AIIB and China's diplomatic image

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Transnational Corporations Review

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More African countries on the route: the positive and negative impacts of the Belt and Road Initiative

Michael Mitchell Omoruyi Ehizuelen

To cite this article: Michael Mitchell Omoruyi Ehizuelen (2017) More African countries on the route: the positive and negative impacts of the Belt and Road Initiative, Transnational Corporations Review, 9:4, 341-359, DOI: 10.1080/19186444.2017.1401260

To link to this article: https://doi.org/10.1080/19186444.2017.1401260

Published online: 21 Nov 2017.

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RESEARCH ARTICLE

More African countries on the route: the positive and negative impacts of the Belt and Road Initiative

Michael Mitchell Omoruyi Ehizuelen

Institute of African Studies, Zhejiang Normal University, Jinhua, Zhejiang, China

ABSTRACT The grand vision was launched in 2013 originally as the ‘One Belt, One Road’ (OBOR) initiative. OBOR involves China underwriting billions of dollars of infrastructure investment linking coun- tries in Europe, Asia, and Africa. At the centre of the plan are two physical routes: the Silk Road Economic Belt, stretching from Asia to Europe; and the twenty-first century Maritime Silk Road that begins in China and passes along the Indian Ocean littoral to East Africa and then Europe. The nature of this economic initiative seeks to create a community of shared prosperity, in which nations can share mutual benefits and coexist peacefully along the trade routes. The paper examines China–Africa relations, centring on the possibility of expanding the OBOR initiative to cover more African nations. Also, it examines the investment environment of Africa and its sig- nificant for more African slot. Africa should provide enabling business environment to grasp the OBOR’s opportunities.

KEYWORDS Africa; China; infrastructure; investment; OBOR

1. Introduction

Historically, China has attempted twice to link its economy with that of the Western countries. The initial attempt took place two millennia ago during the Han Dynasty, when China opened the ancient Silk Road to trade with Central Asia and the Mediterranean region. Then, in the fifteenth century during the Ming Dynasty a second, mari- time, Silk Road was formed connecting China to the Red Sea via the Indian Ocean and the Arabian Sea. While both attempts initially succeeded in opening the West’s gates, China never really made it through those gates in any meaningful way. Instead, it descended into isolation and warlordism, and its economic and political engage- ment with its surroundings was mainly with its neighbours to the east and south. The third attempt to integrate with the West – the ‘third knock’ as former Hong Kong Home Affairs Secretary Patrick Ho put it – is happening today, as China implements a strategic vision of building a new Silk Road Economic Belt and a Twenty-First-Century Maritime Silk Road. China’s lofty ambition to revive its ancient silk road trading routes is now becoming a reality. When complete, ‘One Belt, One Road,’ or the Maritime Silk Road as it is more commonly known, will connect China via rail and shipping links with major markets in the Middle East, Central Asia, and Africa. The Maritime Silk Road began when the Chinese ventured into Southeast Asia, traditionally called Nanyang. By the Song Dynasty (960–1279), Imperial China had established tributary relations with numerous states in Nanyang (Wong, 2014, p. 3).

In October 2012, Professor Wang Jisi was the first Chinese scholar to mention the need for China to revitalise three Silk Roads, to Southeast Asia, to South Asia and to Central Asia (Bondaz, 2015, p. 7). One year later (2013), China’s ‘One Belt, One Road’ initiative came to prominence. What started in 2013 as big, albeit half-baked, idea, is rapidly gaining steam and morphing into a blueprint for growth. OBOR will not only enable the poor to elevate themselves but it will also provide a shot in the arm to the slowing Chinese economy by creating new markets for Chinese goods and services. As Xi Jinping put it ‘when big rivers have water, the small ones are filled; and when small rivers have water, the big ones are filled.’ China, it seems, has finally discovered the organising prin- ciple of its foreign and economic policy. Chinese President Xi Jinping on 15 May 2017, at the Belt and Road Forum (BRF) held in Beijing urged major multilateral institutions to join the new Belt and Road Initiative which is the centrepiece of economic, political, and strategic policy framework of the Fifth-Generation Leadership of China

CONTACT Michael Mitchell Omoruyi Ehizuelen [email protected] Institute of African Studies, Zhejiang Normal University, Jinhua, Zhejiang, China � 2017 Denfar Transnational Development INC.

TRANSNATIONAL CORPORATIONS REVIEW, 2017 VOL. 9, NO. 4, 341–359 https://doi.org/10.1080/19186444.2017.1401260

under him. With Chinese President Xi Jinping declaring that the initiative underscores ‘the need to improve policy coordination and reject beggar-thy-neighbor policies … [the] need to seek win-win results through greater open- ness and cooperation, avoid fragmentation, refrain from setting inhibitive thresholds for cooperation or pursuing exclusive arrangements and reject protectionism’ by expanding links between Asia, Africa, Europe and beyond, as the United States President Donald Trump promotes ‘America First’.

BRF served as China’s highest profile diplomatic event of the year, culminating in the 30 world leaders in attendance signing on to a joint communique that championed globalisation and free trade. At the forum, Xi Jinping highlighted some of the recent achievements of the initiative so far in a series of bilateral examples. In the three-plus years since rolling out the concept, China has successfully ‘deepened policy connectivity’ with a number of other states and groupings. That includes aligning the Belt and Road with the development strategies of the Russia-led Eurasian Economic Union, ASEAN, Kazakhstan, Turkey, Mongolia, Vietnam, the United Kingdom and Poland. Xi also highlighted a few of the more high-profile projects under the Belt and Road framework, for example, the acceleration of the building of Jakarta-Bandung high-speed railway, China-Laos railway, Addis Ababa-Djibouti railway, the Mombasa-Nairobi Standard Gauge Railway (SGR), and Hungary-Serbia railway, and upgraded Gwadar and Piraeus ports in cooperation with relevant countries.

Furthermore, the total trade between China and other OBOR nations in 2014–2016 has surpassed $3 trillion, and China’s investment in these nations has exceeded $50 billion.1 Those numbers were bolstered by the estab- lishment of financing mechanisms specifically to carry out the OBOR vision, including the China’s Silk Road Fund and the multilateral Asian Infrastructure Investment Bank (AIIB). The Chinese president promised that China will funnel an extra RMB 100 billion ($14.5 billion) into the Silk Road Fund, while the China Development Bank and Export-Import Bank will set up novel lending schemes of 250 billion ($36.2 billion) and RMB 130 billion ($18.8 bil- lion), respectively, for the OBOR projects. Additionally, China will offer RMB 60 billion ($8.7 billion) for humanitar- ian efforts focussed on food, housing, health care and poverty alleviation.2 The initiative covers two-thirds of the world’s landmass, 4.4 billion people in 65 countries with a collective GDP of more than 2 trillion dollars. The anticipated investment for OBOR will be $4–$8 trillion. About 50,000 miles of high-speed railway are planned to be built, more than currently existing in the whole world. Billions of dollars in new rail, shipping, and airport infra- structure are underway in dozens of countries, including Egypt, Djibouti and Kenya, which are among a small group of African countries that are expected to benefit most from OBOR.

Nearly 2.6 billion, mostly located in developing Asia and Africa, lack access to 24/7 electricity. Almost 800 mil- lion people worldwide lack access to water, and about 2.5 billion people lack access to basic sanitation. Roughly 1–1.5 billion people have no reliable phone service. Just over 20% of people in developing countries have access to the internet. Within this context, China’s Belt and Road Initiative is a breath of fresh air. It aims to boost global growth, alleviate poverty and connect billions of people by addressing one of the biggest barriers to economic development – the infrastructure deficit. Without infrastructure, there is no connectivity. Without connectivity, there can be no economic exchange. Without economic exchange, there can be no growth. Without growth, there is no prosperity. Without prosperity, infrastructure cannot be funded. And so, goes the cycle. The need for infrastructure investment in Africa is staggering: The continent’s power sector alone requires $450 billion through 2030, with about 600 million people in Sub-Saharan Africa lacking access to electricity today. The oil and gas industry is estimated to need over $2 trillion in investment between 2013 and 2035. Africa needs to spend $38 billion more each year on infrastructure – plus an additional $37 billion on operations and maintenance – just to sustain its current level of development. If Africa is to fully seal its infrastructure gap, some $93 billion per year for the next decade will need to be invested (Mungai, 2015).

