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Archives of Business Research – Vol. 9, No. 5

Publication Date: May 25, 2021

DOI:10.14738/abr.95.10180.

Dzekashu, W. G., & Anyu, J. N. (2021). China Belt and Road Initiative: Ties that Bind or Choke Development in the East and Southern

Africa Subregions. Archives of Business Research, 9(5). 11-27.

Services for Science and Education – United Kingdom

China Belt and Road Initiative: Ties that Bind or Choke

Development in the East and Southern Africa Subregions

William Gang Dzekashu

College of Business, Argosy University, Arlington, Virginia, USA

Julius Ndumbe Anyu

School of Business and Public Administration

University of the District Columbia, USA

ABSTRACT

Most of Sub-Sahara Africa gained independence from Europe in a wave from 1957

through the late 1980s with the notion that her former colonial masters would be

development partners in the newfound era of political, social, and economic

freedom. This perception of partnership is evidenced in the Gross Domestic Product

(GDP) growth, but regrettably, in other countries in the continent, there have been

delays in infrastructure development. With Europe’s failure to meet the

expectation, Africa has turned to China as a development partner. China has tackled

some of the urgent infrastructure needs in return for agricultural products and

natural resources. This recent partnership with China continues to expand in Africa,

demonstrated by the launching of the Belt and Roads Initiative (BRI). East and

Southern Africa represent the highest beneficiaries of the BRI engagements,

receiving over half of the Foreign Direct Investment (FDI) from China whose foreign

investment practices in Africa have come under great criticism from the West. This

skepticism is due to the vague nature of the engagements and notes which are not

publicly reported. This persistent suspicion by the West calls for close monitoring

of the relations between the US and China that could easily escalate to a conflict

between both nations. Though under attack, BRI has scored great instances of

success through the execution of major infrastructure and commercial projects in

partner nations. An issue of focus addressed here is whether the engagements with

China represent sustainable relationships for development.

Keywords. Africa, BRI, China, Debt, Development, East Africa, FDI Flow, FDI Stock, GDP,

Infrastructure, Loans, Southern Africa, Trade, United States.

INTRODUCTION

Chinese investment present in most African countries—mostly in states left by Western

investors—where Chinese investment is growing rapidly, and the market remains dominated

by western nations [6]. The Belt and Road Initiative (BRI) land corridor passes through Central

Asia and Europe connecting two of the world’s largest economies—China and Europe. The

maritime road connects China and Europe and passes through Southeast and South Asia, the

Middle East, and East Africa (mainly Djibouti, Ethiopia, Kenya, and Tanzania) make up an

important part of the BRI, because of Djibouti’s ports, Ethiopia’s rapidly expanding

manufacturing capacity, and the region’s existing plans to connect rail, road, and energy

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Archives of Business Research (ABR) Vol. 9, Issue 5, May-2021

Services for Science and Education – United Kingdom

networks [24]. Though there is significant backing for China’s lending model, the "support in

Africa for the BRI is not unanimous...[and] the interest [in its engagements] is dependent upon

[the] proximity to the BRI and the availability of alternative options for economic growth," [29].

Note that the overall lending model by China of not attaching strings to its loans and investment

commitments, has come under fierce attack by the West. China’s expansion of the BRI

engagements in Africa has been judged by whether the loans “bind or choke” development. This

assessment appears to be a milder concern in the face of worries about the possible future

conflict between China and the United States (US). Despite all the talk about China’s

involvement in Africa, the former is still second to the US which holds the number one investor

position in Africa and accounts for $54 billion in FDI stock. The US has over 600 companies

operating in South Africa alone.

In under four decades, China grew to a major economic power; a remarkable growth that raised

questions among US policymakers [28]. The US wants to see improved investment and trade in

Africa as an integral part of a new strategy geared towards countering Chinese growth in the

continent [9]. Critics expressed doubt about this renewed US interest in Africa especially

following the disparaging remarks by President Trump about the continent [12]. Agence

France-Presse [1] reported that China’s investment strategy of throwing money at developing

nations appeared to have hit a hurdle in the Republic of Congo where the African nation sought

a bailout from the International Monetary Fund (IMF). Considering the atmosphere of political

in accountability, corrupt African nations shall continue to gravitate towards China (deemed as

Africa’s largest bilateral creditor) for economic partnership. The total debt owed to Chinese

state-owned enterprises by African governments is approximately US$150 billion.

