CHINA’s Belt and Road Initiative (BRI) is the country’s flagship foreign policy exercise. More than US$800 billion has already been committed to BRI projects on its six corridors. China has also signed 170 BRI cooperation agreements with 125 countries and 29 international organizations in Asia and Europe as well as Africa, Latin America and the South Pacific.
The BRI has already created new cross-border railways between China and Myanmar, the penultimate section of which opened last month, and to Laos, which opened in December. Work is underway to extend this line to Thailand. Elsewhere, Chinese firms are leading the project to build a new high-speed line in Indonesia and a metro in Lahore.
These projects have improved connectivity in countries where the cost and practicality of building new infrastructure is challenging. Yet the BRI has been criticized in the West as a way to spread Chinese economic and political influence at the expense of local autonomy.
The G7 group of the world’s largest economies has even pledged to try to combat the BRI, eventually launching the Global Infrastructure and Investment Partnership in June. This program pledges an initial amount of US$600 billion for infrastructure projects in developing countries over the next five years. The United States alone will contribute $200 billion.
China’s growing influence is most evident in Africa. A rapid investment and construction program over the past 15 years or so has seen Chinese companies build new railways, roads, ports and airports across the continent. African governments, desperate to improve infrastructure and show progress to their electorate, were lured by the speed of execution and favorable financing terms offered by the Chinese and quickly signed on.
The result is far from optimal. These projects were largely built to Chinese standards by Chinese contractors and often in the interests of China rather than local governments. Kenya’s $3.2 billion standard gauge railway project – the country’s largest infrastructure project since independence – highlights the problems.
Funded by the Chinese bank Exim, a single free feasibility study was conducted by the same Chinese group that built it. No bidding was allowed, despite local objections. The 592 km line was completed in 2019 but it carries only a fraction of the promised traffic. Losses mounted, and government efforts to force shippers to use the line after taking control were defeated in court. The country even risks defaulting on program loans.
Such results are not acceptable to both parties, and China, aware of the risks of default, has reduced its investments in Africa since 2019. However, there are signs that the broader infrastructure investment landscape is in jeopardy. changing.
At over US$20 billion, Angola has the highest debt burden to China of any African country. Plans to tie oil supply to repayments backfired after the mid-2010s oil crash. But under President João Lourenço, Angola has implemented sweeping legal and regulatory reforms to clean up a culture of corruption and attract outside investment as it attempts to diversify its economy away from oil. The privatization of the operation of key infrastructures is at the heart of this strategy.
The July 19 news that a consortium of Swiss commodities trader Trafigura, Portuguese construction group Mota-Engil and Belgian private rail operator Vecturis had beaten a Chinese group to win a concession to operate and maintain the Lobito in Angola was eye-catching.
Speaking from his experience with the tender process, Mr. Eric Peiffer, Managing Director of Vecturis, which has been active in Africa since the 1990s, said the professionalism shown, especially from the country’s regulator, was encouraging. He says all legal issues have been dealt with. Bidders even had to fill out predefined forms and develop their plans in four separate meetings held a week apart, a situation he said did not sit well with the Chinese.
“We had to solve many problems to meet the terms of reference of the call for tenders,” he explains. “It was good for us because it didn’t open the door to interpretation or vague arguments. There was also no room for influence or rumours, these were just objective numbers.
Peiffer adds that working with internationally renowned companies such as Vecturis as well as Motal-Engil and Trafigura reassures global lenders about the bankability of African infrastructure projects. Attracting private financing is a key objective for Angola, according to the Minister of Transport, Mr. Ricardo Santos D’Breu.
Peiffer doesn’t believe Angola is trying to exclude China; the choice was “positive”, he says, with the government attracted by the winning bid’s emphasis on broader social development, interaction with local communities and transfer of know-how. The fact that his company is independent and not tied to any mining or government interest also helps his cause.
For now, Angola’s approach seems to be the exception rather than the rule. However, if China loses more tenders, it will adapt, and there are signs that this is happening, albeit in the wider Belt and Road.
A study of Chinese contractors working on the Ferrogrão project in the Brazilian Amazon by the Carnegie Endowment for International Peace, published in August 2021, finds that the Chinese have worked successfully with their Brazilian peers to adapt to the country’s stringent environmental regulations and socio-economic development. political climate.
The need to improve Africa’s infrastructure is greater than ever, especially in the fight against climate change and in the face of rapid urbanization. As Western governments join China in providing the necessary financial support to get projects off the ground, a golden age for African infrastructure development could be on the horizon.
It is therefore imperative that these governments learn from recent experience. Only by defending their own interests by enforcing their own laws and regulations, as Angola appears to be doing, will they reap the maximum benefits possible.