The relationship between China and Africa has long been portrayed as a swap of much-needed infrastructure in return for raw materials. China accounts for a large proportion of global demand for copper, iron ore, bauxite, copper and other minerals, so it is unsurprising that the mining sector has attracted a lot of investment.

Yet the relationship between the two is now far more complicated than that, with hundreds of large corporations and millions of small-scale entrepreneurs developing their own trading links and projects according to the opportunities on offer.

Chinese involvement in Africa was originally viewed as a grand strategy imposed from above by central government but this image is becoming less true as time goes on.

As China’s economic growth has slowed down, many Chinese companies have looked overseas for contracts, taking advantage of Beijing’s promise to fund projects in Africa. In addition, it is clear that an increasing number of Chinese companies now see some African states as excellent hosts for manufacturing outsourcing, in the same way as international firms have outsourced their own production capacity to China for many years.

The pace of growth in the economic relationship is breathtaking. The value of trade between China and Africa increased from $10bn in 2000 to $220bn in 2014, although it has now fallen slightly because of lower commodity prices.

Zambian economist Dambisa Moyo says: “African countries need trade and they need investment. To the extent that China, or anybody else – India, Turkey, Russia or Brazil – bring new trading and investment opportunities.”

The impact of the investment is not purely economic. There are increasing numbers of Chinese shopping malls and retail parks across Africa, which bring Chinese goods, culture and workers to the continent.

Very low interest rates

Many analysts had expected the pace of road, rail, power and dam construction to slow down over the past few years but if anything it has speeded up. There are some valid concerns over the debts being taken on board by African governments.

It is now generally reckoned that China accounts for a sixth of all outstanding lending to the continent. Yet the borrowing governments calculate that the infrastructure in question will boost GDP by more than the cost of servicing their debts. It is difficult to assess the financial terms of such deals, as they are usually kept secret, but it is generally believed that they take the form of concessional loans, with very low rates of interest.

Such investment has enabled the development of much-needed infrastructural projects, many of which would not otherwise have been built. It has created a great deal of employment, although many Chinese companies have brought a large proportion of their workforce from China.

In many cases, the raw materials and components required are also imported, although local content requirements are increasingly being enforced. The Namibian Port Authority, for instance, insisted that China Harbour Engineering Company source at least 30% of all its raw materials locally in its construction of the new container terminal at the Port of Walvis Bay.

In some cases, the quality of the work undertaken has been criticised. Chinese Overseas Construction and Engineering Company was building a $12m bridge in Kenya’s Busia County but the bridge collapsed at the start of July, before it had even been completed. Kenyan state engineers are currently investigating the cause of the collapse. There have also been instances of poor treatment of workers.

The focus on getting the job done has had both positive and negative implications. The required infrastructure is provided but in the past, there has been too little emphasis on skills transfer, restricting one of the key benefits of such investment and making it more difficult to maintain and upgrade the project in question.

This is starting to change and more Chinese companies are engaging with local partners and helping to train local engineers and other specialists. In the telecoms sector, for instance, tens of thousands of Africans are being trained by Chinese firms or on Chinese-funded courses at any one time.

Some of China’s major projects in Africa include:

Kenya’s Standard Gauge Railway

When the boom in Chinese investment in African infrastructural projects began, power projects, such as Ghana’s Bui hydro scheme, attracted the most attention. More recently, transport schemes have taken the lead. Chinese construction companies and Chinese banks are behind many of the road projects that are transforming transport links across the continent. One of the most high-profile projects ever developed by Chinese firms in Africa opened on 1 June, with the completion of the new Standard Gauge Railway (SGR) from Mombasa to Nairobi.

When the scheme was first mooted as a replacement for the existing colonial-era railway that runs along the same route, it was seen as a vague aspiration rather than a concrete proposal and yet the line was completed on schedule – rare in infrastructure project work anywhere in the world. China Communications Construction Company (CCCC) built the line at a cost of $3.8bn, with funding from Export-Import Bank (Exim) of China, making it the most expensive infrastructure project built in Kenya since independence.

At present, the vast bulk of passenger and freight transport between Kenya’s main port and its capital city is by road but the government hopes that the new line will change this. Transport Principal Secretary, Paul Maringa, said: “The SGR is the backbone of Kenya’s multi-modal infrastructure development and thus it will play a key role is spurring economic growth.”

Freight trains capable of transporting 4,000 tonnes will travel at 80km an hour, while passenger trains will be able to make the journey in just over four hours.

The government of Uganda is keen to see the line extended to Kampala. Although a preliminary agreement with China Civil Engineering Construction Corporation in 2012 came to nothing, in May Kampala awarded the $2.3bn contract to another Chinese firm, China Harbour Engineering Company (CHEC).

Yet again, funding is expected to be provided by Exim Bank. Chinese finance has also been mooted for a spur line from the SGR to the South Sudanese capital, Juba. Project coordinator Kasingye Kyamugambi said: “As soon as studies are complete and approved, and funds secured, works on the other sections of the SGR will commence.”

