markets. For this study, however, careful consideration will only be given to Transnet’s putative solo approach of Africa; and to a certain degree, the fragmentation in its internationalisation thrust will also be explored. Closely examined, Transnet’s Africa approach mirrors policy discords on three fronts: first, the DPE and not DIRCO, somewhat assumes centre stage as a protagonist of Transnet’s global relations. Second, DIRCO’s passive role in Transnet’s global activities is compromised by the perception that international business is the sole preserve of the private sector. Lastly, the Africa approach is also compounded by the fragmentation in ‘Brand Transnet’s’ globalisation attempts, particularly because of the lack of centrality of its international relations processes. Of course, these policy cleavages bode ill for knowledge exchange efforts between these institutions as neither is aware of the other’s activities in the continent. In focusing the analytical lenses on the DPE, it is of great interest to note that this department has sanctioned what it calls the ‘Department of Public Enterprises Market Entry for Africa’. This document outlines the guiding principles that Transnet and other South African SOMNCs should adhere to in pursuing their business expansion ventures in the continent. Broadly, these guidelines suggest that Transnet’s continental operations should reflect an SOMNC that is committed to maintaining dynamic consultation with the DPE and that is steadfast in promoting the continent’s socio-economic  Kynge J, Peel M, Bland B (2017), op. cit., p. 3.  These two companies merged in 2015 to form CRRC. 92  Talane V (2019), ‘A year of damning revelations at Zondo Commission into state capture’, available at https://www.iol.co.za/news/politics/a-year-of-damning-revelations-at-zondo-commissioninto-state-capture-39780230. 90 91

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upliftment.93 In reviewing the DPE’s involvement in Transnet’s global relations, one is in fact reminded that the post-Westphalian state is ‘fragmented, decentralised and internationalised’94 and that the ‘command and control’95 levers of global affairs no longer rest with the central government. One also appreciates what Professor Brian Hocking refers to as ‘multistakeholder diplomacy’96 which in essence postulates that non-traditional actors such as the DPE have a role to play in global affairs. Nonetheless, of major concern is the fact that in this policy document, DIRCO’s role as a custodian of South Africa’s foreign policy remains nebulous and not emphatically pronounced. As it stands, the DPE strategy somewhat nourishes the pervasive perception that although this country’s government institutions pursue the same agenda in the continent, their joint effort is debilitated by the dearth of intra-­ governmental consultation.97 On the other hand, DIRCO’s reluctance to develop a policy framework for Transnet’s Africa operations is rooted in Chapter Seven of the National Development Plan (NDP 2030), where it is stated that: ‘it is an incontestable reality of capitalist international relations that it may be states that secure international trade or financial relations, but it is, ultimately, private companies that do business across the border’.98 This policy position infers that international business is the sole preserve of multinational corporations such as MTN, Nando’s and Shoprite and does not fully recognise Transnet as a continental commercial player. However, it is important to note that the internationalisation of SOEs is not unique to Transnet but is rather in line with our BRICS99 counterparts. In fact, the globalisation effort has long being executed by companies such as Petrobras, Brazil’s oil state entity, which has operations in countries as far as Nigeria, Venezuela and Angola.100 On the other hand, Russia’s gas state corporation, Gazprom, manages fields in countries such as Kyrgyzstan, Algeria and Tajikistan.101 However, in all fairness, attempts were made by the Public Enterprises Parliamentary Monitoring Group to draw DIRCO into a  Grant-Makokera G (2015), ‘South African Economic Diplomacy: Engaging the Private Sector and Parastatals’, ISS Paper 280, p. 9; Vickers B and Cawood R in Adebajo A and Virk K (2018), ‘South Africa’s Corporate Expansion: Towards an “SA Inc.” Approach in Africa’, Foreign Policy in Post-Apartheid South Africa: Security, Diplomacy and Trade, London and New York. 94  Hameiri S and Jones L (2016), ‘Rising Powers and State Transformation: the Case of China’, European Journal of International Relations, 22(1), p. 72. 95  Ibid., p. 80. 96  Hocking B (2006), op. cit. 97  An attempt was made to engage the Department of International Relations and Cooperation within the DPE, on the intricacies of the strategy; albeit with little success. 98  National Development Plan 2030, ‘Chapter Seven: Positioning South Africa in the World’, available at https://www.poa.gov.za/news/Documents/NPC%20National%20Development%20 Plan%20Vision%202030%20-lo-res.pdf. 99  Brazil, Russia, India, China and South Africa cluster. 100  Rodrigues I, Vascondellos E, Sbragia R (2008), ‘The Internationalisation of R&D at Petrobras’, available at https://www.researchgate.net/publication/300437753_The_Internationalization_ of_RD_at_Petrobras. 101  Gazprom (2018), ‘Fields’, available at https://www.gazprom.com/projects/#field. 93

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cooperation plan with Transnet and the DPE. Consider for example, a 12 August 2015 meeting to discuss the ‘Transnet on Africa Strategy’ where it was stated that this SOMNC functions ‘under a governance model with forums hosted by the Department of Public Enterprises with emphasis on how this department and the Department of International Relations could support state-owned companies’.102 Lastly, the Transnet Africa approach is compromised by the fragmentation of its internationalisation efforts given its sheer size. To cite an example, TFR has a unit called the International Business Department which ‘facilitates the operation and enables development of rail corridors to connect and integrate the African region for economic growth and sustainability’.103 On the other hand, Transnet Engineering (TE) has a similar division called the Business Development Department, which aims to promote the company’s railway manufacturing capabilities to the rest of the African market. As already noted, a global company called TIH, which should ideally centralise and manage all Transnet’s international operations, was established in 2018, but is currently not performing this all-embracing global function. When all is said and done, there is no denying that the merger of the China South Rail and the China North Rail in 2015 to form CRRC104 created the world’s largest railway company, bigger than the Canadian Bombardier and the French Alstom.105 Nevertheless, what Transnet lacks in size and unlimited funds, can always be made up for in strategic thinking. Translated, this means that the ‘silver bullet’ in Transnet’s arsenal need not be pecuniary in nature, but rather ideological. In this regard, the notion of pan-Africanism should therefore transcend the political and social unity of Africa and should spill over into the infrastructure realm, to mirror Transnet as a ‘catalyst for African innovation and industrialisation’.106 The idea of ‘Made in Africa’ railway rolling stock was propelled and granted much currency by TE when it in 2017, manufactured its first ever Trans-Africa Locomotive (TAL). According to TE, the TAL is particularly ‘made by Africans for Africa’ and was designed to run on the Cape gauge lines and to withstand the harsh African terrain.107 In fact, Transnet’s advocacy for pan-African railway rolling stock has received the much needed support from the African Union. Consider for example a 2016 Presidential Infrastructure Championing Initiative (PICI) report that states that the ‘AU Rail Stock decision for South Africa to become the manufacturing hub,

 Public Enterprises Parliamentary Monitoring Group (2015), ‘Transnet on Africa Strategy’, available at https://pmg.org.za/committee-meeting/21299/. 103  Transnet Freight Rail (2020), ‘International Business’, available at http://www.transnetfreightrail-­ tfr.net/BU/IB/Pages/Overview.aspx 104  Ker M (2017), op. cit., p. 7. 105  Smith K (2017), ‘Will Alstom-Siemens merger check CRRC’s international expansion?’, available at https://www.railjournal.com/opinion/will-alstom-siemens-merger-check-crrcs-internationalexpansion. 106  Gama S (2017), ‘Loco designed, engineered, and manufactured in Africa, unveiled’, available at https://www.railwaygazette.com/traction-and-rolling-stock/loco-designed-engineered-andmanufactured-­­in-africa-unveiled/44287.article. 107  Ibid. 102

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dovetails the operations of Transnet in executing its Africa Strategy during the current financial year, having already grown considerably in cross-border activities’.108 Moreover, most African railway authorities operate aging infrastructure. Instead of directing their limited funds to railway-related projects, many African governments would rather funnel the available monies to the social programmes in the education and health sectors. This challenge, perhaps, presents Transnet with an opportunity to leverage some of its South African-based maintenance facilities such as those in Koedoespoort and Germiston, as well as its School of Rail, to serve as Africa’s railway maintenance and training hubs. Overall, Transnet is steadily positioning itself as an emerging international relations actor with expertise that could be utilised as a soft power instrument for positioning South Africa as an African railway ‘centre of excellence’. To take full advantage of this phenomenon, it is imperative for Transnet to improve its profile at home and abroad, considering that its involvement in state capture has tainted its image. It is also in DIRCO’s interest to review its economic diplomacy positioning on state enterprises and to pay particular attention to their cross-border activities. Therefore, the promotion of ‘Brand Transnet’ across the continent requires what Brendan Vickers and Richard Cawood refer to as an ‘SA Inc. approach in Africa’ or broadly, a unified approach by South African institutions with an interest of operating in Africa.109 For Transnet, this approach, will yield the following positive dividends; first, it will establish a platform for collaboration that will induce effective consultation110 between itself, DIRCO and the DPE. This will in turn open up communication channels between these three institutions and will stimulate the cross-­ fertilisation of ideas between them. Second, the ‘SA Inc. approach’ could also bring organisations such as Brand South Africa on-board the Transnet band-wagon. With its wide-reach of the African market, this institution could be leveraged as an anvil upon which the Transnet Africa marketing strategy could be forged.

8 Conclusion The convergence of railway infrastructure and foreign policy opens up a relatively new research avenue of understanding post-apartheid South Africa’s international relations and diplomacy in Africa. This research angle is the first step in shining light on South Africa’s role as a player in the continent’s railway sector and its continued advocacy for railways as a catalyst for regional integration in light of the Africa Continental Free Trade Area. Nevertheless, it cannot be denied that the continent’s railway sector is a ‘battleground’ between South Africa and China. However, the latter contender will likely emerge on top by virtue of its financial brawn and

 Presidential Infrastructure Championing Initiative (2016), op. cit. p. 17.  Vickers B and Cawood R in Adebajo A and Virk K (2018), op. cit. p. 131. 110  Grant-Makorera C (2015), op. cit., p. 7. 108 109

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strong diplomatic support. These twin factors reinforce its ability to be a ‘one stop shop’ for the continent’s railway needs. China, in comparison to South Africa, has successfully constructed numerous railway lines across the continent and continues to expand its operations at an alarming rate. Are we perhaps witnessing an era where Cecil John Rhodes’ effort of connecting the continent from Cape to Cairo will indeed be achieved by China? It is imperative, therefore, for South Africa to recalibrate its economic diplomacy position and to grant full support to Transnet’s ambition of increasing its footprint in the continent. Certainly, this will be a joint effort not only between DIRCO and Transnet, but also between other relevant stakeholders, so much so that Transnet’s penetration of the continent mirrors an ‘SA Inc. Africa approach’. Railway transport will in the foreseeable future serve as the mainstay of many African economies, as such, the moment is ripe for Transnet to push for the construction of the ‘Made in Africa’ trains which will position South Africa as a key player in the continent’s railway industry.

China-Ethiopia Relations: Comprehensive Economic Cooperation (2000–2019) Messay Mulugeta, David Monyae, and Bhaso Ndzendze

1 Introduction Infrastructure is the general term for the basic improved physical systems of a country. It is the physical components of interrelated systems providing essential commodities and services to enable, sustain, or enhance societal living conditions. Infrastructure therefore includes the fundamental facilities and systems serving a country, city, or an area, including the services and facilities necessary for its economy to function. Infrastructure is composed of public and private physical improvements such as roads, railways, water supply systems, sewers, telecommunications (including internet connectivity) and electric grids. There are two general types of ways to view infrastructure-hard and soft. Hard infrastructure refers to the physical networks necessary for the functioning of a modern socioeconomic system-­examples are roads and railways; while soft infrastructure refers to all the institutions that maintain the economic, health, social and cultural standards of a country. Soft infrastructure includes, but not limited to, educational programmes, law enforcement systems, emergency services, poverty reduction programme, safety net programmes and information services (Buhr, 2003; Torrisi, 2014). Ethiopia is currently improving and modernising its infrastructures more importantly in collaboration with China. The country is massively investing in road networks, electric power grids, railway systems, telecommunication connectivity and building facilities nationwide. M. Mulugeta · D. Monyae Centre for Africa-China Studies, University of Johannesburg, Johannesburg, South Africa e-mail: [email protected] B. Ndzendze (*) Department of Politics and International Relations, University of Johannesburg, Johannesburg, South Africa Centre for Africa-China Studies, University of Johannesburg, Johannesburg, South Africa © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Ndzendze, D. Monyae (eds.), Perspectives on Africa-China Infrastructural and Industrial Cooperation, Africa-East Asia International Relations, https://doi.org/10.1007/978-3-031-38395-3_3

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The significance of the infrastructure sector in the process of economic development has long been acknowledged and accepted by researchers and legislators. As noted by Azam and Abubakar (2015), the role of infrastructure is broadly considered to be vital for economic growth without adequate supply of which the production and exchange of goods across markets would grind to a halt. Economic globalisation would not take place without the reduction in communication and transportation costs brought about by the progress achieved in the development of infrastructure within and across countries. The provision of sound infrastructure facility greatly contributes to the national and/or regional productivity growth in particular and to the overall aggregate output of the national in general. The availability of appropriate and comprehensive infrastructure can increase productivity growth by utilising more efficiently their available scarce resources. Therefore, investments in infrastructure are usually considered as imperative instruments of development. Thus, China-Ethiopia collaboration in areas of infrastructure development has something great to contribute to sustainable economic development and bilateral ties between the two countries. It is thus reasonable to analysis the infrastructure cooperation between Ethiopia and China. China’s involvement in economic development in Africa has grown exponentially since the 1990s. Its investment in Africa has increased particularly sharply since the 2015 Forum on China-Africa Cooperation (FOCAC) Summit, where China announced a commitment of US$60 billion in financial support to the continent in the form of aid as well as development finance. China announced a further commitment of US$60 billion at the 2018 FOCAC summit, comprising US$20 billion for extended credit lines; US$15 billion for grants, interest-free loans and concessional loans; US$10 billion for investment financing; and $20 billion for related outlays. These sums are to be spent over the three-year period of the FOCAC Beijing Action Plan, from 2019 to 2021 (Messay, 2017; Corkin et al., 2008; Marafa, 2009; Broich & Adam, 2014). China’s engagement with African countries as well as pan-African institutions, notably the African Union (AU), has created unparalleled opportunities for people across the continent. Countries benefiting from Chinese investment interventions and aid and include Nigeria, Angola, Ethiopia, Kenya, Zambia, South Africa, South Sudan, the DRC, Congo, Cameroon, Mozambique and Uganda. In line with China’s principle of non-interference in the internal affairs of African countries, restated in the Beijing Action Plan, its assistance to African countries has not been affected by changes in forms of government or national leadership (Messay, 2017). The first Ethiopian Cultural Delegation was sent to China in 1956 during the reign of Emperor Haile-Selassie (1930–1974) of Ethiopia and Chairman Mao Zedong (1949–1976) of China. This delegation served as a gateway to the socioeconomic and diplomatic relationships between Ethiopia and China. Formal diplomatic relations between Ethiopia and China was established in the early 1970s when Ethiopia established an embassy in Beijing. China has two embassies in Addis Ababa, one is PRC’s embassy to Ethiopia while another one is PRC’s embassy to AU. Next to the formal diplomatic relations, various bilateral agreements have been signed between Ethiopia and China. All over again, the Ethiopia-China relation has transformed into a more strategic partnership with the establishment of the Forum

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on China-Africa Cooperation (FOCAC) in 2000. The China-African Fund, which was founded following the Beijing Summit FOCAC, was established in June 2007 to support Chinese enterprises investing in Africa. The fund serves as a bridge between Chinese companies and African projects. Even if the cooperation between Ethiopia and China seems to have started with the signing of trade agreement in 1971, the economic and political relationships between them were not remarkable until the coming to power of the Ethiopian People’s Revolutionary Democratic Front (EPRDF) in 1991 and the accession of China to the World Trade Organization (WTO) in December 2001. Yet in the span of about two decades, the economic nexus between the two countries increased unprecedentedly. Generally, China’s current fast economic growth and its accompanying increased investment in Ethiopia over the last decades have brought about enhanced performances in economic activities (mainly in the construction sector) and technology transfer to the latter (Corkin et al., 2008; Marafa, 2009; Broich & Adam, 2014). Therefore, based on the importance of infrastructure for socioeconomic development, this chapter aims to present the existing China-Ethiopia infrastructural cooperation and the infrastructures developed therein. Descriptive statistical tools and content analysis were applied to look into the existing cooperation as well as the developed infrastructure therein, the areas/lengths covered and the costs it consumed. The results and discussions are expected to guide the management authorities in making appropriate policy.

2 China-Ethiopia Relations: Historical Overview 2.1 Diplomatic Relations China’s relations with Africa, particularly, the Horn of Africa including Ethiopia, are longstanding. Africa-China bilateral trade, for example, dates to the tenth century BC, when the Egyptian city of Alexandria started trading with the people who had settled in present-day China. Evidence also indicates that trade relationship between China and Africa took place at some point during the first period of the Silk Roads Trade (about 50 BC–250 AD). Gebregeorgis (2016), for example, cited historical sources indicating the indirect contact of Chinese merchants with the Aksumite Kingdom of Ethiopia since the Chinese Qin Dynasty (third century BC) and Han Dynasty (third century BC–third century AD) through the Balkh in Eurasia and Parthia in the Persian Plateau. There are also sources (Geoff, 2014; Muna, 2015) that are sure about the indirect trade involvement of China with parts of the Horn of Africa in some point during the Tang dynasty/618–907 AD/. There are substantial sources indicating the contact of Zheng. Zheng, an administrator and diplomat during the Ming Dynasty (1368–1644) in China, with people who had lived in the present-day sub-Saharan Africa centuries before the arrival of the 16th century European (Portuguese) explorer Vasco da Gama. In fact, the relations had lapsed during the period of Western imperial domination until the latter half of the 20th century (Dent, 2011; Geoff, 2014; Muna, 2015).

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The modern era of Afro-Asian (specifically, Afro-China) relations was thought to have started in 1955, when the Bandung Conference (Indonesia) brought together 29 African and Asian countries. However, trade and investment between Africa and China increasingly built in 1990s, a process principally motivated by China’s rapid industrialisation and economic development (Dent, 2011). The relationship was officially inaugurated in a meeting of the Forum on China-Africa Co-operation (FOCAC) in 2000 at Beijing. FOCAC was consecutively held in Addis Ababa (in 2003) and Beijing (in 2006). Those FOCAC meetings ultimately devised four fundamental principles, which most likely led Africa to welcome China more actively than its preceding western partners. The principles are sincerity, friendship and equality; mutual benefit; mutual support and close co-ordination; and mutual learning and common paths of development. These principles give good explanations for the fact that China has no interest to compete for hegemony in Africa. Taylor’s (2006) arguments and my discussion with a veteran FDDI Visiting Scholar in November 2017 also validate that China’s interest in Africa is only economic such as market and natural resources, at least for this time, and not to create its authority with dominating political influence over African nations. The recent Djibouti President Ismail Omar Guelleh’s official visit to China (22–24 November 2017) and the warm greetings by the Chinese leaders at the Great Hall (Tiantian, 2017) is one of the testimonies for the burgeoning ChinaAfrica economic ties. In fact, it is more likely to speculate China’s interest in Africa may expand to peacekeeping and strategic missions at least to protect its massive investment projects and the Chinese workers in Africa in the years to come. Next to the formal diplomatic relations, various bilateral agreements have been signed between Ethiopia and China (Damtew and Tsegay, 2017). These include Ethiopia-China Agreement for Economic and Technological Cooperation (1971; 1988; 2002); Ethiopia-China Trade Agreement (1971; 1976); Ethiopia-China Trade Protocol (1984;1986;1988); Ethiopia-China Agreement Concerning the Encouragement and Reciprocal Protection of Investments (1998); Ethiopia-China Agreement for Mutual Promotion and Protection of Investment (1988); and EthiopiaChina Agreement for Trade, Economic and Technological Cooperation (1996). Chinese premier Zhou Enlai visited Ethiopia in January 1964. The Ethiopian Emperor Haile-Selassie visited China in October 1971, where he was received by Mao Zedong. Qian Qichen, China’s vice-premier and minister of foreign affairs, visited Ethiopia in July 1989, January 1991 and January 1994. Chinese president Jiang Zemin visited Ethiopia in May 1996. In June 2001, the Ethiopian deputy foreign minister visited Beijing, where he expressed support for the ‘One China’ principle in the dispute with Taiwan and a few islands. In December 2003, Chinese premier Wen Jiabao visited Ethiopia to attend the opening of the China-Africa Cooperation Forum. In December 2004, the heads of the Ethiopian and Chinese legislatures met in Beijing and in a joint statement said that the two counties wish to expand all aspects of cooperation. In May 2007, China’s Assistant Minister of Commerce Wang Chao visited Addis Ababa and signed a debt relief agreement worth US$18.5 million. In February 2008, the Chinese minister of construction met his counterpart in Addis Ababa and re-­ emphasised the commitment of the two governments to cooperation. The Ethiopian minister welcomed the involvement of Chinese construction companies in

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improving Ethiopian infrastructure. In November 2008, the chairman of the standing committee of China’s National People’s Congress (NPC) visited Ethiopia where he met senior Ethiopian officials and political leaders including President Girma Wolde-­ Giorgis (2001–2013) and discussed ways to strengthen economic cooperation. Agreements between the two countries include Agreement for Economic and Technological Cooperation (1971, 1988 and 2002); Trade Agreement (1971, 1976); Trade Protocol (1984, 1986, 1988); Agreement for Trade, Economic and Technological Cooperation (1996) and Agreement for Mutual Promotion and Protection of Investment (1988). In May 2009, the two countries signed an agreement to eliminate double taxation, expected to boost trade and investment. Again, as noted by Damtew and Tsegay (2017), the Ethiopia-China relationship has transformed into a more strategic partnership with the establishment of the Forum on China-Africa Cooperation (FOCAC) in 2000. More importantly, Ethiopia hosted and co-chaired the second Ministerial meeting of FOCAC, which was held in Addis Ababa in 2003. The China-African Fund, which was founded following the Beijing Summit FOCAC, was established in June 2007 to support Chinese enterprises investing in Africa. The fund serves as a bridge between Chinese companies and African projects. It opened its East African branch in Addis Ababa in 2010 to facilitate the activities of Chinese companies in Ethiopia and Eastern Africa at large. The opening of the branch office in Ethiopia reflects the strong level of relations between the two countries as well as the confidence China has in Ethiopia. Ethiopia is also one of the countries which have participated/shown interest in the Belt and Road Initiative (BRI), a Chinese development initiative proposed by the leader Xi Jinping, which focuses on connectivity and cooperation between Eurasian countries to develop China-centred continental and maritime infrastructure networks to expand China’s economic and political influence in global affairs, particularly Asia, Europe and Africa (Chin & He, 2016; Csanádi, 2017; Klose et al., 2017). Even if the cooperation between Ethiopia and China seems to have started with the signing of trade agreement in 1971 (Venkataraman & Solomon, 2015), the economic and political relations between them were not remarkable until the coming to power of the Ethiopian People’s Revolutionary Democratic Front (EPRDF) in 1991 and the accession of China to the World Trade Organization (WTO) in December 2001. Trade between the two countries, for example, started to boom in 2006, the time when China became Ethiopia’s largest trading partner. Yet in the span of about two decades, the economic nexus between the two countries increased unprecedentedly. The bilateral trade between the two countries, for example, increased from almost nil before 2005 (Alemayehu & Atnafu, 2009) to over 3 billion USD in 2015 (Venkataraman & Solomon, 2015). This signifies very close bilateral relations that Ethiopia has built with China over the past decade compared to any other country in Africa. Generally, China’s current fast economic growth and its accompanying increased investment in Ethiopia over the last decades have brought about enhanced performances in economic activities (mainly in the construction sector) and technology transfer to the latter. The various agreements and forums between Ethiopia/Africa and China are expected to further the socioeconomic and political connections between the two

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countries in times ahead. Mutual support on issues of, for example, culture, trade, investment, agriculture, education, health, human resource development and many more are expected to expand. The visit of the Chinese Premier Li Keqiang (May 2014) can be regarded as another turning point to broaden the economic ties between Ethiopia and China. As one of the key building blocks of the Ethiopia-China ties, Ethiopian Airlines has been playing a high-flying role. The airline has been flying between Addis Ababa and Beijing since the 1970s and currently, it flies between Addis Ababa and various cities of China, namely Beijing, Chengdu, Guangzhou, Hong Kong, and Shanghai. In fact, the Ethiopia-China economic relationship is not free of challenges that both parties are required to come to terms with. Many respondents, in both countries, mentioned several predicaments that they observed in the relationship milieu. These include, but not limited to, the enormous trade imbalance between the two countries, low-priced/low-quality goods that Ethiopia is importing from China, poor compensation for investment-induced displacements in Ethiopia, quality of the project outputs (mainly in construction sector), corruption/bribery, the adverse environmental impacts of the projects, and the rights of the daily works.

2.2 Gradual Forging of a Special Partnership Since 1991 Despite commercial contacts between China and Ethiopia since early times, neither side showed much interest in diplomatic and economic cooperation with one another until the last quarter of the 20th century. China was one of only five governments which refused to recognise Italy’s conquest of Ethiopia (1935–1941). Relations were poor during Emperor Haile-Selassie era (1930–1974), when Ethiopia was allied with the western powers in the Cold War. Some historians (Bahru, 2003) also argue that Chinese support for the Eritrean People’s Liberation Front (EPLF) contributed to tension between the countries from 1967. However, the two countries established diplomatic relations on 1 December 1970 when China agreed to recognise Eritrea as Ethiopian, in exchange for Haile Selassie’s recognition of Taiwan as Chinese. Relations improved for a short period after the Ethiopian Revolution of 1974, but became strained as the Ethiopian military junta developed increasingly close ties with the Soviet Union. It was after the Ethiopian People’s Revolutionary Democratic Front (EPDRF) took power in 1991 that cooperation between China and Ethiopia has steadily improved, with increasing diplomatic contacts and growing trade, investment and remarkable emergency responses from China. Cabestan (2012) indicates that since 1995, China and Ethiopia have gradually forged close relations. On both sides, the establishment of this partnership was motivated as much by diplomatic, strategic, even ideological considerations and emergency response. Some scholars (Cabestan, 2012) argue that for China’s economic and trade cooperation with Ethiopia is a means rather than an end in itself; while for Ethiopia, however, the partnership mainly serves the internal political and economic purposes of the regime that has been in place since 1991. However, contrary to the views of some, the relationship

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is not a link that Beijing has sought to establish with African countries that are strategically important but economically backward. It rather seems the attraction the Chinese model of development holds in Africa and elsewhere. EPRDF came to power after long-fighting against the communist-oriented government for 17 years. It took power with the backing of the Western world specially USA. As a result, EPDRF did not initially give priority to strengthening ties with China. The regime favoured market economy, except in such matters as land ownership which belong to the state and the people as well as maintenance of state monopolies over some giant companies such as telecommunication, energy and air transportation services. It was only in 1995 that the regime decided to rebalance its foreign policy in favour of Russia and China. EPDRF leaders soon favoured China to learn about ‘socialist market economy’ and state-owned enterprises to help them develop agriculture, manufacturing and service sectors. Following his victory in one of the most debatable elections in Ethiopia in October 1995, Melese Zenawi (premier of Ethiopia) visited China. Subsequently, as stated by Aaron (2020: 3): the Chinese president, Jiang Zemin, stopped in Addis Ababa as part of an extensive tour of Africa. These visits culminated in the signing of a trade, economic, and technical cooperation agreement between the two nations. In the agreement, China bestowed on Ethiopia most-favored-nation status, and Addis Ababa was chosen to host the first FOCAC in 2000. Since, then China has been actively engaged in Ethiopia’s economic development, offering loans and skilled manpower and helping to building highly visible infrastructure, roads, and railway systems in Addis Ababa and elsewhere.

China-Ethiopian relations genuinely entered a new phase of close diplomatic, political, and economic partnership in 2005. As noted by Cabestan (2012), this evolution has a direct link to the EPDRF’s strengthening of its powers following the 2005 elections. The election was tainted with numerous irregularities and was accompanied by much violence (at least 200 dead), and led to a rapid deterioration in relations between Ethiopia and its traditional donors (the United States and European Union), which began to attach conditions to, if not suspend, their assistance. EPDRF then adopted a veritable developmentalist state agenda. A special and more strategic partnership between China and Ethiopia was forged in 1991 with the coming to power of the Ethiopian People’s Revolutionary Democratic Front (EPRDF) in Ethiopia and the accession of China to the World Trade Organization (WTO) in December 2001. Trade between the two countries, for example, started to boom in 2006, the time when China became Ethiopia’s largest trading partner. Yet in the span of about two decades, the economic nexus between the two countries increased unprecedentedly. The bilateral trade between the two countries, for example, increased from almost nil before 2005 (Alemayehu & Atnafu, 2009) to over 3 billion USD in 2015 (Venkataraman & Solomon, 2015). This signifies very close level of bilateral relations that Ethiopia has built with China over the past decade compared to any other country in Africa. Generally, China’s current fast economic growth and its accompanied increased investment in Ethiopia over the last decades have brought about enhanced performances in economic activities (mainly in construction sector) and technology transfer to the latter.

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2.3 FDI and Trade China has achieved rapid economic growth in the past three decades, which branded it as ‘China’s Economic Miracle’. Various sources (Walsh, 2009; Dent, 2011; OECD, 2012; Yu & Yuan, 2014; Csanádi, 2017; Losoncz, 2017; Morrison, 2017; Rippel, 2017) are of the same opinion that the tremendous economic development over a short period (only since the second half of the 1970s) has lifted China to the second largest economic power in the world. China’s economy is the largest and most powerful among the new global economic powers: Brazil, Russia, India, China and South Africa (BRICS). According to Losoncz (2017), China’s GDP volume at constant prices reached 11.4 trillion USD in 2016; and its GDP per capita at constant prices was 8260 USD (Table 1). The country established exemplary giant companies such as China Civil Engineering Construction Corporation Ltd. (CCECC), China Communications Construction Company Ltd. (CCCC), China Railway Group Limited, metro companies, manufacturing companies, ICT technology companies, petroleum and chemicals corporations, automotive industries, power plants and agricultural enterprises. It also exceedingly enhanced its magnificent tourist sites such as the Great Wall, Forbidden City, Pearl River Cruise and Weidong Chinese Cultural Museum, as well as amazing modern skyscrapers such as the Shanghai Global Financial Center. With these achievements, China has become a model country for other developing nations in Africa, Asia, Eastern Europe and Latin America, which, in turn, enabled it to highly deepen its economy across the developing world, especially Africa (UN, 2018). According to Dent (2011), it is with Africa that China has established the strongest links mainly for mutual benefits. Literature, for example, Chakrabarty (2016); Gedion (2009); Bräutigam and Tang (2012) indicate that Chinese interest in Africa in general and in Ethiopia in particular is driven by a quest for resources and diplomatic support. Chakrabarty (2016) and Gedion (2009) argue that Ethiopia could be a commercial launch pad for Chinese companies and China is also getting diplomatic support from Ethiopia for its international policies and development strategies such as the Belt and Road Initiatives. In fact, Ethiopia needs China for economic assistance as an alternative source to the West and generally considered as a role model for Ethiopia to follow. However, there are many challenges that have been visible in the bilateral relationship between the two countries. Gedion argues that, on the economic front, the bilateral relations are imbalanced; dumping of low-price export; underbidding local Table 1  China-origin FDI sources in Ethiopia/August 1998–December 2017 Capital inflow (only operational projects) Countries China only China joint investment Total

In billion ETB 18.570 5.647 24.217

Source: Computed based on data from EIC

In million USD 682.502 207.536 890.040

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companies and ideological differences among others. Adem (2012) also put in plain words the Ethiopia-China relationship as ‘infrastructure for diplomatic support’. By and large, as indicated by Chakrabarty (2016) and Gedion (2009), the overall impact of Ethiopia-China economic relations is beneficial for both countries. Bilateral trade between the two countries expanded rapidly, and China is currently Ethiopia’s top trading partner. Ethiopia gained from China’s zero-tariff policy on agricultural imports, and there was a dramatic growth in its agricultural exports (such as sesame) to China. China is also a major source of manufactured goods and machinery for Ethiopia. Despite being an agricultural exporter, it has attracted significant volumes of Chinese official financial flows and foreign direct investment (FDI). Most Chinese investment projects (both private and state-owned-enterprises [SOEs]) in Ethiopia are found engaged in manufacturing sector (Fig. 1), a growing sector in Ethiopia (accounting for about 13.8% of the country’s GDP), revealing a gradual structural transformation of the country’s economy from agriculture (current GDP share of 38.8% in 2014) to manufacturing sector (EIC, 2016). Out of the total number of licensed projects, 67.6% are manufacturing, 13% are construction contracting projects, 11.6% are real estate, 3.8% are hotel development, and the rest 4% are agriculture, tour operation, mining, and health projects. Of the total registered capital, 61.7% goes to manufacturing, 24.6% goes to construction contracting and the rest 13.7% goes to real estate development, hotel, mining, tour operation and health projects. China started massive investment in Ethiopia in 1998 (Fig. 2). Currently, China is the leading investor in number of projects, employees and foreign capital inflow in Ethiopia (Fig. 3). According to the data obtained from EIC, the total number of investment projects licensed between August 1998 and September 2017 is 1206. It is incredible to perceive that, at the time of this study, 60.3% (that is 728 projects) of the total licensed projects were operational with increasing trend form over the

70

Percentage

60 50 40 30 20 10 0 Manufacturing

Construction

Real state Hotel development Other projects development & and related (agriculture, tour related operation, mining & health) Investment projects by sector

Fig. 1  China-origin investment projects by sector in Ethiopia/August 1998–December 2017. (Source: Computed based on unprocessed data obtained from EIC)

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years mentioned above. Of the projects, 24.46% (295 projects) and 15.17% (183 projects) were at pre-implementation and implementation status, respectively. For clarity, EIC characterises projects at pre-implementation stage as licensed investment projects that have not yet started any practical activity; while those at implementation stage are characterised as projects in which practical undertakings, such as construction of civil works, provision of machineries/equipment are underway, but not yet started production of goods or provision of services. The investment projects which have either partially or fully begun production of goods or provision of services are identified as operational projects. On the sectoral structure of the investment, out of the total number of licensed projects, 67.6% are manufacturing projects, 13.0% are construction, 11.6% are real estate development, 3.8% are hotel development, and the remaining 4.0% are agriculture, tour operation, mining, and health-related projects. From the total registered capital, 61.7% has been allocated for manufacturing; 24.6% for construction; and the remaining 13.7% for real estate, hotel, mining, tour operation and healthrelated projects. China’s investment in Ethiopia ranks first both in the number of projects and in the registered capital among all foreign investment projects in Ethiopia. This signifies that the prominence of the Ethiopia-China economic relations for various intents and purposes in Ethiopia, such as job creation, technology transfer and economic growth. In case of investment capital, China is still the leading country in the contemporary foreign investment in Ethiopia, followed by Saudi Arabia, Turkey and India. In addition to exclusively China-origin companies investing in Ethiopia, there are also Chinese joint venture partners from about 20 countries, such as Australia, 148

139 125

125

Number of projects

94 81 56

85

79

88

55 44

23 25 1

1

1

2

33

1

Source: Computed based on unprocessed data obtained from EIC Fig. 2  Trend of Chinese investment projects in Ethiopia, 1998–2018. (Source: Computed based on unprocessed data obtained from EIC)

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Numebr of Projects

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Series1

Total 1,206

Pre-Implementaon 295

Implementaon 183

Operaon 728

Source: Computed based on unprocessed data obtained from EIC Fig. 3  China’s investment status in Ethiopia/August 1998–December 2017. (Source: Computed based on unprocessed data obtained from EIC)

Canada, Ethiopia, Finland, France, India, Italy, Malaysia, Netherlands, Sudan, Turkey, South Africa, United States of America (USA) and United Arab Emirates (UAE). The total value of the joint venture investment at all stages (operational, implementation, and pre-implementations) between August 2017 and December 2017 adds up to about 30.970 billion ETB (1.138 billion USD at the current exchange rate). Still, the vast majority of the projects are owned by Ethiopian and Chinese joint companies, constituting about 84.0% of the Chinese joint projects in Ethiopia. With these jointly undertaken business enterprises, China-origin companies are also contributing to Ethiopia’s economy in bringing in investors from other countries across the world. In addition to its current huge contribution in various aspects (such as job creation, foreign currency payment and technology transfer), the Chinese co-­investment approach has an enormous role in promoting Ethiopia as a favourable investment destination country. This, no doubt, will help Ethiopia in achieving its long-term vision in the economic sector (NPC, 2016) that is ‘to build an economy which has a modern and productive agricultural sector with enhanced technology and an industrial sector that plays a leading role in the economy; to sustain economic development and secure social justice; and, increase per capita income of citizens so that it reaches at the level of those in middle-income countries’. According to the study report by Mileva (2008) to European Central Bank (ECB), FDI constitutes the largest portion of capital inflows in most developing countries in the world. Its contribution in some countries is found to be around half of the total national capital inflows. Beyond adding to existing national capital stock, FDI stimulates investments in other sectors of the host economy through ‘crowding in’ or ‘spill over effects’.

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In view of the foregoing fact, Ethiopia is gaining huge amount of FDI because of its economic ties with China. As shown in Table 2, China-origin operational investment projects registered between August 1998 and December 2017  in Ethiopia amount to 18.570 billion ETB, equivalent to 682.502 million USD at the current (mid 2018) exchange rate. Similarly, the Chinese joint investment projects (with Ethiopians and other countries) added up to 5.647 billion ETB, equivalent to 207.536 million USD.  Altogether, between August 1998 and December 2017, Chinese and Chinese-Ethiopian joint investment amounted to 24.217 billion ETB (which is equivalent to 890.040 million USD). In addition to the operational ones, projects at pre-implementation and implementation levels are also expected to play vital roles in various aspects of the Ethiopian economy. The registered capital by China-origin and China joint investment projects at pre-implementation and implementation stages during August 1998 to December 2017 was about 75.40 billion ETB (equivalent to 2.77 billion USD at the current [mid-2018] exchange rate). This was a very enormous FDI in Ethiopian history and ranks China the leading source of FDI in Ethiopia, followed by Saudi Arabia, Turkey and India. With this, no doubt, China is enormously contributing to the Ethiopian economy in job creation, technology transfer, strengthening the capital stock, and stimulating the national/local investors in every sector through its spillover effects. Chinese investment has been rising over the years, particularly between 2006 and 2017 (Fig.  4). China and China-Ethiopia joint projects owners invested over 585 million USD in 2009 alone and over 766 million USD in 2017. In fact, the volume of investment decreased in 2011 and 2012; probably because it was this time that the government of Ethiopia set a minimum financial requirement for foreign inventors to initiate investment projects in Ethiopia. Yet, again it started accelerating in 2013 and has been continuing with remarkable pace up to the present time. It is also realistic to look forward that the existing peaceful political and socioeconomic relationship between Ethiopia and China hints at increasing Chinese investment trend during the times ahead, and will be contributing more greatly to the Ethiopian economy in many aspects. Trade Between Ethiopia and China The import-export trade between Ethiopia and China started shooting up in 2006, the time when Ethiopia’s import Free-On-Board (FOB) value was 663,570,000 USD while the export FOB value was 71,688,000 USD, showing a negative balance of 591,882,000 USD. Ethiopia’s import from China tremendously increased and hit a record high in 2015 when the FOB’s value mounted to over 6 billion USD (Fig. 5). It seems that Ethiopia’s export to China is not only lower but it is also slower in progress (with coefficient of variation/CV/of FOB values over years = 0.51) as compared to the more accelerating importation from China (with the CV = 0.62). This can be an important economic implication for Ethiopia in that it is expected to work hard towards enhancing its export trade and make the best out of its current encouraging relationships with China. As a key component of Ethiopia-China economic relations, the import-export trade between the two countries plays a vital role for economic transformation in

4007

136,618

26,852

4667 710,330

1

12

17

3 237

65 49,713

1204

798

50

Employment (Permanent) 159 47,387 50

1 20,723

3218

2130

50

15,134 190

Employment (Temporary)

1 54

2

4

1140 38,783

3276

679

Operational projects No of Capital in projects ‘000’ USD 1 377 46 33,311

Source: Ethiopian Investment Commission a Meat export, property management and maintenance service, architectural engineering consultancy services, etc.

Sectors Agriculture Manufacturing Hotels (including resort hotels, motels and lodges) and restaurants Tour operation, transport and communication Real estate, machinery and equipment rental and consultancy service Construction contracting including water well drilling Othersa Grand total

Capital in ‘000’ USD 14,451 519,652 4082

Total No of projects 2 200 2

10 9158

99

62

Employment (Permanent) 60 8927

Table 2  Summary of licensed Chinese investment projects by sector and status / 03 April 2018–22 August 2019 in Ethiopia

0 2845

220

10

2615

Employment (Temporary)

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Capital inflow in '000' US dollars

8,00,000 7,00,000 6,00,000 5,00,000 4,00,000 3,00,000 2,00,000 1,00,000 0 1995

2000

2005

2010

2015

2020

Year of investment

Source: Computed based on data obtained from EIC. Fig. 4  Trend of capital inflow from Chinese investment projects in Ethiopia (Source: Computed based on data obtained from EIC) 70,00,000 Ethiopia's import FOB value in '000'USD

FOB value in '000' USD

60,00,000

Ethiopia's export FOB value in '000' USD

50,00,000 40,00,000 30,00,000 20,00,000 10,00,000 0

2006

2007

2008

2009

2010

2011

Source: Computed based on data obtained from EIC.

Year

2012

2013

2014

2015

2016

2017 (Not full Year)

Fig. 5  Trend of import-export trade between Ethiopia and China/2007–2017. (Source: Computed based on data obtained from EIC)

Ethiopia in that, as indicated in the European Commission (EU) ‘benefits of trade for developing countries’, ‘trade strengthens ties between nations by bringing people together in peaceful and mutually beneficial exchanges and as such contributes to peace and stability’. Similarly, it ‘… enhances competitiveness by helping developing countries reduce the cost of inputs, acquire finance through investments, increase the value added of their products and move up the global value chain’. UNCTAD (2014:1) also clearly indicates that ‘…in the post-2015 development agenda, international trade should be seen an enabler for achieving a broad range of

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development goals through promoting inclusive and sustainable economic growth’. Particularly, if properly harnessed, the opportunities brought by international trade can be vital for investment stimulation, job creation, efficient resource utilisation, technology transfer, innovation, production efficiency and ultimately livelihoods enhancement in developing countries, such as Ethiopia and China. In view of these realities, the enormous and rising import-export trade amount between Ethiopia and China certainly contributes hugely to achieve the overall importance of trade indicated herein both for Ethiopia and China. It is said to be contributing significantly to the economy in both countries by allowing them to access new markets for their raw materials and/or finished/semi-finished goods, and thereby opening up new production possibilities and technologies for both countries. Although the trade balance is positively skewed to China (Fig.  5), the vast market in China for Ethiopian raw materials and/or semi-processed goods certainly encourages export diversification for Ethiopia, which, in turn, contributes greatly to job creation and balance of payment for Ethiopian economy. In the same way, the ever-progressing Ethiopia-China trade has an immense role in enhancing the financial capacity of the local enterprises and producers in Ethiopia and enables the Ethiopian people to consume cheaper Chinese products in comparison with overpriced/costly import items from Europe and North America. Post-April 2018 Ethiopia-China Development Cooperation Ethiopia and China economic cooperation continued unrelentingly there was a change of government leadership in Ethiopia in April 2018. The countries have been enjoying strong relationship and cooperating in different areas such as investment, human capacity building, project financing/loan and aid. Recent data from EIC shows that Ethiopia managed to attract about 237 investment projects (with the investment amount of about 711 million USD) from China between 03 April 2018 and 22 August 2018. Of these, 54 projects are already operational investing about 39 million USD and creating job opportunity for over 12,000 Ethiopians. These Post-April 2018 projects provide job opportunity for about 71,000 Ethiopians when fully operational (See Table 2). Following the COVID-19 outbreak in China, many feared that Chinese investment in Ethiopia would slow down. However, these fears have proven to be unfounded. Current data from the Ethiopian Investment Commission (EIC) shows that at least 30 Chinese investment projects have been licensed in Ethiopia between 2 January 2020 and 16 April 2020, involving total registered capital of more than $2 billion. All except one are at the pre-implementation stage, and the remaining project has entered the operational stage. Eighteen are located in Addis Ababa, nine in the Oromia region, two in the Amhara Region, and one in the Tigray Region (Messay, 2017). The newly licensed companies are active in textiles, plastics, food, compact transformers and switchgear, diapers and sanitary pads, metal, oxygen and acetylene gases, basic precious and other non-ferrous metals, medical instruments and appliances, wearing apparel (including sport wears and shoes), domestic appliances, baby food, yeast, vinegar, mayonnaise, iodised salt and similar food

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products, paper and wood products, starches and starch products, and chemical products (such as propellant powders, explosives, photographic films and similar products). Others are engaged in medical services, rail engineering consultancy services, real-­estate development, construction engineering, and data centre services. When fully operational, these projects are expected to create about 7600 jobs (Messay, 2017). To conclude, Chinese investment in Ethiopia has continued unabated even during the COVID-19 pandemic, thereby further dispelling the skepticism in some quarters about Chinese engagement with Africa. Certainly, based on their first-hand experiences, the Ethiopian government and the Ethiopian people do not believe that Chinese involvement in their country constitutes a form of neo-colonialism, or that China is seeking to establish an African hegemony.

3 Cultural Cooperation and Academic Mobility According to the information from the Ministry of Foreign Affairs (MoFA) of Ethiopia, the first Ethiopian Cultural Delegation was sent to China in 1956, only two years earlier than the launching of the ‘Great Leap Forward’ in China. This delegation served as a gateway to the socioeconomic and political relationships between Ethiopia and China. In 1964, the then Premier Zhai Enlai of China visited Ethiopia. Consequently, Formal diplomatic relation between Ethiopia and the People’s Republic of China was established in 1970s, effected by Emperor Haile Selassie I/1930–1974/ (Bahru, 2002) of Ethiopia and Mao Zedong, Chairman of the China Communist party from 1935 to 1976 (Walsh, 2009). Sino-Ethiopian cooperation is also playing a vital role in sustainable human resource development. At a reception held in Addis Ababa in September 2019, the Economic and Commercial Counsellor’s Office of the Chinese Embassy in Ethiopia outlined progress made with the Training Fellowship Programme under the Beijing Action Plan. More than 5500 Ethiopians have been trained in China in the fields of engineering, education, health, governance, agriculture and manufacturing. At this event, the Counsellor’s Office announced scholarships in China for 228 Ethiopian MSc and PhD students.

4 Development and Humanitarian Aid China is also making a major contribution to emergency response in Africa – notably its massive aid to all African countries, via the Jack Ma and Alibaba foundations, to fight the COVID-19 pandemic. Among other things, bulk medical supplies were delivered in three rounds in March and April 2020. In August 2019, China sent 7987 metric tonnes of emergency food aid worth about $7 million to Ethiopia destined for internally displaced people (IDPs) as well as people affected by El

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Nino-­induced drought. Humanitarian food assistance began with the onset of the weather-induced disasters in 2015 when China provided around $60 million worth food assistance to Ethiopia, both bilaterally and via the World Food Program (WFP). Chinese investment in Ethiopia has continued unabated even during the COVID-19 pandemic, thereby further dispelling the skepticism in some quarters about Chinese engagement with Africa. For its part, China is scrupulously upholding its commitment to support Africa’s sustainable development while allowing African countries to explore their own development paths, formulate their own development strategies, and improve their own governance, as spelled out in the FOCAC. On the Ethiopian side, relevant leaders and government institutions should bear in mind that getting the best out of its relationship with China and the opportunities on offer will require effective, efficient and accountable planning and governance. Chinese aid to Ethiopia has included dispatch of medical teams (before and during the COVID-19 pandemic) and teachers to Ethiopian technical colleges. Ethio-­ China Polytechnic College (rests on 23,000 sqm), for example, was constructed by SOGECOA, a Chinese company, over five years starting in 2005. It also includes educational scholarships for Ethiopian students studying in China. China’s aid programme funded the construction of a vocational school in Ethiopia: with students learning skills including engineering, automobile, architecture and construction. In June 2009, the Chinese ambassador assisted in laying the foundation stone for the state-of-art hospital named after Tirunesh Dibaba, an Ethiopian female athlete who won two gold medals at the 2008 Beijing Olympics. The hospital (with 6000 square metres in size with 100 beds) was built by the Chinese government at a cost of $12.7 million to promote Sino-Ethiopian friendship. The Chinese government is funding construction and will provide medical instruments and equipment. The hospital was completed in November 2011 and handed over to the Ethiopian government. Fifteen Chinese medical personnel were sent to help their Ethiopian counterparts.

4.1 Infrastructure Cooperation: Bilateral Agreements, Loans and Major Projects Ethiopia has benefited hugely from Chinese engagement. China and Ethiopia have entered into bilateral developments agreements and loans to development several huge projects in Ethiopia. Chinese government has provided huge infrastructure loans to Ethiopia, of which some are concessional (i.e. with a grant element above 25%). These are nearly all tied to construction projects to be undertaken by Chinese enterprises. In 2002, for example, the Sino-Hydro Corporation started work on the estimated $224 million Tekeze Hydroelectric Project with a 185-metres dam on the Tekeze River in northern Ethiopia due for completion in 2007. After delays due in part to problems with massive landslides, the project was completed for a final cost of $365 million in July 2009 and should deliver 300 megawatts of power (Dreher et al., 2017). In July 2009, Ethiopia signed further agreements with China for the Sino Hydro Corporation to build hydro-electric the Gibe IV (on Omo River in southwestern

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Ethiopia) and Halele Warabesa dams. China and Ethiopia signed a 1.9 billion EUR deal for the construction of the Gibe IV and Halele Werabesa dams, which are expected to produce 2150 MW. China Exim Bank loaned a concessionary loan to finance 85% of the project, and the Ethiopian government will finance the remaining 15%. Including this agreement between Sino Hydro Corporation Limited and the Ethiopian Electric Power Authority, there were, at the time of writing, seven hydropower dams under construction in Ethiopia with an aggregate capacity of over 5000 MW. The Halele Werabesa project was planned to commence construction in 2013 and to be operational in 2018 at the earliest. The project will cost between 650 and 700 million USD, including the budget for a 79 km transmission line to carry generated electric power, estimated at 2300 GWH/year. Reports indicate that Ethiopia plans to export excess electric power to Sudan, Djibouti and Kenya. Three Chinese banks have provided a $3 billion loan to Addis Ababa-Djibouti Railway. These banks are Exim Bank of China, China Development Bank and Industrial and Commercial Bank of China. The Addis Ababa-Djibouti Railway (inaugurated in January 2018) is a new standard gauge international railway that serves as the backbone of the Ethiopian National Railway Network. This railway is vital for Ethiopia because more than 95% of Ethiopia’s trade passes through Djibouti, accounting for 70% of the activity at the Port Djibouti. In the same way, the Addis Ababa Light Rail transportation system in Addis Ababa was constructed the loan obtained from Exim Bank of China. It is the first light rail and rapid transit in eastern and sub-Saharan Africa. This railway has a total length of 31.6 kilometres with 39 stations. The railway was contracted by the China Railway Group Limited. The final cost to build the railway was US$475 m, with construction taking three years. Shenzhen Metro Group has contributed greatly in trial operations and training the Ethiopian operators (Aklilu & Necha, 2018). While assistance to Ethiopia started long before, it has burgeoned since Dr. Abiy Ahmed became prime minister in April 2018, following the unexpected resignation of Hailemariam Desalegn. Since then, the two countries have signed agreements for numerous megaprojects. In May 2018, according to the Ethio-China Development Co-operation Office (ECDCO), China provided Ethiopia with a $225 million loan for the Mekelle City Water Supply Development Project (MCWDP). Mekelle – the capital of the Tigray region in northern Ethiopia – is a rapidly growing and fast-­paced city, and the project is aimed at providing its residents with an adequate and sustained supply of clean water. China has cancelled a loan for financing the Kebena Square-Arat Kilo Road Project in Addis Ababa, co-financed with the Addis Ababa City Administration (AACA). It has also agreed to restructure a loan for the US$4 billion railway linking Addis Ababa with Djibouti, the US$2.5 billion Addis Ababa-­Sebeta-­ Mieso-Dewale road project, and the US$290 million Omo No 2 & No 3 Sugar Projects. The rescheduling of the loan for the railway project alone has saved Ethiopia more than $430 million in marginal interest and the grace period obtained (Messay, 2017). According to ECDCO, the Chinese government attaches great importance to the Beautifying Sheger Project, and has provided it with significant financial assistance. The project, an initiative of the Ethiopian premier, Dr. Ahmed, involves developing green belts along the rivers running through Addis Ababa, from Entoto Hill in the north to the Akaki waste water treatment plant in the south east. The project includes

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residential parks, bicycle paths, walkways, recreational spaces, an artificial lake, a wedding venue, trees and urban farms. The first phase, comprising 12 kilometres of the 56-kilometre project, was launched in October 2019. China is also funding numerous other projects in Ethiopia via commercial, concessional and interest-free loans as well as grant funding. These include the Addis Ababa Electrical Service Rehabilitation Project; the $98 million Bole-Lemi and Kilinto Industry Zone power transmission project (under construction by a Chinese company TBEA Contractors); the $45 million Meles Zenawi Leadership Academy (under construction by China Wuyi), the Kaliti roundabout-Tulu Dimtu and Kaliti-Bulbula-Kilinto road projects (co-financed by the Ethiopian government and the EXIM Bank of China); the Dire Dawa-Dawale road project; several other sugar projects (Kesem, Wolqait and OmoKuraz no 5); and terminals at Bole International Airport (Messay, 2017). African Union Conference Center and Office Complex is an excellent indication of the collaboration between Africa/Ethiopia and China. The AU Conference Center and Office Complex (AUCC) is a building in Addis Ababa. It is the headquarters of the African Union and plays host to the biannual AU summits. It also serves as a Conference Center for African and diaspora businesses. The main building is about 100 metres tall and it is the tallest building in Addis Ababa. Its cost was US$200 million funded by the Chinese government. The main building was designed and built by a collaboration of Tongii University, China State Construction Engineering and the China Architecture and Design Research Group, with the US$200 million budget donated by the Chinese government. The design of the site resembles two hands in embrace, symbolising Africa-­ China and includes both traditional African art and modern Pan-African symbology, with the height of about 100-metre main tower. However, the majority of materials used in the construction were Chinese, and the art on the walls was produced in China. Construction took three years with a workforce of 1200, roughly half of whom were Ethiopian and half of whom were Chinese. The building was inaugurated on 28 January 2012.

5 China’s Model and Ethiopia The China Model (also known as the Beijing Consensus or Chinese Economic Model) refers to the political and economic policies of the People’s Republic of China that began to be instituted by Deng Xiaoping, leader of China from 1978 until his retirement in 1992. It is the state-led economic development model in which the policies are thought to have contributed to China’s ‘economic miracle’ and fast growth in gross national product over two decades. The phrase ‘Beijing Consensus’ was coined to frame China’s economic development model as an alternative-­ especially for developing countries-to the Washington Consensus of market-friendly policies promoted by the IMF, World Bank and the US Treasury. In 2016, The Beijing Consensus shows not that ‘every nation will follow China’s development model, but that it legitimizes the notion of particularity as opposed to the universality of a Washington model’. Some argue that it as a pragmatic policy that uses

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innovation and experimentation to achieve equitable, peaceful high-quality growth, and defense of national borders and interests; whereas other scholars have used it to refer to stable, if repressive, politics and high-speed economic growth. Ethiopia can learn something great from the China’s state-led economic model and integrate it to its home-grown national development strategy. Ethiopia is experiencing a good track of economic performance with the growth rate of around over 10% per year on average over the past decade just earlier the COVID-19 pandemic. The main drivers of the economic growth are agricultural production and service sectors, supported by foreign development aid. Currently, Ethiopia is under the leadership of premier Abiy Ahmed, who came to power in April 2018 amid the wide-ranging public turmoil against the previous Government. The current government has launched a Homegrown Economic Reform (HEP), which aims at transforming Ethiopia from a largely agrarian low-income country to an industrialised lower-middle-income country by 2030. Ethiopia’s State-Owned Enterprise (SOE) giants such as Ethiotelecom and Ethiopian Airlines are planned to be the crown jewels among proposed privatisation offerings under the reform. As noted by Li et al. (2015), China’s developmental model may not an alternative to Ethiopia’s development pathway. However, it can be a learning platform for Ethiopia to adopt to its Homegrown Economic Reform Agenda, a blueprint to propel the country’s economic progress. The Ethiopia’s Homegrown Economic Reform is already drafted through a process of taking stock of the successes; an in-depth review of key bottlenecks and design of remedies, outlines macro-economic, structural and sectoral reforms that will pave the path for jobs and inclusive growth in the country. Over the past three decades, China has evolved a system that can best be described as ‘political meritocracy’ (Li et al. 2015), referring to a merit-based administrative structure unlike the case in most African countries (including Ethiopia) where, in most cases, the administrative structure is occupied based on political loyalty. This is where Ethiopia must be cautious and modify to its situation, may be merit plus loyalty seems perfect. Unlike the politically diffuse civilisations of the Western World and the Indian subcontinent, China has managed to establish political unity over most of its territory which seems compatible with Ethiopia’s premier ‘medemer’ (synergy) philosophy that requires and integration of resources, knowledge/ expertise and values across the country. This differs from traditional socialism mainly in its use of a market system in the economy. It also differs in its commitment to democracy ‘with national specific characteristics’ and to a new model of party leadership. According to Li et al. (2015), China’s reform performs much better than the reform efforts in many other countries that have tried to emulate the Western ways. It has found its own political path and won praise from the entire world. Ethiopia is recommended to understand that the increasingly prosperous China does not represent an alternative development model that has gained some traction in the developing world, and the fears that the China development model will dominate the world are premature. Based on the analysis of Li et al. (2015), there are at least four corners of the China development model that Ethiopia can explore, learn therein and consider for its homegrown economic development model. These are:

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1. State-led development approach: China’s economy is mainly based on a state-­ led-­development approach that has done remarkably well over the last three decades, consistently ranking among the fastest-growing in the world. It has attracted significant amount of foreign direct investment and has become the largest trading country in the world. Such remarkable successes were attributable to the model of the developmental state that Ethiopia is recommend to consider to extract something good therein. It also recommended for Ethiopia to look into the fact that the Chinese reform since 1978 ranks as one of the most extraordinary episodes of social and economic transformation in history: industrialisation, marketisation, urbanisation and globalisation all occurring at the same time. 2. Development as the top priority: China needed stability and economic development before they could afford the luxuries of liberal democracy and personal liberty in a Western mould. 3. Focus on good governance: Good governance has recently become a catchword among Chinese policymakers and the academia. It is increasingly reflected in reform practices at all levels of government in response to emerging social, political, economic and environmental issues, as well as to challenges posed by China’s market-oriented reforms and rapid modernisation. 4. Gradual and pragmatic reform: The reform in China is marked by incremental and piecemeal changes. Compared with that of the Soviet Union, China’s reforms have been executed more cautiously and more slowly. Over the past three decades China has been undertaking incremental changes, drifting away from the orthodox Marxist ideology.

