The value of loans from Chinese lenders to energy and infrastructure projects in Africa almost trebled between 2016 and 2017, from USD 3bn to USD 8.8bn, with policy lenders China Development Bank and China Exim particularly active in helping bridge Africa's infrastructure gap.
Almost half of the total USD 19bn of Chinese outbound loans poured into infrastructure projects in sub-Saharan Africa since 2014 were made last year (2017). Notably, Chinese lenders accounted for more than 40% of all infrastructure finance in sub-Saharan Africa in 2017 and its policy banks made more the four fifths of lending by Development Finance Institutions (DFIs) in the region.
Chinese commercial and policy bank lending for infrastructure projects in sub-Saharan Africa totalled USD 3.6bn in 2014, USD 3.4bn in 2015 and USD 3bn in 2016, before spiking almost 300% to USD 8.8bn in 2017, driven by a series of large power projects across Africa.
The trends are revealed by new research from global law firm Baker McKenzie and IJGlobal, the leading trade publication for infrastructure projects, as leaders from the BRICS bloc - Brazil, Russia, India, China and South Africa - meet in Johannesburg this week for their annual summit. Data is drawn exclusively from fully financed projects and excludes recent announcements of government funding commitments.
Speaking from the BRICS Energy event, which preceded the BRICS Summit, Kieran Whyte, Head of Energy, Mining and Infrastructure at Baker McKenzie in Johannesburg said the rising impact of Chinese policy lending in Africa is increasingly visible.
“Chinese president Xi Jinping’s recent tour of African countries ahead of the Summit is proof of the increasing interdependence of the maturing but still fast growing Chinese economy and developing economies in Africa,” says Whyte.
“This is much more sophisticated outbound lending than the cliché about China investing in African minerals and rail to get commodities to China to feed manufacturing – the data clearly shows Chinese lending predominantly shifting towards African power projects,” he says.
“All countries need power generation, transmission and distribution assets which are reliable and meet demand; without this, wider development is a distant dream," said Jon Whiteaker, editor of IJGlobal. "It is little surprise then that the power sector has grown to be by far the biggest recipient of Chinese policy lending in Africa. The US government may have recently jump-started its Power Africa programme, but it has increasingly been Chinese lenders which African and Middle Eastern countries have turned to get power projects financed.”
Globally, infrastructure deals featuring significant Chinese financing have risen more than threefold since 2012, driven among other things by China's Belt & Road Initiative (BRI), going from 31 deals in 2012 to 105 deals in 2017. The BRI is a world scale Chinese development strategy that combines the creation of a 21st Century Maritime Silk Road and a Silk Road Economic Belt.
Whyte explains that this shift towards power is because China is comfortable operating in the energy sector and is aware power acts as a catalyst for the growth of other sectors in Africa, providing foundations for long term economic development.
"It's also true that in terms of infrastructure development, many of China’s construction companies are world leaders in the power sector and Chinese goods and equipment are used in the construction process, which further benefits China's economy,” he says.
Whyte adds that as one of South Africa’s largest trading partners, China plays an important role in infrastructure investment in that country. At the BRICS Summit Energy event this week, China pledged to invest USD 14.7bn in South Africa and to grant loans to state owned enterprises Eskom and Transnet.
Against the background of a geopolitical shift in trade relations, China has noted that it is looking to work with African countries in a participative and inclusive way,
Another recent report by Baker McKenzie and Silk Road Associates; Belt & Road: Opportunities & Risks - the prospects and perils of building China's New Silk Road details how key opportunities in Africa with regards to the Belt & Road Initiative will be transactions related to major projects in the power and infrastructure sector and related financing.
Recent examples of large power deals in Africa where at least 50% of the finance was provided by Chinese lenders include:
While European DFIs increasingly focus only on lending to renewable energy projects in Africa, coal is still an essential part of energy baseload and vital in a region where grid capacity is almost non-existent and almost two-thirds still live without ready access to power.