The Belt and Road Initiative is China’s way of addressing the infrastructure gap. Africa, with its abundant nat- ural resources, wealth of infrastructure opportunities and convenient location, is a perfect match for China’s global infrastructure plan, ‘One Belt, One Road,’ which sets out to create new land and sea trade routes to ensure energy supplies, increase foreign trade, promote Chinese enterprise and products, a necessary step for economic growth in Africa and in particular industrialisation. This is widely seen as one of China’s major overseas and economic pol- icy goals3 which are likely to have a significant effect on Africa. The overall goal of this paper is to examine China–Africa relations while centring on the implementation and likely inclusion of more African countries in the OBOR initiative. The rest of the paper is structured as follows: Section 2 deals with what One Belt One Road initia- tive means for China–Africa relations; Section 3 look at how the OBOR initiative can find a Place for more African Nations; Section 4 discuss what African nations can do to improve their general environment for investors from

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China and other countries to start snowballing effect and stimulate economic growth in the continent. Section 5 concludes the paper.

2. What OBOR initiative means for China–Africa relations

The idea that China would be crucial to African development is neither new nor accidental. In fact, Chinese poli- cymakers have been aware of this notion for quite some time. China Ya-Fei-La Strategy, literally meaning ‘Asia- Africa-Latin America’ was conceived during the Maoist era in the 1960s (Casanova & Garcia-Herrero, 2016) in an attempt to promote the advancement of developing country goals in a new world order. Since then, China has played an active role in promoting South-South cooperation, being Africa – China cooperation a significant part of the equation. China’s role in supporting African development obviously pre-dates official OBOR by many years. Over the past decades, China has built up a strong brand in Africa. Africans generally view China as a positive influence. For instance, a survey of 54,000 individuals spanning the continent of Africa by Afrobarometer found that 63% of respondents believed China was either a somewhat or very positive influence on their country (Afrobarometer, 2016). The OBOR initiative is regarded as a welcome shift of the economic policy debate from macroeconomic to structural policies (OECD, 2015).

As a cause and consequence, China has proven to be incredibly successful both diplomatically and commer- cially. As a result, Africa’s economic trajectory has increasingly aligned to China’s. China is the source for 21% of Africa’s total imports, and 17 percent of Africa’s total exports; China’s policy banks have extended nearly $100 bil- lion in loans to African sovereigns and corporates; and Chinese FDI stock in Africa is close to $30 billion (Stevens, 2017). Given China’s rising importance across Africa, many African nations are still metabolising the medium- to long-term implications of the ‘New Normal’. Envisioned here is an economy that is expanding more slowly; one that is less factor- and investment-driven. Of course, lower output growth in China has spilled over onto sub- Saharan Africa through direct and indirect channels. Now it seems another question must be posed: what further influences will the Belt and Road have on China–Africa relations? Promisingly, it seems that the downward momentum of China–Africa investment and trade has bottomed. China’s non-financial direct investment in Africa jumped 64% year-on-year in the quarter. Interestingly, Djibouti – one of three African countries embedded in OBOR – saw an increase of over 100% year-on-year in the quarter. Furthermore, China and Africa trade volume has been soaring showing tremendous development potential and vitality in the relations. China surpassed the US to become Africa's largest trade partner in 2009. In 2014, mutual trade volume totalled $220 billion, 22 times more than the trade volume in 2000, and the investment from China into Africa exceeded $30 billion. However, trade and investment both dropped greatly in 2015 due to the Chinese economic slowdown. But in 2016, the trade volume increases to $149.2 billion from $147.6 billion in 2015, while in January–November 2016, the non- financial direct investment flow from Chinese enterprises to Africa increased 25% with more than US$3 billion (MOFA, 2017). China’s investment in Africa continues to increase greatly, embodying Chinese enterprises’ confi- dence in tapping African market and China’s increasingly anti-risk tenacity in its investment and cooperation with Africa.

For Chinese firms investing in Africa, improved economic conditions of most African nations, rich natural resources, and large potential markets all contribute towards location advantage for them (Chun, 2013). Also Africa’s motive for increased trade, infrastructure development, institutional environment and increased invest- ment relationships with the Chinese have also added to the internationalisation advantage for China’s firms run- ning a business in Africa which is part of the OBOR aims. Critics of the plan tend to view OBOR as merely a trade route for oil and minerals. African natural resources help power factories across China and provide the minerals and metals for the manufacturing sector. Indeed, the top 10 Chinese imports from Africa are raw materials. Oil- rich Angola is the top African exporter to China, and 99% of its exports to China are petroleum products (EOM, Hwang, Atkins, Chen, & Zhou, 2017). However, from Figure 1, we can see China is investing across all the coun- tries both in resourced endowed and non-resource endowed economies. Most significantly, in the service sector with fewer in the manufacturing sector (Chen, Dollar, & Tang, 2015). In 2015, manufacturing was 13% of Chinese foreign direct investment in Africa. In comparison, just 7% of U.S. investment in the region went to manufacturing ventures.4 Speaking of Africa, in late December 2015 at the FOCAC Summit in Johannesburg, China promised to lend Africa $60 billion, of this enormous amount, more than half of the money will be channelled towards infra- structure construction in Africa. China is committed to dozens of large-scale infrastructure investments in Africa, in the power generation sector and transportation as well (see Table 1). The table classifies a selection of larger

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projects and conveys some of the geographic and sectoral depths of China’s infrastructure-associated investment in the African continent.5

The leading project among those is almost certainly the Standard Gauge Railway project in Kenya that was inaugurated on 31 May 2017. China’s plan to pursue infrastructure development in the African continent will con- tinue. The significance is clarified by both political and economic benefits and most especially by China’s OBOR

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Figure 1. Distribution of Chinese ODI Projects by Nation. Source: Chen et al. (2015).

Table 1. Selected African Infrastructure built by China. Nations Projects Explanation Investment

Ethiopia Addis Ababa Port of Doraleh in Djibouti

The railway crosses 752 km and cuts the travel time between Addis and the Port of Doraleh from three days to just 12 h

$2.49 billion

Chad China-Sudan Railway A 1344-km railway being constructed in three phases and will also connect the two countries with Cameroon

$5.6 billion

Congo DRC Infrastructure for Mines Barter Deal The deal was to develop the mine fields in Mashamba and Dima basins and Kolwezi

$7.16 billion

Kenya Standard Gauge Railway A 609-km railway linking Mombasa’s port to the capital Nairobi (completed on 31 May 2017)

$3.8 billion

Mozambique Mphanda Nkuwa Dam and Hydroelectric station project

Offer 1500 megawatts of power to national electricity grid, and includes construction of Moamba major Dam to supply drinking water to residents of Maputo

$3.1 billion

Nigeria Coastal Railway 1,402-km railway to connect Lagos with Calabar (to east), passing through 10 states and connecting cities with oil-rich Niger-Delta states

$12 billion

Nigeria Dangote Cement PLC. Expansion Dangote Cement Plc. Expansion in Nigeria, and into Ethiopia, Kenya, Zambia, Senegal, Mali Cameroon and Ivory Coast. A boost to cement production of 25 mn tonnes and taking production to over 70 mn tonnes per year

$4.3 billion

South Africa Modderfontein New City Project A housing and entertainment precinct being built in outer Johannesburg, South Africa’s largest city

$7 billion

Sudan Port Sudan Khartoum Railway The project was completed in 2012 and it connects Port Sudan to the nation’s capital, Khartoum in a 762 km of railway

$1.38 billion

Tanzania Bagamoyo Port 20 million (annual) container ports, which would be the largest East African port. This would be connected to a railway corridor and sit next to a new industrial zone. Shrouded in uncertainty

$7 billion

Ethiopia Grand Ethiopia Renaissance Dam Hydroelectric power of an average output of 39,000 megawatts per year. The project is expected to be completed by 2025

$100 billion

Source: Mail and Guardian (2015).