6 Conclusion: Difficulties and the Way Out To achieve a well-built and sustainable Ethiopia-China economic relationship, the governments of both countries are advised to work towards sincere mutual benefits, as per the FOCAC principles, unlike the case that Ethiopia has been experiencing from most western countries. The relationship is required to be based on the old principle ‘teaching to fish to feed for a lifetime’ not on the basis of ‘giving fish to feed on for a day’. Although investments should create opportunities from which all parties would gain, Ethiopia, as a least developed country, has to be provided with sufficient opportunity to learn from circumstances that led to China’s economic growth and adapt it to its socioeconomic and environmental situations. This, no doubt, enables Ethiopia to bring about sustainable, equitable and eco-friendly development within a few years to come. This scenario hugely benefits both sides as Ethiopia’s economic growth improves the livelihood of the people that, in turn, widens China’s market in Ethiopia for its manufactured goods. It also builds the purchasing power of Ethiopians to utilise the goods and services supplied by China. In fact, the Ethiopia-China economic ties should be accompanied by the advancement of the Ethiopian youth in targeted vocational and technological skills to widen employment opportunity for the youth in Chinese companies in Ethiopia, a condition that helps the companies to make use of the cheap labour. Therefore, for

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efficient Ethiopia-China economic relationships, which unfold utmost mutual benefits, various issues should be given attention during strategy formulation. These, include, but are not limited to, adequately thought-out joint projects, exchange of researchers, local employment and market opportunities, local skills development, technology transfer, inclusion of local community and the environmental milieu. As a way forward, Ethiopia should not try to copy and paste the China’s development approach, but still Ethiopia can use the Chinese development model as a learning forum to be adopted/adapted to its own homemade growth strategy. This is because, as noted by Li et al. (2015), whether China’s experience provides useful lessons for Ethiopia’s economy is a debated issue. Several economists argue that China’s experience has no general implications (in the sense that one-size-fits-all) for all developing economies because China’s initial conditions are unique. This means it would not be easy for other countries to match all what China has done. The Chinese model requires large fiscal resources, technological sophistication, a well-trained and loyal security apparatus, and sufficient political discipline within the regime not to take power struggles public. Nonetheless, as the prestige of the Chinese model grows, even without Chinese efforts to propagate it, other authoritarian governments are encouraged by the idea that authoritarianism is compatible with modernisation, and they try to adapt, to varying degrees, Chinese methods of control. The advanced modernisation can be combined with authoritarian rule, the Chinese regime has given new hope to authoritarian rulers elsewhere in the world. Although it is in the best interest of China if the China model could work in other contexts, the current leadership in Beijing downplays the Chinese style of reform as a model for other parts of the developing world. The Ethiopian case also demonstrates the importance of contextual factors. In the midst of the COVID-19 pandemic, the Ethiopian nation underwent a brutal civil war that began in November of 2020 and took place primarily between the federal government and the regional Tigrayan government. The outbreak of the Tigray War in 2020 puts forth a number of policy and theoretical problems on the question of peace and economic growth and development. Specifically, does it throw out our understanding of causation in the attainment of these? In other words, given the growth registered by Ethiopia over the preceding two decades, does the outbreak of the conflict in such a country mean that scholars have to do away with the notion that growth is the predictor of peace? Or did contextual factors such as the onset of COVID-19 disrupt the process? Or did it perhaps indicate a lack of shared development experience by all the regions in the country? These and other questions require in-depth examination in future research. What is evident, at this point, is that the country will require large-scale investment in infrastructure as part of its recovery path. A study conducted by the Ethiopian federal government and the World Bank established that damage to six regions will come up to at least US$3.6-billion, with damages most felt in education and health infrastructure (Accord, 2023). At least 2681 schools were completely and 4158 others were partially damaged. In total, 4.2 million learners and close to 200,000 teachers and education staff were affected by the war (Accord, 2023). This will not fare well for the country’s growth path. Barring some extensive recovery, we hypothesise that the country’s ability to transfer technical knowhow, from China and other partners, will be particularly undermined.

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References Aaron, Tesfaye. (2020). China in Ethiopia: The Long Term Perspective. New York: State University of New York Press. Accord. (2023). Civil War between the Ethiopian Government and the Tigray people’s liberation front: A challenge to implement the responsibility to protect doctrine, AJCR 2023/1. https:// www.accord.org.za/ajcr-issues/civil-war-between-the-ethiopian-government-and-the-tigraypeoplesliberation-front-a-challenge-to-implement-the-responsibility-to-protect-doctrine/ Adem, S. (2012). China in Ethiopia: Diplomacy and economics of Sino-optimism. African Studies Review, 55(1), 143–160. Aklilu, A., & Necha, T. (2018). Analysis of the spatial accessibility of Addis Ababa’s light rail transit: The case of East–West Corridor. Urban Rail Transit, 4(1), 35–48. https://doi.org/10.1007/ s40864-018-0076-6 Azam and Abubakar. (2015). The impact of infrastructure on trade and economic growth in selected economies in Asia (ADBI Working Paper Series, No 553). Bahru, Z. (2002). A history of modern Ethiopia, 19855–1991 (2nd ed.). Ohio University Press. Bräutigam, D., & Tang, X. (2012). An overview of Chinese agricultural and rural engagement in Ethiopia (IFPRI Discussion Paper 01185). Available at https://deborahbrautigam.files.wordpress.com Broich, T., & Szirmai, A. (2014). China’s economic embrace of Africa: An international comparative perspective no 2014-049. MERIT Working Papers from United Nations University – Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT). Buhr, W. (2003). What is infrastructure? (Discussion Paper No. 107-03). Department of Economics School of Economic Disciplines University of Siegen. Cabestan, J. P. (2012). China and Ethiopia: Authoritarian affinities and economic cooperation (pp. 53–62). https://doi.org/10.4000/chinaperspectives.6041 Chakrabarty, M. (2016). Ethiopia-China economic relations: A classic win-win situation. World Review of Political Economy, 7(2), 226–248. Chin, H., & He, W. (2016). The belt and road initiative: 65 countries and beyond. Global Sourcing Fung Business Intelligence Center. Corkin, L., et al. (2008). China’s role in the development of Africa’s infrastructure. Working Papers can be downloaded in Adobe Acrobat format from http://www.sais-jhu.edu/academics/ regional-studies/africa Csanádi, M. (2017, January). Chinese power structure and its transformation in comparative perspective. Financial and Economic Review, 16(Special Issue), 7–20. Damtew, R. Y., & Tsegay, S. M. (2017). Developing south-south cooperation: The case of EthioChina economic relationship. International Journal of Research Studies in Management, 6(1), 75–89. Dent, C.  M. (2011). Africa and China: A new kind of development partnership. In C.  M. Dent (Ed.), Africa and China relations. Ruotledge Contemporary China Series. Dreher, A., et al. (2017). Aid, China, and growth: Evidence from a new global development finance dataset. Aid Data Working Paper #46. AidData at William & Mary. EIC. (2016). Ethiopian investment report. Ethiopian investment commission. Addis Ababa: EIC. Elmslie, Bruce and William Milberg. 1996. Free trade and social dumping: Lessons from the regulation of U.S. interstate commerce. Challenge, 39(3), 46–52. Gebregeorgis, A. (2016). Ethio-China economic relations: Nature of China’s foreign direct Investment in Ethiopia. http://etd.aau.edu.et/handle/123456789/4411. AAU Institutional Repository. Geda, A., & Meskel, A.  G. (2009). Impact China-Africa investment relations: Case study of Ethiopia, African economic research consortium collaborative research on the impact of chain on Africa, Final Draft. Geoff, W. (2014). Ming China and Southeast Asia in the 15th century: A reappraisal (Asia Research Institute Working Paper Series No. 28). National University of Singapore. Gedion Gamora. (2009). Ethiopia and China Political and Economic Relations: Challenges and prospects after 1991. afrology.com, https://pdfs.semanticscholar.org

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Klose, S., Pepermans, A., & Wang, L. (2017, November). An uphill struggle? Towards coordinated EU Engagerneru with Chira’s Belt and Road Initiative, No. 48. Losoncz, M. (2017). The dilemmas of China’s shift in growth trajectory and economic governance. Financial and Economic Review, 16(Special Issue), 21–49. Li, S., Xiao, L, & Liu, Y. (2015). The Price evolution in China’s automobile market. Journal of Economics and Management Strategy, Wiley Online. https://doi.org/10.1111/jems.12116 Marafa, L. M. (2009). Africa’s business and development relationship with China: Seeking moral and capital values of the last economic frontier. Nordiska Afrikainstitutet. Messay Mulugeta (2017). The Economic Development Component of the Ethiopia-China Relationships. Ethiopian Journal of Development Research, Volume 39 , No 2, African Journals Online (https://www.ajol.info/index.php/ejdr/article/view/185311) Morrison, W. M. (2017, September 15). China’s economic rise: History, trends, challenges, and implications for the United States, congressional research service. Mileva, E. (2008). The impact of capital flows on domestic investment in transition economies (ECB working paper No. 871). http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1090546 Mulugeta, M. (2017). The economic development component of the Ethiopia-China relationships. Ethiopian Journal of Development Research, 39(2) African Journals Online (https://www.ajol. info/index.php/ejdr/article/view/185311) Muna, A. (2015). Ethiopia-China ties, 45 years and growing ever strong. http://aigaforum.com NPC. (2016). Federal Democratic Republic of Ethiopia growth and transformation plan II (GTP II) (2015/16–2019/20) Volume I, Main Text. National Planning Commission, Addis Ababa. OECD. (2012). China in focus: Lessons and challenges. OECD. http://www.oecd.org/china, htttp://www.oecdchina.org Rippel, G. (2017). China-rebalancing and sustainable convergence. Financial and Economic Review, 16(Special Issue), 50–72. Taylor, J., et al. (2006). Novel food and non-food uses for sorghum and millets. Cereal Science, 44, 252–271. https://doi.org/10.1016/j.jcs.2006.06.009 Tiantian, 8. (2017). African interests expand beyond business. Global Times, 9(2446) www.globatimes.cn Torrisi, A. (2014, June 13). China’s Ministry of Industry and Information Technology calls for regulations on rare earths recycling. Industrial Minerals Magazine. UN. (2018). World economic situation prospects. United Nations. UNCTAD. (2014, October). The role of international trade in the Post-2015 development agenda, trade and development board, and trade and development. Ethiopian Journal of Development Research, 39(2), 31 Commission 6th Session. United Nations Conference on Trade and Development. Geneva, 5–9 May 2014. Venkataraman, M., & Solomon, M. G. (2015). The dynamics of China-Ethiopia trade relations: Economic capacity, balance of trade & trade regimes. Journal of the Global South, 2, 8. Walsh, B. (2009). GCSE modern world history, Mao’s China, c.1930–1976. Hodder Education Publisher. Yu, G., & Yuan, D. (2014). Financial development is a booster or a stumbling stone to China’s outward foreign direct investment: An empirical study based on quantitative and quality dimensions. International Trade Issues.

Chinese Investment in West African Infrastructural Development: Selected Case Studies Oluwaseyi Ebenezer Olalere

1 Introduction In the last two decades, China has been increasingly dominant globally. One of the major changes affecting the increasing economic and political influence of China is its ‘Going Out’ policy initiated in 1999, which has resulted in negotiations and the signing of multilateral and bilateral trade agreements worldwide. There is a long history of relations between the People’s Republic of China and the African continent, beginning in 1956 when China established diplomatic relations with Egypt. It was soon followed by cooperation agreements with various African Heads of State, to quote just a few, Ben Bella of Algeria, Kwame Nkrumah of Ghana, and Sekou Touré’ of Guinea. China became the biggest trading partner for Africa in 2009. The relationship that encompasses the political, economic, scientific, and cultural dimensions is of critical importance for the African continent’s development and has significant geostrategic consequences. China’s investment portfolio in Africa is led by large infrastructure projects (such as hydroelectric dams) in areas of strategic value for China. Most investments have been made in the energy and transportation sectors, specifically in hydropower and oil development (Tiboris, 2019). Focus has remained consistent in these sectors, which constituted 58% of all of China’s investments from 2005 to 2018 and 60% of investments over the past two years (Tiboris, 2019). The Belt and Road Initiatives (BRI) launched in 2003 bolster the presence of China in Africa through infrastructure construction and development. Up to date, China’s Belt and Road and Silk Road initiatives are creating fresh waves of road, rail, port, and energy investment in Africa, making the continent more connected internally and with the outside world. The BRI is a transcontinental development O. E. Olalere (*) Centre for Africa-China Studies, University of Johannesburg, Johannesburg, South Africa © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Ndzendze, D. Monyae (eds.), Perspectives on Africa-China Infrastructural and Industrial Cooperation, Africa-East Asia International Relations, https://doi.org/10.1007/978-3-031-38395-3_4

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project that seeks to improve connectivity between Asia, Europe, and Africa, and ultimately increase trade and connectivity, development, and prosperity along economic corridors. Over the years, more than 37 African countries have signed BRI-­ related memoranda of understanding (MOUs) with trade volume rising to about US$5 trillion between China and BRI countries. Funding and institutional modalities and programme agreements and project implementation have followed apace, to make the BRI the largest international development financing initiative in history, with widely recognised geo-economic and geopolitical impact.1 China’s investment in Africa primarily takes the form of loans that tend to focus narrowly on the construction of individual infrastructure projects rather than broad-­ based development support. Chinese state-owned banks sometimes pay directly to their state-owned construction companies to complete the projects. This practice streamlines the lending and construction process but also limits the benefits to the wider economy and means that projects are much less transparent to the global community. According to some estimates, Chinese state-owned enterprises receive more than 95% of China’s total foreign direct investment. While there is no question that China is investing heavily and increasingly in Africa, the volume of announced loans appears to be significantly larger than the number of projects that the country is financing and completing. While China has many different hands in various businesses across Africa, China’s current engagement in Africa is primarily focused on sectors such as infrastructure development, reconstruction of the public service, and extraction of natural resources. It is important to understand what is happening in Africa, not only for African economic, political, and social development but also for the rest of the underdeveloped world, as successes and mistakes can teach us important lessons for the future in these cases. Besides, it is important to recognise that many African countries are already suffering from slow infrastructural development and specifically related to this paper, both outdated and non-functional infrastructure. The involvement of China in West Africa’s hydropower, road, rail, and port projects, which will connect several countries in the region, is an example of its commitment to regional growth and integration in Africa. Over the years, through trade, aid and investment, China has been particularly linked to different countries in West Africa, while West African countries has also been pursuing trading opportunities in China. The relationship between China and some West African countries such as Nigeria, Ghana, Ivory Coast, Senegal, and Togo also have its basis on the premise of exploring their economic comparative benefits for mutual benefit. More specifically, Trade between China and Nigeria has increased since China’s economy needs more Nigerian raw material resources including crude oil to propel its industries (Powanga & Giner-Reichl, 2019). China also takes advantage of the vast population of Nigeria, estimated at around 200 million people (World Bank, 2019) to generate extra-territorial markets for

 For a comprehensive review of the Belt and Road Initiative and its larger economic and geopolitical dimensions, see the 2018 OECD Business and Finance Outlook (OECD, 2018). 1

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manufactured goods in China. Because of its enormous population, the most populous country in Africa, rich in natural resources, Chinese investment in Nigeria became a trending issue in the 21st century, with more than 200 Chinese companies currently operating in Nigeria, making the country the largest recipient of Chinese Foreign Direct Investment (FDI) – about $15 billion of its $26.5 billion investment in Africa. Furthermore, China is assisting Ghana in its energy problems, rail and road networks, and other infrastructural projects. The dam, completed at the end of 2013, was expected to generate 400 megawatts, a fifth of Ghana’s hydro capacity. In 2009, the Chinese government provided the Electricity Corporation of Ghana with US$170 million in supplier’s credit for the extension of electricity to 300,000 households. China has assisted Ghana in the rehabilitation of the international road that leads from the capital city of Accra through Kumasi to Burkina Faso. Additionally, West African countries have benefitted from China’s regional investment, making an important contribution to improving African infrastructure through construction of roads and bridges, railways, high-voltage power transmission lines and power stations. Hence, this paper explores the involvement of China in West Africa and its implications for regional integration through the financing and construction of regional infrastructure development projects.

2 Reviewing China’s Infrastructure Cooperation in Africa Africa’s economy has experienced growth since the late 1990s, because of higher domestic demand, improved macroeconomic management, and ultimately, higher commodity prices. Some of the struggles that emerge are how to take advantage of this commodity boom by diverting capital, labour, and entrepreneurship away from subsistence agriculture and informal employment into infrastructural productivity. The bilateral relations between African countries and China are perceived to have brought the core objective thrust to the forefront. China is currently involved in an infrastructure project in about 35 African countries, whilst the concentration of projects is to be found in Angola, Nigeria, and Sudan. However, plans have been in place for a new range of projects in other countries by China, especially in the DRC. The activities of the country have been divided equitably among two major sectors: power generation (especially hydropower), and transport (particularly railroads), followed by ICT sector (specifically equipment supply), however, the water projects attracted the least amount of activity2 (Cissé, 2015; Gu & Carey, 2019). Part of the regional agendas of African governments lies in building regional infrastructure across the continent. China has been at the forefront of supporting Africa’s infrastructural projects and joins African countries in raising global awareness as to the challenges that come with it. About USD380 billion have been

 China in Africa – AGE (African Growing Enterprises) – Institute of Developing Economies.

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invested in Africa across rail, road, electricity projects and concrete production during the period 2005 to 20183 (CARI, 2021). Financing infrastructure is a crucial activity that fosters China’s economy and continues to drive its modernisation. The involvement of China in Africa in recent years is key to economic cooperation, which strongly focuses on trade and investment. Infrastructure gap in Africa is a bottleneck for the continent’s development and integration. The lack of relevant infrastructure in the continent aligns with the interest of China in investing in infrastructure projects such as (roads and railways, ICT infrastructure, ports, hydropower dams) in African countries. The policymakers in African countries have always welcomed the investment in infrastructural development projects to foster development and bridge the infrastructural gap. Furthermore, the presence of China in West African countries has particularly focus on hydropower dams, roads, and railways. This includes the Bui dam which has a generating capacity of 400 MW, estimated to be US$621 million. The financiers are the China’s Export-Import Bank (Exim Bank) and the Ghana government. The Mambila power project in Nigeria which cost about US$5 billion and a generating capacity of 6000 MW. The Ivory Coast is investing heavily in major infrastructure projects by securing a $500 million low-interest loan from the China’s Exim Bank. This is to finance construction of a 275-megawatt hydropower station near the western town of Soubre and pushing to increase energy production by 150 MW per year. China also recognises that the lack of infrastructure in Africa is a major obstacle to the continent’s development. It has therefore prioritised infrastructure in its African agenda and has vocalised and implemented infrastructure development as a priority through platforms such as FOCAC. Other major Chinese funded, and constructed projects include the 186  km Abuja–Kaduna Railway that was completed at a cost of $850 million in Nigeria, and which forms part of the larger 1224 km Lagos–Kano railway construction and modernisation project; the $12 billion Nigerian Lagos–Calabar Coastal Railway; and the construction of the $200 million Mammah Airport in Sierra Leone (Plessis, 2016). From the African perspective, China offers investment, services, and consumer goods more complementary to regional value chains than the more expensive and cutting-edge technological products and services offered by traditional Western partners. To understand the implications of China’s economic presence for West Africa’s development and economic growth outlook, it is useful to outline the nature of its involvement in West Africa’s infrastructure space. Relevant projects undertaken by China in few West African countries are outlined in Table 1.

 Addressing China’s Rising Influence in Africa by Michael Tiboris, Fellow, Chicago Council on Global Affairs. May 2019. 3

2019 2019 2019 2013 2015 2013 2015 2017 2018 2019 2013 2015 2013 2013 2017 2017 2019 2013 2016

Signed

Implemented

Year

Status

Ghana Nigeria Nigeria Senegal Benin Benin Cote d’Ivoire Cote d’Ivoire Cote d’Ivoire Cote d’Ivoire Niger Niger Nigeria Nigeria Nigeria Nigeria Nigeria Senegal Senegal

Country

Sinohydro Ltd. Exim Bank Exim Bank CN Gov Exim Bank Exim Bank Exim Bank Exim Bank Exim Bank Exim Bank Exim Bank CIDCA Exim Bank Exim Bank Exim Bank Exim Bank CDB Exim Bank Exim Bank

Financier 550 209 184 17 229 132 820 66 283 290 76 15 984 500 1267 461 157 146 71

(continued)

Construction/Rehabilitation of Selected Roads and Interchanges in Ghana-­Phase 1 Four Airport Terminals Expansion Incremental Project Four Airport Terminals Expansion Ancillary Project Boucle de Dakar Electricity Network Supplementary Phase Adjarala Hydropower Project 147 MW (Benin Loan) Akassato-Bohicon Road Lot 3; 72.1 km National Power Grid Upgrade Project Agboville-Rubino-Ceshi Road Asphalting; 51 km Tiébissou-Bouaké Highway; 96 km Gribo Popoli Hydropower Project 112 MW 259 km SORAZ-Zinder et Maradi-Malbaza Transmission Line; 132 kV Third Bridge over Niger River (The General Seyni Kountché Bridge) Zungeru Hydroelectric Project 700 MW Four Airports Terminal Expansion Projects Lagos-Ibadan Railway Modernisation Project II Abuja-Keffi-Makurdi Road Rehabilitation and Upgrade; 227 km Lekki Deep Water Port Gouina Hydropower 140 MW Project; Senegal Portion Building Foundiougne Brigde

USD million Purpose

Table 1  Signed, implemented, and completed China-funded roads, railways and hydropower projects in West Africa (2000–2019)

Chinese Investment in West African Infrastructural Development: Selected Case Studies 63

Ghana

Ghana Ghana Ghana Ghana Ghana Mali Nigeria

Nigeria

Nigeria Nigeria Senegal Senegal Senegal Senegal

Sierra Leone

2000

2007 2007 2012 2012 2003 2010 2002

2002

2012 2010 2007 2010 2015 2015

2004

China National Electric Engineering Co.; Ltd. (CNEEC)

CIDCA CIDCA Exim Bank Exim Bank Exim Bank China International Water & Electric Corporation (CWE) China International Water & Electric Corporation (CWE) Exim Bank Exim Bank Exim Bank Exim Bank CIDCA Exim Bank Shandong Electric Power Construction Corporation III (SEPCO III) China Machinery Engineering Corporation (CMEC) Exim Bank Exim Bank Exim Bank Exim Bank Exim Bank Exim Bank

Financier

3

500 500 51 78 689 331

115

306 292 75 76 22 157 115

20

63 23 115 500 70 6

Abuja Light Rail Project; 78 km Railway Modernisation Project 1 (Idu-Kaduna); 187 km 28 km Dakar Loop Power Transmission Projects; 4 × 90 kV (360 kV); Phase I 28 km Dakar Loop Power Transmission Projects; 4 × 90 kV (360 kV); Phase II Thies-Touba Toll Highway; 113 km Road connecting Blaise-Diagne International Airport (AIBD) to Mbour and Thiès Roads; 55 km Goma Hydropower Project Repairs in Dodo chiefdom Kenema District; Guala Village- 4 × 1.5 MW

Ondo State; Omotosho Gas Power Plant Project 335 MW

Akassato-Bohicon Road Lot 2; 72.1 km Akassato-Bohicon Road Lot 1; 72.1 km Abidjan-Grand Bassam Highway; 42 km Soubre Hydropower Project 275 MW Odienné-Gbéléban Road Asphalting; 71 km Volta Lake Resettlement Township Electrification Project under the Upper West Electrification project (USD seller’s credit) Volta Lake Resettlement Township Electrification Project under the Upper West Electrification project (RMB seller’s credit) Bui Hydropower Project 400 MW (CL part; Total 749.6 mn) Bui Hydropower Project 400 MW (CommL part; Total 749.6 mn) Bui Hydropower Project 400 MW Additional Finance Loan 1 (Total 749.6 mn) Bui Hydropower Project 400 MW Additional Finance Loan 2 (Total 749.6 mn) Accra-Kumasi Road; Ofankor-Nsawam Section Rehabilitation and Expansion; 17.4 km Bamako-Segou Road Renovation Phase 1 Ogun State; Papalanto Gas Power Project 335 MW

USD million Purpose

Source: Johns Hopkins University, SAIS China-Africa Research Institute, China-Africa Loan Database, updated January 2021

Benin Benin Cote d’Ivoire Cote d’Ivoire Cote d’Ivoire Ghana

2013 2013 2012 2013 2017 2000

Completed

Country

Year

Status

Table 1 (continued) 64 O. E. Olalere

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3 China’s Role in Nigeria’s Infrastructural Development: Opportunities and Challenges In Africa, Nigeria remains one of China’s most important strategic partners and allies and the most important in West Africa. What draws China to Nigeria hinges on several issues: the location of the country in the strategic Gulf of Guinea region and its potentially massive domestic consumer market of about 130 million people. It is a continental and regional influence in institutions such as the African Union (AU), ECOWAS and ECOMOG and most importantly, its massive oil reserves. Reports indicated that foreign direct investment from China into Nigeria was $85.8 million in 2013 and increased to $116.87 million in 2014. China’s investment in Nigeria has climbed to $15 billion, grew by 27% in 2016, and increased to 33% in 2017, having already financed over $22 billion worth of projects in Nigeria (Oyeranti et al., 2011). Significant investment in economic growth areas such as power-sector development, rail transportation, solid minerals, housing infrastructure and agriculture in $3 billion cumulative was received from China as reported by the Nigerian Investment Promotion Commission (NIPC) (Toogood, 2016). For instance, a contract for $12 billion Nigeria railway project was signed with China in November 2014. Similarly, a memorandum of understanding (MOU) was signed between China and Nigeria for investment in railways, Agric-industrialisation, refineries, the Mambilla hydro-­ electric project, and a general increase in trade on September 13, 2016. And most recently, the $23 billion deal for three refineries in Kogi, Lagos, and Bayelsa states was signed between Nigeria and China on September 15, 2016. Globally, the Nigeria economy is currently among the seventh largest, endowed with resources, vibrant and growing diverse population allows reaping a ‘demographic dividend’ (through harnessing her human resource) and offers a huge market for investors. Sadly, the country rich in oil were recently labelled to be among the poorest globally; this could be akin to the overdependence on oil, whilst the development of other sectors has been poor as well as under-utilisation of her manpower. Due to this, the Nigerian government has incited to opt for more options to diversify and industrialise the economy as well as to channel a significant number of talents who would be able to bear the responsibility in the new era and creating more employment opportunities. Over the years, more than 55% of the Chinese contract value is accounted for by Angola, Sudan, and Nigeria. This suggests that Chinese contractors have a significant presence and experience in several countries that have not yet featured prominently in Chinese financing deals. Looking sectorally at China’s footprint in Nigeria’s infrastructure development path, the following picture emerges:

3.1 Hydropower Dam The power sector has been attracting the biggest amount of Chinese financing amidst other sectors at present with more than US$5.3 billion in cumulative commitments. As of the end of 2007, ten major dams are being financed by the Chinese

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in about nine different African countries. These projects are estimated at a total cost of more than US$5 billion, most of which the Chinese were financing over US$3.3 billion (Foster et al., 2008; IEA, 2016). The power plants have a combined generating capacity of more than 6000  MW of electricity, a substantial fraction of the 17,000 MW of hydropower generating capacity that exists today in Africa (Foster et al., 2008; IEA, 2016). In West Africa, most Chinese-built capacity is in gas-fired power plants, especially in Nigeria which has enormous natural gas resources. In Nigeria alone, Chinese companies have completed three projects totalling 1.5 GW, with some advanced technologies provided by Western original equipment manufacturers (OEMs) such as General Electric (GE) (IEA, 2016). The birth of Mambilla power plant was first conceived in 1972, but it, however, took another 35 years for work to begin on Nigeria’s gigantic plant. The largest power generator is anticipated to be completed by 2030, and to generate about 3050 MW of energy, there will be four dams on the Dongo River comprising of two underground powerhouses with 12 turbine generators. The ground survey for the project was completed in 2010, and the environmental approval was received in 2011, the construction of US$6 billion projects began in 2017 in which 85% funds are from the Chinese Export-Import Bank, and the Federal Government of Nigeria fund the remaining 15%. Upon completion, the expected that the mega dam constructed on Dongo River will help generate 700 km of transmission lines across Nigeria, and nearly double the country’s total electric power production (Tiboris, 2019; Toogood, 2016). Aside from Nigeria being the continent’s biggest economy, and with the largest population, arguably continuing electricity shortages are the main thing holding this giant back. Sadly, the country could only be able to generate around 4000  MW, although in theory it can generate 12,000  MW of energy from hydro and thermal sources alone (Tiboris, 2019). According to projections, Mambilla will boast this shortage by roughly 80%. The Nigerian government began the construction of three gas-fired power stations, with the help of credit line from the Export-Import Bank of China: the development of Papalanto (335  MW) in Ogun state, by Chinese group Sepco, the construction of Omotosho (335  MW) in Ondo, by China National Machinery & Equipment Import & Export Corp. (CMEC), and Geregu (138 MW) in Kogi state developed by Siemens. Occasionally, the Chinese companies CMEC and China Machine-Building International Corporation (CMIC) have also been committed to major projects in Tanzania and Luanda (Angola) respectively, for electricity transmission. The central focus of China presently is on the construction of large hydropower projects. The continent has barely leveraged on about 5% of its identified hydro potential given the current power supply crisis in Africa, these massive schemes are critical for Africa’s economic development. In that sense, the emergence of China as a major financier of hydro schemes is a trend of great strategic importance for the African power sector.

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3.2 Railway The entrance of China into Africa in the 1970s started in large part because of the construction of the Tanzania-Zambia railway, representing the huge role China plays in the economic development of Africa. More recently, the African rail sector has seen a major comeback with the help of China through the financing commitments of about US$4 billion for this sector. Part of the comeback includes rehabilitating of more than 1350  km of existing railway and the construction of over 1600 km of a new railroad. To put this in perspective, the entire African railroad network amounts to around 50,000 km. Nigeria, and Mauritania have recorded the largest deals; the construction of Abuja Rail Mass Transit which is committed to financing by the Chinese in Nigeria and to rehabilitate the 1315 km of the Lagos-Kano line. The Lagos-Kano railroad project has a total cost estimated to be US$8.3 billion, and through a line of credit, the Chinese were to cover US$2.5 billion part of which would also be assigned for supporting power projects. The contract was first awarded by the former Nigerian President Olusegun Obasanjo in 2006 to the Chinese company and promised the firm an oil block in return as an incentive. The initial offer of a US$2 billion loan deal was facilitated by China.

3.3 Roads The expansion of the 5.4  km Abuja-Keffi expressway and dualisation of Keffi-­ Akwanga-­Lafia-Makurdi Road is a key project of the larger continental trans-Sahara highway in which the China Harbour Engineering Company is the major contractor. The trans-Sahara highway project is a continental scale infrastructure that passes through six African countries, namely Algeria, Chad, Mali, Nigeria, Niger, and Tunisia and has the objective to make an enormous contribution to the development of commercial exchanges through roads connectivity and promote regional integration. The work on the project commenced on 1 April 2020, and is expected to be completed in 2022 for a duration of 36 months.4 China Harbour Engineering brings speed, efficiency, and corporate social responsibility in the discharge of its work while handling the Nigerian component of the trans-Saharan highway. The China’s Exim Bank funded 85% of the first road project through an innovative model in the form of preferential export buyers’ credit, under which the federal government would offer a 15% counterpart funding. The Nigeria government incorporates a plan that demonstrates crucial innovative insights that provide timely and required infrastructure projects that would accelerate economic recovery and development.  Nigeria’s Road Infrastructure Renewal and China Relations – THISDAYLIVE. https://www.thisdaylive.com/index.php/2020/01/26/nigerias-road-infrastructure-renewal-and-china-relations/. 4

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3.4 The Lekki Free Trade Zone The apparent commercial investment in Nigeria’s markets is quite astonishing. China announced in 2016 of its investment of about US$267 million to establish the first phase of the Lekki Free Trade Zone (FTZ) in Lagos.5 The Lekki FTZ was approved by the Chinese government and will be ‘the first of its kind the Chinese government has ever built abroad’. According to the first phase of the plan, by 2009, it is anticipated that the construction of various workshops for the manufacturing of sundry goods, road networks and power plants will be finished6 (Lawanson & Agunbiade, 2018). Three Chinese companies and the Lagos state government are links together due to the Sino-Nigerian joint venture. On the other hand, 60% of the shares are held by China’s CCECC  – Beyond International Investment and Development Company and the remaining 40% by Nigeria’s Lekki Global Investment Company. The first phase covers an area of 15 km2, with the Chinese investing $200 million and the Nigerians $67 million (Taylor, 2007; Lawanson & Agunbiade, 2018). Phase 1 (South-West Quadrant), made up of general mixed industries, is in full operation, while construction of the Phase 2 (South-East Quadrant) petroleum refinery commenced in 2014. With a total investment of about $5 billion, the Phases 3 (North-­ West Quadrant) aim to cover 150  km2, focusing on chemicals, pharmaceuticals, logistics, cars, heavy industry manufacturing, petroleum processing, import/export businesses, tourism, education, real estate, a deep-water port, banking, and finance, among others (Lawanson & Agunbiade, 2018). Phase 4 (North-East Quadrant) is proposed as a new town providing a range of employment, commercial, residential, community and recreational uses. In 2016, the investment of China in Nigeria grew by 27%, whilst over $22 billion worth of projects have been financed by China in Nigeria increased with a 33% increase in 2017, and the total investment of China in Nigeria has climbed to $15 billion.7 The construction of the Lekki Free Trade Zone possesses some economic significance as it will help to reduce the reliance of the country on imports and play a role of extending the Belt and Road further to the West African countries.

3.5 China-Financed Bui Hydropower Project in Ghana One of the major impediments to the regional economic growth in West Africa is lack of access to consistent electricity. The scarcity of power generating capacity, distribution, and transmission networks as well as well-established utility  This Day, 9 May 2006.  The People’s Daily (Beijing), 13 May 2006. 7  Chinese investment can boost Nigeria’s industrial transformation by Edeh Emmanuel | chinadaily. com.cn | Updated: 2018-11-22 14:17. 5 6

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frameworks poses significant challenges to numerous sub-Sahara African countries socio-­economic development. In recent years, China has become an important source of financing and has contributing hugely to the generation and transmission capacity in SSA power sector, especially hydropower. Ghana has two large-scale dams before the Bui Dam: the Akosombo Dam and the Kpong Dam, respectively founded in 1961 and 1982 (Tang & Shen, 2020). This two Dams have an installed capacity of 1180  MW in total, majorly supplying power to the Southern coastal regions. Industrialisation has brought about a steady increase in the demand of electricity in Ghana but the crisis in the 2000s finally triggered the immediate need for greater electricity capacity. Due to this, Ghana decided to construct a third dam – the Bui Dam – to enhance the country’s overall energy capacity and provide electricity to the North, where access to electricity is more scarce than other regions. The Bui Dam has been planned since the 1920s but was not initiated since the early 2000s due to frequent changes in incumbent government as well as lack of funding (Hensengerth, 2013). The Bui Hydro-electric Dam in the northern region of Ghana is the largest Chinese infrastructural project in the country, built by Sino-­ Hydro at an estimated cost of US$622 million and financed by the Chinese Exim Bank. The eventual cost of constructing the Bui Dam stood at $790 million (Akyeampong, 2015). The Ghana government’s financial contribution was $82 million, and the loan was collateralised through the export of cocoa from Ghana to China. The building of the dam started in 2007 and was completed in 2013. The Bui Dam becomes the Ghana’s second largest dam with a capacity of 400  MW (Hensengerth, 2013). The dam was also designed to provide irrigation for 30,000 ha of agricultural land.

3.6 The Soubre Hydropower Project in Cote d’Ivoire The Soubre hydropower project began in 2013 while 85% was financed by the Export-Import Bank of China and 15% by Cote d’Ivoire. The construction works, which lasted four years, allowed a dam to be built – a barrage 19 m high and 4.5 km long leading in the south to a 275 MW power plant, which enables an annual generating capacity of more than 1190 GWh. This development, completed a year ahead of schedule, is today the biggest of its kind in Côte d’Ivoire and allows the country to increase its electric power by 10%. Ivory Coast currently has an electrification level of 50% and aims to move from a capacity of 2000 MW to 4000 MW by 2020. The Soubré hydro development is part of the strategy of Ivorian authorities to promote an energy mix with an increase in the hydro share (which should shift from 30% to 45% by 2020) associated with other renewable energy sources (mainly solar) for a share estimated at 5%. This energy mix is aimed at reducing the share of thermal energy by 50% and to lighten the gas bill while highlighting the strong commitment by Côte d’Ivoire to combat global warming. The project is expected to annually generate about 1190 GWh and provide 90% of the country’s electricity. The US$572 million 275-MW Soubre hydroelectric power station located at Naoua

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Falls on the Sassandra River near the city of Soubre in Cote d’Ivoire (Ivory Coast) was commissioned in 2017 (Tang & Shen, 2020).

3.7 The Gouina Hydroelectric Plant in Senegal/Mali The Gouina Hydroelectric Plant is a hydroelectric installation currently being constructed on Gouina Falls along the Senegal River in Mali. It is located about 18 km (11 mi) southeast of Diamou in the Kayes Region. It is the fourth project of the Senegal River Basin Development Authority and its groundbreaking ceremony on 2013. Preliminary construction had been suspended due to the 2012 Malian coup d’état and subsequent Northern Mali conflict. The plant is expected to be completed in 2020 and will provide power to Mauritania, Mali and Senegal. The plant will cost US$329 million and the 280 km (170 mi) of transmission lines will cost US$65 million (Han & Webber, 2020). The project received 85% of its funding from the Exim Bank of China along with US$1 million from the EU-Africa Infrastructure Trust Fund and US$1.4 million from the International Development Association and European Investment Bank (Han & Webber, 2020). It will have an installed capacity of 140 megawatts (190,000  hp) and will use the outflows of the Manantali Dam upstream to regulation water flow into the plant.

3.8 Souapiti Hydropower Project 450 MW in Guinea The Souapiti hydropower station is a 450 MW hydroelectric facility developed with Chinese support on the Konkure River in the Republic of Guinea, West Africa. The Souapiti hydropower project was developed by the China Three Gorges Corporation (CTGC) while the main civil construction works were started in April 2016. The first two units of the plant were commissioned in November 2020, followed by the commissioning of the third unit in January 2021 and the grid connection of the fourth (last) unit in March 2021. The project achieved full capacity with the commissioning of its fourth generating unit in March 2021. The loan agreement was signed in September 2018 and the Souapiti hydroelectric facility is expected to generate up to 2.016 billion kilowatt hours (kWh) of electricity annually (Tang & Shen, 2020). Apart from meeting the power demand of the Republic of Guinea, the project is also intended to supply excess power to the neighbouring countries, including Senegal, Mali, Sierra Leone, Liberia, and GuineaBissau through the West African power grid. The Souapiti hydropower station was financed through a £911  m ($1.1bn) credit loan facility from the Export-­Import Bank of China (Han & Webber, 2020).

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4 Conclusion The Chinese involvement in the development of Africa has brought positive trends to the continent and the relationship between China and some West African countries might face few challenges that need to be handled to sustain the positive trends and allows new ones to emerge. The following policy implications, lessons, and agenda are proposed for the future economic relations between China and West African countries. It is imperative for the government in West Africa to persistently resist attempts to reduce the benefits of FDI by active government involvement and negotiation with the Chinese government and investors. Effective governance and the country’s macroeconomic climate should be ensured to promote growth and investment sustainability. There is a need to invest commodity boom resource inflows in enhancing investment climate, developing human resources needed to support investment in new industries, and setting up development banks necessary to provide financial support to emerging private investors. To this end, good and transparent governance must be exercised while implementing these initiatives to ensure the desired results are achieved. Effective implementation of these measures under good governance would establish the requisite conditions in the West African economy for the Chinese FDI to have substantial backward and forward linkages. Sub-Saharan Africa lags other developing regions on most of the standard infrastructure development indicators. That has motivated African leaders to call for more international support in this area. They have traditionally welcomed China’s fresh approach to development assistance, which avoids domestic intervention and emphasises collaboration and cooperation between developing nations. The new role that China plays creates challenges for governments and actors in civil society. But despite the potential challenges, Chinese finance offers Africa an important opportunity for development, reaching a sufficiently large scale to make a material contribution to meeting its vast infrastructure needs. There should be a synergy between the West African government and Sino-­ African stakeholders, to ensure coherence in strategising policies and efforts aimed at bridging the trade imbalance between China and African countries in favour of West African countries. Potential West African countries with vast resources should also diversify its exports from primary to secondary products to increase its product value in China, to generate higher foreign exchange earnings. West African government should pass legislation against the importation of inferior Chinese goods. Furthermore, the West Africa power sector needs greater access to capacity building, capital funds and technologies from experienced manufacturers. Stakeholders from China and other countries can be highly complementary in contributing to African power sector development. While China has the capacity to fund and build projects at a massive scale and lower cost, industrialised countries can provide high-­ value technologies, contribute to capacity building, and create an adequate regulatory environment to ensure the success of all projects, to ultimately promote energy access and economic growth in West Africa.

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References Akyeampong, E. (2015). China in West Africa’s regional development and security plans. Africa Development, 40(4), 1–19. CARI. (2021). Loan data: Aggregate loan data (excel file). http://www.sais-­cari.org/data. Accessed on 20.09.2021. OECD. (2018). OECD Business and Finance Outlook 2018. OECD Publishing, Paris. https://doi. org/10.1787/9789264298828-­en Cissé, D. (2015). China’s engagement in Africa: What are the potential impacts on Africa’s regional integration? http://forum.tips.org.za/images/forum%20papers/2015/58c2c3_59ef69 9920674d898865c5a7c74b77d8.pdf. (3), 1–20. Foster, V., Butterfield, W., Chen, C., & Pushak, N. (2008). China’s growing role as infrastructure financier for Sub-Saharan Africa. Trend and Policy Options, 5, 16–73. Gu, J., & Carey, R. (2019). China’s development finance and African infrastructure development. Oxford University Press. https://doi.org/10.1093/oso/9780198830504.003.0008 Han, X., & Webber, M. (2020). From Chinese dam building in Africa to the belt and road initiative: Assembling infrastructure projects and their linkages. Political Geography, 77, 102102. Hensengerth, O. (2013). Chinese hydropower companies and environmental norms in countries of the global South: The involvement of Sinohydro in Ghana’s Bui Dam. Environment, Development and Sustainability, 15(2), 285–300. IEA. (2016). Boosting the power sector in Sub-Saharan Africa: China’s involvement (IEA partner country series). IEA. https://doi.org/10.1787/9789264262706-­en Lawanson, T., & Agunbiade, M. (2018). Land governance and megacity projects in Lagos, Nigeria: The case of Lekki Free Trade Zone. Area Development and Policy, 3(1), 114–131. https://doi. org/10.1080/23792949.2017.1399804 Oyeranti, G.  A., Babatunde, M.  A., & Ogunkola, E.  O. (2011). An analysis of China-Nigeria investment relations. Journal of Chinese Economic and Foreign Trade Studies, 4(3), 183–199. Plessis, R. (2016). China’s African infrastructure projects: A tool in reshaping global norms. Policy Insights – South African Institute of International Affairs, 35, 1–14. Powanga, L., & Giner-Reichl, I. (2019). China’s contribution to the African power sector: Policy implications for African countries. Journal of Energy, 2009, 1–10. Tang, K., & Shen, Y. (2020). Do China-financed dams in Sub-Saharan Africa improve the region’s social welfare? A case study of the impacts of Ghana’s Bui Dam. Energy Policy, 136, 111062. Taylor, I. (2007). China’s relations with Nigeria. The Round Table, 96(392), 631–645. Tiboris, M. (2019). Addressing China’s rising influence in Africa. Chicago Council on Global Affairs, 1, 1–17. http://www.jstor.com/stable/resrep21272 Toogood, K. (2016). Understanding the emerging relationship between China and Africa: The case of Nigeria. Stimson Center, 1–11. http://www.jstor.com/stable/resrep10795. World Bank. (2019). The World Bank Annual Report 2019: Ending Poverty. Investing in Opportunity.

Partnership for the Development of Africa’s Telecommunications Sector Under Agenda 2063: African and Chinese Telecommunications Companies in Africa Daouda Cissé

1  Introduction Since the 1990s, opening up to attract foreign investments has been China’s strategic plan, not only to create jobs for its population but also as a learning process to develop key sectors for its economic development by putting an emphasis on skills and technology transfers for its population and its industries. Therefore, through this learning process, China has managed to set up and develop state and private enterprises in its key economic sectors to be big players locally as well as internationally. These companies first started in China, before expanding their activities internationally and becoming globally competitive. Chinese telecommunications companies, in this case Huawei and ZTE, followed this strategy. By expanding their activities abroad, Chinese multinational companies contribute to China’s overseas investments and contribute to promoting China’s overseas political economy. Policies by African governments in the late 1990s and the early 2000s to modernise the telecommunications sector and bridge the telecom divide between people in rural and urban areas in their respective country, and the increase in demand for mobile phones in Africa and around the world during the last two decades, have attracted the attention of telecom companies (Alper & Miktus, 2019). Africa has This chapter is modified from a previous version published as “Chinese Telecommunications Companies in Africa: Competition or Partnership with African Telecommunications Companies?” International Journal of Afrasian Studies 2022, Vol. 1, No. 1, 57–78. Used with permission. D. Cissé (*) Centre for Africa-China Studies, University of Johannesburg, Johannesburg, South Africa

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Ndzendze, D. Monyae (eds.), Perspectives on Africa-China Infrastructural and Industrial Cooperation, Africa-East Asia International Relations, https://doi.org/10.1007/978-3-031-38395-3_5

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become a thriving market for the telecom industry and is among the world’s fastest growing mobile phone markets (International Trade Centre, 2020). This fast growth has been facilitated by the liberalisation of telecom policies in African countries, which has allowed for the creation of regulatory bodies and increased competition in Africa’s telecom market. New operators in Africa’s telecom industry have created competition with state-owned telecom services providers by influencing price competition and driving telecom subscription services growth rates. Linked to the growth of mobile services in Africa and limited access to telecom networks in rural and remote areas, more telecom services providers and telecom equipment manufacturers are interested in increasing their operations in Africa. Mbeki (2003) noted the inequitable development of and access to telecommunications services across Africa in general, and in South Africa in particular, have created two separate but co-existing domains: a sophisticated, advanced, and globally competitive first world and an informal, marginalised and unskilled developing world. Specifically, urban areas have been targets for major telecom operators in Africa (McKinsey Global Institute, 2013). However, more focus is currently applied to rural areas to help rural residents access telecom networks, develop businesses and communicate, and increasingly bridging the gap between rural and urban areas. For these reasons, and their quest to establish markets abroad, Chinese telecom companies are increasingly investing across Africa. Investments in services sectors also illustrate a broader case of the qualitative changes (with the diversification of investments moving from the resources sector to the services sectors) in China’s African investment strategy. China is increasing its investments in Africa’s services sectors, particularly in the finance and telecommunications sectors, which are key investment sectors (Chen et al., 2018). With China’s ‘Go Out’ policy (a strategic policy which encourages and supports Chinese companies, both private and state-owned, to go global), Beijing has shown a desire for its companies, including telecom companies, to venture abroad. Through China’s 12th five-year plan (2011–2015), the Chinese government encouraged the building of global brands by Chinese companies. Consequently, Huawei and ZTE are increasingly targeting this business stream, not only in Africa but also globally. China currently plays a major role in financing and supplying telecom and Information Communication Technology (ICT) equipment in Africa. Specifically, mobile usage in Africa has experienced outstanding growth, with an annual growth of 4.6% and more than 130 million new subscribers expected to materialize by 2025 (Global System for Mobile Communications Association-GSMA, 2019). This interesting market development aligns with Beijing’s ‘Go Out’ strategy which supports Chinese companies to expand their operations in overseas markets. Alongside the general internationalisation process of Chinese telecommunications companies abroad, and in Africa in particular, the chapter mainly aims at exploring the relationship (partnership or/and competition) between African and Chinese telecom companies and the future of Africa’s telecommunications industry under Agenda 2063. Therefore, the study does not focus on the Chinese telecommunications companies’ competitive advantages and different classical motivations to venture to Africa. Previous papers (Cissé, 2012, 2014) related to the topic have

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discussed the classical motivations and ties between Chinese companies and their governments (both provincial and central). Qualitative interviews were conducted: • between 2012 and 2013  in Johannesburg and Cape Town with South African telecommunications companies’ employees (including managers) and Chinese managers at Huawei and ZTE. • between 2012 and 2015 in Dakar with Senegalese employees at both Chinese telecom companies, Senegalese vendors of telecom devices and representatives of telephone companies. The following chapter explores the internationalisation of Chinese telecom companies in Africa, their relationship with African telecom companies based on the notions of partnership and competition and the future of Africa’s telecommunications industry under Agenda 2063.

2 Expansion of Chinese Telecommunications Companies Abroad The telecom sector has been one of the fastest growing sectors in China’s economy during the last two decades (GSMA, 2019). Many rapidly expanding Chinese companies have emerged to compete with foreign multinational companies. Chinese telecommunications companies’ growth goes alongside China’s economic growth trend and modernisation, which have been accompanied by the increased competitiveness of Chinese enterprises in global markets. The motivations for Chinese companies to go global include the search for new markets to export their products, the need to acquire advanced management and technology skills and to secure natural resources (Wang, 2017). Seeking new markets for growth is the main motivation for Chinese multinational companies to invest abroad. By going global, they are subject to less competition and higher profit potentials due to their price competitiveness and diplomatic, political, and financial support from Beijing’s central government. Second, Chinese companies venturing abroad learn foreign management and technology strategies to be internationally competitive and to build innovative brands. Third, Chinese companies going global follow Beijing’s strategic policy by securing resources for China’s modernisation and economic growth. To survive the intense competition in the global market, innovation remains a major challenge influencing the acceptance of Chinese companies abroad. Thus, the acquisition of new management and technological skills is needed for Chinese companies to enter the global market. Building global brands, as highlighted in China’s 12th five-year plan, and the need to focus on research and development are major challenges affecting the competitiveness of Chinese companies in global markets. While many Chinese companies are developing management and technology capabilities to improve their global competitiveness, others are building strong global relationships and acquiring foreign businesses through mergers and acquisitions (He et al., 2019).

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The support of the Chinese government to companies going global with the related focus on the ‘Go Out’ strategy, is an important aspect in the internationalisation of Chinese multinational companies. The Chinese government, through its agencies, organisations and financial institutions (China’s Export-Import Bank [Exim Bank], China Development Bank, China-Africa Development Fund) brings important support to Chinese companies overseas (Chen, 2020). To achieve the ‘Go Out’ policy and allow Chinese companies to venture abroad, the Ministry of Commerce (MOFCOM), the National Reform and Development Commission (NRDC) and the State Administration of Foreign Exchange (SAFE) have all developed strategies and policies to assist Chinese companies to expand their businesses abroad. In 2006, then Chinese Premier Wen Jiabao reaffirmed the Chinese government’s commitment to support globalisation by offering various types of support including new policies and services to coordinate overseas investments and manage risks (Xinhua, 2006). To develop businesses and increase investments abroad, the Chinese government encourages and supports Chinese enterprises by providing them with preferential loans and buyer credit. To achieve such policies, financial institutions such as the China Development Bank and the Bank of China decided to offer foreign exchange and insurance services to Chinese companies expanding overseas. For example, in 2009, the China Development Bank through a five-year cooperation framework agreement provided ZTE with a US$ 15 billion credit line, including ZTE overseas projects financing and ZTE credit limits. The global ambition of Chinese telecom companies is obvious: they want to go global and expand their business over China’s borders. For example, Huawei during the last two decades has established research centres overseas. A Boston Consulting Group noted that ‘Huawei and ZTE were globalising fast and were determined to stay the course’ (Li, 2006). The internationalisation of Chinese telecommunications companies has contributed to change the performance of the sector by creating global competition and reshaping management strategies. Their participation in overseas markets has taken different forms, including research and development, project contracting, joint ventures, mergers and acquisition, and telecom management and operation. Africa’s telecom market, which is an important market for the global telecom industry, plays a key role in the activities of Chinese telecom companies across the continent by allowing them to enter into partnership with local telecom operators. Chinese research and development centres participate to improve telecom technologies and solutions for network providers.

3 Chinese Telecommunications Companies in Africa Since the 1980s, rapid economic growth has driven China’s new interest in Africa (Dollar, 2016). With resource security at the heart of China’s engagement in Africa, the role of Chinese multinational companies in various investment sectors has become an important feature of the African investment and development landscape. However, China’s late inroads (in the 1980s and 1990s) into Africa in terms of

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investments and its relative lack of experience in developing and managing large scale projects abroad are major challenges for Chinese multinational companies. In the internationalisation strategy of Chinese companies, it is apparent that most companies have remained at the developing stage, where they see international business as an extension of their domestic market (Peng, 2012). In addition to construction, mining and energy, telecommunication is one of China’s key investment sectors overseas and plays a critical role in China’s economic development strategy (Executive Research Associates, 2009). Investments in telecommunications go alongside strategic policies of China’s interests abroad to find new markets to export its manufacturing products, develop its technology and acquire foreign technology. Within its strategic political considerations, the primary objective of China is to see the emergence of Chinese international competitive enterprises (Dumbaugh, 2008). The two Chinese largest telecom companies (ZTE and Huawei) play key roles in the expansion of Chinese investments abroad and in China’s political economy strategy overseas, and Chinese telecom companies are operating following China’s geo-strategic objectives. This creates a challenge in Africa for effective strategies in dealing with Chinese telecommunications companies. The willingness of African governments to modernise and develop their telecom industry, through the liberalisation of telecom policies in African countries in the 1990s and in the early 2000s, has made the African telecom industry attractive to foreign investors (Williams, 2011). However, while urban areas benefited from such policies in the 1990s and early 2000s, rural and remote areas faced the lack of network coverage, access to telecom devices and mobile handsets which contributed to influencing the investment decisions of foreign telecom investors such as Huawei and ZTE to tap into Africa. Telecommunications is a key sector for economic development, and it contributes to services trade, the most dynamic element of the global trading system, while the sector also has an important role to play in offering innovative solutions to traditional development challenges. In recent years, African governments have shown an interest in developing their telecommunications environment. The boom in Africa’s mobile phones market is related to the high costs of building landline phone networks when compared to mobile phone base stations. The high costs of establishing telephone wires have not been viable for most of the African population living in poverty and in rural areas. Before the boom in mobile phones in Africa, most areas were effectively isolated. Increased demand for mobile phones and their access to people in rural areas have motivated more mobile phone manufacturers to supply African customers with low-cost mobile telephone handsets and wide telecom coverage. By focusing on the growing demand in mobile phone business in Africa, Chinese multinational telecom companies operate in the continent and are changing the telecom industry by increasing cost pressure on their main competitors with low-cost mobile handsets and telecom equipment. Globally, Huawei’s market share was around 18.6% of unit sales in the third quarter of 2019, up from 14.6% in 2018 (Holst, 2020). Improving technical capacities, linked to low costs of production, access to state funding and state political support provide Chinese telecom

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companies (Huawei and ZTE) with a competitive advantage that is not available to independent telecom companies. The process of globalisation has opened markets for trade and investments. Once the largest recipient of FDI, China is currently investing abroad, and expansion through foreign markets has become a strategic growth pattern for China. The internationalisation of companies has driven foreign investments in different regions of the world. Social, political, economic and technological factors have always influenced and continue to be important factors influencing the strategic decisions of companies to operate overseas. These economic, political and social environments in host countries attract multinational corporations (Kyove et  al., 2021). Chinese telecom companies possess strategic advantages, including political and financial support from China’s central government and competitive prices, when investing in the telecom sector in Africa, and African countries represent a potential market for their business. Countries are attractive if they have large markets, significant natural resources, low-cost labour, trainable or well-trained human resources, good communication systems and infrastructure (Wattanasupachoke, 2002). Africa arguably possesses all the important factors needed to attract foreign investments but lacks the necessary physical infrastructure (Kaur et al., 2018). To operate in Africa’s telecom industry, Chinese telecom companies are interested in technological factors. Countries with the adequate technological background (the type of technology in use, the level of technological development and the speed of adoption or diffusion of new technologies) and reliable infrastructure are the first destinations for Chinese telecom companies. Due to the lack of adequate infrastructure and technologies in Africa, the telecom industry has lagged. Chinese telecom companies (ZTE and Huawei) tapped into Africa to develop the telecom infrastructure and network and thereby bridge the telecom divide (Chanakira, 2010b). The following section analyses Chinese telecommunications companies’ business strategies in Africa.

4 Business Strategies of Chinese Telecommunications Companies in Africa While investing in Africa, Chinese telecom companies are more focused on the needs and requirements of customers (Tong, 2021). Good service based on Huawei and ZTE’s customer-oriented strategy is the main element for the success of both companies in Africa (Pawlicki, 2017). A better understanding of the local population’s needs and rapid responsiveness to satisfy such needs, competitive prices, intra-governmental relations and partnership with local telecom operators help Chinese telecom companies in Africa to win the trust and reliance of customers. To achieve tremendous margins, Huawei’s pricing strategy has been to ensure lower prices than most of its competitors: 5–15% lower than its main competitors (Roll, 2018).

