Lots of businesspeople and tourists traveling to Africa are baffled. “Where am I?” they’re wondering. “Did I get aboard the wrong plane?” Locals also are surprised.
What’s causing all this confusion is the large and growing number of Chinese there. Clearly, they want to profit from the abundant resources and business opportunities in Africa. But others think more nefarious motives are at play. They wonder whether China is trying to take control of the continent.
It’s no secret that Africa has great wealth in its land. Unlike other regions, whose territories have been explored and mined extensively, much less development has been done in Africa. As a result, there is a great deal of potential profit to be made there, and China, like other countries, is trying to benefit from those untapped resources.
For centuries, countries, companies, investors, and speculators have exploited the riches of other nations. Sometimes they did this through political manipulation and sometimes through brute force. Chinese companies have gotten into this game, but they are using a very different tactic: economics.
Builders ’R Us
Currently there are more than 10,000 Chinese-owned firms doing business in Africa, and according to a variety of sources, most, if not all, of the major construction projects are built by them.
Even in Africa, building new infrastructure is very expensive, and these countries are, for the most part, very poor. As a result, these nations borrow money from Chinese firms to finance the various projects and are now heavily indebted to them.
Here’s how Forbes explains what’s going on: “The reason Chinese corporations are in Africa is simple: to exploit the people and take their resources. It’s the same thing European colonists did during mercantile times, except worse. The Chinese corporations are trying to turn Africa into another Chinese continent. They are squeezing Africa for everything it’s worth.”
Two million Chinese now live in Africa, and more are coming. The number of major projects they are constructing is increasing. And along with all of this activity, references to Chinese culture and other things Chinese are becoming more prevalent.
China’s state-run newspaper, China Daily, can now be purchased in several African cities, in many countries signs and billboards are in Chinese, China’s state-run news channel can be watched on local TV, Chinese language schools are opening, and some African students have been awarded scholarships to study in China.
More importantly, it’s not just major projects that Chinese firms are constructing. They are building “special economic zones” - in effect large self-sustaining Chinese cities - across Africa. These “zones” have Chinese factories and are staffed with Chinese managers who supervise Chinese workers who use Chinese equipment to manufacture products.
One of the biggest of these has been built next to Lagos, Nigeria. It has its own laws, and is based on a model in Shenzhen, a city in China. Since Shenzhen, in China, became a special economic zone 30 years ago, it grew from a small town of 20,000 to one with a population of 15 million today.
Along the coast of Tanzania, China Merchants Holdings International has plans to transform Bagamoyo from a lagoon into the largest port in Africa. Factories will be located in a special industrial area and new apartments will house an estimated 75,000 people. And a new international airport is being built in that country.
CNN reports that in Addis Ababa, Ethiopia’s capital city, “Cars chug through the city on smooth Chinese roads, Chinese cranes lift the skyline, sewing machines hum in Chinese factories in Chinese-owned industrial parks, tourists arrive at the Chinese-upgraded airport and commuters ride modern Chinese trains to work. Simply put, Addis Ababa is becoming the city that China built.”
According to consulting firm McKinsey, China is now Africa’s biggest trade partner, and trade exceeds $200 billion per year; deals now under discussion could add many billions more. In 2018 China announced a $60 billion African aid package, which will improve good will and likely also pave the way for even more business deals.
Obviously, many Chinese firms are profiting from these developments and so are many Africans. But with debt increasing so quickly, some African nations cannot make the payments on their loans.
Zambia is just one example. Africa Confidential, a respected newsletter, has warned that if the Zambian government defaults on its loans, it could lose its sovereignty, as China will seize national assets. That may already have started happening, as the Zambian government is engaged in talks concerning trading its national electricity company in exchange for its loans. And China is already in control of the country’s broadcasting company, ZNBC. Reportedly, the main airport in Lusaka could be the next asset on the auction block.
Africa Confidential writes that, “A major worry of the IMF (International Monetary Fund) and the US is that China’s strategy is first to encourage indebtedness, and then to take over strategic national assets when debtors default on repayments.”
The newsletter adds that Chinese own 77% of the national debt in some countries and that Zambians would be shocked if they knew the real amount of debt owed to China. Britain’s Department for International Development was investigating three ministries for fraud. Africa Confidential noted that the Zambian government is continuing to spend money lavishly despite the country’s debt woes.
Are these examples of how shrewd Chinese companies do business? Is it an example of the evils of predatory debt? Or are those firms simply very lucky, and in the right place at the right time?
Whatever the answer, a lot of Chinese are profiting, flexing their economic and political power, and setting the stage for continued expansion. You can be sure other countries are watching closely and enviously and trying to figure out a way to get into the act.
Sources: bloomberg.com; cnn.com; forbes.com; lusakatimes.com