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DOI: 10.4018/JCAD.2021010101
Journal of Comparative Asian DevelopmentVolume 18 • Issue 1 • January-June 2021
Copyright©2021,IGIGlobal.CopyingordistributinginprintorelectronicformswithoutwrittenpermissionofIGIGlobalisprohibited.
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Identifying Forward and Backward Linkages From China’s Infrastructure Investment in AfricaEhizuelen Michael Mitchell Omoruyi, Center for Nigerian Studies under the Institute of African Studies, Zhejiang Normal University, China
ABSTRACT
ThecontinentofAfricamustindustrializetoeradicatepovertyandcreatejobsforits12millionAfricanyouthwhojoinitsworkforceyearly.Oneofthemajorfactorshinderingindustrializationhasbeentheinsufficientstockofproductiveinfrastructurethatwouldpermitcompaniestothriveinindustrieswithrobustcomparativeadvantage.WithinthecontextofAfrica-Chinacooperation,ChinahasemergedasakeypartnertoseveralAfricannations,includingfinancingaswellasconstructinglarge-scaleinfrastructureprojects.WithemphasisontheTazararailway,Mombasa-Nairobirailway,andGhanaBuihydropowerdam,thispaperemploysbackwardandforwardlinkagestheorytoinvestigatewhatrolethesethreeChinese-ledinfrastructureprojectsplayinAfricaninfrastructuredevelopmentandwhattheinfrastructureinvestmentleadstoconcerningcreatingnewopportunitiesandbusinessesforAfrica.ThepaperdiscoversthatthesethreeChinese-ledinfrastructureprojectshavemultiplegainsand linkages forandbeyond the threevariousprojectsareas.Aboveall, these threeChinese-ledinfrastructureprojectswereseenbytheChinesegovernmenttofulfilitsgoalsinAfrica.
KeywoRDSAfrica, Backward, China, Financing, Forward Linkages, Infrastructure
1. INTRoDUCTIoN
Fiveofthetoptenfastestgrowingeconomiesintheworldin2019areinAfrica,andfourinSub-SaharanAfrica(SSA)(Deloitte,2019).Yet,forGDPgrowthtoproducestructuralchangesrequiredacrossAfrica,itneedstobeinclusive.Essentially,morefocusmustbeplacednotonlyonquantity(highgrowth) but alsoon thequalitative aspect of growth.All these canbepossible ifAfricaneconomiesinvestmoreininfrastructure.Thisisbecauseinfrastructureholdsatransformativepowerintheglobaleconomy.NowondertheChineseproverbsays:“Ifyouwant toprosper,firstbuildroads”(Deloitte,2018).ThatwaswhywhenChinalauncheditsowneconomicdevelopmentitbuiltroads,ports,ruralpowerplants,modernizedagriculture,invitedinfactoriesandexperimentedwithdifferentapproaches:specialeconomiczonesforinstance.TheChinesedidthisbecausetheyknowthat through the constructionof electricity, roads, ports, airports, railways, and communicationsnetworks,nationscanpowerthehomesoftheircitizensandcommerce,connectproducerstomarkets,andshare informationspeedily, therebyboostingworldwideandregional trade,competitiveness,economicopportunities,andthequalityoflife(Sy,2017).
With that said,notably,better infrastructurecanbenefitAfrican theeconomy through thesethreechannels.Firstly,cheapertransportcostscanhelpcreatenewmarketsandrealizethereturn
Thisarticle,originallypublishedunderIGIGlobal’scopyrightonJanuary1,2021willproceedwithpublicationasanOpenAccessarticlestartingonFebruary19,2021inthegoldOpenAccessjournal,JournalofComparativeAsianDevelopment(convertedtogoldOpenAccessJanuary1,2021),andwillbedistributedunderthetermsoftheCreativeCommonsAttributionLicense(http://creativecommons.org/licenses/
by/4.0/)whichpermitsunrestricteduse,distribution,andproductioninanymedium,providedtheauthoroftheoriginalworkandoriginalpublicationsourceareproperlycredited.
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to agglomeration, which in turn fosters competition, spurs innovation, lower prices, and raisesproductivity,therebyleadingtoasurgeinthestandardofliving(HenckelandMcKibbin,2010).Secondly,transportinfrastructurecanhaveadirecteffectontheeconomicefficiencyofaneconomybyreducingtransportcostsandanindirecteffectbyloweringinventories.Thirdly,asaneconomymovesuptheglobalvaluechain,adaptingitsinfrastructurecanbeacatalystforpromotingprivateactivitiesandindustrialization,andensuringthatenoughemploymentiscreatedforthe12millionyoungAfricanyouthenteringthelaborforceyearly,1attractingforeigninvestmentinothersectorsandincreasingbusinessconfidence,fostersinnovationandproductivity,promotethemanufacturingsector, skills development, integration, intra-African trade, tourism, competitiveness, economicopportunities,qualityoflifeandleadingtomoretradewiththerestoftheworld.ThisshowsthatinfrastructurecanhelppropelFDIandinturnhelptodevelopforwardandbackwardlinkageswhichwillpermitdomesticcompaniestobebetterintegratedintoglobalsupplychains.
With that said, Mckinsey Global Institute (MGI) estimates that infrastructure typically hasasocioeconomicrateof returnofaround20percent (MGI,2016). Inotherwords,onedollarofinfrastructureinvestmentcanraiseGDPby20centseventually.Simulationsshowthatindevelopingnations,increasingthepublic-investment-to-GDPratiofrom7.0percentofGDPto14.0percentofGDPinaboutthreeyearsandstabilizingitat9.0percentofGDPafterwardscansubstantiallyraisetheoutputby7.0percentoverthelongterm(IMF,2014).2Thepotentialbenefitsofinfrastructureareevenlargerwhenthenetworkandcross-sectoralimpactsandsynergiesareaccountedfor.TheWorldBankestimatesthatSSAgrossdomesticproduct(GDP)percapitagrowthwouldsurgeby1.7percentagepointyearlyiftheregionweretoclosetheinfrastructuregap(intermsofbothquantityandquality)relativetothedevelopingworldmedian.3
NowonderPark(1989)hasconfirmedthattheinfrastructureindustrygeneratesoneofthehighestmultiplier effects through its extensivebackward and forward linkageswithother sectorsof theeconomy.Assuch,foranationtodevelopthatnationneedstofirstmovefordevelopinginfrastructurefacilitiestothebackwardregionsofthenationtoboostuptheeconomicperformanceofthatnationbymeansoffacilitatingmajoreconomicactivities,namelyagriculture,industryandservice.Also,thenationfollowsthesamepathandtrytoinvestfurthersothatthereisaparallelsurgeinthelevelsofinvestmentexpenditureswhichacceleratetheprocessofgrowthanddevelopmentoftheeconomy.Theformeroneisknownastheforwardlinkageandthelatterisknownasthebackwardlinkage.
On the other hand, concerning forward and backward linkages, infrastructure can raise theproductivityofotherfactorsofproduction.Forinstance,installationofanovelirrigationsystemcanimprovethequalityoffarmland,therefore,raisingproductivityperhectareandshiftingtheproductionpossibilitycurveoutward(Todaro&Smith,2009).Thehigherproductivity,inturn,attractsmoreresources(privateinvestment)intoproduction,whichfurthercontributestohigherlevelsofoutput,theprofitabilityofproduction,incomeandemploymentinthesesectors.Thisindicatesthatacombinationofthesetworepercussionsmayhappenwheninvestmentbyonesectorleadstoinvestmentbyothersectorsinaparallelwayandtosayinotherwaysthattheforwardandbackwardlinkagesworksidebysidethatmayensuretheoverallgrowthanddevelopmentofanation.Notably,theimportanceoftheinfrastructuresectorstemsfromitsstronglinkageswithothersectorsoftheeconomy(WorldBank,1984).Thismeansthattheproperworkingofbothlinkagesgenerallyacceptedasacatalysttodevelopmentandthesoundbasesoftheinfrastructuralfacilitiesinmostcasesdefendtheeconomiesfromanyglobalshocks.
Withtheaboveforwardandbackwardlinkages,thereisaneedforurgentimplementationofreforms to improve institutions that foster private sector growth, develop local capital markets,strengthendomesticresourcemobilization,andimproveinfrastructure.ThiscouldalsomakegrowthinAfricamoreinclusive,reducingpovertyacrossAfricaandpromotingtheworldsharedprosperity,especially African nations. Therefore, infrastructure is featured in Goal 9 of the 17 SustainableDevelopmentGoals(SDGs)ofthe2030Agenda–“Buildresilientinfrastructure,promotesustainableindustrializationandfosterinnovation”andAspiration2ofAgenda2063,theAfricanUnion’svision
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forAfrica’stransformationoverthenextfivedecades.Assuch,scalingupinfrastructureinvestmentintheregioncouldhelpattainmuchneededhighergrowth.
Withthatsaid,notably,regionalinstitutions,includingtheAfricanDevelopmentBank(AfDB),theNewPartnershipforAfrica’sDevelopment(NEPAD),andtheUnitedNationEconomicCommissionforAfricaareactivelysupportinginfrastructuredevelopmentinthecontinent,thereisthepossibilitythatmeetingtheSDGsof2030andAfricanAgenda2063willrequireadecisiveactionasAfrica’sinfrastructureneedsremainimmense.Forexample,Sy(2017)claimsthatonly30percentofAfrica’spopulationhasaccesstoelectricity,34percenthasaccesstoroads,andtheinternetpenetrationrateiswobblylow,amere6percentcomparedwith70-90percentforotherdevelopingnations.Theauthoraddedthatinsub-SaharanAfrica(SSA),theinfrastructuredeficitisparticularlyacute,withthepoorestnationsinAfricafallingfarbelowotherlow-incomenationsonallinfrastructure-relatedindicators.
ToaddressthecontinentinfrastructuredeficitandcompletelyattainGoal9oftheSDGsandAspiration2ofAgenda2063,governmentswillneedtoaccelerateandintensifyeffortstomobilizedomesticandexternalfundingresourcesforinfrastructuredevelopment.Notably,SSAnationsspendalmostUS$60billionfromtheirnationalbudgetsoninfrastructuredevelopmentin2012(Sy,2017).Althoughthisamountissignificant,thisamountfallsshortoftherecentestimatebytheAfricanDevelopmentBank(AfDB)thatputthecontinent’sminimuminfrastructureneeds–fornationstosustainthegrowthoftheireconomies,population,incomelevelandreplaceageinginfrastructure–atUS$130billiontoUS$170billionyearly;atleasthalfofthatrequirementisrecentlyunfinanced(AfDB,2018).
So,wherecanAfricangovernmentsfindthenecessaryfundingtocarryouttheseprojects?AsubstantialportionoftheseinvestmentsarenowcomingfromAfricangovernments,donors(ICAmembers),andnon-traditionalsources:Theprivatesectorandemergingnations,especiallyChina(seeTable1)(Fosteretal.,2008;UNCTAD,2008;Moyo,2009;AfDB,2018).Africannationsarenowseekingfinancialresourceswellbeyondforeignaid;asaresult,thisopensupopportunitiesforpossibleAfrica-ChinaCooperation.
WithafocusonthesethreeChinese-ledinfrastructureprojects-Tazararailway,Mombasa-Nairobirailway,andGhanaBuihydropowerdam,thispaperemploysbackwardandforwardlinkagestheorytoinvestigatewhatthesethreeChinese-ledinfrastructureprojectshave ledtoconcerningcreatingnewopportunitiesandbusinessesforthecontinentofAfrica.Assuch,thepapermostlyreliesonmultiple data sources such as archives, second-hand materials, and international organizations reports thathavealreadybeenundertakenonthistopictoelucidateandcomprehendtheexistingprocessofAfrica-Chinacooperationbyfocusingoninfrastructureprojects.