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ZTE, on the other hand, prices 30–40% below its European competitors. Rapid responsiveness by personnel and high customer service are also key elements in their strategies to operate in Africa. Chinese telecom companies always operate in collaboration with their African telecom partners to set up base stations in rural zones in Africa. To satisfy local populations’ needs, they also control the effectiveness of these base stations placed in rural areas. After providing customers with telecom network equipment, Huawei and ZTE offer long-term maintenance services to ensure the reliable operation of local networks (Pawlicki, 2017). China’s engagement in Africa’s telecom industry can be seen as a win-win strategy if we are to consider the improvement and growth in the ICT sector across the region in the last two decades. Chinese telecom companies, by leveraging their expertise and experience in their home and overseas markets, help bridge the digital divide and offer people the opportunity to join the information and communication era despite their location. During the 2010 World Cup in South Africa, for instance, Huawei developed solutions to meet customers’ demand for telecommunications. The company achieved customized solutions to offer people in remote areas better information access. Through technological innovation, Chinese telecom companies reduced communication fees for African mobile subscribers. In Nigeria, for instance, Huawei built Code Division Multiple Access (CDMA) networks to provide telecom services that cover one-third of the population. During the Thirteenth Nikkei Global Management Forum in Tokyo, Deputy Chairman of Huawei, Ken Hu, argued: ‘innovation in emerging markets means practicality and adapting to local requirements, whether it requires adopting cutting-edge technology or just thinking outside of the box. Our goal is to work together to develop innovative products and solutions that enrich lives of those in emerging markets’ (Nikkei Global Management Forum, 2011). The strategy of Chinese telecom companies in Africa is to partner with local telecom service providers by providing telecom infrastructure and equipment to offer mobile phone users the benefit of low communication fees. They develop strategic partnerships with the main African network providers such as MTN, Orange, Algeria Telecom and Maroc Telecom. Such partnerships with local telecom operators in host countries allow Chinese telecom companies to gain their technical expertise, networks, customer base and other resources. Huawei and ZTE’s partnership with MTN of South Africa, is already a strategic approach for both companies to gain new markets in the continent as MTN operates in more than 20 African countries. The establishment of research and development centres in Nigeria and South Africa by Huawei contributes to Chinese telecom companies’ technological innovation policies. Paul Wu, co-founder and CEO for Huawei South Africa (2009–2011), argued: ‘our Research and Development Centers are the engine of our business. We are looking forward to bringing our international expertise to pioneer local, customized solutions to South Africa’s telecommunications industry’ (Huawei South Africa Press Office, 2009). This new trend is to assist in positioning Africa’s telecom technology innovation drive to be on par with the global telecommunication innovations. Huawei, in its collaboration with the local telecom providers, aspires to ensure service innovation and design solutions to address telecom challenges in Africa. Huawei’s research and development centres

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aim at bringing global telecommunication innovation to operators in Africa with customized solutions for Africa’s telecom industry. However, in the African telecom sector, China’s contribution comes with preferential loans to governments to acquire Chinese telecom equipment and infrastructure. Financially supported by Beijing’s central financial institutions (China’s Exim Bank, China Development Bank, China Africa Development Fund), Chinese telecom companies’ operations in Africa also involve tied loans between the Chinese and African governments (Grimm, 2011). The Chinese financiers provide African governments with loans to buy only equipment from Chinese telecom companies to develop their telecom equipment and services. Such loans, called vendor-­guaranteed loans, come directly from the Chinese companies which receive credit lines from Chinese financial institutions to invest in Africa. As in the other investments sectors, mining, infrastructure and construction, China also provides loans to its telecom companies to operate overseas. With strong government backing, loans from governments and operators to buy Chinese equipment, China’s no strings policy and low-cost technology supply have facilitated the competitiveness of Chinese telecom companies in Africa. China’s state-backing of Huawei and ZTE allowed these companies to seize global market share from more innovative international competitors, reducing their growth in sales and investments in research and development (Atkinson, 2020). For their global expansion, Huawei and ZTE secured credit facilities from Chinese policy banks and state-owned banks. China provides direct and indirect subsidies (guaranteed market share, cheap credits from Chinese state banks) that reduce Chinese telecommunications companies’ operational costs, speed time to market for their products, and allow them to price their products well below prices set by their competitors (Hart & Link, 2020). There are strong linkages between the China-Africa strategy and Chinese telecom businesses. Chinese telecom companies have seen opportunities in Africa and can use their competitive price advantage to operate not only in Africa, but also in other regions of the world. China, through its overseas political economy agenda, always integrates business and political objectives. The role of the Chinese government in the telecom sector is clear: China will further expand telecom cooperation with African nations in line with mutual benefits and common development. Moreover, the Chinese government supports its telecom companies to run more telecom services in Africa (Yeophantong & Wang, 2019). Chinese telecom companies enter the African market and establish partnerships with governments to build e-government networks for ministries and organisations to provide information and services for African citizens. ZTE and Huawei have built national fibre optic communications networks and e-government networks for more than 20 African countries (Zhang, 2011). In addition to network equipment and telecom infrastructure, Chinese telecom companies have the advantage of selling cheap mobile handsets to mobile subscribers in Africa. This allows them to expand their products into the African market and gain value among customers. Compared to their competitors, Huawei and ZTE operate in different segments of the telecom industry in Africa.

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From fixed and mobile networks, data communications, optical networks, software, services and terminals, Chinese telecom products have entered the African markets (Chanakira, 2010a). Furthermore, cutting-edge technology, reliable equipment for local telecom operators, service response capabilities and efficient project management offer Chinese telecom companies in Africa more markets and from the reliance of a huge number of African mobile phone users and governments (ZTE, 2011). Alongside making forays into African telecom infrastructure building, Huawei and ZTE always invest in global brand awareness, including in African markets. Although Huawei and ZTE are big telecom players in the telecom industry, their brand names are not well known. To deal with the lack of awareness of Chinese telecom brands, Huawei, for instance, has targeted the global market through investments in branding, advertisement, marketing, sponsoring, public relations and lobbying. Such an approach falls under the Chinese telecom companies’ global branding and their long-term strategy to build brand awareness and expand globally. Through co-branding, Chinese telecom companies achieve brand extension, global branding and bigger market share. The combination of telecom brand names (for instance the combination of MTN and ZTE through co-branding) is a way for Chinese telecom companies to be known globally. The partnerships and collaborations Chinese telecom companies establish with African telecom companies enable them to penetrate the African market by extending their brands to a degree based on the African telecom companies’ market shares. It is an opportunity for the Chinese telecom companies to access new markets and reach new customers. Chinese telecom companies work with African telecom companies to combine resources (i.e. technologies, distribution networks, telecom solutions, telecom infrastructure and networks) to leverage core competencies. Such an idea contributed to a growth strategy in which Chinese and African telecom companies benefit from their combined strengths and the product or service offered leverages the companies’ brand names (Roll, 2005). By co-branding handsets and mobile devices through their collaboration with MTN, ZTE aimed at building a strong brand in the South African marketplace and beyond. Brand building is one of the key strategies developed by Chinese telecom companies to become competitive in the global telecom industry. Building competitive brands and internationally renowned companies falls under China’s 12th five-­ year plan which has encouraged innovation by the Chinese multinational companies. Co-branding also contributes to global brand awareness of Chinese telecom brands among customers in Africa who know little about ZTE or Huawei. It is important to mention that all these business strategies by Chinese telecom companies are supported by China’s overseas political economic policies. For instance, when operating in the African telecom industry, they benefited from the political advantage, the economic advantage and political diplomacy established through China’s engagement in Africa, using these benefits to access more markets and at times win contracts. Economic diplomacy is another political economic strategy that Huawei and ZTE use in African countries by building telecom network equipment and base stations in rural and remote areas which are sometimes difficult

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to access due to bad road infrastructure, unreliable and risky to invest in. Economically, the low cost of product development, considering research and development, manufacturing, distribution and sales have allowed ZTE and Huawei to acquire more markets than their competitors. Such business practices enabled Chinese telecom companies in Africa to win a positive image and reliance from African customers and governments, a positive image which enabled them to run state-to-state as well as private projects. Furthermore, diplomatically, not only telecom companies but also other Chinese multinational companies are strongly backed in their overseas operations by Beijing’s central government. The diplomatic attention paid to African countries by the Chinese government helps to support state-to-state projects and development assistance and constitutes an important feature for Chinese telecom companies’ bidding processes. Chinese telecom companies develop political capital in Africa; for instance, Huawei and ZTE have political ties with China’s government as well as with host countries’ governments. ‘When Chinese government leaders visit other developing countries, they are often accompanied by the senior management team of Huawei and ZTE’ (Cooke, 2012: 1842). Both companies gain influence and reliability and have more important business operations by building political and diplomatic relationships with host countries’ policymakers through visits by Chinese officials. It is worth noting that public and economic diplomacy strategies are common strategies (not only Chinese practices) used by political officials to enable their countries’ companies to gain economic influence in places where they invest.

5 Competition or Partnership Between Chinese and African Telecommunications Companies in Africa? Often China’s engagement in various sectors of African economies is seen as competition against African companies, as well as foreign companies which operate in African countries. But beyond the Chinese competition which is often pointed out in Africa, collaboration and cooperation drive the partnership between Chinese and African companies and are part of Chinese companies’ business strategies to access markets and to adjust their managerial and technological skills to African countries’ needs. Through the partnerships established, opportunities emerge for African companies as well as Chinese companies. Such a strategy for partnership and collaboration is not unique to the Chinese companies in the telecommunications industry but is expanded to other sectors, too: mining, oil, construction, and finance. It enables Chinese companies to adjust to the local market dynamics and explore consumers’ needs to later cater to such needs. It is a long-term strategy but is beneficial in the long run as it enables Chinese companies to acquire expertise, develop new techniques and solutions and expand their operations to other markets by tapping into the local companies’ networks.

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In the African telecom market, compared to their western counterparts, Chinese telecom companies have seized a considerable market share of Africa’s telecom industry, thus leading to competition for other telecom investors as well as African telecom companies. Building telecom infrastructure in rural areas in Africa through telecom projects with financial support from the Chinese government through access to credit and loans that enable African governments to benefit from concessional or preferential loans, price competitiveness (low-bidding contracts, cheap telecom devices and mobile handsets) and contributions to developing e-networks for African governments are strategies implemented by Chinese telecom companies to expand their businesses in Africa. Chinese telecom companies’ forays into Africa’s telecom industry have created competition for African telecom companies, with major telecom companies having lost contracts to their Chinese counterparts investing in Africa. Such competition in the telecom infrastructure development sector is fueled by tied development projects, supported by the Chinese government, which require that the Chinese companies build the project with Chinese telecom equipment. At the same time, through partnerships established with major African telecom companies in Africa, Chinese telecom companies explore market and distribution networks already established by the latter. Therefore, it is quite common to find Chinese telecom devices and mobile handsets in telecom shops across the continent. Such an approach contributes to marketing Chinese telecom products to African customers and increasing the Chinese telecom companies’ market share in the African telecom industry to the detriment of African local telecom companies. Chinese telecom companies, particularly Huawei and ZTE in our study, have established partnerships with major African telecom companies which operate and have expanded their businesses across the continent. Such partnerships enable Chinese telecom companies to access different markets and develop their businesses across the continent. For instance, with the MTN-Huawei partnership, Huawei can tap into the African market where the South African telecom company has established business and consolidated market and distribution networks. In 2014, MTN awarded Huawei with a five-year contract for managed services. According to the terms of contract Huawei delivered managed services including managed network operations, network performance management and spare parts management in Ghana, Cameroon, Guinea and Benin (Huawei, 2014). The partnership and collaboration between Chinese and African telecom companies can lead to competition for development between Chinese and well-established African telecom companies in the African telecom market. While with its tailored technological approach to customers’ needs (including African telecom operators’ needs) Huawei wins managed services contracts, African telecom companies could fully benefit from the Chinese telecom companies by developing such technologies that African companies would themselves provide to their customers across Africa. Although limited, such a collaboration exists to some extent. In South Africa for instance, MTN engineers sit in ZTE’s offices and jointly develop telecom solutions with their Chinese colleagues at ZTE. Joint-projects are developed for local telecom solutions and technologies tailored for the South-African telecom market. In

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addition, Huawei and ZTE also collaborate with Telkom SA which is the main landline network provider in South Africa. However, issues related to Telkom SA’s ‘unfair’ bidding process for network updates arose between ZTE and Telkom SA and severed ties between both companies (Mawson, 2012). Huawei and ZTE’s collaborations with Telkom SA include the development of landline networks as well as broadband networks and devices. ‘Huawei has been Telkom’s only strategic partner for its 21st century (21CN) integrated access network which includes voice, IP and video’ (Executive Research Associates, 2009: 65). Huawei also provides Vodacom with 3G terminals and Cell C with high end IP networks. Through its telecom companies’ work, China contributes to enhancing broadband communications in Africa. But Telkom stores, such as MTN and Vodacom stores, across South Africa serve as sales points for Huawei and ZTE’s devices and handsets. In other African countries, both companies have developed partnerships with local companies (which particularly do not operate in the telecom industry) to establish showrooms to display and sell their devices and handsets. In Senegal, for instance, Matforce Technologies (which is a branch of Matforce CSI) operated as a sales representative of Huawei in Senegal. As Matforce Technologies’ sales of Huawei products did not yield the expected results for Huawei’s objectives to place and make its products known in the Senegalese market, the partnership between Huawei and Matforce Technologies was suspended. Huawei approached other companies (Midcom and Fall Distribution) which operate in the distribution of telecom products (devices and mobile handsets) in the Senegalese market. While the negotiations between Midcom and Huawei were not successful due to Huawei’s conditions and offer, Fall Distribution has become the sales representative of Huawei products in Senegal. As such, Fall Distribution ensures the communication and marketing of Huawei products to the Senegalese customers, with the support of Huawei’s staff in field marketing. As well, Huawei offers after sales services to customers who purchase its products from Fall Distribution. However, it is convenient to mention that despite efforts by Huawei to sell its products (mainly devices and mobile handsets of good quality), the Senegalese market remains difficult for the company due to the Senegalese customers’ interests in other brands (Samsung, Apple, Tecno and Itel) and the competition from Samsung, Apple and Tecno Mobile (a Chinese company which makes both Tecno and Itel brands). According to the author’s interviews in 2015 with salesmen, distributors and customers in the Senegalese market, Huawei faces issues related to ensuring good marketing and communication for its products, mainly due to the low budget the company allocated to these services. Perhaps as a telecom equipment manufacturer and more focused on building telecom infrastructure, Huawei invests more in its core activities where it makes more revenues rather than in the sales of its devices and mobile handsets. Although the telecom sector is liberalised in a number of African countries, the telecom industry falls under the control of the state, with a state telecom regulating agency. Therefore, foreign telecom companies which invest in Africa need to establish cooperation and partnership with local telecom companies across Africa in

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order to have access to telecom networks which remain entirely controlled by state telecom service providers. Alongside collaboration in managed services, Chinese and African telecom companies engage in building and improving the telecom infrastructure across Africa. Huawei and ZTE have strong expertise in building telecom infrastructure, but when operating in African countries’ telecom industries, they partner with local African telecom companies to have access to telecom networks as well as operate in areas which need improvement for communications, network coverage and telecom equipment installations. With the presence of Huawei and ZTE, which operate in Africa, it is important to mention the expansion of the competition between those two giant Chinese telecom companies, competition which is fierce in China’s telecom industry. Both companies have their headquarters located in Shenzhen and are major competitors in China. While on the one hand, Huawei is a private company with strong ties with China’s government (due to the political affiliation with the Chinese Communist Party); on the other hand, ZTE is a state-owned enterprise and receives more political and financial support from Beijing’s political and financial state agencies. Like in China, both companies are also big players in international markets, not least so in African telecom markets. In competition with Huawei, which is a leading player among Chinese telecom companies in Africa; in recent years, in South Africa ZTE won contracts with MTN, Cell-C and Vodacom, all South African telecom services providers. In August 2014, the company won a contract with MTN to build a national fibre-to-the-home (FTTH) network. Alongside its involvement in telecom infrastructure building (by supplying telecom equipment and services to South African telecom services providers), ZTE targets the broader information and communications sector which involves broadband, transportation and public sector telecom solutions. The ZTE-MTN partnership also covers telecom solutions which include voice, data and data for social networks. More importantly, ZTE aims at increasing its market share in the South African telecom industry through mobile handsets and devices sales. In October 2014, ZTE’s then newly appointed chairman mentioned that the Chinese telecommunications company intended to expand its market share within the South African telecom market by 10% through aggressive marketing campaigns by tapping into MTN’s market share (Phakathi, 2015). Such a move was done to increase ZTE brand awareness among South African telecom products’ customers.

6 Agenda 2063 and the Future of Africa’s Telecommunications Industry In the twenty-first century, Africa’s telecommunications industry has noticed remarkable progress. Such a progress is linked to policies put in place in the early 1990s to develop the sector as well as the modernisation of the telecommunications

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infrastructure across the continent. Africa has made great progress in the telecommunications coverage in the past 30  years, expanding at a fast pace across both low-and middle-income countries in the continent and more people are acquiring mobile devices, leading to about 40% of Africa’s population having access to mobile phones (The World Bank, 2017). However, although efforts have been made to bridge the gap between urban and rural areas for connectivity and access to telecommunications handsets, under the Agenda 2063, many challenges must be met by African countries to fully integrate the continent and its populations through Information Communication Technology (ICT). To achieve such an integration in the telecommunications sector, African governments need to focus more on the harmonisation and the standardisation of telecommunications policies across the continent. Many African countries aspire to bridge the telecommunications divide between rural and urban areas as well as participate in the global telecommunications industry with their partners in a more globalised and interconnected economy (Holmner & Britz, 2013; Ponelis & Holmner, 2015a, b). While there are advantages and efforts being made to achieve growth in the telecommunications sector across Africa, it is important to highlight the high costs for telephony, devices and data for most Africans. In this regard, Africa lags far behind other regions of the world. Such high costs (although slowly decreasing in some cases) are related to the lack of adequate telecommunications infrastructure and perhaps at times on the reliance on foreign companies to build networks and base stations. African countries have been unable to attract viable and sustainable investments for infrastructure development and to reduce the infrastructure gap between them and other regions of the world. Large amount of funding for infrastructure development in Africa is channeled through Foreign Direct Investments (FDI) and aid from traditional partners; therefore, mainly directed to the resources sector; a sector many African economies rely on. It has become obvious over previous years that funding from Africa’s traditional western development partners is inadequate for the continent’s sustainable infrastructure development (Owusu-Sekyere, 2018). With their emerging partners (China, India, Brazil, Malaysia, Turkey and Russia), African countries have seen a shift with new major infrastructure projects in a wide range of sectors and a surge of interests for the rehabilitation and the recovery of abandoned projects by some of the traditional partners due to the lack of funding, political and economic unwillingness and political unrests. Alongside China and India, developing countries from the South (i.e. Turkey and Indonesia among others) are funding and building new infrastructure, investing in African markets, and introducing new technologies into the continent (Alden, 2019). However, African governments need to individually and collectively explore different regional infrastructure financing mechanisms to complement the Chinese support for the purposes of sustainability and to close the apparent infrastructure deficit on the continent (Vhumbunu, 2016). Building adequate infrastructure, including in the telecommunications sector has always been a major challenge for development in African countries. The African Development Bank (2010) estimated that nearly US$ 93 billion per year is required

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Table 1  Africa’s telecommunications infrastructure development compared to other regions Infrastructure category Telecommunications

Type Internet access Mobile technology Fixed line technology

Africa 16% access 40% overall, 95% in urban areas 3% in Sub-Saharan Africa (SSA)

Other regions ±80% in developed countries 53% East Asia and Pacific, 80% Latin America and Caribbean 19% Latin America, 16% Middle East and North Africa

Source: The African Development Bank (2010)

to bridge the infrastructure gap in Africa by 2025 (See Table 1 about Africa’s telecommunications infrastructure development compared to other regions). Through the Agenda 2063 and the Sustainable Development Goals (SDGs), priority for infrastructure is high for both African countries’ and their global partners’ development programmes. Since 2015, one of the pillars of the SDGs (goal number 9) is to promote facilitating the development of resilient and sustainable infrastructure in Africa by 2030 (The United Nations Development Programme, 2015). Africa has a huge potential in the telecommunications industry as being the continent that has a large number of mobile phone usage. At the end of 2019, 477 million people in Sub-Saharan Africa subscribed to mobile services accounting for 45% of the population and the mobile market in the region will reach half a billion mobile subscribers in 2021 (GSMA, 2020). According to GSMA (2020) the mobile market in Africa will reach several important milestones over the next 5 years: half a billion mobile subscribers in 2021, 1 billion mobile connections in 2024, and 50% subscriber penetration by 2025 with 614 million mobile subscribers. O’Dea (2020) state: ‘Over the coming years, mobile phone users in Africa can also expect to see improvements in speed and reliability brought about by improved transmission technology and infrastructure. In 2019, 59% of connections were made over 2G, a figure that is expected to drop to 14% by 2025. Over the same period of time, 3G and 4G connections are expected to increase, and three percent of connections could be made using 5G spectrums’. GSMA (2020) reports that mobile Internet users in Africa have reached 272 million in 2019 (26% of population) and by 2025 they will be 475 million with a 39% penetration rate. In contrast to these recent and future developments and figures, the International Telecommunications Union (2013) cited the following ICT statistics: 16% of Africans were using the Internet; 7% of African households had Internet access; annual household Internet access growth stood at 27%; less than 10% of wired broadband subscriptions had speeds of then 2Mbps or more; mobile broadband penetration increased from 2% in 2010 to 11% in 2013. The development of the telecommunications industry can contribute to supporting growth and reducing poverty. With ICT, African countries can leapfrog the digital divide, have education for all and leverage the use of science and technology in the service of production, processing and industrialisation whose socio-economic impact would be huge (The African Union Commission, 2017).

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With the Agenda 2063 ahead, African governments must take advantage of the implementation of the post-2015 development agenda to support the telecommunications industry. That needs investments in infrastructure development, capacity building, commitments to funding ICT for development. Such a structural transformation requires active government intervention in three areas to catalyse sustainable development in Africa: investments in human development, energy and innovations in ICT (Armah & Baek, 2018). While building and modernising telecommunications infrastructure remain huge priorities for many African countries, growing interests should also be directed to fostering human capital through training, capacity building, skills transfer at professional schools, universities, research and development centres and innovation centres. That should be done jointly across the continent to take advantage of the regional labour market opportunities and value-added services. Therefore, governments and private sector could contribute to making broadband affordable and accessible for most people in Africa and must ensure that African countries ultimately benefit from the ICT and telecommunications industry (Chilima, 2016). However, the development of the telecommunications and ICT sector in Africa should enable and empower societies and countries rather than establishing and expanding external economic and political interests (Ponelis & Holmner, 2015a, b). With the policies in place and the partnership development between governments and telecommunications companies, progress have been made to bridge the telecommunications divide in Africa to enable connectivity and access to mobile handsets to many Africans. Alongside such progress, major efforts should be made to contribute to transforming African societies and economies for inclusion, regional and global participation, governance, education, capacity building, technology transfer across the continent. The ability of the continent to achieve inclusive growth and sustainable development is dependent on the existence of meaningful infrastructure that facilitates value added economic activity and job creation, enables private investment, and ensures a quality standard of life for society (Owusu-­ Sekyere, 2018). Besides, the development of the telecommunications industry could contribute to enhancing other sectors of African economies. Africa’s telecommunications industry has contributed to create numerous new jobs and catalyse economic and social transformation for the growing workforce that will continue to increase (Ponelis & Holmner, 2015a, b). Soon Africa’s workforce will be the world’s largest and by 2035 will be larger than that of China (Berman, 2013). The development of the telecommunications sector coupled with an adequate training and skills transfer could enable the growing number of Africa’s youth to create their own sustainable jobs in various sectors of the economy (i.e. finance, mobile banking, outsourcing, e-commerce, agriculture, IT, education). ICT and telecommunications infrastructure development are critical resources for education and socio-economic growth (The African Union Commission, 2017). Agenda 2063 should enable African countries to address many challenges that constraint sustainable development across the continent. African countries through the agenda’s targets could enhance their investment environment to attract global

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partners in various sectors of their economies. That entails adequate and well-­ integrated infrastructure networks across the continent. From a national or a regional approach in the past to a more continental way forward recently, on 27 January 2015 the African Union signed a Memorandum of Understanding (MoU) with China to cooperate on major infrastructure networks and industrialisation process in Africa within the framework of the Agenda 2063 (African Union, 2015). The collaboration and cooperation between the African Union and China are to accelerate the continent’s integration. African governments need an integrated and well-coordinated approach for a regional or transnational infrastructure delivery during negotiations with their partners for priority projects and the terms and conditions of funding mechanisms. Such an approach is to speed-up African regional integration and structurally transform African economies for sustainable development (Vhumbunu, 2016). The plan for ‘the Africa we want’ as stipulated through the African Union’s Agenda 2063 means an integrated, technologically and economically advanced Africa in symbiosis with global partnership (The African Union, 2013). Therefore, African governments need to embrace a multi-stakeholder approach to telecommunications and ICT policy development that bring together all African national, regional and continental as well as other stakeholders involved in Africa’s digital and telecommunications revolution (Olugbenga, 2017). In this regard, Facebook has partnered with leading African and global telecommunications companies to build 2Africa which is the most comprehensive subsea cable to serve the African continent and the Middle East and the project will interconnect 23 African countries, the Middle East and Europe by 2023 (Ahmad & Salvadori, 2020). Such a partnership contributes to delivering reliable and faster connectivity in Africa as well as connect millions of Africans to the rest of the world and bridge the ICT and connectivity gap between the continent and the rest of the world; thus enabling better global connectivity through new partnerships and technologies. It also comprises of investments in infrastructure in South Africa, Nigeria, Uganda and Democratic Republic of the Congo among other countries as announced by Facebook engineering (see Fig. 1 for more details). Agenda 2063 plans to achieve delivering high-level infrastructure; with the development of ICT and digital economy at the core of the agenda to bring about integrated connectivity between regions of the continent (The United Nations Development Programme, 2015). Besides, BRICS of which South Africa is a member also adds to the various platforms (Agenda 2063, the Belt and Road Initiative, the Forum on China-Africa Cooperation) and has goals to contribute to Africa’s infrastructure development based on multilateral cooperation and co-financing for sustainable development. In this regard, projects will be funded through the BRICS (Brazil, Russia, India, China and South Africa) New Development Bank. To improve industrial competitiveness, countries increase the relative share of capital, technology and infrastructure in their factor endowment mix (Chang & Baek, 2010). Actions are required from African governments to speed up the interconnectedness of people and different regions through the accumulation of finance for the implementation and the development of telecommunications infrastructure that

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Fig. 1  Map of countries which will be interconnected through 2Africa. (Source: Ahmad & Salvadori, 2020, Facebook Engineering)

could bring about continental integration in various areas of African economies. In May 2014, the launch of the Africa-China Growing Together Fund through the People’s Bank of China and the African Development Bank (AfDB) already provides wide opportunities for infrastructure projects in Africa (Vhumbunu, 2016). Yet, following the Agenda 2063, during FOCAC 2015 which took place in Johannesburg, South Africa, the African Union (AU) has committed to supporting and funding infrastructure development across the continent based on a collaboration with China. Such a commitment and collaboration with China was highlighted in the FOCAC 2015 action plan (2016–2018) as follows: The two sides agree that underdeveloped infrastructure is one of the bottlenecks hindering independent and sustainable development of Africa. The two sides will take concrete measures and give priority to encourage Chinese businesses and financial institutions to expand investment through various means, such as Public-Private Partnership (PPP) and Build-Operate-Transfer (BOT), to support African countries and the African flagship projects, in particular the Programme for Infrastructure Development in Africa and the Presidential Infrastructure Championing Initiative, in their efforts to build railroad, highway, regional aviation, ports, electricity, water supply, information and communication and other infrastructure projects… and facilitate infrastructure connectivity and economic integration in Africa…China and Africa will develop transnational and transregional infrastructure… as well as cooperate on the joint development of ICT infrastructure in telecommunications (Forum on China-Africa Cooperation, 2015).

Prior to FOCAC 2015, in the FOCAC 2012 action plan (2013–2015) as follows: China committed to support Africa in achieving connectivity and integration and developing more integrated infrastructure within the framework of the Programme for Infrastructure Development in Africa and the Presidential Infrastructure Championing Initiative … and

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continue to encourage capable Chinese enterprises and financial institutions to participate in transnational and trans-regional infrastructure construction in Africa and provide preferential loans to support infrastructure building in Africa  (Forum on China-Africa Cooperation, 2012).

7 Conclusion Chinese telecom companies’ foray into the African telecom industry is motivated by several factors: • liberalisation of African countries’ telecom industries • African governments’ policies to improve the telecom sector in their respective countries • need for better access to telecommunications and access to overseas markets for Chinese companies, among others. In this context, the willingness of African governments to liberalise the telecom industry in the 1990s and the early 2000s has attracted Chinese telecom companies (which are following a globalisation path) into the African telecom industry The arrival of Chinese telecom companies across the continent fueled competition between themselves, the African telecom companies and the other foreign telecom companies which operate in Africa, thus breaking telecom sector monopolies in African countries. Lower cost of telecom equipment and infrastructure, interest in making telecom networks accessible to rural and remote areas at affordable prices, access to affordable mobile handsets and African governments’ policies to develop the ICT sector in their respective countries have been positive advantages for Chinese telecom companies entering the African market. Alongside access to affordable mobile devices and handsets for customers with a low purchasing power, African countries benefited from Chinese telecom investments through telecom network and infrastructure building, skills transfer, capital and technology acquisition by African telecom operators. However, although there is a growing interest from African governments towards having Chinese telecom companies’ investments in the telecom infrastructure, investments which are based at times on partnership and collaboration with African telecom companies, there are specific risks for the latter and ICT vendors with regard to competition. China’s investments in the services sectors in Africa are increasing and receiving positive attention due to the diversification of sectors of investment out of the traditional resources sector. However, Chinese telecom companies’ engagement in Africa has brought concerns related to ICT security through spying and Internet censorship exerted by officials, particularly in countries which lack freedom of speech and with either controversial or authoritarian governments, with the assistance of Chinese companies. More often and visibly though competition from

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Chinese telecom companies has been echoed by African telecom providers, vendors and local officials (for instance in Kenya and Nigeria). Although China’s investment in the continent is diversifying, attention should be paid to not exclusively involve Chinese companies in sensitive services sectors. In China, although the government welcomes foreign investments, sectors such as telecommunications and banking, among other key sectors, remain closed to foreign investors and entirely controlled by the government and state-owned enterprises. The development of the telecommunications industry in Africa is seen by many governments as the foundation of sustainable development. While there have been growing efforts to bridge the telecommunications divide by increasing access to networks and mobile handsets, more focus should be put on broadband connectivity as many areas and people in both rural and urban areas across the continent remain without Internet access. Limited, insufficient or lack of access to wider telecommunications services is a barrier for a large majority of people across the African continent, thus creating social exclusion. Wide access to telecommunications tools and services plays an important role to mitigating socio-economic disparities between communities and societies. The development of ICT and telecommunications infrastructure should provide access to information, communication and opportunities for social inclusion. Therefore, increasing access to broadband connectivity should be a dire priority for African governments to reduce the broadband gap nationwide, regionally and globally. Regional imbalances in ICT and telecommunications infrastructure across Africa reflect the fragmentation of a potential continental connectivity and raise challenges to achieve common projects between African countries on the one hand and with their global partners on the other hand. African governments in their various partnerships and platforms for infrastructure development need to clearly differentiate national, regional and international projects to meet targets based on their policies and plans. Regional and global partnerships could contribute to mitigate the lack of high-­ capacity back bone networks which impedes reliable continental broadband connectivity. Besides, interests in submarine fibre optic cables versus wireless networks on which the focus is when it comes to telecommunications infrastructure should be developed. In early February 2020, during the breakdown of submarine cables that has temporarily jeopardised regional connectivity by slowing down Internet connection in South Africa for instance, regional Internet sharing based on available capacity with more submarine cables connecting parts of the continent has proven important and efficient for solutions. More efforts should be done to support regional initiatives for connectivity across Africa via communication and telecommunications cables: submarine fibre optic cables, mobile networks cables, data centres cables, telephone cables, LAN cables and coaxial cables. African countries could take advantage of their partnership with China in the telecommunications sector to develop such interests for faster and reliable connectivity across the continent. Chinese companies have a comparative advantage in submarine fibre optic cables as most of the related projects were undergoing in Greater China including Hong Kong and Taiwan a decade ago. China has already involved in such submarine cables projects in 2018 to provide high-speed Internet

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traffic between Africa and Asia as probably a flagship corridor of the belt and road initiative. Such a project aims at enabling better digital infrastructure and services for countries in both continents. Furthermore, the Digital Silk Road as part of the Belt and Road Initiative is a platform that can contribute to strengthening partnership and cooperation between African countries and China in the telecommunications sector for the development of digital economy in Africa. The Forum on China-Africa Cooperation (FOCAC) has played an important role in fostering such partnership in the telecommunications sector between China and African countries. Under the Agenda 2063, African and Chinese companies alongside governments’ involvement could develop cooperation in the digital economy, broadband connectivity and ICT infrastructure. Coordination between Africa and China to establish a strong cooperation agenda could yield benefits in the modernisation of the telecommunications infrastructure in Africa and be catalysers for other sectors such as trade, transport, agriculture, financial technology, education and electricity. There are already bilateral converging interests between China and several African countries to meet the market demand and learn from each other in sectors related to ICT and telecommunications. Under the various platforms (FOCAC, Belt and Road Initiative, Agenda 2063) African countries should join forces with China for practical and sustainable projects. Huawei and ZTE have partnered with companies across the continent for ICT innovation, communication networks, artificial intelligence. Although the Digital Silk Road could bring opportunities to Africa’s telecommunications industry and digital economy, it could present risks and challenges related to cybersecurity, governance, IT freedom and control of citizens African governments’ commitment to develop the ICT and telecommunications sector should not raise suspicions among their populations for a controlled Internet but rather should enhance regional and global connectivity, contribute to socio-­ economic transformation of people and the economy. Modern and adequate telecommunications infrastructure could contribute to improving the life of millions of Africans across the continent through education, business and social contacts. Such an approach to enhance regional and global connectivity among Africans in the continent and between Africans and the rest of the world is a means to facilitate and improve people’s social interactions worldwide. However, protective measures to avoid data cyber-attacks, networks failure, data losses should be highly considered for a better and improved regional network security. The African Union with its Agenda 2063 is aware of the numerous security challenges and risks that the development of the digital economy could pose to African countries even though it could provide great opportunities for the continent. With China at the heart of the Digital Silk Road initiative, changes in partnership and policy for many African countries could translate into many risks to deal with: political risks, lack of transparency, governance and renegotiation. Besides, African governments should tackle political instability, mismanagement of funds, corruption, lack of adequate regulatory framework that could hinder and affect investors’ confidence in the short and long term for sustainable investments. The partnership between African countries and China through the Belt and Road and the Digital Silk Road initiatives should involve private companies for expanded investments in a

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wide range of industries and for a more inclusive sustainable development that consider job creation, education, training, skills and technology transfer for the majority of the African youth. However, African countries individually as well as through the regional and continental organisations need to elaborate mechanisms to fund their projects to avoid over-reliance on foreign funding and mitigate debt risks. For instance, the establishment of sovereign funds generated from sectors in which countries have comparative advantages or a levy-based funding could reduce the reliance of African governments on foreign funding and debts.

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Egypt-China Relations After Egypt’s 2011 Revolution: A Focus on Physical Infrastructure Emmanuel Matambo

1 Introduction Egypt has the distinction of being the first country in Africa and the Arab world to establish formal diplomatic relations with the People’s Republic of China. This was in May 1956, and it came a year after the fabled Bandung Conference of the developing world. In return for Egypt’s support for China’s international recognition, especially at the United Nations, China took Egypt’s side during the latter’s fight with France and Britain in the Suez Crisis. ‘China provided Egypt with a US$5 million loan, a first for China in Africa, and called on the United Kingdom and France to end their aggression’ (Shinn, 2019: 63). Informal relations between Egypt and China extend back to the 1930s when China, then under the nationalists, sent some of its Muslim students to study at Al-Azhar University. The ensuing chapter presents and analyses Egypt’s relationship with China after the 2011 revolution in Egypt that led to the downfall of longtime leader Hosni Mubarak. More emphasis is placed on China’s relationship with Egypt under the current government of Abdel Fattah El-Sisi because in the aftermath of Mubarak’s ouster, it is El-Sisi’s government that has led for more than a term in office. The fact that in his first 4 years in office, Egypt’s Abdel Fattah El-Sisi visited China no less than five times and has met President Xi Jinping more times than that demonstrates the importance of China to the current Egyptian government. Egypt is also a strategic African player and ‘the largest recipient of FDI [foreign direct investment] in Africa’ (UNCTAD, 2020). Trade volumes between Egypt and China are impressive although the asymmetry of exports and imports sullies mutual beneficiation. In the first 10  months of 2019, bilateral trade reached $10.58  billion, E. Matambo (*) Centre for Africa-China Studies, University of Johannesburg, Johannesburg, South Africa e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Ndzendze, D. Monyae (eds.), Perspectives on Africa-China Infrastructural and Industrial Cooperation, Africa-East Asia International Relations, https://doi.org/10.1007/978-3-031-38395-3_6

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mostly based on China’s exports as compared to Egypt’s agricultural exports such as oranges, grapes and dates. According Trading Economics by the end of 2019, Egyptian exports had reached $556.92 million, with crude oil, distillation products and fruits accounting for $363.59 million (65%) of total exports (Trading Economics, 2020). Five years prior, Sino-Egyptian trade had increased by 12-fold (China International Import Expo, 2019). The Observatory of Economic Complexity reports that ‘during the last 25 years the exports of China to Egypt have increased at an annualized rate of 14.4%, from $463M in 1995 to $13.3B in 2020’. It should be noted that with the onslaught that the COVID-19 has wrought on the global economy, some of the projects written about in this chapter might be waylaid. Egypt will form the centre of attention and analysis in this chapter. Therefore, a section will be dedicated to understanding Egypt’s foreign policy before another section is added that outlines a general, albeit short, history of Egypt’s relationship with China. The section following that looks at the reach and deficit of Africa’s physical infrastructure in general. This will help to lend perspective to Egypt’s infrastructure. The section after that is a general presentation of Egyptian foreign policy with emphasis on its main architects. A section will then follow that will look at current Sino-Egyptian relations, starting with a brief recapitulation of their genesis to the place of infrastructure in this relationship. This will segue to the section dealing specifically with Egypt’s position in China’s Belt and Road Initiative (BRI). Through the BRI, China is involved in augmenting Egypt’s infrastructure in construction, energy, transport, trade and industry. This is a positive response to Egypt’s Vision 2030, an ambitious plan tailored towards making Egypt one of the leading global economies by 2030. The section following that will then seek to give an analytical understanding of Sino-Egypt synergy and the possible opportunities and hiccups that might accompany this relationship. The conclusion will be a general summary of the chapter and a hint at what Egypt and China could do to establish a credible win-win relationship.

2 Africa’s Infrastructure Challenges Africa continues to suffer from the dearth of infrastructure needed to turn the continent’s potential and resources into tangible benefits and vehicles for sustainable development. Agenda 2063: The Africa We Want (2015), the African Union’s blueprint envisions that by 2063, the centenary year since the founding of the Organization of African Unity (OAU), Africa will have modernised infrastructure that supports learning and ‘a world class, integrative infrastructure that crisscrosses the continent’ (Agenda 2063: 4). Agenda 2063 wants the twenty-first century to be Africa’s century and good infrastructure is indispensable to bring this about. The forms of infrastructure to be pursued range from high-speed railway networks, roads, shipping lines, sea- and airports and an ICT infrastructure that could enhance the digital economy.

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The 2018 Infrastructure Financial Trends Report by the Infrastructure Consortium for Africa (ICA) noted that although annual infrastructural financing had passed the $100 billion mark for the first time in 2018, the ‘persistence of the financial gap’ remains (The Infrastructure Consortium for Africa, 2018: iv). The 2018 African Economic Outlook by the African Development Bank estimated that ‘Africa’s infrastructure needs – $130–$170 billion a year – leave a financing gap of as much as $108 billion’ (AfDB, 2018: xv). Energy infrastructure got the most attention, with slightly over 40% of total expenditures in 2018, followed by transport, water and ICT.  The 2020 African Economic Outlook (Supplement) estimates that ‘infrastructure deficiencies have been estimated to account for 30–60 percent of the negative effects on the productivity of African firms’ (AfDB, 2020: 42). Power outages are one of the most formidable obstacles to manufacturing and doing business in Africa, thus highlighting the urgency to invest in energy infrastructure. The AfDB (2018: 112) has advocated the creation of special economic zones (SEZs) and industrial parks as means to remedying the shortage of infrastructure. The bank made specific reference to how SEZs helped to spur China’s growth from 1978 onwards. The infrastructure challenges currently besetting Africa vary depending on the type of infrastructure. For example, while ‘approximately 340 million Africans do not have access to safe drinking water and one million lives are lost each year because of water-borne diseases’, in terms of mobile banking Africa is actually ahead of other countries with comparable mobile income (ICA, 2018). Other variations will be referred to as the chapter looks at how certain types of infrastructure in Egypt buck the conditions of other African countries. The next section is a brief outline of Egypt’s foreign policy; this section paves the way for a section on Egypt’s more specific relationship with China.

3 A General Overview of Egypt’s Foreign Policy Egypt, like all countries, draws its foreign policy and its priorities from a confluence of factors, both physical and ideational. Situated on the northeastern tip of the African continent and embedded, geographically and socially, in the Middle East, Egypt has a foreign policy that straddles a gamut of regions, each foisting its foreign policy demands on the country. According to Boutros Boutros-Ghali (1982: 769), the Egyptian diplomat and former Secretary General of the United Nations, ‘Egypt, for several centuries, has been performing an important function of cultural and political synthesis between Islam and Christianity, the Arab world, Europe and Asia’. The same has been the case for Egypt’s position in Africa. Egyptian foreign policy has been very important to the prospects or lack thereof, of peace in the Middle East, especially regarding Arab-Israeli politics, and to peace in North Africa. Tianshe Chen (2011: 95) has asserted that in Egypt, ‘[w]hen making foreign policies, the president almost has absolute decision-making power’. Thus, this brief presentation of Egypt’s foreign policy will look at the main actors from Nasser to Abdel Fattah El-Sisi but link their foreign policies with other factors such as the

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context of the international zeitgeist in which they operate. Emphasising the varying foreign policy inklings of Egypt’s presidents obliquely implies that although unchanging circumstances (or corporate identities) of Egypt such as geography remain intact, they are used to different effects by Egypt’s presidents. During the presidency of Gamal Abdel Nasser, Egypt was an active player from the developing world in the Cold War arena, with a prima facie bias towards the Union of Soviet Socialist Republics (USSR/Soviet Union). This bias towards the Soviet Union was evident in Egypt’s endorsement of Five-Year Plan, an initiative mostly associated with the Soviet Union, China and some regions of the developing world (Alexander & Naguib, 2018: 94). It is noteworthy that Nasser was one of the few African heads of state that took part in the 1955 Bandung Conference in Indonesia, a conference that remains one of the most authoritative demonstrations of solidary in the developing world. It was also a demonstration of autonomy from the two superpowers of the day. Thus, Egypt’s foreign policy during Nasser’s reign leaned towards fortifying concord in the developing world and waging an intercontinental struggle against colonial and imperial dominance. Nasser also pursued Arab nationalism, and this manifested itself in the formation of the United Arab Republic, composed of Egypt and Syria in 1958, 2 years after Egypt nationalised the Suez Canal, precipitating a diplomatic crisis with the Western world that saw Egypt drift even deeper into the Soviet orbit. It is noteworthy, though, that because of Egypt’s claim of being non-aligned, its patent leanings with the East/socialist bloc entangled the country’s diplomacy in seeming contradictions (De Smet, 2016: 119). Another interesting fact during Nasser’s presidency is that when China was rocked by the Cultural Revolution which Mao unlashed in 1966, China recalled all its ambassadors from the Middle East, save for the one to Egypt. Although the relations between the two countries were rocky, the distinction of Egypt being the only country the region to retain a Chinese ambassador is testament to the value that China placed on Egypt’s regional importance (Li, 1995). Anwar Sadat, Nasser’s successor, followed Arab nationalism to a limited degree and focused more on establishing peaceful coexistence with Israel after the 1973 Yom Kippur War, which Egypt fought in concert with Syria against Israel. The aftermath of the war opened channels for the pursuit of Arab-Israeli peaceful coexistence through diplomacy rather than war, with Egypt being the principal Arab player. One of the biggest changes of Egypt’s foreign policy behaviour during this period was ‘the unprecedented and courageous visit of President Sadat to Israel in November 1977, and the conclusion of the peace treaty with Israel’ (Boutros-Ghali, 1982: 771). Sadat’s efforts won him adulation and admiration in Israel and the United States but put him at odds with most of the Arab world. After the Camp David Accords, signed by Sadat and Israel’s Prime Minister Menachem Begin, 17 Arab nations renounced formal ties with Egypt. It is Arab embitterment over Sadat’s peace efforts with Israel and the concomitant dalliance with United States that would eventually lead to his assassination in 1980. During that period, China counseled the Middle Eastern countries and Palestinians not to server ties with Egypt (An, 2010).

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Hosni Mubarak, who ascended to the presidency after Sadat’s assassination, was ‘intent on pursuing the negotiations and efforts to reach a comprehensive, peaceful solution that would bring justice and security for all’ (Boutros-Ghali, 1982: 777). In addition, Mubarak had a constant reminder of the internal and external factors that had led to the tragic end of his predecessor’s reign. For this reason, he wanted to temper the extreme views of Nasser and Sadat and chart a middle course that would bring stability and create grounds for development in Egypt (Dessouki, 1987: 82; Cook, 2020). Sadat’s renunciation of Arab radicalism established a pragmatic base on which his successor could build his foreign policy. Putting the cloak of stability around Mubarak’s leadership was crucial to mask his raw intent on securing his regime – thereby forestalling possibilities of revolt. At a regional level, Egypt under Mubarak did not overtly assert regional domination, although it enjoyed it to some degree (Aftandilian, 1993). This explains why Egypt fought against Iraq during the Gulf War, fearing that Iraqi seizure of Kuwaiti oilfields would give Saddam Hussein a chance at dominating the Middle East using oil revenue and the military might that it could purchase. When the Arab Spring ended Mubarak’s presidency, Egypt had registered some improvements: life expectancy rivalled that of the developed world and polio immunisation was around 95% (Cook, 2020). Muhammad Morsi succeeded Mubarak. The end of the Mubarak era in 2011 set in motion a state of flux in high-level politics in Egypt. One of the main reasons for Muhammad Morsi’s removal from power was that he was of Muslim brotherhood stock. It is noteworthy, though, that his first foreign visit outside Africa and the Middle East was to China where he met with his Chinese counterpart – Hu Jintao. China promised to provide Egypt with police cars and a $200  million credit to the National Bank of Egypt (Bardsley, 2012). Morsi was removed from power in 2013 and after the short acting presidency of Adly Mansour, Abdel Fattah El-Sisi was voted as Egypt’s president. Egypt under the government of El-Sisi has deepened relations with China, partly because the controversial nature of El-Sisi’s ascendancy to power did not augur well with Western democracies. This was not the case with China. Second, Egypt has very ambitious plans; the most prominent is the construction of the new administrative capital outside Cairo. China, with its historically close relationship with Egypt, coupled with its good record of accomplishments in infrastructure development, is a natural partner for Egypt. In January 2016, President Xi visited Egypt at El-Sisi’s invitation. This visit was the first of its kind since 2004 and came 4 months after El-Sisi visited China in September 2015 to join China in commemorating 70 years since the end of the Second World War (Hassanein, 2019). The following section looks at how this Sino-Egyptian relationship manifests in the area of infrastructure.

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4 Egypt-China Relations After 2011: A Focus on Infrastructure As China was embarking on its economic reforms starting in 1978, it invested heavily in infrastructure. Among OECD donors and multinational banks however, investment in infrastructure fell; for example, from the 1950s to the 1980, World Bank allocations to infrastructure fell from 70% to 30% (Jing & Carey, 2019: 155). Recently, infrastructure has again started to claim attention. Through grand projects such as China’s Belt and Road Initiative (BRI), China wants to play a central role in building assorted forms of infrastructure, from transport to telecommunications. Africa is the least developed region in the world and the deficiency of infrastructure conspires with other challenges to stymie the continent’s potential. According to the Programme for Infrastructure Development in Africa (PIDA), ‘road access rate in Africa is only 34%, compared with 50% in other parts of the developing world, while transport costs are 100% higher. Only 30% of Africa’s population has access to electricity, compared to 70–90% in other parts of the developing world’. Egypt is vastly outperforming most of its counterparts in these areas, needing an annual 0.7% of its GDP for electricity to meet the Sustainable Development Goals (2016–2030) for provision of electric energy (G20, 2017: 41). China’s involvement in financing and building infrastructure in Egypt is a microscopic manifestation of China’s activities in the rest of the Africa continent. From 2011 to 2016, China’s average annual contribution to Africa’s infrastructure was $11.5 billion. This was more than any other single country and tellingly, vastly more than the $2.5 billion average of Multinational Development Banks (MDBs). It is heartening to note, though, that most of the funding comes from African governments, scoring an average of $30.1 billion in the same timeframe (AfDB, 2018: 82). In 2018, China contributed $25.7 billion to Africa’s infrastructure funding, representing 23.55% of the overall funding for that year. In the 3 years preceding that, ‘commitments by China increased by 65%’ (ICA, 2018: 2). An encouraging trend about China’s recent commitment to Africa’s infrastructure is that it goes ‘beyond the country’s earlier focus on financing for resource-rich economies and is reaching sectors in which it has particular technical expertise – such as hydropower – and those that are not as amenable to the private sector – such as transport (especially road and rail)’ (Gutman et al., 2015: 2). The main areas of China’s involvement in Africa are in the energy and transport sector. Speculation about China’s motives is rife with division. Some argue that at the superficial level, building infrastructure is aimed at helping Africa into the global economy by fostering growth and overcoming infrastructure deficits; but, at a more fundamental level, China wants to secure Africa’s diplomatic support at forums such as the United Nations and on touchy issues such as Taiwan and the South China Sea (Mourdoukoutas, 2019). On Sino-­ Egyptian ties, there is an explicable suspicion that courting a country such as Egypt, with its considerable Muslim population, gives some semblance of justifiability to China’s treatment of the Uighur Muslim population whom it suspects of extremist sensibilities.

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In the new millennium, the first major Chinese commitment to Egypt’s infrastructure was Hutchison Port Holdings’ (HPH) acquisition of ‘a 50 per cent share in a joint venture with Alexandria Port Authority to construct, operate, and manage two container terminals in the ports of Alexandria and El Dekheila on Egypt’s northern Mediterranean coast’ (Scott, 2015: 1). The amount of the purchase was not made public. Since acceding to the presidency, El-Sisi has a ‘track record of seeking Chinese help to fulfill his ambitious domestic and foreign agenda’ (Hassanein, 2019). After securing $12.5 billion from the IMF in 2016, Egypt embarked on a battery of economic reforms that included the removal of energy subsidies, renouncing currency controls and transforming the tax structure – all aimed at bolstering foreign revenue (African Development Bank, 2018). ‘In this climate, China has injected between 16 and 20 billion USD into the Egyptian economy in the form of loans, investments, and development projects’ in the sectors of ‘infrastructure, energy and the telecommunications’ (Tahrir Institute for Middle East Policy, 2019). While Egypt seeks to learn from the experience of resurgent economies such as the Asian Tigers and India, China seems to be a model of choice. Ofir Winter and Doron Ella (2019: 3) assert that China claims Egypt’s admiration because it is an exemplar for a ‘government that places greater emphasis on stability, development, and construction, and less on freedom and democracy’. El-Sisi has noted China’s silence and hence tacit approval of the events that followed Egypt’s 2011 revolution. This is symptomatic of China’s non-interference policy, which has been an endearing feature of China’s interaction with the developing world. Egypt has reciprocated by keeping out of China’s treatment of the Uyghur Muslims. Like many African countries, Egypt stands in need of infrastructure. According to World Bank estimates, in the 10 years starting in 2018, Egypt will have a labour force of 80 million people. ‘Improving infrastructure will provide access to jobs, markets and basic services. It will also create reliable supply chains and therefore allow for the efficient movement of goods and services across borders, and bolster Egypt’s export potential’ (World Bank, 2018: 1). However, according to the G20’s 2017 Global Infrastructure Outlook, Egypt will need to invest about $675 billion in infrastructure over 20 years to meet its growing challenges (ibid). Unfortunately, it is projected that Egypt could only manage to muster $444 billion during this period, leaving a gap of $231 billion (AfDB, 2018: 10). Like elsewhere in Africa, Egypt has identified China as a dependable partner in remedying the dearth of infrastructure. The free-trade and industrial zones that Egypt started creating in the 1990s have not made much impact on the economy partly because of ‘infrastructure gaps (including multimodal transport systems)’ (OECD, 2018: 69). Egypt has sought cooperation with China ‘in the projects of the new Suez Canal industrial zone and the new administrative capital, and established new collaborations in the fields of technology, investments, trade, maritime transport, and tourism’ (Winter & Ella, 2019: 3). China’s Tianjin Economic-Technological Development Area (TEDA) is ‘developing an area of 7.23 square km in Egypt’s vital Suez Canal economic zone’ (Xinhua, 2019). The Chinese Embassy in Egypt boasts that the Suez Economic & Trade Cooperation Zone (SETCZ) ‘is by far the largest project invested by China in Egypt’ that by 2012 had attracted 38 comprising

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of ‘2 constructive enterprises, 13 service enterprises and 23 productive enterprises, with the total registered capital up to USD 357.6 million and almost 1000 local jobs’ (Chinese Embassy in Egypt, 2012). In 2017 Sino Hydro, a subsidiary of China’s PowerChina, offered to help set up Tahrir Petrochemicals Complex, Egypt’s largest petrochemical facility, and extended $3.1 billion towards the project. The China Harbour Excavation Company (CHEC), a subsidiary a subsidiary of state-owned China Communications Construction Company (CCCC), is another big player in Egypt’s infrastructure space. CHEC built a container terminal at Port Damietta and a terminal basis in the Sokhna Port. Through the CHEC, China has also been involved in Egypt’s transport infrastructure. Following El-Sisi’s December 2014 visit to China, CHEC and Egypt’s Ministry of Transport signed an agreement for a high-speed railway from Alexandria in the Mediterranean to Aswan near Sudan. The total estimate of the project was $10 billion (Scott, 2015). State-owned Aviation Industry Corporation of China (AICC) also signed a Memorandum of Understanding (MoU) with Egypt’s Ministry of Transport to provide a $1.5 billion loan to build an electric railway from El-Salam City to Belbeis and Sharqeya in greater Cairo, a distance of 80 km. The loan was repayable over a 20-year period. The Chinese Railroad Corporation and China’s Exim Bank undertook to contribute towards building a light rail system that would connect the new administrative capital to cities other than Cairo. The project was earmarked to require $1.2 billion and that, upon completion, it would cater for up to 350,000 passengers daily. China State Construction Engineering Corp (CSCEC) is building what is set to be the tallest building in Africa in Egypt’s new administrative capital. In conjunction with Egyptian construction companies, China is building no less than 20 buildings in the emerging business district (Tahrir Institute for Middle East Policy, 2019). The accession of Xi Jinping and El-Sisi to the presidency of their respective countries almost coincided with China’s One Belt One Road initiative.

5 Egypt in the BRI Mooted in 2013 by China as the One Belt One Road (OBOR) initiative, the Belt and Road Initiative (BRI) is one of the biggest infrastructure projects in history. The change in nomenclature (from OBOR to BRI) was not perfunctory; it meant to convey an inclusive nature to the project and present it as a collective effort between China and other participants, rather than a single network emanating from, and leading back to, China. President Xi Jinping (2018a: 317) proposed the BRI during his visit to Kazakhstan ‘to forge closer economic ties, deepen cooperation and expand development space in the Eurasian region’. The BRI has two main forms; one is the Silk Road Economic Belt, which is a land-based node of roads emanating from China to Europe and tracing the same route of the ancient Silk Road. The second part is the Maritime Silk Road of the twenty-first century, also analogous to ancient maritime routes. At the opening of the Belt and Road Forum in May 2017, Xi

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(2018a: 78) announced that 4 years after the proclamation of the BRI, ‘over 100 countries and international organizations [] supported and got involved in this initiative’. By 2018, 68 countries had signed some forms of BRI agreements. Expectedly, Chinese firms will execute almost 90% of the BRI projects (The Economist, 2017). According to the Chinese Ministry of Commerce (MOFCOM), from 2013 to 2019 ‘total trade between China and other countries participating in the BRI … exceeded 6 trillion dollars, and China’s investment in these countries … surpassed 80 billion dollars’ (MOFCOM, 2019a). In the space of 2 years (2014–2016), the total trade volume ‘exceeded US$3 trillion-worth (sic)’ (Xi, 2018b: 80). The BRI ‘directly touches and concerns several African countries, primarily Egypt, Ethiopia, Morocco, and South Africa’ (Kidane, 2019: 231). It is in China’s interest to court Egypt under the framework of the BRI because Chinese infrastructural involvement, especially in the Suez Canal and Mediterranean Sea, could give Chinese ships seamless passage to Europe (Bocharov, 2020). The Suez Canal remains ‘the main trade route between Europe and Asia, accounting for roughly 7.5% of world sea trade’ (AfDB, 2018: 9). The interests go both ways because Egypt’s internal challenges compel it to seek lucrative relations with China. A year after China announced the BRI, Egypt launched its own plan of development and revitalisation. When the two leaders met in China in 2014, they pledged to improve on what they termed a strategic partnership. In February 2016, President El-Sisi of Egypt launched Egypt’s Vision 2030. The vision has eight main targets among them improving quality of life, innovation, peace and security and improving the country’s stature. Both China and Egypt have argued that their respective plans offer opportunities for strategic synergy. In his speech at the 2018 FOCAC event in China, El-Sisi highlighted the consonance between the BRI and Africa’s Agenda 2063. He was also one of the 35 world leaders that attended the Belt and Road Forum in China in April 2019. At the end of 2018, Egypt was one of the 13 countries that benefited from the $7.5 billion dollars issued by the Asian Infrastructure Investment Bank (AIIB), the main funder of the BRI, for 35 projects (ibid). The 13 countries jointly with China ‘set up the Maritime Silk Road Port Cooperation Mechanism and released the Ningbo Initiative on the Maritime Silk Road Port Cooperation’ comprising of ‘33 representatives from government transportation and customs departments, key port enterprises, port authorities and terminal operators’ (National Health Commission of China, 2018). China and Egypt signed a Five-Year Plan under the framework of the BRI. The plan enjoined the two countries to ‘seek greater cooperation in terms of production capacity, while strengthening bilateral investment ties, developing the China-Egypt Suez Economic and Trade Co-operation Zone, and nurturing financial co-operation between their respective financial institutions and enterprises’ (HKTDC, 2016). By 2019, Egypt became ‘the fourth largest recipient of Chinese investment in Africa’ (Tahrir Institute for Middle East Policy, 2019). Private Chinese companies have piggybacked on the BRI to establish plants in Egypt. For example, China’s giant shoe manufacturer Huajian Group announced in August 2019 that it would be investing in Egypt’s Roubiki Leather City an undisclosed number of resources. The fact that the group’s founder and chairman Zhang

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Huaron was accompanied ‘by Han Bing, the minister counsellor for economic affairs at the Chinese embassy in Cairo’ to meet Egypt’s Minister of Trade and Industry (Amr Nasser) demonstrates close synergy between the Chinese government and private Chinese companies in some cases. It is also telling that China’s Ministry of Commerce (MOFCOM) broadcast the announcement on its web site (MOFCOM, 2019b). More than just infrastructure, the BRI will also be a vehicle for cultural exchange and Egypt, through its rich history, diverse population and religious heterogeneity, has an appealing cultural dynamic. Through Egypt’s participation in the BRI, China will entrench its connection with Middle Eastern countries and civilisations. At the 2016 Arab League Summit, Xi Jinping (2017: 502) stated: ‘the Belt and Road Initiative calls for exchanges between nations and civilizations for better mutual understanding, rather than mutual resentment’. An ideal case scenario for the BRI is that mutual understanding is coupled with mutual development, or ‘win-win’ cooperation to use China’s parlance. However, what are the odds of this happening as current relations between Egypt and China stand in the area of infrastructure? The penultimate section offers some interpretations.

