8 June 2017

Africa: Is China's Belt and Road Initiative Just a Bedtime Story?

Photo: The Conversation Africa
China’s proposed one belt, one road route map.
analysis

'Once upon a time several routes led from China to central Asia and to Europe. It was called the Silk Road. People put things on camels and crossed the desert to trade with other people. Then later, ships travelled through Southeast Asia to Africa and they would bring things back to China, like giraffes.

'A few years ago China's President Xi Jinping proposed making new routes like the old routes. But even bigger. It's called the Belt and Road Initiative.'

This is 'Baba' explaining Xi's ambitious new project, in simple terms, to his young daughter in episode one of Belt and Road Bedtime Stories. This is a series of films produced - with a perfectly straight face - by the state-owned English-language newspaper China Daily to publicise the Belt and Road Initiative (BRI), previously known as One Belt One Road.

Though Xi announced BRI in 2013, the bedtime stories were transmitted on the eve of the BRI Forum which Xi hosted in Beijing last month to officially launch the project. About 110 governments and international organisations attended.

China could funnel investments worth US$1 trillion into BRI-participating countries

The 'belt' roughly follows the old overland Silk Road which Marco Polo pioneered in the 13th Century, linking China to Europe. The 'road' follows the ancient maritime Silk Road from China, through Southeast Asia and then across the Indian Ocean to East Africa and northwards through the Red Sea.

So is the BRI a romantic bedtime story to lull the world into a sense of false security as China creates a Eurasian trading bloc and zone of influence across the eastern half of the planet - to rival the US-dominated transatlantic zone?

Is it just a way for China to get rid of its immense surplus productive capacity and labour and to create new markets for its exports? Is it a way to externalise floods of renminbi to try to establish the Chinese currency as a rival to the US dollar?

All these sceptical interpretations have been offered.

Or is it rather 'the most ambitious development plan in world history' as others have called it? Something like America's post-World War 2 Marshall Plan to reconstruct Europe, which could boost development across Southeast Asia, South Asia, Central Asia, the Middle East, Eastern Europe - and Africa?

Or perhaps it's all of the above, suggests Glenn Ho, China specialist at KPMG South Africa. However China sees it, he says it will create lots of economic activity in the countries along the route and should be taken seriously and exploited.

He notes that many sceptics were silenced when the first train traversed the belt between China and the UK, reaching London from Yiwu in central China in January this year, carrying T-shirts, textiles and other goods. It cut four weeks off the sea journey (though the cost was about twice as much).

At about the same time, the first oil was being pumped from Kyaukphyu port in Myanmar to Kunming, capital of China's Yunnan province. The new pipeline bypasses the sea route through the Straits of Malacca and South China Sea, both strategic bottlenecks, through which 80% of China's oil passes.

These two early projects epitomise vital aspects of the BRI, the trade dimension and for China, the security dimension.

A recent Credit Suisse report has suggested that China could funnel total investments of US$502 billion into infrastructure projects in countries participating in the BRI, though some put that figure as high as US$1 trillion. These projects include power plants, solar farms, motorways, bridges, ports and high-speed rail links.

This will come from a US$100 billion dedicated Silk Road Fund as well as money from Chinese banks, state-owned enterprises, the Chinese-led Asian Infrastructure Investment Bank and the Shanghai-based New Development Bank run by BRICS, the association of emerging markets comprising Brazil, Russia, India, China and South Africa.

Could the BRI focus on East Africa knock SA off its pedestal as Africa's industrial heartland?

Many commentators believe the BRI was inspired by seismic shifts in the Chinese economy, away from the old focus on industrial production for export towards internal consumption-led growth. That has created the surplus production and labour capacity that Beijing is seeking to export to countries along the belt and road, also creating new markets for Chinese goods.

And Xi may also be taking advantage of a fortuitous opportunity to extend China's economic and political influence as a world leader, capitalising on a moment of American global capitulation under an isolationist and unilateralist President Donald Trump.

What does this all mean for Africa?

Most maps show the maritime 'road' of the BRI crossing the Indian Ocean to touch down in Kenya/Tanzania and then snaking northwards, taking in Uganda, Rwanda, Burundi, Ethiopia, Somalia, Djibouti, Eritrea, Sudan and Egypt to the Mediterranean. Kenya, and particularly its main port of Mombasa, look like the focal point.

Last week Kenya and China launched the single-track, 485km Mombasa-Nairobi line, the first leg of the proposed US$14 billion Standard Gauge Railway (SGR), which will eventually reach Uganda. The first leg was largely built by China, which also provided a loan to cover about 85% of the total US$3.8 billion official cost.

The SGR - replacing the precarious 19th Century, British-built, 1m-gauge 'Lunatic Express' as it was called - is a typical BRI project, opening up the East Africa interior more efficiently to Chinese-manufactured imports and African resource exports. China has already largely built and financed landlocked Ethiopia's electrified railway to the Red Sea at Djibouti and several other regional infrastructure projects.

As with other big projects along the belt and road, many criticisms have been levelled at the SGR.

The Economist Intelligence Unit has noted that the completed first leg cost more than twice the international norm per kilometre - the likely result of a lack of tendering for the project and probable corruption. China has also been accused of breaking its promise to source at least 40% of goods and services for the project locally. But it is a fait accompli.

There are also grave dangers for African countries like Kenya in taking on unaffordable debt for such large infrastructure projects.

And what of African countries not on the actual route? China and the African Union (AU) have not signed any formal agreement on the BRI, although China has made it clear that participation is open to all countries, not just those on the belt and road routes.

And South Africa, for example, signed a formal agreement to cooperate on the BRI in December 2015, which also looked towards broader China-Africa cooperation.

The first China-to-UK train in January cut four weeks off the sea journey

'We believe that South Africa has much to contribute to the BRI as a major power on the African continent, and we are willing to join efforts with South Africa to better align the BRI and Africa's development and achieve mutually beneficial and win-win growth,' the Chinese embassy in Pretoria told ISS Today.

But Pretoria sent only its transport minister, Joe Maswanganyi, to the BRI Forum last month, suggesting relatively low interest in the BRI.

KPMG's Ho suggests South Africa should pay more attention to the BRI. He sees the BRI acting as a catalyst for construction of continental West-East railways to link with the east African SGR. This would make Kenya and East Africa the hub for African trade with the Middle East, Central Asia and Europe along the BRI. Such a corridor could also link the BRI to westward trade with the Americas, shortening the sea routes around the Cape.

If Africa becomes a new manufacturing hub and breadbasket for the world, as some predict, these would be its routes to global markets. This development could be the catalyst for the long-deferred construction of the mega Grand Inga hydroelectric plant on the Congo River.

All that development in East Africa could bypass South Africa's ports and knock the country off its pedestal as Africa's industrial heartland.

'We need to get our act together,' says Ho. South Africa should be positioning itself to get on the BRI, for instance by using cheaper labour elsewhere in Africa for broader manufacturing while focusing its own dearer labour on niche manufacturing at home.

The BRI express is clearly leaving the station and all countries need to decide where it's going, and if they have a seat on the train.

Peter Fabricius, ISS Consultant

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