Table 1. Trends in Infrastructure Finance in Africa, by Source ($ billion)
Source 2012 2013 2014 2015 2016 Average
Africangovernments 26.3 30.5 43.6 24 26.3 30.1
Donors(ICAmembers) 18.7 25.3 18.8 19.8 18.6 20.2
MDBsandotherbilaterals 1.7 2 3.5 2.4 3.1 2.5
China 13.7 13.4 3.1 20.9 6.4 11.5
Arabnations 5.2 3.3 3.4 4.4 5.5 4.4
Privatesector 9.5 8.8 2.9 7.4 2.6 6.2
Total 75.1 83.3 75.4 78.9 62.5 75.0
Source: The Infrastructure Consortium for Africa (ICA) 2017; AfDB, 2018
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Thein-depthpartofthispaperwillbethecasestudiesoftheTazararailway,Mombasa-Nairobirailway,andGhanaBuihydropowerdamthatillustrateasmallpartoftherealityofthistopic.Fromthesecasestudies,identificationoflinkageswillbeofferedanddeliberatedon.Therefore,oneofthesignificantaimsofthispaperistoidentifylinkagesthatemergefrominfrastructureprojectsinAfricacomingfromChina.ItisinthiscontexttheauthoranalyzesthelinkagedevelopmentasawindowofopportunityforAfrica’sinfrastructureinvestment.
2. LINKAGe DeVeLoPMeNT AS A wINDow oF oPPoRTUNITy FoR AFRICA’S INFRASTRUCTURe INVeSTMeNT
Thispaperisframedbytheconceptofbackwardandforwardlinkagestheory.Backwardlinkagesareestablishedwhenthegrowthofoneindustryleadstogrowthamongsupplyingindustries,whileforward linkages evolve when the growth of one industry leads to the growth of industries thatusetheiroutputsasinputs.Moreso,backwardlinkagescreateadditionaldemandfortheoutputofupstreamsectorswhich,inturn,inducesanaugmentedupstreaminvestmentandanaugmentedlevelofcapacityutilization,aswellasapossibleupstreamtechnologicalupgrading.Theoveralleffectontheeconomydependsonthetypeofsectorstowhichasectorbackwardlyconnects(Tregenna,2008).Bycontrast,theforwardlinkagesofasectorimpactdownstreamsectors.Therefore,decreasingcostsofasector’soutputcanresult ingrowth-inducingeffectsondownstreamindustries.Thesecouldcomprisedownstreaminvestment,technologicalupgrading,oraugmentedproductivityandresourceutilization.Boththesegrowthinducingmechanisms–backwardandforwardlinkages–areso-calledHirschman-typeproductionlinkages(Tregenna,2008).
TheconceptofbackwardandforwardlinkageswasintroducedbyAlbertHirschman(Hirschman,1969);developmentplannershavelongusedtheconcepttoinvestigatestheseinteractions.However,fewanalystshaveafocusoninfrastructuredevelopment.Basically,whatitdoesisthatit triestodescribetheeconomicconnectionbetweenthebuyerandtheproducer(Guo,2013).Inotherwords,alinkageexistswheneveranongoingactivitygiverisetoeconomicorotherpressuresthatleadtothetakingofnewactivity(SenderandSmith,1986).Thelinkagesrecognizedintheeconomicliteratureovertheyearscompriseofthosearisingdirectlyfromtheproduction(backward,forwardandsidewayslinkages),andconsumptionordemand,butalsofrominfrastructuralexternalities,lateralmigrationoftechnologiesandfiscalrevenues(Hirschman1958;1981;Mteghaetal.,2012;WalkerandJourdan,2003).Somenationshavebeenmoresuccessfulinensuringthatlinkagesmaterializethanothersandthisistiedtothemechanismthatisused,oragency.Therelationshipbetweenlinkagesandagency(notnecessarilythestate)determinesthesystemofaccumulationofeconomieswhichinturnshapesthestructureoftheeconomy(FineandRustomjee,1996).
Nowadays,ithasbeensaidthatusually,theprojectproduceslinkagesandthetheoryarguesthatthemorelinkagesaprojectcreatesthebetteritisand,therefore,mostinvestmentsshouldbeboostedintothatcertainprojectthananywhereelse.AnobviousinstancetodescribetheselinkagesisbyusingtheinstanceofthesteelindustryprovidedbyDadvar(2016)wherethebackwardlinkagesarecoalandironminingandforwardlinkagesare,forexample,cannedgoods.Whentryingtounderstandalong-term,ongoingprocesslikeinfrastructureprojectthistheorycanbeagoodwaytodemonstrateinrealtermswhattheseprojectsresultin(Hirschman,1969).
Intermsofwhattheseinfrastructureprojectsproduce,thecontinentofAfricaneedstoprovidejobopportunitiestomillionsofyounginhabitants,openintra-tradeaswellasinternationaltraderoutesandprovidethebestopportunityforAfricannationstoliftthemselvesoutofthetrapsofisolation,poverty,andmarginalization.Onlymassiveinvestmentininfrastructurecancreatethewindowofopportunityrequiredtomaximizeprofit,minimizecost,createmultipliereffectsandopenopportunitiesthatenabletheactivitiesofothersectorsliketourism,agriculture,extractiveandindustrialsectorstofunctionand,inturn,allowsthecontinentofAfricatoeradicatepovertyandattainsustainabledevelopment.Simultaneously,thiswillhelpfacilitatedynamicprocessesoftechnologicalinnovation,
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skillsdevelopment,knowledge-intensificationandcapitalaccumulation.Linkagedevelopment ininfrastructureinvestmentcanopenvitalopportunitiesinthisrespect.
By advancing backward and forward linkages to the infrastructure sector, African nationscanmaximizedirectandindirect jobcreationeffects.Ontopof that,steadyincreasesinlinkagedevelopmentcanoffersignificantopportunitiesforAfricannationslabor-intensiveandsmall-scaleenterprises,employingsemi-skilledandcasualworkers,helpsmallandmedium-sizedenterprisesovercomefrequenttransactioncosts,electricityandwateroutagethatusuallycreatebarriersforfirmstoentermarketsandraiseentrepreneurship,ultimatelyaffectinghouseholdincomegrowth,consumption,andvulnerabilitytomacroeconomicshocks.Moreover,asforsoftinfrastructuresectors,constructionfirmscanstimulatelocalemploymentbutalsogeneratespillovereffects,suchasskillsdevelopment,managementexperience,andtechnologytransfer.Forsoftcommoditysectors,resource-processingindustriescanbolsterrawmaterialsupplies,4whichcreatefurtherjobopportunitiesintheagriculturalsector.However,alltheseopportunitiesinresource-processingindustriesneedinfrastructuresuchasrailway,roads,water,ports,communication,powergridsandserviceproviderssuchastransporterstofunctionwhichworkasbothforwardandbackwardlinkages.Therefore,developingbackwardandforwardlinkagestotheinfrastructuresectorscancontributetodevelopmentofAfricaneconomies.Thisisbecause,byintegratingforwardlinkageswithgoodinfrastructureinplace,Africannationscananticipateaccruinghigherexportrevenuesandforeignearnings(MorrisandFessehaie,2014).
Intheglobalarena,infrastructureisessentialforparticipationinglobalvaluechains(GVC)toupgradetheeconomicstructure.GVCsrefertothediversevalue-addedconnections,composedofseveralactivities,requiredtobringaproductfromconceptionanddesigntoitsdeliverytothefinalconsumerand,finally,toitsdisposal(KaplinskyandMorris,2001).ThisGVCsofferopportunityforleastdevelopednationstoalleviatepovertybysnowballingincomeandcreatingemployment.Kummritzetal.(2017)discoveredbothbackwardandforwardGVCsparticipationcanleadtothegrowthofdomesticaddedvalue,basedonadatasetcovering61nationsand34industriesbetween1995and2001.Improvinginfrastructure,includinghardinfrastructureandsoftinfrastructure,isanecessaryconditionforreapingthebenefitfromtheparticipationinGVCstoupgradetheeconomicstructure.Reliableinfrastructuretoconnectsupply,andefficientmovementofgoodsandservicesacrossborders, fastand reliable information transfer, andsufficiently lowcoordinationcostsareprerequisitesforparticipatinginGVCs.AsarguedintheWorldBankReportTransformation through Infrastructure,infrastructuredevelopmentiscriticaltodeliveringgrowth,reducingpoverty,addressingtransactioncostsandbroaderdevelopmentgoals(WorldBank,2012).
Linkages from infrastructure development can help propel industrial development and thisindustrialdevelopmentcanopenopportunitiesforpositiveexternalitiesthatarehardtoquantify.Withinfrastructuredevelopment,Africannationscanpromotediversificationoftechnologicalcapabilitiesandoftheirskillsbasebydevelopingbackwardlinkagesupplycompaniestothecommoditysectorsandresource-processingindustries.Also,becausethenaturalresourcesectorusuallyrequiresthedevelopmentofinfrastructuretoextractandtransporttheoverwhelmingbulkcommodities,potentialforlinkagesisenhanced.Thistendstooccurmorefrequentlywithahighvolumeofmineralresourceswhichgenerallyneedshighwaysandrailways.Asthesearedevelopeditturnsouttobeeasiertoadvancesupplierandresource-processingactivities,whichinturnraisetheeconomiesofscope5asforfurtherinfrastructuredevelopment.Thispositiveexternality,however,isuncommoninthecaseofcommodities likeoil,goldanddiamonds,whichpromoteenclave-kind infrastructure (PerkinsandRobbins,2011).Forthoselinkagesinvolvingknowledge-intensiveservices,thekeyelementsofinfrastructurearelikelytobetelecommunications,securityandairtransport,whereastheprovisionoftangibleinputsintothecommoditiessectorandtheprocessingoftheoutputofthecommoditiessectoraremostlikelytorequirehardinfrastructuresuchasroadsandrail.
With thatsaid, theevidenceabove indicates that therehasbeenasteadyupsurge in linkagedevelopmentandthattherearesignificantopportunitiesfordeepeningthisprocess.Assuch,iftheprocess is deepened, linkage development can also create the opportunity to maximize positive
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externalitiesderivedfromclusters.Whensupplierandresource-processingindustriesarehavinggoodinfrastructuresuchasconstantelectricity,goodroads,andbeingpositionedclosetotheextractionlocation, there are agglomeration effects.6Theprocessesof agglomeration arebackedbypublicinfrastructure,particularlyinthetransportsector.Backtotheclusteraspect,nevertheless,efficiencybenefitsfromcompaniessituatedinclusterincludegainingaccesstoapooloflabor,andtospecializednetworksuppliers.ThisisspecificallyvitalforthecontinentofAfrica.Bypromotingspecializedsupplynetworks,buyersaccrueadvantagesintermsofloweringtransactioncosts,reducingstocks,shorteningdeliverytimes,andsnowballingflexiblytoadjusttonovelproducts.Henceinfrastructureplaysacriticalroleinalltheseprocessesreachingthemarketandinprovidingthenecessaryinputsforproduction.
Basedonlinkagedevelopment,Krugman(1991)displaysthatmanufacturingcompaniestendtolocateinregionswithlargermarketdemandstorealizescaleeconomiesandminimizetransportationcosts.Lowtransportcostspermitlargerscaleproduction,whichinturncreatesinvestmentactivitiesinotherindustries.Fromthedevelopmentviewpoint,oneofthemostvitalfeaturesofanyindustryistheextenttowhichitcangeneratedemandfortheproductsofotherindustries.Anindustrymayencourageinvestmentbothinthesubsequentstagesofproductionbyforwardlinkageandinearlierstagesthroughbackwardlinkage.Thiscreatesemployment,generatesincomesandtriggersspilloverintorural,servicesandsupplyingsectors;thisisparticularlyvitalforAfrica.