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and Maritime Silk Road initiative. The infrastructural upgrade ushered by the OBOR initiative is also expected to highly benefit numerous nations that lie along and beyond the Silk Road routes, as it will also serve the import and export activities of these nations, especially African nations. The Belt and Road focus on infrastructure because Chinese construction companies need the business. China has provided almost 900 aid projects to African nations since 1956. The aid includes assistance supporting textiles factories, hydropower stations, stadi- ums, hospitals, and schools. Although China assist African nations with infrastructure which Africa needs in terms of closing the infrastructure deficit, but these projects do not come cheap or free. They are funded with Chinese loan from the China’s largest financier of African loans – China’s Export-Import (EXIM) Bank. The billions of dollars China commits to Africa are repayable, long-term loans. From 2000 to 2015, China Eximbank contributed US$63 billion in loans to Africa, largely aimed at road, railroad, airport and harbour construction. The top Africa nation recipients of China Eximbank financing from 2000 to 2015 are Ethiopia at US$7.2 billion, Angola at US$6.9 billion and Kenya at US$6.3 billion (EOM et al., 2017) (see Figure 2). Chinese loans are not necessarily meant to access natural resources: although Angola is a resource-rich country, Ethiopia is a resource-poor country. Moreover, there are few patterns of favoured lending to client states: Sudan is a top country for Chinese loans, but Zimbabwe is not. The largest China Eximbank commitment was a US$3.8 billion loan (in two tranches) in 2014 to build the Standard Gauge Railway from Mombasa to Nairobi in Kenya. The second largest loan was a commitment of US$3 billion (split between Ethiopia and Djibouti) in 2013 for the construction of the Addis Ababa-Djibouti Railway (EOM et al., 2017).

In 2000, the gross annual revenue of Chinese construction contractors in Africa was $1 billion; by 2015, this fig- ure was $55 billion (see Figure 3) (EOM et al., 2017). The top five countries are Algeria, Ethiopia, Angola, Kenya and Nigeria. These top five countries account for 48 percent of all Chinese companies’ 2015 construction project gross annual revenues in Africa; Algeria alone accounts for roughly 15.1%. Except for a slowdown in 2011, the gross annual revenues of Chinese companies' construction projects have been steadily increasing since 2000. In January–November 2016, the contractual value of contracted projects newly signed by Chinese enterprises in Africa reached US$65.2 billion, with an increase of 7.2% year on year (MOFCOM, 2016). The number of Chinese workers in Africa by the end of 2015 is just over 263,000. This is an extra 4289 workers than in 2014, which shows that 2015 has a much slower growth rate than 2014 and 2013, each of which added 45,000 and 33,000 workers compared with preceding years (John Hopkins University SAIS China–Africa Research Initiative, 2017). In 2015, the top five nations with Chinese workers are Algeria, Angola, Ethiopia, Equatorial Guinea and the Republic of Congo. These five nations are responsible for over 60% of the entire Chinese workers in the continent of Africa at the end of 2015; Algeria alone accounts for over 35%. These figures comprise of Chinese workers sent to work on Chinese firms’ construction contracts in Africa (‘workers on contracted projects’) and Chinese workers sent to work for non-Chinese firms in Africa (‘workers doing labour services’) (John Hopkins University SAIS China–Africa Research Initiative, 2017).

Looking ahead, on a more positive note, OBOR projects may place a floor under raw material demand inside China (even as the economy rebalances) given the projects envisioned in China’s Western and Central regions. Furthermore, the infrastructure projects across OBOR are certainly potentially sizable. That said, over the near term, given that China’s domestic fixed asset investment tallied $8.5 trillion in 2016, it would be difficult for OBOR to fully offset the ongoing slowdown in investment growth in China. Of course, given 5 years of below-trend

Figure 2. Chine Exim Bank loan to Africa, by country, 2000–2015. Source: EOM et al. (2017).

TRANSNATIONAL CORPORATIONS REVIEW 345

economic growth in advanced economies, China has been recalibrating the destination of its sales abroad. And Africa has proven to be an obvious market because it still needs China’s well-made but low-cost products. Indeed, for a two and half year period after the global financial crisis, Africa was actually China’s fastest-growing market. Worryingly although, for the first time, African imports from China declined in 2016. The slump has been particularly precipitous in some key economies such as Angola (�60%), Nigeria and South Africa (�25%), and Mozambique (�37%) and Tanzania (�13%). Of course, Africa’s softer economic growth has had a sizeable explanatory role in declining sales to Africa – especially in key markets such as Nigeria and South Africa. Thus, it is reassuring that Chinese sales to Africa were flat in Q1:2017 at $20 billion (Stevens, 2017).

Chinese investment in the belt and road nations has been a cumulative $50 billion. An estimated 47 central government-owned SOEs were involved in 1676 projects in OBOR countries. China has developed 56 overseas economic and trade zones with 20 OBOR countries (Stevens, 2017). Unfortunately, Africa is a bit part player at the periphery of OBOR, touching only a few countries in East Africa. Worryingly, OBOR may divert attention away from Africa. Already by region, Africa has been usurped by OBOR countries as the favourite destination for Chinese infrastructure investment. Policy banks have already extended more loans to OBOR in just three years than they have cumulatively to Africa, and are expected to lend out nearly 10 times more over the next three years. Looking ahead, OBOR also casts some doubt over what was seen as a logical progression of outbound investment following Chinese sales in Africa. As yet, rising consumer demand in Africa is reflected in the growth of total imports. African countries need to begin to selectively manufacture these products in partnership with Chinese firms. More than ever before, the onus is on African projects to remain relevant. It seems reasonable to argue that any African infrastructure projects that can fit into the still fluid OBOR narrative will be fast-tracked. OBOR may build an additional framework – complementing FOCAC – for which Chinese government and corpor- ate leaders and their counterparts can align their engagements. This means that Africa needs to provide a more systematic coordinated and industry-specific plan to remain at the centre of China’s foreign policy. At the same time, African governments must also focus on sustainable development and determine the best policy mix and governance structures to keep China true to its commitment to job creation and industrial upgrading inside Africa. In recent years China’s manufacturing investment has increased significantly.

At present, China is restructuring and upgrading its industrial structure and exporting excess manufacturing capacity due to the rising cost of labour. China’s labour-intensive industries are losing their comparative advan- tages. Firms have started relocating to nations with lower wages rates, Africa is an ideal partner to host China labour-intensive industries as they transfer overseas. With the fall in demand for China’s exports and earlier dis- proportionate capital investment growth mean that China is now home to excess capacities across a swathe of its industrial sub-sectors, especially for instance in steel. Africa’s under-realized industrial capacity and a substantial chance for Chinese companies in construction sectors in Africa have instigated a stable stream of investments in African steel and Iron ore (Johnston, 2016). Speaking of investment, since Africa is not a major region along the

Figure 3. Gross annual revenue of Chinese Construction Projects in Africa. Source: John Hopkins University SAIS China–Africa Research Initiative (2017).

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OBOR route and so is it hard for the continent to fully benefit from the initiative. This can be seen in the area of investment. According to Huiping Chen (2016), the author asserts that China’s outward FDI to the continent of Africa accounts for a very small percentage when compared to its total outward FDI with other regions (see Figure 4). For that reason, there is a need for more concerted effort to improve this, and OBOR initiative provides an ample opportunity for redress. The inclusion of African countries into the OBOR initiative could help keep man- ufacturing jobs and investment in China and Africa as well as address the thorny problem of industrial overcap- acity in China even as the Chinese own economic growth slows. It is also our view that African nations should take action at various levels to profit from the OBOR initiative.

