Is China Rethinking Its Investment In Africa?

“China is a true friend,” Tanzanian president John Magufuli effused not so long ago. Surprising then, that, early last month, he should be assailing his Chinese partners, accusing them of treatment that could “only be accepted by mad people”. This souring of Sino-Tanzanian relations is emblematic of a mood shift across the African continent. For years, Chinese money has poured into developing Sub-Saharan nations – but amid allegations of debt traps, exorbitant costs and sub-par performance, Beijing’s ‘Belt and Road Initiative’ (BRI) looks to be changing course.

Likened to the post-War Marshall Plan, the BRI is one of the most ambitious infrastructure projects ever conceived. It was announced in 2013 and is, on paper, a trillion-dollar investment plan aimed at building China’s influence in Africa and beyond. Ports, power stations and railways across the continent have sprung up over the last few years, funded through a ‘no strings attached’ model (as opposed to Western investment, which is often dependent on democratic progress). But some fear Chinese heavy handedness and unfair investment conditions. Their demands over the $10bn expansion of Tanzania’s Bagamoyo port included a 99-year lease and a ban on harbour development elsewhere in the country. Little wonder Mr Magufuli balked at the offering, describing it as “exploitative and awkward”. 

Neighbouring Kenya is another state rich in Chinese investment. It was an early player in the BRI and is Africa’s third largest recipient of Beijing money. Much of that has been plunged into the now notorious Standard Gauge Railway (SGR) project. Hailed as a new chapter in Kenya’s history by president Uhuru Kenyatta, the coast-to-capital trainline is the nation’s single largest infrastructure scheme since independence in 1963.

But much like it’s predecessor line – branded ‘lunatic express’, owing to its enormous cost – the SGR has hit serious roadblocks. Chinese money seems to have dried up for the second stage of the track, which currently terminates at a small town some 100km from capital city Nairobi. And those sections which are running are haemorrhaging money, experts warn. The SGR ran up a loss of $100m in its first year of operation, official figures show, with stringent investment terms requiring monthly payments of over $11m to Chinese creditors for a decade.  

“Kenya has committed itself to too many overly ambitious projects in the name of infrastructure led development with debt, interest and repayment levels that are unsustainable,” said Robert Shaw, a locally-based economist. “Look at the SGR. The loan repayments are kicking in this year, interest repayments are hefty and even without factoring in these two, the railway operation by itself is losing money on a daily basis,” he added, speaking to InsideOver.

Some suspect more than just economic imprudence on the part of the Chinese, however. The US has repeatedly accused China of setting debt traps for developing nations, enticing corrupt officials with seemingly loose conditions and cash incentives. Once financially beholden to Beijing, and struggling to pay back loans, key geostrategic assets – power stations, railways, ports – could be seized back by the Chinese, critics warn.

Embroiled in a trade war with China, this could be dismissed as crude American mudslinging – but domestic voices are raising the alarm too. Look at Hambantota port in Sri Lanka, which was taken over by a Chinese firm as unmanageable debts mounted, says Mutula Kilonzo Jr, a prominent Kenyan senator. 

“If we do not wake up and smell the coffee… history is going to judge us so harshly,” he told fellow lawmakers. “[We are] selling our country to the Chinese”.

Strident as it is, his argument has been lent some credence by newly published research. Chinese involvement in no fewer than 46 African developments could enable “Beijing to potentially restrict access to its rivals, exploit ports during conflict, and collect intelligence,” the Center for Strategic and International Studies (CSIS) found. The group pointed to evidence of naval vessels visiting Chinese funded harbours, several of which are ‘deep-water’ dual purpose civilian-military installations.     

But not all believe the debt trap narrative to be accurate. “Highly overblown” is the rhetoric surrounding China’s strategic interest in Africa says Yunnan Chen of the School of Advanced International Studies (SAIS). Research carried out by the centre showed “the often-cited case of Hanbantota port in Sri Lanka is an exception, not a pattern,” she said, adding that “China’s attitude to debts have been remarkably lenient in many cases, and has often extended or forgiven debts”.

Regardless of their motivations, a shift in the Chinese investment strategy is emerging. Desperate to land more cash for his faltering railway, Kenya’s president visited Beijing in person earlier this year. To his great dismay, no extra funding was forthcoming – but a new export deal on avocados and some smaller infrastructure agreements were struck. These more modest Sino-African investments seem to be the direction of travel, and will, some say, allow for a more balanced relationship. 

“Kenyans have grown weary of what they view as a government with fundamental problems with corruption and fiscal accountability, continuing to secure massive amounts of debt,” said Nairobi-based economist Anzetse Were. “In declining to finance the final stages of the SGR, this seems to signal the Chinese government is cognisant of these concerns,” she added.

Given the poor performance of more than a few of its African investments, there’s a self-serving explanation for China’s moderation too. A railway between Djibouti and Ethiopia, completed in 2017, cost the Chinese state-owned insurer Sinosure $1bn in losses. Such failures reflect poorly on Beijing. But they arguably cost the local people more, who find public services drying up as loan repayments devour domestic budgets. For their sake, let’s hope a more measured approach to investment prevails.