“Build it, and they will come” is China’s dictum for infrastructure construction at home, but has it been able to do the same in Africa? A new report by the National Bureau of Asian Research looks at just how well China’s huge investments in that continent are turning out.

The basic numbers are impressive: Over the last 20 years, a small handful of Chinese financiers and state-owned enterprises have financed one in five new infrastructure projects across Africa, and built a third of them. Over half of the Chinese-funded projects are transport sector-related, including ports and railways, followed by those in energy and power. 

But not all projects have produced windfall gains, and Chinese stakeholders have faced several challenges. This week, The Wire takes stock of China’s infrastructure in Africa, the companies involved, and how it stands to gain. 

WHAT HAS CHINA BUILT?

A quarter of Africa’s commercial ports have ties to Chinese companies, leaving only eight coastal or island nations without some form of Chinese port infrastructure, according to research by Isaac Kardon, an assistant professor of strategic research at the U.S. Naval War College. The largest concentration is in West Africa, from where critical minerals including bauxite, cobalt and copper are exported. 

China has also spent heavily on African rail. Four railway projects completed between 2015 and 2017 alone add up to nearly 2,800 kilometers of track, almost four times the length of Amtrak’s northeast corridor. And Chinese contractors and financiers have supported at least 78 power plants — largely using hydropower or coal — with a total generating capacity of almost 27,000 megawatts, roughly equivalent to that of Belgium. 

Telecommunications companies like Huawei and ZTE have built expansive networks on the continent, according to research by Daria Impiombato at the Australian Strategic Policy Institute, a think tank. ZTE has telecom projects in at least 60 percent of African countries, while Huawei has won bids for an estimated 70 percent of the continent’s 4G networks.

WHICH COMPANIES ARE INVOLVED?

Experts say China’s real strength in Africa is its ability to link together different Chinese-financed, built and operated systems. 

“Ports are not particularly good unless they’re served by roads, rail and air. Even better if they are well-connected to industrial parks and manufacturing,” says Naval War College’s Kardon. “They need a vertically integrated ecosystem — that I think is the best way to understand Chinese investments in critical infrastructure.”

Take Djibouti, a small coastal state situated at a strategic point on the Horn of Africa: a large port there, joint-owned by China Merchants Group, has been connected to a new railroad to Ethiopia built by China Civil Engineering Construction Corporation (CCECC) and an international airport. A neighboring new data center linked to the Belt and Road Initiative serves as the landing station for a Huawei-built undersea fiber-optic cable. More controversially, the port has allowed China to establish its first overseas naval base. 

China has been able to link such projects by striking financing deals with local governments that favor employing Chinese builders. In turn, a handful of SOEs have built most of the Chinese-funded infrastructure projects: China Communications Construction Company (CCCC) dominates port construction; China Civil Engineering Construction Corporation (CCECC) is prominent in rail; while Sinohydro is active in power plants. 

“When you take on Chinese finance, what you’re doing is accepting that you will almost certainly hire a Chinese contractor,” says Yunnan Chen, a researcher at U.K.-based think tank the Overseas Development Institute. 

Some Chinese construction firms have sought to move up the value chain by becoming, for example, port operators. “Decisions about the utilization of your warehouses and your cranes, approval of which ships come and go, who gets their cargoes dealt with first — these are all up to the port operator,” says Kardon. “If you’re a COSCO ship and you’re pulling into a COSCO-owned and operated terminal, that’s a business synergy. That’s why they invest in ports.” 

Geopolitical factors are also important. China’s shortage of foreign naval bases has forced its navy to rely on friendly commercial ports. The PLA Navy has made port calls to refuel and resupply at one third of Chinese-owned ports overseas, with 70 percent of ports hosting the navy for the first time after 2012, according to a recent paper authored by Kardon. 

ARE THESE PROJECTS PROFITABLE?

China’s increasingly saturated domestic market has been the driving force behind many SOEs’ expansion into Africa. But their returns on investment in Africa have varied widely. 

Railway investments have proven particularly hard to make money from. A new line in Kenya, built by China Road and Bridge Corporation in 2017, has seen lackluster cargo revenues that have failed to offset the cost of popular but loss-making passenger services.¹Page 39

Such projects can bring wider benefits, however, making it hard to assess their success. “A railway should be something that’s catalytic,” says Chen. “Its returns are not necessarily financial, but from their broader economic impact…they have also been very, very positive for human mobility.” She points to the example of the Chinese-built Abuja-Kaduna railway in Nigeria, which became hugely popular as a safe alternative to road travel — albeit until a recent terrorist attack. Other projects such as Kenya’s railway line have taken to hiring Chinese private security companies to protect the railway and train local personnel.²Page 42

One big question now is how much more China will invest in Africa. A slowing economy at home combined with the difficulties African nations are finding in debt servicing have led to a decline in China’s development spending in the continent. The country hasn’t financed any standard gauge railways in Africa since 2016, and it has committed to stop financing coal power plants. No energy loans were issued under China’s Belt and Road Initiative last year for the first time this century. 

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