3. The inclusion of more African nations into the Belt and Road Initiative

Africa has a natural and historical connection with the Belt and Road Initiative. In the fifteenth century, Chinese Admiral Zheng He led a fleet of 300 ships to Africa, which has planted friendship seeds in the hearts of both Chinese and African people since then. With an area of over 30 million square kilometers, 1.1 billion population (youth accounts for more than 50 percent), 800 million hectares arable land, countless natural resources, Africa is unarguably an important pillar of the world economy. China and Africa are anticipated to move to a higher level of economic cooperation which could transform Africa’s economies, bolstered by the formal inclusion of Africa in China’s trillion-dollar Belt Road strategy. China’s commitment to construct a gigantic network of roads, rail lines, and ports and other infrastructure in 67 nations across Asia, Europe and Africa, at a cost of $1 trillion, is widely seen as one of its major overseas and economic policy goals.6 For that reason, the OBOR initiative has been viewed as an ambitious and promising plan by the international community. In spite of the enthusiasm demon- strated by the Chinese for this grand initiative, nonetheless, the strategic aims of OBOR are interpreted differently by individuals. Recently, international relations scholars have compared OBOR with the US-led Marshall Plan in the post-World War II period, but scholars from China argue that the OBOR and Marshall Plan are not compar- able.7 The reason why they are not comparable lies in policy purposes and goals. For the Marshall Plan, it was officially the European Recovery Program, was the American initiative to offer economic support to rebuild war- devastated European nations, while preventing them from pursuing communist regime and following the then Soviet Union.

In contrast, the OBOR initiatives’ emphasis was placed on stronger and closer economic cooperation, on joint infrastructure projects, the enhancement of security cooperation, and environment technical and scientific collab- oration. The other difference is the goals of these two initiatives. While the Marshall Plan covered only Western countries and excluded all nations and regions the West thought were ideologically close to the Soviet Union, Chinese initiatives are open to all the economies along the land and sea Silk Roads, regardless of their ideological and societal leanings. In fact, many countries have shown great interest in the initiative; China has been promot- ing the initiative chiefly with a focus on Asian and European nations. Only since early 2015, Africa is beginning to become a focus of the Initiative.

On 20 January 2015, shortly before the initiative’s vision document was published in March, former chief economist of the World Bank, Justin Yifu Lin, raised the idea that China should also include Africa in the initiative, expanding it to ‘One Belt and One Road, One Continent’ and that the initiative’s ‘core task in Africa should be industrial relocation and infrastructure construction’ (China Daily, 2015). A focus on infrastructure, proposed by

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Figure 4. China’s outward FDI flows by regions (2006–2014). Source: Huiping Chen (2016).

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Justin Yifu Lin is completely in line with an agreement signed between China and the African Union (AU), which aims to link all 54 African nations through transportation infrastructure projects, including modern highways, air- ports, and high-speed railways. In 2015, the African Union (AU) launched Agenda 2063, intending to accelerate the modernisation and industrialisation progress of African countries. Since the continent launched the AU’s Vision 2063, Africa has been identified as the future driver of global growth. The reality is that Africa we knew 30 years ago is fast transforming and all indicators are pointing to the continent of peace and security under- pinned by good governance and enhanced economic growth and development.

However, it will be crucial to determining how OBOR can complement Agenda 2063 to create the ‘Africa we want’. Agenda 2063, a 50-year development plan which is used to build an integrated, prosperous and peaceful Africa is considered as one of the efforts to pursue economic development in Africa. The agenda is comprised of seven primary aspirations, 18 goals and 44 priority areas, further expressed into 161 different national-level targets (DeGhetto, Gray, & Kiggundu, 2016). The synergies and complementarities between OBOR and Africa’s Agenda 2063, while focussing on the implementation of both agendas are based on the fact that both agendas highlight the need for inclusive and people-centred development with an emphasis on sustainable industrialisation, indus- trial diversification, creating high value added and decent employments for all. Additionally, strategic coordination between OBOR initiative and Agenda 2063 offers several cooperation possibilities for the Chinese and African investors. The ‘461’ China–Africa cooperation framework and the ‘Three Networks and Industrialization programme could be considered a rehearsal to help align and coordinate these two development strategies (Shu, 2015). To attain the economic transformation envisioned by both agendas, a high premium has also been placed on deep- ening regional economic integration through infrastructure development and regional trade. China is supportive of Africa’s home-grown development plan as set in the African Union’s Agenda 2063. There are clear synergies with the Belt and Road Initiative that support greater connectivity.

Justin Yifu Lin further argued that OBOR will provide major opportunities for Chinese firms to expand their for- eign market, and the strategy will bolster various African economies and benefit China in the meantime. The socio-economic development level of African nations is not a bottleneck preventing them from joining the initia- tive. On the contrary, the engagement of Africa with the initiative will further strengthen China–Africa economic cooperation. So, as an initiative of economic cooperation with overseas nations to promote common develop- ment, He Wenping echoed that the initiative and Africa’s development strategy ‘share similar spirit’ and that com- bining the two ‘will not only create new momentum for Sino-African cooperation, but present new approach for South-South cooperation as well’ (Global Times, 2015).

In another call for Africa’s inclusion in the initiative, Lin Songtian, Director of the Department of African Affairs at China’s Ministry of Foreign Affairs, echoed in October 2015 that ‘Africa–China cooperation is a relationship that is blessed with shared needs, benefits and opportunities, which will make the African continent a significant foot- hold for the OBOR initiative’ (FOCAC, 2015a). The initiative targets to ‘link Asian, European and African nations more closely and promote mutually beneficial partnership to a new level and in new forms (NDRC, 2015). Although China attached great importance to China–Africa relations, the OBOR document only provides detail concerning Europe and Asia. Europe was mentioned 12 times, Asia and its sub-regions mentioned over 30 times, while Africa was mentioned only six times (WWF, 2016). Nonetheless, from the Chinese viewpoint, they assert that the African continent is the last stop for the OBOR initiative, which means that more African nations will be included in the OBOR initiative.8 Sun asserts that China’s interests have been well-articulated by the Chinese lead- ership in their emphasis on employment creation in Africa through their ambitious proposal to build African regional infrastructure networks in 2014. Sun further argued that the establishment of the OBOR initiative does not change the overall direction of China’s Africa policy.9

However, looking at the geographical areas of this initiative, out of the 67 nations (see Table 2) that are part of the initiative, only three nations (which represent just 4%) are from the continent of Africa (see Figure 5). In terms of population share, Africa represents 18% (see Figure 6). Africa has one of the fastest growing young population globally, with a labour force expected to be larger than that of China or India by 2035 (AfDB, 2014). Nevertheless, in spite of the anticipated huge demographic dividend, poor infrastructure is one of the key obstacles to African development. As a result, scaling up infrastructure investment in the region could help achieve much expected higher growth and OBOR’s aim is meant to facilitate infrastructure among countries along the route which com- pliment African infrastructure need. In 2015, the summit of China–Africa Cooperation Forum (FOCAC), which serves as the supreme platform for China–Africa cooperation since 2000, upgraded China–Africa relations to a ‘comprehensive strategic and cooperative partnership. True, the OBOR initiative was not included in spite of the

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initiative’s aim of promoting connectivity with the African continent. But in consideration of the openness and flexibility of the initiative, including Africa is a reasonable and desired option. It will offer a valuable opportunity for China and Africa to share development opportunities and further reinforce their relations.

The dearth of clear references in the vision documents on the extent and the possibility of Africa’s participation in the initiative is an indication that the inclusion of Africa was initially not foreseen and that details remain to be defined. In this context, it is not surprising that China’s latest Policy Paper (Xinhuanet, 2015) published in December 2015 does not include any references to the Belt and Road Initiative. The only reference incorporated in the FOCAC Johannesburg Action Plan (2016–2018) is that the ‘African sides welcome the Chinese side’s cham- pioning “the 21st Century Maritime Silk Road”, which include the African continent, and that China and Africa will foster mutually beneficial partnership in the blue economy’ (FOCAC, 2015c). This is now the only Pan-African statement that allowed Africa to consider itself a part of the Maritime Silk Road. Since 2013, China’s state media

Figure 6. OBOR Nations Population Share by Region, 2017. Source: Author’s personal illustration.