Furthermore,speakinginmorecontemporarytermsofdevelopmentthatcirclesverymucharounddevelopmentassistance, soas for these investments tocontribute toan industrial transformationitrequirestosubstituteforbackwardandforwardlinkages(Brautigam,2009).Thereisageneralagreementindevelopmentliteraturethatbasicinfrastructure–rangingfromtransportandpowertowater,sewagesystemsandtelecommunications–isaprerequisitefordevelopmentand,moreover,foranyeconomytofunction.NowonderBrautigam(2019)citingDrown(2011)statementassertsthatwhenNgoziOkonjo-Iweala,avicepresidentoftheWorldBankandformerfinanceministerofNigeria,askedtheChinesehowNigeriacouldattain10percentgrowthlikeChina,theyreplied:‘Infrastructure– infrastructureanddiscipline’.This isparticularly relevant in theearlystagesofdevelopment,whenprovisionofinfrastructuregeneratesitsownlinkageswithinthedomesticeconomy.
3. THe STATe oF INFRASTRUCTURe IN AFRICA
Thepositiveimpactofphysicalinfrastructureoneconomicprosperityandbusinessiswellidentified.Improvedinfrastructureservicessuchastransport,electricity,telecommunications,sanitationandseweragesystemspositivelyaffectproductivityandencouragemoreregionalintegrationandtrade.Africahasrecentlyexperiencedsubstantialeconomicgrowth,withanaverageannualgrowthrateof4.7percentbetween2000and2017(AUC/OECD,2018).SimulationsproposethatimprovingAfrica’s infrastructure could boost GDP growth by an additional 2.2 percent a year (Foster andBriceno-Garmendia,2010).Increasedaccesstoinfrastructurecanalsofacilitatemoreintra-regionaltrade,particularlyfollowingthesigningoftheAfricanContinentalFreeTradeArea(AfCFTA)pactinMarch2018.In2015,intra-Africantraderepresented18percentoftotalexportsinAfrica,a10percentsurgesince1995,althoughstillarelativelylowfigurebycomparisonwithAsiaandEurope.Intra-regionaltradefortheseareasstandsat59percentand69percentrespectively(Sow,2018).
ImprovingconnectivityisalsoessentialtoenhanceAfrica’sintegrationintoregionalandglobalvaluechains.Effectiveandefficienttransportnetworksenablefirmstoreachouttoregionalandinternationalmarketsatalowercost.Inadditiontofasterdeliveryofgoodsthroughimprovedcross-borderroads,railways,andinternationalportsandairports,Africannationscouldimportrawmaterialsandintermediategoodsmorecheaplyandexportmanufacturedproductsmorecompetitively.
Inothercases,physicalinfrastructurecanalsoservetherequirementsofothersectors,usersandproducers–thisisbroadlyknownas‘corridordevelopment’.Speakingofacorridordevelopment,IndiaEXIMBank(2018)reportcitingtheWorldBankhasestimatedthataroundUS$200billionworth
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oftradeinAfricaiscarriedbytheregion’strunkroadnetworkincludingstrategictradingcorridorsconnectingdeepsea-portstoeconomichinterlands.Thesenetworksincludeabout10,000kmofroads.Apartfromthis,between60,000and100,000kmofroadsarerequiredtoprovideintra-continentalconnectivitybywayofanintra-regionaltrunknetwork.Hence,itcanbesaidthatthelackoftransportinfrastructureisbackholdingeconomicintegrationofAfrica.ThishighcostofinfrastructurepersistsinthecontinentofAfrica,andcanhaveamajorimpactonregionalcompetitivenessaswellasreducetheworldwidecompetitivenessofthecontinent’sexportsandlimitsthesectorsinwhichAfricancompaniescompete.
Thehighcostofinfrastructureispresentacrossseveralsectors,imposingadditionalcostsonbusinessesand reducingproductivity.Forexample, thepoorqualityof road, railwayandharborinfrastructuregeneratesanadditional30percentto40percentofcostsforintra-Africacommoditytrading(UN-Habitat,2014).Nowadays,goodstravelingbetweenLagos(Nigeria)andAccra(Ghana)arefrequentlytransportedbysea,despitelandproximitybetweenthetwocities(OECD,2018).TheportofLomeinTogo,asmallWest-Africannation,hasbecometheleadingportintheWestAfricanregion,whileLagos’portinNigeriahaslost30percentofitscontainertrafficsince2015duetoabnormallyhighcostsandnotoriouscongestion(Dynamar,2018).Regardless,infrastructureservicesaretwiceasexpensiveaselsewhere,reflectingdiseconomiesofscaleinproductionandhigh-profitmarginsduetocompetition.Forinstance,theaveragecostofimportinga20-footcontainerinAfricaisUS$2,793withanaveragedeliverytimeof38days.Whiletheaveragecostofimportinga20-footcontainerinSingaporeisUS$440withanaveragedeliverytimeof4days(Bond,2016).Moreover,poortransportinfrastructureaccountsfor40percentoflogisticscostsincoastalnationsand60percentinlandlockednations(UN-Habitat,2014).
Inconsideringbarriersagainstinfrastructureandlinkagesdevelopment,thepaperalsodelvesintothestateofinfrastructureinAfrica’sagriculturalproductionsector.Notably,theregion’seconomyismostlyagrarian,butfarmersareunabletomoveupthevaluechainwithoutelectricityforprocessingandforpreservingproduce.Asaresult,thedearthofinfrastructureinAfricahasmadethecontinent’sdomesticmarketforagriculturalproductionlessdeveloped.Forinstance,localsuppliersarenotalwaysabletomeetdemandsbecauseelectricpowerisnotreadilyavailable.Shortagesofpowerandwatersuppliesandinadequateinformationandcommunicationstechnology(ICT)infrastructurecanreduceproductivitybyasmuchas40percent(AfDB,2013).Almost5percentofyearlysalesarelostduetoelectricaloutagesinSub-SaharanAfrica(SSA);thecostoffuelforbackuppowergenerationwasestimatedtobeatleastUSD5billionin2012(OECD/IEA,2014);asaresult,productsaremoreexpensiveforconsumers.
Thisisasectorwhichisfrequentlyseentohaveaquintessentialenclaveactivity,solelydedicatedtocommodityexportsandwithfewexternalitiestothesurroundingeconomy.Withthatsaid,theabsenceoftransportlinkagesbetweenruralandurbanmarketslessenopportunitiesfortheevolutionofagriculturefromsubsistencetomarket-based.TheagriculturalsectorremainslargelynotmodernizedalthoughitcontinuestobethebiggestsectorinAfricaneconomies,accountingfor20percentofregionalGDPand65percentofemployment;thissectorhasthepotentialtobemuchmoreproductivewithsustainableenergysources(IEA,2015).
Asforelectricity,thereareoverthirtyAfricannationsexperiencingpowershortagesatpresentandthisisleadingtoeitherexpensiveshort-termfixesorpowerblackouts.ThishasactedasbrakesinAfricadevelopment.AlmosthalfofAfricans(600millionpeople)didnothaveaccesstoelectricityin2018,while about80percentofSSA firms suffered regular electricitydisruptions leading toeconomic losses (IEA, 2019a). For those that do have electricity access in the region, averageresidentialelectricityconsumptionpercapitaisequivalenttoabouthalftheaveragelevelofChinaorone-fifthofEurope(Bond,2016).
Mostmanufacturingactivitiesrequirereliableaccesstoelectricityforseveralhoursaday,atapricethatstillkeepstheactivitiescompetitiveinthemarket.Forthisreason,Africaambitiontoacceleratean industrial expansioncontinues tobehampered in severalnationsby theunreliable
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powersupply.Onlyahandfulofnations–includingSenegal,Ghana,Ethiopia,SouthAfrica,KenyaandRwanda–aresuccessfulinreachingfullaccesstoelectricityby2030.ThecontinentstrugglestosustainGDPgrowthinpartisduetothedearthofelectricity(Castellanoetal.,2015).Withthatsaid,figure1showspopulationaccesstoelectricityinChinaanddifferentAfricaneconomies.WhileChinahasahighaccessrateof100percentandMongolia90percent,Africalagsonthisindicator,withthehighestaccessratesat85percent.AverageaccesstoelectricityintheWestandSouthernAfricaisatabout35percent;inEasternAfrica,itisaslowas19percent(Calabreseetal.,2017).Asforregionalelectricityoutagesinamonth,thestudyshowedthatChinahasareliableenergysupply,withanaverageof0.1outagepermonthsorabitmorethanoneeveryyear.Incomparison,theSSAgrouprateisinbetween,withfewerthan3outagesamonthonaverage.Whatismore,SouthernandEasternAfricasufferfromfeweroutages(about5permonth)whereasinWestAfricathesearemorecommon(over13permonthonaverage)(seefigure2).
As for firms that are using generators, the same study shows that the low reliability of theelectricitysupply isconfirmedby the fact that innumerousAfricaneconomies,companiesowngeneratorstominimizedisruptionintheproductionprocess.Notably,50percentoffirmsoperatinginAfricahavegenerators.Particularly,thenumberishigherinWestAfrica(66percent)andinEasternAfrica(54percent)comparedwithSouthernAfrica(30percent)(seeFigure3)(Calabreseetal.,2017).Also,intheabsenceofsupplyfromtheformalsystem,numerousmiddle-incomeAfricans,desperateforelectricity,installhigh-costdieselgenerators.Suchgeneratorsarepollutingandthecostofelectricityproducedisamultipleofwhatelectricityfromthemodernsectorwithtechnologywouldcost.SuchaddedcostslessenthecompetitivenessofAfricancompanies.Besidesthis,intheabsenceofelectricitysupply,almost730millionrelyonthetraditionaluseofsolidbiomass(mainlyfuelwoodandcharcoal)forcooking.Yearly,almost600,000prematuredeathsthatoccurredinAfricaareattributabletohouseholdairpollutionresultingfromtraditionaluseofthesesolidfuels.
Becauseofthesechallenges,Calabreseatal.(2017)studyaddedthatSSAelectricitypriceishigherthaninChina.OnlyslightlyinEasternAfrica(US$0.16)andconsiderablyinWestAfrica(US$0.30)(seefigure3).The authors affirm thatAfricapricesarenoteven,nonetheless,whilesomenationshavepricesmuchlowerthanChina’s price(Zimbabwe,Mozambique,Zambia,DRC,Sudan,SouthAfrica,andEthiopia),someothershaveveryhighenergyprices(especiallySierraLeone),drivingtheaveragevalueup.
As such,basedontheInternationalEnergyAgency(IEA)outlook,SSAelectricitydemandisanticipatedtotripleby2040,toreach1.300terawattsperhour(TWh).Also,by2040,totalpower
Figure 1. Access to Electricity, 2012. Source: Calabrese et a., 2017.
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generationcapacityisanticipatedtoquadrupleto385Gigawatts.Thereportaddedthatby2040,demand for the industry will double while residential demand will grow by over five times ofcurrentlevels.By2040,atarateof6percentperyear,electricitydemandgrowthwillsurpassGDPgrowth(IEA,2014).Africahasampleprimaryenergyresourcestomeettheinfrastructuredemandmentionedinitially:recoverableoilresourceswillbesufficientfornext100years,coalforother400yearsandgasforover600years,andrenewableenergysources(geothermal,hydro,wind,andsolar)areabundant(IEA,2014).
Withthatsaid,Figure4showsthattheproportionofSSA’spopulationhavingaccesstopipedwater,electricity,flushtoiletsandlandlinetelephonyisconsiderablyhigherinurbanareasthanin
Figure 2. Electrical outages in a month, various years. Source: Calabrese et a., 2017.
Figure 3. Price of Electricity, various years. Source: Calabrese et a., 2017.
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ruralareas.Progressintheprovisionofsocialinfrastructurehasatbestbeenslow,andmoretypicallynon-existent.Thiscontrastswithotherlow-incomeeconomiesinwhichtherehasfrequentlybeensubstantialheadwayininfrastructureprovision.Forinstance,SSAhasthreetimesmoregeneratingcapacitypercapitain1970thanIndia,butby2000IndiahadsurpassedSSAandhadtwiceasmuchpercapitacapacityasSSA(Fosteretal.,2008).Therefore,beyondthepooravailabilityofinfrastructureistheslowrateofheadway(seefigure5).