6 Interpreting Egypt-China Relations in Infrastructural Development Ideals of sovereignty in the developing world and a concerted struggle against Western dominance in the resources and internal affairs of the developing world helped to conceive Egypt-China relations. China’s support for Nasser’s nationalisation of the Suez Canal exhibited the solidarity that the Bandung Conference promoted. From these ideological origins, relations between Egypt and China under current circumstances are more tailored towards pragmatism. Egypt is a strategic gateway to China’s penetration of the Mediterranean. China is Egypt’s dependable source of finance needed to facilitate Egypt’s ambitious infrastructure plans. The chapter has shown that even private-owned Chinese firms are making inroads in Egypt. Furthermore, Chinese companies are also poised to merge with non-Chinese ones in order to be involved in building Egypt’s infrastructure. The data has shown that the BRI fosters the expansion of Sino-Egyptian relations beyond state-to-state interaction and involves more activities than infrastructure. The case of Huajian Group in Egypt’s leather industry demonstrates this. As one of Africa’s most populous countries, Egypt has a massive pool of potential labour force which could benefit from China relocating some of its industries to the continent, if that became the case. However, this could only happen if Chinese industries are sure to find dependable infrastructure (in the form or transport and constant supply of electricity). It is thus imperative that Egypt improves its infrastructure, not only to cater for its population, but also to attract the interest of Chinese industries in search of more affordable labour abroad.

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Egypt’s decision to build the new administrative capital is a sound one, as it will help to depopulate Cairo. The country has shown a great deal of confidence in China by awarding multiple responsibilities in the new capital, and enlisting China to build the Iconic Tower. These is evidence that Egypt has made progress in securing access to potable water and energy for its citizens. The main niche that China could thus play in Egypt could be in reviving the industrial zones that have been torpid in Egypt, and improving transport infrastructure. Despite the obvious benefits that infrastructure development could bring to Egypt, there are certain concerns for which the two countries should be braced. The onslaught of the coronavirus is likely to influence China’s commitment to some of its ongoing projects in Egypt, especially in terms of state-sponsored contributions. Second, China’s commitment to Egypt and its simultaneous commitment to infrastructure development in Ethiopia could be a source of tension if it touches the Grand Renaissance Dam. Third, the lingering doubt that African countries could fail to pay back their debt to China is reasonable when one considers the fact that for several years Egypt has been running a deficit in its budget. Finally, and in addition to the previous misgiving, is the occasional opacity that surrounds China’s dealings with Africa, in terms of the exact amounts of funds and terms involved. This only adds to intrigue and fears that China is ensnaring its African counterparts into a debt trap from which Africa could emerge only after ceding some of its valuable assets. Disclosure could demystify this speculation.

7 Conclusion The chapter set out to look at the depth and manner of China’s infrastructure involvement in Egypt after the 2011 revolution. Egypt, like many African countries, suffers a deficit of infrastructure. China’s involvement, especially under the framework of the BRI, is thus commendable, although it comes with certain concerns. Xi Jinping touts the BRI as one of China’s prongs on its quest for ‘peaceful development, and independent foreign policy of peace and a mutually beneficial strategy of opening up’ (Xi, 2017: 502). However, it is difficult to establish the depth and fairness of China’s commitment and relations with its African partners because some of the deals are bereft of disclosure. When all the figures are in the public domain, it would be more manageable for writers and observers to analyse the data and see how it correlates with the tenor of Africa-China relations. Absent that, research is likely to be speculative and suggestive.

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References African Development Bank. (2018). 2018 African economic outlook: Egypt. Available at https:// www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-­Documents/country_notes/Egypt_ country_note.pdf African Development Bank. (2020). African economic outlook (supplement): Amid COVID-19. https://www.afdb.org/sites/default/files/documents/publications/afdb20-­04_aeo_supplement_ full_report_for_web_0705.pdf Aftandilian, G. L. (1993). Egypt’s bid for Arab leadership. Council on Foreign Relations Press. Agenda 2063: The Africa We Want. (2015). The African Union Commission. Alexander, A., & Naguib, S. (2018). Behind every Caesar a new one? Reflections on revolution and counter-revolution in Egypt in response to Gramsci on Tahrir. Review of African Political Economy, 45(155), 91–103. https://doi.org/10.1080/03056244.2017.1391765 An, H. (2010). Continuing development and strengthening of China-Egypt relations. Bardsley, D. (2012, August 29). Egypt’s Morsi visits China in investment bid. The National. Available at https://www.thenational.ae/world/asia/egypt-­s-­morsi-­ visits-­china-­in-­investment-­bid-­1.403334 Bocharov, I. (2020). Egypt-China relations at the present stage. Russian International Affairs Council. Available at https://russiancouncil.ru/en/analytics-­and-­comments/columns/ middle-­east-­policy/egypt-­china-­relations-­at-­the-­present-­stage/ Boutros-Ghali, B. (1982). The foreign policy of Egypt in the Post-Sadat era. Foreign Affairs, 60(4), 769–788. Chen, T. (2011). Four points toward the understanding of Egypt’s foreign relations. Journal of Middle Eastern and Islamic Studies (in Asia), 5(1), 83–101. https://doi.org/10.1080/1937067 9.2011.12023175 China International Import Expo. (2019). Egypt, China share promising potentials for joint trade, investment: Experts. Available at https://www.ciie.org/zbh/en/news/exhibition/ News/20191218/20512.html Chinese Embassy. (2012). Suez economic & trade cooperation zone. Available at http://eg2.mofcom.gov.cn/article/biography/201204/20120408090576.shtml Cook, S. A. (2020). The whole world got Hosni Mubarak wrong. Foreign Policy. https://foreignpolicy.com/2020/03/03/hosni-­mubarak-­legacy-­whole-­world-­wrong-­egypt/ De Smet, B. (2016). Gramsci on Tahrir: Revolution and counter-revolution in Egypt. Pluto Press. G20. (2017). Global infrastructure outlook. Oxford Economics. Available at https://cdn.gihub.org/ outlook/live/methodology/Global+Infrastructure+Outlook+-­+July+2017.pdf Gutman, J., Sy, A., & Chattopadhyay, S. (2015). Financing African infrastructure: Can the world deliver? Available at https://media.africaportal.org/documents/ AGIFinancingAfricanInfrastructure_FinalWebv2.pdf Hassanein, H. (2019). Egypt takes another step toward China. The Washington Institute. Available at https://www.washingtoninstitute.org/policy-­analysis/view/egypt-­takes-­another-­ step-­toward-­china Hillal Dessouki, A. E. (1987). Egypt. In S. F. Wells Jr. & M. A. Bruzonsky (Eds.), Security in the Middle East. Westview Press. HKTDC. (2016). China and Egypt announce five-year plan for strengthening their comprehensive strategic partnership. Jing, G., & Carey, R. (2019). China’s development finance and Africa’s infrastructure development. In A. Oqubay & J. Y. Lin (Eds.), China-Africa and an economic transformation. Oxford University Press. Kidane, W.  L. (2019). Agreement and dispute settlement in China-Africa economic ties. In A. Oqubay & J. Y. Lin (Eds.), China-Africa and an economic transformation (pp. 216–238). Li, D. (1995). China’s foreign policy toward the Middle East in the post-Cold War era. Zhongsheng Chubanshe.

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Part II

Industrial Cooperation

Agriculture in African Industrialisation and the Role of China Gedion Jalata

1 Introduction In 2003, the African continent adopted the Maputo Declaration on Agriculture and Food Security, which paved the way for the Comprehensive African Agriculture Development Programme (CAADP). The aim of CAADP was to spur agricultural development and boost economic growth. Africa’s heads of state recommitted their resolve to transform the continent’s agriculture in 2014, with the signing of the ‘Malabo Declaration for Accelerated Agricultural Growth and Transformation for Shared Prosperity and Improved Livelihoods’. Apart from an emphasis on increasing national investments towards agriculture, the continent is also receiving development assistance in the different sectors of the economy, including agriculture. This assistance is coming not only from traditional donors, but also from emerging economies, namely China, India, Brazil, Turkey, and South Korea. This chapter provides an in-depth analysis of the role of the agriculture sector in Africa’s industrialisation, and how China is supporting this agenda. The chapter notes that Chinese development assistance to Africa’s agriculture is marginal in comparison with assistance provided to other economic sectors; it is, however, increasing. The trend indicates a strengthening of relations between China and Africa. While assistance is welcome, it is important to ensure that Africans remain primarily responsible for developing the continent’s sluggish agriculture sector. To that end, the role of emerging powers in the development of agriculture in Africa, including China and others, must be strategic, well-thought, and aligned with the specific continental or national context. It is also imperative that Chinese support to the agricultural sector focuses on the sector’s ability to generate foreign exchange G. Jalata (*) Centre for Excellence, Addis Ababa, Ethiopia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Ndzendze, D. Monyae (eds.), Perspectives on Africa-China Infrastructural and Industrial Cooperation, Africa-East Asia International Relations, https://doi.org/10.1007/978-3-031-38395-3_7

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earnings; diversification of exports, creation of employment, and facilitating strategic linkages. In this regard, China must scale up its agriculture development assistance to Africa in general, and focus on promoting agro-processing industrial parks to support agricultural value chains, in particular.

2 Agricultural Development in Africa 2.1 Trends in Agriculture Development in Africa

in percentage

Africa is endowed with abundant natural resources. The continent has about 12% of the world’s arable land, of which 60% is uncultivated. Only 7% of the continent’s arable land is irrigated, compared to 40% in Asia. In 2013, 183 million hectares of land was under cultivation in Sub-Saharan Africa (SSA), and approximately 452  million hectares of additional suitable land was not cultivated. Smallholder farmers account for most of the cultivated land and a sizable share of agriculture production. For instance, more than 75% of the total agriculture output in Kenya, Tanzania, Ethiopia, and Uganda is produced by smallholder farmers with an average farm size of about 2.5 ha (ECA Report, 2014: 14). With SSA countries being heavily dependent on agriculture, the sector has a positive relationship with the national gross domestic product (GDP). Accounting for an average of 30% of Africa’s total GDP, agriculture’s contribution to the GDP of different countries in SSA varies widely, to less than 8% in Southern African countries. Moreover, on average, about 65–70% of Africa’s labour force is employed in the agriculture sector. Figure 1 below shows GDP, employment, and the relative productivity level of the agriculture sector for 11 African countries for 1960, 1990 and 2010. The countries included in this survey are Botswana, Ethiopia, Ghana, Kenya, Malawi, Mauritius, Nigeria, Senegal, South Africa, Tanzania, and Zambia.

72.7

80 60

61.6

37.6

24.9

40 20 0

0.5 1960 GDP (%)

49.8 22.4 0.4

1990

2010

Years Employment (%)

0.4

Relave Producvity Levels

Source: De Vries, Gaaitzen, Timmer and De Vries. 2003: 6, 11. Fig. 1  GDP, employment and relative productivity levels of the agriculture sector for 11 African countries (1960, 1990 and 2010). (Source: De Vries et al., 2003: 6, 11)

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As Fig. 1 indicates, the agriculture sector’s GDP contribution to the 11 African countries surveyed declined over the period (37.6%, 24.9% and 22.4% in 1960, 1990 and 2010 respectively), while the productivity of the sector declined from 0.5 in 1960 to 0.4 in 2010. The sector also lost labour incrementally from 72.7%, to 61.6% and then 49.8% in 1960, 1990, and 2010, respectively. However, agriculture still has the potential to contribute greatly to economic growth and transformation in Africa. It remains the key sector for food security, employment, growth, and development in most African countries. Agriculture-led growth has the most substantial impact on reducing the depth and breadth of poverty. An increase in food staples is considered generally as pro-­ poor, as export crops may have higher value and growth potential. Africa’s big development agenda is to achieve an agriculture sector annual growth rate of at least 6%, a pre-requisite to meeting the time-bound targets set in the Millennium Development Goals (ECA and OECD, 2014), the current Sustainable Development Goals (SDGs) and the first ten-year plan of Agenda 2063. However, only eight African countries have been able to achieve the 6% agriculture sector annual growth rate. These are Angola, Ethiopia, Burkina Faso, The Republic of the Congo, The Gambia, Guinea-Bissau, Nigeria, Senegal, and Tanzania. The impressive economic growth and rapid improvement in rural poverty in Ethiopia, Rwanda, and Ghana have been fueled by growth in the agriculture sector. However, productivity in the sector is low in Africa and lags behind that of other continents. Africa’s rural population seems unable to transform its productivity rate significantly, and continues to live in poverty. This failure to transform agriculture is a significant barrier to development on the continent (ECA, AU, AfDB, and UNDP, 2014: 13–17). Rapid agricultural transformation through increased productivity, income growth, and competitiveness, with good natural environmental stewardship for sustainable development, is needed to actualise this economic growth agenda.

2.2 Budget Allocation to the Agriculture Sector An overview of the general nature of agriculture finance in Africa indicates that there have been five essential time periods and trends. The first was the 1950s to the 1970s. The financing of farmers during this period was characterised by interventions such as input credit, which was delivered through cooperatives and obtained from development assistance, government allocations, and central banks. This period also saw the establishment of agricultural banks, with most failing because of financial constraints and the lack of profitability. The second period was the 1980s. This period was characterised by the structural adjustment programme (SAP) policies. Some of the elements of the SAP included the removal of the government from the agriculture markets; the elimination of subsidies; and the abolition of sectoral lending quotas that had traditionally been imposed on banks that were financing agriculture. Consequently, the policy had positive results for farmers selling traditional export crops, such as coffee and cocoa.

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However, the programmes harmed smallholder farmers producing staple foods for domestic markets. Since then, poverty reduction has been an essential development agenda item on the continent (Xiayun et al., 2013; Amanor, 2013a). The third period was the 1990s, a period in which microfinance emerged as a potential panacea to the failure of the agricultural banks and financial liberalisation. Microfinance proved to be more effective at targeting the poor, in both rural and urban areas, with market-determined interest rates and better loan repayment conditions for poor households. Critics, however, argue that the agriculture sector did not benefit much from the supply of microfinance (African Centre for Economic Transformation, 2014: 72; Xiayun et al., 2013: 35). The fourth period started in 2003, with the Maputo/CAADP Declaration. In line with the CAADP declaration, African countries committed to allocating at least 10% of their national budgets to the agriculture sector. Some improvements in national agricultural investments were observed, with the continent’s agricultural sector spending increasing by more than 7% annually between 2003 and 2010. The number of countries spending more than 10% of their national budget on agriculture increased from 11% in 2003 to 22% in 2006. Moreover, 50% of the countries spent 4.6% of their national expenditure on agriculture development, showing a decrease from 57% in 2003 (ECA and OECD, 2014: 14). Regarding the 10% of budgetary allocation target, only a single country, Niger, consistently allocated 10% of its national budget to agriculture since 2003. Ethiopia and Mali have been able to allocate 10% or more of their budget to the agricultural sector since 2004, while Malawi and Zambia have been able to achieve this since 2005 and 2007, respectively. See Table  1 below on the share of agriculture expenditure (% of total spending) in selected countries in Africa. Finally, recent global concerns for food, industry, and fuel have also triggered a surge in agriculture investments in Africa. This is mainly because the rising global population is expected to reach 9  billion by 2050, and this may result in rising incomes, higher expenditures on foodstuffs. Biofuel initiatives, which resulted in an increase of investments in developing countries and the rapid rise in food prices, have bred investors in agriculture (Amanor, 2013a). However, the latest data on access to finance for the agriculture sector indicates that ‘few producers have access to credit, and high-risk levels, combined with the absence of effective public-private risk hedging systems remain, a barrier to investment’ in Africa (ECA and OECD, 2014: 14).

2.3 What Are the Challenges of Agricultural Development in Africa? Agriculture is the mainstay of most economies in Africa, accounting for more than 30% of the continent’s GDP. Nonetheless, the sector has not witnessed impressive growth due to a combination of factors that include the weak political will to

Year 2000 25.0 10.4 3.2 6.8 – 8.8 8.9 – – 1.6 – – – – 2.6 8.6

Source: ReSAKSS (2015)

Country Burkina Faso Ethiopia Ghana Kenya Liberia Malawi Mali Mozambique Niger Nigeria Rwanda Sierra Leone South Sudan Tanzania Uganda Zambia

2001 18.0 4.0 4.7 6.6 – 4.9 12.8 – 15.8 6.0 6.2 2.4 – – 1.6 6.2

2002 23.0 5.6 6.9 5.4 – 8.7 8.9 – 16.6 3.5 8.6 2.3 – 4.5 2.6 5.2

2003 33.0 8.4 5.8 4.1 – 6.6 9.6 – 16.4 1.9 3.9 3.1 – 6.8 2.3 6.1

2004 20.0 13.6 8.8 5.1 – 7.0 11.4 6.2 19.5 3.1 4.0 3.0 – 5.7 2.1 6.1

2005 12.0 16.5 9.8 6.6 – 11.1 15.5 4.4 14.5 3.4 3.4 2.3 – 4.7 2.0 7.2

2006 20.0 17.5 10.3 5.9 4.0 11 10.6 3.4 15.1 4.1 3.3 2.9 – 5.8 3.9 9.3

Table 1  Share of agriculture expenditure (% of total spending) in selected countries in Africa 2007 16.0 14.6 9.9 4.4 5.5 13.2 11.0 3.9 15.4 4.4 5.5 2.5 – 5.7 3.0 13.2

2008 14.0 11.7 10.2 4.8 8.6 31.6 12.7 5.4 12.2 4.6 5.6 2.2 1.4 2.5 3.2 12.5

2009 9.0 17.5 9.0 3.9 2.3 24.7 16.9 5.8 13.9 5.3 6.4 2.0 1.9 6.7 4.5 9.3

2010 11.0 21.2 9.1 4.6 2.9 28.9 13.9 5.5 12.7 5.7 6.6 1.7 1.4 6.8 3.8 10.2

2011 – – – 8.7 – – 23.9 – – – – 0.2 1.9 6.8 3.1 –

2012 – – – 6.8 – – – – – – – – – – 4.5 –

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support the sector; price risks and non-conducive policies; and little attention from international development partners. Moreover, increasing soil degradation; salinisation of irrigated areas, migration of youth to urban areas, climate change, infrastructure challenges, and market access is adversely affecting the productivity of the sector in many African countries. National seed regulatory policies are weak in many Africa countries, which undermines the functioning of the entire seed value chain. This is worsened by the absence of harmonised regional seed protocols. As measured by cereal productivity, yields remain low, averaging 1 metric tonne per hectare. This is a quarter of the global average. Per capita, food production has been declining, although aggregate production has been increasing through the expansion of the cultivated area. This, coupled with the 2009 food crisis, has resulted in Africa being a net food-importing region (except for South Africa). Africa’s cereal imports increased dramatically from less than 5 million metric tonnes a year in the early 1960s to more than 50 million metric tonnes per year by the mid-2000s. This is the direct antithesis of the situation in Asia, where per capita food production almost doubled between the early 1960s and the mid-2000s (ECA, 2014: 48). This happened because of the rapid uptake of high-yielding wheat and rice varieties and the use of fertilisers and irrigation, combined with subsidies. This, in turn, reduced the unit cost of production, and raised the productivity of land and labour. Research evidence suggests that ‘a 10 percent drop in transport cost as a result of improved road infrastructure is likely to generate a 25 percent increase in trade and drive down distribution costs to the benefit of producers and consumers’ (AGRA, 2013: 86). Sufficient infrastructure, including rural access roads, irrigation, and rural road networks, can contribute to lowering food distribution costs, to the benefit of producers and consumers (African Centre for Economic Transformation, 2014: 108). Low human skills development, lack of land management capabilities, and limited institutions to support the use of technology are important factors in explaining the relatively sluggish progress of the agriculture sector reflected in African countries that include Sierra Leone, Liberia, Niger, Mali, and Burkina Faso, among others. This problem is amplified by the frequent lack of capital. Insufficient financing continues to manifest in several ways, often equating to a lack of dependable farm inputs such as high-yielding varieties of seed, appropriate fertilisers, or cheap credit (Binswanger-Mkhize, 2009). There is also a low level of agricultural research and development in SSA. SSA has nearly 50% more agrarian scientists than India and about a third more than the United States (US), but all of SSA spends only about half of what India spends and less than a quarter of what the US spends on agriculture research and development (R&D). Only five African countries (Nigeria, South Africa, Botswana, Ethiopia, and Mauritius) are paying the recurrent budget of their national agricultural research system from national resources (Binswanger-Mkhize, 2009). For instance, only Kenya and Uganda consistently spend more than 1% of their GDP on agricultural research and development. Increasing the budget allocation to R&D by each country to at least 1% of agricultural GDP is recommended (AGRA, 2013: 25).

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Another significant challenge for agricultural development in Africa is the magnitude of financing requirements for the continent’s agriculture. Although accounting for more than 30% of the GDP of most countries, governments’ agriculture expenditure is less than a third of the contribution. Despite their commitments to the CAADP agricultural priorities, national governments have also not increased their funding for agricultural research significantly (in general) (ECA and OECD, 2014). The expansion of agriculture output in SSA, where farmers are predominantly smallholders, will require an average annual net investment of US$11 billion. Given the substantial financing requirements for smallholder agriculture, it is unlikely that African countries will be able to raise the needed funds (AGRA, 2013: 23). The challenge of illicit financial flows (IFFs) also depletes the resources available for development in Africa. The Economic Commission for Africa (ECA) and AU report on IFFs, 2015c, indicated that through trade mispricing alone, Africa is losing $50 billion per year (ECA and OECD, 2014). In the years from 1970 to 2008, the continent lost around $854 billion in IFFs. The total outflows from 2000 to 2010 were equivalent to nearly all the official development assistance (ODA) received by the continent (ECA and OECD, 2014). This is tremendous financial bleeding from the continent that could have been used to finance development. Due to several reasons, including IFFs above, the agriculture sector in Africa continues to be given low priority for investment. The total foreign direct investment (FDI) for Africa in 2000 was US$9.6 billion, which significantly increased to US$46 billion in 2009 (ECA, AU, AfDB and UNDP, 2014). In comparison, and for the same years, FDI inflows in Latin America were US$79.7 and US$78.4 billion, respectively. In summary, although agriculture is vital for Africa, it is ‘undervalued, under-resourced and under-provided’ (Binswanger-Mkhize, 2009: 46).

2.4 Regional and Sub-regional Agriculture Initiatives in Africa Despite the agricultural productivity challenges faced by SSA countries, the recent success recorded in some countries reflects that it is possible to achieve sustained agricultural growth in the region. The most notable cited economies in this regard are Kenya, Malawi, Zambia, Uganda, Tanzania, Ethiopia, Mali, and Burkina Faso. Their growth is attributed to several factors which include (i) the improvement of price incentives for producers as a result of unified exchange rates, lower industrial protection, and sharply reduced export taxation; (ii) growth opportunities for import substitution and regional agriculture trade resulting in higher international commodity prices; and (iii) strong commitment to agricultural and rural development by African governments, the regional institutions, and development partners. African countries are giving greater priority to agricultural development, courtesy of the leadership and support being provided by the African Union (AU) through the structured implementation CAADP, and the Malabo Declaration commitments. Launched in 2003 by the African heads of state and government in

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Maputo, Mozambique, CAADP sought to eliminate hunger and reduce poverty through agriculture. To do this, African governments committed to spending at least 10% of their annual national budgets from the then average investment levels of between 4% and 5%, which would in turn spur annual growth of agricultural GDP by at least 6%. As noted above, some African countries achieved the CAADP target, with Niger, Ethiopia, Mali, Malawi, and Zambia exceeding the target. African countries also committed to increasing agricultural trade within Africa, and harmonising fertiliser policies to reduce procurement costs. After the Maputo declaration, some notable progress in promoting the continent’s agriculture sector has been made. In 2006, through the Abuja Declaration, African heads of state committed to availing funds from national budgets to make the African Fertilizer Financing Mechanism operational; to develop and implement policy and regulatory frameworks for the fertiliser industry; and for RECs to develop and implement frameworks to monitor and evaluate progress in the implementation of the Abuja Declaration on Fertilizer. In 2009, the AU recognised the CAADP as the overarching framework for agricultural development and investment. Some of the accomplishments include the mobilisation of a considerable amount of finance for selected CAADP programmes. These are making markets work for the poor, with US$3.8 million being mobilised for this cause. African efforts aimed at supporting sustainable land and water management received US$1 billion. African fertiliser financing mechanisms received US$35 million. The regional programme on enhanced livelihoods for pastoral areas received US$19.8  million. The regional food security and risk management programme for Eastern and Southern Africa received €10 million (NEPAD, 2015). The AU also designated 2014 as the year of agriculture and food security in Africa. Furthermore, the Maputo Declaration was reaffirmed in the 2014 Malabo Declaration on Accelerated Agricultural Growth and Transformation for shared prosperity and improved livelihoods. African governments also further committed to ensuring at least double the current agricultural productivity levels by 2025 and to mobilising private and public investments. The AU Commission (AUC) and the NEPAD Planning and Coordinating Agency (NPCA) have been tasked to develop a roadmap for agricultural growth and transformation and to review progress using the CAADP Result Framework. There are also other emerging regional agricultural strategies in Africa that recognise the Malabo position. Agenda 2063 has a vision for the agricultural sector to be productive and resilient. The Common African Position (CAP) on post-MDGs also reflects that improved agricultural productivity is vital for a successful economic transformation in Africa. The document further indicates that a modernised and diversified agricultural sector increases agricultural productivity and sustains the agro-processing value chain by ensuring a predictable supply of raw materials. Sustainable agriculture reduces food loss shortages and leads to food self-­sufficiency and adequate nutrition, which in turn improves the health and productivity of labour. This will ultimately lead to structural transformation and inclusive and people-­ centred development. The document also calls for multilateral partnerships for sustainable agriculture, food self-sufficiency, and nutrition (CAP, 2014: 10, 12).

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Despite all these attempts to enhance the productivity of the agriculture sector in Africa, agriculture remains neglected in government budgets. It falls short of the Maputo commitments in most African countries’ budgetary allocations. Among the 44 countries that had signed the CAADP in 2014, half had reached 5%, with a continental average of 4%. In comparison, only five African countries were able to achieve 10% and above, as noted above, consistently. Regulatory and tariff barriers to trade have also limited regional trade in cereals to less than 5% of Africa’s total imports. This has adverse effects on the food security agenda of the continent (ECA and OECD, 2014).

3 Africa-China Partnership on Agricultural Development At the policy level, the Chinese government attaches great importance to the agriculture cooperation with African countries. As indicated in the 2013 White Paper on China-Africa Economic and Trade Cooperation, ‘the Chinese Government attaches great importance to its mutually beneficial agricultural cooperation with Africa, and works hard to help African countries turn resource advantages into developmental ones and sustainably develop their agricultural capacities’. It is important to note that China has been involved in African agriculture for almost half a century. Nonetheless, it was only 13  years ago (i.e. after the zero-tariff policy that the Chinese government adopted in 2005 for the least-developed African countries and some products from Africa) that agriculture exports from Africa to China increased from US$1.16 billion in 2009 to US$2.86 billion in 2012 an increase of 146%. At the same time, China’s agriculture exports to Africa grew from US$1.58 billion to US$2.49 billion. This represents a 57.6% increase. The most notable agricultural exports from Africa to China are non-food items such as cotton, hemp, silk, and oilseeds. Especially after the introduction of this policy, sesame imports in China grew from US$97 million in 2005 to US$441 million in 2011. This trend showed an annual increase of 28.7%, which is higher than the average growth rate of all products imported from Africa during the same period. China’s direct investment in African agriculture is also increasing fast. For instance, it grew from US$30 million in 2009 to US$82.47 million in 2012. This is because of investments by Chinese enterprises in Africa, in areas such as breeding of improved seeds, planting of grain and cash crops, and processing of agricultural products. Chinese support to African agriculture comes in both monetary and in-kind, focusing on food production, breeding, storage and transport, infrastructure development, training, construction of agricultural technology demonstration centres, as well as providing technical assistance through Chinese agricultural experts and technicians. Chinese banks also extend financing services to the continent’s agriculture sector. Since 2006, China has constructed and commissioned more than 40 agricultural demonstration centres in Rwanda, the Republic of Congo, Mozambique, Ethiopia, and some other countries.

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The country has also sent 50 agricultural technology teams to African countries to provide policy consulting and training of local personnel on practical techniques. Chad is one of the beneficiaries of China’s agriculture development assistance. A project to breed high-yield and improved quality crop varieties resulted in several thousand farmers receiving technical training. Consequently, the country registered over 25% increase in crop yields. At the 2015 FOCAC Ministerial Conference, China made various pledges in relation to agricultural cooperation with Africa. China pledged to expand cooperation on investment and financing to support sustainable development in Africa; to build or upgrade agricultural technology demonstration centres to increase agricultural productivity; to provide support through teams of senior agricultural experts and teachers to provide vocational education to African countries; to encourage and support investment in agriculture in Africa by Chinese enterprises; to translate and publish Chinese agricultural technology materials, and facilitate joint participation in book fairs in China and Africa; and, to facilitate access to the Chinese market for African agricultural products. At the 2018 FOCAC Ministerial Conference, China made the following pledges in relation to agricultural cooperation with Africa. • China will support Africa’s agricultural modernisation and will help the continent to upgrade its industrial and agricultural infrastructure, increase agricultural productivity and value-addition of agro-products, and the improvement of food and nutrition security by 2030. China will invest in the testing and adaptation of machines to align them to the African conditions, as well as establishing African dealerships to provide after-sale support and service. China will support the development of township and village industries, and will also promote inclusive growth and shared. • Working with its African counterparts, China will formulate and implement a programme of action to promote China-Africa cooperation on agricultural modernisation. This will see the implementation of 50 agricultural assistance programmes, the provision of RMB 1  billion (equivalent in $/GBP/EURO) of emergency humanitarian food assistance to African countries affected by natural disasters; providing technical assistance through a team of 500 senior agriculture experts, and training of entrepreneurs in agri-business. • China will support Africa in enhancing productive capacity in agriculture by promoting high-tech food production and agro-processing. • China will assist in terms of capacity building and technology transfer through the exchange of scientists, and the commissioning of research in crops, including molecular detection and identification of plant diseases, pest risk analysis, seed health testing/certification, and management of quarantine or containment facilities for materials with high-risk biosecurity levels. • China will assist cotton-producing African countries to establish high-quality standards as well as enhancing their capacity for industrial planning, production, processing, storage, transportation, and trade. This will move them up the cotton production value chain, and expand Africa’s market share in the international cotton market.

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• China will contribute to the development of the sugar cane sector, as well as exploring possibilities of facilitating the trade of sugar products with high potential. Agriculture played a central role in China’s economic development, and sharing these experiences has been a consistent priority in China’s engagement with Africa. Chinese cooperation for the sector in Africa focused on technocratic and capacity building interventions, as well as providing hybrid seed. It is also influenced by China’s own domestic development experience. For instance, since 2012, China has provided training opportunities for more than 20,000 Africans. The country also offered scholarships to more than 14,000 African students in the years 2012 and 2013 alone. China and African countries also collaborated to launch 30 agricultural technology cooperation projects. In addition, China has sent more than 500 agricultural experts and technicians (China-Africa, 2015).

3.1 Country Experience from Ethiopia, Mozambique, and Ghana 3.1.1 China’s Agriculture Development Assistance to Ethiopia China’s ties with Ethiopia are historic, with the two countries being the oldest nations in the world. Yet Sino-Ethiopian economic cooperation, including aid, officially began in the early 1970s and remained low until 1995. Sino-Ethiopian economic cooperation was restored with the return to power of the Ethiopian People’s Revolutionary Democratic Front (EPRDF) in 1991, with bilateral economic cooperation witnessing marked progress and rapid development in different areas especially after 1995. During the 1995 visit to China by then Ethiopia’s Prime Minister, His Excellency Meles Zenawi’s, the two countries signed economic and technical cooperation agreements. Prime Minister Zenawi also gained a good understanding of the operations of prominent Chinese enterprises and corporations. Similarly, when the Chinese President, Jiang Zemin, made an official visit to Ethiopia in 1997, the two countries also signed agreements on trade, investment and joint commercial ventures, and science and technology (Jalata & Venkataraman, 2009). About 92% of Chinese development assistance to Ethiopia goes to two sectors, namely energy generation and supply (65%), and transport and storage (27%). The remaining 8% goes to industry (3%), agriculture (3%) and education (2%). Accordingly, the agriculture sector is only 3% of the total Chinese development assistance to Ethiopia, and has been like this since 2008 when China started to support the agriculture sector. From 2008 to 2015, China disbursed concessional loans of about US$11,375 million, and grants worth US$97355 between 2013 and 2014, to two principal features of Ethiopia’s agriculture sector. The first feature is the establishment of agricultural technology demonstration centres, while the second is the dispatching of Chinese agricultural technologists to work in the agricultural

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Agriculture Industry

65%

Transport and storage Energy generaon and Supply Educaon

Source: Ministry of Finance and Economic Development of Ethiopia (MOFED), 2015 Fig. 2  China’s development assistance to Ethiopia by sectors (actual disbursement) from 2005 to 2015 (April). (Source: Ministry of Finance and Economic Development of Ethiopia (MOFED), 2015)

technology demonstration centres and to teach at agricultural technical vocational education and training (ATVET) in Ethiopia. See Fig. 2 below on China’s development assistance to Ethiopia by sector (actual disbursement) from 2005 to 2015 (April). The Ethiopian government is promoting investment in the country by offering diverse incentives for public and private investors. China’s agriculture sector FDI to Ethiopia, however, like development assistance, is minimal. The most significant Chinese foreign direct investments in Ethiopia are in transport, energy, technology, real state, and agriculture (China Global Investment Tracker, 2015). The total number of registered investments in the agriculture sector by China since 2008 is about 33. Of these, 18 are in vegetable farming; four are in edible oil production and processing, including a major investment in palm oil plantations; three companies are licensed for sugar cane production and processing, and three have received permits to operate in pig farming and processing. Another two companies have permits for poultry farming, one for mushroom farming, and one for a rubber plantation. Although Chinese investment in Ethiopian agriculture is relatively smaller compared to its investment in other sectors, it has been growing incrementally from a decade ago when it was almost nil. Ethiopia also learned from emerging economies, such as India, Brazil, and South Korea, from whom it adopted restructuring the agricultural research system; promotion of a bio-energy strategy; and group action approaches for organising farmers, respectively. Ethiopia also took some agricultural policy lessons and measures from China, including the introduction of agricultural technical and vocational schools (TVET); the introduction of agro-industry zones near major towns; and the adaptation of group action approaches for organising farmers (CAADP, n.d.).

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3.1.2 China’s Agriculture Development Assistance to Mozambique Investment by Chinese enterprises in Mozambique has been increasing rapidly. For instance, China invested around US$200  million in Regadio do Baixo Limpopo, otherwise known as the Xai-Xai irrigation scheme. The project aimed to increase rice production through an irrigation scheme and the transfer of rice production technology to local farmers. As a result of the intervention, local farmers registered yields of up to 5 tonnes per hectare, 2 tonnes more than previous yields from their paddy fields. Despite all its successes, the Xai Xai project has its critics. Some argue that technology transfer failed because Mozambican farmers lacked the requisite commitment to agriculture. Further, the investment was also regarded as ‘land grabbing’, with reports citing the displacement of several local people from their land. Critics also argue that there was no local consultation when the project was implemented (Anesi & Fama, 2013). In response to critics, the Chinese government clarified that the agricultural investment was requested by the Government of Mozambique with the objective increasing the country’s rice production from 100,000 to 500,000 tonnes. In another agriculture intervention, Chinese enterprises and the China-Africa Development Fund jointly invested in a cotton planting and processing project. Modelled on enterprises working with smallholder farming households, the project engaged tens of thousands of local growers, effectively enhancing local capabilities in cotton processing. This project is also extended to Malawi and Zambia (Gabas, & Goulet, 2013). 3.1.3 China’s Agriculture Development Assistance to Ghana China and Ghana established diplomatic relations in 1960. Since then, Ghana has provided diplomatic support to China in return for China’s material support, loans, and grants. For instance, Ghana supported China’s push for a permanent seat at the United Nations, and for the ‘One China’, effectively declaring Taiwan as an integral part of China. During Wen Jiabao’s visit to Ghana in 2007 the two countries signed agreements on different areas of economic cooperation. The principal China-Africa cooperation areas include infrastructure, energy, communications, agriculture, trade, education, and training. In this context, China extended a US$66 million loan to Ghana for the upgrading of its telecommunications network; and a US$6 billion concessionary loan from China’s Exim Bank for the country’s rail network. China also wrote off US$25 million in debt for Ghana, among others. China also extended development cooperation for the construction of a hydro-electric dam and road. Seven hundred Ghanaians received Chinese-funded training courses in trading, communication, energy, auditing, agriculture, and fisheries operations. Within the context of the oil industry, Chinese development cooperation in Ghana has been increasing, with Ghana signing a US$13 billion loan with the Chinese Exim Bank in 2013 (Strange et al., 2013).

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In the agriculture sector, China extended US$99 million in interest-free loans for fisheries and rice projects. Exchanges have been facilitated in the areas of irrigation, agro-processing, agricultural technology, and infrastructure development. Volunteers sponsored by the Chinese government have been teaching agriculture at the University of Ghana. China also established the West African regional office of the China-Africa Development Fund (CADFund) in Accra to facilitate Chinese investment in the sub-region. Constituting only 4% of its total investment in Ghana, Chinese investment in the agricultural sector is minimal. The largest agriculture investment is in irrigation, with the Afife or Weta project, occupying 880 acres being the largest rice-growing irrigation project in Ghana. There are other investments in fertiliser plants and agrochemicals by Chinese companies. This may be developed with an interest in the emerging petroleum industry in Ghana (Amanor, 2013b).

4 Challenges and Prospects on Agriculture Partnership Between Africa and China 4.1 Challenges in Agriculture Cooperation Despite all the attempts to promote China-Africa collaboration in agricultural development, it is clear that the partnership on the agriculture sector is low. Critics argue that Chinese development assistance and foreign direct investment may cause potential food security conflicts between China and African countries. This argument is further strengthened by noting that Chinese agriculture support, particularly in rice production for a few African countries such as Mozambique, is clearly destined for export to the Chinese market. However, to a great extent, Chinese farms in Africa produce solely for local markets. However, in the future, and as a result of its population growth, China may run out of farmland. This will have an adverse effect on its food security, forcing it to opt for producing greater quantities abroad, as is the case with Japan and Korea (Scoones et al., 2013). As reflected above, Chinese agricultural investment in Africa focuses on agricultural technology and seed cultivations through agricultural technology demonstration parks. The underlying aim is to make foreign aid sustainable by linking it with commercial opportunities for Chinese companies. The production of hybrid rice is one central technology being disseminated in these parks. While hybrid rice is more productive than their parent stock, it has limitations with adverse effects on farmers. Farmers have no option but to purchase seed every season because harvested hybrid rice does not reproduce the genetic traits of their parents. The plight of the farmers is worsened by the fact that they no longer have the traditional seeds after adopting the hybrids. Further, most seed producers are owned and controlled by multinational companies. The experts seconded by China are also coming for short-term contracts, mostly for 2-year contracts, unless extended. This may adversely affect sustainable profitability as an objective in the agricultural sector (Chichava et al., 2013).

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A criticism of China’s approach to supporting Africa’s agriculture is its failure to invest in a comprehensive understanding of the local context by ‘investigating the economic dynamics such as markets, transportation or distribution, or the institutional chain required’, especially for hybrid rice. China hoped to inspire local villagers by their working spirit and personal practice, and focused on technical transfer by demonstrating, teaching, and repairing, but did not investigate. Another challenge is the barrier created by the cultural difference between China and Africa. For instance, not all experts coming from China speak English very well, which creates a communication challenge for Chinese experts and their African counterparts. Moreover, there is a huge gap in the agricultural practices of China and Africa. Chinese farmers use intensive agriculture, while African farmers use the shifting cultivation method that depends on fallow systems, which may create misunderstanding between the two. This phenomenon leads to the conclusion that Africa does not understand China and vice versa. This is further fuelled by the Chinese tendency to segregate themselves from the local population when implementing development assistance projects (Chichava et al., 2013).

4.2 Prospects in Agricultural Cooperation Despite the above arguments on the challenges of agricultural development in current China-Africa relations, agriculture is an emerging area for China’s engagement in Africa. Agricultural engagement in Africa today is framed as ‘South-South Cooperation’, which emphasises a reciprocal relationship of mutual benefit. There are bright prospects for the sector, for the following reasons. First, Africa and China need each other. In as much as Africa needs developmental assistance from China, China needs Africa because of its resources, including land, low-cost resources, labour and market connections, which are vital to agri-­ business and trade plans. Africa’s vast uncultivated arable land is also critical for longer-term global food security, particularly for the populous countries of Asia, including China. Second, the China-Africa relationship is deepening over time, with favourable implications for future agricultural cooperation between the two. This is reflected in the 2013 Chinese White Paper on Economic and Trade Cooperation. As noted in the document, China plans to enhance its agricultural collaboration with Africa in the future in many ways: In the future, China will advance agricultural cooperation with Africa in all respects while ensuring that this cooperation puts both parties on an equal footing, is mutually beneficial, and promotes joint development. It will work to establish and improve a mechanism for bilateral agricultural cooperation and strengthen Sino-African collaboration in the sharing of agricultural technologies, resource varieties and agricultural information, the processing and trade of agricultural products, construction of agricultural infrastructure, and training of human resource. China will continue to encourage and support established Chinese enterprises to investment in agriculture or technological cooperation in Africa. China will arrange and launch an appropriate number of agricultural demonstration centres in African countries, depending on their actual needs. China will also work to deepen Sino-African cooperation within the frameworks of the United Nations’ Food and Agriculture

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Organization (UNFAO) and the International Fund for Agricultural Development (Information Office of the State Council, The People’s Republic of China, 2013).

Third, there is an improved political commitment from African countries on agricultural development. This is demonstrated by the African countries’ commitments to develop and implement appropriate transformative policies and allocating at least 10% of their national budgets to agriculture. As noted above, Chinese development assistance is demand-based. Thus, emerging issues in Africa may encourage China to enhance its focus on the agriculture sector in its engagement. Specifically, African countries can benefit from the experiences of China’s smallholder agricultural policy and institutional capacity through development cooperation efforts. Chinese agricultural cooperation in the future may also be extended to building irrigation systems and dams, and the supply of farm machinery, inputs, and agrochemicals, rather than the current assistance that is focused on on-farm management, seeds and inputs. Fourth, agricultural development assistance is considered as complementary to growing Chinese interest in energy and mineral projects. This is based on the Chinese global principles of diplomacy known as ‘getting’ and ‘giving’. As the director of China Farm Agribusiness Corporation commented: ‘China’s growing interest in energy and mineral projects in Africa is likely to trigger some negative reactions’. In this regard, he suggested, ‘China should offer to combine exploitation of other countries’ resources with help for their agriculture’. Consequently, it has been seen that China has increased its agriculture assistance to Africa from time to time at multilateral FOCAC, UNFAO, and bilateral forums for African countries. Finally, other emerging powers are engaged in agriculture development in Africa, the most notable being Brazil. Both China and Brazil achieved impressive results after transforming their agriculture sectors. The competition between China and Brazil in Africa is seen in their involvement in the agriculture sector in Ghana and Mozambique. This may influence China to enhance its agriculture sector support to Africa. Thus, African countries need to leverage this advantage to the utmost as the two emerging powers are competing to support the agriculture sector in Africa. Furthermore, it is essential to note that emerging economies do have a different focus and achievement in their agriculture support to African countries. For instance, China focuses on intensive small-scale agriculture and has achieved great success in this area. Brazil, on the other hand, transformed the Cerrado (savannah) into one of the top grain and beef-producing, and dairy cattle, regions with the help of technology (Amanor, 2013b, 2014).

5 Concluding Remarks African agriculture is at a turning point, with growing momentum to transform and modernise from its current state. Transforming the continent’s agriculture and scaling up productivity is the sole responsibility of Africans. Africa’s development requires consistent and broad-based growth spearheaded by the agriculture sector,

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and accompanied by dramatic improvements in infrastructure, governance, and other social indicators. Political will, determination, and commitments are, thus, timely and pertinent to developing and using the agricultural sector as an engine for economic transformation in Africa. This, however, does not mean that Africa does not need a hand of solidarity to address its poverty and to develop its own potential for agricultural productivity and transformation, as well as feeding its ever-­ increasing population. Africa needs to draw pertinent lessons on agricultural development from the emerging economies of China, India, and Brazil by investing more of its own resources into agricultural science, agricultural education, and research, as well as technology. It is essential to recognise that the agriculture sector in China was not developed through development assistance, but rather through a combination of market reforms, trade, and foreign direct investment. Various kinds of development assistance, likewise, did not significantly help African countries to transform their agricultural sector. As rightly indicated by Deng Xiaoping, the Chinese foremost reformist leader, agriculture development relies on the policy first and on science and technology second. Accordingly, agricultural productivity enablers for smallholder farmers, such as technology adoption, input-output markets, access to finance, policy environment, and institutional and human capacity building, must be provided by the government. Public investment (including in irrigation, rural infrastructure, and research and development) to accelerate agricultural productivity is badly needed, and special attention must be paid to smallholder farmers, especially women and youth. Strengthening national, sub-regional, and continental capacity to generate and manage knowledge that supports evidence-based planning and evaluation of CAADP, is crucial. In this regard, each African country must recognise the importance of the agricultural sector to the economy, develop and implement sound agricultural sector policies and strategies. Policies and strategies must be pro-poor, pro-rural and consistent with the focus on productivity-based and staple crop-led agricultural development. Policies and strategies must also link the effects of agriculture with industrialisation. Against this background, African countries may request China and other emerging powers to support their policies. There is a debate as to whether the Chinese agriculture model can be replicated in Africa or not. It is important to note that success in agriculture crucially depends on the indigenous scientific capacity to generate new technology that suits the specific context, both on the continent and in each African country. It is important, for instance, to recognise that neither rice nor wheat, which spearheaded the green revolution in Asia, is of importance to Africa. This is mainly because the continent’s output for each crop is only 2% of world production. Rather, the major crops in Africa must be given priority, both in the African green revolution, but also in Chinese agricultural development assistance to Africa (AGRA, 2013). These crops include millet and sorghum, which constitute 40% and 18% of world production; and yam, plantain, and cassava, which represent 95%, 70%, and 44% of world production. This suggests that ensuring a food secure and prosperous Africa in a sustainable way requires a unique green revolution. This can be done by increasing agricultural

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productivity through investments in research and technology and infrastructure, as well as providing the enabling environment for the private sector, including farmers, in promoting agribusiness. It will also require rethinking agriculture to involve a value chain approach from the supply or production side, to demand or the consumption side. There are huge financial gaps in the ability to transform the agriculture sector in Africa, as noted above. In this regard, there is need to harness the contribution and efforts of diverse actors in the agriculture sector in Africa. Indeed, the green revolution in Asia was state-driven, market mediated, and used a small-­ farmer-­based strategy. To fill the financing gap for the agriculture sector in Africa, foreign direct investment inflows through foreign private companies are seen as an important resource. Furthermore, employing different innovative financing approaches for agricultural development in Africa is also vital. Financial gaps can be removed by using private and public-sector investments, as well as through public-­private partnerships. It is also important to understand the nature of Chinese development cooperation in Africa, i.e. strategic, planned, and focused on long-term goals. In this regard, China is benefiting from the agriculture support it provides to African countries. First, Chinese technicians are gaining tremendous know-how on the nature of African agriculture and will be able to influence subsequent developments on the continent. Secon, through its investment, Chinese companies derive revenues from the agriculture infrastructure support to African countries. Chinese development cooperation is based on requests from the recipient country following its strategic policy priorities, and the recipient country requires strong bureaucracy to execute policies, as well as pledges made at FOCAC every 3 years. Following the FOCAC pledge, individual African countries are expected to negotiate further to get their portions from the pledge. The ‘One China’ policy, which required countries to recognise Taiwan as part of mainland China, is still a requirement for African countries to get development assistance from China. African countries, therefore, need to develop their agriculture sector policy and strategy accordingly and leverage Chinese engagement in the agriculture sector. African countries are also expected to strengthen their bureaucratic capacity to implement policies successfully. African countries may also draw lessons from China’s history, as the country had similar difficulties in transforming the agricultural sector. Indeed, agricultural sector reforms are still ongoing in China. As noted above, there is a huge systemic difference between Chinese and African agriculture practice. In this regard, the Chinese government must do a lot in supporting its companies and agricultural experts to develop a deeper understanding of African rural culture, society, and history. Furthermore, to improve agricultural research and development in Africa, Chinese development assistance through demonstration centres across Africa is highly encouraged and appreciated. Nonetheless, this must be done with active participation from the locals, particularly on agriculture project design and implementation. Finally, this chapter recommends that Chinese support in the agriculture sector should focus on how the agricultural sector may have rapid development in terms of foreign exchange earnings, export diversification, employment generation, knowledge and skills transfer, technological advancement, and linkage effects. Although

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the partnership is not free of challenges, if properly harnessed, the opportunities brought by these activities can be a powerful force for economic development, and have a great role in promoting inclusive and sustainable economic growth in Africa. In this regard, China must scale up its agriculture development assistance to Africa, particularly by fostering agro-processing industrial parks, meat processing, value addition on agricultural products, and leather and leather products, as well as supporting agricultural value chains in Africa.

References African Center for Economic Transformation. (2014). African transformation report: Growth with depth. African Center for Economic Transformation. Alliance for a Green Revolution in Africa (AGRA). (2013). Africa agriculture status report: Focus on staple crops. Smart Printers. Amanor, K. S. (2013a). South-South cooperation in Africa: Historically, geopolitical and political economy dimensions of international development’. IDS Bulletin, 44(4), 80–90. Oxford: John Wiley & Sons Ltd. Amanor, K. S. (2013b). Expanding agri-business: China and Brazil in Ghanaian agriculture. IDS Bulletin, 44(4), 80. Oxford: John Wiley & Sons Ltd. Amanor, K. S. (2014). South-South cooperation in African agriculture: China, Brazil, and international agribusiness. In ECDPM. Available at http://ecdpm.org/great-­insif=ghts/emergin Anesi, C., & Fama, A. (2013). China accused of stealth land grab over Mozambique’s Great Rice Project. Available at http://www.theecologist.org/News/news_analysis/2177709/china_ accused_of_stealth_land_grab_over_mozambiques_great_rice_project.html Binswanger-Mkhize, H. P. (2009). Challenges and opportunities for African agriculture and food security: High food process, climate change, population growth, and HIV and AIDS. FAO Expert Meeting on How to Feed the World in 2050, 24–26 June 2009. CAADP. (n.d.). Can China and Brazil help Africa feed itself? CAADP Policy Brief, Future Agricultures. Available at www.future-­agriculturs.org CAP. (2014). Common African position on the post-2015 development agenda. African Union. Chichava, S., Duran, J., Cabral, L., Shankland, A., Bubkley, L., Lixia, T., & Yue, Z. (2013). Brazil and China in Mozambican agriculture: Emerging insights from the field’. IDS Bulletin, 44(4), 101–115. Oxford: John and Wiley & Sons Ltd. China-Africa. (2015). A good story to tell: China-South Africa relations reach strategic milestone (Vol. 7). De Vries, G., Timmer, M. P., & De Vries, K. (2003). Structural transformation in Africa: Static gains, dynamic losses. Journal of Development Studies, 6, 11. ECA. (2014). Frontier markets in Africa-misperception in a sea of opportunities. Addis Ababa, Ethiopia. ECA and OECD. (2014). The mutual review of development effectiveness in Africa: Promises and performance. A joint report by The Economic Commission for Africa and the Organisation for Economic Co-operation and Development. ECA, AU, AfDB, UNDP. (2014). MDG 2104 report; assessing progress in Africa toward the Millennium Development Goals: Analysis of the common African position on the post-2015 development agenda. Gabas, J.-J., & Goulet, F. (2013). South-South cooperation and new agricultural development aid actors in western and southern Africa. China and Brazil-case studies (Working Paper, May. No. 134).

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Information Office of the State Council, The People’s Republic of China. (2013). White Paper on China-Africa Economic and Trade Cooperation. Available at http://www.safpi.org/sites/ default/files/publications/China-­AfricaEconomicandTradeCooperation.pdf Jalata, G. G., & Venkataraman, M. (2009). An analysis of Ethio-China relations during the Cold War. Journal of China Issues, 45(1). New Delhi: Siege Publications. Ministry of Finance and Economic Development of Ethiopia (MOFED). (2015). NEPAD. (2015). Available at http://www.nepad.org/foodsecurity/agriculture/about Regional Strategic Analysis and Knowledge Support System (ReSAKSS). (2015). Available at http://www.resakss.org Scoones, I., Cabral, L., & Tugendhat, H. (2013). New development encounters: China and Brazil in African agriculture. IDS Bulletin, 44(4), 1–18. Strange, A., Parks, B.  C., Tierney, M.  J., Fuchs, A., Dreher, A., & Ramachandran, V. (2013). China’s development finance to Africa: A media-based approach to data collection (CGD Working Paper 323). Center for Global Development. http://aiddatachina.org/projects/120 Xiayun, L., Tang Lixia, X., Xiuli, Q. G., & Haimin, W. (2013). What can Africa learn from China’s experience in agriculture development? IDS Bulletin, 44(4), 31–41.

‘Made in Uganda by China’: Chinese Industrial Parks in Uganda Bhaso Ndzendze and Messay Mulugeta

1 Introduction Uganda’s economic history is deeply tied to its political history. Undergoing two wars in the 1970s (against Tanzania, which also saw the fall of Idi Amin) and 1980s (the Bush War, which brought the current government into power in 1986), the country has since then undergone substantial recovery, being among the most steadily growing in East Africa in the subsequent period to the present. In recent years, the country has been growing, registering between 3.4% and 10.5% in its GDP between 2000 and 2019, buttressed by hundreds of millions of dollars in new FDI. This has been reflected in its Human Development Index (HDI), which has steadily grown by 69.1% between 1990 and 2018. In the same period, life expectancy in the country increased by 17.1  years, while expected years of schooling increased by 5.6 years. Indeed, the country is nearly universally regarded as representing ‘one of the world’s earliest and most compelling AIDS prevention successes’ (Green et al., 2006: 335). Nevertheless, Uganda’s HDI score in 2018 (0.528) still placed it at number 159 out of 189 globally and 26th out of 53 in Africa (which places it in the upper bound of the ‘Low human development’ cohort [United Nations Development Programme, 2019: 25]). Thus, the country faces numerous

B. Ndzendze (*) Department of Politics and International Relations, University of Johannesburg, Johannesburg, South Africa Centre for Africa-China Studies, University of Johannesburg, Johannesburg, South Africa e-mail: [email protected] M. Mulugeta Centre for Food Security Studies, Addis Ababa University, Addis Ababa, Ethiopia Centre for Africa-China Studies, University of Johannesburg, Johannesburg, South Africa © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Ndzendze, D. Monyae (eds.), Perspectives on Africa-China Infrastructural and Industrial Cooperation, Africa-East Asia International Relations, https://doi.org/10.1007/978-3-031-38395-3_8

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challenges related to infrastructure, slow diversification from its coffee crops, bringing into focus the oil, gold and other sectors, including tourism. Above all, the country has seen its economic prospects as being deeply tied to industrialisation. Despite the Museveni government’s extensive ties to the West, particularly with the US (despite frequent criticisms over human rights [Epstein, 2016]), the People’s Republic of China (PRC) has emerged as one of the country’s commercial partners. Since coming into power in 1986, the NRM government (which had received some assistance from the PRC during the Bush War), has deepened ties extensively, with President Museveni visiting China in 2019 for a four-day working visit, while the Chinese foreign minister Wang Yi paid a visit to Kampala in 2016. Relations between the two countries were established in 1962, the year of Uganda’s independence from Britain. Trade between the two nations were at US$1 billion in 2017. Additionally, Chinese enterprises have made a significant contribution to the rolling out of infrastructure in Uganda. In total, China represents some 20% of Uganda’s external debt, equivalent to about $1.6 billion in 2018, although the number has been increasing. About 103 Chinese companies are members of the Chamber of Commerce of Chinese Enterprises in Uganda. Additionally, the presence of many Chinese IPs and manufacturing companies in Uganda is an attractive feature. Thus, the presence of Chinese companies acts as a crowding-in factor, creating conditions in which more can follow. Government incentives such as ten-year tax exemption as well as low-­ cost, English-speaking labour, make the country more attractive according to over a dozen interviewees, as does the stability in the country’s domestic politics. This chapter reviews the growth of Chinese economic activity in Uganda and presents findings from a field study involving ten Chinese industrial parks in Uganda, as well as interviews with Chinese businesses operating in that country. Significant within the study is the notion of Made in Uganda by China, which has seen the country achieve import substitution in some product sets, particularly light manufacturing. Chinese commercial sentiment is long-term oriented and Chinese managers and investors are optimistic about their prospects in the country and the region. The Chinese also utilise strategies involving proximity to the government (which is sometimes seen by the Chinese as being too biased towards the local workers to their detriment), along with collective cooperation through the Chamber of Commerce of Chinese Enterprises in Uganda, strict adherence to Ugandan regulations and avoidance of social pushback through. Local sentiment towards Chinese businesses operating in Uganda by local experts and businesses is, however, mixed; ranging from embrace, to suspicion, and outright rejection. These are also deeply intertwined with misgivings about the Ugandan government, which is seen as corrupt and benefitting in underhanded dealings with the Chinese. The second section gives an overview of the Ugandan economy since its independence. This helps give the necessary context for engaging and analysing China’s commercial ties with Uganda as it gives an indication of the trajectory of its economy, the nature of its trade relations and therefore the extent to which the relationship with China has complemented or transformed Ugandan economic outlooks. The third section provides a review of the literature on Uganda and China, noting

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the many extensive studies and the results they have yielded, the themes they present (including in comparative perspective, vis-à-vis Uganda’s other partnerships, as well as China’s presence in other countries on the continent) and, finally, some of the shortcomings they present and thus the critical gap they provide for this chapter. In the fourth section, the chapter presents the methods utilised in the study, which are quantitative and qualitative (mixed) in nature. In the fifth section, we present the findings made in the field study and discuss their implications conceptual and policy implications. The chapter concludes, noting areas for further analysis.

