China’s Bagamayo Problem
Africa is known as a nodal point for China’s Belt Road Initiative, especially the continent’s Indian Ocean littoral. Chinese influence on the continent has grown substantially as a consequence and Africans have expressed strong approval of China in surveys. Lately, however, falling commodity prices and greater scrutiny of Chinese debt requirements have resulted in political and commercial problems for some of these investments. These are some of the more recent examples.
TANZANIA Tanzania has rejected five commercial demands by the Chinese contractor over the $10-billion Bagamayo port project, further clouding the future of the Belt Road Initiative anchor project. On October 22nd the head of Tanzanian Ports Authority said the country would not accept the demands of the China Merchant Holdings International. These include a 99-year lease on the port, waivers from paying taxes and utility costs, permission to set up and run companies inside the port without regulatory approval, and a ban on the construction of any competing ports elsewhere in Tanzania. Tanzania has offered China a 33-year lease on the port instead of the 99-year lease that was originally envisaged. Tanzanian Ports Authority said China Merchant Holdings International would have to conform to the new rules or abandon the project.
The Chinese upgrade of Bagamayo was agreed to by Tanzania’s last president in 2013 with the first phase to have been completed by 2017. The plan would make Bagamayo the largest port and logistics centre in East Africa, the port covering 800 hectares plus a special economic zone of 1,700 for 700 factories. The present Tanzanian president, John Magufuli, suspended the port project in June and accused China of exploitative commercial demands.
KENYA In October Kenya inaugurated the second phase of its Chinese-built Standard Gauge Railway project, running from Nairobi to the interior town of Naivasha. The $ 1.7 billion second phase is financed by Exim Bank of China. Along with the $3.2 billion second-phase, which runs from Nairobi to Mombasa, the train constitutes the largest infrastructure project of independent Kenya.
Critics have complained that the second-phase is a “train to nowhere”. The final and third phase was supposed to extend the line to Kisumu on Lake Victoria and create a cargo linkage to Uganda, Rwanda and South Sudan. However, China announced in April it would not be party to the third phase reportedly because of doubts about its economic viability.
The debt sustainability of the existing train section is also under question. The first phase earns about $ 75 million a year which would mean it would take some 70 years to pay off the Exim Bank debt. The cost of moving containers on the train is about a third higher than moving them by truck. The Kenyan government has begun forcing businesses to move the containers by train. This has caused problems for land transport firms but has also undermined the Nairobi-Mombasa corridor being developed by Japan and India which has focussed on road development.
ZAMBIA Thanks to slumping copper prices and high levels of Chinese debt, Fitch ratings this month downgraded Zambia’s sovereign rating to CCC – indicating a high likelihood of default. Zambia is among China’s closest economic partners in Africa, a recipient of billions of dollars in Chinese investments in its cobalt and copper sectors, but has also borrowed $ 6.37 billion between 2000 and 2017. This debt, about a third of the total and at non-concessional interest rates, has led to questions about Zambia’s financial stability.
Fitch has noted Zambia has debt repayments of $ 2.4 billion for 2019 alone, nearly equal to 10 per cent of its GDP. Lusaka had sought a soft loan from the IMF to ease its financial problems. The IMF said Zambia first needed to clean up its books and restructure its Chinese loans, which Zambia has resisted. The Zambian president, Edgar Chagwa Lungu, made a state visit to India in August to improve investment flows. The visit was marred by Lusaka’s seizure of a copper mine owned by India-based Vedanta Resources.
FRANCE LOSES OUT France ended October with the second round of its Ambition Africa business forum, designed to shore up its commercial presence in Africa. French companies continues to have a strong presence in telecom, port management and some services in Africa but have seen Chinese firms become the dominant players in infrastructure and construction. French firms have shifted to stressing their capacities in sustainability and water management. A continuing source of controversy, however, is the CFA franc, a currency managed by France’s central bank but operating in 14 Francophone African countries which critics have attacked as a colonial hangover that undermines the financial sovereignty of its users.
OTHERS Uganda has also begun experiencing protests against indebtedness to China. The Ugandan government has borrowed several hundred millions of dollars from the Chinese Exim Bank to build roads, dams and airport expansions. In October, long-standing Ugandan President Yoweri Museveni caused a public outcry by intervening in a highway contract and insisting it be given to a specific Chinese firm. Commentators say Uganda has started this expansive spending since oil had been discovered and there was an expectation of future revenues.
Ghana unusually fined a Chinese-operated but Ghanaian-registered fishing vessel for rules breaking in early October. The ship owners and the government reached an out of court settlement after the $ 1 million fine was announced.
The Guardian ran a lengthy story on the collapse of Modderfontein, a South African $ 6 billion luxury development touted by the Chinese contractor Zendai. Touted five years ago as the “Manhattan of Africa,” the Johannesburg suburb was going to be fully pedestrianised and an example of futuristic urban development. However, Zendai rejected the authorities insistence the project include 5,000 units of low-income housing.
A South China Morning Post article surveys how the thousands of scholarships being granted to African students to study in China is generating goodwill and influence for Beijing across the continent, ameliorating some of the concerns about its investment activities.
