© CEphoto, Uwe Aranas
Sometimes you can’t see the forest from the trees, so, let’s hope that this article does a good job in capturing a drone shot. Much of the narrative dominating the story around Africa-China relations comes with sinister undertones. Why is China suddenly so interested in Africa? There must be a grand plan, hatched up and faithfully executed by politicians and mandarins out there in Beijing, outlining Chinese ambitions to engage in neocolonialism across the continent. They want the resources and the important national assets of African nations. They want to own the continent so that they can exploit Africa’s rich mineral resources as it sees fit, and have first dibs on African strategic assets.
The problem with this narrative is that it’s vastly oversimplified and misinformed. Just because Europe and North America did it to Africa does not mean that everyone else wants to, or needs to for that matter. The arguments behind Chinese debt diplomacy and China’s seemingly insatiable lust for African minerals and resources are largely rooted in speculation and conjecture. The evidence on hand to support it is scant at best. The act of one government, or corporation, or public body unilaterally taking ownership and possession of the strategic national assets of another country is very rare and difficult to pull off.
The Smoking Gun
Hambantota Harbour Sri Lanka by Dinesh De Alwis
There is apparently this Sri Lanka Hambantota Port example that everyone likes to cling on to as the smoking gun behind this theory, but this, much like a lot of the discourse surrounding Chinese ‘neocolonialism’ in Africa is just that - a smoking gun. Evidence of the trigger pull, the fired guns, targeted victims, we don’t really have that here. What we have to work with when it comes to the Hambantota Port isn’t all that much. The Sri Lankan government chose to lease the port out to an experienced Chinese corporation in order to raise about $1 billion towards paying off debts largely owed to Japan, the World Bank and the Asian Development Bank. That’s the story.
Furthermore, the Hambantota Port took in nearly $12 million in annual revenue and turned over a profit of about $1.81 million in 2016. It’s also worth noting that once you factor in the costs associated with purchasing the lease and upgrading and improving port facilities, China Merchants Port (the company that’s currently running the port) is expected to shell out close to $2 billion over the course of its investment. So it might take a minute for them to recover their overall costs, if at all. I don’t know, this arrangement doesn’t exactly sound like something you would go out of your way to engage in. Perhaps that may be part of the reason why similar examples of this widely covered instance are so rare with China to begin with.
The rationale behind Chinese involvement is complex and multi-layered. Once you take a deep dive into it all and the bigger picture starts to reveal itself, the oft-quoted reasons behind Chinese expansion into African economy and business increasingly begin to look small fry. Why? Because China’s making way more money from everything else besides near non-existent debt recovery and resource exploitation when it comes to their African engagements. Access to African import and construction markets are raking in far more cash than all of that other stuff for China. This is chess, not checkers.
'Win-win' Cooperation?
Before we elaborate on that though, let’s first get to the heart of this issue, which is Africa’s unrivalled reserves in a wide array of rich minerals and resources. The continent’s huge quantities of valuable resources like gold, platinum, iron, copper, cobalt, manganese, rubber, oil, and many others, have always been the object of envy, and unknowingly painted a target on its back soon after Africa’s initial interactions and engagements with outsiders.
Now it is true that China is heavily reliant on imported resources to help power its roaring economy. It is true that it imports lots of resources from Africa in particular as well. But it’s also true that Chinese corporations only controlled seven percent of African mine production of non-fuel minerals (everything outside of coal, oil and natural gas) in 2018.
Still some ways behind the big European and South African players that have dominated this market from its very onset. Looking at this, I wouldn’t be surprised if China actually imported a significant portion of African origin resources from other non-Chinese companies. So, contrary to popular belief, China doesn’t seem to be carrying out a resource-grab like many of us like to think. And if this is really their intention, then they don’t seem to be doing all that great of a job at following through on it.
With that said, natural resources do have their role to play in the Africa-China relationship, but it’s more nuanced than one would initially think. Resource exploitation and acquisition is not the end goal for China, it’s just a means to it. Here’s the thing, many African countries suffer from a lack of infrastructure development. Anyone who’s been here knows what I am on about: the unpaved roads that increase commute and delivery times, inadequate rail and road networks which prevent regional trade from flourishing, unstable power supplies, poorly managed and equipped ports, the list goes on. Not to mention that the continent’s rapidly expanding and increasingly urbanised population is only going to fuel additional demand for these different kinds of infrastructure.
This really is no joke, next to corrupt leadership, poor infrastructure might be the biggest thing that is stopping Africa from reaching its full potential. In fact, according to the African Development Bank, poor infrastructure wipes off two entire percentage points off of growth throughout the continent each year. For instance, annual growth for Africa in 2021 is estimated at 3.4 percent, but it could have been 5.4 percent if it were not for the infrastructure gap.
