China’s Obor could keep African economies moving
In the first of a two-part series, Doug Tsuruoka finds experts bullish on the opportunities for African nations from Beijing's investment drive; however, local support will be key
It’s a ripple effect that could transform Africa’s economies — but it will take time to gather force.
China’s bold One Belt One Road (Obor) initiative to forge an integrated economic zone that stretches from Central Asia to Europe has an African component that could energize nations such as Nigeria and Tanzania at a time when they need a lift. Growth in sub-Saharan Africa hit its lowest level in two decades last year due to unstable oil prices, inflation and political volatility.
Analysts say Obor’s impact could be sizable in Kenya and all over East Africa, where the focus on a supporting Maritime Silk Road that touches the Indian Ocean region is spurring investment from Beijing to facilitate East-West trade. Such activities will complement strong Chinese trade ties with Nigeria, Angola and South Africa.
Obor has a firm beachhead in Africa. China surpassed the US as Africa’s largest trading partner in 2009. Chinese companies are already active on the continent, where over a million Chinese workers and immigrants live. State-related entities and businesses from China have financed and built infrastructure projects for various African nations, including railways, ports, roads, dams and telecom networks.
“[Obor] is something that’s already happening in Africa,” says David Dollar, a senior fellow at the Washington, D.C.-based Brookings Institution. The former World Bank official estimates that China currently finances about US$10 billion a year in infrastructure investment in Africa. “That’s significant. It’s about a third of all external financing for infrastructure projects in Africa,” Dollar said.
He notes that Obor’s maritime link will benefit Africa the most when shipping routes from the South China Sea and the Indian Ocean are factored in. “There’s a need for maritime infrastructure all along these routes and East Africa is definitely part of that,” Dollar said.
Is there a danger that China will neglect the Africa portion of Obor in favor of Central Asia and Europe? “No,” Dollar said. “Sending goods by land from Central Asia to Europe is expensive and not very practical.” Container ships are much more efficient, he says. This is why the idea of expanding East Africa’s ports dovetails with Obor.
A May report by professional services firm Ernst & Young said China has invested a total of US$66.4 billion in 293 foreign direct investment projects in Africa since 2005, creating 130,750 jobs.
“(Obor) could prove to be a win-win situation for both partners, positioning Africa as a suitable avenue for China’s excess savings and infrastructure capacity,” the report said.
Currently, Africa ships oil, iron ore and metals to China and receives machinery, transportation, communications equipment and manufactured goods in return. Ernst & Young estimates that Chinese exports to Africa weighed in at US$82.9 billion in 2016 vs. US$54.3 billion in imports.
Obor’s expanding scope
Obor’s benefits for Africa were detailed in a May article published by the South African Institute on International Affairs (SAIIA). The piece, by policy experts Yu-Shan Wu, Elizabeth Sidiropoulos and Chris Alden, noted how China’s activities are expanding outward from East Africa and African states are showing increased interest in joining the Chinese initiative.
“With financial ambitions of this magnitude, there is no doubt that (Obor) will have a ripple effect on the continent,” the authors wrote. “Economically speaking, [Obor] could channel China’s overcapacity in areas such as infrastructure development to Africa, a necessary component for its industrialization.”
As part of a wider integration, Obor is also expected to forge economic links between Africa and both Europe and Southeast Asia. Chinese capital and technology also promise to kick-start industrialization, which is uneven and lags in many African countries.
“There is the promise of a more equitable global order compared to the current structure that neither Africa nor China helped build,” the authors pointed out.
But Obor’s promise must still grapple with African realities. Unstable security and investment environments made worse by the rise of Radical Islam are deterring Chinese and other foreign investors. Transport, energy and communications infrastructure in many parts of the continent are still inadequate to sustain African participation in an ambitious plan like Obor. And Africa’s private sector needs to rise to a level where it can partner with Chinese firms in construction, manufacturing and other ventures, analysts say.
“The reality on the ground is that there are many existing challenges for these Chinese projects,” said Africa analyst Janet Eom, noting a lack of infrastructure and skilled labor at local level. Eom is a research manager for the China Africa Research Initiative (CARI) at the Johns Hopkins School of Advanced International Studies in Washington, D.C.
“It remains in the hands of Africa to make the necessary linkages between national, continental and global initiatives”
On the Chinese side, Brookings’ Dollar says a lack of transparency on Beijing’s financing and other plans for Africa makes it difficult to assess Obor’s real impact on the continent.
Actual African interest in Obor also remains spotty. Kenyan President Uhuru Kenyatta was the only African head of state to attend May’s Belt and Road Summit in Beijing, though lower-ranking ministers were present from Egypt, Ethiopia and Tunisia. This compares with the 28 leaders from other countries, including Vladimir Putin of Russia, who attended the confab.
Analysts say continuing and consistent political support from African governments is key if Obor is to succeed on a regional basis.
“It remains in the hands of Africa to make the necessary linkages between national, continental and global initiatives,” the SAIIA article said.
Doug Tsuruoka is Editor-at-Large of Asia Times