2 Uganda: An Economic Overview (1963–2000) At independence, ‘Uganda had one of the most vigorous and promising economies in Sub-Saharan Africa, and the years following independence had amply demonstrated this economic potential’ (World Bank, 1993). Furthermore, The country was self-sufficient in food, and the agricultural sector earned ample foreign exchange through the export of coffee, cotton and cocoa, despite traditional methods of production. A vibrant manufacturing sector supplied basic inputs and consumer goods. Mining in the south supplied copper and cobalt for export, and the country enjoyed a positive balance of trade. Fiscal and monetary management was sound, and the domestic savings rate averaged about 15 per cent of GDP. There was a strong local administrative system that provided effective supervision of economic activity by disciplining all those who were not productive. The locals needed little coercion to produce, since consumption was predicated on what they produced (Sejjaaka, 2004: 99).

This was owed to the nationalisation of the Obote regime. Furthermore, before Idi Amin’s ‘Economic War’ pursued under Amin, this ‘precipitated the flight of capital because there were no indigenous managers to run the nationalised companies’ (Sejjaaka, 2004: 100). The environment was becoming ‘increasingly volatile’ (Sejjaaka, 2004: 100). Second, it led to a lot of indebtedness as the country took up loans for public works on facilities and infrastructure (Sejjaaka, 2004: 100). Third, there was the corruption and ineptitude of the Uganda Development Corporation (UDC), which was managing the nationalised companies (Sejjaaka, 2004: 100). ‘The UDC had been created in 1952 as a vehicle for investment, not for nationalisation of existing business firms. The new parastatals were given monopolies over the marketing of export, produce and commodities, but proved inept and corrupt’ (Sejjaaka, 2004: 100). Finally, the cooperatives and trade unions, ‘which had been strong up to that point’, were disempowered by the introduction of the Cooperative Act (1970) (Sejjaaka, 2004: 100). Overall, then, the government’s initiatives did not fulfil the goal of forming a local business-owning class. In effect, Obote’s policies disenfranchised the non-citizens who ran the economy without empowering the African natives who, hitherto, had not been allowed to participate in commerce, industry and large-scale agriculture. The experiments in socialism, the enlargement of the bureaucracy and the ambitious investment in infrastructure without regard to budgetary or economic fundamentals began to eat away at the economy (Sejjaaka, 2004: 100).

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This was not in a political vacuum. As seen in the preceding section, this slowdown in economic growth all took place in a context wherein the government was seen as corrupt, which was accompanied by increasing violence (Sejjaaka, 2004: 100). This therefore gave way to Idi Amin’s coup, which in turn paved the way ‘for economic decay, which he oversaw until his overthrow eight years later’ (Sejjaaka, 2004: 100). ‘Increased defence spending, financed by bank borrowing, made the national budget untenable. Annual inflation rates shot to double digits’ (Sejjaaka, 2004: 101). In 1972, he declared an ‘Economic War’ against ‘imperialist’ forces and the large Asian community in Uganda: Like Obote, Amin believed that it was important to address the social inequality that prevailed in the country by economically empowering Ugandans. At this time, Uganda’s Asian population had extensive control over the economy as artisans, shopkeepers, industrialists and professionals. In particular, they controlled local and international trade. Amin expelled the Asians, and in this way continued the wave of nationalisations that Obote had begun. Increased insecurity and persecution of white-collar workers resulted in an additional mass exodus of professional managers of all nationalities and persuasions. The vacuum that was created by his actions marked the beginning of Uganda’s economic collapse (Sejjaaka, 2004: 101).

Furthermore, the new regime maintained much of the restrictive apparatus of its predecessor. As a consequence of his policies, even the process of making transactions and ownership of asserts was put in jeopardy, and made basic commodities scarce to obtain. This was also rooted in the ‘wide disparity between official prices and actual market prices’ (Sejjaaka, 2004: 102). ‘The black market prospered, to the benefit not only of smugglers, but public officials, who through personal influence could obtain (and re-sell) “allocation chits” for sugar, beer, salt and even foreign exchange’ (Sejjaaka, 2004: 102). In this arbitrary environment the establishment of an ‘anti-smuggling unit’, meant that, for some, getting caught could mean torture or even execution. ‘The net effect was to further emaciate the economy, as the biggest culprits were influential public officials who were not punished’ (Sejjaaka, 2004: 102). As a consequence of its human rights record and as much of the world had little to gain from doing business with Uganda, the country obtained pariahdom as it became the subject of international embargoes, primarily from the US.  After the EAC fell, this further led to isolation for Uganda. ‘Key industries relocated to Kenya. Services such as air transport and telecommunications, which had benefited from the existence of the EAC, also suffered. The rail transport system collapsed, and this further increased the costs of inputs’ (Sejjaaka, 2004: 102): With the military as the prime mover, the economy had developed into a magendo economy where grabbing of all available assets, confiscation of agricultural products and smuggling to neighbouring Kenya had become the order of the day carried out in an atmosphere of lawlessness and disrespect for moral values and with the use of coercive means (Hansen, 2013: 98).

Between 1971 and 1986, the country’s constant-price GDP fell by 13% (World Bank, 2019). In effect, ‘the economy declined by 1 per cent per year, even as Uganda’s population was growing rapidly. Many factories collapsed due to lack of inputs,

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which were imported, and due to the absence of vertical or horizontal linkages between economic sectors. All sectors, with the possible exception of subsistence agriculture, suffered from the lack of imported inputs’ (World Bank, 2019). In prewar Uganda, between 1971 and 1979, the country’s income per capita declined from US$255 to a mere US$148. Furthermore, the country’s debt to export ratio increased from 51.1% to 142.2%, while ‘agriculture’s share of GDP rose from 48.5 per cent to 70.5 per cent as the manufacturing sector collapsed’ (Sejjaaka, 2004: 102). Before the outbreak of the conflict with Tanzania, there was a global downturn in the price of coffee, the country’s principal export (Sejjaaka, 2004: 102). The price declined from an all-time high of US$3.34 in early April 1977 to US$1.17 by June of 1978. In assessing Ugandan exports from 1971 to 1977, we found that the UK, the US (notwithstanding the official embargo), Japan, and Kenya were Uganda’s principal export partners (Table  1). Within the region, Kenya was the country’s principal export partner. In turn, of its exports, coffee composed a growing composition of total exports, starting at 40.8% in 1960, and culminating at 92.9% by the eve of the war in 1977. Cotton, the second-highest product of export, which had been at 35.9% share of exports dipped to 2.6% in 1977. Thus, Uganda’s problems were worsened by a decline in the global price of coffee (Hansen, 2013: 98). Another structural change soon followed developed: People developed a number of coping mechanisms. The peasants scaled down the production of cash crops and turned to growing food stuffs simply in order to maximise their food security and secure a livelihood. At the same time, we saw a considerable expansion of urban farming (urban agriculture). It helped to mitigate the rapid deterioration of the urban economy following the expulsion of the Asians. Some economists have argued that real wage income dropped by nearly 80% (Hansen, 2013: 98).

In light of this, and the popular dissatisfaction it raised, ‘Amin tried to use Tanzania as a scapegoat to divert attention from his internal troubles and to cover up the massacre of dissident troops’ (Valeriano, 2011: 210). Following the war, Uganda

Table 1  Uganda’s production and trade (1960–1981) Coffee Production (thousands of tonnes) Percent of total exports Cotton Production (thousands of tonnes) Percent of total exports Copper Production (tonnes) Percent of total exports Sugar (percent of exports) Tea (percent of exports) Total exports (percent of GDP) Total imports (percent of GDP)

1960

1965

1971

1977

1981

113 40.8

218 42.0

191 50.7

156 92.9

128 98.0

210 35.9

243 23.1

75 17.6

14 2.6

4 0.9

14,515 8.9 3.6 3.5 27.4 17.1

16,870 11.0 1.2 3.3 3.3 25.7

16,900 8.3 1.0 4.7 1.8 17.2

2,500 0.0 0.0 2.1 1.0 4.1

nil 0.0 0.0 0.1 4.6 nil

Source: International Bank for Reconstruction and Development (IBRD) (1962), World Bank (1993) and International Monetary Fund (IMF) (1995)

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underwent elections which were won by Milton Obote, thus making him the first African leader to make a return to power after having undergone a coup d’état. The NRM contested the results, leading to a civil war, which ended in 1986, when Yoweri Museveni became the president. The economy was in a state of disaster. ‘Its roads, railways, hospitals, and schools were destroyed. Real per capita GDP, at $230, was 60 percent of its level in 1971.3 Its average annual rate of growth from 1965 to 1985 was −2.6 percent, the lowest in the world for that period. The post-1986 economy of Uganda since underwent increasing stabilisation and post-war reconstruction, registering an increasing FDI and decreasing unemployment’ (Warnock & Conway, 1999: 5). Furthermore, as late as 1999, a World Bank study noted that Overseas companies seem interested in investing in Uganda but are still quite cautious. The memories of the expulsion of the Asian business community hold some companies back. The government is trying to attract foreign investment by publicly welcoming it, but in practice overseas companies are finding ambivalent attitudes among individual government officials, who give different impressions based on their own viewpoints (Warnock & Conway, 1999: 7).

However, the country registered numerous strides. Its HDI increased substantially, while its FDI consistently grew, from US$160.7 million in 2000, to some US$543.8 million by 2010. Figure 1 demonstrates the country’s growing FDI in the years since the Great Recession, reaching US$1.3 billion in 2018. At the same time, the country’s unemployment figures have been less linear, registering a volatile trend of 2–3.5% in the 1990s and early 2000s, before stabilising to less than 2% since 2010 (see Fig. 2). Figure 3 below demonstrates survey results conducted by the Afrobarometer on four thousand Ugandans’ perceptions of the government’s handling of unemployment. We note that the majority of those asked thought the government was managing fairly to very well in managing the unemployment in the country. One of the consistent and increasing presences in Uganda’s economic trajectory is China. As Fig.  4 below shows, the country, particularly since the years of the 1.6 1.337

1.4 1.2 0.984

1.02

1.096

1.059

1

0.6

0.802

0.737

0.8

0.625 0.543

0.4 0.2 0 2009

2010

2011

2012

2013

2014

Fig. 1  Total FDI to Uganda (in billions of USD)

2015

2016

2017

2018

2019

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Fig. 2  Unemployment in Uganda (in % of total workforce) 40 34

35 28

30 25

21

20 15 10

10

7

5 0

Very badly

Fairly badly

Fairly well

Very well

Don't know

Fig. 3  Responses by Ugandans to Afrobarometer to ‘How do you think the government of Uganda is managing unemployment?’. (Afrobarometer. 2018. ‘Uganda’, Afrobarometer. Available online at: http://afrobarometer.org/online-­data-­analysis/analyse-­online (accessed: 22 March 2020))

Total annual FDI (in bilions of USD)

250 205.34 200 150

121.51

100

79.04 60.6

50

26.5 4.01

1.29

1.29

2009

2010

9.91

9.79

2012

2013

0 2007 -50

2008 -6.7

2011

2014

2015

2016

2017

Years

Fig. 4  Annual flow of foreign direct investments from China to Uganda between 2007 and 2017 (in millions of USD)

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Great Recession, has been a major recipient of Chinese FDI. The FDI has grown from US$1.29 million in 2010, to a peak of US$205.34 million in 2015, before registering at US$79.04 million in 2017. According to data from the Johns Hopkins University-based China-Africa Research Initiative (CARI), PRC loans have grown to a total of US$3.181 billion by 2019, having been substantially bolstered by a US$2.128 loan in 2015, and US$297. million in the subsequent two years. Overall, ‘China registered the highest amount of planned investments in Uganda in 2018/19, with a total value of $607.3m, accounting for 45.1% of all the planned investments’. For an economy with a total GDP of US$28.50 billion (2019), these economic patterns have evoked a body of literature regarding the outcomes they produce, and the intentions which motivate them as well as the incentives for both sides in heightening them. They also call into question the actors which drive them which the present study is partially driven by. Section 3 below reviews the literature and identifies the therein prior to detailing the methodology employed in this study.

3 Literature Review: China-Uganda Relations Due to Uganda’s smallness, relative lack of minerals, and landlocked status, the Uganda-China relationship is not among the most sizeable for China, but it is among the fastest growing (Fig. 5). Trade between China and Uganda has also increased under Museveni’s presidency. Even within the last ten years, the amount of trade between the two nations has more than quadrupled, from around $230 million in 2008 to over $1 billion in 2018. The majority of this trade is Chinese exports to Uganda, which account for 20 18 16 14 12 10 8 6 4 2 0 2010

2011

2012

2013

2014

Imports from China (as % of total Ugandan imports) Exports to China (as % of Ugandan exports)

Fig. 5  Ugandan trade with China (2010–2015)

2015

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about $850 million in trade. China’s largest exports are machinery and electrical equipment. Uganda’s major exports to China include many raw goods such as hides, oils, and seeds. Additionally, Uganda has emerged as a potential market for many Chinese businesses, both state-owned and private. These businesses include oil and construction, as well as smaller stores and factories for electronics, clothes, and other consumer goods. Chinese companies are in charge of the construction of an express highway connecting the major city of Entebbe to the capital, Kampala. The Ugandan government also utilises Chinese technology for small and large scale agribusiness projects, with over 40 Chinese agricultural scientists having taken part in planning these projects in Uganda since 2012. Opinions vary in Uganda on the role China plays in the local economy. According to AfroBarometer data, 57% of Ugandans believe China has a positive influence on Uganda, compared to only 7% saying negative. The largest positives of China’s influence were China’s investment in infrastructure, China’s business investment, and the cost of Chinese products. By far the largest source of negative opinion was the quality of Chinese products. Ugandan business owners have expressed opposition to Chinese influence in the country. Shopkeepers and creators of local goods have difficulty competing with the price of Chinese exports. In addition, local construction companies introduced a bill that would force the national government to prioritise local construction companies in the completion of government projects. This bill was vetoed, with MPs citing the inability of Ugandan construction companies to handle the scale of large infrastructure projects… In 2016, Warmerdam and Van Dijk conducted a survey of Chinese private enterprises active in Kampala, Uganda aimed at establishing their motivations for coming to Uganda. They found that privately owned enterprises mentioned access to local markets as a motivation more frequently (92% of all interviewed) than state-­ owned enterprises (67%) or hybrids (83%). Some 56% of SOEs had come to Uganda for Chinese government-funded projects, but non-governmental projects, projects funded by international organisations such as the World Bank and African Development Bank, and Ugandan government-funded projects were also important motives. On the other hand, a sizeable number of Chinese POEs (17%) and SOEs (8%) were attracted by the perception that Uganda had a stable, safe and secure investment climate (Warmerdam & Van Dijk, 2016: 5), thus replicating the findings in respect of Kenya and Djibouti (see also Ndzendze, 2017: 9).

4 Methodology The research was done in Kampala, Mukono, Sukulu and Kapeeka. The interview respondents consisted of Chinese business owners and managers and company representatives, the government officials of the respective African countries and academics and other members of the research communities of those countries, members of African intergovernmental continental and regional organisations, as well as the

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diplomatic staff of China in the country.1 In total, the researchers spoke to ten respondents.2 The research team also took up ethnographic methods by observing the industrial parks and factories with work in progress, as well as interviews with management, and industry experts. The main questions centred around the following: • • • •

Labour practices and seniority of Ugandan workers in management Environmental impact Relations with government Local or international sourcing of materials

Discourse analysis is then carried out in the form of the identification of key themes in the interviewees’ statements. These are in turn complemented by corroborating quantitative data, leading to a mixed methods research.

5 Findings The government of Uganda is working to gain the country higher growth rates and move the country towards middle-income status. The development strategy is focused on addressing infrastructure bottlenecks by building hydropower plants, a modern road network, and railways. In addition, Uganda is developing oil fields with an international consortium of oil companies. The crude oil will be transported to international markets via a pipeline through Tanzania and supply a planned domestic refinery. The IMF (2017) notes that ‘the ongoing economic integration in the East African Community provides opportunities for Ugandan firms to benefit from a larger market and better linkages. Good infrastructure combined with a skilled workforce and an enabling business environment are the ingredients for Uganda to benefit from these opportunities and achieve high rates of growth’, and at the same time cautions that ‘given that infrastructure investment is mostly financed through borrowing from abroad, public debt is on the rise. And the report says the investment must yield a return in the form of higher growth if this trend is to be reversed again’. Broadly, there were seven major findings that carry across from the interviews. These mainly had to do with: (1) investment attraction, (2) employment and environmental conditions, (3) knowledge transfer, (4) the impact of Chinese manufacturing, (5) understanding of the relevance of the Belt and Road Initiative in Africa, (6) the importance of legal compliance and (7) the relevance of the Chinese model to Uganda. These are put in summary below and are then followed by policy insights.

 Particularly the Director of the political Office of the PRC in Uganda.  China Communications Construction Company Limited, Uganda,中国交通建设乌干达有限公 司 China Railway No. (中铁三局); Tian Tang Group (owner of the Mukono Industrial Park, Mbale Industrial Park; 天唐集团), Sukulu COmprehensive Plant (东送公司); Zhang’s Group (Liao Shen Industrial Park [张氏集团]); China International Water and Electrical (中水对外), and the China Harbour and Engineering Co. Ltd. (中国港湾). 1 2

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5.1 Investment Attraction Challenges highlighted with regard to the investment climate include poor quality of some infrastructure in Uganda, a perceived inefficiency of the Ugandan workers as a low but significant number of whom tend to be absentees in daily intervals for cultural ceremonies and family obligations and other similar reasons. Two out of the total managers interviewed indicated that the Ugandan Revenue Authority (URA), with whom they interact when importing materials, is a corrupted government office with officials often requesting bribes. They also noted that the quality of materials in Uganda is not on par with their requirements and as such they have no choice but to import from other countries, including the region (such as coal from Tanzania) and from China itself. There are also challenges related to service tax, an infrastructure levy, and overtop taxation – and particularly the Internet tax – some of which are uncommon in other countries. All the managers, however, also expressed that there is security of electricity power supply, that the president and other higher officials are very cooperative, and overall appraised it as being excellent for Chinese investors. Managers interviewed stated that incentives by government were a critical factor in encouraging their investment and continued presence in the countries. These include strong legal frameworks, industrial parks, availability of foreign currency. The investors appear to be attracted by industrial parks which come with pre-built sheds (factories), infrastructure (especially transport and steady energy supplies), and their in-built and accumulating facilities (such as customs and banks) that make them one-stop shops. Some also expressed that the additional attraction factor is the cheapness of the land, which is leased for a renewable 49  years, which company representatives regarded as being virtually free due to the ten-year tax exemption for foreign investors in industrial parks. Free usage of the use of US dollar in local markets means that there are no problems with repatriating profits, unlike in Ethiopia, for example, where there is some currency control. Additionally, the government has taken additional steps to bring infrastructure to some companies by especially providing power and infrastructure such as roads to the specific needs of companies. Managers also expressed the importance of the comparative dissemination of the English language among the workers as this facilitates easier communication, as well as the comparatively low wages of US$55 to US$60 per worker per month, which is lower than neighbouring Kenya for example.

5.2 Employment and Environmental Conditions All industrial parks and businesses studied employed mostly of local staff, ranging between 70% and 100% in composition. In terms of workers’ rights, it is notable that there are mostly no non-unionised employees.

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Work is also conducted in conjunction with environmental impact assessments, and work has been at times halted, as in the case of the China International Water and Electrical Group when they discovered a rare fish species in Uganda; they halted work to relocate the fish, in collaboration with the government. Environmental impact assessment (EIA) is in place, and there have been no registered complains, and there is a professional in environmental scientist supervising any related concerns. The IP emphasises reusing/recycling as a priority and has been playing a role in planting seedlings as a technique for environmental protection.

5.3 Knowledge Transfer Knowledge transfer is reportedly a major issue and yardstick for success for Chinese companies in Uganda. Additionally, China is supporting the UPE (Universal Primary Education) Program in Uganda according to the Chinese Embassy in the country. However, there is no agreement over what constitutes ‘knowledge transfer’. Nor is there government follow-up on former employees to determine or measure such a transfer. Nevertheless, skills transfer remains aspiration and is particularly noted by those that are yet to begin operations in the country. China Harbour and Engineering Co Ltd, is one of the biggest companies in China and is operating mostly (90%) overseas. In Uganda, it was established in 2012 to push the railway project to link Kenya and Uganda. However, although the company has finished the feasibility study and signed agreements and carried out EIA, it is not yet clear as to when to start work. The work is meant to be funded by the EXIM Bank of China. The company hopes that 90% of the workers will be from Uganda, in this regard the company will have its own training plants. Some high-level skill training will be made in China in collaboration with relevant Colleges/Universities and training centres in China. This leads to skills transfer, too. Some collaborating universities/companies in China are Shijiazhuang Tiedao University, Jiao Tong University, among others.

5.4 Towards ‘Made in Africa by China’ The findings suggest that because the investors are generally optimistic about their profit margins in Africa, the Sino-Africa relationship holds many potential long-­ term benefits, stemming from the relocation of manufacturing value chains from China to countries with an abundant supply of labour, additional access to alternative forms of development financing that centre on formerly under-financed sectors such as infrastructure and energy, and increased trade and FDI. As pointed out by an African assistant manager in a Chinese group operating in Uganda, some of the Chinese companies have helped their respective countries of operation achieve import substitution, as well as increments in foreign exchange reserves.

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5.5 Belt and Road Initiative in Africa Chinese grand plans make for limited analysis due to their minimal impact on the ground so far. One of the interviewees commented on ‘Made in China 2015’ as a concept that China was developing in expense of its environment so far. But after 2025, there will be more environment friendly and knowledge-intensive way of doing business in China. However, the implications for Chinese businesses and IPs in Uganda were not fleshed out. Uganda is also among the countries interested in China’s BRI, having signed an agreement with Beijing to this effect in 2018. A Chinese official working in the country informed us that ‘the BRI is underlined by the principle of development for all and is based on building together for mutual benefit’. While there is an apparent consensus on this, along with many documents signed, the interviewees (including government offices, businesses and members of the research community) are only aware of the Belt and Road Initiative in name only and still perceive it as a programme that is still at government-to-government level. There was only one firm (Wu Yi) that was found during our fieldwork that directly responds to the BRI.

5.6 Legal Compliance Because of the attention paid to them by the African host governments, their own government, local and international media and local civil society, Chinese businesses operating in Uganda studied are eager to operate strictly within the laws of the countries in which they operate and to especially not violate laws relating to labour, the environment and social relations. The various chambers of commerce, which are ran under the auspices of Chinese embassies, ensure that the investors understand and comply with the laws, while also serving as their bargaining platform. Currently the CCCC Limited (Uganda) chaired Association of Chinese Enterprises in Uganda. They also stated that they make use of Ugandan legal experts, local material suppliers, and telecommunication companies.

5.7 Development Model China also introduced rice cultivation and consumption in Uganda and now rice is one of the stable foods in Uganda. Uganda also borrowed money from China to construct an Expressway from Entebbe International Airport to Kampala. Might the country, then, also adapt the Chinese model? Mr. Yi recommends Africa countries to modify the Chinese development trajectory (not to copy) because the situation in both areas is not the same. China did not copy from other developed countries. It went its own way. Mr. Yi also argues China has provided another alternative (another route) to development, and this is why is has been highly criticised by the Western media and governments.

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Sukulu Phosphate sees its role in the economic development of Uganda as very big, because the company itself is very involved on working on critical sectors such as energy, minerals, and fertilisers, in addition to the revenue for the government, job opportunities for the youth, and technology transfer. However, the CEO is also aware that ‘Uganda is growing and moving regardless’ of the company’s own involvement, and the company is equally benefitting from the opportunities being generated by its presence in Uganda. As most of the lower jobs are occupied by Ugandan workers about 70% of the worker force at Entebbe International Airport Upgrading Project is Ugandan. Mr. Mushabe Dennis indicated that in quality,3 70% are Chinese workers, but if we take quantity 70% is Ugandan. Overall, this is the role of CCCC Limited (Uganda) in Ugandan development according to its public relations personnel, who indicates that ‘construction is the base of any economic development’ (and hence CCCC is greatly contributing to the national economic development of Uganda): CCCC is contributing in job creation, networking of cities, facilitation of transportation of goods, has three road projects in Uganda, and one airport upgrading project, and has completed road projects so far in Uganda with the average length of about one thousand kilometres.

6 Conclusion According to the Ugandan researchers and subject matter experts, the challenges include the fact that Uganda is on a good track of growth but remains plagued by challenges in inequality and socioeconomic problems that result from it. However, they also note that it is in fact good that loans from China are free of any conditions and do not interfere in internal politics. However, there are suspicions that there may be a hidden agenda on the part of the Ugandan government, which, according to the interviewees, needs enhancement of negotiation capacity when dealing with China. Cooperation platforms that are pan-African such as the AfCFTA may be very helpful in this regard. One of the researchers interviewed also notes a ‘lack of awareness from our people about Chinese companies in Uganda’. The Chinese are seen as being engaged in some petty economic activities such as retailing, beauty salons, among others, that could be areas of opportunity for Ugandans. There are also concerns about a lack of openness of the government to the public on issues of what China is ‘really doing’ or ‘really working on’ in Uganda. There is also the perception that Ugandan elites and brokers buy land in cheap prices and resell it to Chinese and other companies in higher prices. This leads to the view that the local people are not benefiting from foreign investment regarding land. We are indeed disadvantaged for not having acquired interviews with Ugandan officials in this regard. Chinese

 ‘Quality’ refers to top positions such as supervisors, managers, etc. according to our interview respondent. 3

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companies are seen as highly damaging the environment in Uganda, including its wetlands. Mining companies were seen as doing the worst damage in this regard. There is also a perception that there is poor technology transfer from China to Uganda, as most capital and sophisticated operations are handled directly by the Chinese. Example of technology transfer were also not forthcoming from the managers of the Chinese companies. Indeed one of the managers interviewed stated that this is because the companies are ran in a ‘Chinese way’ and thus have ‘special’ working conditions to which they have noted ‘a lack of motivation and efficiency from the Ugandan workers’, as well as a ‘lack of Ugandan skilful workers’. This is a contradiction the heart of the Uganda-China relationship: while unskilled workers are a source of attraction for Chinese investors, they will not a source of long-term growth unless there is a transfer of skills. This is a major area of future research. Further research in the form of follow up studies should also investigate the impact of regionalisation through examining the impact of the Democratic Republic of the Congo and South Sudan who have undergone recent shifts in their government and conflict-resolution respectively. Studies here could examine the sentiments of Chinese towards these given reluctances expressed in the interviews recounted.

References Epstein, H. (2016). Uganda: When democracy Doesn’t count. New York Review of Books. URL: https://www.nybooks.com/online/2016/01/25/uganda-election-when-democracy-doesnt-count/ Green, E. C., Halperin, D. T., Nantulya, V., & Hogle, J. A. (2006). Uganda’s HIV prevention success: The role of sexual behavior change and the national response. AIDS and Behavior, 10(4), 335–346. Hansen, H. B. (2013). Uganda in the 1970s: a decade of paradoxes and ambiguities. Journal of Eastern African Studies, 7(1), 83–103. International Bank for Reconstruction and Development (IBRD). (1962). The economic development of Uganda. Johns Hopkins Press. International Monetary Fund (IMF). (1995). International financial statistics. IMF. IMF. (2017). International financial statistics. IMF. Ndzendze, Bhaso. (2017). Implications of the US-led War on Terror for Africa-China relations. Centre for Africa-China Studies. URL: https://www.cacs.org.za/cacs-occasional-papers/ cacs-occasional-paper-no-4/. Sejjaaka, S. (2004). A political and economic history of Uganda, 1962–2002. In F.  Bird & S. W. Herman (Eds.), International businesses and the challenges of poverty in the developing world. Palgrave Macmillan. United Nations Development Programme. (2019). Human development report 2019. UNDP. URL: https://hdr.undp.org/content/human-development-report-2019 Valeriano, B. (2011). Power politics and interstate war in Africa. African Security, 4(3), 195–221. Warmerdam, W., & van Dijk, M. P. (2016, January 25). What’s your story? Chinese private enterprises in Kampala, Uganda. Journal of Asian and African Studies, 52(6). Available at http:// journals.sagepub.com/doi/abs/10.1177/0021909615622351 Warnock, F., & Conway, P. J. (1999). Post-conflict recovery in Uganda. Semantic Scholar. World Bank. (1993). World development report. World Bank. URL: https://documents1.worldbank.org/curated/en/468831468340807129/pdf/121830REPLACEMENT0WDR01993.pdf World Bank. (2019). World development report. World Bank. URL: https://www.worldbank.org/ en/publication/wdr2019

Kenya-China Relations in Augmenting Kenya’s Infrastructural and Industrial Needs: A Multidimensional Assessment of Perception Emmanuel Matambo and David Monyae

1 Introduction This chapter looks at Kenya-China relations, focusing on China’s involvement in Kenya’s industrial and infrastructural sphere. It does so by employing the perceptions of actors from various politico-economic stations. The chapter explores: (1) The main drivers of current Kenya-China relations; (2) The incentive of public and private Chinese involvement in Nairobi’s industry and infrastructure; (3) The perceptions of Kenyan workers in Chinese firms on China’s involvement in industry and infrastructure in Kenya; and (4) The appraisal of academics on Kenya-China relations in general and China’s involvement in building and financing infrastructure in Kenya. It is of benefit for China and the Chinese to engage in Kenya, which is “the dominant economy in the East Africa Community, contributing to more than 50% of the region’s GDP” (KenInvest, 2019) and was ranked 56 on the Doing Business mechanism for 2020. In 2019, Kenya’s economy grew by 5.9% which was a reduction from the 6.5% of 2018 (African Development Bank, 2020), but was still much higher than sub-Saharan Africa’s average economic growth of 2.6% (World Bank, 2019). To enhance its potential, Kenya seeks to benefit from China’s infrastructural and industrial projects because, as is typical of most African countries, Kenya “sorely lacks investment and the funds for industrialization” (Yueh, 2019: 28). This dearth hampers development. The primary data used in the paper was gathered through interviews with Kenyan academics, workers in Chinese factories and Chinese entrepreneurs. The chapter commences with a brief history of Kenya-China relations. The second section will E. Matambo (*) · D. Monyae Centre for Africa-China Studies, Johannesburg, South Africa e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Ndzendze, D. Monyae (eds.), Perspectives on Africa-China Infrastructural and Industrial Cooperation, Africa-East Asia International Relations, https://doi.org/10.1007/978-3-031-38395-3_9

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be a literature review of what has been written thus far, generally, on Kenya-China relations. The third section outlines the methodology that was used for the chapter. The fourth section will be the presentation of findings. The fifth section will be the discussion and a few words of counsel and recommendation. The final section will be the conclusion. The main findings made in the research point to Kenyan optimism about China’s contribution to augmenting infrastructure in the East African country. It was also established that China manifests itself through both public and private entities and that both have been laudable in going beyond their economic interests to tend to the needs of the communities in which they operate. Thus, there seems to be a correlation between active community social responsibility (CSR) by Chinese firms and the positive picture that beneficiaries of such CSR have of China and its forays in Kenya’s industry and infrastructure. This, notwithstanding, the opacity that usually surrounds agreements between the Chinese government and its African counterparts, Kenya in this respect, continues to blight China’s reputation especially in the eyes of the West, the media, and African activists. In addition, there remains areas of improvement; Chinese workers are mostly housed differently from their Kenyan counterparts. Second, there are still misunderstandings between Chinese supervisors and their Kenyan subjects on issues of alleged insubordination and indolence. It would also be of great political import for China, in non-Chinese/Western eyes, for China to assess the potential of its African partners to repay debt before doling out loans that, in the case of default, might lead to the forfeiture of certain African assets or injurious measures of income generation to repay Chinese debt.

2 Kenya-China Relations: A Brief History For historical validity, China’s president, Xi Jinping, has referred to Zheng He, a legendary Chinese expeditionary, as a pioneer of interaction between China and Kenya. Zheng He “made seven expeditions to Western Seas, reaching many Southeast Asian counties and even Kenya on the eastern coast of Africa, leaving behind many stories of friendly exchanges between China and the countries along the route” (Xi, 2018a: 285). However, the genesis of current and formal Kenya-­ China relations was shaky. After Kenya gained independence in 1963, the new country’s president, Jomo Kenyatta, was more aligned to the capitalist West, as opposed to the socialist East. This plainly put China and Kenya in different cold war camps. However, Oginga Odinga, Kenyatta’s deputy, was socialist-leaning and sought close Kenya-China ties. In addition, Uhuru Kenyatta. Jomo Kenyatta’s son and Kenya’s current president, has been inclined to China. China was one of the first countries to establish formal relations with Kenya in December 1963, just two days after Kenya gained independence (Sun, 2020: 42). It is noteworthy that this was the time when China and the Soviet Union were embroiled in the Sino-Soviet ideological rift. This split was costly for China’s standing in Africa. Liberation movements that were aligned to the Soviet Union, such as

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South Africa’s African National Congress (ANC) and the South African Communist Party (SACP) were hostile towards China’s implacability which stressed that post-­ Stalinist USSR was revisionist. To thwart Soviet influence in Africa, China blundered into aligning itself with controversial and right-leaning movements such as UNITA in Angola and the Pan-African Congress of South Africa. Apart from China’s fight with the Soviet Union over African support, China was also fighting a bigger struggle: recognition by the United Nations. After the founding of the communist People’s Republic of China in 1949 and the flight of the nationalist Kuomintang to the island of Taiwan, the nationalists retained UN recognition and a permanent seat at the Security Council. China was cultivating ties with the developing world that would ultimately prove decisive in ending Taiwan’s recognition. That Odinga was amenable to this idea endeared him to China. Another reason Odinga sided with China is that China did not have a history of colonizing any African territory. The West, on the other hand, had. America, as the principal capitalist power, was ideologically unattractive to Odinga. During the Sino-Soviet split, however, despite China’s fulminations against alleged Soviet apostasy, Jodie Y Sun (2020: 44) argues that “Kenya’s ultimate preference for Chinese aid over the Soviet equivalent was based on economic rather than ideological reasons.” Chinese led projects were more particularly attractive to Africa and Kenya because they were turnkey projects. In some cases, as was the case with the Tanzania Zambia Railway project, for example, China offered labor in addition to finances and expertise (Scott, 2019). Soviet projects required that beneficiary countries organize and finance the suggested projects (Esseks, 1975). Unfortunately for Kenya-China relations, internecine conflict within the ruling Kenyan African National Union (KANU) forced Odinga to resign his positions as party and national vice president in 1966. This effectively left Kenyatta and his acolytes, whose sympathies were with the capitalist bloc, as the sole authors of Kenya’s foreign policy. Coupled with this was China’s own internal chaos that was wrought by Mao’s Cultural Revolution. This episode saw the undermining of career Chinese diplomats such as Zhou En-Lai by Mao’s red guards. Arap Moi and Mwai Kibaki in Kenyatta’s government were manifestly against China and this escalated in 1967. The impasse was caused by China taking umbrage at criticism by the Kenyan government and the Kenyan government’s refusal to offer apologies or, better yet, to act against anti-Chinese elements. Although bilateral trade between the two countries remained largely unabated, there was deep diplomatic hostility which resulted in the respective ambassadors of the two countries being declared undesirable persons. While the relationship between the two countries started improving in the 1970s, it was in the 2000s that Kenya-China relations became more pronounced. China today has one of the biggest embassies in Kenya. Even more tellingly, the embassy is situated next to Kenya’s Ministry of Defense. The current close relationship between the two countries is mainly due to China’s growing economy, its voracious pursuit of African resources, and Africa’s need for infrastructure which China has proved to be able to alleviate.

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3 Literature Review: China in Kenya’s Infrastructure Generally, investing in Africa’s infrastructure is imperative. This is so because Africa’s population of about 1.2 billion people is estimated to double by 2050 (Goalkeepers Data Report, 2018: 6), making Africans the fastest growing population. Coupled with this rapid population growth is the reality that sub-Saharan Africa is also the fastest urbanizing region (Shepard, 2019). However, the population and urbanization trends have not been simultaneously matched by sufficient infrastructure. Some estimates say that Africa has an “infrastructure funding gap of $130–170bn a year” (Ballard, 2018). China has been one of the main players in seeking to remedy the dearth of infrastructure in Africa and Kenya is one of the arenas in which this is playing out. As will be shown, infrastructure in Kenya is being established by both the public and private sector from China. Kenya holds China’s capacity to build infrastructure in high regard. When in July 2004 “Kenya and Uganda signed a Memorandum of Understanding approving the joint concessioning (sic) of KRC1 and URC2 for a period of 25 years” (UNCTAD, 2005: 23), the China Railways First Group Company was one of the first five companies to be pre-qualified for the project and was asked to present its bid by April 2005. The MoU was an acknowledgement that Kenya and Uganda would accrue better returns if they partially privatized their dilapidated railway systems, leaving a 20% stake for each country. The dilapidation began in the 1980s and it was largely due to the collapse of the East African Railway Corporation (EARC) – a company that handled all railway transportation along “the 1,300-km main Mombasa-Nairobi-Malaba-Kampala line” (UNCTAD, 2007: 5). The respective national companies that took charge of railway management did not cope with the responsibility. The Belt and Road Initiative (BRI) is the main framework through which China will build a network infrastructure and social networks beyond Asia, in the same manner that the ancient Silk Road did. Launched in 2013 (Xi, 2018b: 111), the BRI is divided into the Silk Road Economic Belt (on land) and sea-based 21st Century Maritime Silk Road (Xi, 2018b: 96). It currently straddles more than 65 countries and “builds infrastructure on the maritime road traversing south-east Asia to East Africa while the overland belt encompasses the old Silk Road and extends into Central Asia and the Middle East as well as Central and Eastern Europe” (Yueh, 2019: 28). In 2019, Kenya’s President, Uhuru Kenyatta was one of Africa’s leaders to attend the Belt and Road Forum in China during which he witnessed the signing of the $2.23 billion worth project to build the Konza Data Centre and Smart Cities and the JKIA-James Gichuru expressway project. The deals “will be fulfilled through concessional financing and Public-Private Partnership (PPP)” (PSCU, 26 April 2019).

 Kenya Railway Corporation.  Uganda Railway Corporation.

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To revive its transport infrastructure, Kenya has reached out to China to help with both road and railway infrastructure. The most prominent and arguably most controversial of such projects is the Standard Gauge Railway (SGR) which extends from the port of Mombasa to Nairobi and is likely to be extended to Kampala in Uganda and Kigali in Rwanda. Another massive project is the Thika highway in Kenya, from the city center to the Thika Industrial project (Okoth, 2020) which is colloquially known as “shock and awe” project because of how it was built without interrupting traffic and completed circa 2010 which was ahead of schedule. The SGR was also accomplished ahead of time. The Lamu Port-South Sudan-Ethiopia-­ Transport (LAPSSET) Corridor project is a project that is regional in its scope and will connect Kenya with South Sudan and Ethiopia. In addition, Kenya has been endowed with inland ports in Naivasha and Embakasi. The downside of China’s infrastructure projects in Kenya has been corruption on the side of Kenyans. This corruption comes in form of price inflations for land that has been earmarked or chosen for infrastructure. To circumvent this, the government of Kenya is mulling over installing underground transport systems. It is commendable that Kenya provides the steel needed for railways. Apart from transport network, China has also been involved in improving Kenya’s technology by direct involvement through Chinese personnel but also through offering scholarships to deserving Kenyans to go and study technology in China. On an annual basis, the Africa Policy Institute (API) facilitates about 50 scholarships for Kenyans and a good number of them study digital economics among other such fields. This form of training will eventually be important as China has begun to relocate or establish some of its industries in Kenya, such as the Eldoret Industrial Zone. From a political point of view, China has been reluctant to assert itself in East Africa. The main reason is that the West, mainly Britain, France, and the US is loath to allow China an influential presence in that region. China’s military base in Djibouti has attracted negative attention from the West.

4 Methodology The material in this chapter is presented and analyzed according to the principles of constructivism/interpretivism. This paradigm helps the researchers to be solely responsible for interpreting the data that has been gathered for the chapter. Furthermore, the authors take into cognizance that interpreting qualitative data as done in the chapter makes no claim of positivist certitude. The constructivist paradigm of research works better in tandem with qualitative research approaches. For this reason, while the authors may refer to the quantitative bents of Kenya-China industrial and infrastructure relations, it will mainly rely on qualitative data. On electing a theoretical lens from which data is analyzed, the chapter employs a constructivist approach to international relations. This approach looks at international relations as essentially social and hence defying exact predictions (Palan, 2000). For

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this reason, one can only refer to history and current circumstances to judge the quality of relations between nations but cannot, with certitude, predict the quality of future relations. Agents involved in a relationship interact according to how they perceive each other’s identity and possible interests emanating from such identities. The numerous references made to community social responsibility in this chapter point to the importance of how creating a good impression in the community plays a major role in constructing a positive identity of Chinese industrial and infrastructural enterprises in Kenya. Both primary and secondary data were used to frame the chapter. Primary data was collected mainly through interviews and observations by the authors. The interviewees ranged from Chinese investors, Kenyan employees in Chinese firms and Kenyan academics from institutions of higher education and those involved in institutes that deal with policy crafting and recommendations. The interviews were unstructured and this type of data collection gave respondents and interviewers flexibility in their interaction. In addition, the chapter differs from much literature on Africa-China relations in that it does not seek so much to offer wide-reaching statistical analyses of the subject at hand, which might confound rather than enlighten a large portion of the intended readers. This choice of scholarship offers a human dimension to China’s industrial and infrastructural activity in Kenya. Secondary data was gathered from published material ranging from academic literature, policy comments and recommendations and the writings and speeches of China’s president – Xi Jinping. China has made enormous inroads in funding infrastructure projects in many African countries. Thus, the Kenya-China nexus is more of a case study to Africa’s connection with China in the areas under investigation. Thus, the research style adopted is a case study. This dovetails very well with the research paradigm and approach in that it concedes the possibility that the findings to be derived for this research will not necessarily be generalizable to other cases. Thematic analysis will be used to analyze the data. This will mostly be done through noting of convergences, divergences and, where possible, unique aspects among the different types of data used. The following section of chapter presents the main finding from the research.

5 Presentation of Data 5.1 Sino-Pessimism/Phobia vs. Sino-Optimism-Philia Sino-pessimism could be described as trepidation that comes with China’s increasing influence and presence in the rest of the world. Sino-phobia, on the other hand, is the fear or hatred of China and the Chinese. Sino-optimism is the feeling of sanguinity about China’s good fortunes, both in China and in the rest of the world. Sino-philia is the love of China and the Chinese. In our interviews with Kenyan

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intellectuals, policy analysts and Kenyan workers in Chinese-run factories and firms, we gathered information that could be placed under the spectrum of either hostility (Sino-pessimism and Sinophobia) or friendliness (Sino-optimism and Sinophilia). Peter Kagwanja3 of the API asserted that the positive tenor of the general Sino-African relationship is mainly sustained by the fact that despite China’s longstanding association with Africa, it never took part in the colonization of the continent. Patrick Mbatatu, a specialist in Development Policy at Kenyatta University, concludes that Kenyans and Africans generally demonstrate optimism towards the continent’s relationship with China, although cultural misunderstandings usually sully the relationship. A study done by Kamoche and Siebers (2015: 1) also noted “the challenge of reconciling cross-cultural differences” in the Kenya-China engagement. Patrick Maluki of the Institute of Diplomacy at the University of Nairobi urged that Kenya and other African countries assume what could be termed as “guarded” Sino-optimism and Sinophilia. This approach is informed by the fact that Africa’s colonization at the hands of Western powers provides salutary lessons on how the continent should interact with the increasingly powerful China. In sum, there was a general approbation of China’s presence in Kenya, from intellectuals, representatives of government structures (from the Kenyan Investment Authority, henceforth KenInvest) and Kenyan workers who ply their trade in Chinese firms that have been stellar in their corporate social responsibility (CSR).

5.2 Beyond Purely Economic Ambition: Chinese Involvement in Corporate Social Responsibility (CSR) CSR “is described as a process whereby individuals identify stakeholder demands on their organisations and negotiate their level of responsibility towards the collective wellbeing of society, environment, and economy” (Font & Lynes, 2018: 1028). Simply, CSR entails that individuals and/or organizations, typically from the private sector, go beyond the confines of their economic or material pursuits to be socially responsive to the needs, privations and aspirations of the societies or communities in which they operate. This is usually done through altruism, philanthropy, and activism. Our research established that some Chinese firms play a noble role in the Kenyan communities in which they are operating. Beyond providing employment for a segment of those communities, CSR ensures that Chinese firms are hailed by the wider communities. Twyford4 ceramic factory was especially impressive in its commission of CSR.  The respondents for our interview demonstrated how the factory expressly responds to specific Sustainable Development Goals (SDGs). To promote good  Personal communication. July 16, 2019. Africa Policy Institute, Nairobi.  A ceramics company in Kajiado, outside the main town of Nairobi.

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health, which is SDG 3, the factory donated KES200,000 and government representatives conducted an auction at which 1500 goats were sold and the proceeds used to help procure health insurance for 5000 families. The factory also makes use of a “complete set of water purification and recycling equipment to make sure the efficient use of resources and environment” (Twyford, 2018). As a response to SDG 4 (quality education), the factory helped to rebuild a school in Mathare that had been charred beyond use. In return, the school offered a token of appreciation by renaming itself as KEDA5 DBSA School. Eighty students have received the Maisah Bora scholarship, under Twyford’s aegis, to help them further their education. To promote clean water consumption, the factory sunk a borehole in Inkiwanjani area to service the community.6

5.3 Kenya’s Allure to China: A Typical Case of China’s Preference for African Resources? For investors that seek to have a foothold in East Africa, Kenya is usually the first port of call, in the same way that South Africa is to Southern Africa. As stated in the introduction, Kenya is the biggest economy in East Africa. Aviation Industry Corporation of China (AVIC) the main shareholder of AVIC International Holding Corporation (AVIC INTL) is building a smart city called the Global Trade Centre (GTC) in Nairobi. The center will comprise hotel and conference facilities, a residential area and shopping mall. GTC intends to be the landmark in Nairobi’s Westland area. The managing director of the project averred that the main target of the GTC is multinational corporations from around the world. Kenya and Nairobi were chosen as hosts for the smart city because they are the hub of East Africa’s economic activity. To make the project more multination, AVIC has entrusted the care of the hotel to JW Marriott. Moses Ikiara of the KenInvest noted that Kenya’s importance is underlined by the fact that, despite not having the mineral and energy resources that usually attract China and other foreign players to other African countries, Kenya has been the cynosure of foreign attention. Apart from being a relatively peaceful country, the diverse nature of Kenya’s economy is an important component of Kenya’s allure to prospective investors. A visit to Twyford gave another indication of why Kenya is an attractive destination for investment. Twyford is a subsidiary of Sunda International Group, and its 60 acres facility in Kajiado was established courtesy of KEDA Clean Energy, a Chinese company (Kenyan Ministry of Industry, Trade and Cooperatives, 2018). Twyford sources 99% of its material from Kenya. Furthermore, the administrators at the factory reported that 65% of the material produced caters

 KEDA Clean Energy is the company that established Twayford in Kajiado.  Personal communication.

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for the Kenyan market. This makes it attractive for foreign investors to venture into sectors for which there are readily available Kenyan resources and market. Our research took us to a precast manufacturing plant by China Wu Yi, a state-­ owned enterprise. This is the only firm we found during our fieldwork that directly responds to China’s Belt and Road Initiative (BRI). Being state-owned has not prevented it from engaging in CSR. It provides potable water to water-scarce communities and on top of that it has also helped to build a local school. While the Kenyan workers at China Wu Yi were not interviewed due to time constraints, the workers at Twyford applauded the immensity of CSR sponsored by Chinese firms. In the larger scheme of analyzing the impact of Kenya-China relations on Kenya, CSR is likely to paint a positive picture of China. Like in any other relationship, the Kenya-­ China relationship, as expressed through interaction between Chinese and Kenyan citizens in industry, is not immune to challenges.

5.4 The Clash of Worldviews While state-level or diplomatic interaction between China and its African partners is invariably cordial, the increasing interaction between non-political or non-state actors of Chinese extraction, in form of Chinese migrants, entrepreneurs and multinational corporations and ordinary Africans has not been immune to misunderstanding and tension. Kenya is not an exception and Patrick Mbataru7 from Kenyatta University noted this. The respondents from the Twyford reported that cultural differences are a crucial component of misunderstanding and tension between Chinese and Kenyans. Other observers (e.g., French, 2014; Ehui, 2016) have noted that cultural collision and stereotyping is common from both Chinese and African citizens. Kenyans have been accustomed to Western ways of working that entail collegiality between workers and their superiors and their adherence to work hours. The Chinese mode of work is reportedly different in that power dynamics between superiors and workers are often defined in their manner of interaction. In other words, superiors lord it over their subordinates. Worksite tension between Chinese employers and their African employees have been widely reported across Africa (e.g., see Human Rights Watch, 2011). Criticism of China as a state and/or its citizens and multinational corporations is also common. However, the Kenyan respondents, most especially Patrick Mbataru and Peter Kangwanja, are adamant that such criticism is usually sponsored by Western players who are loath to concede that their monopoly of exploiting Africa is aggressively being challenged by an ambitious new player in the form of China (Jackson, 2012). A similar argument has been made by Ngozi Okonjo-Iweala (2006), a former Nigerian Finance Minister, who has urged the West to “learn to compete” with China rather that unfairly and selfishly traduce it (see also Mutambara,

 Personal communication with Mbataru. July 17, 2019.

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2013). Lemmy Nyongesa, an architect and doctorate candidate at the University of Nairobi, somewhat concurs with the other respondents, though with caution. He brings up the issue that the mystery that surrounds the terms of contracts that African governments sign with China is of concern. However, he proposes that if Africa and Africans are curious to access the actual terms of such contracts, then they should be the principal petitioners and should thus not be used as the handmaidens of Western powers eager to demonize China.

6 Discussion of Findings as Derived from Data 6.1 Not Always Smooth Sailing Kagwanja mentioned the difficult history of Sino-Kenyan relations at state level. State-level interaction was the same for the rest of the continent where, for a long time, China was present mainly through its diplomats and multinational corporations. The chapter has elsewhere referred to the growing diversity of Chinese that are currently coming to Africa. This summons the importance of specifying the socio-political and economic station of Chinese that one is referring to when ascribing certain attributes. While Chinese politicians and diplomats are likely to effect a positive image of China, and even live it out, ordinary Chinese migrants are not bound by the demand and expectation for diplomatic probity. Their pursuit of financial interests and respite from China could manifest itself in ways that might be at variance with what China seeks to present at the diplomatic level (French, 2014: 7). Howard French (2014) predicts that, with time, these ordinary Chinese, rather than agents of Beijing at state level, are likely to do more to construct an image of China in Africa. Mario Esteban (2010) has done research which established that, although African politicians are generally sanguine about China’s presence in Africa, through its diplomats, infrastructure, investment aid, ordinary Africans are not as sanguine and this is because ordinary Africans usually interact with Chinese migrants whose views and conduct are not and need not be necessarily in tandem with China’s institutional ones. One of the major concerns about ordinary Chinese in Africa is that they self-isolate and are thus reluctant to blend in with Africans. This stems from the observation that Chinese workers in Chinese firms are usually housed on-site, separate from their fellow workers of African origin (Lu et al., 2017). Our research uncovered contrasting realities. At China Wu Yi, Chinese workers have been provided with accommodation in the premises of their employment while their Kenyan counterparts reside outside. In addition to the accommodation, the Chinese workers at China Wu Yi have also been provided with a Chinese chef to tend to their Chinese nutritional needs with their indigenous delicacies. The China-­ Africa Research Initiative policy brief by Lu et al. (2017: 1) quoted above suggests that housing Chinese workers on-site is common among those “working on infrastructure, mining, or oil projects.” However, this happens because firms are

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concerned about the safety of their employees; it is not necessary about Chinese self-isolating or being ethnocentric. Our tour guide at China Wu Yi explained that the intent was to house both Kenyan and Chinese workers within the work precinct but that this was not possible because of limited space. While this is explicable, it need not be taken at face value because the presence of a Chinese chef suggests that the current situation has conveniently worked itself out and that even if Kenyan workers were to be accommodated, there would have to be changes in the kitchen personnel which would either entail a change of eating options or separation of eating amenities which in itself could continue the separation of workers along nationality lines. The Keda factory (Twyford) at Kajiado presented a contrast to the living arrangements we observed at China Wu Yi. The workers at Kajiado are accommodated on the premises save for those who live nearby and choose to live with their families. All workers cook separately and hence the possible problems that could arise at China Wu Yi are prevented. The challenge that the Kenyan workers at Kajiado pointed out, as shown above, was the manifestly stratified nature between workers and their employees which at times can be abusive. French’s (2014) research demonstrated that some Chinese workers can indeed be abusive to their African workers, with occasional violence being visited upon the latter (see also Human Rights Watch, 2011). The tension that sometimes infests relations between African workers and their Chinese employers is not invariably the responsibility of Chinese employers. The same goes for violence; in Zambia, for example, there have been fatalities on both sides of the bargaining equation with Zambian workers killing their Chinese managers and vice versa. For non-state actors and the non-Chinese international community, one of the downsides to the Kenya-China infrastructure and industrial relationship will be centered on issues of viability and Kenya’s potential to pay back loans incurred from China. The SGR, Kenya’s biggest infrastructure since independence has already been a center of criticism (Yueh, 2019: 29). According to some estimates “Taxpayers have been forced to shoulder the burden of the SGR loans because revenues generated from the passenger and cargo services on the track are not enough to meet the operation costs, which are estimated at Sh1.5 billion a month against average sales of Sh841 million” (Okoth, 2020). Against such criticism, however, Moses Ikiara of KenInvest is convinced that, ultimately, the SGR will benefit Kenya and that observers that currently criticize the project are hurriedly looking for quick returns. He urges that positive effects of the project are likely to be felt as people become more familiar with it and start using it more. That KenInvest is part of the Kenyan government should leave observers with the expectation that Ikiara is bound to toe the government line. This, then, requires that observers continue to monitor Kenya’s interaction with China and draw attention to issues that eventually might be a burden to Kenyan citizens. This is more so when it comes to government debt rather than private investment or funding from China.

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6.2 Skills Transfer Apart from transport network, China has also been involved in improving Kenya’s technology by direct involvement through Chinese personnel but also through offering scholarships to deserving Kenyans to go and study technology in China. On an annual basis, API facilitates about 50 scholarships for Kenyans and a good number of them study digital economics among other such fields.8 This form of training will eventually be important as China has begun to relocate or establish some of its industries in Kenya, such as the Eldoret Industrial Zone. Furthermore, our research established that the Chinese have not stopped seeking the skills that they do not possess from those who do. At the onset of the reforms that China embarked upon, Deng Xiaoping, the main architect of reforms, encouraged Chinese citizens to seek skills, mainly industrial and technological, from countries that had such skills (Yueh, 2013). This was the case at the China Wu Yi precast factory that we visited in Nairobi. The machinery used at the factory was imported from Germany and for some time, Chinese would­be operators learned from German experts on how to work the machines. The German experts had to physically be present in Kenya to facilitate such transfer of skills. This knowledge was further transferred to the Kenyan employees. A popular criticism about China is that it is flooding Africa with Chinese nationals who do not bring critical skills that Africa lacks. Alongside Algeria, Angola, Nigeria, and Ethiopia, Kenya is one of the top five African countries with high numbers of Chinese workers. A report by the China Africa Research Initiative (CARI, 2019) at the Johns Hopkins University has established that although the numbers of Chinese workers in Africa was fluctuating from 2009, they reached their peak in 2015 (263,659 workers), they have been declining steadily since then, having reached 201,057 in 2018. This research does not pretend to have an exact explanation for this trend but skills transfer and a vigilant union movement in Africa could be a positive impetus to this decline. One of the quickest ways of accelerating skills transfer is by establishing joint ventures between Chinese and local firms. Yueh (2019: 29) noted that “Chinese contractors do not enter into joint ventures with local firms or hire Kenyan managers” and this limits “the potential for positive spillovers.” This observation was in tandem with our own. However, we also noted that at Twyford, most of the workers doing technical activities were Kenyan, with an encouraging number of women involved in the designing of tiles. Our observation was that while administration was under the charge of Chinese personnel, most of the factory was operated by Kenyan employees. However, as Yueh (2019: 29) states, there still is “a dearth of skilled [local] managerial staff” that must be remedied.

 Personal communication with Kagwanja. July 16, 2019.

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6.3 CSR as a Driver of Sino-Optimism Both Kenyan and Chinese respondents are optimistic about China-Kenya relations. Kagwanja’s optimism suggests that, within Kenya, China is hailed even outside the government. His feeling might appear to be shared by the many Kenyans that he said are inviting Chinese firms to build private infrastructure belonging to Kenyans. This optimism is also expected from Kenyans who benefit, both personally and vicariously, from Chinese opportunities such as scholarships, employment, and provision of basic needs. Thus, the evolution of Sino-Kenyan relations has expanded between state-level relations to include the private sector. While companies such as Twyford are private, they have demonstrated that they carry with them some of the ideals of the Chinese government such as mutual economic growth and the pursuit of people-centered paths to development. It is telling that the presentation of Twyford’s work was dominated mostly by a depiction of how the firm responds to SDGs. This was underlining the point that CSR is much a part of Twyford’s vocation as is the generation of profit. Wu Yi is a state-owned enterprise but it has a laudable portfolio of CSR. Emphasis on CSR by both public and private entities proves just how effective community engagement is in creating a positive picture of China in Kenya. The research discovered that there is a strong correlation between CSR and the perception that Kenyans have of China’s industrial and infrastructural involvement in Kenya. When applied to other projects where Chinese finances are used to build industry and infrastructure, a proactive CSR engagement might have a chance of securing the support of Kenyan citizens. As counseled before, however, China and Kenya bear the responsibility of being candid about the negative possibilities that come with China’s industrial and infrastructural involvement in Kenya. The contracts that are signed between the two governments should not be shrouded in mystery as this might only deepen suspicion in Kenya and the West. Tempting Kenya with contracts that it cannot easily honor, chiefly through nonrepayment, will only stoke the argument that China is entrapping heavily indebted countries with the ultimate intent of seizing their valued assets. The Chinese private sector will be lauded for as long as it does not sidestep local legislation regarding work conditions.