Onthepositiveside,Lomas(2012)assertsthatmobilephonenetworkshaveexpandedspeedilyinthecontinentreaching80percentofthepopulation,from2percentin2000.Africaasawholerecordedthelargestleapincellularsignalcoveragefromnearly23percentofthepopulationin2003to88percentin2012(TheAfricanCapacityBuildingFoundation,2016).
Thecontinenthasalsodevelopednewservices,suchasM-Pesamobilemoneytransfer–pioneeredinEastAfrica–onitsnetworkplatform(AfDB,OECD,andUNDP,2014;Shapshak,2018).Simply
Figure 4. The rural-urban divide in Africa’s infrastructure. Source: Derived from Foster et al. 2008 and cited in NEPAD, 2015.
Figure 5. Slow progress in infrastructural development in Africa. Source: Derived from Foster et al, 2008 and cited in Source: NEPAD, 2015.
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gainingaccesstoM-Pesamobile-moneyservice,2percentofKenyahouseholdswereliftedoutofpovertybetween2008and2014 (Tompsett,2018).According to theWorldBankGlobalFindexDatabase,“thepoweroffinancialtechnologytoexpandaccesstoanduseofaccountsisdemonstratedmostpersuasivelyinSSA.”Thiswasmentionedduringthebank’sfinancialinclusionsurveywhichdiscovered21percentofadultsintheregionpresentlyhaveamobilemoneyaccount(WorldBank,2017a).Thisis“almosttwicethesharein2014andeasilythehighestofanyregionglobally.”Seetable2forasummaryofsomedataregardingregionalruralaccesstothemobilecellularlink.Ingeneral,theastuteadoptionofnoveltechnologyallowspoorlyendowednationsduetothecapabilityto leapfrogolder technologiesprevalent inmoredevelopednations;mobilephones areonebestinstanceofthisphenomenon.
Fortransport,hightransportcostadds75percenttothepriceoftheproductintheregion.Asforthenation,forinstance,improvingKenya’sinfrastructureuptothelevelofmiddle-incomenations,wouldbolsterannualgrowthbyover3percentpointsandforNigeria,thiswouldmeananupsurgeinyearlyrealGDPgrowthbyalmost4percentagepoints.7ClosingtheinfrastructurequantityandqualitygaprelativetothebestperformersintheworldcouldraisethegrowthGDPpercapitaby2.6percentperyear(WorldBank,2017b).
Moreso,figure6highlightstheeffectofutilizationlossesinelectricity,water,andtransportonGDPforthemostaffectedlow-andmiddle-incomenations,including21Africannations.Africannationscompriseatleasthalfofthetop15most-affectednationsineachcategoryofinfrastructuredisruption.Speakingofinfrastructuredisruption,itaffectsfirmsthroughvariousimpacts(seeTable3)andcostsfirmsoverUS$300billionperyear(Hallegatteetal.2019).Mostvisiblearethedirectimpact;afirmrelyingonwatertocoolamachinemusthaltproductionduringdryout;arestaurantwith an electric stove cannot cook meals without power. Disruptions leave production capacityunused,reducefirms’sales,anddelaythesupplyanddeliveryofgoods.Assuch,thelargestpotentialgrowthbenefitsthatthecontinentofAfricaenvisagedwouldcomefromclosingthegapinelectricity-generatingcapacity,water,transportandmostespeciallyfrominfrastructuredisruption.
To close the continent infrastructure gap, new estimates by the African Development Bank(AfDB)suggestthatAfrica’sinfrastructurerequiresUS$130-170billionyearly,withafinancinggapintherangeofUS$67.6-US$107.5billion(AfDB,2018)peryear;higherthanthemostwidelyquotedfigureonAfrica’sinfrastructureneedsofUS$93billion,from2006AfricainfrastructureCountryDiagnostic(ACID)study(quotedinFosterandBriceño-Garmendia,2010).Tomakethemattermoredifficult,sluggisheconomicgrowthhasputconstraintsonAfricangovernmentbudgetswhiletheBaselIIIrules8makeitharderforbankstofreeupcapitalforinfrastructurelending.
Table 2. Rural access to mobile cellular link
Region General mobile cellular coverage (%)
Rural population coverage (%)
Rural population covered (millions)
Rural population not covered (millions)
Africa 88 79 498 129
Americas 99 96 171 9
Asia 92 87 2,017 309
Europe 100 98 196 3
Oceania 98 84 3 0.6
World 93 87 2,886 451
Source: The African Capacity Building Foundation, 2016
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Figure 6. Top 15 nations with greatest utilization rate losses, by type of infrastructure disruption
Table 3. Disrupted infrastructure services have multiple impacts on firms
Sector Direct impacts Coping costs Indirect impacts
Power ●Reducedutilizationrates(US$38billionayear)
●Saleslosses(US$82billionayear)
●Generatorinvestment(US$6billionayear)
●Generatoroperationcosts(US$59billiona
year)
●Higherbarrierstomarketentryandlower
investment
Water ●Reducedutilizationrates(US$6billionayear)
●Saleslosses
●Investmentinalternativewatersources
(reservoirs,wells)
●Lesscompetitionandinnovationduetolackof
smallandnewfirms
Transport ●Reducedutilizationrates(US$107billionayear)
●Saleslosses●Delayedsuppliesand
deliveries
●Increasedinventory●Moreexpensivelocationchoicesfor
instance,inproximitytoclientsorports
●Inabilitytoprovideon-demandservicesand
goods●Diminished
competitivenessininternationalmarkets
Telecommunications ●Reducedutilizationrates●Saleslosses
●Expensivelocationchoicesclosetofast
internet
Source: Hallegatte et al. 2019Note: Highlighted in bold are the impacts for which original estimates are presented in this section. Estimates cover low-and middle-income nations
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Assuch,Africannationsarepresentlylookingforfinancialresourceswellbeyondtheirowndomesticrevenuesandforeignaid,anditswillingnesstotakeoutChineseloanstoplugthefinancinggap. The Africa infrastructure gap and financing is also broadly acknowledged by individualgovernments, African regional organizations, such as NEPAD9, the East African Community10,SADC11,andECOWAS12,byUnitedNationsagencies(particularlytheUNECA13),byDevelopmentBanks(suchastheAfricanDevelopmentBank14),theInternationalFinancialInstitutions(particularlythe World Bank) and the Organization for Economic Co-operation and Development (OECD),DevelopmentAssistanceCommittee(DAC)aswellasindividualbilateraldonors.AlthoughAfrica’sfinancingmaynotbemetsolelybyChinesefinancing,China’sroleisseenbymanyasimportant.Withthatsaid,itisinthiscontextofinvestmentandweakinfrastructuralprovisioninAfrica,theauthortriestoidentifyforwardandbackwardlinkagesinChineseinfrastructureinvestmentinAfrica.
4. IDeNTIFICATIoN oF FoRwARD AND BACKwARD LINKAGeS AND ANALySIS oF CASeS
InfrastructuredevelopmentiscriticaltothecontinentofAfricaeconomicdevelopmentandpovertyreduction.Thatiswhypresently,itisinfrastructureAfricannationsneedmostandinfrastructureiswhatChinaismostequippedtooffer.ItisnotlostonseveralAfricanleadersthathardlyfourdecadesagoChinawasinthesamepositionthecontinentofAfricaistoday–abackwaternationwhoseeconomymadeuphardlytwopercentofworldwideGDP.However,overthepastfewdecades,Chinashockedtheworldinthewaythatitusedinfrastructuretopropeleconomicgrowth,creatingahigh-speedrailnetworkthatpresentlytop29,000kilometers,pavingover100,000kilometersofnovelexpressways,constructingover100novelairports,andconstructingnolessthan3,500novelurbanareas–whichcomprise500economicdevelopmentalzonesand1,000city-leveldevelopments(Wade,2019).Overthisperiod,China’sGDPhasgrownmorethan10-fold,rankingnumbertwogloballynowadays.
Therefore,ChinaandAfricaregardinfrastructuredevelopmentascrucialfordevelopmentofthecontinentofAfrica,especiallysinceinfrastructuredevelopmentplayedamajorroleinChina’sownpovertyalleviationaswellaseconomictransformation.China’sapproachtoinfrastructuredevelopmentinafundamentallydissimilarwayfromitscounterpartsintheWestbothhomeandoverseas.China’sapproachisrelationalandfitstherecentAfricanUnionAgenda2063vision;assuch,numerousAfricangovernmentsarelookingtoChinatobringtheirexperiencetotheirnations;nowonderratherthanforeignaid,Chinesecompanieshavebroughtemployment,training,noveltechnologyandfinancing(Reuben,2018),andsupportingAfricatodevelopthecontinent’sinfrastructuresector(seetable4andfigure7).Figure7showsthatmostfinancedprojectsareintransport,shippingandportsectors(52.8percent),followedbyenergyandpower(17.6percent),realestate(14.3percent),includingindustrial,commercialandresidentialrealestate)andminingsectors(7.7percent).
Asdisplayedinfigure7,investmentininfrastructureandcapitalprojectscanbeessentialtodiversifyeconomiesandpromoteprivatesectoractivitiesandindustrialization,ensuringenoughjobsarecreatedfor12millionyounginhabitantsenteringAfrica’sworkforceeachyear(Deliotte,2018).Withthatsaid,economicliteratureidentifiesthesignificanceofChina’sinfrastructureinvestmentasoneofthekeycatalystsbehinddevelopmentintheregion(GodfreyandRoss,2016).China’semphasisonAfrica’sinfrastructureconstructionintensifiedwiththelaunchingoftheBeltandRoadInitiative(BRI).Asaresult,incontrasttoseveraltraditionaldonornationscenteringonsocialsectors,China’slendingagenciesoffersignificantloansforinfrastructureprojectsinAfrica(ChenandNord,2018).
Chinese loans have assisted to finance large-scale investments in infrastructure, energy andmining,therebyclosingthecontinentcriticalinfrastructuredeficit,creatingeconomicstimuliwitha largepositiveeffectongrowthandprosperity (Kuo,2018).Basedon theDeloitte report, thusfar, by 2018, China-Africa Development Fund (CADFund) had invested over US$4.6 billion inmorethan90projectsin36Africannations.Thereportaddedthatoverall,Chinahaspartakeninmorethan200Africaninfrastructureproject,makingChinathesinglelargestfinancierofAfrican
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infrastructure,15financingoneinfiveprojectsandconstructingoneinthree(figure8).16Inaddition,Chinesefirmshavecompletedandarebuildingprojectsthataredesignedtoassistaddtoorupgradenearly30,000kmofhighways,2,000kmofrailways,85milliontonnesperyearofportthroughputcapacity,overninemilliontonnesperdayofcleanwatertreatmentcapacity,nearly20,000MWofpowergenerationcapacity,andover30,000kmoftransmissionandtransformationlines(Deloitte,2019).TheDeloittereportaffirmsthatthevariousprojectsareanticipatedtoboostlocalexportsbyUS$5.8billionandcreatethelocaltaxrevenueofUS$1billion.
Nottomentiontheinfluenceviaspillovereffectsofconstructionprojects,suchassignificantexportsofmachineryandtransportequipmentandlaborexports(workersoncontractedprojectsandworkersdoinglaborservices).Notably,lookingatChina’sfootprintinAfrica’sinfrastructuredevelopmentpath, it is in thiscontext theauthoranalyses theforwardandbackward linkagesofdifferentinfrastructurecasesthatChinahasinvestedinsofar.
Figure 7. African investment in infrastructure and capital projects by financing source. Source: Deloitte, 2018 Note: EU Nations include Austria, Belgium, France, Germany, Italy, Luxembourg, Norway and Portugal. Single Nations include Angola, Brazil, Ghana, India, Japan, Macau, Mauritius, Morocco, Nigeria, Russia, South Korea, Switzerland and Thailand.
