China in the neo-colonial race for Africa: newcomers lucky?

    20 Jul 2021

    China is a relatively new investor and a specific investor. Along with the Russian and American models of building loyalist blocs in the international arena, China has developed its unique algorithm for economic expansion without being burdened by shared historical memory or the demands of democratic transformation. However, it is essential that potential partners do not criticize the violation of Uighur rights in the Xinjiang Uyghur region and do not support the autonomous sentiments of Taiwan, Hong Kong, and Tibet.

    Let’s check Oleksandra Terentyeva from Political critique magazine opinion about “Sea Silk Road” and other Chinese projects in Africa that influence the environment strongly. Dams and “battle for the Blue Nile” are among them – we’ve mentioned this conflict among the main regional river here.

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    Economic blackmail has already become a traditional tool for European states to pressure their former African colonies to uphold human rights, end violence in conflict regions, or hold mutually recognized elections. Therefore, the political crisis in the African country means an immediate reduction or even complete closure of government projects or the imposition of sanctions. Such regular cessation and resumption of cooperation do not contribute to developing a coherent foreign policy strategy of the ex-metropolis towards African partner countries.

    This paves the way for China’s diplomatic mercantilism. Not too burdened by moral demands, this approach gains ground for investment bondage, leaving behind traditional African partners and challenging the “heralds of democracy” of the United States, the EU, and various international organizations.

    Hydropower fever and the Sea Silk Road

    China’s ambitious investment in the African continent is various hydropower projects that have been built or planned in at least 22 countries. Not surprisingly, Ethiopia, one of the few African nations not colonized by Europeans in the second half of the 19th century, became China’s second debtor after Angola ($13.5 billion in debt). It is here that for Chinese investment, in addition to the light rail line in Addis Ababa, the so-called “Millennium Dam” or “Ethiopian Renaissance Dam” is being built on the Blue Nile River, which should become the continent’s most powerful hydropower plant and the seventh-largest in the world. The Ethiopian HPP is the basis of a sharp conflict between Egypt, Sudan, and Ethiopia itself over the control of the waters of the Blue Nile River (geographically, Ethiopia is the first to control its water flow).

    “Dam of the Great Ethiopian Renaissance,” Ethiopia

    For Ethiopia, hydropower is an opportunity to create a symbol of the unification of a state with a population of 112 million, establish itself as a regional leader, and electrify rural areas. For Egypt and Sudan, which already receive Ethiopian refugees from the Tigris conflict region, it is a matter of preventing Ethiopia’s monopoly on the waters of the Blue Nile (in March 2021, the two countries even signed an agreement on military cooperation).

    China’s position, as always, is based on mercantilism and careful balancing – complete diplomatic neutrality. Egypt is one of the main sites of confrontation between China and Egypt’s longtime ally, the United States. And Sudan, as already mentioned, is also a partner of China in the development of the railway. Thus, the Chinese side is not interested in its role in inciting regional conflicts; the main thing is to make a profit from the new dam worth $5 billion. It is currently 80% built and will reach the expected capacity in 2023.

    For comparison, a similar project was proposed for construction on the Congo River in the former Belgian colony of the DRC. The Inga Dam was also to become the most powerful hydropower plant in the world. Its cost was estimated at 11 billion dollars. Potentially, it was to supply electricity to several countries north of the DRC, all the way to Egypt. South Africa and Nigeria have also expressed interest in purchasing electricity. The problem arose in the search for financing. Initially, it was about the participation of the World Bank, which later withdrew from the project, and private investors (and private investment involves the corresponding risks). However, in 2020, it became known that DR Congo had agreed to form a consortium of Spanish and Chinese investors (25% to 75%, respectively) to secure funding for the Inga III dam segment.

    Instead, back in 2016, China signed an agreement with the government of the DRC to build new parts of the Busanga Dam in another part of the DRC, where the African copper belt passes (43.3% of DRC exports to China are cobalt, almost 40% – processed and unprocessed copper ore). Here, China has been developing a joint Sicomines mining complex with the Congolese company Gecamines for ten years. The cornerstone of both the first and second HPP projects is the need to flood the valleys near the dam – and thus the resettlement of tens of thousands of people. For example, to implement the Chinese initiative in 2017, the administration gave locals 12 days to leave their homes, which local NGOs protested. Sicomines operates in the region under a similar $ 6 billion agreement with Angola: the Chinese side is committed to building $ 3 billion in infrastructure here, and in return, receives a 68% stake in the mine. The expected cost of the dam is $ 660 million. In June 2021, it became known that the launch of the dam is planned for September.

    The other side of the coin is the post-design operating conditions. For example, former Tanzanian President John Magufuli actively protested against Chinese projects. In 2019, the construction of the port of Bahamoyo (potentially the largest in East Africa) was stopped because the conditions imposed by the Chinese side were bondage: China would have to lease the port for 99 years, and the Tanzanian side had to guarantee the absence of new ports at a distance of 600 kilometers for 33 years. In addition, when the port began operations, the Tanzanian side had no right to discuss the issues of its subsequent investors.