Figure 5. One Belt and One Road Initiative by Region. Source: Author’s personal illustration.

Table 2. List of the 67 nations along the OBOR’s route. Region Countries

Africa Djibouti, Egypt, Kenya East Asia China, Mongolia Southeast Asia Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Timor-Leste, Vietnam Central Asia Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan Middle East Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Palestine, Syria, United Arab

Emirates, Yemen South Asia Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka Europe Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia,

Hungary, Latvia, Lithuania, Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey, Ukraine

Source: Helen Chin & He (2016) and Mwatela & Zhao (2016).

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has published numerous diverse Belt and Road Maps with varying indications of Africa’s participation in the Maritime Silk Road. Most of the maps include a route through the Indian Ocean towards Kenya, passing Somalia, Djibouti, Eritrea, Sudan and Egypt before continuing in the Mediterranean Sea.

Other maps display the Maritime Silk Road leading from the Indian Ocean directly to the Red Sea through the Suez Canal into the Mediterranean Sea. In most cases, these maps do not provide any indication on ports along the African part of the Maritime Silk Road. However, the latest version published by the Chinese news agency Xinhua (see Figure 7) displays that the route has reached Africa’s east coast, specifically an area that is part of modern Kenya – Nairobi, as a part of the Maritime Silk Road.10 This is consistent with the most historical link to Africa that relates to China’s fourteenth-century maritime fleets, which initially saw the bilateral trade between China and Kenya during the early fifteenth century (Wekesa, 2015). Also, with the violence between North and South Sudan being far over, the need for an alternative route to export oil to China is needed.11 These facts help clarify why Kenya is China’s nominated African hub for the One Belt, One Road (OBOR) initiative. Notably, the other cities on the map are port cities, while Kenya is nearly 500 km further than the closest port situated in Mombasa. This is not only an indication that China sees Kenya as part of the Belt and Road Initiative, but also that the new $3.8 billion railway and economic corridor that China built in partnership with Kenya from Mombasa to Nairobi is part of the Maritime Silk Road.

As a relatively large regional and coastal economy with a port of East African significance (in Mombasa), Kenya is also important for reasons of economic geography (Johnston, Morgan, & Wang, 2014). Chinese-invested rail plans intend to better link Kenya and its ports to a number of proximate landlocked economies, including Burundi, Rwanda, Uganda and South Sudan, unlocking intra-Africa as well as broader international trade opportu- nities in the process. In July 2016, neighbouring and Coastal Tanzania also signed a US$7.6 billion loan agreement with the Export-Import Bank of China (Johnston, 2016). The loan is for the construction of a standard gauge rail corridor that will similarly connect Tanzania with regional neighbours Congo, Uganda, Rwanda and Burundi. Such in fact is the scale of Africa’s need for infrastructure and innovative funding for it – and China’s capacity and will- ingness to deliver it – just the kind of investment projects being intended by OBOR.

Figure 7. Map of the Silk Road Economic Belt (Silk Road) and Twenty-first Century Maritime Silk Road (Maritime Silk Road). Sources: Xinhua.21

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3.1. Some proposed potential members of OBOR initiative

3.1.1. Mozambique

With a population of about 30 million and a GDP of 3.3, down from 6.6 in 2015 extending membership to the country will make economic sense. Mozambique’s two-way trade figures with China have shown a recovery. In the first 5 months of the year, imports and exports totalled 748 million US dollars, which represents a growth of 6.4% compared with the same period in 2016. Whilst imports from China fell 1.35% to 517 million dollars, exports grew by 29.11% to 231 million dollars. This makes Mozambique the fourth largest Lusophone trading partner with China – behind Brazil, Angola and Portugal. China’s investment in Mozambique has also been growing at a very fast pace and in cumulative terms is approaching US$6 billion. The pace of growth of Chinese investment in Mozambique has been very fast, with 100 Chinese companies operating in the country in diverse areas such as energy, agriculture, fishing, real estate, building materials, tourism, buses, telecommunications, infrastructure and trade. Chinese investment in Mozambique aims to help Mozambicans to be self-sufficient, both in the industry and in agriculture. In Mozambique, a consortium of Chinese companies has announced to invest USD 1 billion to construct a new port in Maputo (Macau Hub, 2016). With all these positive signs and development, China intends to view Mozambique as a natural extension of the twenty-first century Maritime Silk Road and bolster cooperation with Mozambique in maritime economy and port-neighbouring industrial parks, as well as transfer its advanta- geous production capacity and mature technologies to Mozambique (MOFA, 2016).

3.1.2. South Africa

The Trade Law Centre data display that none of China’s top ten trading partners in Africa is a member of the OBOR initiative. Even China’s main trading and fellow BRICS partner South Africa (NBSC, 2015). Most recent reports, however, indicate that South Africa may also be part of the Maritime Silk Road since South Africa and China have signed a Memorandum of Understanding (MoU) with regard to the One Belt One Road initiative (People’s Daily Online, 2016). With a population of over 55 million, it will make economic sense to include the second biggest economy in Africa–South Africa. Since 1998, China–South African relations have passed through three different stages: the relationship began as a limited partnership defined by a recognition of common inter- ests; then evolved to a maturation of strategic economic and political ties; and finally settled on its current ‘comprehensive strategic partnership’ that has developed into a strong trade relationship and heightened the nations’ common interests. China’s relationship with South Africa has deepened significantly in recent years, as shown by a raft of economic and political proclamations.

The year 2014 was dubbed ‘the year of South Africa in China’. It was followed in 2015 by the ‘Year of China in South Africa’. Now South Africa has been upgraded to China’s lofty ‘Strategic Comprehensive Partner’. In 2009, South Africa become China’s largest trading partner in Africa, accounting for one-quarter of China’s trade with African countries, with bilateral trade reaching US$16.06 billion, a 56% increase in 2008.12 By 2014, bilateral trade had reached US$24.16 billion, with South African exports to China totalling R94bn; and imports from China total- ling R167bn.13 From 1996 to 2011, bilateral trade grew from 1.3% of total South African trade to over 13%.14

Chinese scholars stress that Chinese–South African trade is based on the ‘comparative advantage’ of each country and that China’s domestic labour supply and manufacturing capacity complements South Africa’s rich mineral resources and well-developed mining economy.15 China has become a major investor in South Africa’s key indus- tries, like mining and financial services. The participation of South Africa will, thus, make economic sense as it expands the Maritime Silk Road beyond its ancient route to the South. South Africa has a broad portfolio of proj- ects with China in the area of infrastructure and power projects as well as the monetary sector and industrial partnership.

3.1.3. Nigeria

Another potential member of the OBOR initiative is Nigeria. Nigeria is a regional economic giant that plays a cen- tral role in increasing China’s engagement in Africa. Nigeria is a resource-endowed nation with a population of over 180 million people; Nigeria has a young and growing diverse population. The favourable demographics advantage makes Nigeria a consumer country. China has been embraced with large arms by Nigeria and has con- tinued to expand its trade relations in the country. Nigeria became China’s third largest trading partner in Africa in 2014. According to the statistics of the General Administration of Customs of China, total bilateral trade volume

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between China and Nigeria, from the year 2004 to 2015, recorded at 101 billion dollars. Furthermore, China and Nigeria bilateral trade from January to July 2016, stood at $6.46 billion. This represented 7.6% of the total trade volume between China and Africa and 36.4% of total trade volume between China and ECOWAS (Akingbade, 2016). On the part of investment, China invests $2.5 billion in the Nigerian’s economy especially in areas such as petroleum, solid minerals, telecommunications, broadcasting, construction materials and agriculture. Also, the China Railway Construction Corporation signed a USD 12 billion contract to build a 1400-km railway along Nigeria’s coastline, linking Lagos with Benin and Cameroon. Furthermore, the China Railway Construction Corporation has recently completed the Abuja-Kaduna railway, which is the first phase of a larger railway modern- isation project connecting Lagos with Kano in Nigeria’s north. Other large Chinese-invested infrastructure projects include the port of Lekki and the adjacent Lekki Free Trade Zone. Nigeria possesses some economic significance relating to the Lekki port that is expected to be completed in 2018. When completed, the massive port facilities may function as a trading centre expanding the Maritime Silk Road further to the West on the continent of Africa (United Nation Development Programme China, 2015b). China is, therefore, one of the few countries that can assist Nigeria to bridge her huge financing gap, especially for infrastructural development. However, Nigeria was not given priority from China in terms of membership. The reason might be the snowballing administrative and business cost coupled with the rising security concerns may be among the reasons Nigeria has not been given top priority by the Chinese.