Chinese companies were also involved at every stage of the development of the first urban light railway in Sub-Saharan Africa. The first phase of the $475mAddis Ababa Light Rail opened in 2015. Funding was provided by Exim Bank, construction carried out by China Railway Group and the system is being operated by Shenzhen Metro for the first five years before being handed over to Ethiopian Railways Corporation. China Electric Power Equipment Technology Company developed the dedicated power grid for the system.

The ports of Djibouti and Walvis Bay

There has been lots of investment by Chinese firms in the African port sector recently, particularly by CHEC and China State Construction Engineering Corporation. China Cosco Shipping has also launched more services to African ports and China Merchants Group (CMG) has invested heavily in Djibouti. CMG bought a 23.5% stake in the Port of Djibouti and 67% in the nearby Doraleh Container Terminal in January for $185m, on top of the $590m investment it has made in Doraleh Multipurpose Port, which opened at the end of May.

CMG president Li Xiaopeng said: “Making full use of Djibouti’s geographical advantages, we are in the process of making the country the ‘Shekou of East Africa’. We will use our experience in Shekou and adjust the model to local conditions.” CMG has turned the Chinese port of Shekou into one of the most important trade centres in the world.

Chinese firms are gaining experience on African ports that can be of use to them elsewhere. To take one example, CHEC has run into unexpected difficulties in building a new container terminal at the Port of Walvis Bay for the Namibian Port Authority. The completion date has been pushed back by at least a year, to mid- 2019, following the discovery of a 23m thick layer of dead vegetation starting 20m beneath the sea bed. CHEC has spent six months carrying out tests on the layer and devising a solution to the instability it causes, adapting its construction methods in the process.

Lekki free trade zone

Much further north, CHEC may save the ailing Lekki port project. Nigeria is in desperate need of new port capacity, partly because the existing Lagos ports are hemmed in by urban development and so have little room for expansion, but also because other countries in West Africa are in the process of building far bigger container terminals than anything currently on offer in Nigeria. Two brand new ports have been planned, Badagry and Lekki, 60km either side of Lagos respectively.

International Container Terminal Services Inc was the main contractor on Lekki but pulled out of the project earlier this year after years of delay. However, the Nigerian Ports Authority (NPA) has now revealed that CHEC has bought an unspecified stake in Lekki for $86m. The Chinese firm and any partners it brings on board will be required to invest at least $1.5bn to develop the deep-water port.

CHEC may have been attracted by the plan to develop a large free trade zone (FTZ) next to the port. Chinese investors are becoming increasingly interested in African FTZs, processing zones and industrial parks.

Chinese manufacturing sector wages have risen by an average of 15% a year over the past five years. This is persuading both Chinese and foreign investors to move some of their manufacturing capacity out of China. Asian countries including Vietnam, Bangladesh and latterly Myanmar have been the main beneficiaries but Africa’s rapid population growth is starting to attract Chinese attention.

Ethiopian industrial parks

Ethiopia has been particularly successful in developing industrial parks. China Civil Engineering Construction Company (CCECC) completed Hawassa Industrial Park last July to serve textile and clothing producers.

The government says that Hawassa will be used as the model for nine similar parks to be developed elsewhere in the country. It is expected that Chinese companies will take the lead on most if not all of them.

In July, Tadesse Haile, the state minister of economic affairs in the office of the prime minister, revealed that two new industrial parks were to open in September.

CCECC has built both Dire Dawa and Adama industrial parks at a combined cost of $315m. Located 445km and 99km east of Addis Ababa respectively, both will follow Hawassa in focusing on textiles and apparel manufacturing.

Ethiopia has received $12.3bn in Chinese lending since the turn of the millennium. It is perhaps no coincidence that it is the African country with the economic strategy most closely modelled on China’s development over the past 30 years. Beijing’s interest in the country can hardly be motivated by access to raw materials as Ethiopia has few mineral resources of any international note.

Speaking during a visit to Kenya in July, Zhu Layi, the president of the Guangdong New South Group, said: “SEZs [Special Economic Zones]are a very good model to push for Chinese industries to establish manufacturing plants in African countries. They improve the business environment in the manufacturing sector and hence are likely to become magnets for Chinese investors seeking opportunities in Africa. In addition, SEZs can help to spur the transfer of Chinese industrial technology into Africa.”

Guangdong already operates SEZs in Nigeria and is now developing its first zone in Mombasa in a joint venture with Kenya’s own Africa Economic Zone.

Outlook

Beyond the more high-profile projects, economic ties between China and Africa are becoming ever more diverse. Estimates vary but there are now believed to be a million Chinese entrepreneurs living in Africa and many more with ties to the continent based in China itself.

Even in sectors with the longest track records of cooperation, new trends are emerging. Most recently, Chinese firms have invested heavily in cobalt mining in the Democratic Republic of Congo.

There is undoubtedly a political and geopolitical element to the investment. Beijing and many Chinese companies see the Africa of the future as a continent where they can exert a great deal of influence. Yet it would be wrong to regard China as a monolithic influence on Africa. It is more accurate to view the relationship as a piecemeal patchwork of economic activity between a vast nation that has experienced economic growth on historic levels over the past 30 years and a continent with a similar population and also huge potential. NA

Chinese companies are increasingly engaging with local partners and helping to train local engineers and other specialists.

There are now believed to be a million Chinese entrepreneurs living in Africa and many more with ties to the continent based in China itself.