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How Africa Can Benefit From China's Belt and Road Initiative

7 MINS READJul 2, 2019 | 10:30 GMT
People attend the inauguration of the Oshodi Transport Interchange, a multistory bus terminal in Lagos, Nigeria, on April 24, 2019.

People attend the inauguration of a multistory bus terminal in Lagos, Nigeria, on April 24. China sees Africa as a natural extension of its Belt and Road Initiative.

(PIUS UTOMI EKPEI/AFP/Getty Images)

By Efem Nkam Ubi, for Financial Nigeria

The extension of the Belt and Road Initiative (BRI) of the People's Republic of China to Africa could be viewed as an afterthought. The BRI, which launched in Kazakhstan and Indonesia in 2013, seemed to be "Asia first" in outlook. Speaking about the initiative in 2014, Chinese President Xi Jinping, said: "First, we should focus on Asian countries and realize connectivity in Asia first. The Belt and Road both trace their origins to Asia ... It is natural that we focus our attention on connectivity between Asian countries and strive to expand our common interest."

According to the World Bank, the BRI aims to strengthen infrastructure, trade and investment links between China and dozens of other countries that collectively account for over 30 percent of global GDP, 62 percent of the world's population and 75 percent of known energy reserves.

In no time, however, Chinese partnerships under President Xi's signature infrastructure development and investment program have extended beyond Asia to the Middle East, Europe, Africa and the Americas. Dubbed the Chinese Marshal Plan, Nigeria and another 125 countries and 29 international organizations are now participating in the initiative.

Chinese trade with countries along the BRI corridors is growing fast; it exceeded $6 trillion between 2014 and 2019. Between 2013 and 2017, China's total trade with BRI members grew faster than its overall international trade that was worth $6,975 billion. China's investment in countries that have signed up to the initiative as of 2019 is estimated at $200 billion.

China assumed that Africa is part of the historical and natural extension of the Belt and Road Initiative. The declaration of the Forum on China-Africa Cooperation (FOCAC) 2018 Beijing Summit and its 2019-2021 Action Plan state that Africa is an important partner in the BRI cooperation. But a pertinent question is whether Africa can maximize the investment opportunities of BRI to build infrastructure and develop industrial capacity that the continent chronically lacks.

China's Belt and Road Initiative will provide African countries with great opportunities to build their infrastructure as well as develop industrial capacity.

Infrastructure and industrialization are two pristine promises of the Belt and Road Initiative. It is believed that cooperation between Africa and China in these areas will generate more resources for economic growth and development in the continent. The BRI will provide African countries with great opportunities to build their infrastructure as well as develop industrial capacity.

To maximize the benefits of this cooperation, African countries must overcome some longstanding issues. First is governance. Africa needs good leadership, political will, policy consistency and continuity of government's programs. There is also the need to have astute investment policies to underpin Africa's foreign relations.

Second, Africa must hold China to its promise and get the best from it. For instance, China has promised to advance industrial capacity development along with BRI implementation, in line with the African Union's Agenda 2063. As the FOCAC Beijing Action Plan (2019-2021) states, it is imperative that China and Africa make the best use of industrial capacity cooperation mechanisms to achieve tangible results from various projects. By inference, the instrumentality of the BRI should help Africa to develop technologically.

Third, Africa should be able to access the $60 billion pledged by China at the 2018 FOCAC to boost resources for development on the continent. The funding comprises Chinese concessional loans and grants, and an additional $10 billion special fund for development financing. Africa must also maximize the development impacts of the investments. This would be better achieved if the beneficiary countries first develop national development plans that methodically identify the areas where investment will be most beneficial.

Africa would have to avoid the distractive mischaracterization of its investment relations with China. Perhaps the most oft-repeated concern is that Africa may be plunged into a debt trap by Chinese loans. This criticism has revolved around speculations such as China's "neo-colonialism" and alleged "predatory" debt practices. For instance, China has been accused of seizing already-built infrastructure or capture host countries' resources for unpaid debt.

These allegations are undermining China's cooperative endeavor with many developing countries. As Yun Sun, a nonresident fellow with the Africa Growth Initiative at Brookings Institution, has observed, these doubts about the massive Chinese economic and infrastructure campaign have led to the cancellation or the downsizing of major projects in some countries, including Pakistan, Malaysia and Myanmar.

It is worth pointing out here that the "debt trap" argument is fallacious. According to a new study by the U.S.-based Rhodium Group, China is inclined to renegotiate or write off debts incurred by other countries for its BRI infrastructure projects, and only rarely seizes assets. In fact, the study found that between 2007 and 2019, there was only one confirmed case of asset seizure by China and that was in Sri Lanka, where the government decided to hand over control of the Hambantota Port to a Chinese state-owned company in 2016 to avoid defaulting on its debts.

China is not the only country lending to Africa. In fact, African countries owe more debt to the West and its financial institutions than to China.

However, the Sri Lankan case may not be a cut and dried case of asset seizure. China's investment agreements do have stipulations for selling or concessioning the infrastructure it financed, where the beneficiary government is unable to meet its own part of the contractual obligation. The Chinese construction company for the project would take control of such a facility to recoup or until it has recouped its money.

Besides, the Chinese government has continued to maintain that the BRI has no political motives and China is not pushing any developing country into a "debt trap." As a matter of fact, China has shown a willingness to write-off debt owed to it, renegotiate some debts and has agreed to deferment of payment on others. China has written off debts totaling approximately $50 billion. In 2015, it agreed to write off $40 million in loans to Zimbabwe. Again, at the 2018 FOCAC Summit, China wrote off a $7 million loan to Botswana. And this year, Ethiopia announced that Beijing had forgiven interest owed on its Belt and Road loans.

In any case, as I have argued in a previous article in the October 2018 edition of Financial Nigeria magazine, China is not the only country lending to Africa. Western countries and their financial institutions are doing the same. In fact, African countries owe more debt to the West and its financial institutions than to China. Therefore, if Africa is entrapped in debt, then it would be to both the West and China.

Africa needs infrastructure, and the continent also needs to industrialize. The reality is that Africa has no wherewithal to do these alone without external financing and technical assistance. Africa needs partnership and cooperation with other countries, especially China. The reality is that China has demonstrated its commitment to invest in some sectors of the developing world where the West has refused to invest, especially with regards to the provision of hard and productive infrastructures.

Africa should not allow "Sino-skepticism" to derail its investment cooperation with China. African countries only need to refocus and strategize on policies that will enhance the benefit that would accrue to them from engaging China and in participating in the Belt and Road Initiative.

Efem Nkam Ubi is a research fellow and head, Division of International Economic Relations, at the Nigerian Institute of International Affairs, Lagos. This article was first published in the June 2019 edition of Financial Nigeria.

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