3.1.4. Angola

Over the past year, the Angolan economy has shown signs of slowing down. Gross Domestic Product (GDP) grew by 2.8% in 2015, down from 4.8% in 2014, mostly as a result of the drop in oil prices (World Bank, 2016). With a population of over 26 million, Angola can be a potential member of the OBOR initiative if membership is extended to the country. Beyond the usual political rhetoric, Angola has become a core stra- tegic partner of China in Africa. It has also been amongst one of the largest recipients of Chinese investment in Africa. Angola is strategically important to China for a number of reasons. First, its vast oil deposits tie in with China’s national oil corporations’ designs for pursuing oil assets to support its search for securing global energy security. Second, as an African west coast economy, Angola has great potential as a gateway to the region and most importantly to central Africa – in particular, the DRC – where Chinese mining investment is currently being negotiated. Third, Angola is one of the most fertile agricultural regions in Africa offering great potential for commercial agricultural development. China Development Bank has already announced a US$1 billion fund for investment in this sector. Angola received the largest share of China’s loans between 2000 and 2014,16 is China’s second largest trading partner (NBSC, 2015) and number one oil exporter on the con- tinent.17 Angola has further been selected by China as a China–Africa industrial cooperation priority country, which makes it likely that industrial cooperation will significantly increase under the FOCAC Johannesburg Action Plan (2016–2018). Being a Lusophone economy, it is also less politically exigent for China to build a presence in Angola compared with Francophone and Anglophone African countries where the strategic inter- ests of the former colonial powers are far more entrenched than in the Portugal-Angola case. The keyword here is potential. Angola’s economic progress will be underpinned by political stability and effective govern- ment management. China has recognised this potential and is investing accordingly. Due to its investment, Angola has become one of China’s largest trading partner in Africa and its investment will continue to scale rapidly as a result. Based on this, with Angola inclusion, the OBOR initiative will further enlarge from its ancient route, venturing into the Atlantic (WWF, 2016).

3.1.5. Democratic Republic of Congo (DRC)

The Democratic Republic of the Congo (DRC) is the largest country in Francophone Africa, with a population of over 82 million. The country has vast natural resources and spans a surface area of 2.3 million square kilometres. After sharply increasing to almost 9% in the period 2013–2014, the real gross domestic product (GDP) rate decel- erated in 2015 and the growth rate is not expected to exceed 2.5% in 2016. On 27 May 2011, in Brussels, China and the Democratic Republic of the Congo (DRC or Congo) signed an $9 billion-dollar economic cooperation agreement to increase the trade in natural minerals between both countries. Today, China is the DRC’s largest for- eign investor. With China’s increasing need to intensify development and growth, China sees the DRC as both a

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development partner and a beneficiary of its economic investments abroad. In fact, the DRC government repre- sentatives assert that the China’s policies for economic investments generate ‘tangible development’. The China Road and Bridge Corporation is building a new port at Pointe-Noire, Congo’s economic capital. The port construc- tion plans include an industrial park as well as an oil refinery and a power plant. China’s plan of building a new railway line would most likely encompass the modernisation of the existing PointeNoire-Brazzaville line and per- haps also the line branching off to Mbinda, which connects Congo to Gabon (CRBC, 2016). So, with all these development between both parties, the inclusion of the Republic of Congo into the OBOR initiative will make economic sense, because the Maritime Silk Road would, therefore, enlarge further up North from Angola into the geostrategically vital Gulf of Guinea.

3.1.6. Togo

Togo, a small nation in West Africa, is seeking to strengthen bilateral relations with China with the hope of becoming China’s staging point in West Africa. Similar to the other countries, China has been active in Togo’s transport infrastructure which is in line with the aim of OBOR – connectivity. Togo can be a potential member as well. Togo has an estimated population of 7.3 million inhabitants, with a demographic growth rate of about 3%. Togo’s recent economic performance has been relatively robust: over the past three years, GDP growth has averaged approximately 5%, higher than most Sub-Saharan economies. The main drivers of the economic growth have been agricultural production and the extractive industries, as well as trading activ- ities. Agricultural production, which accounts for approximately half of the country’s GDP and over 60% of its employment, benefitted from good climatic conditions. Inflation has remained under control, averaging 2.1% in 2016 thanks to a prudent monetary policy followed by the low food prices. China and Togo are highly complementary economically and enjoy broad prospects of cooperation. Togo is the gateway to West Africa, having a geographic advantage and great potential in the development of industries of transit trade, cotton, and phosphate. Togo is implementing the strategy of ‘Development Channel’, aimed at developing the econ- omy and accelerating agricultural modernisation, which has attracted the attention of Chinese investors. A number of renowned Chinese businesses such as CACC, Huawei, ZTE and WIETC have already started invest- ment there. Chinese businesses have strong wish to participate in infrastructure construction and industrialisa- tion process in Togo. Chinese businesses investing in Togo carry out a more localised operation and make their due contribution to Togo’s economic and social development. So, if membership is extended to the country, it can be the anchor point in West Africa.

3.1.7. Tanzania

The East African nation of Tanzania has an estimated population of 50 million as of 2016. The country has main- tained relatively stable, high growth over the last decade (averaging 6–7% per annum). Tanzania and China have enjoyed relatively solid economic and political relations for many years now. China hosted the Belt and Road Forum for International Cooperation in May 2017. Tanzania was invited, not only because it is a historic and nat- ural part of the Maritime Silk Road, and it is a landing point of the Belt and Road in Africa. More significantly, Tanzania was invited because of its special traditional friendship with China built since history. In 2015, the Chinese government selected Tanzania as a pilot country for China–Africa capacity cooperation. Currently it is the largest trade partner and project contractor of Tanzania, and a major source of FDI. A large number of Chinese state-owned and private firms with robust capital, technical and management capacity are taking part in Tanzania’s industrialisation.

The results of China–Tanzania cooperation can be seen in various sectors of the economic development and all the aspects of people’s livelihood in Tanzania. The highly complementary national development strat- egies are an internal impetus to push forward the Belt and Road Initiative. President Magufuli is leading Tanzania people to forge ahead on the road of building a middle-income nation by improving infrastructure, expanding economic and trade cooperation with oversea nations, fostering industrialisation, invigorating agri- cultural industry and other strategic measures. All these stated development strategies are well in line with the concept and content of OBOR Initiative. So, it will make economic sense if membership is extended to Tanzania because it will bring significant influence to the OBOR initiative. This is as a result of the Tanzania–Zambia railway constructed by the Chinese in the 1970s, which stands as a great historical

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significance for China–Africa cooperation and could offer a chance for connecting landlocked nations like Zambia to the Maritime Silk Road.

The successful execution of the initiative all through the continent of Africa will have an added impact of developing intra-Africa trade. Currently, trade among nations in Africa stands at around 12%, which is the lowest compared to 60% in Europe, 30% for ASEAN and North Africa 40%.18 The multiplier effect that the OBOR initiative has would most definitely drive the continent of Africa into the growth path. Sun19 asserts that the inclusion of Africa in the OBOR strategy will generate more attention, emphasis and, most significantly, more government money to bolster the policy’s execution. In this way, the move could offer extra momentum to bolster the scope and depth of China’s economic initiative in the Africa continent. The membership of Africa countries into the OBOR initiative will potentially bring significant opportunities for China and Africa to work together for the better development of China–Africa cooperation.

