Straightforward Development and Boosts in African Investment
Plentiful international media coverage of the Belt and Road Initiative (BRI) focuses on criticism of the BRI infrastructure funding model and the so-called “debt” it creates in recipient countries, but the key point missed by these commenters is the supreme importance of these projects for the economic development of African countries (with East Africa being a good example).
As far as Africa is concerned, this is one of the few times that a credible infrastructure funding alternative has been presented, considering that multilateral institutions have completely ignored the continent. From Africa’s point of view, the concern is not about taking on debt to finance the infrastructure projects, but on the speed that these crucial levers of economic development are put in place, especially projects such as power plants, roads and railway tracks.
For example, it costs around US$1,200 to move a container from the Mombasa port to Nairobi, Kenya by road, a distance of around 500 kilometers (expensive by any standards), while moving the same container on the new Mombasa-Nairobi Standard Gauge Railway constructed with the help of China would only cost around US$550, a 54-percent cost saving. The gains are tangible and immediately felt from a business perspective. Instead of paying extra for transporting goods, business operators can immediately reinvest the saved funds and receive more value for money.
These are issues that need to be considered when discussing and commenting on the BRI and its flagship infrastructure projects.
Moreover, there are not many alternatives to the single window financing option that China is advocating, in which Chinese companies offer a complete development process through one entity (financing, construction of the project and training of the required technicians), contrasting usual financing models involving multiple separate entities. Should participating countries decide on the usual model, they would need to negotiate with a financing party, then with different Engineering, Procurement and Construction (EPC) contractors and finally with a technical training entity. For massive infrastructure projects, the traditional model comes with a high chance of failure, so the fact Chinese companies can act as a single entity to handle all the above-mentioned functions has been a blessing for African countries—especially those with limited human resources and technical capacities.
Given the fact China has developed from a poor country to an economic power over the past 40 years since the beginning of its reform and opening up, I firmly believe in the value of its first-hand experience and better understanding of the important role of infrastructure in developing countries. After all, four decades ago, China had similar developmental problems that Africa is confronting now.
Going forward, we need to see more inclusion of local companies and better technical training on the part of Chinese contractors, which is in both parties’ long-term interests.
On the African side, we need to take pages from Chinese development experience and strive to develop as fast as China. Whether or not we call it “the China model” doesn’t really matter as long as it works for the intended purposes.
Finally, African countries participating in the BRI should focus more on the long-term economic value of infrastructure projects and their repayment capabilities.
“Who cares if the cat is black or white cat as long it catches mice,” goes a proverb. It is about time we move past rhetoric and judge infrastructure projects by their results on the ground.
Hopefully, China will do everything it can to maintain its commitments and promised funding levels of the BRI infrastructure program.
The author is a China-Africa investment advisor and commodity trader based in Shenzhen, China. He studied at the University of International Business and Economics in Beijing. He is originally from Rwanda.