Blog Post #6- Foreign Investment in Sub-Saharan Africa: A Look at China's Belt and Road Initiative

Foreign Investment in Sub-Saharan Africa: A Look at China's Belt and Road Initiative

Introduction:

In this blog post, although this blog is primarily about Southern Africa, I will cover China's investment in Sub-Saharan Africa as a whole. Although some of the highest levels of investment do occur in Southern Africa, I would like to cover cases outside of the scope of my previous posts. It would be impossible to write a blog on development and politics in Africa without dedicating at least one post to the massive increase in FDI by the Chinese government. These investments include massive infrastructure projects in transportation, energy, and natural resource mining in not only Southern African Countries but also in countries like Nigeria, Kenya, and Tunisia. Although I have not spent a significant amount of time exploring the investment taking place in Africa by China, I have studied China's Belt and Road initiative and its investment in its eastern provinces of Xinjiang and in South Asia. This topic has certainly been one of my favorites to dive into more as it correlates heavily with my studies within International Relations back home. This rise in investment has been highly controversial with some scholars seeing it as a form of neocolonialism and an attempt by China to exert soft power over the continent. However, there is also much literature that proposes a very different view, that Chinese investment on the continent is more successful than western attempts. So in this blog post, I will look at the situation objectively while giving background into China's Belt and Road initiative and unpacking potential motivations behind their sudden interest in the African continent.

The Financial Times 2017

What is the Belt and Road Initiative?:

The Belt and Road Initiative began as two separate initiatives to expand China's trading power. The first was to reestablish the historical Silk Road which connected China to Europe and the Middle East, and the second was the create a maritime "Silk Road" through the South China Sea and Indian Ocean. (Dollar 2019). However, these two efforts both with the goal of trade expansion, were consolidated into the current Belt and Road Initiative (BRI). Dollar says that the BRI, if implemented successfully, would enable China to "efficiently utilize excess savings and construction capacity, expand trade, consolidate economic and diplomatic relations with participating countries, and diversify China’s import of energy and other resources through economic corridors that circumvent routes that are controlled by the U.S. and its allies". (Ibid.). So there is clear motivation for China to begin investing in these projects all across Central Asia, South Asia, and Africa. The overarching goal for China is to build a "Community of Common Destiny for Mankind" which essentially connects the world economically, politically, security wise, to China. (Nantulya 2019). The critical first step to accomplishing this goal is to be physically connected to the rest of the world. Doing this would allow for China to have more control over supply chains and trade routes. A large part of China's economy is manufacturing, so becoming more vertically integrated would give China a massive advantage in multiple markets.

Belt and Road Network and Plans (Mercador Institute for China Studies 2018)

Development on the African Continent: 

Although Chinese-African relations had begun around 50 years ago as a push towards South to South development, this past decade has seen the relationship balloon and grow like never before. (Garcia-Herrero and Xu 2019). Just a few years ago in 2015 at the Forum of China-Africa Cooperation (FOCAO), President Xi Jinping pledged nearly 60 billion in investments to the continent and most recently in 2018, reiterated that pledge. (Sow 2018). These investments are primarily within transport and energy sectors as shown in Figure 1. Chinese investment is not only done through traditional FDI but also through project finance and mergers and acquisitions. (Garcia-Herrero and Xu 2019). China's project finance is probably the most significant. China is the largest financier of infrastructure projects in Africa, financing every 1 in 5 and constructing every 1 in 3. (Edinger and Labuschagne 2019). This primarily due to wanting to make China's material and oil investments more secure such as in the case of the Niger Delta region in Nigeria which has received major funding for railroads. (Sow 2018).

Figure 1: Chart of Chinese Investment in Africa by Sector (Brookings 2018)

Although this blogpost is primarily focused on development initiatives, its relation to water is still there. As I discussed in my previous post, China has been a key investor in hydropower and in the building of ports for trade in countries like Tanzania and Djibouti, both of which are key components of China's Maritime Silk Road. (Nantulya 2019). Although there are existing ports in many African cities, China's investment to build more opens up many regions to trade and makes imports of material used on infrastructure projects more manageable. China has also based their own navy around these ports, the first significant one being in Djibouti. (Ibid.). China's grand plan for their port system in Africa is to connect ports in Sudan, Mauritania, Senegal, Ghana, Nigeria, Gambia, Guinea, São Tomé and Príncipe, Cameroon, Angola, and Namibia. (Ibid.). A large part of these project investment strategies is to also be able to sustain all of the workers during the building process. However, because the continent's poor infrastructure, part of the project also focuses on clean water and sanitation. Energy, while mostly focused on oil and gas, is also centered around hydropower and other greener solutions. China has been one of the leading investors in clean energy, beating out the U.S by 3 to 1 in money spent. (Sow 2018.). Aside from the hydropower plants and dams being built on the Zambezi like I mentioned in my previous post, these sorts of projects are happening all over Africa such as the 2,600 MW Mambilla Hydropower Plant in Nigeria. (Risberg 2019). Water and sanitation are also a huge issue, so water treatment plants that are able to treat more than nine million tonnes of water have been built by Chinese enterprises. (Edinger and Labuschagne 2019).

Controversy:

Some might think that all of this investment seems too good to be true, especially considering the amount of lending China has done to economically volatile countries. And for the most part, those suspicions are validated. Many scholars are skeptical of these projects as it creates a notion of dependency that could be used to sway countries to act in China's favor. (Risberg 2019). This debt distress China has put on countries it is investing in creates a very sensitive relationship. The unsustainable levels of debt China has put on countries in Africa has seemed to force trade deals that are often one sided and clearly favor China. (Kleven 2019). These deals typically see China extracting resources in exchange for cheap finished goods that some economists say are undermining local markets as in the case of Kenyan cement. (Nantulya 2019). Many scholars have labeled this neo-colonialism, however some African leaders have spoken out against these claims as they believe that China is doing what no other country has been able to do which is consistently invest in Africa and see projects through. (Sow 2018.).