The African countries seeing most Chinese lending are Kenya and Nigeria, which alone have swallowed up almost 40% of the USD 19bn of lending to projects in sub-Saharan Africa since 2014. However, Chinese banks have been active lenders to infrastructure projects in 19 different countries in the past four years. Chinese policy lending is also set to widen, with Senegal recently becoming the first West African country to sign up to supporting the BRI.
Infrastructure projects in Ethiopia have received USD 1,8bn since 2014, Kenyan projects USD 4,8 bn, Mozambique infra deals USD 1,6bn and Nigerian projects USD 5bn from Chinese lenders. South African infrastructure projects have received USD 2,2 bn from Chinese lenders since 2014, Zambia has received USD 1.5bn and Zimbabwe has seen USD 1.3bn in loans from Chinese policy lenders since 2014.
The power sector in sub-Saharan Africa has received USD 17,5 bn in loans from Chinese lenders since 2014 (USD 8,8 bn of this amount was in 2017). The oil and gas sector has received USD 3,2 bn (USD 1,7 bn in 2017) and the transport sector in sub-Saharan Africa received USD 5,5 bn from Chinese lenders since 2014 (with USD 500 million received in 2017).
Whyte notes that for investors in Africa, “A big attraction of China’s Belt & Road Initiative for both African governments and project sponsors is that it assists the speed of project implementation. Project stakeholders advise that the whole process is a lot quicker than other options. Chinese policy lenders assist in providing liquidity and contribute to the speed of implementation of projects in Africa, which is necessary for Africa to participate in the roll-out of the fourth industrial revolution and the global energy transition,” he adds.
Source: The Business Insider
China’s President Xi Jinping pledged during a visit to Senegal on Saturday to strengthen economic ties with Africa, a continent already awash with cheap Chinese loans in exchange for minerals and huge construction projects.
Xi arrived in Senegal on Saturday for a two-day visit to sign bilateral deals, the first leg of an Africa tour that will also take him to Rwanda and South Africa, the latter for a summit of BRICS countries: Brazil, Russia, India, China and South Africa.
China now does more trade with Africa than any other nation does, and its consistent overtures to the continent contrast sharply with the United States, whose President Donald Trump has shown little interest in it.
The visit was Xi’s first trip to West Africa as president, but his fourth to Africa, he told a joint press conference with Senegalese President Macky Sall after their third ever meeting.
“Every time I come to Africa, I have seen the dynamism of the continent and the aspirations of its people for development,” Xi said. “I am very confident in the future of Sino-African relations.”
Earlier, Xi was greeted by a brass band and hundreds of people waving Chinese and Senegalese flags and wearing T-shirts emblazoned with the two leaders’ faces.
LOADING UP ON CHINESE DEBT
Africa is in the midst of a boom in infrastructure projects, managed and cheaply financed by China, part of Xi’s “Belt and Road” initiative to build a transport network connecting China by land and sea to Southeast Asia, Central Asia, the Middle East, Europe and Africa.
China has pledged $126 billion for the plan, which has been praised by its supporters as a source of vital financing for the developing world. In Senegal, Chinese loans have financed a highway linking the capital Dakar to Touba, its second main city, and part of an industrial park on the Dakar peninsula.
China’s ambassador to Senegal Zhang Xun was quoted by the local press in March as saying China had invested $100 million in Senegal in 2017.
“Senegal takes a positive view of China’s role in Africa,” Sall said at the news conference. “For its contribution to peace and stability and equally ... for the financing of budgets.”
But critics say Africa is loading itself up on Chinese debt that it may struggle to repay, with estimates ranging in the tens of billions of dollars. That could leave African nations with no choice but to hand over controlling stakes in strategic assets to the Chinese state.
U.S. officials have warned that a port in the tiny Horn of Africa nation of Djibouti, a host to major U.S. and French military bases, could suffer this fate, although Djibouti rejects the fear.