The Corona Virus Disease 2019 (COVID-19) pandemic has posed economic challenges for BRI

partner nations to meet their debt obligations; thus, leading to fears that the countries may

likely slide into debt-trap diplomacy with China [13]? There have been calls for China to follow

the actions of G20 nations to either suspend debt payments or forgive the loans for low-income

countries in Africa particularly due to the devastating effect of the pandemic on their

economies. China offered that member nations use the BRI to develop a health model to protect

safety and wellbeing in member countries; a model of recovery to restore economic and social

activities, and growth to unleash development potential through unity and solidarity [38];

which if implemented diligently, the BRI could score successes within the network of trade

routes linking Africa, Asia, and Europe.

PROBLEM STATEMENT

The gap identified in infrastructure by the African Development Bank (AfDB) in 2018 for all of

Africa amounted to US$87 - 112 billion annually [31]. Currently, less than half of this amount is

being financed. According to Dzekashu and Anyu [12], “this investment gap offered a unique

opportunity for the US and the West to engage with their African partner-nations to offer an

alternative to what has become questionable Chinese investment practices” (p. 21). Also, the

labor force is expanding by 20 million people a year, with rapid urbanization along with it,

Africa’s infrastructure needs are only poised to grow [23]. Africa has an urgent need to scale up

private investment. To accomplish this, the African continent needs private investors. The

required capital investment in Africa can only be met by external financing.

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Dzekashu, W. G., & Anya, J. N. (2021). China Belt and Road Initiative: Ties that Bind or Choke Development in the East and Southern Africa Subregions.

Archives of Business Research, 9(5). 11-27.

URL: http://dx.doi.org/10.14738/abr.95.10180

Since its launch in 2013, the BRI has demonstrated proof of constructive growth in

infrastructure connectivity, railway construction, energy pipelines, and electricity generation

[18] in Africa. Many infrastructure projects completed by China before 2013 in member nations

have now been rebranded as BRI projects [42]. The West has perceived China’s approach to

development partnership in Africa with sheer mistrust [12], especially over the vague nature

of the engagements. The US Secretary of State Hillary Clinton warned Africa at the onset of the

union with China in these terms, “Africa should beware of the new colonialism played by China”

[4, 37]. The vagueness of the commitments raise the risk of debt distress in some borrower

countries [15], an issue that the West continues to stress. The much focus on the possible

negative outcomes of the engagements in Africa tends to shroud the successes of development

[12].

OBJECTIVES AND SCOPE

According to Dzekashu and Anyu [12], the perception by the West, about China’s engagements

in Africa conflicts with the views of China and most African nations who have benefitted from

these engagements who argue that China has stood in the gap as an alternative to the West. The

question that this paper seeks to address is whether commitments under BRI lead to

constructive development outcomes in the East and Southern Africa Subregions. The objective

of this article is to present an impartial synthesis of existing literature relating to China’s BRI.

Moreover, the essay provides statistics on BRI projects in Africa by subregion with keenness to

East and Southern Africa defined by the United Nations (UN) as follows; East Africa: Burundi,

Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Mauritius, Rwanda, Seychelles,

Somalia, South Sudan, Tanzania, and Uganda; and Southern Africa: Angola, Botswana, Lesotho,

Malawi, Mozambique, Namibia, South Africa, eSwatini (formerly known as Swaziland), Zambia,

and Zimbabwe. The paper further provides project assessment and discussion of the economic

outlook in select nations within the identified subregions that have benefitted substantially

from BRI engagements.

DEFINITION OF TERMS

Below are definitions peculiar to international investments and trade that could provide

additional context for understanding.

Foreign Direct Investment (FDI) is an investment made by a firm or individual in one country

into business interests located in another country. Generally, FDI takes place when an investor

establishes foreign business operations or acquires foreign business assets in a foreign

company.

Foreign Direct Investment (FDI) flows record the value of cross-border transactions related to

direct investment during a given period, usually a quarter or a year. Financial flows consist of

equity transactions, reinvestment of earnings, and intercompany debt transactions.

Foreign Direct Investment (FDI) stocks measure the total level of direct investment at a given

point in time, usually quarterly, semi-annually, or annually. The outward FDI stock is the value

of the resident investors' equity in and net loans to enterprises in foreign economies. The

inward FDI stock is the value of foreign investors' equity in and net loans to enterprises resident

in the reporting economy. FDI stocks are measured in USD and as a share of GDP. FDI creates

stable and long-lasting links between economies.