Journal № 2 (18) 2023 Competent opinion

At first glance, Russia is noticeably behind the Chinese penetration of the African continent. In 2022 China-Africa trade amounted to $282 billion (up 11% from 2021), while Russia-Africa trade was about $18 billion, despite an increase of 40% over the year. China's exports to Africa totaled $164.49 billion (according to Chinese customs authorities), while imports reached $117.51 billion.

In this sense, purely economic competition is impossible and is unlikely to be productive. It is more important to understand what China is actually doing in Africa and how sustainable this model is.

China openly underlines its growing interest in Africa, and usually speaks of purely economic rather than political aspirations, emphasizing a win-win position. In fact, formally China has never tried to export its ideology (unlike the USSR), although it willingly provides scholarships for African students in Chinese universities to instill appreciation for Chinese culture. The National People's Congress has official relations with 35 African parliaments, and the CCP International Relations Department has relations with 110 political parties in 51 African countries.

Chinese projects in Africa are indeed numerous, and all of them are in one way or another related to raw materials, ports and roads. Apart from bilateral relations, Beijing uses in Africa various multilateral cooperation mechanisms including the Belt and Road Initiative, Forum on China–Africa Cooperation and China International Import Expo. Through the mechanisms of the Belt and Road Initiative China finances the creation of infrastructure – coastal infrastructure, the Bagamoyo port in Tanzania, mining in the Democratic Republic of Congo, as well as the construction of the Chad-Sudan railroad, the Mfanda Nkuwa hydroelectric dam, and a railway line in Nigeria.

It is Nigeria that is currently the largest African importer from China, while South Africa is the largest exporter, followed by Angola and the Democratic Republic of Congo.

The flip side of such interaction is a number of «debt traps», that regularly arise and grow at the interface of Sino-African economic cooperation. Not surprisingly, many experts argue that China is deliberately driving the countries of the continent into such traps, without explaining why it is doing so. At the same time, African countries themselves are eager, though not without bargaining, to hand over control over entire sectors of the economy to their Chinese partners. Serious economic analysis shows that in an overwhelming number of cases African «debt traps» are mostly the fault of African governments that are unable (or unwilling) to service their debt, loans or meet investment obligations efficiently. The task of China, on the other hand, is primarily to actively use the country's infrastructure, which is not in crisis or stagnant.

Nevertheless massive Chinese investments paradoxically led to imbalance in the African economy, the closer the interaction, the more complicated the situation. For example, China's longtime friend Zambia, where China helped build a railway line between Dar es Salaam in Tanzania and Kapiri Mposhi back in the 1960s and 1970s, owes China tens of billions of dollars and it is China that is the country's largest bilateral creditor: it accounts for a third of all national debt. Zambia's total debt has reached $34 billion, about 133% of the country's GDP, with 16.8 billion of that coming from foreign assets. In 2020 Zambia defaulted on its foreign debt and, as a consequence, the economic problem of debt with China turned into a political one.

Similar situation is observed in Kenya, by mid-2020 its total debt to China has reached $6.83 billion. Most of this amount was due to a very promising project: the construction of a $5.3 billion railroad connecting Nairobi to the port of Mombasa. Initially, the project itself was seen as prospective and necessary for Kenya, because it could significantly increase the trade infrastructure of the country, but from the very beginning of its implementation, the local media have attacked China with accusations that Beijing may seize the Kenyan port in case of default on debts. The perception of the project was extremely negative, which, of course, did not contribute to its success.

Notably China was not the only creditor of Kenya; this African country got so caught up in foreign loans that by 2020 its debt-to-GDP ratio had risen to 69%.

It must be admitted that China had no intention of bankrupting Kenya, in fact Beijing restructured the debt, realizing that maintaining a barely viable economy and achieving a gradual financial return is still better than a full default. Beijing has even built a new expressway in Nairobi costing $600 million. The project is based on the «build-operate-transfer» model, which means that ownership of the road will revert to Kenya after 30 years, and China will theoretically have time to recoup its expenses.

Another major player on the continent is Angola. In 2021 it was the country with the highest debt to China of all African states, $18 billion, and 72% of Angola's total oil exports went to China. China agreed to provide investment in infrastructure in exchange for oil, triggering a boom in Chinese investment: in 2013, the country was home to about 172,000 Chinese working on infrastructure projects.