In Guinea, meanwhile, one of the world’s poorest nations, China is lending $20 billion to the government in exchange for aluminium ore concessions.
As well as trade and minerals, China has also seen Africa as a source of political support. Chinese diplomacy has, as of May this year, succeeded in getting every African country except Swaziland to break off diplomatic relations with Taiwan, which China sees as a renegade province.
Not for the first time, the 2018 World Cup Finals will take place without the Chinese national team. In fact, China’s World Cup record is abysmal (and I say this as a Scottish football fan).
The team has qualified only once for the final stages – in 2002 when it played three games in South Korea, failed to score in any of them and was eliminated without securing a single point. On a more positive note, losing only 4-0 to Brazil was an achievement of sorts, given that the Brazilian goal scorers were Roberto Carlos, Rivaldo, Ronaldinho and Ronaldo.
Apart from this short-lived foray into the finals, China did not enter the competition between 1930 and 1954 or between 1962 and 1978, failed to qualify for the finals in 1958 and again between 1982 and 1998 and from 2006 to the present.
In the Asia qualifying stage of the 2018 World Cup, China received a bye into the second round where they came second in a group headed by Qatar. Following the third qualifying round, China was eliminated, having been placed in its group below – among others – war-torn Syria, which is currently obliged to play “home” games abroad.
Xi has a dream
It is against this dismal backdrop that we must try to interpret Chinese president Xi Jinping’s vision for the future of Chinese football. In 2011, Xi confessed that he had three World Cup dreams for China: to participate once again in the World Cup finals, to host the World Cup finals and to be World Cup winners.
There can be little doubt that the People’s Republic of China (PRC) will host the World Cup finals at some point in the not-too-distant future. With the Summer Olympics already under China’s belt and the Winter Olympics to come, the country has already shown itself to be willing and able to host sporting mega events.
The FIFA World Cup would present greater logistical challenges than the Olympics but no more so than in Russia. China’s massive cities would be happy to stage matches and, where suitable venues do not yet exist, they would be built. The Chinese team would, of course, qualify as hosts, perhaps its best chance of repeating the achievement of 2002.
But what of Xi’s third dream? Here Xi and, by extension, the Chinese Football Association (CFA) face a much greater challenge. It is true that host countries have often done well. However, it has proved impossible to date to prevent a European or South American team from winning the World Cup. Although in the past there have been high hopes for an African victory, hosting the finals did not mean success for the South African team.
Moreover, we should not forget that football has been the number one sport in most African countries throughout the period in which football’s significance in China has been dwarfed by that of badminton and table tennis.
A run on goal
A further obstacle to the realisation of Xi’s third dream stems from the contradictions that are inherent in his country’s ruling ideology of which he is now the unassailable guardian.
Socialism with Chinese characteristics has come to mean the combination of a strong state and an increasingly liberal market economy, the differences between which can be seen in the relationship between the CFA and the Chinese Super League (CSL). Founded in 2004, the latter has attracted the interest of some of the richest companies in China, eager to own a football club and gain the additional benefits that this can bring.
These owners provide live football entertainment to fans whose engagement would otherwise would be restricted to watching televised games from the major European leagues – hence their investment in bringing star players from Europe and South America to play for their teams. Their primary interest is securing the best return for their investment – not in creating a successful national team and thereby helping to fulfil Xi’s dream.
These owners are capitalists but of a distinctly Chinese type, subject to considerably more surveillance and interference than their Western counterparts. The CFA is even more closely tied to the state, the interests of which it has a far greater obligation to serve than equivalent organisations in the West.
Thus, almost certainly because of state pressure, the CFA’s latest ruling on the use of foreign players decrees that CSL teams can use three at most in a match and that the number of foreign players on the field must not exceed that of domestic players under the age of 23. The battle for the soul of Chinese football is likely to continue.