    Port of Bahamoyo, Tanzania

    Emperor Xi’s Belt and Way: how China manages the business?

    The initiative of the General Secretary of the Central Committee of the Communist Party of China Xi Jinping “Belt, Road” in 2013 includes three large-scale lines of infrastructure investment from China to European borders. The newest of them – the Polar Silk Road (direction of work for 2021-2025) – is entirely designed to include China in the Arctic resource race. The first two areas – the land Silk Road and the Sea Silk Road – are developing successfully on the Asian continent, including the construction of pipelines, new railways and highways in Central Asia, and the development of port infrastructure in Pakistan and Southeast Asia.

    Other than those in the east of the continent and participating in the Sea Silk Road segment, African countries were not initially part of the initiative. Still, the growth of Chinese investment in African countries has coincided with the development of Xi Jinping’s program since about 2009. In 2012, China surpassed the United States in terms of foreign direct investment in African countries and had only increased in volume since then. From 2014 to 2018, China accounted for 16% of foreign direct investment in Africa, while the United States and France – only 8%, and the United Kingdom – a total of 5%.

    The Chinese investment concept is shrouded in several myths: yes, it seems that a significant amount of investment is directed exclusively to the resource sector, local workers are not too involved in infrastructure works, and official Beijing and a small number of Chinese state-owned companies have a serious plan. mercantile occupation of the African continent (like the myth of the systematic resettlement and conquest by the Chinese of the eastern regions of the Russian Federation).

    There is some truth in this, but in general, it is not quite so. The basic scheme of investing in African infrastructure is the so-called commodity-based concept – investments backed by payments in the form of minerals (oil, cobalt, copper ore, bauxite – whatever anyone has). Chinese companies establish import operations or become shareholders in local mining companies. There are cases where investments are not supported in this way – for China, the risks are more significant, and, therefore, negotiations to reduce the debt burden are even more reluctant.

    The issue of employing Africans on Chinese projects is quite ambiguous and even controversial. Since 2015, along with the fall in mineral prices, the number of Chinese employed here has also begun to fall. If in 2015 it was 263 thousand people, in 2019 – already 182 thousand. Angola, Nigeria, Zambia, Kenya, and Ethiopia, excluding the Maghreb Algeria, are the primary recipients of Chinese labor and have the largest reserves of minerals, including oil, the most significant funding of Chinese projects in their territories and, not surprisingly, top the list of Chinese debtors.

    It is clear that Chinese companies do not provide 100% of the necessary staff to citizens of their country and still hire locals, formally creating new jobs for states. The question arises: in what conditions they work and what positions they hold. For example, the University of Florida’s Center for African Studies estimated in 2016 that there were many more African employees in the economic cooperation zones than the Chinese (Ogun-Guangdong, Nigeria – 177 Chinese and 1,619 local workers, Chambishi Zambia – 1,372 Chinese and 7,973 local workers). The fact is that the standard of living in China is growing, and so is the level of wages. Now it is much more expensive to bring workers from China to Africa. In addition, some African countries have legal restrictions on the employment of foreigners.

    However, the threat to workers’ rights lies in their working conditions. Like European companies, the Chinese bring their specialists for managerial positions and hire locals for unskilled or low-skilled manual labor, often not in completely safe conditions. Instead, there are situations – such as in Ghana in 2014 – when the local administration begins to pursue anti-Chinese, sometimes xenophobic policies due to the dominance of Chinese workers and illegal, according to locals, mining. Ghana also has a mineral-backed investment scheme, supplying China with its oil (76.7% of exports) and bauxite.

    Chinese infrastructure investments in African countries are too reminiscent of similar European projects a century and a half ago. Today, the legacy left by metropolises on the continent is assessed in the same way as China’s campaigns: on the one hand, states receive several new useful logistics facilities, especially roads and railways, and on the other hand, become dependent on debt bondage.

    This is called debt-trap diplomacy (or sometimes the related term “checkbook diplomacy») when the creditor (in this case – China) deliberately provides excessive loans to then benefit from political or economic control over the beneficiary. In the wake of the COVID-19 crisis, several African countries have turned to the IMF, the African Union, and other international organizations for financial and diplomatic assistance, hoping to obtain loans or negotiate debt relief for China. Thus, European and American competitors in China, by providing loans, regain control over African countries.

    “Railway from the mine to Shanghai”

    The Chinese railway campaign in Africa has become a logical continuation of the Belt, Road infrastructure plan. Over the past ten years, some of the continent’s largest states – Sudan, Chad, Angola, Ethiopia, Nigeria, and Kenya – have signed contracts to build new railways on their territories. Chinese proposals for these states have proved more than timely.

