What China Is Really Up To In Africa

[Ubiquitous]

Africa has become the fastest urbanizing region of the world, with
rural migrants moving into cities a clip that has even surpassed that
of China and India, as the continent becomes one of the final frontiers
of the forth industrial revolution. This rapid transition presents big
challenges but also offers big rewards for countries willing to risk
billions in an infrastructure building revolution unlike anything the
world has seen before – and no country has answered Africa’s call quite
like China.

By 2050, Africa’s 1.1 billion person population is slated to double,
with 80% of this growth happening in cities, bringing the continent’s
urban headcount up to more than 1.3 billion. The population of Lagos
alone is growing by 77 people per hour. According to McKinsey, by 2025
more than 100 cities in Africa will contain over a million people.

With this breakneck pace of urbanization comes many unprecedented
economic opportunities. The IMF recently declared Africa the world’s
second-fastest growing region, and many are predicting that it is well
on its way to becoming a $5 trillion economy, as household consumption
is expected to increase at a 3.8% yearly clip to $2.1 trillion by 2025.
The attention of the world is now drifting towards Africa, with
comparisons to 1990s-era China are no longer coming off as radical
projections.

China has likewise become a central player in Africa’s urbanization
push, as a huge percentage of the continent’s infrastructure
initiatives are being driven by Chinese companies and/or backed by
Chinese funding.

“Right now you could say that any big project in African cities that is
higher than three floors or roads that are longer than three kilometers
are most likely being built and engineered by the Chinese. It is
ubiquitous,” spoke Daan Roggeveen, the founder of MORE Architecture and
author of many works on urbanization in China and Africa.

Even before the Belt and Road was formally announced in 2013, China was
making major strides into Africa’s urban development sphere. When the
Communist Party of China first came to power in 1949, it was virtually
completely unrecognized by pretty much every other country in the world
— most of whom favored the Republic of China, the former government
that the Red Army chased away to Taiwan. But China began lobbying
Africa extensively, getting the People’s Republic recognized one
country at a time. Before long, these political commitments were being
repaid in concrete and steel, as China started building railroads,
hospitals, universities, and stadiums throughout the continent.
However, there were other reasons for China’s early partnerships with
Africa: even though the colonial powers were largely gone or on the way
out, the continent was still the same stockpile of natural resources
it’s always been, and China wasted no time stepping into the power
vacuum, laying the political and economic inroads that have given
Beijing the advanced position it has there today.

China is now Africa’s biggest trade partner, with Sino-African trade
topping $200 billion per year. According to McKinsey, over 10,000
Chinese-owned firms are currently operating throughout the African
continent, and the value of Chinese business there since 2005 amounts
to more than $2 trillion, with $300 billion in investment currently on
the table. Africa has also eclipsed Asia as the largest market for
China’s overseas construction contracts. To keep this momentum
building, Beijing recently announced a $1 billion Belt and Road Africa
infrastructure development fund and, in 2018, a whopping $60 billion
African aid package, so expect Africa to continuing swaying to the east
as economic ties with China become more numerous and robust.

Nothing without infrastructure
As Chinese President Xi Jinping once pointed out, “Inadequate
infrastructure is believed to be the biggest bottleneck to Africa’s
development.” Collectively, the countries of Africa would need to spend
$130-170 billion per year to meet their infrastructure needs, but,
according to the African Development Bank, they are coming up $68-$108
billion short. Closing Africa’s infrastructure gap has been the
obsession of multiple waves of colonists, and China is the next in line
to reach into the heart of the continent with railroads, highways, and
airports.

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

Infrastructure is what Africa needs most and infrastructure is what
China is most equipped to provide. It is not lost on many African
leaders that hardly 30 years ago China was in a similar place that they
are now — a backwater country whose economy made up hardly two percent
of global GDP. But over the past few decades China shocked the world in
the way that it used infrastructure to propel economic growth, creating
a high-speed rail network that now tops 29,000 kilometers, paving over
100,000 kilometers of new expressways, constructing over 100 new
airports, and building no less than 3,500 new urban areas — which
include 500 economic development zones and 1,000 city-level
developments. Over this period of time, China’s GDP has grown more than
10-fold, ranking #2 in the world today.

It is precisely this kind of infrastructure-induced economic growth
that Africa is looking for right now, and many African leaders are
looking to China to bring their experience to their countries. The
central players in many of Africa’s biggest ticket infrastructure
projects — including the $12 billion Coastal Railway in Nigeria, the
$4.5 billion Addis Ababa–Djibouti Railway, and the $11 billion megaport
and economic zone at Bagamoyo — are being developed via Chinese
partnerships.

Since 2011, China has been the biggest player in Africa’s
infrastructure boom, claiming a 40% share that continues to rise.
Meanwhile, the shares of other players are falling precipitously:
Europe declined from 44% to 34%, while the presence of US contractors
fell from 24% to just 6.7%.

“The Chinese SOEs they are really taking over the market of
infrastructure projects in Africa. It's true to say that everywhere you
go in East Africa you see Chinese construction teams,” said Zhengli
Huang, a research associate at the University of Sheffield who has
carried out extensive case studies on urbanization in Nairobi.

The reasons for this ubiquitous presence are rather straight forward,
as Roggeveen points out: many African contractors simply don't have the
capacity for major development projects, “so if you want to do large-
scale construction you either turn to a western firm or to a Chinese
firm, but the Chinese firm is always able to undercut you on price.”

Debt trap?
When we look at Africa, we see many countries chasing dreams of a
better economic future while burying themselves in massive amounts of
infrastructure-induced debt that they may not be able to actually
afford. There have already been warning signs: the $4 Addis Ababa-
Djibouti Railway ended up costing Ethiopia nearly a quarter of it’s
total 2016 budget, Nigeria had to renegotiate a deal with their Chinese
contractor due to their failure to pay, and Kenya’s 80% Chinese-
financed railway from Mombasa to Nairobi has already gone four times
over budget, costing the country upwards of 6% of it’s GDP. In 2012,
the IMF found that China owned 15% of Africa’s external debt, and
hardly three years later roughly two-thirds of all new loans were
coming from China. This has some analysts issuing warnings about debt
traps – with some even going as far as calling what China is doing a
new form colonialism.

What does China get out of this?
China needs what Africa has for long-term economic and political
stability. Over a third of China's oil comes from Africa, as does 20%
of the country’s cotton. Africa has roughly half of the world’s stock
of manganese, an essential ingredient for steel production, and the
Democratic Republic of the Congo on its own possesses half of the
planet’s cobalt. Africa also has significant amounts of coltan, which
is needed for electronics, as well as half of the world’s known supply
of carbonatites, a rock formation that’s the primary source of rare
earths.

However, there is a common misconception that all Chinese projects in
Africa have the backing of Beijing. More often than not, Chinese SOEs
are operating in Africa on purely for-profit ventures that don’t have
the ambitions of their government in mind. However, it can be difficult
to separate China’s commercial intentions in Africa from the strategic,
as, in many cases, the two inevitably overlap. The internationalization
of Chinese construction firms and IT companies as well as the building
of infrastructure to better extract and export African resources, are
key concerns for Beijing. So while the infrastructure being built on
the ground may not necessarily be orchestrated by Beijing it does
ultimately play into China’s broader geo-economic interests.

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Let's go Brandon!