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Improving Chinese investment in Africa

by Kat Usita

Improving Chinese investment in Africa


China asserts its global infrastructure spending spree is an attempt to replicate its successful domestic growth formula worldwide. Others view it as a form of imperialism: an attempt by an emerging superpower to extend its geopolitical reach by providing enormous grants to developing economies. Regardless of which viewpoint one subscribes to, well-placed infrastructure investment should contribute to economic growth.

This is especially true for transport infrastructure, which spurs business development and improves access to opportunities that might otherwise be out of reach. Despite these potential benefits, Chinese infrastructure projects face several economic and political challenges in host countries. Managing these concerns is key to the success of China’s infrastructure initiatives.

Facilitating increased activity
In 2015, Ethiopia’s first light railway system opened in the capital of Addis Ababa. A loan from the Export-Import Bank of China covered most of the $475m construction cost. The railway was expected to ease much of the capital’s vehicular traffic.

Two years later, train cars are packed with commuters, but many of the city’s roads remain choked. While costly and inefficient, heavy traffic both on and off the tracks indicates the transport network is facilitating greater economic activity.

Still, the Ethiopian government and their Chinese partners must take steps to decongest the railway system. Its capacity should be increased by adding train coaches and fares managed to redistribute demand. Extensions to the railway should be strategically located to encourage more motorists to use public transport.

In Nigeria, the Kaduna-Abuja rail line connects those living in the north of the country to opportunities in the capital. The number of people using the line has been steadily rising since it started running last year, offering passengers a safer and reasonably priced alternative to road travel. Additional coaches have been ordered to increase trip frequency and accommodate more passengers.

Like most China-funded projects, the $876m contract for the railway’s construction was given to a Chinese construction company.

Unfulfilled expectations
Elsewhere in Africa, such investments are not always warmly welcomed. Part of the Belt and Road initiative linking Chinese producers to markets in Asia and Europe is the $3.2bn Mombasa-Nairobi railway that opened in May, connecting the port city to Kenya’s capital.

Though its construction was generally well-received by citizens, it triggered concerns about overpricing and disruption to parts of Nairobi’s national park. Kenyan taxpayers will bear for decades the cost of the project as they repay the Chinese loan.

Such apprehension is not unsubstantiated. Tazara, a railway built in the 1970s to link Tanzania and Zambia, was China’s first major infrastructure investment in Africa. It cost $500m at the time to complete, around $3bn today, adjusting for inflation.

Although the line has contributed to economic growth along its corridor, especially in facilitating the export of Zambian copper, it has been inefficiently operated and poorly maintained. Tazara is now a worn-out reminder of unfulfilled expectations, and successive governments have struggled to revitalise the railway.

A strategic and sustainable approach
China will continue to build where it can, even if the resulting projects are met with scepticism both from outside observers and in host countries. Aside from providing access to previously under-connected locations, infrastructure investments create jobs for Chinese contractors. This often leads to considerable criticism.

Locals expect to be employed by construction companies, but they are not always hired, as firms bring in their own workers from China. When locals are given jobs, there are frequent complaints about unfair wages and unsafe working conditions. Problems arise too when staff are not trained properly to run and maintain facilities.

Impoverished governments will keep borrowing from China to build much-needed infrastructure, but should be more strategic in selecting which projects to undertake and ensure that locals benefit from jobs created by construction booms. China, for its part, should take a more sustainable approach to African infrastructure. These projects should not just be built quickly; China has to consider the long-term needs of affected local communities.

Kat Usita is Researcher at OMFIF.