Table 4. Trends in infrastructure finance in Africa, by source ($billion)
Source 2012 2013 2014 2015 2016 Average
Africangovernments 26.3 30.5 43.6 24 26.3 30.1
Donors(ICAmembers) 18.7 25.3 18.8 19.8 18.6 20.2
MDBsandotherbilateral 1.7 2 3.5 2.4 3.1 2.5
China 13.7 13.4 3.1 20.9 6.4 11.5
Arabnations 5.2 3.3 3.4 4.4 5.5 4.4
Privatesector 9.5 8.8 2.9 7.4 2.6 6.2
Total 75.1 83.3 75.4 78.9 62.5 75.0
Source: AfDB, 2018
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Analysis of CasesCase 1: Tanzania-Zambia RailwayBehind the seemingly bleak outlook, there is a silver lining in terms of diversity in some otherAfricannationskeentoinvestheavilyininfrastructureprojectstoboostgrowth,oftenwithChina’sinvolvement.Therefore,theChinesegovernmenthasshownremarkableprowessininvestinginAfrica’sinfrastructuresector.Chineseinvolvementistraceablebacktothe1960s,whentalksopenedwithTanzaniaandZambiatoanambitiouspost-colonialrailwayfromDaresSalaamtoKapiriMposhi,just north of Zambia’s capital, Lusaka. The Tanzania-Zambia Railway also known as TanzaniaZambiaRailwayAuthority(TAZARA)isabinationalrailnetwork,extending1,860km,with975kminTanzaniaand885kminZambia(seetable8),andthenetworkisbasedontheCapeGaugewithawidthof1,067mm,builtbetween1970and1975(Brautigam,2009;Atsushietal.,2017).TheTAZARArailwayisgenerallyregardedasChina’sfirstlarge-scaleventurefinancedbyChineseloanduringtheMaoera,forwhichChinaprovidedazero-interestloanof$570million,morethanallotherChinese-sponsoredoverseasprojectscombinedpriorto1975(Donghai,2016).ThepurposeoftherailwayprojectistoendlandlockedZambia’sdependenceonRhodesia(Zimbabwe)andSouthAfricabygivingthenationanalternativeoptionforcoastalaccess(Monson,2013:47).
Figure 8. China’s share of regional and continental project activity. Source: Deloitte, 2018.
Table 5. Tanzania: Rail networks (km)
Tanzania Railways Limited (TRL) 2,582 TAZARA 1,860
Centralline 1,254 Tanzania 975
TangaLine 437 Zambia 885
LinkLine 188
MwanzaLine 378
MpandaLine 210
SingidaLine 115
Source: Atsushi et al., 2017
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ThescaleandthecostoftheprojectandthecommitmentshownbytheChineseindeliveringitontimeinthefaceoftherefusalofthefundingoftheprojectbyWesternnationsandtheWorldBankisoftenpointedtobytheChineseasasymboloftheirfriendshipwithandcommitmenttoAfrica.ItshouldbenotedinpassingthatthiswastheperiodoftheColdWar,andthatperhapstheWesternunwillingnesstofinancetheprojectcouldbebecausetheyviewedtheprojectthroughtheColdWarlens.TobuildtheTazararailway,theChineseneededtoboretenkilometersoftunnelsandconstruct300bridges,whichrequiredshiploadsofmaterialsandequipment.ItalsoinvolveddozensofChineseministries,whichdidputenormouspressureonChineseaid(Brautigam,2009).Atcompletion,89millioncubicmetersofearthandrockshadbeenmoved,320bridges,22tunnelsand225culvertsbuilt(Xinhuanet,2019).Xonstructionoftherailwayservedasablueprintforfuturelarge-scaleChineseprojectsinAfrica.Withthatsaid,themostsignificantforAfricaaswellastheoutsideworldistoknowifthesesortsofprojectshavecreatedbackwardandforwardlinkages.Basedonthisinstanceseveralofthesecanbeexamined.
Researcherswhostudytheissueofskills-transferfromChineseconstructioncompaniesidentifythat,asearlyasthe1970s,duringtheconstructionoftheTazararailway,“AfricanandChineseworkersnotonlylaboredsidebysidebutalsoengagedinwhatwasknownas“technicalcooperation”,asChineserailwayexpertstrainedtheirAfricancounterpartsintheworkplaceandtechnicaltrainingshops”17.Specifically,Brautigamaffirmsthat16,000skilledChineseworkerswereemployedandtensofthousandsofAfricansworkers(Brautigam,2009).AnotherstudyalsofoundthatChineseconstructioncompaniesprovideemployeeswithon-the-jobtraining,focusingparticularlyonmachineoperation.18ThesecontributionsandbenefitsfrombuildingtheTazararailwayregardingemploymentopportunitiesandskilltransfershowthatforwardlinkagesforincreasinglaborareskillstheseworkerslearntandgain,whichtheymaytakeintootherfirmsorusetosetuptheirownfirmsinfuture.
Alternatively, this could also be seen as a backward linkage because in order to build andimprovetherailwaytheprojectwillneedworkersandsopeopleturnouttobeanessentialfactorfordevelopmentoftheproject.Whilecreatingemploymentopportunitiesandtransferringskillstothepeopleisnotonlyaninvestmentfortheproject,itisalsobeneficialforthefutureofthehosteconomy.
Withrespecttolabor,trainingcentersandengineeringworkshopshaveemergedasawayofpreparingandraisingknowledgetonovelworkersaboutthiscertainkindofindustrybutalsoawayoftrainingpeopleandgivingthemaccesstoskillsandknowledgethatservestheindustryneedsaswellaspracticalskillsandexperiencethatareneededtoworkandmeetconstructionfirminterests.Also,theseinvestmentscanbereferredtoasbackwardlinkagesasinvestinginrailway,directlyledtogrowthintrainingcenters,thisimpliesthattheconstructionfirmisdirectlyinvestinginhumancapital.
Withthatsaid,overthepastfourdecades,TazarahasbeenplayingavitalroleineconomicandsocialdevelopmentofTanzaniaandZambia.indicatingthattherewasagreatneedfortheTazarafacility.Thisisbecause,fromtheenvironmentalperspective,thestudyshowsthattherailwayhasanimportantadvantagetofostersustainabletransportation(Koppetal.,2013).Also,therailsectoraccountsforonly3.6percentoftotaltransportemissions,whileitcontributestomorethan8percentofthetotalmovementsofpassengersandgoodsovertheworld(IEAandUIC,2015;Atsushietal.,2017).Railcarries6.3percentoftheglobalpassengertransportdemandand9percentoftotalfreightdemand(seetable9).Therefore,itwasagoodidealforbothTanzaniaandZambiagovernmentstobuildtheTazararailway.Forinstance,Zambiaisalandlockednationasstatedinitially,tosurviveeconomically,thenationmustimportfood,rawmaterialsandminingequipment.Likewise,thenationmustexportcommoditiessuchascopperwhichaccountsfor90percentofthenation’sexportearnings.
TherailwaywasneededtoreducedfreightratesfortransportingcopperfromMbeyatoDas-es-Salaam,stimulateagriculturalandlivestockdevelopmentintheregionandupsurgeZambiaandTanzaniaopportunitiesforexternal trade.For instance,nearly31miles(50kilometers)fromtheZambianbordersliestheTanzaniatownofMbeya.TheplateauandhillnationsurroundingMbeyaholdconsiderablepotentialforcultivationofgrain,oilseedandothergoods.AboutmidwaythroughTanzaniaistheKilombero’sValley,whichevenpresentlyisTanzania’smajorsourceofsugarcane.
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Kilombero’swell-watered,fertilesoilholdsgreatpotential.Besidessugarcane,itissuitableforgrowingriceandvegetableandforraisinglivestock.WiththerailwayprovidingeasytransportationfromtheportcityofDas-es-SalaamtoMbeyaandNewMposhiinZambiaandotherdiversevillages,itwasagoodreasontosetupagriculturalproduction,andthishasmadetradewithintheregionmucheasier.Backwardlinkagesincludefarmers’purchaseoffarmproductionitems(seed,fertilizer,chemicals,etc.),whileforwardlinkagesincludetheprocessingoffarmproducts,andthetransportationofthoseprocessedproducts.ThishasexternalitiesforothernationsintheregionhastheinfrastructureisalsoavailableforotherneighboringnationssuchasMalawiandSouthernDemocraticRepublicofCongo,whicharepracticallylandlockedintheregion.
Thenatureofinfrastructurehasanimportantimplicationfordevelopmentoflinkages.Someinfrastructureishighlyspecifictoacommodityproducer,andhasverylowpotentialforpositivespilloverswhichmightfacilitatethegrowthofbackward,forward,orhorizontallinkages.Forexample,theTazararailwaylinebetweenZambia’slandlockedcopperbeltandtheportofDaresSalaaminTanzania,theinfrastructurehasthecapacitytomeettheneedsofmultipleusers,bothfeedingintoandoutofcoppermines,andfeedingintoandoutofothersectorsoftheeconomy.NowonderZambiawasabletoexportitscoppertoEuropethroughTanzaniawithoutusingtherailwaybuiltbyBritainandcontrolledbythenwhite-ruledSouthAfrica,
Monson (2009) affirms that the Tazara railway facilitated trade within the region for vitalperishable and non-perishable goods. The railway line was able to reduce the distance forcommunication and enables firms to take advantage of novel business opportunities and createforwardlinkage.MonsonaddedthattheTazararailwayledtoeconomicdevelopmentinotherpartsoftheEastAfricanregionandothersectorssuchasthehydroelectricpowerplantatKidatuandthepapermillatRufiji(Monson,2009).ThisisanothergoodexampleofbackwardlinkagecreatedfromconstructingtheTazararailway.Likewise,itcanbeaforwardlinkagesincethepowerplantgenerateselectricpowerforthetraintorun.
AlthoughtheTazararailwayhasproducedalotofpositiveadvantages, ithashadnumerousproblemssinceitscompletion,especiallythedearthoftherequiredtechnicalmaintenance,upgrade,and ineffective operation and management. Sun affirms that China has complained that thegovernmentsofTanzaniaandZambiaonly“manage”butneverinvestintheTazaraRailway,andtheWesternmanagementsystemtheyadoptedhaspreventedChineseinvolvementinthekeymanagementissuestoimproveitsperformance.SunaddedthattheproblemscausedduringtheoperationprocesshavebeenblamedonthequalityofChineseconstruction,whichhastarnishedtheimageofChineseprojectsinAfrica(Sun,2017).
HavinglearnedtheselessonsfromtheTazaraRailway,ChinaisdeterminedtoobtainmanagementrightsforboththeMombasa-NairobiandAddis-Djiboutilines.Ehizuelen(2017)affirmsthattheAddis-Djiboutilineadoptsthe“6+2model”,inwhichChinaRoadandBridgeCorporation(CRCC)andChinaRailwayGroup(CRG)willoperateandmaintaintherailwayforsixyearsuponthelaunchofoperationandprovidetwoadditionalyearsoftechnicalsupportduringthegradualhandoverofmanagementauthorities.Headdedthatinthesameway,CRBChasreacheda10-yearagreement
Table 6. Global transport modal share (%), 2012
Passenger (passenger-km) Freight (ton-km) Total (Transport unit)
Road 82.7 8.8 31.3
Aviation 10.6 0.7 3.7
Navigation 0.3 81.5 56.8
Rail 6.3 9.0 8.2
Source: IEA and UIC, 2015; Atsushi et al., 2017
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undera“5+5model”withKenyaRailwaysCorporationtakingovertheoperationandmaintenanceof theMombasa-Nairobi line, including the traindispatch system,maintenanceof railways, andthelocomotives(Ehizuelen,2017).The“5+5model”meansthattheKenyansidewillconductaperformanceevaluationoftheservicebyCRBCbythefifthyear.
