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China’s Interest In Africa Has Been Heightened By A Thirst For Oil, But It’s Shifting To Building Its One Belt, One Road Network

ArmchairTechInvestor, May 23, 2018, by Brad Peery

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Below is an analysis of some of the major efforts China is undertaking in Africa to advance its One Belt, One Road (OBOR) Initiative.

Djibouti

*Djibouti is not a new effort for China in Africa. China already has a base there and has plans to expand that base into a regional military supply port.

Some Pentagon officials regard the Djibouti base, and the future second base at Jiwani, as part of efforts to control oil shipping in and out of the Persian Gulf and the Red Sea. Both Chinese bases are located near strategic chokepoints-Djibouti near the Bab el Mandeb on the Red Sea and Jiwani close to the Strait of Hormuz on the Persian Gulf.

“Djibouti’s government will embrace greater Chinese involvement in the nation’s ports and sees no reasons for U.S. concern that its strategic interests may be threatened”, Finance Minister Ilyas Dawaleh said.

Because Djibouti is located on a global shipping crossroads that links the Red Sea and Suez Canal, Djibouti has become increasingly important to regional and world powers. Djibouti is almost the size of the state of Massachusetts. The largest U.S. military base in Africa is situated there and China’s first such overseas facility, which was inaugurated in August 2017, is also in the Doraleh area.

The Horn of Africa country is embroiled in a dispute with DP World Ltd. over the running of the Doraleh Container Terminal and has struck a deal to boost cargo trade with a company working with Chinese state-owned enterprises. It would be “ridiculous” to imagine that China could restrict or deny U.S. access to Doraleh as a result of the deal, Dawaleh said in a phone interview.

“Djibouti’s development needs all its friends and strategic partners,” he said. “At the same time, no one can dictate to us who we should deal with.”

U.S. Africa Command General Thomas Waldhauser warned that a Chinese takeover of Doraleh could have “significant” consequences if there were restrictions on the U.S.’s ability to use the facility.
*Beijing is using commercial bridgeheads to give its warships staying power in the Indian Ocean. Foreign Affairs, By Keith Johnson and Dan De Luce, April 17, 2018

Ethiopia

Ethiopia is a North-Eastern African country in the Horn of Africa. It is landlocked and borders Djibouti on the east. With a population of over 90 years, it is the second largest African country, with only Nigeria being larger. The country is underdeveloped, and has a small GDP per person.

China has been Ethiopia’s largest trading partner over the last 10 years. Cumulative foreign direct investment (FDI) from China increased more than tenfold from US$109 million in 2007 to US$1,130 million in 2015. In one year’s time, the amount increased to over US$2 billion in 2016. Chinese FDI is pivotal in infrastructure development, telecommunications, energy and manufacturing. Ethiopia completed it first freeway in 2014, aided by China. China has a very strong rail development capability, and provided funding for the Addis Ababa rail project. China has also aided Ethiopia in developing industrial parks.

**“The Belt and Road Initiative could advance Ethiopia’s development as well as that of other African countries, Ambassador Tekeda Alemu, Ethiopia’s permanent representative to the United Nations, said in May, 2017. The initiative offers opportunities for participating countries to mobilize resources and speed up development, Alemu said in an interview with Chinese media in his office in New York.”
**Belt and Road has promise for Ethiopia, Africa: envoy
By Hong Xiao and Wang Linyan, China Daily USA , May 11, 2017

Madagascar

Madagascar is an island country in the Indian Ocean and is about 250 miles from the east coast of Southern Africa. Madagascar has bilateral investment agreements with seven countries including China.

U.S. has signed the African Growth and Opportunity Act (AGOA) which expanded the product scope for duty-free exports to the U.S. based on an existing Generalised System of Preferences (GSP).

***“In March 2017, China and Madagascar signed a memorandum of understanding (MOU) to jointly advance the One Belt, One Road Initiative, as well as bilateral agreements in economic co-operation, trade and infrastructure construction. Total trade between Madagascar and China increased by 8.6% to US$1.25 billion in 2017. According to China’s Ministry of Commerce, China’s cumulative FDI in Madagascar was US$297.6 million in 2016, compared to US$25.4 million in 2011.”
***China welcomes Madagascar to join Belt and Road construction
Source: Xinhua March 27, 2017-03-27, Editor: huaxia

Morocco

Morocco is considered to be well-diversified in the region. It is estimated that the Moroccan economy grew by 4.2% in 2017. Real GDP growth is expected to reach 3% in 2018. The country considers itself to be a regional hub in Africa. The country has initiated a program to increase its competiveness.

The U.S. has a free trade agreement. Other free trade agreements include the European Union (EU), European Free Trade Association and the Pan-Arab Free Trade Area (PAFTA), which consists of 17 Arab member countries.