But it’s not this conflict of interests alone that threatens Xi’s dream. A lucrative, entertaining national league does not guarantee a successful national team – you only have to look at England’s track record to see this. Nor does a league which offers limited opportunities for local hopefuls to play alongside foreign talent (see Scotland, for example).
The real key may be having the capacity to select players for a national team who have experience of playing in overseas leagues in France, Spain Portugal, Germany, Belgium and elsewhere). With that in mind, the time has come perhaps for the CFA, the CSL owners and Xi to consider exporting China’s football talent to fulfil the dream.
More articles about China and Xi Jinping, written by academics:
The Trump administration told lawmakers the U.S. government has reached a deal to put Chinese telecommunications company ZTE Corp back in business, a senior congressional aide said on Friday.
As with a similar announcement earlier, the proposed deal ran into immediate resistance in Congress, where Democrats and Trump's fellow Republicans accused him of bending to pressure from Beijing to ease up on a company that allegedly poses a significant risk to U.S. national security.
ZTE was banned in April from buying U.S. technology components for seven years for breaking an agreement reached after it violated U.S. sanctions against Iran and North Korea. It would now be allowed to resume business with U.S. companies, including chipmaker Qualcomm Inc.
The deal, communicated to officials on Capitol Hill by the Commerce Department, requires ZTE to pay a substantial fine, place U.S. compliance officers at the company and change its management team, the aide said. The Commerce Department would then lift an order preventing ZTE from buying U.S. products.
U.S. President Donald Trump on Tuesday floated a plan to fine ZTE up to $1.3 billion and shake up its management as his administration considered rolling back more severe penalties that have crippled the company.
The White House did not immediately confirm reports of the latest deal, but a spokeswoman said, "This is a law enforcement action being handled by Commerce. We are making sure ZTE is held accountable for violating U.S. sanctions, pays a big price, and that we are protecting our security infrastructure and U.S. jobs."
Fox News said Trump told them on Thursday that he had negotiated the $1.3 billion fine with Chinese President Xi Jinping in a phone call.
ZTE, which is publicly traded but whose largest shareholder is a Chinese state-owned enterprise, agreed last year to pay a nearly $900 million penalty and open its books to a U.S. monitor for breaking a 2017 agreement after it was caught illegally shipping U.S. goods to Iran and North Korea, in an investigation dating to the Obama administration.
The company has lost over $3 billion since the April 15th ban on doing business with U.S. suppliers, according to a source familiar with the matter.
Responding to news of the administration's proposed settlement with ZTE, Republican Senator Marco Rubio tweeted: "Yes they have a deal in mind. It is a great deal ... for #ZTE & China. #China crushes U.S. companies with no mercy & they use these telecomm companies to spy & steal from us."
Rubio, as well as Democratic Senators Chuck Schumer and Chris Van Hollen, said Congress should act to stop Trump from letting ZTE get back into business.
U.S. intelligence and U.S. law enforcement agencies have serious concerns that ZTE and other Chinese telecommunications firms use their equipment to gather intelligence on U.S. citizens.
William Evanina, the acting director of the National Counterintelligence and Security Center, said at his May 15 confirmation hearing that he would not use a ZTE phone nor recommend that anyone in a sensitive position in government use one.
Chinese officials sought a pullback on ZTE as part of any broader deal to prevent a trade war between the world's two biggest economies. U.S. Commerce Secretary Wilbur Ross is scheduled to visit China next week for another round of talks.
ZTE needs U.S. components for its mobile phones and network equipment. U.S. companies provide an estimated 25 percent to 30 percent of components in ZTE's equipment.
As part of the agreements ZTE made last year it dismissed four senior employees.
Shares of ZTE's U.S. suppliers traded higher on Friday. Optical networking equipment maker Acacia Communications Inc, which got 30 percent of 2017 revenue from ZTE, rose 4.4 percent. Optical component company Oclaro Inc, which received 18 percent of its fiscal 2017 revenue from ZTE, rose 2.7 percent.