4. Is reviving Africa’s investment environment the key for more slot?

Many African countries have a great deal to gain from OBOR, but there are a number of risks in investing in such markets, including: foreign exchange volatility; risk of recession; price instability; ‘crowding-out’ of private sector investment; legal and regulatory issues; dearth of pre-existing basic infrastructure; corruption; bureaucratic issues; and poor transparency. Also, several African nations have relatively weak governance systems. So, operating risks are higher in such environments, project management could be fraught, and the financial returns hampered.

In order to slot in more African nations into the Belt and Road Initiative, the continent needs to revive its investment environment. As more African nations have expressed interest, China has responded, at least rhetoric- ally, in favour of their inclusion. Yet this will not be enough. Support from African nations is key. This will success- fully hinge on these African nations providing sufficient security to protect the investment environment. Establishing a business-friendly climate is a key step towards the development of a vibrant private sector that is crucial for Africa’s transformation and the success of OBOR in Africa. The private sector does not come to Africa to give aid – they come to Africa to do business, but through the business they achieve development goals. A vibrant private sector is the engine of productivity, economic growth and higher incomes. The private sector gen- erates 90% of Africa’s employment, two-thirds of its investment and 70% of its output, almost 70% of African nations have improved their general quality of governance in recent years (AfDB, 2014). Also, a large and differen- tiated formal private sector which contributes taxes and expects services can be a strong advocate for policy reform and a driver of good governance. Establishing a virtuous circle by improving the business environment and permitting private sector growth can, in turn, strengthen governance reforms.

While seen for a long time as a risky place to do business, the last decade has put the continent solidly on the map of international investment. Since 2000, close to US$46 trillion of foreign direct investment has flown into Africa, with the annual rate rising five-fold. The success has been matched with a policy stance more favourable to businesses. Africa has made considerable headway in promoting a more business-friendly environment. The cost of business start-up has fallen by more than two-thirds over the past eight years, while the time required for business start-up nearly halved. More broadly, African governments will need to do more to foster an enabling environment for projects to succeed, especially if, as envisaged, the private sector plays a significant role in the Belt and Road projects. Although Africa’s investment environment has improved over the past decades and is among the fastest growing economies in the world (AfDB, 2014). However, improving the investment climate from what it is nowadays in the continent can help begin the snowballing effect and stimulate economic growth in Africa.

The policies and means of attracting both foreign and domestic investment are (a) setting relevant macroeco- nomic policy frameworks and providing the public sector with a proper role. African countries can reduce risk through macroeconomic stability. This means that inflation has to be controlled, exchange rates stabilised and interest rates set at realistic levels; (b) defining and implementing proper incentive packages. Investment incentive systems are the main policy instruments that can directly influence the volume and allocation of investment. In view of the competitive global investment environment, African governments should undertake a complete over- haul of their investment incentive packages, taking into account the experiences of other developing regions; (c) African countries are widely diverse, ranging from energy-resource rich to some of the world’s most energy poor countries. In terms of Infrastructure development, power is one of the main challenges facing Africa across all aspects of the Economic Value Chain. According to the International Energy Agency (IEA), however, only 45% of

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Africa’s population had access to electricity in 2014, compared with 80–100% in other parts of the developing world (see Table 3),20 increasing public investment towards human development and infrastructural development. The budget allocation process should take into account the priority accords of these two key pre-requisites to enhanced investment flows.

Due regard should be accorded to the social rate of return in these domains which should be seen as partici- pating in productive activities (and not as unproductive investments); (d) Building reliability through political sta- bility, predictable sets of rules and regulations and continuity in the supply of foreign currency for input imports and transfers; (e) enhancing financial intermediation. The banking and non-banking financial systems should be shaped to play their role in promoting productive investments and providing efficient services to investors and corporate activities. The speculative bias of current credit and monetary policies should be looked into and rem- edied. Banks should be urged to consider funding productive investments. Investment banks should also be encouraged; (f) improving the world's perception of Africa: abolishing the continent's negative image. Where the lack of information is the cause of such stereotyping and the consequent shying away from Africa by potential investors, a general information campaign could make a great difference. The benefits of such campaign could be immense. First, it could convince potential investors to pay more attention to Africa. Second, it could influence the behaviour of African governments in creating conditions attractive to investors. The record of the modern mass media and the experience of South-East Asia show that these objectives can be achieved. If the investment environment can be revived for the Chinese and other investors from other part of the world, then the OBOR ini- tiatives will be able to offer a strategic opportunity to dock development strategy with Africa’s Agenda 2063.

4.1. Positive and negative impacts of OBOR initiative

On his first visit to Africa as president in early 2013, speaking in Tanzania, China’s President Xi Jinping called for China and Africa together to realise a fast track of ‘comprehensive development.’ Since then, growth in China has slowed, increasing the importance of outbound growth to China’s own economic transformation. This piece has provided an overview of the logic of broad economic complementarity that underpins OBOR in Africa: that of a large per-capita-resources-scarce developing economy with an old population and that of a large resource-rich developing continent with a mostly young population; and between a country with excessive savings and infra- structure capacity, and a continent which in aggregate relatively lacks both. The OBOR initiative represents an agenda that broadly seeks to take ‘win–win’ advantage of that complementarity. Despite the hazards and uncer- tainties, the projects not only has substantial financial support but also offers its partners numerous opportunities for mutual gain.

Several African nations need to improve their infrastructure stock. Pressures on the existing stock continue to mount as population rise, urbanisation continues, and ongoing industrialisation and economic development requires backing from infrastructure. These factors, combined with the need to catalyse future economic growth with high quality infrastructure, necessitate ongoing investment. For years, Gabon, a West African country, had wanted to improve the transport network of its crumbling French colonial buildings and dilapidated roads. Things change recently when China Road and Bridge Corporations (CRBC) won the contract to build the first overland route from the capital city Libreville to Port-Gentil with the nation’s deepest harbour. The once impossible road

Table 3. Electricity access in 2014 – regional aggregates.

Region Population without electricity (millions) Electrification rate (%)

Urban electrification rate (%)

Rural electrification rate (%)

Developing aations 1185 79 92 67 Africa 634 45 71 28 North Africa 1 99 100 99 Sub-Saharan Africa 633 35 63 19 Developing Asia 512 86 96 79 China 0 100 100 100 India 244 81 96 74 Latin America 22 95 98 85 Middle East 18 92 98 78 Transition Economies & OECD 1 100 100 100 World 1186 84 95 71

Source: IEA, World Energy Outlook, Electricity Access Data Base (IEA: 2016). Retrieved from http://www.worldenergyoutloo- korg/resources/energydevelopment/energyaccessdatabase/ (Accessed 2 June 2017).

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through seemingly impassable jungle and marshland is now a reality, and the economic and commercial value- added from this route stacks up. Irrespective of this infrastructure development in Gabon, several African nations still lack the financial capacity to develop their infrastructure through public funds, and the private sectors is unable to meet the shortfall.

Better integrating the private sector into the construction industry, rather than relying predominantly on the public sector, can bring a number of benefits, including mitigating the financing burden placed on the govern- ment; snowballing productivity and improving the quality of public services; and facilitating knowledge transfer and sharing of the best-practice experiences and expertise from the private to public sector. A greater number of such funding arrangements can be anticipated for construction projects across the Silk Road. Certainly, funding model used will be particularly well suited to building capacity and undertaking the required infrastructure development.

There are several necessary conditions for private sector financing to work alongside public money. These include transparency around the way the money is allocated, a suitable balance between the public financing and the private financing, obvious returns, a robust regulatory system that is able to work across borders, and conduct that everybody can recognise as being close to market principles. Without these conditions, the private sector may be reticent to invest, dampening the spill-over effects.

