On Monday, Chinese Premier Li Keqiang concluded his eight-day, four-country tour of Africa. His visits to Ethiopia, Nigeria, Angola and Kenya focused heavily on expanding economic ties with the continent and resulted in dozens of agreements on trade, energy, investment and development. A highlight of his trip was his appearance at the World Economic Forum (WEF) on Africa in Abuja on May 8. In a special address at the Plenary Session of the meeting, he laid out the grand strategy of China’s aid plan, calling for “more investment and financing, and expanded cooperation in infrastructure projects.”
His words reflected a pledge he made earlier in the week of increasing Chinese aid to Africa by $12 billion, which includes $10 billion in loans and $2 billion for the Chinese Africa Development Fund. With this commitment, China has extended a total of $30 billion in credit to the continent and $5 billion in development assistance. Moreover, in response to the recent kidnapping of over 200 schoolgirls in Nigeria, Li made a promise to support rescue operations to recover the missing girls. In general, he also pledged to “assist Africa’s capacity-building in such areas as peacekeeping, counterterrorism and anti-piracy.” These commitments fall in line with the general trends exhibited by the Africa policy of President Xi Jinping’s administration, which has emphasized peace and security as well as economic cooperation.
The trip culminated on a high note in Nairobi, where Li signed agreements with Kenyan President Uhuru Kenyatta and other East African leaders to construct a $3.6 billion, 380-mile railway line linking Nairobi to the important Kenyan port of Mombasa. This link will be a part of a regional railway system that will eventually extend through Rwanda, Uganda, Burundi and South Sudan. Construction is expected to begin on October 1, 2014 and end in March 2018. The Export-Import Bank of China will fund 90 percent of the project while the Kenyan government will cover the remaining 10 percent.
The railway project represents a major opportunity to promote trade among East African countries, where the transaction costs of transporting goods and people are generally very high. The new railway link is expected to be significantly more efficient and reliable than Kenya’s existing, colonial era lines, reducing journey times and the costs of shipping freight—from 20 cents per ton per kilometer to 8 cents—according to President Kenyatta. These gains in efficiency have serious implications for expanding access to markets and taking advantage of economies of scale, especially for farmers who lose an estimated half of their crops in transport annually. It may also help spur foreign investment since investors often consider poor infrastructure a major deterrent to investment.
On the other hand, critics of the project argue that, in the past, Chinese infrastructure projects have sourced much of their labor from China, failed to train African workers and neglected labor laws in host countries. Concerns over the increase of Kenya’s national debt by nearly one-third and interest payments on external debt by 50 percent have also been raised. Furthermore, questions over the funding necessary to maintain the railroad after it is built still remain. As this railway project and other Chinese-funded projects such as the $13.1 billion railway project in Nigeria get underway, it is important that discussions between African and Chinese leaders focus on ensuring that Chinese funds benefit Africa as much as they do China.
Transparency over financing and other terms of Chinese engagement in African countries will benefit everybody in the long term. Transparency will help African voters better assess the expected costs and benefits of the deals and know how much future generations will have to pay for them. If the projects are successful, other foreign investors will be able to better assess the political risk and other risks associated with large infrastructure projects and will participate in future ones. And China will have the satisfaction of playing a leadership role in the development of infrastructure in Africa.