Inbothcases,Chinaclaimsthatitistrainingasignificantnumberoflocaltechnicalemployeesandproviding technical transferunder the frameworkof capacitybuilding.This is an importantsustainabilityissuethatAfricanpolicymakersandleadersshouldseriouslyconsiderwhenitcomestosuchhugeundertakingsinAfricainthefuture,notonlyinpartnershipwiththeChinesebutalsowithotherforeigngovernmentsandfirms.
Case 2: Mombasa-Nairobi Standard Gauge RailwayOneofKenya’stopdevelopmentalchallengescontinuestobetheshortageofphysicalinfrastructure.Greater economic activity, enhanced efficiency and increased competitiveness are hampered byinadequate transport, communication, water and power infrastructure. The world is eager to dobusinesswithKenya,butfindsithardtoaccessKenyanmarkets,especiallyintheinterior,becauseofpoorinfrastructure.Physicalinfrastructurecoveringtransportation,powerandcommunicationviaitsbackwardandforwardlinkagesfacilitiesgrowth;whilesocialinfrastructureincludingwatersupply,sanitation,sewagedisposal,educationandhealth,whichareprimaryservices,hasadirectimpactonthequalityoflife.Withoutthisinfrastructure,Kenyawillnotattainthegrowthlevelsanticipatedorneeded.Assuch,infrastructureplanningandinvestmentare,therefore,criticalifKenya’smassiveeconomicanddevelopmentalpotentialistoberealized.
Withthatsaid,Infrastructureprojectsbringsymbolicbenefitsaswell,highlightingthenation’sindependenceandself-determination.Thisisparticularlytrueforrailprojects,whichoftenreplacecolonial-eralinesthatwereusedtomoveresourcesoutofAfrica,beforefallingintodisrepair.Assuch,thereplacementoftheold,colonial-eranarrowgaugetrackwiththe472kilometersMombasa-Nairobistandard-gaugelineworthUS$3.8billion19isthetransportsolutionandexperiencethathasbeenmissingsincetheKenya-UgandarailwayoveracenturyagoopenedupEastAfricabystimulatingthegrowthofbusinessesandtradingcentersalongtheNorthernCorridortransportsystem,andwillraisethespeedoftrainsontheline,from30kphto90kph20.TheMombasa-NairobiStandardGaugeRailway(SGR)builtbyChinaRoadandBridgeCorporationandfinancedlargelybyChinesecreditlines,closinga110-yearchapterofrelianceoncolonialinfrastructurewasinauguratedonMay31,2017.
AccordingtotheKenyaNationalBureauofStatistics(KNBS),thefastdevelopingeconomyofKenyathatishighlydependentonagriculture,tradeandtourism(KNBS,2019)neededanefficientrailwayespeciallyconnectingMombasa,themainporttoupcountry.TherailwaywilldefinitelyreducetrafficonthenotoriousMombasaroadbyabigmargin.Intheearlystagesofitsimplementation,themegainfrastructurewasperceivedasanyothergrandpublicinvestmentthatwouldaddtothestockofinfrastructureandimprovetransportation,easethecostofdoingbusinessfortheprivatesector,permitsconsumptionofcheapforeigngoods,andenablesenterprisestoexportlocallymanufacturedcoffee,tea,andleatherwithlowercost.Therailwaynotonlytransformpeople’slives,butalsowitnessedthedevelopmentofAfrica-Chinacooperation.Assuch,somecommentatorsconsiderChina’s“railwaydiplomacy”asaboonforAfrica(Phametal.2018).
Morlin-Yron(2017)assertsthatinAfricawhere,90percentofallAfricanimportsandexportsareconductedbyseathroughportsandspecificallyKenya,wherealmost4,000truckstraveleverydayfromMombasatoNairobi,therailwaybecomesveryadvantageousallowinggoodstofloweasilyfromportsinland.Initially,fortravelingbetweenthesetwobiggestcities,Kenyanseithertookveryexpensiveflights(USD150-200roundtrip)oroptedfora12-hourlongroadtrip(Wuetal,2019).TheSGRwasproposedwasabletoremedythesehindrancesandshortenedpassengertraveltimetoalittlemorethanfourhoursandfreighttransportationtolessthaneighthours(GlobalRailwayReview,2017).TheMombasa-NairobiSGRhasestablishedbackwardandforwardlinkageswiththeeconomybyfacilitatingtheseamlessmovementofbulkcargo,alreadyferriedtwomillionpassengers,
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significantlyincreasinglocalbusiness,improvedtourismopportunitiestoKenyanhinterlandandacrosstheborders.TheSGRpullsalongthemanufacturingsectorandstimulatesdomesticandinternationaltrade,therebypositioningitasaregionallogisticshub.
Notably,manufacturing,oneofPresidentUhuru’s‘Big4’(foodsecurity,affordablehousing,manufacturing, and affordable healthcare for all) pillars of development in his second and finalfive-yearterm,willbethegreatestbeneficiaryoftheSGR.TheSGRlinkstheplannedNaivashaExportProcessingZone(EPZ)andOIKariageothermalfields to theNairobi-Mombasarailway.Therefore,Kenya’supcomingexport-drivenmanufacturingandprocessingindustrywillnotonlytakeadvantageofcompetitivelypricedgeothermalelectricitybutalsobenefitfromdirecttransportationtotheMombasaportforexport.Asaresult,themodernrailwaysystem,whichhasbeenglorifiedandvilifiedinequalmeasure,willbeservingasanovelengineofKenya’seconomicgrowthandmakestheentireeasternregionmoredynamicentrenchingitselfasthenervecenterofsharedindustrialgrowthandeconomicprosperityfortheregion.
ChinasupportingAfricatobuildrailwaysisawayofjoiningthedotsinAfricaandforminglines;linesthatarecross-continentalandwillpotentiallychangeearliertradeandinvestmenttrendslaiddownbythecolonialists.TheSGRispartofChina’snovel“BeltandRoadInitiative”andaimtoopenEastandCentralAfricauptointernationaltradeandinvestment.Improvingconnectingisvitalforpromotingthecontinent’sgoodsandcommodityexports,whichcantherebyassistAfricannationstointegratemorefullyintoglobalvaluechains.AccordingtotheWorldBankreport,a1percentdecreaseintradecostsislikelytoraisebilateraltradebetweeneconomiesthatparticipateinBRIprojectsby1.3percent(ChenandLin,2018).TheauthorsaddedthattheinitialestimatesproposethattheBRItransportationnetworkscouldbolsterFDIonthecontinentby7.4percent,withthelargestimpactonGDPgrowthinSub-SaharanAfricaregion(ChenandLin,2018).
Therefore,improvementinthenetworkandcapacityofrailwaysandothercross-bordertransportinfrastructurecouldleadtosignificanteconomicbenefitseventually,boostingmoreintra-Africantradeaswellasaugmentedinvestment,therelatedtechnologyandskilltransfers,creatingemploymentandhighergrowthinAfricaneconomies.Thesewouldbeaboononthecontinent,whereendemicpovertyhascontributedtoinsecurityandinstabilityaswellasaprominentreminderofChina’spresenceinAfrica.Ontheotherhand,thiswouldimplythatforwardandbackwardlinkageswouldbecreatedasthebuilding,roads,andseaportswouldneedagreatamountoflabor,Asaresult,theSGRprojecthadcreatedover46,000localjobs(Mutethya,2018).Thequalityoflifeoftheseworkerswhocontributetothebuildingoftherailways,roadsandseaportswillimproveandthiscanaffecttheentireeconomyofthenationpositively.Likewise,theSGRprojectbroughtabout2,071Chineseworkers,mainlyinmanagementandengineering(KenyaandEconomicandTradeAssociation,2017).
OneofthemostvitalelementsofthecontractsignedbytheKenyagovernmentandCRBCwastheemphasisitplacedontraining.AtthebeginningoftheMombasa-NairobiSGRproject,CRBCsetupathree-prongedtrainingprogramforKenyanrailwayexperts(Wuetal.,2019).Thethreefocusareasincludedonthejobtrainingforlocalemployeesintheconstructionstage,trainingforrailwayengineeringpersonnelintheoperationstage,andpromotingjointeducationprogramsinrelatedmajorsbetweenChineseandKenyanuniversitiesrespectively.CRBCalsoworkedincooperationwiththeKenyangovernmenttosponsor60Kenyanhigh-schoolgraduatestostudyatprestigiousuniversitiesinChina(fouryearsinEnglishorfiveyearsinChinese)inrailway-relatedmajors(KenyaChinaEconomicandTrade,2017).Thefirstgroupof25Kenyanstookupthecoursein2016andanother35enrolledin2017(Mutethya,2018).Atleast2,000youtharesettobetrainedintheoperationandmaintenanceoftheSGR,accordingtothetransportsecretaryofKenya(BusinessDaily,2017).
Besidestrainingprograms,CRBClaunchedarailwaytechnologytransfertrainingcenteratVoiin2015tobuildthecapacityofKenyantechnicalworkers(DailyNation,2015).Arguably,thisisatangiblebenefitonthecontinentwhere60percentofyoungpeoplebetweentheagesof15and17arenotparticipatinginanyformofeducation(WENR,2019).Likewise,thisisaninvestmentwhichcreatesseveraldiverseformsoflinkages,vitalonesbothshortandlongtermswhichgowiththeconcept
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ofbackwardandforwardlinkages;themorelinkagesthatarecreatedthebettertheinvestmentisforKenyaandthecontinentatlarge.Forwardlinkagesrelatemoretothelong-termeffectofcapacitybuildingandthatthemoreengagedyoungpeopleareespeciallywithprimaryeducation,themoresuccessfultheywillbeinfuture.Though,investinginhumancapital,ortrainingconstructionworkersmightnotdirectlygoinlinewiththetheoryofbackwardandforwardlinkages,butitdoesshowthattheoutcomeofthebackwardandforwardlinkagesforbuildingtheSGRhasapositiveresultonthegeneraleconomyaspeoplebecomeeducated,trained,acquireskillsandgainfutureemployment.
Moreso,itwouldbenaturaltoassumethatopportunitiesforconstruction-relatedlocalindustrieswouldbetremendousasdemandformaterialsuchascement,steel,railwaysleepers,andsandneededforconstructionwouldsurge.Wuetal.(2019)basedontheirinterviewconfirmthishypothesisasthetermsofthecontractindicatethattheSGRprojectisrequiredtopurchasealltheconstructionmateriallocallyandutilize40percentoflocalcontentintermsofconstructionmaterialscivilworks,andjobopportunities.Thiswouldcreatebackwardlinkagestodifferentsectorsthatcanprovidematerialsandgoodsrequiredtocompletetheproject.However,Wuetal.(2019)affirmthatbasedonlocalentrepreneurs,includingcementandsteelmanufacturerssuggestedadissimilarrealitybysayingtheycouldnotcompetewithrawmaterialsimportedfromChinaandwere,therefore,losingbusiness.
Inaddition,therearesomeseriouschallengesconnectedwithoperationsoftheSGRthatimpedeitsabilitytorealizeitspotential.AccordingtoWuetal.(2019),thegovernmentforcesthemtousetheSGRforkeytransportationbetweenMombasaportstoNairobievenifthisinvolvesdelays,thusdistortingthelogicofsupplychains.ThenovelNairobiclearingofficeisunabletohandlesnowballingcargoandwhenthecargoisnotclearedinfourdays,thefirmisburdenedwithonerousUSD25perdayfine.AlthoughusingthehighwaywasmoreexpensivethanSGR,businesseshadrelationshipswithtruckfirmswhichensuredthefastandefficientmovementofgoods.