****”Chinese Foreign Minister Wang Yi and Moroccan Minister of Foreign Affairs and International Cooperation Nasser Bourita on Friday signed a Memorandum of Understanding (MOU) on joint construction of the Belt and Road.” Additionally Mr. Bourita indicated “Morocco welcomes Chinese companies to expand markets in Africa and the Arab states by making use of his country’s geographical advantages. Bourita also said “Morocco supports China’s efforts to safeguard its sovereignty, territorial integrity and legitimate maritime interests.” This could preclude Morocco from challenging China’s claims in the Indian Ocean, including those China claims that are challenged by India.
**** China, Morocco sign MOU on Belt and Road
Source: Xinhua|, November 17, 2017, Editor: Mengjie

South Africa

South Africa has a population of over 50 million people. It also had a relatively high per-capital income of $5,018 in 2016. It sits at the southern tip of Africa and considers itself to be the gateway to Africa. The China OBON Initiative has challenged that assumption by largely bypassing South Africa in implementing its African leg of the maritime portion of the network.

South Africa has a stagnant economy and grew by only 0.3% in 2016. South Africa has challenges that include poverty, inequality and unemployment. South Africa’s largest export market is China, which accounted for 9% of its exports in 2016. China supplies imports totaling 18% of South Africa’s imports. South Africa’s large trading partners include the U.S. The U.S. African Growth and Opportunities Act (AGOA) allows about 7,000 kinds of South African products to be exported to the U.S., with attractive quotas and duty-free treatment, until 2025.

According to UNCTAD, inflow foreign direct investment (FDI) in South Africa was US$2.3 billion in 2016, an increase from US$1.7 billion in 2015, about a 35% increase. South Africa is a member of the COMESA-EAC-SADC Tripartite Free Trade Area. This free trade area includes the three largest regional economic communities (RECs) in Africa:
• The Common Market for Eastern and Southern Africa (COMESA);
• The East African Community (EAC); and,
• The Southern African Development Community (SADC),
This creates an integrated market with a combined population of about 600 million people and a total GDP of about US$1 trillion. This agreement is tentative, and will come into force when it is ratified by the 26 member states.

South Africa became the fifth member of the prestigious BRIC Summit in April 2011. The other four members are China, India, Russia and Brazil. Being a member of BRIC was supposed to allow South African businesses to gain improved access to a group which includes over 40% of the world’s population and 17% of the global trade. After the seventh BRIC Summit in 2015, the New Development Bank was established with an initial authorized capital of US$100 billion. The fund’s objective is to support infrastructure and sustainable development projects in emerging economies.

*****”China’s Belt and Road Initiative (BRI) delivers a final blow to South Africa’s foreign policy claim to be the gateway to the African continent. As China boosts its preferred Silk Road partners, it leaves South Africa at a loss for its very own foreign policy identity—and opens up a murkier future for the African continent.”

After China unveiled its OBOR Initiative in 2014, it started to pursue its Africa agenda without going through South Africa. China made clear its growing relationship with other African states that included Kenya, Tanzania, Djibouti, Ethiopia and other emerging partners in East Africa.

China insisted on including it OBOR Initiative in different forums, especially BRICS and the Forum on China–Africa Cooperation (FOCAC). In these forums there was no coordinated African effort to limit China’s influence in continent-wide development. China seems to be looking at expanding BRICs to include countries such as Kenya and Egypt or, alternatively to focus more on its OBOR Initiative and less on the aims of BRICs.
*****South Africa’s dilemma in the Belt and Road Initiative: Losing Africa for China?, Friedrich-Ebert-Stiftung, by Tamara Naidoo, February 26, 2018

Tunisia

China’s energy needs were the genesis of its interest in North African countries. Beginning in 2017, China became more interested in Tunisia in conjunction with its OBOR Initiative following projects in Algeria and Egypt that ran into difficulties, triggered by lower oil prices. Algeria had problems with permits and was frustrated that 40,000 imported Chinese labors were being used instead of local laborers being hired. Projects in Egypt have also been unsuccessful.

******“Talks were launched in 2015 with the goal of better integrating the Tunisian market into the EU. In this sense, Tunisia functions as an ideal middleman for a China interested in controlling physical passageways between North Africa and Europe as part of the One Belt, One Road initiative. China is apparently interested in Tunisia’s Bizerte port, which offers easy access to Europe and is located at a critical hub of fiber optic submarine network cables.

China’s interest in Tunisia is mutually beneficial. With national inflation expected to reach between 9% and 12%, crippling IMF and government imposed austerity measures and a devalued dinar and high unemployment, Tunisia’s economy needs help. In a 2016 survey, Afrobarometer found that 47% of Tunisians believe China’s economic assistance is helping to meet Tunisia’s needs.”
******Tunisia hopes boost in Chinese investment can ease economic woes,
Al-Monitor, Sarah Souli, March 19, 2018

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