China is also very interested in Egypt, a country where Russian interests also lie. For Egypt, China is the leading importer, while Egyptian exports to China more than doubled between 2010 and 2018. According to expert estimates, Egypt borrowed $3.4 billion from China between 2000 and 2017, which is a lot for a country experiencing serious economic difficulties. In addition, China was one of the first foreign countries to support Egypt's project to build a new administrative capital, and state-owned China State Construction Engineering Corp. signed an agreement to participate in the project in 2015.

Given all these multiple risks and clearly poor management of credit and investment in Africa, it is worth asking why China persists in pouring its funds into the continent. One of the most important reasons is taking control of the economic infrastructure in Africa, especially the ports and access roads. This means that any export-import operations in Africa are gradually passing under Chinese control. And this affects Russian interests as well, given Russia's desire to take trade relations with Africa to a new level.

Chinese companies are now the main builders, owners and operators of ports in Africa, as well as investors in them. This is not to say that it is universally detrimental to the local economy; in some cases, major Chinese companies, having taken control of the ownership and operation of port assets, are creating value chains on port reconstruction and services, while also training local staff and creating a new layer of experienced managers.

In addition to tied loans, China's foreign direct investment in Africa is also growing, although it is generally not large – it is profitable for Beijing to lend to the African economy. FDI increased from $75 million in 2003 to $5 billion in 2021. In 2008, FDI peaked at $5.5 billion with the purchase of a 20% stake in Standard Bank of South Africa by the Industrial and Commercial Bank of China (ICBC). In 2021, the top five African destinations for Chinese FDI were the Democratic Republic of Congo, Zambia, Guinea, South Africa and Kenya.

Usually financial conditions of such deals are not fully disclosed. At the same time, it has been officially announced that PRC financial institutions have committed to provide about $50 billion in loans for transport infrastructure in Africa from 2000 to 2019. The Export-Import Bank of China (China Exim Bank) has been the most active Chinese lender to African ports, lending for at least 16 of 25 PRC-financed projects. Another major bank, China Development Bank, accounts for four projects in West Africa.

Transport infrastructure is the main target of loans. Chinese contractors have been involved in a number of rail projects in Africa (as well as light rail projects, rail rehabilitation, and locomotive sales), including three national projects in Nigeria, Ethiopia, and Kenya. In terms of cost, these projects are the largest on the continent and involve Chinese - financing and construction, and ultimately Chinese management throughout the life cycle. With the exception of Ethiopia, the projects are financed by loans from the Export-Import Bank of China and contracts from Chinese state enterprises, which have a near monopoly in the rail and transport sectors.

For instance, in Nigeria Lagos – Kano line was constructed in parts starting with a 187-kilometer single-track line from the capital Abuja northward to Kaduna. The project was completed in 2014 at a cost of $874 million with a $500 million soft loan from China Exim Bank, and in 2017 construction of the next 156-kilometer line, from Lagos to Ibadan, began with the participation of Chinese companies.

Seaports are another point of priority interest for China in Africa. China is building or planning to reconstruct 46 ports in Africa almost all along its west and east coasts. Ports in Africa, especially in sub-Saharan Africa, play a key role in Beijing's Belt and Road Initiative. Remarkably, these were not private companies but large state-owned enterprises, such as COFCO, the largest export-import operator, that rushed into this «breakthrough». Giant state-owned enterprises such as China Merchants Group, China Harbour Engineering Company and China Communications Construction Group are eager to export their industrial capacities to emerging markets in Africa. The Chinese authorities openly lobby for such projects. For example, after a brief phone conversation with Xi Jinping in June 2021, Tanzanian President Samia Suluhu Hassan announced the resumption of negotiations with China Merchant Holdings to build the Bagomoyo port.

China is advancing in Africa via ports. As of 2019, Chinese companies fully operated at least 11 of the 46 ports in sub-Saharan Africa, and Chinese investments were present in about 17% of the 172 ports in Africa. Chinese companies financed 27 of sub-Saharan Africa's 46 ports, and Chinese companies managed 75% of the ports financed by China, furthermore Chinese companies also built 90% of these ports.

By 2022 Chinese companies had built, financed (including through investments) and operated one or more port terminals in 61 out of 231 trading ports in 30 African states. Thus, only eight coastal or island African states do not have PRC port infrastructure. Another 16 are landlocked and therefore cannot use deep-water ports, but, importantly, their markets and resources become more accessible through new ports and domestic transport infrastructure. All of this gives China a presence in more than a quarter of all ports on the continent, much higher than in the rest of the world. West Africa accounts for 33% of Chinese presence, East Africa for 17%, North Africa for 9%, and South Africa for 3%. According to official PRC data, Chinese firms accounted for 31.4% of all infrastructure projects on the African continent in 2020. In 28 of the 61 port projects, firms from China own some form of stock (usually in the corporation that owns the lease to operate the port terminal). All this cannot be seen other than as Africa losing control over port structures and transportation.

