How China dominates Africa's infrastructure sector

 How China dominates Africa's infrastructure sector

Strong capital, government support, flexible approach and fast construction speed help Chinese enterprises surpass European and American rivals in Africa.

The Economist says that when it comes to the construction of large projects in Africa, China has no rival. Beijing-backed companies have redrawn the continent's traffic map.

Thanks to Chinese engineers and banks, you can catch a train in Lagos to Ibadan in Nigeria, drive through parts of eastern Congo in hours instead of days, or fly to dozens of new airports. from Zanzibar to Zambia. That is not to mention a series of other works, from skyscrapers, bridges, dams or harbors.

In the past that was not the case. In 1990, American and European companies accounted for more than 85% of construction contracts on the continent. Chinese companies are not even mentioned. Now, Western companies are struggling to land contracts in this rapidly growing market.

The World Bank forecasts infrastructure spending in Africa will reach more than $300 billion by 2040. Africa's population is growing fastest in the world and people are also moving to cities. to live at a faster rate than other places. Both of these trends will drive infrastructure demand.

In 2020, Chinese construction companies were responsible for 31% of infrastructure projects in Africa valued at $50 million or more, according to Deloitte. This is up from 12% in 2013. Western companies are only directly responsible for about 12%, down sharply from 37% in 2013.

This reversal has not only worried shareholders of Western companies but also their governments. They argue that the growing economic power in Africa is reinforcing China's strategic and diplomatic influence.

A Chinese engineer and local workers at the Mombasa-Nairobi railway project site in Emali, Kenya, Photo: Reuters

A Chinese engineer and local workers at the Mombasa-Nairobi railway project site in Emali, Kenya, Photo: Reuters

The Belt and Road Initiative (BRI) funds ports, roads and other infrastructure, leading Western leaders to fear China could open a second naval base on the continent. Meanwhile, Chinese investments in mines in Africa will also help the country control strategic minerals, such as cobalt used in electric cars.

Unable to sit idly by, in recent years, the US has begun racing with China in foreign policy. Europe is busy offering African countries alternative financial packages to the BRI. At the EU-Africa Summit on February 17, European leaders outlined a plan to pour 150 billion euros ($170 billion) into African infrastructure.

Western governments are also trying to get their businesses to invest and build more in Africa. But easier said than done. Some companies complain they are at a disadvantage from the start, as China is a country willing to spend big. Between 2007 and 2020, Chinese banks provided $23 billion in African infrastructure, more than double the $9.1 billion from all Western banks combined, according to the Development Center. Global (Washington, USA).

Chinese banks also seize opportunities faster and sometimes more recklessly. When Kenyan President Uhuru Kenyatta wanted $4.7 billion to build a new railway line that the World Bank warned would never turn a profit, China accepted the loan.

But China is also a tough negotiator, with deals worth more than $1.1 billion in Ghana and Guinea, for example. These loans are collateralized by bauxite mines. A study by AidData, of the University of William & Mary (USA), shows that China often imposes much tougher conditions to ensure its loans are paid.

Western companies also complain that their governments are less diplomatically soft. Last year, China said it would spend money to build a new smart foreign ministry headquarters for Congo and Kenya. Before that, it also funded the construction of many projects, from parliamentary complexes in Sierra Leone and Zimbabwe to presidential residences in Burundi, Guinea-Bissau and Togo.

With such generosity, it is not surprising that some African governments tend to favor Chinese companies. In contrast, Western governments often give aid to issues that African authorities don't usually talk about much, like girls' education.

Most notable are the famous Chinese companies that build quickly. Financial resources from banks in this country disbursed very quickly. Along with that, some projects in Africa also appear to be copies of those already built in China, which saves planning time. The Economist also said that some projects that are implemented very quickly may still be due to skipping the environmental impact assessment stage.