Nobel for Ethiopian Leader
Ethiopian President Abiy Ahmed became the twelfth African Nobel laureate. Ahmed won the peace prize for signing an agreement between Ethiopia and its northern neighbour Eritrea ending a decades-long territorial dispute that has resulted in armed conflict in the past. The award went along with local ethnic protests that claimed 67 lives, a reminder of Ahmed’s continuing political difficulties in home and the possibility of a difficult re-election campaign in 2020.
Some of the bloodiest protests were led by Jawar Mohammed, a local strongman of the Oromo ethnic group. Mohammed had been part of the Oromo agitation that had helped put Ahmed into power last year. Ahmed, the first Oromo leader of Ethiopia, introduced greater political freedoms after he came to power. One consequence has been the rise of ethnic strongmen in different parts of the country and increased inter-ethnic violence that has led to two million Ethiopians being displaced. Such leaders have emerged even among his own Oromo base. The followers of Mohammed, who accuses Ahmed of “dictatorial” tendencies, have a past record of attacking members of other ethnic groups.
Putin’s Africa Summit
Underlining a growing footprint in the continent, Russia held its first African summit in Sochi on October 23-24. President Vladimir Putin hosted delegates from 54 African countries and described Russia’s Africa relations as “on the up.” The summit reflects a larger Russian pattern of seeking new diplomatic avenues following Western sanctions. Russia’s Africa policy remains limited, focussing on a handful of key countries and leaders, with an emphasis on military relations.
Russia seeks to join the band of countries which hold regular Africa summits, including India, China, Japan, the European Union and Turkey.
According to the think tank SIPRI, 17% of Russian arms sales are to Africa, making it second only to Asia as a market. Russia is an important military provider, sometimes through private mercenary firms like the Kremlin-linked Wagner Group, in civil wars in the Central African Republic, South Sudan and Libya. It has a particularly close relationship with Algeria which buys nearly 80% of all Russian arms sales to the region.
Russian firms have invested in the extraction of strategic mineral like bauxite and manganese and even a few oil and gas ventures in places like Mozambique. Overall, Russia’s bilateral trade with Africa is about $ 20 billion which makes it the sixth largest trading partner of Africa, behind Britain. It has made a new foray with a contract to build a nuclear reactor in Egypt.
Putin’s Africa push has aroused concern in the West. France, for example, has been displeased with Russian operations in its ex-colony Central African Republic. Putin has also encouraged some African leaders, such as the president of Guinea, to forgo elections and the constitution.
FACEBOOK RESPONSE Facebook announced it had shut down three networks of accounts it said were associated with the Russian businessman Yevgheniy Prigozhin and were being used to influence elections and political developments in eight African countries. Prigozhin had been earlier accused by US authorities of having interfered in the US presidential elections in 2016 and being linked to the Kremlin. Facebook said that Madagascar, the Central African Republic, Mozambique, Congo, Ivory Coast, Cameroon, Sudan and Libya were the countries that were targeted. Unlike in the past, the Russian disinformation campaign also used local organisations and players to send out messages across a number of social media platforms. The Libyan social media campaigns were also linked to the Wagner Group, a Russian private security organisation active in Africa.
African Union Reforms
The 2016 Kagame report outlined means by which the African Union could become more effective in promoting peace, security and prosperity in the continent. Among its more important recommendations was to dilute the AU’s tradition of non-intervention. The AU proved important in efforts to ease out illegitimate leaders in Gambia and Cote d’Ivoire. It was unabIe to build a consensus among neighbouring member-states when it came to suspect elections in the Democratic Republic of Congo and has been unable to do anything about the violence in Burundi. The Africa Centre for Strategic Studies, in a review of the AU’s record of implementing reforms, says the organisation continues to be hampered by the inability of the AU Commission, staffed by professionals and technocrats, to override the more politically driven Assembly of Heads of State and Government. The AU can only be as effective “as its members want it to be.”
Business Friendlier Togo
Togo and Nigeria saw their rankings jump in the most recent World Bank Ease of Doing Business Index. Togo jumped a remarkable 40 points, and now comes in at number 97 on the overall list. Nigeria jumped an impressive 15 points, but is still 131st on the list. Togo was rewarded for streamlining regulatory and administrative processes, and lowering electricity rates. Mauritius is the top-ranked African country in the list at 13th place. South Africa saw its position fall two points.
Africa’s wealthiest businessman, the Nigerian billionaire Aliko Dangote, told Bloomberg Television that his two main investments, a 29% expansion of his flagship company’s cement production and the building of one of the world’s largest refineries in Nigeria, should be completed in two year’s time. Combined with other investments that are coming on line, Dangote said he expects his group’s revenues to grow over sevenfold to $ 30 billion as a consequence. After that, the Dangote group will invest 60% of its profits overseas.
Africa Talk in America
Three African language groups are among the top ten fastest growing languages spoken at home in the United States, says a survey by the US Census Bureau. Swahili and related languages from East Africa, Yoruba/Igbo/Twi from Nigeria and Ghana, and Amharic/Somali from Ethiopia and Somalia make it to the list, reflecting the growing migration link between Africa and the US. Since the 1970s, African migration has doubled every decade though in absolute terms the numbers remain small. The US Census plans to print census guides in 2020 in three African languages Yoruba, Igbo and Twi.
China’s Bagamayo Problem