7 Conclusion The chapter was an empirical study into the perceptions of Chinese firms involved in Kenya’s industrial and infrastructural development. While the data from Chinese participants was gathered from those involved in this development, the Kenyan sample was more expansive and included academics and workers in Chinese firms. There has been massive Chinese involvement in Kenya’s economy in different ways. The study concludes that, despite some areas of misunderstanding, there is

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general optimism towards China’s presence in Kenya. Beyond catering for local employees, some Chinese firms are active beyond the confines of their firms; their CSR is a very important factor in creating a positive perception of China in general and its involvement in industry and infrastructure. The chapter took a constructivist bent of research in international relations which accentuates the importance of norms, identity construction and interests that are constructed based on those identities. China’s history of ideological solidarity with Africa, although shaky in Kenya’s case, and the fact that China has no colonial history on the African continent imbue China with a more amenable identity. CSR, as said before, has also played a part in constructing a positive identity of China and its involvement in Kenya’s industrial and infrastructural development.

References African Development Bank. (2020). Kenya economic outlook. Available at https://www.afdb.org/ en/countries/east-­africa/kenya Ballard, B. (2018, April 20). Bridging Africa’s infrastructure gap. World Finance. Available at https://www.worldfinance.com/infrastructure-­investment/project-­finance/ bridging-­africas-­infrastructure-­gap China Africa Research Initiative. (2019). Data: Chinese workers in Africa. Available at http:// www.sais-­cari.org/data-­chinese-­workers-­in-­africa Ehui, R. (2016). French, HW. China’s second continent: How a million migrants are building a New Empire in Africa. New York: Alfred A. Knopf, 2014, 285 pp. Journal of Retracing Africa, 3(1), 84–86. Esseks, J. D. (1975). Soviet economic aid to Africa: 1959–72. In W. Weinstein (Ed.), Chinese and Soviet aid to Africa. Praeger Publishers. Esteban, M. (2010). A silent invasion? African views on the growing Chinese presence in Africa: The case of Equatorial Guinea. African and Asian Studies, 9(3), 232–251. Font, X., & Lynes, J. (2018). Corporate social responsibility in tourism and hospitality. Journal of Sustainable Tourism, 26(7), 1027–1042. https://doi.org/10.1080/09669582.2018.1488856 French, H. (2014). China’s Second Continent: How a Million Chinese are Bilding a New Empire in Africa. New York: Alfreed A. Knopf. Goalkeepers Data Report. (2018). The stories behind the data 2018. Bill and Melinda Gates Foundation. Human Rights Watch. (2011, November 4). You’ll be fired if you refuse: Labor abuses in Zambia’s Chinese state-owned copper mines. Available at https://www.hrw.org/report/2011/11/04/ youll-­be-­fired-­if-­yourefuse/labor-­abuses-­zambias-­chinese-­state-­owbed-­copper-­mines Jackson, T. (2012). Postcolonialism and organizational knowledge in the wake of China’s presence in Africa: Interrogating South-South relations. Organization, 19(2), 181–204. Kamoche, K., & Siebers, L.  Q. (2015). Chinese management practices in Kenya: toward a post-colonial critique. The International Journal of Human Resource Management, 26(21), 2718–2743. KenInvest. (2019). Invest in Kenya: East Africa’s powerhouse. Available at http://www.invest. go.ke/why-­invest-­in-­kenya/ Kenyan Ministry of Industry, Trade and Cooperatives. (2018). Chinese industrialists seek to invest Ksh200 billion in Kenya. Available at https://bit.ly/2HKnOo3 Lu, Y., Sautman, B., Yan, H., & Zhou, W. (2017). Adaptation of Chinese immigrants in Zambia. China Africa Research Initiative, Policy Brief 19. Available at https://bit.ly/2uyZq5O

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Mbuli, E.  V. (2007). Improving transit transport in East Africa: Challenges and opportunities. UNCTAD. Mutambara, A. (2013, June 13). How African states need to respond to China’s shifting growth model. New African. Okonjo-Iweala, N. (2006, October 24). Viewpoint: China become Africa’s suitor. BBC News. http://news.bbc.co.uk/2/hi/business/6079838.stm Okoth, E. (2020, January 2). Burden on taxpayers as Treasury starts repayment of SGR loan. Business Daily. Available at https://www.businessdailyafrica.com/economy/Burden-­on-­ taxpayers-­as-­Treasury-­starts-­repayment-­of-­SGR-­loan/3946234-­5404862-­gncuxy/index.html Palan, R. (2000). A world of their making: an evaluation of the constructivist critique in international relations. Review of International Studies, 26(4), 575–598. PSCU. (2019, April 26). Kenya inks $2.23 billion projects deal with China. The East African. Available at https://bit.ly/2ulm9lH Scott, G. (2019). Adventures in Zambia Politics: A Story in Black and White. Boulder: Lynne Rienner. Shepard, W. (2019, October 3). What China Is Really Up To In Africa? Forbes. Available at https://www.forbes.com/sites/wadeshepard/2019/10/03/what-­c hina-­i s-­r eally-­u p-­t o-­i n-­ africa/#636bad1a5930 Sun, J. Y. (2020). ‘Now the cry was Communism’: the Cold War and Kenya’s relations with China, 1964–70. Cold War History, 20(1), 39–58. https://doi.org/10.1080/14682745.2019.1602120 Twyford. (2018). Kenya Twyford factory. Available at http://www.twyfordtile.com/kenya.html UNCTAD. (2005). An investment guide to the East African community. United Nations. World Bank. (2019). Africa: Overview. Available at https://www.worldbank.org/en/region/afr/ overview Xi, J. (2018a). The governance of China (Vol. I, 3rd ed.). Foreign Language Press. Xi, J. (2018b). Important speeches at the Belt and Road Forum for International Cooperation. China International Publishing Group. Yueh, L. (2013). China’s growth: The making of an economic superpower. Oxford University Press. Yueh, L. (2019). China’s economic emergency and implications for Africa. In A. Oqubay & J. Y. Lin (Eds.), China-Africa and an economic transformation (pp. 19–34). Oxford University Press.

Part III

Industrial Cooperation

The Regional Infrastructural Imperatives of the AfCFTA for Development in Southern Africa Nakubyana Mungomba, Mwanda Phiri, and Malindi Chatora

1 Introduction Infrastructure development is an essential factor of economic growth and regional economic cooperation. Along with a long-term development strategy, and macroeconomic stability, infrastructure development is a necessary condition for sustainable economic development. As a region, Southern Africa is yet to find its stride in achieving sustainable economic development. In its 2019 Southern Africa Economic Outlook, the African Development Bank (AfDB, 2019c) projected that the Southern African economy would experience slower growth than other regions on the continent – at 2.2% in 2019 and 2.8% in 2020. And while countries in the region face various macroeconomic challenges, they also face challenges with consolidating their regional integration, particularly through trade, production, finance, and infrastructure (AfDB, 2019c). This is despite having three regional economic communities (RECs) overlapping in the region; Southern African Customs Union (SACU), the Southern African Development Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA). The African Continental Free Trade Area (AfCFTA), which came into force in May 2019, aims to create a single continent-wide market for goods and services, as well as movement of capital and persons. This would make it the largest trade bloc in the world with respect to country members. For Southern Africa, the AfCFTA

N. Mungomba (*) · M. Phiri · M. Chatora Zambia Institute for Policy Analysis and Research, Lusaka, Zambia Centre for Africa-China Studies, University of Johannesburg, Johannesburg, South Africa e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Ndzendze, D. Monyae (eds.), Perspectives on Africa-China Infrastructural and Industrial Cooperation, Africa-East Asia International Relations, https://doi.org/10.1007/978-3-031-38395-3_10

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holds appeal for a number of reasons, including resolving the problem of overlapping membership to various RECs. More importantly, however, the economic potential of the AfCFTA presents the opportunity to expand intra-African trade, enhance the continent’s competitiveness in global markets, and stimulate the muchneeded industrialisation for inclusive development. And these are all key benefits that Southern Africa can tap into to boost the region’s economic development and growth. However, for both Southern Africa and the continent as a whole to realise these gains, it is necessary to fulfil the infrastructure imperatives that are essential for the AfCFTA to succeed. Africa’s infrastructure financing needs are estimated at an amount of $130–$170 billion a year. With a financing gap of $67–$107 billion, RECs must consider regional infrastructure cooperation, while countries need to consider increased domestic resource mobilisation and public-private partnerships for regional public infrastructure (AfDB, 2019b). In recent years, China has also emerged as a major financer of large construction projects in Africa, surpassing even the funding provided by country governments (Deloitte, 2019). And when we examine the state of infrastructure in Southern Africa, we find considerable room for improvement, highlighting the need for the region to embrace the infrastructure imperatives for the AfCFTA in the development of the region. There are many auxiliary issues that need to be addressed to harness the benefits of regional integration to serve as an economic tool for inclusive development. In this chapter, we look at infrastructure and its importance for boosting economic development by facilitating intra-African trade, for example. We extend our analysis to looking at the infrastructure financing need in Africa, with a particular focus on China’s increasing role in bridging Africa’s infrastructure financing gap, honing in on Southern Africa. We discuss two pertinent questions: What are the infrastructure imperatives in Southern Africa necessary for the region to actualise the full potential of the AfCFTA and regional development? Second, what are the infrastructure financing needs required to meet these infrastructure imperatives and how has China helped fill this financing gap? We analyse the infrastructure imperatives in southern Africa along two fronts: transport-related and production-related infrastructure. We find that low quality and inadequate networks of transportation infrastructure in part, explains the poor interconnectivity within Southern Africa, and thus limit regional integration and development. Further, there exists an overall deficiency of critical utility infrastructure such as energy and information and communications technology (ICT), required for Southern African countries to be competitive low-cost producers. Through China’s increased participation in infrastructure development in Africa, we argue that the country could underwrite some of the infrastructure projects required to improve to improve regional integration within Southern Africa and Africa as a whole, particularly by tapping into the African Union’s Agenda 2063, and China’s Belt and Road Initiative (BRI) and the Forum on China-Africa Cooperation (FOCAC). In the remainder of the chapter, we discuss the following: Section 2 is an exposition of how the AfCFTA has the potential to be a game changer for Southern Africa;

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Section 3 examines the state of infrastructure in Southern Africa, and the region’s infrastructure imperatives necessary for the region to actualise the full potential of the AfCFTA and to catalyse Southern Africa’s development; Section 4 considers how to close the infrastructure financing gap that exists in Africa and its sub-regions, including how to actualise the infrastructure aspirations of the AfCFTA through synergies between the African Union’s Agenda 2063, China’s Belt and Road Initiative, and FOCAC; finally, Section 5 concludes.

2 AfCFTA: A Potential Game Changer for Southern Africa 2.1 The Appeal of the AfCFTA for Southern Africa Since the signing of the Kigali Declaration to establish the African Continental Free Trade Area (AfCFTA) in 2018, the AfCFTA has received unprecedented political support evidenced by the quick pace with which countries have endorsed the Agreement.1 For Southern Africa, the AfCFTA holds appeal for one main reason: its economic potential is considerable and a potential game changer for the region. With 1.2 billion people in 55 African countries and an estimated combined gross domestic product (GDP) of US$2.5 trillion, the AfCFTA surpasses the market potential of all the individual RECs in Southern Africa. Therefore, Southern Africa stands to gain from a broader market access that could potentially boost intra-­ African trade and stimulate inclusive growth and development through increased trade in regional value chains and new trade opportunities in untapped African markets (AU, 2018). Maiden simulations on the impact of the AfCFTA found that the AfCFTA could increase Africa’s real income overall and increase intra-African trade by more than 50% as a result of increased exports of more sophisticated industrial, and agricultural products, as well as services (Mevel & Karingi, 2012). Increased real wages could also accrue to African workers, particularly unskilled workers in the agricultural and non-agricultural sectors, thus increasing their standards of living (Mevel & Karingi, 2012). More recent analysis shows similar results. The AfCFTA could have a positive effect on intra-African trade of up to US$35 billion per year and boost agricultural and industrial exports by up to US$45 billion and US$21 billion respectively (African Development Fund, 2019). These gains could be further amplified when accompanied by measures such as trade facilitation and infrastructure development (Mevel & Karingi, 2012; African Development Fund, 2019). Clearly, the AfCFTA provides opportunities for industrialisation and higher-­waged employment for Southern Africa that can address the region’s development challenges. But if the past is any indication, the mere elimination of tariffs at

 By 29 April 2019, 22 countries had deposited their instruments of ratification with the designated depository, triggering enforcement of the Agreement on 30 May 2019. 1

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70

Perent (%)

60

61.5

50 40 23.2

30

19.4

20

12.2

10 0

European Union

ASEAN

SADC 2010

2014

SACU

9.2 COMESA

2018

Source: Authors’ construction based on data from UNCTAD Stats Fig. 1  Intra-regional trade in Southern Africa, Europe and Asia (2010–2018). (Source: Authors’ construction based on data from UNCTAD Stats. Note: Intra-trade computed as the average of the share of intra-imports and intra-exports. We contrast intra-regional trade in southern African RECs with intra-regional trade in the European Union (EU) and the Association of Southeast Asian Nations (ASEAN) after free trade area status had been attained in SACU, SADC and COMESA)

continental level will not be a panacea for Southern Africa’s socio-economic development. The low level of intra-trade within Southern African RECs attests that free trade alone can fall short of increasing trade and stimulating a structural transformation process that is inclusive. For example, although average intra-regional tariffs are virtually zero within the Southern African Customs Union (SACU) and have substantially reduced amongst SADC and Common Market for Eastern and Southern Africa (COMESA) member countries at 0.04 and 0.05 respectively,2 intra-regional trade remains low relative to other economic groupings in Europe and Asia (see Fig. 1). This limited expansion of intra-trade in Southern Africa reiterates the need for additional measures beyond tariff reductions to harness the full benefits of the AfCFTA for Southern Africa. Key among them is the quality and adequacy of infrastructure within Southern Africa, as well between Southern Africa and the rest of Africa. Notwithstanding the potential of the AfCFTA to drive development in Southern Africa, on its own, the AfCFTA is a necessary but insufficient condition for boosting intra-African trade substantially to catalyse structural transformation and inclusive growth (Phiri & Mungomba, 2019). Other fundamentals, beyond the elimination of tariffs are essential for realising the full potential of the AfCFTA to double intra-­ African trade, and accelerate economic growth and industrial development (UNECA, AU and AfDB, 2017; Mevel & Karingi, 2012). To boost intra-Southern African trade, which remains exceedingly low (19.4%) relative to intra-trade in Asian (23.2%) and European (61.5%) RECS,3 the AfCFTA will have to take particular cognizance of the region’s infrastructure imperatives identified in the Southern African Development Community (SADC) Infrastructure Vision 2027 and how to meet their financing costs. With China emerging as a major financer of infrastructure in Africa in recent years, this readily identifies a critical role for China to play in the development of infrastructure for trade and Southern Africa’s economic development.  African Economic Outlook 2019.  Intra-trade computed as the average of the share of intra-imports and intra-exports in 2018 (UNCTAD data). 2 3

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3 Regional Integration and Economic Growth in Southern Africa Southern Africa has a long history of regional integration dating back to the formation of the SADC in 1980, and more recently in 2012, the region’s endorsement of the establishment of the AfCFTA and along with it, the Action Plan for Boosting IntraAfrican Trade (AfDB, 2019c). The AfCFTA – now the prelude to a continental customs union and Africa’s long desired complete economic, monetary, political, social and cultural integration – is one of 14 flagship projects of ‘Agenda 2063: The Africa We Want’; which aspires for an African-driven inclusive and sustainable economic transformation underpinned by peace, unity and a common ideology (AU, 2015). The motivation for regional integration is quite obvious. From theory, trade is a well espoused engine for economic growth and welfare maximisation. Typically, countries that are open to trade have been associated with higher economic growth rates and higher per capita incomes. Teignier (2017) and Alcalá and Ciccone (2002) support these assertions with empirical evidence on the role of trade in raising labour and agricultural productivity, incomes and triggering a process of structural transformation – outcomes that the AfCFTA equally seeks to achieve. Using a general equilibrium model, Teigner (2017) finds that trade was crucial to raising real income growth and welfare in Great Britain and to a lesser extent in South Korea as well. Similarly, Southern Africa regards regional integration as an important economic tool for development explicitly articulated as one of the guiding policies of the SADC Common Agenda to: ‘promote sustainable and equitable economic growth and socio-economic development that will ensure poverty alleviation with the ultimate objective of its eradication, enhance the standard and quality of life of the people of Southern Africa and support the socially disadvantaged through regional integration’ (SADC, 2001:4).

Despite efforts to integrate, however, so far, Southern Africa has not recorded corresponding levels of economic growth. Over the last two decades, the region has generally recorded the lowest average GDP growth rate compared to other regions on the continent, as seen in Table 1.

Table 1  GDP Growth (%) in Africa, by region (2010–2019) Region Central Africa East Africa North Africa Southern Africa West Africa Africa

2010–13 4.8 5.9 4.2 4 6.3 4.9

2014–16 3.1 5.8 2.8 1.8 3.3 3.1

2017 1.1 5.9 4.9 1.6 2.7 3.6

2018a 2.2 5.7 4.3 1.2 3.3 3.5

2019b 3.6 5.9 4.4 2.2 3.6 4.0

Source: African Development Bank Statistics, as presented in ‘African Development Bank (2019)’ a Estimated b Projection

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For Southern African countries constrained by small domestic markets, therefore, the AfCFTA expands opportunities for exploiting economies of scale, improving resource allocation and enhancing firm productivity and competitiveness (AU, 2018). Owing to its sheer size, the potential for the AfCFTA to deepen regional integration, transform Africa’s economies and stimulate inclusive growth through the development of regional value chains is much greater. Moreover, free market access to untapped markets in West Africa, for example, could provide new drivers of investments and growth for Southern Africa. In what follows we explore the infrastructure imperatives necessary for Southern Africa to improve regional integration and harness the potential benefits of the AfCFTA for economic development.

4 The State of Infrastructure in Southern Africa and the Region’s Infrastructure Imperatives In the previous section, we explored the AfCFTA and how it could be a game changer for Southern Africa, particularly on regional integration and economic growth for the region. This led to the understanding that infrastructure is one of the key elements for successful regional integration and reaping the benefits of a continent-­wide free trade agreement. In this section, therefore, we review the state of infrastructure in Southern Africa, and then identify the region’s infrastructure imperatives for fostering not only intra-regional trade, but also trade with the rest of Africa and the world. Poor quality and inadequate infrastructure remains one of the main constraints to the expansion of intra-African trade across the continent. The African Union (2012) has reported that the adverse impact of inadequate infrastructure on production and trade is more severe in Africa than in other regions of the world – both developed and developing. They argue that most of Africa is characterised by low quality and inadequate road, rail, air and waterway networks which limit interconnectivity and the volume of trade between countries. Other than transport-related infrastructure, they also note that trade in Africa is equally constrained by deficiencies of production-­ related infrastructure, particularly energy and ICT, and soft infrastructure in the form of customs and boarder procedures. Collectively, inadequate transport-­related and soft infrastructure contribute to making the cost of transporting goods and services within Africa to be among the highest in the world. In SADC,4 for example, transport costs are 60% higher than equivalent South-East Asian countries (Levin, 2018). It therefore makes sense that infrastructure development will have to be prioritised if intra-African trade is to improve or indeed if the AfCFTA is to be a success. And with the coming of the AfCFTA, there is a hope that greater engagement for regional infrastructure development will also be reinvigorated.

 In this section, we use SADC as a proxy for Southern Africa, while acknowledging that this REC includes the D.R. Congo, which is geographically located in Central Africa, and Tanzania, which is geographically located in East Africa, but are geo-politically closely linked to Southern Africa. 4

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5 The State of Infrastructure in Southern Africa Sub-Saharan Africa (SSA) ranks at the bottom of all developing regions in essentially every dimension of infrastructure performance (Calderon et al., 2018). The 2019 Global Competitiveness Report of the World Economic Forum (2019) scores the region 45 out of 100 in infrastructure performance, compared to South Asia at 59.2, Latin America and the Caribbean at 47.1, and the Middle East and North Africa at 70.5 out of 100. This score confirms the challenges underlying infrastructure provision in SSA which, when combined with its geographic disadvantages – notably the large number of landlocked countries  – contributes to increasing transportation costs that hinder intra-regional trade. Across regions within SSA itself, the scale of infrastructure endowment varies further still. The World Economic Forum (2019) ranks East Africa (46.8) with the highest average infrastructure performance competitiveness score in SSA followed by Southern Africa (46.6) and West Africa (43.6). Within sub-regions, the gap between the best and worst performers is highest among Southern African countries (see Fig.  2.) a further indication that the infrastructure performance in many Southern African countries is still lagging behind. Examining the general quality of infrastructure in Southern Africa more closely, we consider the state of transportation, energy and telecommunication infrastructure as well as customs and border 100 90 80

Mauritius 68.7

70

Kenya 53.6

60

Mauritania 53.7

50 40 30 20

Burundi 39.2 DRC 29.2

10 0

Southern Africa

East Africa

Cape Verde 32.4

West Africa

Source: Author’s construction based on 2019 Global Competitiveness Index Scores Fig. 2  Infrastructure competitiveness gaps within regions (2019). (Source: Author’s construction based on 2019 Global Competitiveness Index Scores. Notes: Average competitiveness scores include transport, utility and ICT indicators. Southern Africa is missing values for Comoros; East Africa is missing values for Djibouti, Eritrea, Somalia and South Sudan; West Africa is missing values for Guinea Bissau, Liberia, Niger, Sierra Leone and Togo)

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procedures and we find a general level of deficiency in these aspects of infrastructure development for the region.

5.1 Transportation Infrastructure Transportation is without doubt an indispensable element of trade and regional integration as it facilitates connectivity and the movement of goods and services across markets. Not only do adequate and quality transportation and logistics infrastructure help in lowering the costs of trade in goods and services, they are also essential for deepening regional integration (AfDB, 2019c), as well as enhancing value chain connectivity (Shepherd, 2017). In Southern Africa, the quality of the road network varies from country to country. While Southern African Governments have made substantial investments in road infrastructure in the past, these efforts have been undermined by inefficient management and inadequate funding which have resulted in the deterioration of road conditions and increased transport costs in the region (SADC, 2012). Crosscountry differences in the state of infrastructure among Southern African countries are more visible when considered within the 2019 Global Competitiveness Index (GCI). Table 2 summarises the overview of Southern Africa’s infrastructure performance as assessed within the Infrastructure Pillar of the GCI. The results show that, with the exception of South Africa which scored 58.7, the remaining countries all Table 2  SADC infrastructure quality competitiveness scores (2019) Transportation infrastructure quality Angola 36.2 Botswana 41.3 DRC 21.5 Eswatini 41.1 Lesotho 21.4 Madagascar 24.7 Malawi 33.2 Mauritius 49.1 Mozambique 28.6 Namibia 48.3 Seychelles 42.2 South Africa 58.7 Zambia 36.6 Zimbabwe 35.7

Quality Road of connectivity roads 77.7 19.2 93.3 46.5 59.3 18.4 64.5 50.4 44.7 29.2 49 17.4 78.4 30.1 36.3 61.4 68 23.4 98.1 71.8 … 50.4 96.2 59.1 77.5 40.6 85.9 30.6

Efficiency Rail of train density services … … 3.9 43.5 4 15.3 43.6 35.3 … … 2.9 17.4 20.3 18.5 9.9 8 … 43.2 7.2 17.8

27.2 40.3 … 34.1 17.7 15.2

Efficiency of air Airport transport connectivity services 26.9 38.1 15.8 45 16.9 30.7 5.9 47.2 5.8 6 20.3 41.4 12.8 39 37.8 66.5 18.9 33.4 24.1 64.1 30.7 57.3 63.5 74.5 25 51.5 22.5 42.1

… shows data is not available Source: Author’s construction based on 2019 Global Competitiveness Index Scores Note: Rankings are out of 141 countries. Data for Comoros are not available

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score below 50 on the transport infrastructure quality indicator. The most problematic areas are the quality of roads, rail density, efficiency of train services and airport connectivity. The large gap between the top performer (Namibia) and the worst perform (Madagascar) confirms the magnitude of the infrastructure challenges facing Southern Africa. Meanwhile, across the region, the three primary trading corridors – the North-­ South Corridor linking the South African ports of Durban, Cape Town, Port Elizabeth and Richards Bay to virtually all the landlocked SADC countries; the Maputo Corridor linking South Africa to Mozambique; and the Dar-es-Salaam Corridor between Zambia and Tanzania have been the focus of most development activities and are therefore relatively well developed (Macci & Raballand, 2009; Simuyemba, 2000). Other development corridors that have enjoyed varying levels of development in the Southern Africa region include Beira primarily serving Zambia and Zimbabwe; Nacala catering for Malawi; Rovuma proposed between Mozambique and Tanzania; Walvis Bay linking Namibia to Botswana and Zambia; Namibie linking Angola and Namibia; and Lobito linking Angola to the rest of the SADC countries through DRC (Simuyemba, 2000). It is against this background that the tension between regional infrastructure being delivered by individual country governments, and it being delivered at a regional level with inter-government cooperation emerges. The usual approach of managing and financing roads and other transport infrastructure through a government department has not yielded the desired results. And while the protocol on transport, communications and meteorology signed by SADC member countries in 1996 paved way for greater private participation in infrastructure development, the AfDB (2019c) notes that very few countries (Mozambique, South Africa and Zambia) have fully embraced the private sector and invested significant resources in infrastructure development.

5.2 Customs and Border Procedures In addition to the challenges the region is facing in transportation infrastructure, there are also shortfalls in ‘soft’ transportation infrastructure. One area requiring attention is the efficiency of customs and border procedures, an aspect that has been identified in the literature as limiting trade facilitation efforts in SSA.  There are several benefits to improving border posts and customs procedures, not least the reduction in the cost and delays incurred by traders, the enhancement of trade competitiveness and potential increases in government revenues (AfDB, 2012). More generally, delays at borders and check points can significantly increase the cost of trade. It is estimated that a day of delay at a border increases the distance between trading countries by up to 85 km. The lengthy customs procedures and lack of transparency at borders thus increases the cost of trading and renders African exports uncompetitive. Traders often encounter a number of government agencies on both sides of the same border which doubles the bureaucracy at borders and

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translates into congestion and delays. This increases the waiting time for trucks to cross borders, raising the cost of delivering their consignments. Southern African countries will have to simplify and harmonise customs and border procedures, automating systems for document checking and clearing by customs authorities and eliminate corruption at borders and checkpoints, to address the ‘soft’ infrastructure challenges facing the region. Otherwise, the cumbersome border procedures within the region make the effective implementation of a free trade difficult, hampering regional integration and development (SADC, 2012; Habiyaremye, 2020).

5.3 Energy Infrastructure Energy is a fundamental driver for various economic activities. Energy infrastructure falls into two broad categories, energy production and energy transmission, primarily for the production and transmission of electricity. Having good quality and reliable energy infrastructure is essential to production in an economy. In addition to its use in daily life, fuel and electricity support infrastructure projects that drive both regional integration and economic growth. In Southern Africa, overall access to electricity has improved in the last two decades. While only 35% of the Southern African population had access to electricity in 2000, this proportion increased to 55% in 2018 (World Bank, n.d.). However, there are stark variations in electricity access among Southern Africa countries (see Table 3). With the exception of Seychelles, Mauritius, South Africa, Eswatini and Botswana, overall electricity access in the other countries in the region remains below 50%. While many initiatives for regional cooperation and energy integration have been put in place over the years – including the establishment of the Southern African Power Pool (SAPP) in 1995 right up to the Regional Infrastructure and Development Master Plan (RIDMP) in 2012 followed by revisions in 2015  – actual regional energy integration continues to be elusive. Electricity crises and droughts affecting hydropower have put energy security to the test in the region. As such, the focus for countries in the region has shifted from regional integration more towards national, bilateral or sub-regional interests and initiatives. Indeed, weak levels of interconnection between countries in the region continue to persist (Montmasson-Clair & Deonarain, 2017). Additionally, limited investment in the sector has led to electricity generation in the region remaining relatively unchanged. To bridge the gap in the energy deficit in Southern Africa, the RIDMP envisages that the region will have to implement several projects including electricity generation and transmission, as well as transport facilities for coal distribution and exports. These projects are estimated to cost between US$ 72 billion and US$ 150 billion in the 2018–2027 period.

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Table 3  Perceived quality of electricity supply (2019) Angola Botswana DRC Eswatini Lesotho Madagascar Malawi Mauritius Mozambique Namibia Seychelles South Africa Zambia Zimbabwe

Electricity access 43 57.3 15.5 75.4 34.4 23.3 10.9 100 28 55.6 99 84.2 32.6 33.6

Electricity supply quality 92.4 90.7 89.7 90.2 82 81.2 78.4 98.3 86.2 92.6 93.6 95.1 89 86.2

Source: Author’s construction based on 2019 Global Competitiveness Index Scores Note: Rankings are out of 141 countries. Data for Comoros are not available

5.4 Information and Communications Technology (ICT) Infrastructure Information and Communications Technology (ICT) infrastructure is a key form of infrastructure that helps promote efficient production and economic growth. Southern Africa has generally experienced considerable growth in ICT, particularly in the form of mobile phone subscriptions which have grown more than two-fold in the last decade alone. The population of mobile cellular subscribers in SADC has increased from 90.6 million in 2008 to 234.9 million in 2017, growth of around 159% (World Bank n.d.). This growth in mobile phone subscriptions has been driven by rapid economic and population growth, liberalisation of the telecommunications market and unprecedented investment in mobile network infrastructure, among other things (Arimah, 2017). Despite experiencing rapid growth in mobile subscriptions, however, Southern African countries still rank poorly across various other ICT adoption indicators (see Table 4). Internet usage is generally very low (below 50%) in most Southern African countries, except for Mauritius, Seychelles and South Africa. This poor ranking of Southern African countries in ICT is concerning given the important role ICT plays in facilitating communication and connectivity with Internet usage being particularly important in globalising trade.

24

72

105

90

95

136

131

119

84

129

138

139

129

137

105

116

133

125

106

114

123

97

90

134

112

135

118

138

84

16

49

84

23

124

102

130

117

139

Source: Global Competitiveness Report 2018 World Economic Reform Note: Rankings are out of 140 countries. Data for Comoros and Madagascar are not available

Overall ICT adoption Mobile telephone subscriptions Mobile-­ broadband subscriptions Fixed-­ broadband Internet subscriptions Fiber Internet subscriptions Internet users 101

103

102

83

95

75

56

58

4

78

83

99

66

9

129

114

97

137

128

109

98

124

103

121

114

86

108

106

115

South Angola Botswana DRC Eswatini Lesotho Malawi Mauritius Mozambique Namibia Seychelles Africa Tanzania Zambia Zimbabwe 119 98 137 125 107 128 47 122 105 63 85 135 106 110

Table 4  SADC ICT adoption rankings (2018)

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6 The Bridge to Regional Integration The preceding evidence shows how countries in Southern Africa are at varying stages of infrastructure development. And while regional integration is fundamental to the building of markets, and the creation of robust and diverse economies, processes must be put in place to foster cooperation amongst the countries to be integrated. This may come in the form of cooperative arrangements or the implementation of intergovernmental treaties, for example. To achieve regional integration, therefore, infrastructure development and coordination  – particularly transportation infrastructure – is vital for spurring intra-regional trade among member states. As such, a poor and inadequate transportation network can undermine progress towards any regional development initiatives (Deen-Swarray et al., 2014) Instead, regions need deliberate and systematic efforts coupled with concerted effort to integrate regional infrastructure and make it a catalyst for economic growth and development.

7 Southern Africa’s Infrastructure Imperatives The necessity of improving the quantity and quality of infrastructure in Southern Africa is not in dispute. Indeed, while Southern Africa will have to spend increasingly more to increase the level of infrastructure development, the quality of this spending will also be important. Set out below are the key infrastructure imperatives identified as critical for Southern Africa.

7.1 Enhance the Quality of Infrastructure Spending Infrastructure spending produces different gains in real growth across countries. One aspect that has been associated with these differences is the quality of infrastructure spending. Some assessments show that the impact of public investment in infrastructure on growth is limited by poor institutions governing infrastructure projects. More generally, weak institutions tend to distort the effectiveness of public infrastructure spending, thereby limiting its impact on growth (Cavallo & Daude, 2011; Warner, 2014). To benefit from infrastructure investments, governments in Southern Africa will have to improve the efficiency of institutions associated with project appraisal, selection and monitoring. By implementing transparent and accountable systems, developing countries can increase their gains from infrastructure spending (Rajaram et al., 2014). This should be coupled with enhancement in public procurement practices. Ensuring transparency, equal treatment, open competition and sound procedural management attracts private investment and consequently competition in the provision of government goods and services (World Bank, 2017).

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7.2 Address Fiscal Challenges As extensively discussed, the infrastructure financing needs for Africa and its various regions are large. While African governments are the largest financers of their infrastructure development (Infrastructure Consortium for Africa, 2019), continuing to impose additional spending on the public sector lays a heavy burden on the already limited fiscal space of many of these governments. Additionally, the scope for spending more on infrastructure spending is limited as governments must also assess the benefits of infrastructure spending against other pressing needs, including social sector spending in areas such as education and health. Given rising debt levels, tightening of external financing conditions and slower growth prospects, it is imperative that Southern African countries increase the efficiency of public investments.

7.3 Enhance Private Sector Participation Through PPPs Bridging the huge infrastructure gap in SSA will require the mobilisation of large financial resources. The unfavourable fiscal positions that many developing countries find themselves have led some to turn to Public-Private Partnerships (PPPs) to finance infrastructure development. However, the share of PPPs still remains low with projects concentrated in only a few countries, namely South Africa, Nigeria, Kenya and Uganda. Many other countries in SSA are hesitant to increase the share of PPPs in infrastructure development due to prior bad experiences. Instead, starting small then building up to larger PPPs based on lessons learned, and allocating higher risk to governments in the first generation of PPPs can help unlocking the flow of private investment (Rana & Izuwah, 2018).

8 Bridging the Financing Gap and China’s Increasing Relevance Section 3 highlights the various infrastructure deficiencies of Southern Africa and financing being one of the main limiting factors in actualising infrastructure development in the region. Indeed, across Africa, infrastructure financing has been a topic of fervent discussion over the years. This section discusses the infrastructure financing gap for Africa in greater detail and some of the efforts made at bridging that gap. Particularly, the section discusses the increasing relevance of China in the infrastructure financing space, highlighting some of the financing needs particularly for Southern Africa. As part of China’s involvement in infrastructure development in Africa, a brief discussion on realising the AfCFTA through synergies between Agenda 2063, BRI and FOCAC is also presented.

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8.1 Bridging the Financing Gap In 2018, infrastructure financing to Africa reached an all-time high of $100.8 billion. This achievement represented a 24% increase over commitments made in the previous year of $81.6 billion. Almost half ($9.5 billion) of this increase was accounted for by the inclusion of stand-alone commitments made by the private sector for the first time ever. Despite this leap in commitments, however, significant financing gaps still remain. Across the various sectors, the annual financing need for Africa stand at $130–170 billion. However, after considering the average commitments made, a gap of $52–92 billion still remains to be financed (Infrastructure Consortium for Africa, 2019). The main funders of infrastructure development in Africa continue to be African National Governments, followed by China and now the private sector, and finally ICA Members5 (see Fig. 3). The data shows how infrastructure financing from ICA Members, who would be considered to be more traditional donors, remains relatively consistent over the six years to 2018 at an average of $20.4 billion. However, it is China which has fairly consistently been driving the ebbs and flows in the variations of total financing to Africa, highlighting the country’s relevance to the continent. Between 2013 and 2018, China was consistently the third largest financer of 100

11.8

80

8.8 2 3.3

60

13.4

40

25.3

2.9 3.5 3.4 3.1

7.4 2.4 4.4 20.9

18.8

2.3 2.9 3 2.6 3.1 5.5 6.4 18.6

3.1 2.4 25.7

19.4

19.7

20.2

19.8 20

0

30.5

34.5

2013

2014

24

2015

30.7

34.3

37.5

2016

2017

2018

African Naonal Governments

Donors (ICA Members)

China

Arab Countries

Other bilaterals/mullaterals

Private sector

Source: Adapted from Infrastructure Financing Trends in Africa – 2017 and 2018 Reports Fig. 3 Infrastructure commitment trends by source (2013–2018). (Source: Adapted from Infrastructure Financing Trends in Africa – 2017 and 2018 Reports)  ICA members include: the governments and development agencies of all the G7 countries (Canada, France, Germany, Italy, Japan, the UK and the USA), South Africa, the AfDB, EC, EIB, IFC and World Bank. 5

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total infrastructure commitments, with the exception of 2014. By 2018, China was the second largest financer of total infrastructure commitments in Africa and the single largest bilateral financier of infrastructure to Africa. China, as a development partner to Africa, provides an option for financing regional infrastructure development on the continent. Sino-African relations date back centuries, and have evolved considerably over the decades. In modern times, the main avenue of cooperation in this relationship has been the Forum on China-­ Africa Cooperation (FOCAC) which was first established in 2000. Since then, cooperation has deepened and pledges of support from China to Africa have increased exponentially over the years. And in addition to FOCAC, the Belt and Road Initiative (BRI) also provides an avenue for supporting infrastructure development. Indeed, the alignment between the BRI and the AU Agenda 2063: ‘The Africa We Want’ has been well documented (Breuer, 2017; Ndzendze & Monyae, 2019; Zhang & Niway, 2018). Therefore, with these two initiatives through which China primarily engages with Africa, the continent has some options for meeting its aspirations for infrastructure and economic development. Particularly for Southern Africa, China continues to provide significant investment in the sub-region. In 2019, China was funding 28.3% of large6 construction projects in Southern Africa that had broken ground by 1 June that year, surpassing country government financing which stood at 27.2% (Deloitte, 2019). For the region, the importance of regional infrastructure development to create a larger market and greater economic opportunities, with infrastructure being critical for promoting and sustaining regional trade, investment, and economic development is key, and cooperation with China provides an avenue to achieve this.

8.2 Realising the AfCFTA Through Synergies Between Agenda 2063, BRI and FOCAC Looking more systematically at the potential for cooperation between Africa and China through their flagship initiatives, links can be drawn between the African Union’s Agenda 2063 and the BRI. When the BRI was first conceptualised, Africa did not feature prominently in the original plan. By the end of 2019, however, about 40 of the AU’s 55 member countries had signed up to the Initiative. In parallel, Aspiration Two of the Agenda 2063 speaks of ‘an integrated continent, politically united and based on the ideals of Pan-Africanism…’ and includes the goals of a united Africa through the AfCFTA and world-class infrastructure across the continent (African Union, n.d.). This aspiration aligns directly with two of the BRI’s five pillars that speak to facilities connectivity, and unimpeded trade. The aspiration also aligns to some of the initiatives proposed under FOCAC, particularly in the 2018

 Projects with a value of US$50 million or more.

6

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Summit. Clearly, the single most prominent point of alignment across the Agenda 2063, BRI and FOCAC is that of infrastructure connectivity. At the 2018 FOCAC Beijing Summit, China categorically pledged its support for the AfCFTA as part of the eight major initiatives announced to support deeper China-Africa cooperation. Particularly, this support was announced under an initiative on trade facilitation, and it was in this context that the desire to continue to hold free trade negotiations with interested African countries and regions was expressed. As part of the trade facilitation initiative, China also expressed a desire to increase imports from Africa, particularly those of non-resource products (Ministry of Commerce, P.R.C., 2018). This therefore presents an opportunity for the continent to extend not just the quantity, but also the quality of its exports to China. As such, to fully maximise on China’s increased willingness to trade, and consequently help create opportunities for economic development in the region, the infrastructure imperatives for the AfCFTA must be prioritised.

9 Conclusion Since 2018, the AfCFTA has received unprecedented political support and now holds a certain appeal for RECs across Africa, including those in Southern Africa. The economic potential that the AfCFTA would open up to Southern Africa is considerable, including increased intra- and inter-regional trade, and providing opportunities for industrialisation and higher-waged employment to support economic development. However, given the focus of the AfCFTA on the elimination of tariffs at continental level, history has shown that there is more to boosting trade and development than mere trade liberalisation. This chapter therefore explored the infrastructure imperatives that Southern Africa needs to embrace in order for the region to reap the benefits of the AfCFTA in promoting trade and economic development in the region. Our analysis finds that the state of infrastructure in Southern Africa leaves much to be desired, particularly in the areas of transportation, energy, and ICT infrastructures. Indeed, there is work to be done to achieve meaningful regional integration. Some of the infrastructure imperatives that we identify as central to fostering this regional integration and thus actualising the benefits of the AfCFTA include the enhancement of the quality of infrastructure spending, addressing the fiscal challenges faced by African countries, and embracing private sector participation through PPPs. All of the foregoing notwithstanding, however, the sheer cost of infrastructure financing in Africa remains one of the biggest hurdles in meeting the continent’s infrastructure imperatives. Nevertheless, over the years, funding towards infrastructure development in Africa has steadily increased. However, we focus on the increasing relevance of China in the infrastructure financing space and how the country has and will continue to help bridge the infrastructure financing gap on the continent. Particularly, we wrap up the chapter by highlighting the synergies

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between China’s BRI and FOCAC initiatives, and Africa’s Agenda 2063, and how these can play a role in the realisation of the AfCFTA.

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Montmasson-Clair, G., & Deonarain, B. (2017). Regional integration in southern Africa: A platform for electricity sustainability. In Competition and regulation for inclusive growth in Southern Africa (Vol. 123). Ndzendze, B., & Monyae, D. (2019). China’s Belt and road initiative: Linkages with the African Union’s Agenda 2063  in historical perspective. Transitional Corporations Review, 11, 38. https://doi.org/10.1080/19186444.2019.1578160 Phiri, M., & Mungomba, N. (2019). Leveraging the BRI fro Africa’s industrialisation and intra-­ trade (Opportunities for the AfCFTA). ZIPAR. Rajaram, A., Kaiser, K., Le, T. M., Kim, J. H., & Frank, J. (2014). The power of public investment management: Transforming resources into assets for Growth. World Bank. Rana, F., & Izuwah, C. (2018). Infrastructure & Africa’s Development – the PPP Imperative. SADC. (2001). Regional indicative strategic development plan. SADC. SADC. (2012). Southern African development community – towards a common future. Accessed in 2019. https://www.sadc.int/themes/infrastructure/en/ Shepherd, B. (2017). Infrastructure, trade facilitation and network connectivity in Sub-Saharan Africa. Journal of African Trade, 3, 1–22. Simuyemba, S. (2000). Linking Africa through regional infrastructure. African Development Bank. Teignier, M. (2017). The role of trade in structural transformation. Accessed on 21 August 2019. http://www.marcteignier.com/research_files/RoleTrade_Teignier.pdf UNECA, AU, and AfDB. (2017). Assessing regional integration in Africa VIII: Bringing the continental free trade area about. ECA Printing and Publishing Unit. https://www.uneca.org/sites/ default/files/PublicationFiles/aria8_eng_fin.pdf Warner, A. M. (2014). Public investment as an engine of growth (Vol. 2014, p. 1). International Monetary Fund. World Bank. (2017). Africa’s pulse no. 15: An analysis of issues shaping Africa’s economic future. World Bank Group. World Bank. (n.d.). World development indicators. Washington D.C. World Economic Forum. (2019). The global competitiveness report 2019. World Economic Forum. Zhang, H., & Niway, T. (2018). Alignment of belt and road initiative with Africa agenda 2063. In 3rd International Symposium on Asian B&R Conference on International Business Cooperation (ISBCD 2018). Atlantis Press.

China and the BRI in Africa: A Focus on Rwanda Charles Matseke

1 Introduction The Future Drivers of Growth Report, jointly produced by the World Bank and the Government of Rwanda, spells out Rwanda’s goal to become an Upper-Middle Income country by 2035 and a High-Income Country by 2050, this report can be viewed as the country’s national development plan, which also set tone for Rwanda’s ambitious goal of creating the first smart city in Africa.1 The empirical data is positive. Given that Rwanda has been a reform-oriented country for more than 20 years, this has yielded these positive results. Over the past 10 years, Rwanda has achieved significant economic and social progress, with GDP growth averaging 7.5% a year, and GDP per capita nearly doubling from US$404 to US$748. Between 2000/01 and 2013/14, more than a million people were lifted out of poverty.2 This rather signals a strong potential on the countries capacity to reform and implements its developmental strategies and policy frameworks. A great success in the country’s track record, one that can be reformed according to current developments and be redeployed towards 2030. The results of these reforms were also evident in the World Bank’s prolific Doing Business Report for 2019, which caters for objective instruments on business regulations and their implementation across 190 countries and selected cities at the  World Bank Group, Government of Rwanda, 2018. Available at https://blogs.worldbank.org/ nasikiliza/the-future-drivers-of-growth-in-rwanda 2  World Bank Group, Government of Rwanda, 2019. Available at https://blogs.worldbank.org/ nasikiliza/category/countries/rwanda 1

C. Matseke (*) Centre for Africa-China Studies, University of Johannesburg, Johannesburg, South Africa e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Ndzendze, D. Monyae (eds.), Perspectives on Africa-China Infrastructural and Industrial Cooperation, Africa-East Asia International Relations, https://doi.org/10.1007/978-3-031-38395-3_11

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subnational and regional level. In this report, Rwanda rose to a global ranking of 29 compared to 41 in 2018.3 Its momentous economic performance has resulted from the implementation of seven reforms over a period of 12 months, which saw the country recognised as one of the ten most improved countries in the world, alongside giants such as China and India. According to the Future Drivers of Growth Report, the next big step for Rwanda’s economy will be to prioritise four interdependent drivers, namely innovation, integration, agglomeration and competition. According to the World Bank’s Human Capital Index, children born in Singapore (the highest ranked country) today are likely to realise 88% of their potential. By contrast, children born in Rwanda today are likely to realise only 37% of their potential. This remains a dismaying statistic, and the Government of Rwanda acknowledges the extent of the challenge to promote a human capital agenda. This chapter explores Rwanda’s past growth trajectory and the role of China in its future of creating one of the first smart cities in Africa. It finds that although Rwanda’s developmental trajectory is that of a third world country, its economy is one of the fastest growing in the East African region and in Africa as a whole. This may be directly attributable to Rwanda’s emphasis on improving its standards of living and infrastructure development, which are both in line with Africa’s Agenda 2063 as well as the aspirations of the continent at large. The first section provides an overview of Rwanda and its history. The second explores Rwanda’s developmental plan and Vision 2020. The third section examines the bilateral and multilateral economic agreements Rwanda has forged to achieve its desired growth trajectory. The fourth section looks at Rwanda’s smart cities master plan and the role of China in expediting Rwanda’s development trajectory.

2 Country Overview According to the International Monetary Fund (IMF) World Economic Outlook, Rwanda will register real GDP growth of about 7.8% in 2019, slightly lower than the 8.52% recorded for 2018, and forecasts growth of about 7.5% in 2024, although these figures may be revised on account of the COVID-19 global pandemic.4 In 2017, Rwanda had a population of about 12.21  million people. President Paul Kagame has led Rwanda since his rebel military forces stemmed the slaughter of hundreds of thousands of Rwandans in 1994. In July 1994, Kagame was sworn in as vice-president and defence minister in the post-conflict post-genocide government, and was elected as president by the Rwandan parliament in 2000. Subsequently, he has won presidential elections in 2003 and 2010, as well as a referendum approving a third term in office in 2017.  Doing Business, 2019. Available at http://www.doingbusiness.org/content/dam/doingBusiness/ country/r/rwanda/RWA.pdf 4   World Trend Plus, 2019. Available at https://www.ceicdata.com/en/indicator/rwanda/ forecast-real-gdp-growth 3

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3 Rwanda’s National Development Plan Rwanda’s Vision 2020 expresses the aspiration of Rwandans to be a united, democratic and inclusive nation. It states that ‘The aim of the Vision is to transform Rwanda into a middle-income country in which people are healthier, better educated, and more prosperous and united, and that the country’s economy is competitive both regionally and globally’.5 The Vision is based on a national consultative process conducted between 1997 and 2000, involving Rwandans from all occupations and all sectors. The Vision sets out the following core goals: • Reconstruction of the nation and its social capital. • Transformation of agriculture into a productive, high-value and market-­ oriented sector. • Development of a competitive private sector. • Comprehensive human resources development, encompassing education, health and ICT skills. • Infrastructural development. • Promotion of regional economic integration and cooperation. • Dealing with the cross-cutting issues of gender equality, sustainable environmental and natural resource management, and ICT.6 Rwanda’s Economic Development and Poverty Reduction Strategy of 2016 provides a medium-term framework for achieving the country’s long-term development goals and aspirations as embodied in Vision 2020, the seven-year Government of Rwanda programme, and the Millennium Development Goals. The strategy promotes three flagship programmes, namely ‘sustainable growth for jobs and exports, poverty reduction by promoting pro-poor components of the national growth agenda, and providing an anchor for pro-poor growth by building on low incidence of corruption and a regional comparative advantage in soft infrastructure’.7 Rwanda’s unprecedented socio-economic progress after the 1994 genocide has served as one of Africa’s most successful stories and a milestone possibility for developing countries across the world and the African continent in particular. The reform minded government of Rwanda embarked on deliberate and decisive measures committed to overcoming its daunting development challenges head-on.8 These measures have thus been broad based socio-economic directives aimed towards the achievement and consistency of sustainable and equitable national

 Ibid.  National Development Plan, Rwanda, 2019. Available at http://www.commonwealthgovernance. org/countries/africa/rwanda/national-development-plan/ 7   IMF, 2016. Available at https://www.imf.org/en/Publications/CR/Issues/2016/12/31/ Rwanda-Poverty-Reduction-Strategy-Paper-21779 8  Fortune of Africa, (nd). Challenges facing education sector in Rwanda. Available at http://fortuneofafrica.com/rwanda/challenges-facing-education-sector-in-rwanda.2019 5 6

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25 20 15 Gross domestic savings (% of GDP)

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Fig. 1  Rwanda’s economic development trajectory from 1995 to 2009. (Source: https://www. google.com/search?q=graph+representing+Rwanda+economic+growth+from+2009+to+2019&tb m=isch&ved=2ahUKEwilsPmF69rxAhVDYBoKHWN7BnAQ2-­cCegQIABAA&oq=graph+re presenting+Rwanda+economic+growth+from+2009+to+2019&gs_lcp=CgNpbWcQA1DrxhVYn NcVYMvgFWgAcAB4AIABgAWIAbcVkgEJMi00LjMuMC4xmAEAoAEBqgELZ3dzLXdpei1 pbWfAAQE&sclient=img&ei=ksvqYKWfB8PAaeP2mYAH&bih=643&biw=1366&client=fire fox-­b-­d#imgrc=xF_KUlRrHT5GWM)

development plans. This head-on development planning trajectory has already culminated into tangible positive results (see Fig. 1) translating into perpetual peace, prolonged political stability together with progressive socio-economic outputs. Rwanda’s annual economic growth rates are recorded to be one of Africa’s highest growth trajectories, alongside its staggering social indicators including child and infant mortality, household income and primary education enrolment rates. Nonetheless, the World Bank still classifies Rwanda as one of the world’s poorest and densely populated country. Nevertheless, strong partnerships between the government of Rwanda, developed economies and international donors are strongly encouraged if Rwanda is to realise to middle-income country’s aspiration.

4 Rwanda’s Country Development Cooperation Strategy (CDCS) 2015–2020 One of the key documents and blueprints that maps out Rwanda’s envisaged development trajectory is the USAID/Rwanda Country Development Cooperation Strategy 2015–2020. Rwanda has imposed on itself a rather complex development trajectory which comprises enormously positive and formidable overall ­developmental objectives.9 Nonetheless, the country’s developmental strategy

 USAID, Country Development Cooperation Strategy 2015. Available at https://www.usaid.gov/ sites/default/files/documents/1860/Rwanda_CDCS_2015-2020 9

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cooperation strategies devised by Rwanda and the USAID 2015–2020 advocate strongly for the positive directives, while on the other hand managing the shortfalls of its strategies. The primary objectives of the CDCS is to fast-track Rwanda’s transition onto a middle-income trajectory and uplift the standards of living through sustained growth and poverty reduction ethos. To further substantiate the USAID efforts to boost Rwanda’s middle-income status, all their activities, projects and initiatives have embedded these goals as their fundamental principle. Furthermore, the CDCS is committed to broaden the outputs envisaged in the gender equality and female empowerment policy by promoting equal access to national socio-economic programmes, services, resources and creating an enabling environment to strengthen women’s leadership role, decision making and power dynamic within the Rwandan society.10 The 2015–2020 CDCS is closely aligned with the government’s development priorities, as spelled out in a series of national strategic documents. While the second iteration of the Economic Development and Poverty Reduction Strategy (EDPRS2) and a series of sectoral strategies detail a practical approach to achieving the Vision 2020 goals in the medium term.11 Vision 2020 identifies the following goals: • Short term: Macroeconomic stability and wealth creation to reduce aid dependency. • Medium term: Transition from an agrarian to a knowledge-based economy. • Long term: Create a productive middle class, and foster entrepreneurship. Progress made towards achieving Vision 2020 will be measured under six pillars: • • • • • •

Good governance and a capable state; Human resource development and a knowledge-based economy; A private-sector led economy; Infrastructure development; Productive and market-oriented agriculture; and. Regional and international economic integration.

To track and measure the progress of Vision 2020, the government has introduced a range of sectoral medium-term strategies. The most recent is the EDPRS2 strategy, which has already dealt with the period 2013–2017 and has thus highlighted key goals addressing key priorities such as poverty alleviation, agricultural development, capacity-building, improved health sector alongside an integrated social protection programme. Furthermore, the USAID/Rwanda developmental ­priority will also mobilise policy instrument to cater for gender perspectives in

10 11

 Ibid.  Ibid.