Ontopofthat,withinKenyansociety,theSGRisembroiledinmultiplecontroversiestypicalof accusation against other Chinese mega-projects, including issues of economic viability, cost,debtsustainability,corruption,andopaquecontractingandfinancingarrangements(Fosteretal.,2009).Duringconstruction,complaintsfromthelocalcommunitysurfacedaroundissuesoflandcompensation,environmentalimpacts,andimportedsourcingofmaterialsandlabor.Notably,thesecomplaintsareexplainableinpartbystakeholders’failuretoconsultwithlocalcommunityneeds.Theauthoralsosuspectsa tendencybyseveral locals todemandmorebenefits fromtheprojectthanispossible,anissueexploitedbylocalpoliticianstoextractpoliticalmileageoutoftheissuessurroundingtheSGR.Arguably,inmostplaces,theethnicandneo-patrimonialpoliticalcultureisbehindthecontroversiesandtheoccasionalviolence.Thisiscompoundedbyadeeplyentrenchedproblemofcorruption,rent-seekingandnepotism.21Withthatsaid,given that theseopportunitiesarecreated,thetougherjobforthecontinentofAfricaistogrowfromthem,try to manage China-Africa relations via these opportunities,andmaximizetheirgains.
Case 3: Ghana’s Bui Hydropower Dam LeavingtheTAZARAandMombasa-NairobiStandardGaugeRailwayfacilityandmovingontootherhardinfrastructuresuchastheGhanaBuihydropowerdam.Notably,thedearthofaccesstoelectricityacrossthecontinentofAfricaisacrucialimpedimenttothecontinent’seconomicgrowth.Thelackofpowergenerationcapacity,transmission,anddistributionnetworks,aswellaswell-establishedutilityframeworks,posessignificantchallengestothecontinentofAfricasocio-economicadvancement.BasedontheIEAreport,thecontinentofAfricaishometonearlyafifthoftheworld’spopulation,butaccountsforlessthan4percentofglobalelectricityuse(IEA,2019b).Asaresult,anappetiteforlargehydropowerprojectsbyAfricannationshasincreasedsignificantlyandcreatedanopportunityforChinesefirmstobuildthemuch-neededpowercapacityinAfrica.Asaresult,hydropowerprojectshavebecomethepreferredprojectsforChinesecontractors(seefigure9).TheChineseareinvolvedin52percentofallhydropowerprojectsintheregion(intermsofcapacity)followedby29.3percentinvolvementincoalprojectsand10.7percentingasprojects(PowerTechnology,2019).Notonly
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doesthisinvestmentfostershort-termdirectlinkagesbutalsomakepeopleliveseasierandperhapssnowballingtheirhumancapitalbyhavingaccesstoelectricpower.
Speakingofahydropowerdam,theGhanaBuihydropowerdamisacollaborativeprojectbetweentheGhanaiangovernmentandSinohydro,aChinesestate-ownedfirmspecializinginhydroelectricinfrastructureprojects.Completed in2013, theBuihydropowerdamwasconstructed toaddresstheelectricityneedsofBrong-Ahafo,Northern,UpperEast, andUpperWest regions,especiallyBrong-AhafoandNorthernregions,whichareadjacenttothedam.TheoverallcostoftheprojectreachedUS$622million,wheretheExport-ImportBankofChinaandtheGhanaiangovernmentwereco-financiers,andSinohydrowasthecontractoroftheproject.TheExport-ImportBankofChinadisbursedtwoseparatecreditlines,onecommercialandoneconcessional,ofUS$292millionandUS$306million,in2008and2009respectively.TheGhanaiangovernmentcontributedaloanofUS$60millionaswell(ChenandLandry,2016).ItisestimatedthatthedamwillraiseGhana’selectricitygenerationcapacitybyalmost20percent.
Construction of the Bui Dam was anticipated to increase the nation’s electricity generationcapacity;nonetheless,itwasnotonlyaboutelectrification.TheGhanaiangovernmentaimedtoboostcocoaexportstoChinathroughtheBuiDam’sloanpact.Asstatedinitially,theExport-ImportBankofChinaprovidedtwocreditlines.Toensurereimbursement,thegovernmentagreedtosecuretheloanswithcocoa;undertheirpact,aChinesefirmwouldpurchase30,000tonsofcocoaeachyearfromGhanaattheworldpriceuntil5yearsafterthedamwasoperational.ThepaymentsforthiscocoawouldgodirectlytotheExport-ImportBankofChina.Theremaininginterestandprincipaloftheloanswouldberepaidby85percentoftheelectricitysales(TangandShen,2019).AccordingtoaWorldBankreport,theloanpactalignswithGhanaPovertyAlleviationPlanIIanddebtdistressisatmoderaterisk(WorldBank,2008).
BasedonHanreport, theelectricityoutputproducedbytheBuiDamdidnotmeetpeople’sexpectations(Han,2018).ThedameventemporarilystoppedgeneratingpowershortlyafteritwasputintouseinJune2014.TheBuiPowerAuthorityclaimedthatthemaincausesbehindtheshutdownwereadearthofwaterinthereservoiraswellastheGhanaGridCompany’sintervention.Thesituationdidnotimprove,andwhenmajorpoweroutageshitin2016,thegovernmentdecidedtoimportpowerfromCoted’Ivoire.Besidesgenerationissues,transmissioncapacitywasalsoworrisome.Ghana’s
Figure 9. Power Generation Projects in Africa, Chinese Contractors vs Other Contractors (capacity additions, MW). Source: Power Technology, 2019.
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electricalstandardsarenotuniform.Thepowervoltageofthedamwasat161KV,whilethestandardusedintheUpperWestRegionis34.5KV.Thissituationledtotwoeconomiclosses.First,Sinohydrohadtoinvestmoremoneyinpowervoltageconversionfacilitiesandsecond,theselowervoltagesaugmentedenergylosses.Moreso,thenationwasadoptinganelectricityvoltagesystemat330KV,whichmeantthattheBuiDamhadtoadapttothenewstandardsaswell.
Furthermore,Hanaffirmsthatthelocalcommunityhadatoughtimebenefittingfromelectricityproducedbythedamformultiplereasons(Han,2018).First,theyhadnoelectricityaccessbeforeresettlement,whichmeanttheydidnotownappliancesorhavepriorexperienceusingelectricity.Second,resettledcommunitiesneededpaymentforlinkingtothegrid,creatinganadditionalbarrier.Lastly,withthepriceofelectricitysnowballinglocalshadlessincentivetobuyelectricity.
Withthatsaid,theBuihydropowerdamwasnotonlyaboutelectrificationaswellastoboostcocoaexportstoChina,itwasalsoaboutsubcontractingarrangements,skillsandtechnologytransfers,andtheprocurementofmaterialsandequipment.Asfortheaspectofsubcontracting,literatureonlinkagesintheconstructionindustryrecognizessubcontractingandotherformsofcooperation,suchasstrategicalliancesandjointventures,theaspectsofbackwardlinkages(PolenskeandSivitanides,1990;DevapriyaandGanesan,2002).Thesecollaborationsfacilitatetechnologyandskilltransfers,aswellasknowledgedevelopmentthatisnecessarytobuildlocalcapacityandenhancetheindustry’scompetitiveness.Notably,DevapriyaandGanesan(2002)studyonSriLankaandOfori(2000)studyonSingaporeindicatethatFDIrepresentamajormodalityforforgingsuchlinkagesviacollaborationwithJapanesecontractors.
Tsikudo(2019)affirmsthatdespitetheseconsiderations,SinohydroprovidednosubcontractsduringtheconstructionoftheBuidam.TheauthoraddedthattheBuiPowerAuthority(BPA)affirmedthatithadaconstructioncontractwithSinohydroandatimelinefortheproject.Toensuresuccessfulandon-timeprojectcompletion,Sinohydrohadtodeterminewhetheritwantedtosubcontractpartoralltheprojecttohastencompletion(Tsikudo,2019).ThisBPAclaimswasconfirmedbySinohydro.Moreso,TsikudoassertsthattheofficialofSinohydroaffirmedthatitscontractwithBPAwasaconstructionarrangementwithnosubcontractingrequirements.However,whenaskedwhethertheywouldhaveconsideredsubcontractingifneeded,theSinohydroofficialanswered:“Yes...anagreementisanagreement”.TsikudoaffirmsthattheBPAofficialsexplainedtheiragreementwithSinohydrowasnotaBuildOperateandTransfer(BOT)(Tsikudo,2019).TheSinohydrocontractonlyspecifiedthatSinohydrohadtodevelopagivenproject.Mostcontractsformajorbuildingprojects,liketheBuihydropowerdam,didnotofferthecontractoranyresponsibilitybeyondmerelybuildingthedam.ThedearthofspecificityintheoriginalcontractbeforetheprojectevenstartedstymiedthebenefitstheBuihydropowerdamcouldhaveproducedforthelocaleconomy.
Withthatsaid,whileliteratureonChineseconstructioncompanies’operationsinAfricasupportssubcontracting to other Chinese companies, there is no robust proof of subcontracting to localcontractors,especiallywithoutanexplicitobligationtodoso(Chenetal.,2009;ChenandOrr,2009).Thismeansthatenforcingsubcontractingwithlocalcontractorsmustoriginatefromtheproject’scontractinwhichallthemodalitiesareclearlystated.
AlthoughSinohydrodidnotprovideanysubcontracttolocalcontractors,theydidsowithotherstructuralworks.Forexample,alocalcontractorbuilta15-kilometeraccessroadwithintheprojectarea.Additionally, localcontractorsconstructedtworesettlementcampsfor thedisplaced.Theseinvolved building facilities, like markets, schools, sanitation systems, and housing units. Localcontractors also built a clinic, BPA’s permanent staff village, and transmission lines (includingpylons)connectingthepowerhousetosubstationsinSunyani.Localcontractorswhogainedfromthesesubcontractingarrangementshighlightedthepositiveimpacttheprojecthadontheiroperations,particularlyfinance(Tsikudo,2019).Tsikudogaveaninstanceofhowonecontractoraffirmedthat“eventhoughthisisagovernmentproject,wedonothavetomobilizefundsforitlikewefrequentlysowithothergovernmentprojects.Sinohydropaidusdirectly.Therefore,ratherthanmovingfrombanktobanksolicitingmobilization,wejustborroworusewhatwehaveandgetrepayment...there
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isnodelays inpayment.Tsikudoadded that inspiteof thepositive feelingsomesubcontractorslamentedonthelimitedinteractionstheyhadwiththeChinesecontractorduringtheirpartnershipasaresultoflanguagebarriers(Tsikudo,2019).
Asfortheaspectofprocurementofmaterialandequipment,Tsikudoassertsthatheavyequipment,likebulldozers,copperwire,turbines,andsteelfortheprojectweresourcedfromRussiaandChina.TsikudoconfirmsthataBPAofficialarguedthat“itiseconomicallysensibletoprocuresuchequipmentfromabroadbecausethereisnolocalsupplier.TheauthoraddedthatanotherBPAofficialaffirmedthat“therewasa15-yeargapbetweentheAkosomboandKpongDams,anda40-yeargapbetweentheAkosomboandBuihydropowerdams.Afirmthatspecializesintheproductionofspecializeddammaterialsrunstherisksoflosses”(Tsikudo,2019).Inadditiontoeconomicconcerns,someexpertsquestionedthequalityoflocalsupplies.
Bosshard(2009)arguesChina’sconstructionindustryisnowcompetitivebecauseofreformsitunderwentduringthe1990s.ChinesecontractorsspentyearsstudyingtheirWesterncounterpartswhilethegovernmenttooktimetoidentifythedeficiencies,andenactedaggressiveindustrialpoliciestotackletheissues.ThiskindofindustrialreorganizationcatapultedChinaintoaglobalhydrodamdeveloper.AlthoughSinohydrosourcedelectricitymaterialsandheavyequipmentfromabroad,itprocuredmaterials,suchasaggregatesandcement,locally(Tsikudo,2019).