Which is crazy to comprehend, in that particular example, that’s more than 50 percent of additional growth left untapped in the form of new and expanding industries, increased consumption and loads more jobs made available. Society has the opportunity to operate at its best when the lights are on and the trains are on time, Africa is no exception to this.
The World's Builders
Enter China, whose economic miracle is partly sustained by the ubiquitous presence of building works and scaffolding all over the country. From 2011-2013, China used more cement for building than the USA did over the course of a hundred years (1901-2000).
If there’s one thing that China knows a lot about, it's building stuff, so why not export all of the expertise and machinery gained from such an experience to the rest of the world? In this scenario, a region such as Africa makes for the perfect customer. It’s the most underdeveloped continent in relation to infrastructure and construction, and it’s the least urbanised. There’s a lot of money on the table here, as it is estimated that Africa overall, needs to spend between $130 billion to $170 billion annually to help plug its infrastructure deficit.
There’s just one issue here though, and that goes back to how these African economies, many of them bereft of foreign reserves and tarred with poor sovereign debt ratings, how are they going to pay for it all? With their minerals and resources.
Think of African natural resources as currency used to pay for Chinese expertise, experience and capital equipment to help deliver on major infrastructure plans. The currency has its uses insofar as it can be used as inputs for key components of Chinese exports and domestic goods. Smartphones need small quantities of gold, copper, silver and platinum in order to fully function. Phone and laptop batteries usually run off of lithium, while China’s thriving EV market needs cobalt batteries in order to keep things moving. Then there’s all of that Angolan oil which does its bit in powering Chinese factories, cars, planes and ships. But resources are only one part of the puzzle - and an increasingly smaller part - a catalyst if you will.
The true, bigger prize that’s up for grabs is access to African markets. Loose change makes a lot of noise. Africa’s plight, and supposed road to salvation is seen as being rooted in its mineral wealth. And because of this, Africa’s market potential is usually overlooked - African market access is the prize, not African resources.
China has Already Set up Shop on the Final Frontier
Judging by their actions and the numbers on the ground, Chinese corporations seem to understand this. The real money and influence isn’t in taking over and running what may be loss making or barely profitable national railway lines, airports and seaports, nor is it really in the resources. In my humble opinion, the money and influence is in the contracts to build those things, which then facilitate the efficient movement of Chinese-made goods throughout the continent. That’s the near $150 billion answer to the million dollar question of why China seems to have taken such a keen interest in Africa as of late.
Yes, the $150 billion answer: $100 billion in Chinese exports to Africa and close to $40 billion in different African construction contracts won by Chinese contractors annually. Visit any major African city or use our map familiarise yourself with the many undergoing and completed infrastructure projects across the region, and China’s presence in this market becomes very clear and acute.
Names like the CRECG, the CSCEC, the CRCC, among others will probably keep on popping out at you. And they will, since they’re among the largest global construction contractors in the world. They actually accounted for a quarter of global construction revenue in 2018. 60 percent of revenue earned from African construction contracts are raked in by Chinese contractors, and Africa is now their largest market for overseas construction contracts. Not Latin America, not the USA, not Europe, not even Asia, but Africa. Africa is also the fastest growing market for construction.
State-led and coordinated infrastructure deals with African governments provided Chinese global contractors with a foot in the door. Then they made their way in, adapted to local market needs and demands, built up a reputation for timely delivering good quality infrastructure at an affordable price, and went on to corner and establish a stronghold on the African market. This only bolstered their coffers, experience, expertise and global reputation so as to leave them well positioned to sell these same services to the rest of the world.
Just look at the rise of the Belt & Road Initiative and the increasing presence of Chinese contractors across construction projects within Latin America and the Caribbean, the Middle East and Europe. Why risk the bad rep, along with investing the time and resources to ‘takeover’ and manage the national assets of floundering developing countries, when you can instead take your place as first in line in a $3.6 trillion global market? Again, this is chess, not checkers.
Better and more extensive roads, railways, city rail links, sea and airports will also fuel further urbanisation throughout Africa. African cities are becoming bigger, with estimates showing that by the end of the century, 13 of the world’s 20 largest megacities will be based in the continent. As cities grow and multiply, so do wage earners. Pay cheques will go to purchasing phones and other electronic goods and motor vehicles, among other things. Things that much of Africa is already importing from China in large quantities - continued African growth will likely accelerate this trend. Haojin is the brand of choice for Africa’s boda boda motorists, and almost every African can probably afford a Tecno - the region’s most widely bought phone.
Marketing Market Access for Better Deals
Addis Ababa City Skyline by ምቅ37382