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respect of gender inequalities and recommended analysis as completed in the information project appraisal documents.12 Subsequently, these efforts will inform and strengthen the EDPRS2 directives that will address the need for all stakeholders support economic growth through mainstream gender and family in planning, budgeting and developing gender-­ sensitive programmes/projects at the national and local levels. The GOR is a leader in applying aid-effectiveness principles to its relationship with development partners (donour countries and organisations); this is being achieved by strengthening GOR systems to meet partner requirements for delivering assistance, including public financial-management systems, as well as increased use of sector programme assistance and sector-wide approaches, and actively promoting donor coordination.13 The governments of Rwanda and Germany sign financing and technical cooperation agreements worth 78 million euros. As per the agreement, 59 million euros of the grant agreement will be provided through KFW Development Bank and will support various initiatives including technical and vocational training, promotion of export-oriented SMEs, through the support to Export Credit Facility in Rwanda under BRD, promotion of green investments as well as ICT support. The remaining 19 million euros will be channelled through GIZ and will support decentralisation and good governance, prevention of sexual and gender-based violence among others. Finally, Rwanda’s development cannot but achieved in isolation of the East African Community, which will follow in the next section.14

5 Rwanda and the East African Community As one of six pillars in its Vision 2020 development strategy document, the GOR considers regional and international integration a key element to the successful achievement of its development agenda. In this long-term strategy, the GOR focuses on pursuing an open, liberal trade regime while minimising barriers to trade and encouraging foreign investment. As a landlocked country, Rwanda is inextricably linked to, and dependent upon, its immediate neighbours’ cooperation to grow and develop, and has therefore prioritised its economic integration in the East Africa region. Within the past 10 years, Rwanda has formally acceded to the East African Community (EAC), and has also become a member of the broader Common Market for Eastern and Southern Africa (COMESA).15  USAID, Country Development Cooperation Strategy 2015. Available at https://www.usaid.gov/ sites/default/files/documents/1860/Rwanda_CDCS_2015-2020.pdf 13  Ibid. 14  Republic of Rwanda, 2021. Maximising aid effectiveness in Rwanda. Available at http://www. devpartners.gov.rw/index.php?id=48&tx_ttnews%5Btt_news%5D=112&cHash=a53bd07dcb6f 6d1fa825a610049cd998 15  Craig Mathieson, 2016: The Political Economy of Regional Integration in Africa. 12

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The decision to join Common Market for Eastern and Southern Africa (COMESA) and the EAC has steadily increased the volume of trade with fellow EAC members, particularly Uganda, Tanzania and Kenya.16 Although intra-EAC trade has increased in aggregate (from $2.2B in 2005 to $4.1B in 2010), it has decreased as a percentage of total EAC trade, with non-EAC partners becoming an increasingly larger share (47% in 2010 compared to 28% in 2005) of total EAC trade. However, while there are clear opportunities for Rwanda to further strengthen intra-EAC trade, this raises potential risks to Rwandan producers who may not be competitive against products from EAC economies with ports providing access to cheaper inputs. Consequently, competitiveness is adopted as a key component in Rwanda’s integration strategy. With its relatively small domestic market, both regional and international trade are key to achieving Rwanda’s economic development goals. For one, coffee and pyrethrum have already illustrated USAID’s efforts in supporting Rwanda’s goal to increase exports in high value cash crops, other exported products include tea, processed fruits, essential oils, processed bans and dairy products. Given increases in regional trade in agricultural commodities, propelled by a nearly three-fold increase in their agricultural; sector and the barriers to market integration that persist, addressing these inefficiencies (such as poor infrastructure) will have significant impacts on poverty reduction. Thus, infrastructure is one of the most critical enablers of a successful regional integration, considering its importance in facilitating activities such as trade, agriculture, tourism and the movement of labour and other resources. A requisite infrastructure for a successful regional integration and exchange would include; roads, railway, aviation, communications and inland waterways. All these infrastructure priorities are also in line with the Treaty for the establishment of the East African Community states that requires that Partner States should provide basic infrastructure as per Operational Principle of the community.17

6 Rwanda’s Trade Profile Rwanda hosts a small industrial sector, which contributes at least 16% of their GDP and creates about 3% of employment opportunities for the overall population. Among its key sectors, the service sector boosts almost half (46%) of the GDP with an annual growth rate of 9% which has been steady since 2014.18 Nonetheless, the government of Rwanda has continued to face subsequent and large current account deficits, this is largely because Rwanda is a highly import-dependent economy. To  World Bank. 2012. Reshaping Economic Geography of East Africa: From Regional to Global Integration, Volume 2. Technical Annexes. Washington, DC. 17  Regional Integration; The World Bank Group helps its client countries to promote regional integration through common physical and institutional infrastructure. Available at https://www.worldbank.org/en/topic/regional-integration/overview 18  Eric Uwitonze and Almas Heshmati, 2016. Service Sector Development and its Determinants in Rwanda. Discussion Paper Series. 16

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visualise this reality, both 2016–2017 trade imports amounted to USD 2.215 billion, unchanged. Some of the key top imports include electrical machinery and parts; vehicles and accessories; cereals and other food stuff; pharmaceutical products; cement and construction equipment including iron and steel; and energy and petroleum products.19 China, Europe, Uganda, Kenya, India, the United Arab Emirates, and Tanzania are among Rwanda’s major suppliers. Over recent years, Rwanda has signed bilateral trade agreements with20 Germany, Belgium-Luxemburg Economic Union, the Republic of Korea, Mauritius, South Africa, Turkey (2016), Morocco, the United Arab Emirates and Qatar. Rwanda has also established bilateral trade agreements with the US and has grown rapidly; nonetheless, what may be a thorn on this relationship is the decision to implement a defector ban on second hand clothing. The United States is considering suspending Rwandan apparel from African Growth and Opportunity Act (AGOA) benefits in response. Between 2010 and 2017, the Rwanda export to the United States grew by more than double the original amount. This bilateral trade toppled to USD 109.83 million. Some of the top U.S. exports to Rwanda include aircraft and parts; mechanical and electrical machinery and related parts; construction equipment; and medical, pharmaceutical, and scientific equipment and products.21 On average, at least 4% of Rwanda’s total export of goods reach the United States. This may be attributable to the fact that in 2016, a total of USD 2.16 million Rwanda exports reached the United States via the AGOA.22

7 Key Industries Rwanda’s economy grew by 6.1% in the 2017/18 financial year, up from 5.9% in 2016/17. This was largely due to the service sector (+8%), the agricultural sector (+7%), and the industry sector (+4%). The economy is projected to grow by 7.2% and 7.8% in the 2018/19 and 2019/20 financial years. The growth performance is expected to be driven by agriculture and industry. The agriculture sector is expected to grow moderately at 5.6% in 2018/19 and 4.5% in FY 2019/20 due to low performance in forestry and poor weather conditions in some parts of the country. The industrial sector is expected to contribute 8.3% in FY 2018/19 and 13.5% in 2019/20

  Rwanda Market Overview, 2019. Available at https://www.export.gov/apex/ article2?id=Rwanda-Market-Overview 20  Rwanda Country Commercial Guide, 2019. Rwanda – Trade Agreements. Available from https:// www.export.gov/apex/article2?id=Rwanda-Trade-Agreements 21  Ibid. 22  Country Strategy Paper; Rwanda, 2016. Available at https://www.flandersinvestmentandtrade. com/export/sites/trade/files/attachments/Exchange%20vzw.%20-%20Country%20Strategy%20 Paper%20Rwanda%20-%20MAR19.pdf 19

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from 4% in 2017/18.23 This will mainly be boosted by mining and construction. The ongoing improvement in international mineral prices as well as planned investments in the mining sector are expected to support domestic production while the construction sector is expected to pick up and grow at 5.2% in FY 2018/19, mainly due to the construction of Bugesera Airport and other private sector projects.24 Arguably, Rwanda’s industry sectors are still at a rather infant stage compared to the rest of the world. With 90% of the population being primarily concentrated in agriculture, (mostly in rural areas) this has not made it any easier for economic growth to thrive as envisaged in Vision 2020. The fact that imports are far higher than exports is an obstacle in meeting Vision 2020. Nonetheless, one mitigating factor has been the governments deliberate efforts in creating long-lasting infrastructure which has continued to attract foreign investment. Currently, the industrial production growth rate is estimated around 7% and only 10% of the total population is directly involved in the manufacturing and service sector combined.25 The overall fiscal deficit is projected at 4.9% of GDP for the FY 2018/19, and is projected to decline to 4.6% of GDP by 2020/21.26 The decline in the overall budget deficit is in line with the government’s effort towards self-reliance. Rwanda’s inflation is negative 0.1% year on year in May 2021. Rwanda’s Consumer Price Index (CPI), main gauge of inflation decreased by 0.1% year on year in May 2021 down from 2.4% in April 2021.27 This was mainly due to the ease in exchange rate pressures, completion of various development and construction projects and the significant fall in food inflation for 2018, the inflation is expected to remain below 5% as exchange rate pressures, and global inflation, international commodity prices and aggregate demand remain broadly subdued. Rwanda has proved itself a reform-minded country and has thus introduced reforms such as The National Strategy for Transformation. This will help the GOR to monitor and evaluate its progress towards not only Vision 2020 but also the AU Agenda 2063 and the EAC Agenda 2050  in terms of economic transformation, social transformation and governance, which will be detailed in the section below. The National Strategy for Transformation (NST1) has been developed as implementation instrument for the remainder of Vision 2020 and for the first 4 years of the Vision 2050. It also integrates farsighted, long-range global and regional commitments by embracing the Sustainable Development Goals (SDGs), the Africa Union Agenda 2063 and its First 10-Year Implementation Plan 2014–2023 as well as the East African Community (EAC) Vision 2050.28  African Economic Outlook, 2018. Available at https://www.afdb.org/fileadmin/uploads/afdb/ Documents/Publications/African_Economic_Outlook_2018_-_EN.pdf 24  Ibid. 25  Ibid. 26  Ibid. 27  Rwanda’s inflation 2021. Available at https://statistics.gov.rw/statistical-publications/subject/ consumer-price-index-%28cpi%29 28  Embassy of the Republic of Rwanda, 2017. Available at https://rwandaembassy.org/rwanda-in-­ the-next-seven-years-2017-2024.html 23

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Allocation of resources in the budget for 2018/19 fiscal year and the medium term is therefore guided by interventions in NST1 as follows:

7.1 Economic Transformation Rwanda has allocated 57% of its total budget to economic transformation. The Government of Rwanda implemented this fiscal policy as a vehicle that would accelerate inclusive economic growth and development founded on the Private Sector knowledge and Rwanda’s Natural Resources. The key sectors under this pillar are Public Finance Management (50% of the economic transformation allocation), Transport (17%), Energy (10%), Private Sector Development and Youth Employment (9%), Agriculture (9%), Environment and Natural Resources (3%), Urbanisation and Rural Settlement (2%), Financial Sector Development (0.5%) and ICT (0.3%).29

7.2 Social Transformation Social transformation was allocated 27% of the budget. The overarching goal for the Social Transformation Pillar is to develop Rwandans into a capable and skilled people with quality standards of living and a stable and secure society. The key sectors under this pillar are: Education (40% of social transformation allocation), Health (30%), Social Protection (15%), Water and Sanitation (7%), Sports and Culture (3%) and Urbanisation and Rural Settlement (2%).30

7.3 Transformational Governance Transformational governance was allocated 16% of the budget. The overarching goal for the Transformational Governance Pillar is to consolidate Good Governance and Justice as, building blocks for equitable and sustainable National Development. The key sectors under this pillar are; ICT (6%) of the transformational governance allocation), Governance and Decentralisation (37%) and Justice, Reconciliation, Law and Order (77%).31

 Ministry of Finance and Economic Planning, 2018. Available at https://www.tralac.org/documents/resources/by-country/rwanda/1991-rwanda-budget-framework-paper-2018-2021/file.html 30  Ibid. 31  Ibid. 29

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The rise of globalisation and multilateralism has offered low income and developing economies the edge to collaborate and cooperate with other developed economies from the global arena, it is in this regard that both China and Rwanda have developed and enjoyed diplomatic and economic relations as early as the 1970s.32 This relationship will be detailed in the next section.

8 COVID-19 Before the ongoing global pandemic, Rwanda was in the middle of an economic boom. In 2019 alone its economic growth exceeded 10% which was mostly boosted by large public investments for the implementation of the National Strategy of Transformation. A continued growth trajectory was expected to follow in 2020. However, the pandemic has disrupted international flows of goods and services with prolific spill over to the broader global economy. Consequently, exports and tourism continue to take a significant hit due to international trade and travel. Already, Rwanda is facing a challenge of mounting balance of payment and fiscal constraints. This has an immediate impact on the country’s capacity to provide public health services for COVID-19 (coronavirus) response and secure enough vaccine to reach head immunity. To assist the GOR prevent, detect and respond to the threat posed by the coronavirus, and boost the national system for public health readiness, the World Bank Group provided USD14.25  million as International Development Assistance credit in immediate funding to a new operation, the Rwanda COVID-19 Emergency Response Project.

9 Rwanda-China Relationship In this section, this paper will provide a brief background of the historical/political relationship between Rwanda and China, and subsequently, some of the major deals and investments between Rwanda and China will be unpacked. China and Rwanda established diplomatic relations on 12 November 1971, and since then the friendly cooperation saw a favourable development between the two countries. The government of the People’s Republic of China firmly supports the government of the Republic of Rwanda in fighting against the neo-colonialism, maintaining national independence and sovereignty, and the government in carrying out policy of peaceful cooperation among the peoples of various countries. China and Rwanda signed a number of cooperation documents covering such areas as investment, finance, e-commerce and law enforcement. In November 2018, during President Xi Jinping’s state visit, the first by a Chinese head of state to the

32

 Ibid.

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African country. China remains one of Rwanda’s development partners through a number of projects ranging from governance, infrastructure, cultural and security, among others. In July 2018, President Xi Jinping of China visited Rwanda where 15 bilateral agreements between the Republic of Rwanda and The People’s Republic of China were signed.33 China’s Belt and Road Initiative (BRI) has been viewed by the Rwandan president Paul Kagame as a catalyst for infrastructure development for both Rwanda and Africa at large, and this has extended into even more deeper ties between Rwanda and the PRC.  The modern infrastructure of East Africa is attributable to China’s presence and the BRI initiative in the region especially in key projects such as the standard gauge railways, highways and power plants, which has benefited Rwanda. The Rwandan President further postulates that his country’s relationship with China has grown stronger with bilateral cooperation (see 2018 FOCAC upcoming deals) yielding fruitful results in such areas as infrastructure construction, health, education and agriculture. The GDP of Rwanda/Gross domestic product 10.35 billion USD (2019).34 The president has previously attributed his country’s development to the PRC’s active participation in Rwanda’s construction and the government’s good management of its resources. Furthermore, the President went further on say that Rwanda has benchmarked its economic development ethos with that of other country’s such as China and continues to mould its own developmental trajectory towards Rwanda Vision 2050. As a non-permanent and rotating chairperson of the AU, Paul Kagame lamented on the fact that China has potential to play a critical role in supporting AU reforms and promoting Africa’s development as a key agenda.35 Following the last FOCAC (December 2020, in Beijing) continued to prove the usual sentiments that Kagame widely shared that the FOCAC serves as a platform for participants to cross-­pollinate ideas and revive the development trajectory of the corporation, which is conducive to promoting common development. Moreover, in respect of President Xi’s concept of building a community with a shared future for mankind is of great significance that will help promote the common development of China and other countries across the world and Africa in particular.36 Lastly, Rwanda further maintained a position that it wishes to see more FDI from Chinese enterprises, sighting that Rwanda’s regional market is conducive for both business and travel and further calls for more   ABC.NET, 2019. Available at https://www.abc.net.au/news/2018-07-22/china-president-xiarrives-african-tour-ahead-of-brics-summit/10021980 34  Rwanda’s GDP 2019.Available at https://www.google.com/search?q=Rwanda+GDP+2019&ei=hjqYIikB4idgQadiqGICg&oq=Rwanda+GDP+2019&gs_lcp=Cgdnd3Mtd2l6EAMyAggAMYIAB AW E B 4 y B g g A E B Y Q H j I G C A AQ F h A e M g Y I A BAW E B 4 6 B w g A E E c Q s A M 6 B Q g AEJECOgsIABCxAxCDARCRAjoCCC46CAgAELEDEIMBOgIIJjoJCAAQyQMQFhAeO ggILhDHARCvAToLCC4QxwEQrwEQkQJKBAhBGABQxUxY2KsBYMyvAWgJcAJ4AIAB_ AKIAZw7kgEHMi0xNi4xMJgBAKABAaoBB2d3cy13aXrIAQjAAQE&sclient=gwswiz&ved=0ahUKEwjIg9_UhtvxAhWITsAKHR1FCKEQ4dUDCA0&uact=5 35  New Times, 2019. Available at https://www.newtimes.co.rw/news/new-complex-symbolisesstrong-rwanda-china-relations-pm 36  Ibid. 33

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Chinese people to come and explore and strengthen the country’s partnership with Rwanda.

10 Major Rwanda-China Deals In 2018, both President Xi and Kagame signed approximately 15 agreements in Kigali on trade, infrastructure, investment, e-commerce, human resource, culture, science and technology, aviation, mining, law enforcement, visa exemption for diplomatic and service passport holders, among others. President Xi furthermore, signed 15 bilateral agreements with Rwanda while visiting the East African country, the second stop on a four-nation tour to cement relations with African allies.37 Paramount in these new deals was a focus on visa exemptions, strengthening mutual investment in e-commerce, cooperation in civil air transport, law enforcement partnerships and human resource development. They also included loans for construction, hospital renovation and the development of Rwanda’s new Bugesera Airport.38 According the China Aid Data, these are some of the infrastructure and investment projects between China and Rwanda. In January 2014, China donated solar energy kit systems to Rwanda followed by the construction of Confucius Institute in Rwanda, Chinese Embassy in Rwanda donated education equipment to a vocational school in Southern province. In 2012 China rehabilitated Rwanda’s Kibungo Hospital39 and in 2007 China Funds Construction of primary schools in Rwanda and China supports Umutara rice field extension project to help alleviate poverty. An additional RWF5 billion for bamboo cultivation, processing and utilisation was provided and China and Rwanda signed agreement for Technology Cooperation to construct the MINAFFET building.40

11 Smart Cities in Kigali According to Mohanty et al., the use of information and communication technologies (ICT) in various cities for varied purpose has increased efficiency of city operations and these cities have been labelled using many terms such as ‘cyberville’, ‘digital city’, ‘electronic city’, ‘flexicity’, ‘information city’, ‘telicity’, ‘wired city’, and ‘smart city’. The same authors argue that, the use of smart city as a concept in

 Ibid.   News24, 2019. Available at https://www.news24.com/Africa/News/chinas-xi-inks-dealsin-rwanda-on-whirlwind-tour-20180723 39  China Aid Data, 2019. Available at https://china.aiddata.org/search?query=rwanda+ivestment 40  Ibid. 37 38

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the academia and practitioner is still new and as such there is no clear and consistent definition tagged to it. However, they define smart city as: a smart city is a place where traditional networks and services are made more flexible, efficient, and sustainable with the use of information, digital and telecommunication technologies, to improve its operations for the benefit of its inhabitants. In other words, in a smart city, the digital technologies translate into better public services for inhabitants, and for better use of resources while impacting the environment less.41 A smart city is a city that is compact, connected, socially inclusive and resilient city that salvages the power of technology, data and innovation to harness the for the standards of living for the people in that city and further coordinate and integrate urban management services. In its own nature, a smart city utilises digital and technology to cater for a high quality of life for its patrons, business and tourism sector under effective technical systems of governance. A smart city embeds technology and data across city functions to make them more efficient, competitive and innovative. As a primary feature, digitisation supports the functioning of urban fundamentals which include planning and strategic tactics around basic services, governance, housing, health and education for a smart city. Additionally, this digital tech can be utilised to support cities to trigger the full potential of economic and social development requisite for a smart city. Through various innovation transparency and connectedness, processes, smart cities can ensure that they meet the environmental, social and economic needs of the present and future generations. Rwanda’s vision of a smart city envisages that leaders and citizens use data, information and knowledge to ensure a co-created inclusive and sustainable future. Rwanda hopes to achieve this by galvanising inclusive data-led government management and planning, efficient community-based infrastructure and services together with localised, shared innovation and economic development. Therefore, for Rwanda, a smart city is a digital ecosystem within a city that strengthens its livelihood, labourhood and sustainability. A smart city initiative is not a unique or standalone document in its own right. This master plan must be the bridge that synergises the day-to-day management routines and processes of the local authorities and to the strategic and long-term policy making. At the core of the national strategic council the plan must be aligned with the country’s developmental policies and thus sets the tone for the execution of the National Urbanization Policy. At both the regional and municipal spheres, the Masterplan extends and validate the initiatives presented at the National Strategy for climate change and Low Carbon Development, the spatial Development Framework and the Masterplan holds the same set of standards across different municipalities. The Rwanda smart city initiative is preceded by The Smart Africa Manifesto adopted by the African Heads of states in 2013. The manifesto envisages for the achievement socio-economic development through ICT, thereby creating a knowledge-based community in Africa. The manifesto is premised on five key elements,  Mohanty, S.P., Choppali, U. and Kougianos, E., 2016. Everything you wanted to know about smart cities: The internet of things is the backbone. IEEE Consumer Electronics Magazine, 5(3), pp. 60–70. 41

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to place ICT at the core of the national socio-economic development initiatives, improved access to ICT, especially with broadband, to improve accountability, efficiency and openness through ICT, to place the private sector at the forefront so as to leverage ICT to promote sustainable development. The Smart Africa Manifesto is being implemented through the Smart Africa Alliance of 2016. Within the paradigm of Smart Africa, Rwanda is taking the lead in the smart cities theme. As a form of continuity, the adoption of Vision 2020 paved a way for the initiation of national information and communications infrastructure plans to cater for the strategic frameworks using ICT to expedite developmental goals. These include the National ICT strategy and Plan (NICI) I (2000–2005), focused on putting in place the foundational legal and regulatory framework to allow the liberalisation of the telecommunication sector and attract private sector investments. The second, NICI II (2006–2010), focused on infrastructure and connecting people and on launching several flagship ICT initiatives such as the One Laptop Per Child projects. The third, NICI III (2011–2015), focused on transforming services such as digital government services. The fourth and most recent NICI IV is a Smart Rwanda 2020 Masterplan, which is a continuation and expansion of the previous NICI Plans and comprises three goals; economic transformation, job creation and accountable governance. The masterplan earmarks 67 key projects with an estimated budget of USD 500 million which was to be implemented between 2016 and 2020. Nonetheless, to achieve the goal of becoming a knowledge-based society, the Masterplan recognises, will require Rwanda to invest more in education, ICT awareness and digital literacy and ensure that cooperation between academic institutions and the ICT industry is strengthened. As a form of continuity and expansion of the Rwandan developmental trajectory, the Masterplan must flow and be aligned with the Rwanda National Urbanization Policy of 2015 to show how urban development can be a driver for economic development. The primary objective of the policy is to enhance institutional capacity to manage urbanisation in a coordinated manner and integrate urban planning and management to ensure sustainable growth, improve living standards in urban areas, create more job opportunities and increase urban productivity. This will be achieved through a stream of guiding principles; sustainability and resilience, integrated planning, decentralisation urban governance, participatory planning, marketresponsiveness, sustainable land use, appropriate urban management and social inclusion. The National Urbanisation Policy equally address for essential elements including coordination, densification, conviviality and economic growth. According to Vision 2020, 35% of the population is projected to live in urban areas by 2020, meaning that an increasing number of migrants from rural to city/ town will be most prominent and will put pressure on local governments to ensure that urban growth is managed sustainably. Moreover, reaching 95% Internet penetration at the end of 2017 gave Rwanda new opportunities to develop the digital economy but also requires new digital skills among its population. Large-scale education programmes to build basic and digital literacy will be crucial. A focus on skills development in engineering, urban planning, architecture and technology. Equally so, legal experts and the like will be needed because of changes in

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legislation around privacy data, security and access. Developments in the urban planning and management processes will be required and innovative ways to deliver these services will also be key. The next section will detail some of the urban and ICT challenges Rwanda faces.

12 Urban and ICT Challenges in Rwanda For the past 20 years, Africa experienced one of the world’s most rapid urbanisation, with an estimated 40% of its population migrating to cities and towns. Within Africa, while East Africa is still the least urbanised sub-region, its annual rate of urban growth of 4.17% is very high, with Rwanda listed among the top fastest urbanising countries at the rate of 4.5% in the past 20  years (United Nations Department of Economic and Social Affairs, 2018).42 To be able to deal with the velocity of movement from rural to urban, a smart city must uniquely deal with this existing problem. Although its main objectives may flow from other policies such as this national development plan, each municipality has its own unique circumstances and should therefore create their own vision, practical objectives, indicators and targets. It is important that the vision correlates with the existing urban master plan or municipal vision. This vision then needs to be communicated well to be validated and accepted by stakeholders and recipients. It must also be widely accepted by other stakeholders, individual targets, frameworks and comprehensive action plan. This vision is not static and may be adjusted overtime to fit into specific and new problems in the system. To achieve this, the overall developmental challenges and following components had to be considered. Rwanda’s economic development thrives through its public sector led development trajectory which has already underscored its own limitations as public debt has increased significantly in recent times. Rwanda’s economic development model has heavily relied on massive public investment (12.3 of GDP in 2019),43 this without doubt resulted in substantial fiscal deficit financed mainly through external borrowing. Consequently, the debt-to-GDP ratio rose to 56.7% in 2019 (from 19.41  in 2010). External financing via concessional and non-concessional borrowings and grants played a critical role in financing public investments.  United Nations Department of Economic and Social Affairs, 2018. Working Together: Integration, Institutions and The Sustainable Development Goals. World Public Sector Report 2018. Available at https://publicadministration.un.org/publications/content/PDFs/World%20Public%20Sector%20 Report2018.pdf 43  Available at https://www.google.com/search?q=Rwanda+GDP+2019&ei=h-jqYIikB4idgQadiq GICg&oq=Rwanda+GDP+2019&gs_lcp=Cgdnd3Mtd2l6EAMyAggAMgYIABAWEB4yBggAEBYQHjIGCAAQFhAeMgYIABAWEB46BwgAEEcQsAM6BQgAEJECOgsIABCxAxCDA RCRAjoCCC46CAgAELEDEIMBOgIIJjoJCAAQyQMQFhAeOggILhDHARCvAToLCC4Q xwEQrwEQkQJKBAhBGABQxUxY2KsBYMyvAWgJcAJ4AIAB_AKIAZw7kgEHMi0xNi4x MJgBAKABAaoBB2d3cy13aXrIAQjAAQE&sclient=gws-wiz&ved=0ahUKEwjIg9_UhtvxAhW ITsAKHR1FCKEQ4dUDCA0&uact=5 42

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Soon, the private sector will hold a strong role in helping to secure economic growth. Low domestic skills and a high cost of energy are some of the major obstacles in the private investment sector. A strong sense of dynamism in the private sector will assist in as far as to support a high investment rate and accelerate economic growth. Inclusive growth remains one of Rwanda’s critical challenges, thus promoting domestic savings is regarded critical. The rate at which poverty was alleviated has decreased in recent years. This signifies the urgency to design a medium-term public investment strategy to achieve a more effective allocation of resources earmarked for critical projects in broad-based and inclusive economic recovery following the pandemic. • Accommodating a growing housing demand –– According to Rwanda National Institute of Statistics, with an average yearly urban growth rate of over 4.5% in the past 20 years, the urban population in Rwanda is expected to double in less than 20 years. By 2032, Rwanda needs to build the equivalent of eight new Kigali’s based on its current density to accommodate new residents. • Mobility and accessibility to urban services –– The demand for transport in Rwanda is expected to increase due to rapid urbanisation, amplified by the growing number of middle-income households. The rough topography of Rwanda limits the possibility of expanding current mobility services and basic infrastructure without driving up service provision cost. Several areas in the Rwandan cities are already experiencing limited connectivity which hampers access and mobility. • Resilience, climate change and environmental risks –– Rwanda is an exemplary country in terms of functional initiatives for environmental protection, such as promotion of reforestation practices, district forest management plans, the low-carbon energy policy and the plastic ban are among many other practices aimed at protecting the environment. However, the increasing population is rapidly increasing pressure on the natural resources. The main sectors that will highly impacted include agricultural land degradation, soil erosion and reduced soil fertility, loss of biodiversity, deforestation and wetland degradation. • Infrastructure gap –– Rwanda has a good base in terms of effective governance and donor investment, and as such it has solid infrastructure compared to countries on a similar stage of economic development. Nevertheless, rapid urban growth is likely to increase demands on basic infrastructure. Further investments will be key in ensuring universal access to basic infrastructure, particularly energy and transport, and water supply, sanitation, watershed management and broadband connectivity.

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• Poverty and inequality –– The levels of poverty reduction in Rwanda varies between district and provinces, generating an imbalance in social and economic development. Although poverty reduced more in rural areas than in urban areas from 2008 to 2011, poverty in rural areas remains at 49% compared to 22% in urban areas. • Financial stability, job creation and competitive business ecosystem –– Poor economic global performance remains a large challenge to Rwanda’s economy and financial sector. A poor demand of Rwanda’s commodity exports could lead to a reduction of the purchasing power of both government and companies on imported goods and services on which the country strongly relies. • Lack of adequate capacity (education system, innovation, digital literacy and career skills) –– The GOR has made significant efforts in expanding access to basic education. However, education in rural areas, among the urban and rural poor, and among children with disabilities and special learning needs which remain a challenge. ICT and technology plays a key role in providing more people with access to education through programmes such as One Laptop Per Child. • Need for usable real-time information and digitalisation of citizen services –– The urban environment of the twenty-first century is characterised by high complexity and uncertainty. Cities constantly need to weigh available budgets against actions necessary to meet urban challenges, such as climate change mitigation and adaptation, population’s growth, infrastructure development and the availability of housing. To address these challenges, it is important for cities to obtain real-time information, which can be provided by data generated through ICT and technology.

13 Conclusion The Rwandan vision of creating the first smart city in Africa equally speaks to a broader vision and agenda for Africa at large. It strengthens the ongoing dual process of digital transformation and rapid urbanisation process across the EAC and Africa ultimately, with more inclusive, safe, resilient and sustainable communities. The smart city plan primarily recommends the implementation of technology solutions, data platforms, Internet of Things and smart grids. This chapter has set out to study and explore the trends and transformations in Rwanda’s growth trajectory in relation to the past and the future role of China in this regard. This was primarily done by reflecting on Rwanda’s social and economic trajectories past, present and future projection into Rwanda’s social and economic landscape 2035–2050. Just

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like any other developing country, Rwanda has evidently found itself and strong and fruitful collaborator in China. The above literature, statistics and figures have thus far proved that Rwanda has benefited a lot from its bilateral initiatives with the People’s Republic of China, among many others, infrastructure development, economic and social transformation through educational training and technology which are much needed not only for Rwanda but for the East African Community at large.

China’s Africa Debt Trap Question: Ethiopia and Kenya Infrastructure Case Studies David Monyae and Ken Chapotera

1 Introduction The question of ‘debt trap’ in Africa has become a cause of disagreement among different analysts and scholars in the academia, and policy circles. The manifestation of unorthodox sovereign financiers in international capital markets has rejuvenated the need to revisit the issue of debt trap in relation to the African continent. One of the key areas such debate has been hotly contested is in infrastructure financing. Traditionally, on the African continent the public purse has taken the burden of infrastructure financing which has continuously been on the decline for decades due to government budgetary constraints and aggressive fiscal policies as a result of multiple forms of both internal and external factors. According to AFDB (2018: 64), ‘the share of resources allocated to infrastructure was cut sharply by African governments and their development partners in the 1980s and 1990s, thanks to the structural adjustment programs most African countries adopted under the so-called Washington Consensus. That partly explains Africa’s current lag in infrastructure relative to other regions. And while capital accumulation started to pick up again in the early 2000s, the pace has been too slow to close Africa’s infrastructure gap’. The inadequate infrastructure financing in Africa has stagnated the continents’ goal to industrialise and efficiently participate in the international global supply chain. ‘The continent’s infrastructure needs amount to $130–$170  billion a year, with a financing gap in the range $67.6–$107.5 billion’ (ADB, 2018: 64). Investment in decent and sustainable infrastructure has the capacity to intensify economic growth as a result of augmented industrialisation and production. It can also increase D. Monyae (*) · K. Chapotera Centre for Africa-China Studies and Department of Politics and International Relations, University of Johannesburg, Johannesburg, South Africa e-mail: [email protected]; [email protected] © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Ndzendze, D. Monyae (eds.), Perspectives on Africa-China Infrastructural and Industrial Cooperation, Africa-East Asia International Relations, https://doi.org/10.1007/978-3-031-38395-3_12

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intra-Africa trade relations by reducing the transactional costs, which are very high in Africa compared to other regions. For instance, according to Arbouch et al. (2020: 3), ‘good quality, quantity, and access to infrastructure can spur growth in the manufacturing and services sector, and reduce intraregional trade barriers. Thus, economies will be better poised to achieve the transition from low- to higher-productivity activities, effective deep economic structural changes, and joining middle- and upper middle-income countries’. Addressing the deficit in infrastructure financing is paramount for African governments to realise United Nations (UN) Sustainable Development Goals (SDGs) and accelerate economic growth. African governments have implemented different strategies at continental and national level to correct the persistent infrastructure deficit. The African Union Agenda 2063 places emphasis on the necessity for excellent infrastructure on the continent under ‘Aspiration Two’ as a perquisite for a well-connected, prosperous and united continent. According to the African Union (2022), ‘world class infrastructure criss-crosses Africa improving connectivity through newer and bolder initiatives to link the continent by rail, road, sea and air; and developing regional and continental power pools, as well as ICT’. The African Union Agenda 2063 is the transformational blue print for the continents’ development ambitions and has been integrated in national development agendas by various African governments across the continent. However, African government face internal constraints on domestic capital to finance infrastructure projects which has made them to heavily rely  on external financial instruments to close the infrastructure gap. As Lu (2020: 1) points out, ‘with limited domestic resources in developing countries, around half of infrastructure financing rely on external sources such as the World Bank, African Development Bank and China EXIM Bank’. Under the AU Agenda 2063, external financiers have been identified as vital instruments to ensure  its  full successful realisation. For instance, different financial instruments and models financing for the first-ten-years of the AU Agenda 63 which, according to the African Union (2015: 77), ‘ranges from government budgetary increases, pure commercial finance from both public and private sources/savings including domestic capital markets, concessional loans, market price-based commercial loans, equity and other market like instruments, FDI, portfolio investments by the private sector (debt, bonds, equity and other securities), and crowd’. Over the last two decades, China has been one of the biggest sovereign financiers of Infrastructure projects on the African continent. The Forum on China and Africa (FOCAC) launched in 2000 and the introduction of the Belt and Road Initiative (BRI) in 2013, have consolidated Sino-Africa relations and offered the continent with different financing channels. However, the role of China financing in Africa has been met with suspicions of neo-colonialism in a form of debt trap diplomacy, especially from the West. According to Onyango (2021), ‘the term debt trap diplomacy was popularised by the scholar Brahma Chellaney who coined the term to describe a scenario where a state or institution holding a powerful position or an abundance of resources, loans enormous amounts of finances to less endowed developing countries. The powerful state or institution then uses the debt as a means of holding leverage over the owing state when it is subsequently unable to offset the

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loan in time’. Western countries,  the Group of Seven ( G7), and other emerging economies have initiated a number of countervailing development projects such as the Global Gateway by the European Union (EU) and the Partnership for Global Infrastructure and Investment (PGII) by the G7 to rival China’s BRI. The premise of this chapter is to address the question of debt trap on the African continent by analysing the role China’s play in Africa’s infrastructure financing and determine whether this is a new form of neo-liberalism or South-South development cooperation that is symbiotic in nature. The chapter commences by providing an overview of Africa’s infrastructure deficit to understand the current nature of infrastructure problems on the continent and why African countries have looked at alternative financiers away from traditional lenders from the west over the years. It will be followed by a discussion on the scope of China’s infrastructure financing in Africa by using Ethiopia and Kenya as case studies. An analysis will then be provided that will look at the question of China’s debt trap in Africa and concluding remarks will be made. This chapter will contribute vital scholarly knowledge on the current question of ‘China’s debt trap’ in Africa through infrastructure financing. It will reveal whether these sentiments are valid or they are just baseless accusations by looking at the needs of African countries and China’s financing methods.

2 An Overview of Infrastructure Gap in Africa The provision of adequate infrastructure has long been viewed as an enabling factor for economic development. ‘An emerging consensus from the literature is that, under the right conditions, infrastructure development can play a major role in promoting growth and equity  – and, through both channels, help reduce poverty’ (Calderón et al., 2018: 2). Africa continues to lag behind other developing regions in terms of infrastructure development. The region has a variety of innate internal factors that augments the latent role infrastructure can play in economic development. Africa has the highest proportion of landlocked countries in the world and the lack of adequate infrastructure development has created barricades for a number of economies  which has isolated them from global markets. According to Calderón et al. (2018: 2), ‘limited openness to trade is the main factor behind the stylized fact that, ceteris paribus, landlocked countries tend to grow slower than others. However, adequate transportation and communication facilities can help overcome these geographic disadvantages. The region’s problem is that poor infrastructure adds to its geographic disadvantage’. The infrastructure problem in Africa is enormous and a matter of urgency to the extent that it overshadows other immediate gaps that hamper Africa’s developmental trajectory. Anago (2021: 4), ‘posited that just 10 African countries, including some of the continent’s rising stars, face an infrastructure gap worth US$1 trillion if they are to meet UN development goals by 2040’. It is paramount and crucial to point out that this infrastructure need in these countries does not fall under the

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category of luxury infrastructure nor the distribution of crucial services to citizens but rather it is a gap perceived to be vital for the financial market to achieve maximum economic output. Africa’s access to infrastructure is extremely poor and in need of redressing. According to AFDB (2018: 66), ‘more than 640 million Africans have no access to energy, giving an electricity access rate for African countries at just over 40 percent – the world’s lowest. Per capita consumption of energy in SubSaharan Africa (excluding South Africa) is 180 kWh, against 13,000 kWh per capita in the United States and 6,500 kWh in Europe’. Energy is a backbone for every economy to ensure maximum economic output. It is crucial for powering manufacturing industries that require high energy consumption, decrease high business transactional cost and maximise entrepreneurial skills that contribute to all-encompassing economic growth. Lack of energy or access to adequate energy chokeholds economic growth and it is detrimental to the livelihood of the population. AFDB (2018: 66) notes that the ‘insufficient access to modern energy causes hundreds of thousands of deaths each year due to the use of wood-burning stoves for cooking; handicaps the operations of hospitals and emergency services; compromises educational attainment; and drives up the cost of doing business’. In addition, access to electricity is not only limited to a portion of the population in various African countries but it is also unreliable with constant power cuts. For instance, ‘firms in Sub-Saharan Africa experienced on average nine power outages in a typical month in 2020. The number of times establishments went under loss of electrical power doubled in comparison to 2019. That year, there were 4.4 power failures per month’ (Kamer, 2022). Africa has performed extremely well in the Information and Communication Technology (ICT) sector. ‘The International Telecommunication Union (ITU) estimate that there were 76.7 mobile phone subscriptions per 100 in its African region (essentially sub-Saharan Africa) in 2018-up from 44.3 in 2010, and mere 12.4 in 2005. Active mobile broadband subscription stood at some 30.7 per 100 in 2018 (1.7  in 2010)’ (SAIIA, 2020). Access to broadband has seen massive significant investments in Africa. According to Calderón et  al. (2018: 13), ‘fixed broadband services, which is another quantity variable for telecommunications infrastructure, were only available in a few countries in Sub-Saharan Africa (only seven) in 1998–2002. With time, in 2008–12, more countries in Sub-Saharan Africa delivered fixed broadband subscriptions. In the latter period, Mauritius led all African countries whereas Ethiopia, Malawi, and Guinea were at the lower end of the spectrum’. Furthermore, according to SAIIA (2020), ‘the ITU found that in 2018, only 26.3% of Africa were internet users. This represented an almost threefold increase over 2010 (9.9%), and a tenfold increase over 2005 (2.7%)’. The trend in ICT has been a positive one as the world is becoming digital and heading towards the fourth industrial revolution. However, despite the gains in ICT over the years, compared to other regions, both developed and developing, Africa lags behind by a significant margin in Internet users worldwide. ‘Globally, internet users, for example, account for 51.4% of the population-nearly double the proportion in Africa. In the Arab States, the equivalent number stands at 49.5%, at 46.2% in Asia and Pacific, at 69.9% in the

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former Soviet Union states, 80.1% in Europe and 74.6% in the Americas’ (SAIIA, 2020). However, in addition to lower access to broadband and percentage of Internet users. Africa’s Internet connection fees are very expensive, sometimes almost double, those in other developing regions. ‘Mobile and internet telephone charges in Africa are about four times higher than those in South Asia, and international call prices are more than twice as high. Connectivity of African countries to international broadband networks is nearly complete, but cost is a key factor affecting adoption. In Africa 1GB of data costs an average citizen nearly 18 percent of average income in 2016, against only 3 percent in Asia’ (AFDB, 2018: 73). Despite these current barriers for universal access to digital technologies and platforms, Africa has been performing better in terms of ICT compared to other sectors. For instance, massive achievements have been made especially in the field of Internet banking. ‘Africa counts almost 500 million mobile banking accounts, with 181 million of them active users, more than all other developing regions’ (OECD, 2020: 11). Transportation is another important feature of any economy. Good and quality transportation network systems such as roads, ports and railway regulate the level of interconnectedness between manufacturers and consumers as well as connectivity to global supply chain networks. However, on transportation network system, Africa performs poorly. According to Holtz and Heitzig (2021), ‘Africa has approximately 31 kilometres of paved road per 100 square kilometres of land in comparison to 134 kilometres of paved road in other low-income countries’. The paved roads, although limited in number, are not in good condition and lack proper maintenance. This has constantly hindered intra-regional trade of goods and services and movement of people between different countries. It has also stagnated the regions’ global competitiveness and connectivity to global supply chain corridors as a result of high transportation costs as majority of its trade is carried on poor road networks. ‘Various reports indicate that inadequate transport infrastructure adds around 30–40% to the costs of goods traded among African countries. Since Africa is home to 16 landlocked countries, poor and underdeveloped transport infrastructure limit accessibility to consumers, hamper intra-regional trade and drive-up import and export costs’ (EXIM Bank of India, 2018: 9). Furthermore, current railway network system in Africa is in poor quality and not up to date with global standards. Majority of the railway network system was constructed during the colonial period and has remained the same or deteriorated over the years due to poor management, lack of investments in upgrades, destruction by natural disasters or conflicts. According to the World Bank (2020: 2), ‘although some upgrading has occurred, most Sub-Saharan Africa (SSA) networks outside South Africa are still operating to the standards to which they were originally constructed. Many structures and even some trackwork are now over 100  years old. Many railways have relatively low axle-load, low-speed, small-scale, under-­ capitalized networks. Combined with chronic under-maintenance over a long period of time, many sections of track have deteriorated, almost to the point of no return’. In addition to South Africa, a number North African countries have also invested heavily in their railway networks to be at par with global standards. ‘Similar quality

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constraints are seen in port infrastructure where – in addition to limited capacity in terminal storage, operation, and maintenance – many ports lack the capacity even to handle large vessels. And they are hamstrung by inadequate infrastructure networks in the hinterland, such as railway lines and roads linked to ports, often leading to long delays at the ports’ (AFDB, 2018: 73). Investment in infrastructure in Africa is not only good for the development of the continent and its people but for the entire world as whole. Estimates suggest that Africa’s demography will play a critical role and contribute significantly to the productive sector workforce in the 21st century. According to OECD (2020: 11), ‘the largest addition to the workforce in the 21st century will be in the African continent, which is set to experience a 40% increase in its working age population in just the 12 years from 2018 to 2030. In 25 years from now, Africa’s population will be 70% larger, adding nearly as much as the entire current population of the Americas, which is 1 billion. By 2050, Africa’s population will reach 2.4 billion, the share of African people increasing from 17% of the global population in 2018 to 26% in 2050, that is, one quarter of the world’s total’. Africa’s urban population migration continues to be on the rise as more people move from rural areas to urban centres in search for better education, economic opportunities, health services and access to good infrastructure. Others have also taken the opportunity to move to other regions such as Europe, North America and Asia. The lack of infrastructure is detrimental not for only Africa and her people but the entire planet as a whole. According to Arbouch et al. (2020: 3), ‘Africa’s economic prosperity will also lead to a reduction in the global poverty that sustains violence, terrorism, socio-political tensions, and uncontrolled mass migration and its contribution to high unemployment in some developed countries, notably in Europe’. The lack of sound investments in various infrastructure sectors contributes to low industrial production and adequate development of African citizens. ‘The productivity loss and the cost to human development brought about by poor infrastructure will not go away without commitments by policy makers and leaders to embark on ambitious investments in the sector’ (AFDB, 2018: 74).

3 China’s Infrastructure Financing in Africa China’s involvement in Africa’s infrastructure financing is far from being a new phenomenon than critics of Africa-Sino relations perceive. ‘Guinea was China’s first African borrower. In 1960, Beijing offered Guinea a line of credit worth about US$25 million. The government of Sekou Toure used this finance to construct a cigarette and match factory employing 1,800 workers, a tea plantation and factory, a conference centre, and a small hydroelectric station in the Kavendou mountain area’ (Brautigam, 2019: 129). Furthermore, the Chinese were also the main financiers of the railway line that connected Tanzania and Zambia in the early 1970s which boosted trade, and offered alternative routes for Zambian goods and services away from over reliance on South Africa for port access. As Otele (2020: 58) notes,

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‘Chinese-built Tanzania-Zambia Railway (TAZARA) that would later form part of the Southern corridor. Linking Zambia to Tanzania’s coastline and covering 1860.5 km, its construction began in 1970 and ended in 1976. TAZARA was put forward by President Kenneth Kaunda to reduce Zambian dependency on apartheid South Africa by having access to an alternative seaport’. In the twenty-first century, Africa-Sino engagements have significantly improved and attracted a lot of attention within the continent and in the West. ‘Since the inception of the Forum on China-Africa Cooperation (FOCAC) in 2000 and the ChinaAfrica Development Fund (CADF) in 2006, China’s interaction with African countries has grown steadily. As of 2018, FOCAC’s commitment stood at U.S.$ 155 billion’ (Otele, 2021). FOCAC meetings have been held at three-year intervals which have witnessed different commitments and cooperation being made, and entered into by China and Africa. The latest major commitment is the inclusion of Africa in the Belt and Road Initiative (BRI) which was launched in 2013. Currently, China has alleviated itself to become one of the main financiers to African countries. ‘Data show that from 2000 to 2017 the Chinese government, banks and contractors extended US$143 billion worth of loans to African governments and SOEs, and estimates suggest that loans to Africa by the China Development Bank and the Export–Import Bank of China are approximately 23% of China’s overseas total’ (Carmody et al., 2022: 64). The relationship between China and Africa is grounded upon a symbiotic relationship which exists between the two global players. On one hand, as aforementioned in the previous section, Africa faces an alarming rate of infrastructure deficit that has continued to hinder its desire to achieve high economic growth rates and the unwillingness by orthodox international financiers from the West to finance its much-needed infrastructure gaps has not made the predicament an easier to mitigate. On the other hand, China has reached overcapacity in its internal domestic markets as a result of high growth rates that have been sustained for decades and it is looking outward for new markets for its domestic enterprises. Goodfellow and Huang (2020: 4) note that ‘a major motivation for prioritising overseas infrastructure financing is the need to export its overcapacity in order to reverse its own post-infrastructure boom economic slow-down’. China’s infrastructure financing in Africa is not only economic or a matter of South-South mutual cooperation and development, it is also a matter of geopolitics and the desire to internationalise the yuan as a major trading global currency. A number of misconceptions exist regarding China’s investment and financing. China’s investments in Africa in relation to Foreign Direct Investment (FDI) is extremely minimal. ‘Chinese Foreign Direct Investment (FDI) in Africa is much less significant than often supposed and has been declining since 2011. Africa hosts just 1.2% of total Chinese FDI – the same as Germany alone – and when it comes to infrastructure China barely invests at all’ (Goodfellow and Huang, 2020: 5). However, China engages extensively when it comes to financing infrastructure projects and all Chinese outside financing is official as it is controlled and directed by the Chinese government. Horn et al. (2021: 2) note that ‘Unlike other major economies, almost all of China’s external lending and portfolio investment is official,

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meaning that it is undertaken by the Chinese government, state-owned companies, or the state-controlled central bank’. Chinese infrastructure financing is disbursed through different channels and institutions that offer diverse forms of financing with different rates and conditions. Morris et al. (2020: 6) point out that ‘No-Interest Loans from China’s Ministry of Commerce (MOFCOM) via Economic and Technical Cooperation Agreements: These RMB-denominated loans are granted to government institutions and they are provided on extremely generous terms. They typically have 20-year maturities, 10-year grace periods, and 0% interest rates. No counterpart funding is required, and when borrowers have difficulty repaying their debts to the Chinese government, these are often the first loans to be forgiven or rescheduled’. Export-Import Bank (Exim Bank) financing is different from MOFCOM as it offers concessional financing and charges interest rates, although this interest rate is normally below international market standards and the grace period is typically 5  years. In addition, ‘Preferential Export Buyer’s Credits from China Exim bank: These USD-­ denominated loans are granted to government institutions that wish to buy Chinese exports. The terms of these loans vary, but they are typically offered with fixed rather than floating interest rates that are more generous than prevailing market rates. As a general rule, these loans are slightly more expensive (higher interest rates, shorter maturities, and shorter grace periods) than China Exim bank concessional loans’ (Morris et al., 2020: 6). These loans do not fund the entire project as at least 15% financing is required from the sovereign borrower to commit to the overall cost of the project. ‘Non-concessional and semi-concessional loans from China Development Bank (CDB) and Chinese state-owned commercial banks (Bank of China, Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China) Loans from these banks are generally provided on less concessional terms because, unlike China Exim Bank, they must maintain their own balance sheets and lend without receiving official subsidies from the state’ (Morris et al., 2020: 6). These loans are issued based on international markets standards and sovereign credit risk analysis on risk and capacity to repay on time. However, a large chunk of financial resources to African countries from China are dispersed via the Exim Bank and CDB. As Goodfellow and Huang (2020: 5) point out, ‘both of the two main policy banks – CDB and Exim Bank – engage extensively in African infrastructure financing’. The BRI in 2013, signalled a new era of Sino-African relationship as the trans-­ continental infrastructure project includes Africa as a strategic and vital partner. Carmody et al. (2022: 58) note that ‘the proceedings of the 2018 Forum for China– Africa Cooperation (FOCAC) summit are riddled with references to the BRI, speaking of Africa as “being part of the historical and natural extension of the Belt and Road”’ and an ‘important participant in the initiative’. BRI hopes to connect continents of Europe, Asia and Africa by investing heavily in infrastructure projects to create economic corridors that ensure improved mobility of goods and services as well as human capital. ‘According to the Chinese government, 37 African countries and the African Union committed to the initiative by April 2019. Central to the BRI in Africa remains the continent’s integration into trans-regional infrastructure

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networks and corridors, as part of the new Maritime Silk Road’ (Carmody et al., 2022: 58). Under the BRI a number of African countries are of strategic importance and have received a number of large infrastructure financing. Kenya and Ethiopia are one of the countries that have benefitted massively under the BRI.

4 Ethiopia Ethiopia, has been on an economic growth trajectory since the end of the military rule and conflict with the now independent Eritrea in 1990s. ‘The country is undergoing significant structural and economic reforms, and experiencing high growth averaging 10.5 percent a year from 2005/06 to 2015/16, compared to a regional average of 5.4 percent. Higher economic growth brought with it positive trends in poverty reduction in both urban and rural areas. In the year 2000, 55.3 percent of Ethiopians lived in extreme poverty, but by 2011 this figure was 33.5 percent’ (Zhang et al., 2018: 8). The country is one of the largest landlocked countries on the continent and has not been blessed with natural resources in a continent that is well provisioned with natural resources. Ethiopia has outperformed, on socio-economic outlook, well-resourced countries with access to deep water ports. Irrespective of these significant socio-economic gains, Ethiopia remains as one of the lower income countries in the global south that needs comprehensive infrastructure investments to elevate its status into a middle-income country. Ethiopia is one of the two most populous countries in Africa, second only to Nigeria, and its capital Addis Ababa is one of top three important political centres of the world, the other two being Geneva and New York. Relations between the two countries solidified in the middle of the 20th century after diplomatic ties were established after the Asia-Africa conference in 1950s, which saw the normalisation of diplomatic relations between the two continents. ‘Sino-Ethiopian economic cooperation grew modestly and remained low until 1995, mainly due to the military rule in Ethiopia. Especially since 1995, the bilateral economic cooperation witnessed marked progress and rapid development in different areas’ (Tarrósy, 2020: 15). In the twenty-first century, bilateral relations between the two countries have increased significantly. The end of the military rule in the late 1990s and the formation of FOCAC at the turn of the century has consolidated Ethiopia-Sino relations. Ethiopia was also the first African country to host the FOCAC conference in 2003. Ethiopia and China have signed different frameworks on cooperation ranging from political, social, military and economical. ‘Before COVID-19, the Ethiopian economy had been impressively growing at 10 percent for over a decade, affirming China’s high standing as a development partner’ (Sany and Sheehy, 2022). Over the years, the Ethiopian government has implemented different policies with the aim of diversifying its economy from one that is heavily reliant on agriculture led-growth into one that is more concentrated on manufacturing, and services. To attain this ambitious manufacture led-growth, the government has enacted the Ethiopian industrial policy since early 2000  in three

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multiple phases. ‘In the first phase, from the early to mid-2000s, the government focused on incentivising local investment aimed at production for export, primarily by providing preferential credit and offering favourable land lease rates through access to land schemes. In the second phase, from 2008, there was a clear shift in emphasis towards attracting foreign investors. The third phase has focused on channelling foreign investment into specialised industrial parks, in particular supporting foreign firms willing to foster links with domestic counterparts’ (Staritz and Whitfield, 2017). The three development phases have been successful in the transformation of the Ethiopian economy from being highly driven by the agriculture sector to having multi-sector led growth. In 2020, the country developed a new strategic plan with the aim of achieving middle income status by 2030. As Calabrese et al. (2021: 11) point out, ‘the government unveiled a new 10-year plan, “Ethiopia 2030: The Pathway to Prosperity.” Aiming to make Ethiopia “an African beacon of prosperity,” the plan’s ambition is for the country to achieve middle-income status and reach a per capita income of $2,220 by 2030. The plan seeks to achieve this via targeted economic growth of 10.2% over the period’. Ethiopia’s ambitions towards reaching middle income status, however, have been constrained heavily by the infrastructure deficit the country faces. The independence of Eritrea in the 1990s saw the country being cut off from the Gulf of Aden maritime transportation access and increased its over-dependence on the port of Djibouti for its exports and imports. ‘As the majority of goods to and from the Port of Djibouti were carried by road, the transport and trade costs for landlocked Ethiopia were prohibitively high compared with other African countries. A low-quality and costly logistics system hindered Ethiopia’s efforts to achieve growth through export-oriented industrialisation’ (Global Infrastructure Hub, 2020: 75). The railway that was built between the two countries at the beginning of the 20th century had deteriorated as a result of mismanagement and declining budget allocations for its upkeep. Furthermore, the energy sector generation capacity in Ethiopia is below the required capacity to sustain the rising productivity in different sectors the economy has been experiencing for over a decade. According to Yalew (2022: 1), ‘Ethiopia has one of the lowest per capita energy supply and consumption, about 56% of the total population have no access to electricity. About 95% of the electricity comes from hydropower’. Under the integrated national development policy that focuses on industrialisation, Ethiopia has been able to direct key investments towards closing infrastructure deficits that could derail its socio-economic gains. According to Nganje et al. (2019: 4), ‘thanks to its comprehensive strategic industrialization plan, the Ethiopian government has been able to direct Chinese investment into key productive sectors, including infrastructure development, with significant results in terms of skills development, job creation, and rapid industrial development’. In addition, the Ethiopian government realised that placing their limited sources towards addressing infrastructure problems in the whole country is not attained and therefore resorted to constructing industrial parks across the country, and linking them with the required infrastructure to achieve their maximum effectiveness and efficiency. Calabrese et al. (2021: 8) note that ‘the Ethiopian model of industrial

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development relies heavily on industrial parks. Given Ethiopia’s large infrastructure gaps, an approach to industrialisation based on industrial parks is sensible, as it allows for the building of infrastructure specifically targeted at production – namely the parks themselves and the transport infrastructure connecting them to the rest of the country – without having to address the whole country’s infrastructure deficit at once’. However, Ethiopia’s domestic savings are not adequate enough to fund its development ambitions which has made the country susceptible to external financiers for much needed financial resources. Despite improvements being made to address Ethiopia’s poor transportation network, the country still faces massive gaps. ‘Since 2005, infrastructure investment rates equivalent to 3% of GDP have more than doubled the road density, from 33.2 km to 78.2 km per 1000 km2’ (AFDB, 2015: 15). Ethiopia-Sino relations have deepened over the past two decades with increased cooperation in trade, investment and financing. ‘China is an important economic partner for Ethiopia. It is the second-largest importer of Ethiopian goods (after the US), and the largest source of Ethiopian imports – over 24% of the goods imported by Ethiopia in 2018 came from China. At least since 2000, Ethiopia has consistently imported more from China than it exported’ (Calabrese et al., 2021: 8). Under the BRI, Ethiopia is one of the countries of strategic importance and has received priority in access to financing. Sany and Sheehy (2022) note that ‘currently, there are about 400 Chinese construction and manufacturing projects in Ethiopia, valued at over $4 billion’. Since, the formation of FOCAC and later BRI Ethiopia has been one of the biggest recipients of Chinese financing. According to Goodfellow and Huang (2020: 8), ‘from 2011–2017, the annual revenues of Chinese contractors in Ethiopia came second only to those in Angola in sub-Saharan Africa. Moreover, in recent years Ethiopia has been the recipient of the largest amount of Chinese concessional lending on the continent (and second to Angola in terms of overall lending). The largest component of its Chinese loans is for transport infrastructure: $4.4bn out of $13.7bn total loans from 2000–2013, or 33%’. One of the biggest infrastructure projects financed by China is the Ethiopia-­ Djibouti railway transportation network. ‘The Ethiopia-Djibouti project was constructed with a total investment of $4 billion. The Ethiopian section of the line cost $3.4bn, 70% of which was provided by China Exim Bank and 30% by the Ethiopian government. The Djibouti government contributed $878m for the project’ (Railway Technology, 2020). The line links the landlocked country to the maritime transportation network through the port of Djibouti in the gulf of Eden, which is paramount for its exports and imports. It also reduces transportation costs and over-reliance on the road network. In the air travel sector, Beijing has also channelled a large portion of financing to modernise Ethiopia’s biggest airport by constructing a new modern terminal. Xinhua (2017) notes that ‘Expansion work of Ethiopia’s largest airport the Addis Ababa Bole International Airport funded by a $345 million loan from China Exim Bank’. This comes at a time when the Ethiopian national carrier, Ethiopia Airlines, is becoming one of the biggest airlines in the world in terms of passenger and freight capacity.

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One of the most noticeable Chinese infrastructure projects in Sub-Saharan Africa is the Light Rail Transit (LRT) in Ethiopia’s capital Addis Ababa. The project set the precedent of the willingness by Beijing to finance modern infrastructure projects which traditional OECD financiers have not been keen to finance. According to Tarrosy and Vörös (2018), ‘Construction on the light railway started in December 2011 after securing funds from China’s Export-Import Bank (Exim Bank). The final cost of the railway was $475 million, 85% of which was covered by a substantial concessional loan from Exim Bank’. The Ethiopian government covered the 15% difference. The LRT covers approximately 35 km through Addis Ababa suburbs and commenced its operation at the end of 2015. ‘Fares are set at 2–6 Ethiopian Birr depending on distance, making it even cheaper than minibus-taxis and thus offering affordable transport to lower-income groups’ (Goodfellow and Huang, 2020: 8). LRT was built to address Addis Ababa’s inadequate and poor public transportation system. Prior to its construction, the city depended heavily on state operated buses and privately owned taxis which were not adequate in a fast-growing economy. Chinese infrastructure financing has also been channelled to addressing the energy problems in Ethiopia. Since 2011, the Ethiopian government has been undertaking a multi billion-dollar hydroelectric generation project to increase access to electricity supply in the country. Although the government of Ethiopia started the Grand Ethiopian Renaissance Dam (GERD) project with internally generated financing, China has played a significant role in funding supporting infrastructures. As Piliero (2021) point out, ‘China has also played a role in developing other infrastructure related to the project, such as providing a 2013 loan of $1.2 billion USD in 2013 to build power transmission lines connecting the dam with nearby towns and cities’. Chinese engineering companies have also been central to the work of the dam. According to Klaassen (2021), ‘Chinese companies  – including Sinohydro, the Gezhouba Group, Voith Hydro Shanghai and the state-owned China International Water and Electricity Corporation – have also been central to the construction of the dam. Ethiopian Electric Power (EEP) contracted China’s Gezhouba Group for US $40.1 million in 2019, expecting them to work aggressively in partnership with other companies to finalise the GERD on schedule’. Concerns have been raised on Ethiopia’s ability to repay back the loans it has received from Beijing to finance its much-needed infrastructure projects.