Investments in port projects are aimed primarily at increasing capacity, reducing trac delays and upgrading infrastructure, which ultimately improves China's access to commercial markets in Africa. In addition, for Beijing, the importance of port investment in Africa is increasing because of growing hostility to Chinese exports in Europe, the United States and parts of Asia. And consequently, ports in Africa are designed to reduce Beijing's dependence on unstable commodity and energy markets – ultimately, the development of port infrastructure will diversify oil and gas imports from unstable markets in West Asia to relatively stable markets in Africa.

Considering massive Chinese investments into mining and energy sectors of Africa, ports are also crucial for the smooth transportation of minerals and resources such as copper, phosphates, lithium, iron, ore and gold. Ensuring an uninterrupted supply of critical raw materials is of great importance to China's high-tech ambitions economic growth.

Obviously, Chinese companies are implementing these projects to access African markets and resources, as well as to promote Chinese foreign policy goals that compete with U.S. interests in Africa. Ports also play a military-strategic role in the region. So far, China has only one military base in Africa (and in the world), the naval logistics base of the People's Liberation Army Navy in Djibouti, and presumably this is only the first step in strengthening its military presence on strategic maritime routes.

And while China's trade with Africa in general does not cause concern in the United States, control over port infrastructure is openly recognized by U.S. think tanks as a direct threat to Washington's interests on that continent. For example, it has been argued that ownership or operation of African ports poses a direct risk to U.S. interests, potentially allowing China to obtain intelligence, block U.S. government access to territory or services in those countries, and use the ports to dock warships.

There is no hiding the fact that Chinese structures in Africa, including port control centers scattered throughout the region, can provide opportunities for the deployment and refueling of the Chinese navy, as well as for blocking the enemy in times of conflict.

It is noteworthy that investments in ports are always associated with Chinese military access to ports. China, for example, has secured the right to dock warships in the Seychelles through a separate bilateral military agreement. However, the rights of operation does not guarantee that the African government will allow a Chinese warship to enter its waters.

Such an aggressive «port» policy of China in Africa leads to unexpected results – Beijing actually creates new infrastructure that was not available to African companies before, exports Chinese industrial standards, regulations, builds power plants, and this, in turn, contributes to the positive perception of Africa by outside investors.

We can also easily see the dramatic growth of Chinese technology giants in Africa, where we find a combination of commercial and potential political benefits. Chinese ICT companies enjoy almost absolute dominance over the continent's digital infrastructure.

Chinese investment in Africa has yielded mixed results. On the one hand, the Chinese experience has created new infrastructure, including stadiums, hospitals, urban and port development. However, many of the new sites are reserved for Chinese rather than local workers, and the quality of infrastructure varies greatly due to local and provincial corruption. However, figures on economic interaction and investment do not convey the intrinsic nature of the relationship at the grassroots level between Chinese management and African employees. In the area of everyday communication, there is a great deal of misunderstanding, with many Africans drawing attention to the fact that Chinese investors and their representatives do not take into account national traditions and customs and do not speak local languages. All of this rightly o‑ends Africans, for whom personal close communication is the key to the "rightness" of relations. We cannot rule out the possibility that China may use African debts to expand its political influence on the continent and to gain access to resources.

Russia has a lot of experience in this area, although not fully realized, which gives some advantage over China's overwhelming financial presence in the region. In any case, Russian companies will have to interact with Chinese companies in Africa, especially in the field of transport and port logistics, and therefore it makes sense to prepare specialists in advance and practice forms of communication. In addition, we cannot rule out that too active economic penetration of China into Africa may also lead to the negative reaction of some leaders of tribal structures and financial groups, which can create a negative image of many projects – here Russia is in a win-win neutral position. There are a number of countries partially bypassed by the Chinese attention – for example, Guinea, Guinea-Bissau, Sierra Leone, where Chinese investments, although present, are still small, while Russian companies have an interest in the region.

In developing its «African strategy», Russia should not underestimate China's long-term policy toward Africa and should build its lines of interest so as not to overlap with Chinese interests at the first stage and, after possible deepening into energy, education and other initiatives, propose joint Russian-Chinese-African projects, including in the fields of energy, transport and military security.