Last week Italy became the first major European economy to join China’s Belt and Road Initiative (BRI).
Italy and China signed 29 deals worth $2.8 billion (Sh282.3bn), and while the absolute amount agreed to may not be large, this marked an ideological shift where Italy broke ranks with other powers in the global North by openly endorsing the BRI which has been subject to deep scepticism and criticism in both Europe and North America.
Closer to home, Kenya’s standard gauge railway is a key BRI project in Africa and exemplifies the opportunities and risks linked to the BRI roll-out in Africa. There are two key issues to manage on both the African and Chinese side if the BRI is to be effectively leveraged.
The first opportunity the BRI presents Africa is addressing the continent’s infrastructure deficit. The African Development Bank (AfDB) estimates Africa’s infrastructure deficit to stand at $170 billion (Sh17.1 trn) a year.
The BRI is a clear opportunity for African countries to meet this gap on a long-term basis. Additionally, the momentum behind the African Continental Free Trade Area (AfCFTA) provides an opportunity for African governments to link the BRI to the vision to interconnect the continent and increase the movement of goods, products and services across Africa.
The second opportunity for Africa is further opening the continent up to the Chinese private sector and foreign direct investment (FDI). After years of the Sino-African relationship being defined by government-to-government deals (and this still dominates), Chinese private sector is increasingly coming into Africa on their own terms and with their own visions.
The BRI opens the continent further to both Chinese FDI and private sector relocation to Africa which presents opportunities for job creation, income growth and increasing Africa’s manufacturing capacity.
However, there are key risks linked with the aforementioned opportunities.
With regards to plugging the infrastructure deficit, there is clear concern that the BRI may further burden the region with more debt.
When this is coupled with fiscal opacity in Sino-African government deals, there is unease that the BRI will not only further indebt African governments, but also debt will continue to be mismanaged by some African governments with no pushback from the Chinese government.
The second risk has to do with the quality of Chinese FDI and private sector engagement in Africa. In many parts of the continent, there are concerns with regard to the extent to which the Chinese comply with the environmental, social and governance (ESG) standards in the countries in which they are domiciled. If the BRI opens Africa up more deeply to Chinese private sector engagement, it is crucial that concerns with Chinese private sector activity with regard to ESG standards are addressed.
The BRI will best serve both African and Chinese governments and the African people if BRI deals have far more stringent controls with regards to ESG due diligence, financial feasibility and financial transparency.
Additionally, the BRI should be more deliberately linked to the AfCFTA and the continent’s vision for interconnectedness.
Secondly, the Chinese government should begin to hold Chinese firms active abroad to Chinese legal and ESG requirements. This will prevent laxity on ESG standards on the part of African governments from being misused and ensure that Chinese private sector activity in Africa is holistically beneficial to African publics.