    For example, the vast system of Sudanese railways from the Egyptian to the southern Sudanese borders, once built for military purposes by the British administration, began to lose its effectiveness and needed modernization. Previously, most of the cars were supplied by the American corporation Caterpillar; however, after the inclusion of Sudan in the list of states sponsoring terrorism, the sanctions imposed on the country stopped any cooperation. However, Sudan realized in time that President al-Bashir’s Darfur policy1 did not deter China from cooperating. In 2010, Chinese corporations signed a series of documents to begin developing plans with Sudan, Cameroon, and, most importantly, Chad, a vast (1.3 million km2) landlocked Central African state and no railways at all. The country has long sought alternatives to the Chad-Cameroon railway project, which was blocked several years ago by the Cameroonian side. The analysis of the technical and economic feasibility of the project began in 2017, and potentially this line could complement the regional railway system Mali – Mauritania – Burkina Faso – Niger – Chad, the study of the feasibility of which began in 2020.

    Map of African railways. Source: Wikimedia

    The rest of Africa, its eastern borders, have also become the site of Chinese railway plans. China is developing a plan to connect Kenya with the African Great Lakes region of Uganda, Rwanda, Burundi, and even the Democratic Republic of the Congo, which is trapped in the continent’s center. Former German and then Belgian colonies with dictatorial regimes like the Kagame Field in Rwanda, with permanent armed conflicts and thirty years of proxy wars, but with vast reserves of unique minerals (mainly gold, diamonds, coltan, tungsten). All of them are partners about which China has no doubts.

    It sounds pretentious, but in practice, such cooperation is enslaved. For example, the situation in Kenya, the only country in the Eastern project where the construction of a railway on the Mombasa-Nairobi section has already begun, has proved critical. In 2020, the country claimed huge losses and burdens on taxpayers (the government pays the Chinese creditor $1 million a month and delays payments for 21 months), especially in connection with COVID-19. Already in 2021, the Kenyan side announced the termination of the contract with the Chinese company due to the high cost of railway services (ticket sales, refueling, etc.).

    Another African country, Angola, is an example of China’s victory over common sense. The fact is that decolonization in Angola, as in several other African countries, has led to a protracted civil war. In addition, the country’s economy is 40% dependent on oil production in the separatist region of Cabinda (a small exclave completely separated from Angola by the DRC), making it difficult to control. In 1993, the UN (and therefore European partners) imposed an embargo on arms supplies to Angola, but Chinese weapons meanwhile are quietly entering the country. In 2002, Angola became China’s second-largest trading partner on the continent, and in 2014, China completed the reconstruction of the 1,300-kilometer colonial railway. So, on the one hand, Chinese equipment was employed on the construction site, but about 100 thousand local workers were hired.

    Railway opening ceremony in Lobito, Angola. Photo: Xinhua

    However, the consequences of investment cooperation with China have been fatal for Angola. Its credit arrangements are different from Kenya’s: while in Kenya it is a net investment in a potentially profitable railway, it is backed by oil exports in Angola. Falling oil prices, declining foreign exchange reserves, lack of new field development – and now the state is no longer able to pay its debts to China (in 2020, it is 22 billion dollars and 43% of total public debt). Currently, 97.3% of Angolan exports to China are crude oil. The state began to negotiate as soon as possible debt settlement with the G20 and became a member of the IMF program. However, China still insists that the China Development Bank, which is a creditor for Angola, should be seen as a commercial creditor, not a public one that can safely review debts. As we can see, China is quite reluctant to the idea of debt restructuring.

    African white elephants “made in China”

    There is a concept of a “white elephant” in infrastructure investment. Initially, white elephants were so rare and demanding animals and sacred in Southeast Asia, Laos, Cambodia, and Myanmar, that they were often owned only by monarchs. These animals did not give any profit but needed a huge investment in their care. So receiving a white elephant as a gift for the great feast meant both a blessing and a curse.

    Today, white elephants are the announced long-term buildings designed to enhance the state’s image where they are built, and in practice, are unprofitable. Some of these white elephants were brought to the African continent by China. They will never be put into operation, and other – already existing – African states will compensate for decades.

    A recent study by the European Economic Review (2021) showed a link between China’s presence and growing local protests, not so much against investment itself as against “side effects” – reduced tourist attractiveness, forced relocation, pollution of reserves, and the environmental problems. The Chinese cooperate with everyone – official governments, both democratic and authoritarian, representatives of insurgent groups, local financial magnates. Because of this, there is little data; they are often opaque, irrelevant, generally hidden. In politically unstable countries, such cooperation benefits local elite groups and then forms the basis of China’s Global African Debt, the continent’s new pressing problem.

    In an interview, Barack Obama once advised African leaders to make sure that railways and highways built by China do not lead directly from the mine or oil field to Shanghai, without giving the states themselves any advantage. There is a possibility that the advice was correct.

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