Besides infrastructural investments in ports, high-speed rail, power generations and other utilities, there are ancillary private-sector investment opportunities in real estate, telecoms, e-commerce, financial tourism, education, creative industries and green technologies. All these opportunities come at a time of rapid internationalisation of the renminbi, including currency swaps, trade-financing deals and offshore bond issuance. The currency has been included in the IMF’s basket of reserve currencies. Numerous banks and financial institutions across African nations are salivating for a greater slice of the action.

Chinese firms, both state-owned and private, are able to go global and export their spare capacity in building infrastructure projects in Africa. Chinese companies are able to provide competitive pricing and their prices are usually lower than Western firms. Chinese companies are also winning lucrative service contracts, once the domain of Western and Japanese companies, to run those completed infrastructure. On the contrary, there are risks and worries about shoddy products and services but the quality question is dispelled after witnessing the 19,000 km high-speed rail network and other mega infrastructure projects undertaken by Chinese firms over the last decade. The perceived risk of low-quality Chinese construction is a thing of the past. Nowadays, Chinese firms are aware that their reputation is in line globally. For example, in March 2012, a military ammunition depot exploded in Brazzaville, Congo, killing over 261 people and levelling entire buildings in a blast radius of 3 km. When the dust settled, one building complex just 50 m away from the epicentre of the blast stood intact shelter- ing a local community living behind it from the worst of the explosion, and the apartment compound was built by Beijing Construction Engineering Group.

Another worry is that of the long-term employment advantages to the host countries by awarding Chinese companies to manage infrastructure projects. The way the Chinese operate is that they can mobilise capital and labour rapidly to get things done, but Chinese companies are aware of the job issue and will earmark a fair share of the job opportunities to local inhabitant. For instance, the overland road built by China Road and Bridge Corporation in Gabon employs around 1000 local inhabitants and 300 Chinese inhabitants.

5. Conclusion

OBOR is a major programme launched by the Chinese government in 2013 with many goals: to overcome domes- tic overcapacity in many industrial sectors through expansion on foreign markets, to support China’s economic development and growth in its transition from an investment-led model to a consumption-based economy, and to improve the security of trade routes, especially for energy products. It is particularly focussed on infrastructure development. The One Belt, One Road initiative builds upon two decades of intensifying China–Africa economic ties. However, as it is, the Belt and Road strategy in Africa, when examined in terms of the significance that China puts in Africa, it does not reflect the optimism that China–Africa cooperation has attracted recently. It displays a discord between the rhetoric about the importance and growth of the relationship. There are only three African nations out of the 67 nations involved in the project; this does not give an optimistic picture.

This ambitious plan, alongside Africa’s independent growth performance, is drawing worldwide attention to the continent’s vast development promise. And since most OECD members and even those of the G20 are home

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to aging populations, increasingly not only China is awake to the benefits of investing in the untapped potential of lesser-developed and youth-filled economies, including in Africa. For African policymakers and entrepreneurs, whether China or another investor supports the development of local infrastructure or opens a textile factory ultimately may prove less important than the fact of negotiating the best and most transformative deal for local development – as China itself has so powerfully demonstrated over recent decades. In exploring ways to best util- ise OBOR’s immense offerings and those of other investors, African governments should be hard-nosed and ori- ented towards implementation and sustainable development in first identifying and then agreeing the best policy mix and governance structures for realising African wins. In summary, there are more benefits to be shared among countries involved in the One Belt One Road initiative, and the inherent risks, if properly managed, will not hinder the progress of world infrastructure upgrading.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. What Did China Accomplish at the Belt and Road Forum? The Diplomat. May 16, 2017. Retrieved from: http:// thediplomat. com/2017/05/what-did-china-accomplish-at-the-belt-and-road-forum/

2. Ibid. 3. See Charles Clover and Lucky Homby, “China’s Great Game: Road to a New Empire.” Financial times, October 12, 2015.

Retrieved from https://next.ft.com/content/6e098274-587a-11e5-a28b-50226830d644#axzz3pCLXHStT. 4. “China’s ‘Belt and Road’ opens up new business in Africa — for both the U.S. and China’. The Washington Post. 24 July,

2017. Retrieved from: https://www.washingtonpost.com/news/monkey-cage/wp/2017/07/24/chinas-belt-and-road-opens- up-new-business-in-africa-for-both-the-u-s-and-china/?utm_term¼.8e8fa99394dd.

5. “What crisis? 16 of China’s biggest projects in Africa – It’s all billion-dollar territory in here.” Mail and Guardian, 19 September, 2015. Retrieved from www.mgafrica.com/article/2015-09-18-multi-billion-dollars-deals-chinas-27-biggest-active- projects-in-africa

6. See Charles Clover and Lucky Homby, “China’s Great Game: Road to a New Empire.” Financial times, October 12, 2015. Retrieved from https://next.ft.com/content/6e098274-587a-11e5-a28b-50226830d644#axzz3pCLXHStT.

7. The ‘Belt and Road Initiative’ Is Not ‘China’s Marshall Plan’. Why Not? The Diplomat, January 26, 2016. Retrieved from: www.thediplomat.com/2016/01/the-belt-and-road-initiaive-is-not-chinas-marshall-plan-why-not/

8. “Why African Nations Welcome China”. The Diplomat, 16 February 2017. Retrieved from www.thediplomat.com/2017/02/ why -african-nations-welcome-china/

9. Yun Sun, Inserting Africa into China’s One Belt, One Road Strategy: A new opportunity for jobs and infrastructure. Brookings Institute, 2March 2015. Retrieved from www.brooking.edu/blog/africa-in-focus/posts/2015/03/02-africa-china- jobs-infrastructure-sun

10. Kenya is also the only African country included in a recent Xinhua New promotional video explaining the Belt and Road Initiative (see https://twitter.com/XHNews/status/709752281692921856

11. Zhou (2014) argues that the 15 months long standoff caused by disagreement on transit fee remittance between South and North Sudan affected oil production and export to China

12. He, ‘When BRIC becomes BRICS’; Wang, ‘South Africa’s role in the BRICS and the G-20’. 13. ‘Media remarks by the Minister of International Relations and Cooperation, Ms Maite Nkoana-Mashabane’ 14. Franz Crul, China and SA on their Way to Sustainable Trade Relations (Stellenbosch: Tralac, May 2013), available at: http://

www.tralac.org/files/2013/05/S13IP022013-Crul-China-and-SA-on-their-way-to-sustainable-trade-relations-20130529-fin.pdf (accessed 15 October 2015).

15. Wang, ‘South Africa’s role in the BRICS and the G-20’ 16. 13% of China’s global oil imports came from Angola in 2014 (see http://www.statista.com/statistics/221765/chinese-oil-

imports-by-country). 17. Five 13% of China’s global oil imports came from Angola in 2014 (see http://www.statista.com/statistics/221765/chinese-

oil-imports-by-country). 18. African Union and SADC discuss intra-regional trade plans. Bridges Africa, International Centre for Trade and Sustainable

Development.15 June 2014. Retrieved from www.ictsd.org/bridges-news/bridges-africa/news/african-union-and-sadc- discuss-intra-regional-trade-plans

19. Yun Sun, Inserting Africa into China’s One Belt, One Road Strategy: A new opportunity for jobs and infrastructure. Brookings Institute, March 2, 2015. Retrieved from www.brooking.edu/blog/africa-in-focus/posts/2015/03/02-africa-china- jobs- infrastructure-sun

20. World Energy Outlook, Electricity Access Data Base (IEA: 2016). Retrieved from http://www.worldenergyoutlookorg/ resources/energydevelopment/energyaccessdatabase/accessed June 2, 2017, http://www.worldenergyoutlook.org

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21. Xinhua Insight: West China seeks fortune on modern Silk Road. Xinhua, 15 May 2016. Retrieved from: http://news. xinhuanet.com/english/2016-05/15/c_135360904.htm

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