Inadditiontoelectricity,boostingcocoaexporttoChina,subcontractingandprocurement,theconstructionandoperationoftheBuihydropowerdamwasanticipatedtodirectlyprovide3,000localjobs.Nevertheless,somecommentatorsareworriedaboutthelaborforcelocalizationofChinesefirmsinAfricannations.KernenandNam(2014)believethateventhoughChinesefirmsactivelyinvestinGhana,completelocalizationofChineseSOEsinGhanadoesnotyetexist.ThoughtheSinohydrohireslocalmanagementstaff,theyaremostlyemployedforexternaloperations,likesalesandhumanresources,forthereasonthatthefirmhopestobuildabetterimageofengagingthelocalcommunities.ThisindicateshowthedegreeofChinesemanagementlocalizationcanbelimited.
Nonetheless,thestudyshowsthattheBuiDamconstructionperiod,2009-2013,neededupto2,600personsfor65kindsofjobs.Ofthisnumber,91percentofemployeeswereGhanaian,whowereemployedasartisans,suchasmasons,carpenters,andelectricians.Otherswereemployedascasuallaborers,includingsecurityguards,drivers,andmanualdailywageworkersandtheywereunskilled before the construction of the Bui dam. The remaining 9 percent employees were theChinese (whonever surpassed400employees)andPakistanis (whowereabout100 for specificpositionlikemachineryoperators,welders,steelbenders)andtheyconstitutedtheexpatriatequotaallottedtothecontractor(Hensengerth,2011;Kirchherretal.,2016;Han,2018).TheGhanaiansreceivedthree-stagetrainingonceemployed.KarnenandLamaffirmthatduringonsitework,moreskilledChineseemployeesoftensupervised,mentored,andworkedwithlocalemployeesingroupsforaperioduntiltheGhanaiansemployeescompletelygraspedtechniquesandskillsforindependentwork(KermenandLam,2014).
The construction project not only offered many job opportunities in the local communitybuttransferredsometechnicalskills tolocalemployeesaswell.Constructionlaborexpertsviewemploymentasameansofearningalivelihoodandawayofdevelopingpeople’sskills(Ngowi,2001).Therefore,employmentinconstructionactivitiesremainsacriticalconduitforlinkages.Thebackwardlinkageinvolvesupgradingworkers’expertise.Forwardlinkagesrelatetotheacquisitionofnovelideasandskillsthatwillbenefitworkersinotherendeavors.ThesecontributionsandbenefitsfrombuildingtheBuidamregardingemploymentopportunitiesandskills transfershowthat theforwardlinkageforsnowballinglaboraretheskillstheseemployeeslearntandgain.
Alternatively, this could also be seen as a backward linkage because in order to build andimprovetheBuidamtheprojectwillneedworkersandsopeoplebecomeanessentialfactorforthedevelopmentoftheproject.Moreso,theconstructionandoperationofthedamprovideincomesforlocalGhanaiansworkers.Assuch,thehigherincomesthatareinducedthroughforwardandbackwardlinkagesareoftenre-spent,generatingaseriesofconsumptionexpenditures.Thesemultipliereffects
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aresecondarybenefits resulting from theBuidam.Whilecreating jobsopportunities,providingincome,andtransferringskillstotheinhabitantsisnotonlyaninvestmentfortheproject,itisalsobeneficialforthefutureGhanaeconomy.
HanaffirmsthattheBuiDamprojectmanagementofficesetupamedicalcenteronsitebecauseof thehigh incidenceofmalariaandotherwaterbornediseasesaswellas thedearthofmedicalfacilitiesintheregion.Toimproverelationsbetweenexpatriatesandlocals,theChinesegovernmentalsoorganizedonsiterecreationalactivitiesandmadedonationstolocalcommunitiesandschools.Incaseofinfrastructureinvestmentsforthemedicalcenter,recreationalactivities,oneinputandemergenceofabackwardlinkagetothesemedicalcenterandrecreationalactivitiescentersislaborbecausethemedicalcenterandrecreationalcenterwillrequireworkers.
Nonetheless,becauseofovertimeworkwhichtheworkerschallengedthemanagementisnotinlinewithGhanalaborlawsofworkingeighthoursperdayschedule,lowwages,anddearthofsecureleave,aswellashealthandsafetyrisks,twostrikesoccurredin2008and2013(ChipaikeandBischoff,2018).Ontopofthat,localworkersaccusedSinohydromanagementofdiscriminationbecauseoftheircounterpartsfromChinawereeachgivenaroomthatwasequippedwithair-conditioners.Theworkersalsocomplainofcasualization22;CasualizationisonelegacyofthestructuraladjustmentpolicyprogramsimplementedinAfricaduringthe1980sand1990s(Lee,2009).ItisacapitalistaccumulationstrategyofwhichtheChinesearetakingadvantageof.Theprocessinvolvestheofferofdayjobsandfixedcontractswithoutpensionsorlong-termsecurity.ThepracticewaswidelyusedbyChinesefirmsandinvestorsinZambiaandTanzania(Lee,2009).AlthoughthepracticeisnotuniquelyChinese,casualizationhasbeenadoptedbyChinesefirmsonotherpartsofthecontinentofAfrica.
Carmody(2011)consideredthelaborcasualizationphenomenonengagedbyChineseinvestorsinAfricaasacharacteristicof feudalism.Theauthor sees laborcasualizationas typicalChina’sindustrializationlevel.Accordingtothisview,Chinaisatadevelopmentstageinwhichcasualizationseem tolerable. Carmody also indicates that nowadays industrialized nations engaged in similarbehaviorsintheirearlydevelopmentstages.TheAfricanLaborResearchNetwork(ALRN)considerscasualizationasexploitativeandcriticizesAfricangovernments’seeminglyunconcernedattitude.ALRNobservesthatAfricangovernments’supineattitudestemsfromtheirfearofbeingviewedaslessbusiness-orientedandinvestor-friendly.Moreso,itaffirmsthatAfricangovernmentsactivelypromoteinvestmentuncritically.Theopen-doorapproachtoinvestmentshasdeepenedthecasualizationofAfricanlaborinChinesefirmsinAfrica.Casualizationcreatesjobinsecurityandenervatescollectivebargainingaimedatimprovingworkingconditions.Casualizationundercutspeople’scapabilitytoupgradetheirskillsandseekbetteremployment.Asaresult,alocallaborunionwassetupin2009.SinohydroalsosignedapactwithGhana’sTradesUnionCongressthatdemandedbothemployeesandsupervisorsbetterunderstandtheirrightsandobligations.
5. CoNCLUSIoN
ThispaperhascenteredonChina’sengagementwithAfricawithrespecttoinfrastructureprojects.Itisworthnotingthattheprevioustraditionalmodelsofinfrastructureinvestmentmightperhapsbemoreconnectedtotiedaidorresource-backedloans.Nonetheless,ithastakenalongtimebeforetheseformsofinvestmentshaveshownanyoutcomeand,therefore,theargumentmightbethatitistimeforAfricannationstostepawayfromatraditionalmodeltootheralternativessuchaswhattheChinesearedoingatthemoment–itmightbethebestwayformeetingAfrica’sneeds.
With that said,bydrawing instancesupondiverseChinese infrastructureprojects inAfrica,thispaperhasattempted to identifybackwardand forward linkages thathavebeencreated fromChinese infrastructure projects. The paper analyzed the developmental outcomes of the Tazararailway,Mombasa-NairobirailwayandGhanaBuihydropowerdam.ItisworthnotingthattheTazararailway,Mombasa-NairobirailwayandGhanaBuihydropowerdamcanbeconceptualizedascasesofvestedinterests.Theauthoritiesinchargeofthethreedifferentinfrastructureprojectssoughttheir
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implementationtoshoreuptheenergysupplyandbolstersocioeconomictransformation.Inadditiontothesegoals,thesethreedifferentprojectswereexpectedtoprovideemployment,irrigation,ecotourism,andsocioeconomicinfrastructurerespectivelywithinthesethreediverseprojectsareas.Ontopofthat,thestudydiscoversthatskillsamongstworkers’spillovertootherbusinessesandfirms,itisworthnotingthatcompetitioninlocalmarketscanpushlocalfirmstoinvestinnoveltechnologies.Withthesegoals,theTazararailway,Mombasa-NairobirailwayandGhanaBuihydropowerdamcanbeinterpretedashavingmultiplegainsandlinkagesforandbeyondthethreevariousprojectsareas.
Nonetheless,thethreevariousprojectswereseenbyChinesegovernmenttofulfillitsobjectivesinAfrica.Howthesegoalswereattainedisafunctionofstatecapacity.Astheanalysisshows,mostofthebenefitsforthesethreenationshavebeenpatchy.TherewasnosubcontractingforstakeholdersinGhanaBuihydropowerdam.Althoughsomematerialswereprocuredlocally,itwasonlydonebecauseimportseemedcostlier.Thegeneralprocessofprocurementregardingthesethreeprojectsimplementationfloutedthelocalprocurementlaw,forinstance,intheGhanaBuihydropowerdam(Tsikudo,2019).TheTazararailway,Mombasa-NairobirailwayandGhanaBuihydropowerdamalsocreatedalotoflaboruneasinessandanxietyviacasualization,whichcausedemployeesinsecurity,andhencelimitedbackwardandforwardlinkages.AlthoughthisisararecaseaswellassomewouldarguethatrelationshipbetweenChinaandAfricaismostlyatoxicone,bydrawingupondifferentinstancesofinfrastructureprojectsitcanbedemonstratedthatsomesignificantoutcomesarebeingmadeinthissectorwerebackwardandforwardlinkagesarecreatedandoffersnewopportunitiesforAfricannationstoadvance.
Linkagesarecrucial;nonetheless,onlyapurposivestatecaninduce,nurture,andsustainthem.Thestate-centeredframeworkrequiresactivestateinterventiontoshapetheoutcomesofChina-Africaengagements.ForAfricannations tocreate linkagesusingChinese infrastructure investments, itrequiresachangeinphilosophy.AfricannationscannotcontinuetouncriticallypromoteandsupportChineseinitiatives.Theexistingopen-doorpoliciesneedtogivewaytoamoreproductiveapproachinwhichAfricannationsobjectivesareintegratedintoproposedChina-fundedprojects.ThegoalforAfricangovernmentistomakesurethattherelationshipcontinuestobecooperativetocircumventexploitationatanytimes.
Inconclusion,totiethisfinalmarktogetherthispaperhasattemptedtodemonstratewhatrolethe Chinese-led infrastructure projects play in African infrastructure development and what theinfrastructureinvestmentleadstoconcerningcreatingnewopportunitiesandbusinessesforAfrica,andasthefinalanalysisrevealsbydrawinguponthethreedifferentinfrastructurecases–currentlytherelationshipisconsideredtobeacooperativeonewerebothAfricaandChinaarewinningfromit.
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2 Methodsusingmoreavailabledatashowthatforadvancedeconomies,anincreaseinonepercentagepointofGDPininvestmentspendinginadvancedeconomiesraisesthelevelofGDPbyabout0.4percentinthesameyearandby1.5percentfouryearsaftertheincrease.
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21 Bach(2013)reviewstheoldconceptofpatrimonialisminaninternational,notexclusivelyAfricancontextandpointstothemixedandambivalentnatureofneo-patrimonialism.Inhisviewofneo-patrimonialisminthestateratherthanthepatrimonialstateperse,personalizedpowerrelationsandappropriationofstate resources co-existwith legal-rational anddevelopmentalmodelsofpublicpolicy.Our researchontheSGRfindspreciselyamixtureofsuchprocesses;DanielBach,“Régimespolitiques,pratiquessystémiquesetdynamiquesdel’émergencedanslesétatsafricainsetpost-soviétiques”[PoliticalRegimes,SystemicPracticesandDynamicsofEmergenceinAfricanandPost-SovietStates],Revueinternationaledepolitiquecompare[InternationalReviewofComparativePolitics]20,no.3(2013):153-169;MichaelaWrong,It’sOurTurntoEat:ThestoryofaKenyanwhistleblower(London:FourthEstate,2009).
22 Aprocesswherebyemployeesareemployedincausalandtemporarycapacityinsteadofbeingpermanentstaff.