5 Kenya Kenya is one of African countries of strategic importance under the BRI project. As an entry point into East African markets and beyond into Central Africa, Kenya is of geopolitical and economic tactical importance to China. Furthermore, the country’s steady economic growth that has been achieved in recent decades and ever-­ increasing population growth presents a large market for Chinese manufactured goods. Kenya needs financing from international capital markets to fund its infrastructure ambitions to enhance economic growth, that is in line with its domestic

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national development goals under ‘Vision Kenya 2030’ of achieving middle income status. As Farooq (2018: 408) notes, ‘to realize the Vision, the Kenyan government is taking every effort to improve infrastructure nationwide so as to enhance the local economy’. Sino-Kenyan relationships exist on the nexus of mutual benefit as both countries’ domestic needs are enhanced and realised through their engagements. The BRI has opened up financing channels to Kenya for the development of its infrastructure ambitions at a time where African countries have had difficulty obtaining financial capital due to concerns on debt sustainability by orthodox financiers from the West. According to Carmody et al. (2022: 65), ‘Beijing’s prominent role started with the China Exim Bank funding 90% of the US$3.6 billion for the 485-kilometre Mombasa-Nairobi Standard Gauge Railway (SGR) line, which has been cast as a flagship project of both the BRI and Kenya’s own “Vision 2030” development framework’. The SGR has reduced travel time between Mombasa and Nairobi, and eased the over-dependency of road transportation by both passengers and freight. As Otwori et al. (2020: 87) argue, ‘the freight and passenger traffic that will be taken up by SGR will reduce the number of vehicles on crucial highways and associated repair costs. It will also be good for environmental protection and reduce road accidents and the duration of transporting products within Kenya and its neighbouring countries’. ‘The SGR project has two stages of development: phase one being Mombasa-­ Nairobi, and phase two – Nairobi-Malaba that is further split into three sections: Nairobi Naivasha, Naivasha-Kisumu, and Kisumu-Malaba. Phase one and section one of the second phase (Nairobi-Naivasha) of the SGR project are already complete and operational. The completed first phase of the project is considered Kenya’s most significant infrastructure project since independence’ (Otwori et al., 2020: 88). However, alarms have been raised on debt sustainability and the productivity of the SGR to ensure the debt is repaired within the agreed period. ‘The SGR construction was largely responsible for driving up Kenyan debt to China from US$756 million in 2014 to US$6.47 billion by 2019. Kenya has also issued Eurobonds to international markets to the tune of US$6.1 billion. China accounted for 22% of Kenya’s external debt portfolio by the end of 2018’ (Carmody et al., 2022: 65). As Kenya has started its debt repayment to China it seems to be unlikely to meet the agreed repayment terms. For instance, the SGR witnessed operation losses since its inception in 2017 as a result of not meeting the intended number of passengers, and freight. This is also partly due to having higher fees compared to other alternative modes of transportation in Kenya. Carmody et al. (2022: 65) note that ‘by May 2020, the SGR had incurred a combined operating loss of about US$200 million. At the same time, the Kenyan government is contractually obliged to pay a fixed quarterly operation fee of about US$28.8 million to the operator Afristar, which is owned by the China Communications Construction Company (CCCC)’. In addition, under the BRI, China has also financed the construction of the Nairobi Expressway. ‘The China Road and Bridge Corporation (CRBC) built the 27.1 km (16.8) miles Nairobi Expressway linking the country’s main airport and the capital. The US$668 million project was financed by the state-owned China Communications Construction Company, CRBCs parent company’ (Nyabiage,

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2022). The expressway is aimed at decreasing traffic jams in the Central Business District (CBD) and commuting time from the CBD to the main airport. However, the Nairobi Expressway was financed under the umbrella pillar of Public Private Partnership (PPP), which saw the Kenyan government entering into an arrangement with the financier to share revenue collections for the duration of 30 years to ease the government’s debt repayment burden. According to the Global Times (2022), ‘the project is the first toll road in the country, developed by CRBC in partnership with the Kenyan government, with a total construction and operation period of 30 years. After 30 years, the entire expressway, equipment, and technology will be handed over to the Kenyan government free of charge’.

6 The Debt Trap Question? Financing from China to African countries has resurfaced the concerns on the twenty-first century neo-colonialism in a form of debt trap on the African continent. As demonstrated in the two case studies above, China has financed much needed infrastructure projects in Kenya and Ethiopia as the countries try to improve their global economic competitiveness, spur economic growth, achieve SDGs and realisation of Agenda 2063. However, this current trajectory has been met by criticism, especially from Western media, leaders and academics. In 2011, while on his state visit to Nigeria, former United Kingdom Prime Minister David Cameron warned African leaders about Beijing becoming a modern colonial power on the continent. As Groves (2011) notes, ‘Mr Cameron admitted the West is increasingly alarmed by Beijing’s leading role in the new “scramble for Africa”’. Under the Trump Administration, the U.S. government increasingly accused China of trying to take full control of African government assets through predatory lending terms. During his diplomatic visit to the continent in 2018, former Secretary of State Rex Tillerson stated at a news conference in Addis Ababa that ‘it is important that African countries carefully consider the terms of those agreements and not forfeit their sovereignty’ (Maasho, 2018). In 2022, current U.S. President Joe Biden and G7 leaders unveiled the PGII as a vehicle to counter the BRI by offering alternative financing. According to BBC (2022), ‘the plan calls for the G7 leaders to raise $600bn over five years to fund the launch of infrastructure projects in middle and low-income countries’. ‘Biden has announced that the US will mobilise $200bn for PGII over the next five years through grants, federal financing, and leveraging private sector investments’ (Komminoth, 2022). The EU has also implemented the Global Gateway among member states as a tool to revive its eroding geopolitical importance in Africa and other developing regions due to the presence of BRI and other rising unorthodox lenders especially from the Middle-East. The Global Gateway, as Teevan et al. (2022: 1) note, ‘It is also the EU’s contribution to the G7’s commitment to narrow the global infrastructure investment gap in the wake of the COVID-19 pandemic. Yet, what really drove the EU to launch the Global Gateway is the sense

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that EU’s influence in key regions is diminishing, while China and other powers are gaining in influence. This has only been heightened by recent events, including COVID-19 and Russia’s invasion of Ukraine’. The ability of PGII to successfully compete against BRI is yet to be seen as EU, USA and other G7 members continue to face their own internal economic problems, rejuvenation of right-wing political parties and willingness of the private sector to invest in developing nations, especially Africa. The PGII is accompanied by democratic values at a time China’s BRI is seen as exploitative, self-serving and less transparent. At the inauguration of the PGII, U.S. President Joe Biden stated, as quoted by Axelrod (2022), ‘it’s built using the global best practices: transparency, partnerships, protections for labour and environment’. Indeed, when it comes to Chinese financing to African countries, Beijing does not make things easier for itself as it fails to publish the details of its loans on open sources. Carmody et  al. (2022: 64) note that the ‘Official data on Chinese loans are not publicly available, and thus all circulated statistics are approximations. Beijing is not a member of the Organisation for Economic Co-operation and Development (OECD), and it does not take part in that organisation’s Creditor Reporting System’. This has amplified accusations from the West and within the continent of Beijing being a predatory financier and pushing African countries into debt distress. Chinese infrastructure financing is seen as a weapon being used by Beijing to entrap African countries in debt trap by financing projects which have less profitable prospects. So that once the debt has reached maturity and the country is unable to repay, Beijing can take control of the vital state assets. As Brautigam and Rithmire (2021) point out, ‘China, we are told, inveigles poorer countries into taking out loan after loan to build expensive infrastructure that they can’t afford and they will yield few benefits, all with the end goal of Beijing eventually taking control of these assets from its struggling borrowers’. Although concerns have been raised on China’s desire to trap African countries with debt and take control of vital assets in case of default. Evidence continues to show that this is just a mere campaign to tarnish the image of China and amplify anti-China sentiments. China has not taken control of any state-owned asset in any country which has been unable to meet debt obligations to Beijing. ‘The Johns Hopkins School of Advanced International Studies curates a database on Chinese lending to Africa. It has information on about more than 1000 loans and, so far, in Africa, we have not seen any examples where we would say the Chinese deliberately entangled another country in debt, and then used that debt to extract unfair or strategic advantages of some kind in Africa, including “asset seizures”’ (Brautigam, 2020: 6). Majority of countries in Africa where Beijing has financed a variety of infrastructure projects have a history of debt distress and rescues from multilateral institutions such as the World Bank and IMF even prior to the rise of China as a net capital exporter. Moreover, Beijing is not the largest holder of Africa’s external debt, although as a single creditor, it is the largest. Acker et al. (2021) state that ‘as Africa’s largest bilateral creditor, China holds at least 21 percent of African debt’. The remaining external debt is owed to other external private sector financiers and multilateral financial institutions. ‘According to the World Bank, at the end of 2016,

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African governments owed $130 billion of debt to other governments. This amounts to 32% of African government external debt. A further 32% is owed to the private sector, and 36% to multilateral institutions (16% the World Bank, 5% the IMF and 15% other multilaterals)’ (Jubilee Debt Campaign, 2018: 5). Evidence shows that, although China is the largest bilateral external debt holder on the continent its debt is less compared to Western multilateral and private lenders. However, the percentage of debt owed to China defer on country-by-country basis. Furthermore, China has also shown willingness to restructure debt repayment and restrain towards contributing to the debt distress in countries they have invested heavily. At the peak of the COVID-19 pandemic, China participated in the Debt Service Suspension Initiative (DSSI) hosted by the G20 in 2020, which was aimed at easing the debt repayment strain due to economic growth decline caused by the pandemic which was faced by many developing nations. ‘China has extended debt relief to developing countries worth a combined $2.1 billion under the G20’s framework, the highest among the group’s members in terms of the amount deferred’ (Reuters, 2020). Referencing the two case studies above, contrary to the western driven agenda of debt trap, in Ethiopia and Kenya, China has demonstrated great desire to avoid debt distress and shown high level of flexibility on repayment methods. ‘Data from the Debt Service Suspension Initiative (DSSI) shows that China is the largest creditor in Ethiopia, with outstanding debt of $8.7 billion (32% of Ethiopia’s total external debt). The World Bank is close behind, at 31%. Higher interest rates for Chinese loans mean that China made up 42% of debt service due in 2020’ (Calabrese et al., 2021: 10). In Ethiopia, Beijing has accepted renegotiated terms of repayments that were brought by Prime Minister Abiy Ahmed as part of his economic reforms to ease the country’s external debt burden. As Chen (2020) notes, ‘In contrast to perceptions of predation, another aspect of China as a creditor is one of far greater flexibility and leniency in dealing with debt. One prominent example is the recent case of Ethiopia’s Chinese-financed railway from Addis Ababa to Djibouti, the Ethiopian government was allowed to defer interest payments in 2018, when it faced foreign exchange shortages; the government was then able to renegotiate the terms of the loan, extending the repayment period to 30 years from the original 15, significantly increasing its flexibility’. Furthermore, China has continued to show concerns of easing debt distress in Ethiopia by rejecting to disburse additional financing for infrastructure projects. For instance, in 2021, Exim Bank froze millions of dollars aimed at financing different infrastructure projects in various sectors due to the fear of Ethiopian government’s ability to service external debt on sustainable levels. As Dadhi (2021) reported, ‘the Export-Import Bank of China has withheld the disbursement of 339 million dollars in loans to Ethiopia as it conducts a review of the country’s debt standing, leading to delays in eight infrastructure projects’. Moreover, under DSSI, ‘China has suspended $190 million in debt (30% of outstanding debt service) in Ethiopia’ (SAIS, 2022). In a similar fashion, in Kenya, China has also shown leniency and elasticity in relation to debt owed to it. In 2021, Kenya benefited greatly when China, through DSSI, suspended debt repayment to ease the country’s economic burden worsened

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by COVID-19 and dwindling foreign exchange reserves. ‘The moratorium started in January 2021. China postponed the repayments in January, helping Kenya temporarily retain $239.1 million that was due for six months ending June 30’ (Munda, 2021). However, additional extension of debt deferment was rejected by various Chinese lenders after the completion of the first phase. Consequently, in 2018, China showed a careful approach towards infrastructure financing when it refused to provide additional funding for the third phase of the SGR due to concerns of the line’s profitability. As Rogers (2022) point out, ‘the line was to have continued to the Ugandan border, but when Kenya asked for funds to extend the line to the Lake Victoria port of Kisumu in September 2018, China said instead that a commercial viability study should be carried out on the entire line, reflecting Beijing’s more cautious approach to overseas infrastructure investment’. Evidence has shown that China continues to make efforts of mitigating debt distress in various African countries it has invested heavily in. The current trend of debt relief efforts from China is not a new phenomenon, China started debt restructuring and relief efforts as far 2000 when the developing world was grappled by unsustainable debt level. As Brautigam (2019: 142) point out, ‘At the start of the debt crisis, the Chinese first responded by providing debt relief: rescheduling payment terms for debts. For example, repayment for Zambia and Tanzania’s Tazara Railway was postponed for ten years. Ghana and Niger were granted another five years for repayment. China’s debt cancellation programme was first announced in 2000 at the first summit of the FOCAC in Beijing. China pledged to reduce or cancel RMB10 billion of debt (about US$1.2 billion at the time) owed by highly indebted poor countries and least-developed countries in Africa’. China made these relief efforts without demanding the beneficiary to make any structural adjustments in their economic policies.

7 Conclusion China financing comes at the time when African countries are in short of capital to finance their infrastructural deficits and western lenders have been reluctant to open up finance of large infrastructure projects in Africa. As evidence has shown from different scholars, the debt trap accusation is just a mere campaign by western media and leaders to instigate anti-Beijing rhetoric around the world. There is no proof of China taking control of state-owned assets in any country that has defaulted on its debt repayment. China has showed willingness and efforts in finding ways to reduce debt distress in highly indebted since becoming an export of financial capital in late 1990s. Furthermore, there is also substantial convergence between African countries financial needs to finance much vital infrastructure and China’s outward outlook to invest surplus financial capital, and find new markets for its industries offshore. The PGII launched by the G7 and EU to counter BRI might struggle in Africa due to the West’s desire to interfere in domestic economic and political issues of African countries. The BRI, on the other hand has been accompanied by China’s

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foreign policy stance of non-interference in domestic affairs of its partners which might partly explain its attractiveness and success on the African continent.

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Goodfellow, T., & Huang, Z. (2020). Contingent infrastructure and the dilution of ‘Chineseness’: Reframing roads and rail in Kampala and Addis Ababa. EPA: Economy and Space, 53(4), 655–674. Groves, J. (2011). Cameron warns Africans over the ‘Chinese invasion’ as they pour billions into continent. Available from: https://www.dailymail.co.uk Holtz, L., & Heitzig, C. (2021). Figures of the week: Africa’s spatial distribution of road infrastructure. Available from: https://www.brookings.edu Horn, S., Reinhart, C. M., & Trebesch, C. (2021). China’s overseas lending. Journal of International Economics, 133, 1–32. Jubilee Debt Campaign. (2018). Africa’s growing debt crisis: Who is the debt owed to? Available from: https://jubileedebt.org.uk Kamer, L. (2022). Number of power outages in firms in Sub-Saharan Africa 2019–2020. Available From: https://www.statista.com/statistics/1279790/ number-­of-­power-­outages-­in-­firms-­in-­sub-­saharan-­africa/ Klaassen, L. (2021). Everywhere and nowhere to be seen’: How China’s role in the GERD dispute challenges Beijing’s non-interference principle. Available from: https://blogs.lse.ac.uk Komminoth, L. (2022). G7’s $600bn global infrastructure initiative targets Africa. Available from: https://african.business Lu, S. (2020). China’s infrastructure investment in Africa. In The belt and road initiative: Opportunities and challenges of a Chinese economic ambition. SAGE Publishing India. Maasho, A. (2018). Africa should avoid forfeiting sovereignty to China over loans  – Tillerson. Available from: https://www.reuters.com Morris, S., Parks, B., & Gardner, A. (2020). Chinese and World Bank lending terms: A systematic comparison across 157 countries and 15 Years. Available from: https://cisp.cachefly.net Munda, C. (2021). Kenya paid China $256m to ease debt repayment standoff: Reports. Available from: https://www.theeastafrican.co.ke Nganje, F., Mthembu, P., Merid, M., Kabechani, A., Mulugeta, M., Kouakou, K., Nampoba, S., Kaunda, S., Jalata, G., Minquan, L., & Mungomba, N. (2019). Africa-China industrial and infrastructural cooperation: Recommendations. The Centre for Africa-China Studies. Nyabiage, J. (2022). Nairobi tollway an example of China’s new belt and road financing approach in Africa. Available from: https://www.scmp.com Onyango, A. (2021). Debt trap diplomacy: How financial hegemony hinders trade and development. Available from: https://tradefinanceglobal.com Organisation for Economic Co-operation and Development. (2020). Quality infrastructure in 21st century Africa. Available from: https://www.oecd.org Otele, O. (2021). China’s Approach to Development in Africa: A Case Study of Kenya’s Standard Gauge Railway. Available from: https://www.cfr.org/blog/ chinas-­approach-­development-­africa-­case-­study-­kenyas-­standard-­gauge-­railway Otele, M. O., Lim, G., & Alves, A. (2020). China-Driven rail development: Lessons from Kenya and Indonesia. Available from: https://saiia.org.za Otwori, L. J., Fredrick, G. A., Abduletif, A. A., & David, D. L. (2020). Kenya’s standard gauage railway project in the context of theory and practice of regional planning. Acta Carolus Robertus, 10(2), 85–96. Piliero, J R. (2021). Ethiopia’s grand renaissance dam: Assessing China’s role. Available from: https://uscnpm.org Railway Technology. (2020). Ethiopia-Djibouti Railway Line Modernisation. Available from: https://www.railwaytechnology.com/projects/ethiopia-­djibouti-­railway-­line-­modernisation/ Reuters. (2020). China has given $2.1 bln of debt relief to poor countries  – finance minister. Available from: https://www.reuters.com Rogers, D. (2022). China hints at renewed funding for Kenya’s rail megaproject. Available from: https://www.globalconstructionreview.com

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Sany, J. & Sheehy, P. T. (2022). Despite high stakes in Ethiopia, China sits on the sidelines of peace efforts: Can Washington successfully pressure Beijing to join multilateral peace efforts? Available from: https://www.usip.org School of Advanced International Studies. (2022). Global debt relief dashboard. Available from: http://www.sais-­cari.org/debt-­relief South Africa Institute of International Affairs. (2020). Africa’s ICT infrastructure: Its present and prospects. Available from: https://saiia.org.za Staritz, C., & Whitfield, L. (2017). Made in Ethiopia: The Emergence and Evolution of the Ethiopian Apparel Export Sector. Roskilde Universitet. Tarrosky, I. (2020). China’s Belt and Road Initiative in Africa, Debt Risk and New Dependency: The Case of Ethiopia. African Studies Quarterly, 19(3–4), 8–28. Tarrosky, I., & Vörös, Z. (2018). China and Ethiopia, Part 1: The light railway system. Available from: https://thediplomat.com Teevan, C., Bilal, S., Domingo, E., & Medinilla, A. (2022). The global gateway: A recipe for eu geopolitical relevance? Available from: https://ecdpm.org World Bank. (2020). Modern Railway Services in Africa: Building Traffic  – Building Value. Transport Global Practice. Xinhua. (2017). Chinese-funded airport project in Ethiopia to be completed next January. Available from: https://www.chinadaily.com.cn/world/2017-­06/29/content_29932267. htm#:~:text=Fully%20funded%20by%20China's%20Exim,Construction%20Company%20 Limited%20(CCCC) Yalew, A. W. (2022). The Ethiopian energy sector and its implications for the SDGs and modelling. Renewable and Sustainable Energy Transition, 2, 1–11. Zhang, X., Tezera, J., Zou, C., Wang, Z., Zhao, J., Gebremenfas, E.  A., & Dhavle, J. (2018). Industrial park development in Ethiopia case study report. Avalable from: https://sipp.unido. org/sites/default/files/knowledge/2020-­11/Industrial%20park%20development%20in%20 Ethiopia%20case%20study%20report.pdf

The Belt and Road Initiative and the Build Back Better World: Implications on Africa’s Infrastructure Development Sizo Nkala and Ekeminiabasi Eyita-Okon

1 Introduction China and the Group of 7 (G7) led by the United States are currently sponsoring parallel, if not rival, multibillion dollar global infrastructure investment programmes, namely the Belt and Road Initiative (BRI) and the Build Back Better World (B3W) respectively. The latter was renamed the Partnership for Global Infrastructure Investment at the 2022 G7 Summit (G7, 2022). While the BRI was launched in 2013, the B3W was launched in 2021 although it had been foreshadowed by infrastructure programmes such as the Japan’s Quality Infrastructure Programme and the US’ Blue Dot Network (BDN) among others. Both initiatives seek to address the global infrastructure funding needs estimated at US$40 trillion which affect mostly developing countries. With infrastructure funding needs of between US$130–170 billion per year and falling short by between US$67–108 billion, Africa is facing an infrastructure crisis. As such, the continent is a focus area in both the BRI and B3W plans. The BRI has already channelled billions of dollars of investment in African infrastructure while the B3W is promising a ‘new deal for Africa’ that will bring in billions more in infrastructure funding. This chapter discusses the meaning and relevance of both programmes to Africa’s infrastructure needs. The second section paints a picture of Africa’s infrastructure crisis. The succeeding section critically discusses China’s BRI and its record in Africa highlighting its successes and limitations. The fourth section delves on the West’ search for alternatives to the BRI which foreshadowed the B3W. The fifth section discusses the content of the B3W and how it relates to Africa. The following section is a critique of the degree to which the BRI and the B3W complement and compete against each other in light of the geopolitical tussle between the West and S. Nkala (*) · E. Eyita-Okon Centre for Africa-China Studies, University of Johannesburg, Johannesburg, South Africa © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Ndzendze, D. Monyae (eds.), Perspectives on Africa-China Infrastructural and Industrial Cooperation, Africa-East Asia International Relations, https://doi.org/10.1007/978-3-031-38395-3_13

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China. It argues that the zero-sum competition may see Africa having to choose one and drop the other. However, it also highlights potential areas of complementarity between the two programmes from which Africa can benefit. The final section concludes the chapter.

2 Africa’s Infrastructure Crisis Africa faces a chronic lack of infrastructure which continues to stifle its growth potential. Almost 60% of Africa’s population lacks access to modern physical and social infrastructure. About 600 million people (half of the continent’s 1.2 billion population) have no access to grid electricity which amounts to 69% of the total number of people without access to electricity globally (Lakmeeharan et al., 2020). Only 13 of Africa’s 54 countries have at least 50% of their populations connected to the grid. From a regional perspective, Puliti (2022) laments that only 42% of the West African population has access to electricity, and it gets worse in rural areas where only 8% of the residents have access. Lack of electricity means that businesses have to resort to expensive alternatives such as generators adding to already high production costs, making Africa’s economies less competitive. Adesina (2016) observes that 90% of primary schools in Africa do not have electricity, a staggering 600,000 people lose their lives from using unclean sources of energy, and the continent loses about 4% of its GDP annually because of lack of energy. Africa needs to invest in wind, solar, geothermal and hydro power generation to add to its power generation capacity and provide reliable access to electricity for millions of its citizens. Africa’s water and sanitation infrastructure is also lagging behind. About one in three Africans (approximately 400 million) are facing water scarcity. Africans make up 40% of the world’s 783 million people who do not have access to safe drinking water (Rodriguez, 2019; Holtz & Golubski, 2021). Moreover, the lack of sanitation facilities for about 700 million people makes it challenging to separate human waste from food and water sources thus exposing the people to diseases such as cholera. While US$64 billion a year is needed to achieve universal water access in Africa, only US$10–19 billion is invested in water infrastructure annually. It is estimated that Africa may be losing 5% of its GDP per year due to water scarcity while 40 billion working hours are spent looking for water every year (ICA, 2018; UNICEF, 2021). Increases in population, urbanisation rates and climate change-­ induced droughts have conspired to ensure that water demand far outstrips water supply. Further, in the transportation sector Africa is also facing a crisis. Africa’s road density of 204 km per 1000 square km is far lower than the world average of 944 km per 1000 square km (Ashurst, 2016). The continent manages only 31 km of paved road per 100 square km compared to 134 km in other low-income countries (Holtz & Heitzig, 2021). Such inadequate road infrastructure makes moving goods and people challenging thus making production costly. This is especially so in a continent with 16 landlocked countries who depend on road infrastructure for access to

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ports. About 80–90% of Africa’s passenger and freight traffic occurs through road transport. The rail infrastructure is not faring any better. The bulk of Africa’s 84,000 km railway network remains is low-speed, small-scale and uneconomic due to poor technological and institutional conditions. Africa’s rail freight traffic in 2019 was just 1.53% of the global rail freight traffic, a reflection of the of the continent’s underdeveloped rail infrastructure (Statista, 2022). While 90% of Africa’s international trade goes through the sea, the poor state of the continent’s maritime infrastructure is a major bottleneck. The majority of the 90 major ports along Africa’s 31,000 km coastline are characterised by obsolete technology, costly operations, and lax security standards which limit the amount of cargo handled by the ports. Dysfunctional ports greatly undermine Africa’s competitiveness in the global economy. Further, only 25% of the airports in Africa have paved runways and even fewer meet the International Civil Aviation Organization standards (Export Import Bank of India, 2018). Limited connectivity, shortage of human resources and lack of transit facilities continue to constrain the air transport sector’s potential contribution to the African economy. As a result, a 2018 report by PricewaterhouseCoopers (PwC), transport challenges add 75% to the price of African goods (PwC, 2018). According to the African Development Bank Group (AfDB) (2019), Africa’s annual infrastructure funding needs range between US$130 billion and US$170 billion. However, total commitments to infrastructure have consistently fallen woefully short leaving the infrastructure funding gap stretching between US$67 billion and US$107 billion. A report by the Infrastructure Consortium for Africa (ICA) on infrastructure financing trends in the continent notes that in the 5 years between 2014 and 2018 Africa saw an average of US$80.7 billion in infrastructure funding commitments leaving an average gap of between US$50–90 billion (ICA, 2018). McKinsey Global Institute estimated that since the beginning of the 21st century, Africa has been spending an average of 3.5% of its GDP annually on infrastructure, China and India spend 7.7% and 5.2% respectively. Africa should spend at 4.5% of its GDP on infrastructure to close to the gap (Lakmeeharan et al., 2020). Africa’s progress in infrastructure became stagnant after multilateral actors such as the World Bank and bilateral partners in Western Europe, North America and Japan quit funding infrastructure projects in the continent as they had one in 1960s through the 1980s (Wethal, 2019). The funding boom flattened in the 1990s due to unsustainable debt that had been incurred by African countries and the Bretton Woods-­ imposed structural adjustment programmes (SAPs) that focused shifted focus to governance rather than hard infrastructure (Mold, 2012; Jerve & Nissanke, 2008). Moreover, some of the infrastructure such as dams, roads and power plants that was constructed in the during the post-independence infrastructure boom never became operational leading to huge losses hence the disinclination to fund infrastructure in Africa (Wethal, 2019). However, African infrastructure is now receiving renewed emphasis as a strategic priority in Africa and beyond. For example, goal 2 of aspiration 2 of the African Union (AU)’s Agenda 2063 focuses on building world-class infrastructure with a view to ‘improving connectivity through newer and bolder initiatives to link the continent by rail, road, sea and air; and developing regional and continental power pools as well as ICTs’ (Africa Union Commission, 2015).

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The Agenda 2063 is a 50-year strategy that was adopted in 2013 to expedite and accelerate the socio-economic development process in Africa. Other major countries such as China have made infrastructure development the core focus of their cooperation with Africa.

3 Enter China: The Belt and Road Initiative When the Belt and Road Initiative (BRI) was first conceptualised by then newly-­ elected Chinese President Xi Jinping in a series of speeches, it was a Chinese-­ sponsored regional infrastructure programme aimed at intensifying the integration and cooperation among states in the Asian region (Embassy of the People’s Republic of China in Belgium, 2013; ASEAN-China Center, 2013; Cai, 2017). In a September 2013 speech at the Nazabaryev University in the city of Astana in Kazakhstan, President Xi delved at length into the history of the Ancient Silk Road which was an overland trade route that connected China to Central Asia and Europe in the far west. The route facilitated the flow of people, goods and ideas, improved connectivity, and triggered sustained economic growth and prosperity for China and the surrounding states. Xi proposed the building of an ‘economic belt along the Silk Road’ which would benefit all the people along the route complemented by policy coordination, improving road connectivity, free-flowing trade, monetary circulation and people-to-people relations (Embassy of the People’s Republic of China in Belgium, 2013). In a follow-up speech in Indonesia in October 2013, Xi further elaborated the idea of the BRI proposing the development of the Maritime Silk Road of the 21st century by building sea infrastructure to expand trade between China and the South East Asian countries (ASEAN-China Center, 2013). Xi reiterated the importance of the Silk Road and Economic Belt and the Maritime Silk Road while speaking at the Peripheral Diplomacy Work Conference in October 2013, stressing the importance of improving regional interconnection through infrastructure and maintaining stability in China’s neighbouring countries which serve as critical export markets for Beijing (Cai, 2017). At the Asia-Pacific Economic Cooperation (APEC) Summit in Beijing in November 2014, President Xi likened the Silk Road Economic Belt and the Maritime Silk Road of the 21st Century, which he called the Belt and Road Initiative, to two wings propelling Asia to the skies (Embassy of the People’s Republic of China in the Indonesian Republic, 2014). In all his speeches, Xi stressed mutual benefit, respect for sovereignty, independence, connectivity and win-win cooperation as the underpinning principles for the BRI programme. Some scholars argue that the BRI was a geopolitical project which sought to counter the former US President Barack Obama’s 2011 Pivot to Asia that would strengthen US influence in China’s neighbourhood. By intensifying its trade and economic relations with its Asian neighbours, China would be able to influence their policy decisions (Chatzky & McBride, 2020; Jia & Wallace, 2021). Yet other scholars are of the view that the BRI was primarily an extension of China’s domestic economic and security policy concerns. According to this line of thought, the BRI was meant to bolster the central

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and western provinces of China whose stagnant economies were promoting political unrest in places such as Tibet and Xinjiang. At the same time, it was a way of restructuring the Chinese economy which was still dominated by low-value manufacturing by emphasising innovation and standard-setting to escape the dreaded middle-income trap (Huang, 2016). The geographical scope of the BRI was expanded in an action plan jointly issued by the National Development and Reform Commission, the Ministry of Foreign Affairs, and the Ministry of Commerce in March 2015. This was the first time that Beijing acknowledged Africa as part of the BRI stating that the initiative will connect Asian, European and African countries and encourage mutually beneficial cooperation. The three continents would be linked through the construction of ports, highways, undersea optic cables, power transmission routes and cross-border infrastructure (The State Council, 2015). The five major goals outlined in the BRI Action Plan include policy coordination, connectivity, unimpeded trade, financial integration, and people-to-people relations. While the 2015 Forum on China-Africa Cooperation (FOCAC) extensively deliberated on infrastructure cooperation between the two parties in the context of the Agenda 2063, it never mentioned the BRI as African countries were still yet to sign up to the initiative. South Africa was the first African country to sign up to the BRI in December 2015 when Beijing and Pretoria committed to exploring complementary strategic programmes under the initiative (All Africa, 2015). To date, the BRI has been endorsed by 48 countries in Africa and the African Union Commission (AUC) who have signed Memorandums of Understanding (MoUs) with China (Nedopil, 2022a). Globally, a total of 145 countries have joined the BRI representing the largest infrastructure programme in history. In some ways, in the context of the China-Africa relationship, the BRI is akin to a child named 2 years after its birth. The cooperation between the two parties was already dominated by trade and connectivity enhancing infrastructure projects prior to the beginning of BRI formalisation through MoUs across Africa from 2015 onwards. Upon the adoption of the BRI in China, Chinese-backed investment in major infrastructure projects such as railways, roads, dams, power plants, gas and oil pipelines, ports and communication networks among others saw a significant uptick across the continent. This was reflected in the intensification of financial relations between China and Africa following the launch of the BRI. In the first 6 years of the BRI between 2013 and 2019, Chinese foreign direct investment (FDI) inflow to Africa averaged US$3.45 billion per year which was almost double the average of US$1.76 billion in the years between 2003 and 2012. The Chinese FDI stock in Africa averaged US$38.12 billion between 2013 and 2019 which was a sharp increase from an average of US$7.8 billion between 2003 and 2012. The BRI also coincided with a period of significant increase in Chinese credit to Africa. The period 2013–2019 saw China make loan commitments of US$99 billion averaging US$14 billion dollars a year. This represented an 80% increase from US$55 billion in the first 12 years of the 21st century (China-Africa Research Initiative, 2021). On specific BRI investments and engagements from China, Africa has received its fair share. According to the International Institute of Green Finance (IIGF), from 2013

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to 2021, Africa has received an average of US$22 billion per year (Nedopil, 2022b). Sub-Saharan Africa got 19% of total BRI investment in 2021 up from 15% in 2020. In line with the BRI’s Maritime Silk Road of the 21st Century, Chinese state-­ owned enterprises (SOEs) have invested heavily in a string of ports along the African coastline. The number of ports attracting Chinese investment increased from just two in 1997 to 13 in 2013 before reaching 24 in 2017. The amount invested in port infrastructure increased from under a billion dollars in 1997 to US$2 billion in 2013 reaching over US$3 billion in 2017 (Yang et al., 2020). Port infrastructure is crucial for Africa’s economic development considering that 90% of Africa export and imports goes through the sea (Table 1). Under the BRI umbrella, China has undertaken numerous major infrastructure projects in the railroad sector. These include the US$3.2 billion Mombasa-Nairobi railway in Kenya, US$1.5 billion Lagos-Ibadan railway in Nigeria, the US$4.2 billion Addis Ababa-Djibouti railway and the US$1.83 billion Benguela railway in Angola. All the railway projects were funded to various degrees, as much as 90% in the case of Kenya, by the Chinese policy bank, the Export-Import Bank of China (Exim Bank). The contractors were also Chinese SOEs such as the China Railway Construction Company (CRCC) and the CRBC. Some of the biggest BRI projects in the energy sector include the US$1.4 billion Karuma hydropower station in Uganda and the US$500 million Memvele hydropower plant in Cameroon (Dollar, 2019). According to the ICA (2018), China was responsible for 25% of Africa’s Table 1  Chinese investment in African ports since 2013 Investor China State Construction (CSC) CSC

Country Algeria Djibouti

Port name Cherchell Port Doraleh Port

China Harbour Engineering Company (CHEC) CHEC CHEC

Ivory Coast

Abidjan Port

Madagascar Ghana

Tamative Port Tema Port

CHEC

Guinea

Conakry Port

CHEC CHEC

Mozambique Tanzania

CHEC

Sao Tome and Principe Kenya

Maputo Port Dar es Salaam Port Deep water port Lamu Port

Gabon

Gentil Port

China Road and Bridge Corporation (CRBC) CRBC CRBC

Republic of Congo Pointe Noire Port

Source: Adapted from Yang et al. (2020)

Year Amount 2016 US$3.3 billion 2014 US$421.7 million 2013 US$933 million 2015 US$1 billion 2016 US$476 million 2016 US$770 million 2016 US$1 billion 2017 US$154 million 2015 US$800 million 2013 US$484 million 2013 US$663 million 2016 US$2.3 billion

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infrastructure funding commitments in 2018 which saw the Asian giant committing US$25.7 billion across water, ICT, energy, and transport sectors. A White Paper released by China’s State Council (2021), between 2000–2020 China constructed and funded more than 13,000 km of roads and railways, over 80 large-scale power plants and 130 medical facilities. While some of these projects came before the announcement of the BRI in 2013, they are consistent with the fundamental aims of the programme which include facilitating connectivity and creating trade channels. The advent of the COVID-19 pandemic has seen an emerging emphasis on the Health Silk Road (HSR) and Digital Silk Road (DSR) dimensions of the BRI. The pandemic has exposed the need for robust health systems in Africa. In that regard, the Chinese President Xi declared that improving Africa’s health infrastructure ‘must be our top priority’ at the 2020 World Health Assembly. Among the notable commitments the Chinese leader made include speeding up the construction of the Africa Center for Diseases Control and Prevention (Africa CDC) headquarters, US$2 billion aid to fight the pandemic and making the COVID-19 vaccines a global public good (Xinhuanet, 2020). At the Extraordinary China-Africa Summit on Solidarity Against COVID-19 on 17 June 2020, President Xi doubled down on his commitment to cooperating with Africa in combatting the COVID-19 and future pandemics. Chinese vaccines have now been registered in 46 African countries and more than 100 million of vaccines from China have been delivered in Africa through sales and donations. At the FOCAC 2021 Summit, China committed to providing one billion vaccines to Africa to help its fight against the pandemic. In the DSR, Chinese companies such as Huawei and ZTE have been making inroads in the African market. Huawei has built 70% of Africa’s 4G networks. The company also has 14% of mobile vendor market coming third after Samsung and Apple. ZTE has been operating in Africa for over 20 years and is a telecom vendor to 140 network carriers in Africa including MTN, Airtel and Orange. Through the DSR, China will shape Africa’s digital economy and digital technology standards. However, the BRI has been criticised on several fronts. A widely criticised aspect of the BRI is its one-stop shop financing model in which the creditor, insurer and contract are all Chinese which is characterised by opacity and lack of due diligence in assessing the economic, environmental and social risks involved (Carrai, 2021; Greiger, 2021). The absence of due diligence in the economic assessment of the infrastructure projects has resulted in some major projects such as the high-speed railways in Kenya and Djibouti operating at a loss (Skidmore, 2022). Moreover, the lack of robust environmental and social assessments has led to accusations of the BRI perpetuating environmental degradation and human rights violations in Africa (Shinn, 2016). Tawiah et  al. (2021) found that China’s construction activities in Africa significantly contributed to Carbon dioxide emission and pollution. In countries such as Zambia and Kenya, the lax environmental and human rights standards in Chinese projects have led to clashes with civil society groups and in some cases the abandonment of projects (Skidmore, 2022). Some scholars have argued that China’s investments in ports and connectivity projects serve its economic interests more than Africa’s. Lokanathan (2020) the ports and the railroads are designed and located to enable the transportation of raw materials such as phosphate, oil, coal,

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cocoa, iron ore, granite and marble rocks from Africa’s hinterland to China while also moving Chinese products and labour to Africa. Further, large infrastructure projects especially in the rail sector become outlets for Chinese companies to export overcapacity especially in the cement and steel sectors which is one of the critical aims of the BRI. Besides exporting overcapacity, the BRI is also exporting Chinese standards in rail and digital technology which is a crucial element of its ‘Going Out’ strategy. The Chinese believe that creating technology standards is more advantageous as it creates dependency on and demand for Chinese technology (Cai, 2017). While this is good for China, it is bad for Africa because dependency on China’s technology will exacerbate the imbalance in its relationship with Beijing which will gain disproportionate leverage. Moreover, China’s lending practices in the BRI projects have been criticised of evading debt sustainability analysis leaving a number of African countries such as Zambia and Djibouti in debt distress (Bandiera & Tsiropoulos, 2019; Dollar, 2019). The negative impact of BRI projects on the debt sustainability of African countries places their sovereignty at risk (Maasho, 2018; The Economic Times, 2021). However, other studies have downplayed the debt-trap lens attached to BRI projects in Africa arguing that only 20% of Africa’s external debt is owed to the Chinese government (Risberg, 2019). A balanced analysis by Adeniran et al. (2021) noted that while Chinese projects do have negative effects such as environmental pollution and undermining the growth of the manufacturing sector in Africa, they also have a positive impact by improving welfare, opening trade channels, economic growth and transferring technology. For example, the Chinese-funded Mombasa-Nairobi railway in Kenya is reported to have increased passenger numbers by over 150% and annual cargo capacity by over 400%. Travel time for passengers has been reduced from 10 hours to 4 hours while that for cargo has been reduced to 8 hours meaning that more people and more goods can be moved faster and cheaper (Adeniran et al., 2021). Consequently, despite the risks that come with Chinese loans and projects, African countries have shown preference for dealing with Chinese lenders to western lenders (Shepard, 2019). Maru (2019) argues that China has become a preferred development partner for African leaders because of the lack of stringent conditions that accompany their loans and the quick turnaround of their infrastructure projects. While China is more popular among African leaders, it comes second to the US in the grassroots level. National surveys of 18 African countries done by Afrobarometer showed that 23% of the perceived China as a positive influence compared to 32% who perceived the US as a positive influence (Afrobarometer, 2020). Although the US development model and influence is still ahead of China in the continent, China is narrowing the gap through its BRI activities. China’s growing popularity in Africa has the West worried of losing its strategic footing in the continent to Beijing. To challenge China’s advance in Africa, the US and its allies have put together a rival infrastructure programme.

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4 BRI Alternatives: The Foreshadow of Build Back Better World (B3W) The B3W itself is a consolidation of previous infrastructure programmes separately pursued by some G7 countries apparently challenging China’s BRI. Japan, China’s main rival in Asia, has been actively courting Africa through infrastructure investment programmes in a bid to counter China’s influence in the region (Nkala, 2021). For the first time since its inception in 1993, the triannual Tokyo International Conference on African Development (TICAD) was held in Africa in 2016. At the gathering, the then Japanese Prime Minister, Shinzo Abe, promised US$10 billion of investment in quality infrastructure in Africa and US$20 billion investment in the African private sector. In the previous year, China had announced a US$60 billion financial assistance package in its own TICAD equivalent, the FOCAC. PM Abe said in his 2016 speech that ‘Japan bears the responsibility of fostering the confluence of the Pacific and Indian Oceans and of Asia and Africa into a place that values freedom, the rule of law, and the market economy free from force or coercion’ (Ministry of Foreign Affairs Japan, 2016). Japan’s Connectivity Initiative has seen the country invest hundreds of millions of dollars in port infrastructure in Mozambique, Kenya, and Madagascar (Nkala, 2021). In some cases, its infrastructure projects were implemented in parallel with Chinese projects. In 2017, Japan partnered with India in the Asia-Africa Growth Corridor strategy whose core priorities included the development of quality infrastructure. However, the AAGC seems to have been shelved by both countries as it has not been followed by any concrete action. Since the launch of the BRI, China’s main protagonist, the US has increasingly channeled more attention to infrastructure in its foreign policy. In 2013, the same year the BRI was announced, the former US President Barack Obama announced the Power Africa initiative which aimed to add 30,000 MW of clean power to Africa’s generation capacity and connect 60 million businesses and homes to electricity by 2030. The US rolled out programmes such as the Infrastructure Transaction and Assistance Network (ITAN) in 2018 and the Transaction Advisory Fund (TAF) in 2019. The ITAN and the TAF sought to attract private sector investment in developing countries by providing project preparation services, commercial advocacy, strengthening infrastructure governance frameworks, and assessing the environmental and financial impacts of infrastructure projects. This is meant to make US-backed infrastructure projects more competitive and attractive relative to BRI projects which have been criticised for neglecting environmental, governance and financial standards. To expedite its infrastructure investment abroad, the US has also reformed its development finance institutions. The reform efforts saw the creation of the US International Development Finance Corporation (DFC) which is an amalgamation of the Overseas Private Investment Corporation (OPIC) and the USAID Development Credit Authority (DCA). The DFC is endowed with US$60 billion war chest which is more than double that of the OPIC and DCA combined (US Department of State, 2019). The new agency can make equity investments and support feasibility studies for projects that are in line with the US foreign policy. The DFC has the mandate to

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provide loans, guarantees and political risk insurance for projects that adhere to the principles of quality infrastructure. The US partnered with Japan and Australia to found the Blue Dot Network (BDN) initiative in 2019 which is a global coalition of governments, businesses and civil society to provide globally recognised certification for infrastructure projects that adhere to international best practice. Such a seal of approval would attract private sector capital to approved projects including those in Africa (Greiger, 2021). The UK and the EU have also courted Africa through initiatives such as the Clean Green Initiative (CGI) and the Global Gateway respectively (McBain, 2022; European Council, 2022). These initiatives will see the two parties investing in Africa’s infrastructure in different sectors.

5 The Build Back Better World (B3W) In June 2021, the Group of 7 (G7) comprising Italy, United Kingdom, Germany, Canada, France, Japan and the US released a Communique proposing a global infrastructure programme known as the Build Back Better World (B3W) echoing the US President Joe Biden’s 2020 election campaign slogan. The B3W, which identifies Africa as one of its focus areas, came at a time when western funding and aid in Africa had been drastically reduced compared to that of China. As Fig.  1 shows, between 2007 and 2020 Chinese policy banks, the China’s Exim Bank and the China Development Bank (CDB) were the source of a total of Amount (US$bn) 25 20

20.1

15 10 5 4.5 0

2.9

2.4

1.9

1.7

1.5

1.2

1.1

0.9

Source: Center for Global Development

Fig. 1  Sources of infrastructure investment in Africa between 2007 and 2020. (Source: Center for Global Development)

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US$23 billion in infrastructure funding in Africa compared to US$10.7 billion from western financial institutions. According to the ICA report (2018), in the 5 years between 2014 and 2018, China committed an average of US$15.1 billion in infrastructure funding in Africa compared to US$8.58 billion from other bilateral and multilateral partners. As such, in the first two decades of the 21st century, China emphatically replaced the West as Africa’s major development partner. In return, China has gained geopolitical ground in Africa with 54 out of 55 countries supporting Beijing’s One China Policy. More African heads of state attend the FOCAC Summit more than they attend the UN General Assembly meetings. Moreover, Africa has sided with China on critical issues such as digital technology, COVID-19 origins research, Hong Kong protests and human rights issues in Tibet and Xinjiang against western preferences (Sun, 2014; Yinsheng, 2021; Clemencot, 2019). To restore their geopolitical influence in Africa and other regions, the US and its western allies have devised the B3W global infrastructure rollout programme that seemingly rivals China’s BRI. In his maiden foreign policy speech in February 2021, the US President Joe Biden vowed to confront China’s ambition to rival the US leadership. He further declared that his administration will ‘confront China’s economic abuses; counter its aggressive, coercive action; to push back on China’s attack on human rights, intellectual property, and global governance’ (The White House, 2021). He adopted the previous administration’s view on China as a strategic competitor and threat to US-led global order representing a repressive vision of the international order (US Department of State, 2019). The former US Secretary of State Rex Tillerson warned that Chinese loans and aid to Africa could undermine African countries’ sovereignty doubling down on the narrative casting China’s presence in Africa as harboring colonial ambitions (Crabtree, 2018). Tillerson’s views on China in Africa were similar to those expressed by one of his immediate predecessors, Hillary Clinton, on her visit to Zambia in 2011 who labelled China’s activities in Africa as representing new colonialism (Reuters, 2011). The B3W programme is self-described as a ‘values-driven vision of infrastructure development, implementation, and maintenance carried out in a transparent and financially, environmentally and socially sustainable manner’ (G7, 2021: 24). It seeks to narrow the US$40 trillion infrastructure gap in middle and low-income countries (Greiger, 2021). The B3W proponents claim to adhere to the values of freedom, democracy, equality, rule of law and human rights. By so doing, the B3W sets itself as an alternative to China’s BRI which the West has accused of lacking transparency, promoting corruption and exporting authoritarianism (Widakuswara, 2021). According to the Communique, the G7 intends to ‘develop a new partnership to build back better for the world, through a step change in our approach to investment for infrastructure’. Further the Group resolved to strike ‘a new deal with Africa including by magnifying support from the International Monetary Fund for countries most in need to support our aim to reach a total global ambition of $100 billion’ (G7, 2021: 2). Among the priorities of the B3W include combatting the COVID-19 pandemic that brought the world to a standstill at the beginning of 2020, post-pandemic economic recovery, ensuring free and fair trade, global digital cooperation,

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technological innovation and green growth through climate-resilient infrastructure, and gender equality. Infrastructure investment in energy, transport, agriculture and industrial sectors will be underpinned by the transition towards a Net Zero economy and climate resilience principles. The G7 commits to mobilising and deploying all sources including private, public, national and multilateral towards technologies and infrastructure that will reverse climate change. The B3W backs the developed country pledge to raise US$100 billion per year through 2025 to finance climate resilient infrastructure in developing countries. The B3W promises to mobilise multilateral development banks (MDBs), development finance institutions (DFIs) and private capital and developing disaster risk finance markets to encourage green infrastructure investment in developing countries. The development of a global green finance market will help mobilise and incentivise the private sector to avail trillions of dollars in climate finance in emerging markets. Unlike the BRI, the B3W infrastructure programme is based on a market-led financing strategy that will see private sector finance playing an important role. The programme lays emphasis on strong standards for infrastructure investment around the environmental, social, financial, labour, governance and transparency aspects as part of the principles for quality infrastructure. Lending practices are to be fair, efficient, transparent, competitive and in line with debt sustainability. China has been accused of debt-trap diplomacy and opaque lending practices that have caused debt distress in recipient countries (Gopaldas, 2018). Importantly, the G7 Communique, claims that Africa is the central focus of their new strategic approach under the B3W. This will pave way for a new partnership with Africa where African states, institutions and expertise will play a central role. Western countries and institutions have been criticised before for imposing stringent conditions on development finance that is sent to Africa and paying little attention to their African partners needs and policies (Brown, 2013). To encourage economic recovery and growth, the G7 committed to investing US$80 billion in Africa’s private sector through 2026. The G7 will work with MDBs in mobilising more private finance for Africa through developing and supporting risk-­sharing instruments among other ways. Hence, while the B3W is a global programme, it will have important implications for Africa. Notwithstanding its potential, the B3W is still just a statement of intention with no concrete details on its implementation. Unlike the BRI that is sponsored and implemented by China, the B3W involves multiple countries and other non-state actors who must coordinate their actions for the programme to be successful. It will depend on the coordination of countries whose perspectives and policies towards both China and Africa differ. Countries such as Japan and Germany whose economies are more intertwined with that of China have a lot to lose by engaging in full blown hostilities against China. Unlike the US, they would prefer a moderated approach to China. The BRI is a one-stop shop with the Chinese government in control of decision-making. Most importantly, the funding from the BRI also comes from Chinese policy banks such as the China’s Exim Bank and the CDB and the Chinese-controlled Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund. This makes the disbursement of funds for projects faster and more convenient. The fact that most of the contractors are Chinese state companies, also

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accelerates the execution of the projects. The B3W on the other hand will depend on the cooperation of a private sector that is highly risk-averse when it comes to investing in Africa. Convincing the private sector to fund infrastructure projects in Africa is going to be an uphill task. The private sector will be attracted to projects with mostly high and short-term returns but limited development impact while shunning those with low and long-term returns but high development impact. Thus, the priorities of private capital may not be consistent with the priorities of African governments. Moreover, the US DFC, which is the equivalent of the CDB or Exim Bank in China, is comparatively chronically underfunded. The DFC’s capital has been limited to US$60 billion compared to the hundreds of billions the Chinese policy banks have at their disposal. Even then, the DFC is subject to onerous legislative and governmental controls on how it deploys its funds. As such, Africa must refrain from counting the B3W eggs before they hatch. Further, the B3W seems to have forgotten nothing and learnt nothing from the history of western investments in Africa. One of the main reasons African countries prefer Chinese funding to western funding is the latter’s stringent conditions and insistence on a set of political values. The B3W statement lays emphasis on democratic values and governance credentials. Most African leaders view such insistence as tantamount to interfering in internal affairs and undermining the sovereignty of their states. This also means that the B3W will only deal with countries that are judged to meet the required democratic and governance standards thus discriminating against those judged otherwise. The likelihood is high that the majority of African countries, already considered undemocratic by the Freedom House, will avoid applying for projects under the B3W. One of the BRI’s most attractive selling points has been China’s trademark indifference to the BRI countries’ political systems and values and its refrain from imposing its values on other countries. This has seen more and more countries signing up to the BRI in Africa. Thus, the B3W might be rendered unpopular in Africa if its proponents attached political reforms as part of conditions for infrastructure deals.

6 BRI and B3W Implications for Africa: Competition and Complementarity The world is witnessing the geo-politicisation of the US$40 trillion global infrastructure funding gap which is affecting mostly developing countries. With an annual infrastructure funding gap of between US$67–1107 billion, Africa is in the thick of the politics of global infrastructure investment. China and the US, the world’s two biggest economies have unveiled the BRI and B3W programmes respectively, to address the infrastructure funding needs of developing countries. The two programmes are anchored on different value systems and centred on different visions for the future of the international order. While China has emphasised sovereignty, non-interference in internal affairs and mutual benefit, the US and its

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allies have emphasised democracy, good governance, and openness among other things. Launched by China in 2013, the BRI is already in full swing in Africa with 49 out of 55 countries in the continent having signed on. The B3W on the other hand, was only launched in 2021, 8 years after the launch of the BRI. It explicitly courts Africa in a ‘new deal’ that will help meet the continent’s infrastructure needs while prioritising human rights and sustainability. It has been widely interpreted as the West’s response to China’s BRI which the former views as Beijing’s way of exporting its values that undermine the rules-based international order (US Department of State, 2019; Cai, 2017; Carrai, 2021). The competition between the BRI and the B3W is almost a zero-sum game with no middle ground and Africa may find it hard to escape from being caught in between. It is a contest for supremacy between two economic models: China’s state capitalism on the one hand and the West’s free market system. China’s state capitalism which is dominated by state-owned enterprises and banks which do not operate according to market principles pose a serious threat to the global dominance of the West’s market-disciplined corporations (D’Aveni, 2012). One telling indicator is the sharp increase of the number of Chinese companies in the Fortune Global 500 Companies from a mere 10 in 2000 to 124 in 2020. The number of US companies declined from 179 in 2000 to 124 in 2020 (Kennedy, 2020). Through the BRI, China is expanding the global market for its state-owned companies thus further threatening western corporates’ dominance. Moreover, the BRI is a showcase of the Chinese economic and political system to the developing countries in Africa where the West’s democratic and capitalist model has held sway. This means that the coming of the BRI has the potential to erode the West’s soft power in Africa which has been vital to its relations with the continent. Thus, the BRI is more than just an infrastructure programme, it is a serious bid to replace one world view with another. The West is not taking this challenge lying down and the B3W is its way of maintaining its hegemony which has brought it so much power and wealth. African countries may find themselves in the dilemma of having to choose between the B3W and the BRI. Nowhere is the competition between the US-led West and China as intense as it is in the technology sector, especially digital technology. The digital sector is the next frontier of global accumulation. According to the World Bank (2020), the digital economy makes 15.5% of the global GDP and has been growing two and a half times faster than the global GDP in the last 15 years. China and the US are already engaged in an intense battle for supremacy in digital technology, especially in setting tech standards. The US-China tussle over tech standard-setting is likely to lead to the bifurcation of global technology standards. Both the US and China view tech standards as important to their national security and economic competitiveness which makes the issue a zero-sum one, raising the stakes even higher (Nye, 2021; Park, 2022). In 2019, the US banned the Chinese world leading telecoms company Huawei and its 5G technology arguing that it posed a national security threat because of its close association with China’s ruling party, the Communist Party of China (CPC). The US went on to cajole Europe to ban Huawei’s supply of 5G technology in European markets because it compromised trans-Atlantic security (Emmott, 2019; Keane, 2019). The UK government is reported to have told Huawei

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that their ban in the UK was a result of geopolitical factors (Helm, 2020). A US government official was quoted warning South Africa against employing Huawei technology saying that ‘Huawei has been involved in numerous cases regarding theft of intellectual property, bribery and other crimes’ (Fabricius, 2020). The US has also restricted the export of chips to Chinese companies while also encouraging Taiwan, the world’s leading chip maker, to curb its exports to Chinese companies (Olcott, 2021). Digital technology is a critical aspect of the B3W and the BRI. The competition will be just as intense in Africa which has a market of 1.3 billion people and where digital penetration is expanding. With both the US and China dangling the carrot of infrastructure funding, African countries will be forced to choose between the two programmes. It is important that Africa distances itself from the geopolitical dynamics at the centre of the BRI and the B3W and pursue a non-aligned path engaging each programme based on its merits and consistency with Africa’s interests. While it remains to be seen how the B3W will unfold, it represents an opportunity for Africa to narrow its infrastructure gap despite the history of western involvement in infrastructure investment in Africa. The G7 countries have a combined Gross Domestic Product (GDP) that makes up 45% of the global economy which means that they have the resources, at least potentially, to fund the B3W (Eyita-Okon & Nkala, 2021). According to Lakmeeharan et al. (2020) from McKinsey and Global, there are international investors with as much as US$550 billion in potential funding that are interested in taking on infrastructure projects in Africa. About 53%  – almost US$300 billion – of these funds are held by investors in four G7 countries, namely the US, France, the UK, and Japan. While China boasts 18.3% of the global GDP, it cannot foot all of Africa’s funding needs. The COVID-19 pandemic has already seen a drastic decline in BRI investments by over 50% (Nedopil, 2022b). Africa and other developing countries will need other sources of investment to complement China’s investments. The B3W can be an effective complement to the BRI if geopolitics is not allowed to get in the way. Moreover, now that the BRI has evolved the BRI 2.0 which incorporates the principles of quality infrastructure into its model, western capital may be injected into BRI projects as well. The B3W and its complementary programmes such as the BDN could help unlock these funds which are mostly from the private sector through investment in project preparation, feasibility studies, contract negotiations and regulatory design in African countries. Lakmeeharan et al. (2020) showed in their report that about 90% of infrastructure projects in Africa do not reach financial close because of weaknesses in selecting projects, feasibility studies, securing guarantees and finalising technical design. The B3W is offering to assist with project preparations that could help crowd in private sector finance in African infrastructure projects. Moreover, the incorporation of environmental and social assessments into infrastructure financing will only benefit African countries and also help in mobilising private capital. China’s BRI has suffered setbacks in some projects in Kenya because of the lack of adequate social and environmental impact assessments (Skidmore, 2022). Such assessments could also benefit BRI projects by making them more sustainable and effective in their development impact. This is especially so

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considering that the BRI has since evolved into the so-called BRI 2.0 which takes the long term environmental and social impact of the BRI projects into full account (Jiahan, 2019). While the insistence on sustainability assessments may add to the cost and hamper project preparation where African countries do not have their own financial and human resources, it will improve the bankability and long-term value of the infrastructure projects. Unlike the BRI which has mostly focused on tangible brick and mortar projects such as railroads, highways and power plants, the B3W incorporates intangible aspects of development such as health, biodiversity, gender equality and education which are no less important for Africa’s development (Crystal, 2021). Good governance, accountability, transparency and upholding human rights are some of the core priorities of the B3W.  For example, the B3W’s pledge of US$2.75 billion investment that will send 40 million girls to school will boost Africa’s quest to narrow gender inequalities and eradicate poverty. Preserving and protecting Africa’s biodiversity which is under serious threat is crucial to maintaining the continent’s development gains. Natural capital supports millions of people’s livelihoods, regulates climate and curbs disease pandemics and its conservation will be crucial in realising the 2030 Sustainable Development Goals in Africa (Dorsouma, 2020). Hence, without directly challenging the BRI in its core areas of physical infrastructure, the B3W can play an important complementary role to the BRI.

7 Conclusion The BRI and the B3W offer opportunities for Africa to narrow its infrastructure gap. The BRI has financed large-scale infrastructure projects across the continent in energy, transport, communication, and water among other sectors worth billions of dollars. It has secured overwhelming endorsement in Africa with 49 of the continent’s 54 countries signing up. However, the BRI has been criticised for undermining debt sustainability, jeopardising sovereignty, violating human rights and environmental standards. The B3W has come in as an alternative to the promising US$100 billion per year in infrastructure to Africa and other countries. The initiative attempts to distinguish itself from the BRI by prioritising transparency, accountability, debt sustainability, environmental and social impact in their investment model. Moreover, the B3W follows a market-led investment model with the private sector set to play an important role while the BRI is mostly state-led with state banks and enterprises funding and executing projects. However, the B3W does not yet have a concrete plan and it is still too early to say whether it will be able to match the BRI funding. Further the B3W and BRI will operate in the context of an intense geopolitical competition between China and the West. Both programmes represent incompatible economic and political models which might see African countries having to choose between the two. Nonetheless, it is important that Africa distances itself from the geopolitical dynamics and engage each initiative on its merits. The B3W and the BRI can potentially complement each other by focusing on different

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competencies. Africa will have to be proactive and ensure that investments from both the BRI and B3W serve its development interests rather than furthering the great powers’ geopolitical agendas.

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