Obor set to impact growth of Africa’s cities, middle class
Chinese-backed infrastructure projects will play a crucial role in the continent's urbanization finds Doug Tsuruoka in the second of a two-part series on Obor in Africa
Africa’s future depends in large measure on urbanization and an expansion of its middle class. Analysts say modern infrastructure is the connective tissue that will tie both of these things together.
This is where China comes in. Chinese help in building roads, bridges, utilities and communications networks under Beijing’s One Belt One Road (Obor) initiative could accelerate the rise of cities and the development of local manufacturing on the continent.
Africa also has the world’s fastest growing middle class. Providing new infrastructure will be key to connecting this population with the new markets that China is nurturing in Asia and Europe.
Obor, moreover, is coming at a critical time. The World Bank has reported sub-Saharan Africa is gradually rebounding after falling commodity prices last year sideswiped what had been the world’s fastest growing region.
The entire continent is said to be showing signs of recovery, with regional growth projected to reach 2.6% this year after touching its lowest ebb in 20 years in 2016. But the international financial institution says the recovery remains tepid. Growth is expected to rise only modestly above population growth, at a rate that hinders efforts to boost employment and reduce poverty.
Janet Eom, a research manager for the China Africa Research Initiative (CARI) at the Johns Hopkins School of Advanced International Studies in Washington, D.C., says that most Chinese-sponsored loans between 2002-2015 went to transportation infrastructure.
“Chinese companies are executing these projects, they’re hiring African labor, they’re stimulating the local economy and the locales where these projects are are doing pretty well”
David Dollar, a senior fellow at the Washington, D.C.-based Brookings Institution, was in Africa recently and noted that most labor on the China-backed transport projects he visited was local. “Chinese companies are executing these projects, they’re hiring African labor, they’re stimulating the local economy and the locales where these projects are are doing pretty well,” said Dollar, a former World Bank official.
Eom adds that Chinese manufacturers are aiding Africa’s middle classes by opening local factories that create employment and diffuse skills and technology throughout the local economy. She says this kind of activity is expected to expand under Obor.
A cornerstone of Chinese infrastructure efforts in Kenya and East Africa was the completion in December of the 300-mile, US$3.6 billion Mombasa-Nairobi Standard Gauge Railway (SGR).
The infrastructure project is the most expensive in Kenya’s history. But it’s also the first railway to be built inside the country since British colonial times. China Road and Bridge Corporation was the main contractor and finished the project in less than four years. Ninety percent of the costs were covered by a loan from the Exim Bank of China. The remaining 10% was from Kenya’s government. An estimated 25,000 Kenyans reportedly worked on the railway.
Soon Jung Park, an adjunct professor with the African Studies Program at Georgetown University, says the SGR’s completion seems to have been well received locally, though “there have been controversies around environmental impacts.”
The New York Times published a very critical story on SGR on June 9, likening it to a “Lunatic Express” and questioning if Kenya can repay the Chinese Exim Bank loan.
Brookings’s Dollar says Kenya’s ability to repay “is certainly something to worry about.” But he’s also confident that Kenya will enjoy a high return from the railway project. Kenya’s government says the SGR will increase the nation’s GDP by 1.5%
A Chinese-built railway linking land-locked Ethiopia’s capital of Addis Ababa with the Red Sea Port of Djibouti also began operating this year. The US$4 billion project was built by two Chinese companies.
“Smaller, land-locked African countries are in dire need of connective infrastructure,” Eom noted.
China’s Yingli Green Energy supplied the solar panels for the South Africa’s Jasper Solar Farm, the continent’s largest solar energy facility, which opened in 2014. And Chinese firms are participating in a multi-billion-dollar extension of Egypt’s Suez Canal.
List of projects
Agreements have also been inked for a brace of huge Chinese-backed infrastructure projects across Africa. They include a Bagamoyo Port container facility in Tanzania due in 2045 at a cost of US$11 billion, a US$14.5 billion Konza Technology City in Kenya, and a US$8 billion satellite city outside Johannesburg in South Africa. China and Nigeria also agreed last year to construct an 871-mile Lagos to Calabar railway that will open in 2018.
Chinese firms are involved in building a US$100 billion Grand Inga Dam in the Democratic Republic of the Congo. Completion of what could be the world’s largest dam is slated for 2025. And China is helping too with another big hydroelectric dam in Ethiopia that will supply power to neighboring countries in North Africa.
It’s unclear how many of these projects will be completed. “There’s always a big gap between what’s announced and what’s implemented,” CARI’s Eom cautioned. But analysts say the economic impact on Africa will be considerable even if only a few of these projects are built.