The China–Africa Relationship: Scope, Scale and Speed
With population set to double from 1.3bn today to 2.6bn by 2050, scaling and speeding up Africa’s infrastructure development across a wide frontier is critical to economic growth and sustainable development. China’s financing of African infrastructure and the role of Chinese construction firms as contractors in Africa have expanded significantly over the past decade. For example, China has supplied much of the ICT infrastructure underpinning the rapid expansion of the mobile telecoms industry in Africa, and is significantly increasing levels of investment through the Belt and Road Initiative (BRI). Yet as global leaders meet in Beijing at the Forum on China-Africa Cooperation, what do we know about the scale and impact of China’s investment on African development and how is the China-Africa relationship evolving.
Photo by-GovernmentZA. Forum on China-Africa Cooperation (FOCAC) Business Summit, 4 Dec 2015
What’s the Essence of the Forum on China Africa Cooperation (FOCAC)
The Forum on China Africa Cooperation (FOCAC) was established in 2000 as a Chinese initiative to facilitate China-Africa development cooperation. FOCAC holds Summit meetings every three years, alternating between China and Africa. Since its inception, FOCAC has evolved into an institutionally-grounded, multi-track process involving, for example, a forum for business and for 'people-to-people relations’ and is the overarching frame within which China’s relationships with individual African states collectively are conducted. The initiation of the FOCAC process saw a step-change in the scale of Chinese diplomatic activity. The process gained added impetus at the policy level with the publication of China's "Africa Policy" in 2006, updated in 2015. FOCAC Summits have focused on African infrastructure needs. In 2014, the Prime Minister, Li Keqiang announced a proposal to “connect up” Africa via regional roads and aviation and high speed rail networks. This speech was followed up by Chinese financing for a “Growing Together Fund” established at the African Development Bank, providing US$2bn over 10 years, and with an invitation for other partners to join in this endeavour to build a “trilateral cooperation platform” for working on connectivity in Africa. At the current FOCAC Summit in Beijing, the FOCAC infrastructure programme is being set in the context of the BRI.
How significant is China in African Infrastructure Financing and Construction
China is clearly the largest single financing source, bilateral or multilateral, for African infrastructure. According to the Infrastructure Consortium for Africa (ICA), China committed an average of US$10bn per year to African infrastructure projects over the five years 2012-2016, This compares with the nearly US$30bn per year committed by African countries themselves and some US$20bn by members of the ICA (essentially OECD countries). China’s two main “Policy Banks”, the China Export Import Bank (China ExIm) and the China Development Bank (CDB) are the most significant investors in large scale projects, such as the standard gauge rail links joining Addis Ababa and Dijbouti and Mombasa with Nairobi (to eventually link to Uganda, Rwanda and South Sudan). China has also just completed major bridges in Dar Es Salaam and Maputo and some 20 African hydro projects between 2010 and 2015, with 20 more coming on stream before 2020.
The trajectory of Chinese project finance has tracked the FOCAC three year pledges of interest-bearing loans: $20bn in 2012 and $35bn in 2015, with a reduction to $20bn, compensated by an increase in concessional finance and aid, in the recomposed financial package of $60bn just announced at the 2018 Summit.
Beyond Chinese-financed projects, the Chinese construction industry is conspicuously engaged in building a much greater proportion of African infrastructure, facilitated by the two Policy Banks and drawing on the scale and capabilities accumulated in building Chinese infrastructure. According to a recent estimate, Chinese construction companies revenues from completed projects in Africa averaged over US$50bn annually in 2013-2016. This number gives an indication of the size of China’s footprint in African infrastructure activity as a service provider. (And Chinese solar panels are the foundation of Africa’s burgeoning locally-owned, low-cost, off-grid electrification industry).
Fostering an inclusive Digital Economy in Africa
China’s large private ICT firms are driving China’s digital revolution at home and internationally, including a growing commitment to, and in, Africa. Announced and codified into the Government’s official work programme at the March 2017 National People’s Congress, the digital economy is a key pillar in the Government’s re-balancing and upgrading towards a smarter, adaptable and responsive economy.
It is a message that China is taking to the world. At the Hamburg G20 Leaders’ Summit in July 2017, President Xi Jinping called on the G20 economies to intensify efforts to support Africa's development and building of a digital economy to achieve this, he pressed for implementation of the G20 Digital Economy Development and Cooperation Initiative and the New Industrial Revolution Action Plan, agreed at the 2016 G20’s Hangzhou Summit.
What then does this mean for Africa? A recent study has detailed the digital journey being taken by African economies, highlighting the leading role played by what the study terms the “KINGS” of Africa’s digital economy, namely, Kenya, Ivory Coast, Nigeria, Ghana and South Africa. In addition to extensive bilateral ICT collaboration with African states, the cumulative body of declaratory policy agreements and action plans of the three primary multilateral fora—FOCAC, BRICS and BRI—demonstrates a consensus for helping to promote and facilitate Africa’s digital economy. China’s deepening involvement includes significant training programmes. It is fundamentally shaped by individual African states however, with much at stake in terms of the economic and political space provided by digitalisation.
New analysis of the China-Africa relationship
In new analysis of the China-Africa relationship, due to be published by the Oxford University Press next May, we will take a look at the factors behind the significant increase in China’s “market share” in African infrastructure development and its incorporation into the Belt and Road Initiative. We will also try to shed new light on why China has been so competitive in this domain over the last two decades; how China’s concepts, institutions and policies differ from those of established sources of official development finance; what are the impacts on development concepts, vocabulary and practice at the level of the G20 and the multilateral development banks; and what is the impact on infrastructure development cooperation and finance scenery in Africa, where there are many actors and coordination initiatives? Watch this space.