14 Sept 2015
Africa Welcomes Belt and Road but Still Cynical of Mainland Motives
- Photo: On track: Will Chinese and African interests align in the long-term? (The Media Club South Africa)
- Photo: Underdeveloped: Chinese funding is sought to boost African ports. (The Media Club South Africa)
- Photo: Can African exports find a place in the mainland consumer market? (The Media Club South Africa)
While many of the aims of China's Belt and Road Initiative are seen as broadly aligning with a number of projects already underway across much of Africa – notably Kenya's Vision 2030 – some need convincing of the mainland's true agenda.
Broadly speaking, China's Belt and Road Initiative could be seen as largely in line with Africa's own plans for economic growth. Infrastructure improvements, resource development, trade integration and improved funding structures have all been identified as priorities across the continent.
At the same time, improved access to Africa's lucrative market is very much a priority for the Chinese government. Chinese investment in Africa has risen sharply over the last 15 years. Overall, Africa has been seen as one of the few areas experiencing robust economic growth, with the continent seen as the new frontier for Chinese business since the early 2000s.
Back in 2014, Li Keqiang, the Chinese Premier, visited Kenya, Ethiopia, Nigeria and Angola. His mission was to pledge further Chinese investment to the continent, particularly with regard to infrastructure development. He also confirmed a US$2 billion boost for the China-Africa Development Fund, an initiative established to invest in Sino-African joint ventures.
During the course of his visit, Li predicted that Sino-African trade would double to $400 billion by 2020. In Kenya, he pledged support for a number of the flagship projects outlined as part of Kenya's Vision 2030 development plan. He also encouraged Chinese financial institutions and businesses to invest in Kenya, while promising to ensure Kenyan products enjoyed enhanced access to the Chinese market.
Overall, the Belt and Road Initiative is potentially hugely significant for many of Africa's economies. For many years, China's growth has been resource-intensive, heavily dependent on – and favourable to – Africa's extractive industries. China's economic development, though, is now seen as having entered a new phase.
Africa, the world's fastest-growing continent, has a combined population of one billion, with its constituent countries now emerging as potentially significant consumer markets for Chinese goods and services in the own right. For this trade to materialise, however, significant upgrades are required in the transport infrastructure of many of the target nations.
In terms of priorities, much of China's activity is currently focussed on the infrastructure and logistics challenges in East Africa, the region seen as the gateway for Chinese economic and political interests. In Kenya, China is playing a key role in the construction of the East Africa Railway. Initially, this will provide a fast freight transport link between the Indian Ocean port of Mombasa and Nairobi, the country's capital. Ultimately, the link will also extend to neighbouring Uganda, Rwanda, Burundi and South Sudan. China is also investing in upgrades to several African ports on both the east and west of the continent. This is in a bid to increase port capacity, while accelerating the interconnection and regional integration of East Africa.
According to a report published by the Forum on China-Africa Co-operation (FOCAC), Africa needs to spend $95 billion a year on new roads, railways, electricity and ports, but lacks dependable local funding sources for such initiatives. As part of the solution to this investment shortfall, the report also highlighted the importance of China's funding for Africa's power infrastructure, tourism and telecommunication sectors.
China's economic integration with Africa is also likely to take the form of offshore manufacturing, an inevitable consequence of China's bid to rebalance its economy. Rising cost pressures in China's domestic manufacturing industries are seen as likely to lead to production being relocated to Africa, as well as to other low-cost regions. Already, a number of Chinese companies are manufacturing textiles and certain FMCGs in Africa.
Sino-African economic relations may well come to be defined by this new model, as Africa needs to remedy the shortfall in its domestic manufacturing resources. Despite this perceived requirement, a number of analysts and policymakers are uneasy over China's growing economic neo-colonial position in Africa and its clearly self-interested agenda. Ultimately, China still has a lot of work to do if it is going to convince many in Africa of the mutual benefits of the Belt and Road Initiative.
Already the process of educating Africa as to the likely benefits has begun, with Hong Kong playing a key role as an emissary of mainland interests. Speaking in South Africa last month, Perry Fung, the Hong Kong Trade Development's Regional Director for the Middle East and Africa, referred to China's slowing economic growth and recent financial market volatility as "the new normal".
Fung, however, contrasted the mainland situation with Hong Kong's ability to maintain a firm hand on the financial rudder as the Chinese markets nosedived. Its global perception as a reliable, established financial and services centre may well see Hong Kong established as the financing platform for many of the countries embraced by the Belt and Road Initiative.
As part of the mainland initiative involves increased Chinese outward direct investment for the emerging markets, Fung was quick to suggest this would be mainly channelled via Hong Kong. He said: "Currently, 57% of the mainland's outbound investment goes to or via Hong Kong.
"Hong Kong serves as a key hub for funnelling China's overseas investment, so the city's service providers can help China seize the Belt and Road opportunities. Hong Kong is the largest offshore capital-raising hub for Chinese finance and has a pivotal role to play in financing the private enterprises involved in the strategy."
At the moment, despite Fung's evangelical zeal, the jury is out. While some see China's Belt and Road Initiative as likely to reinvigorate Africa and boost innovation the region, others believe only Africa can solve Africa's problems, remaining highly sceptical as to China's true motives.
Either way, it is evident that both Africa and China are at a crucial stage in the development of their economies. The Belt and Road strategy clearly demonstrates that China knows where its best interests lie. The challenge remains to convince many in Africa that the strategy also aligns with their own long-term goals.
Mark Ronan, Special Correspondent, Cape Town