China's African infrastructure deals face growing concern that locals don't feel the benefits

People fetch water outside a copper and cobalt mine run by Sicomines in Kolwezi, Democratic Republic of Congo, May 30, 2015. Reuters-Yonhap

Chinese infrastructure-for-minerals deals across Africa are coming under growing scrutiny amid concerns that the promised benefits have failed to materialize.

In the Democratic Republic of the Congo, President Felix Tshisekedi recently ordered renegotiation of a $6 billion deal between state-owned commodity trading and mining company Gecamines with a consortium of Chinese firms led by Sinohydro and China Railway Engineering Corporation to develop a copper and cobalt mine.

Kinshasa maintains that it has not benefited much from the arrangement but Beijing says it has built several projects in the Central African nation despite obstacles, including a lack of power to develop the mine.

Another similar project is a bauxite-for-infrastructure deal in Ghana under which state-owned Chinese firm Sinohydro Corp agreed to invest about $2 billion in infrastructure such as roads, housing and rural electrification.

In exchange, Ghana would use money earned from the sale of bauxite - the main ore used to make aluminum, refined bauxite and aluminum to repay the loans. As collateral, Ghana agreed to establish an offshore escrow account for receiving revenues generated from the sale of bauxite.

According to a study in June by Luis Scungio, a corporate accountability researcher and adviser at the Centre for Research on Multinational Corporations, such deals "reflect the underdeveloped economies of some host countries that have significant natural resources, along with a need for roads, power plants, schools and other infrastructure".

The study said China lacked natural resources but was very experienced in construction. It also said China had signed similar deals in the 1980s when Japan needed raw materials and oil from an underdeveloped China.

"China has replicated this model in Africa, swapping its expertise in the infrastructure sector for various natural resources," Scungio said.

He said both the DRC and Ghana cases had been subject to accusations that they were destroying the environment. Sicomines, the Sino-Congolese joint venture that operates the copper and cobalt mine, has in the past been accused of releasing chemicals from its sites into a river, affecting communities downstream that depended on the water source.

And in Ghana, "the [bauxite] deal has become a matter of fierce controversy because the earmarked location for bauxite exploitation is the Atewa Forest, one of the major evergreen forests in Western Africa".

Some Ghanaian opposition leaders have described the deal as a fiasco because not a single road had been delivered three years after the resource-backed arrangement was signed.

They also warn the US$2 billion deal between Ghana and Sinohydro will increase the debt burden, but the government says it is a barter arrangement that will not increase the country's public debt.

Last week, Gideon Boako, a spokesman for Vice-President Mahamudu Bawumia, told local media that projects funded by a loan from Sinohydro would be completed within three years.

David Landry, a global studies assistant professor at Duke University, said a major problem for the Congolese agreement ― and similar deals in Angola and Guinea ― was a lack of transparency that "fueled speculation about who, between the Chinese and African parties of the deal, would benefit from it".

Chinese President Xi Jinping arrives for a ceremony at the Monument to the People's Heroes on Tiananmen Square to mark Martyrs' Day in Beijing, Sept. 30. Reuters-Yonhap

This issue was particularly salient in the case of the Congolese deal as it was signed shortly after the 2006 Congolese elections and was closely tied to former president Joseph Kabila's election promises.

"This led many to believe that it was negotiated from a position of weakness by the Congolese government," Landry said.

He said resource-for-infrastructure agreements were often unpopular with the populations of the countries where they were implemented. "They are also unlikely to grow in popularity among creditors because of the important risks they comprise. Therefore, in my view, they are unlikely to become more popular in the future," Landry said.

Christian-Geraud Neema, an independent Congolese mining and policy analyst, said electoral considerations were a factor in both the Ghana and Congo deals.

In the case of Ghana, President Nana Akufo-Addo had promised a lot with the bauxite deal, which was supposed to help Ghana fill a part of its infrastructure gap.

"At the end of his second tenure, he needs to leave a political legacy for himself and his party. So there is an urgent political incentive for him to see that deal through with tangible positive results," Neema said.

As for the DRC, Neema said Tshisekedi was running for a second term. "Pushing for more results from the Sicomines deal is one of the sure ways for him to have infrastructure built in the country right before elections in 2023," Neema said. "We see both governments have political incentives to see those deals go through successfully."

"Where African governments are looking to secure political points, China is looking to make money" and would take factors such as commodity prices into account when disbursing funds for these projects, he said.

Neema said that despite the challenges, "China is the only major power with the financial, technical and political will and incentive to invest in major infrastructure projects in Africa".

"It is easier for African countries to secure funding from China than from the international market. The political and economic instability of many resource-rich African countries raises the cost of lending for major projects," he said.

"As long as Western or international market funding will come with political and economic conditions, this model still has a future in Africa for resource-rich countries."