Of the Belt and Road Initiative, the Indian Ocean and Agalega…

By Jan Arden

It is no secret that sub-Saharan Africa, according to international studies, is a resource-rich part of the continent, harbouring minerals, rare earths to oil and gas, amongst others. Yet the region has an immense quadrillion dollar deficit in the type of mega-infrastructure of ports, airports and internal rails and road communications that could maximize their development potential even as a raw-material and commodity supplier. And almost every single country, some emerging from wars of liberation, others run by corrupt leadership, was cash-strapped, looking hungrily for western investment that would only come laden with IMF-World Bank or European Union-type conditionalities and certainly not of the required scale.

Kenya’s Standard Gauge Railway Project Showing Phase 1 & Phase 2. Pic – erepo.usiu.ac.ke  

Many resource-rich, cash-poor nations, were therefore presented with a difficult choice: (a) delay construction of desired infrastructure until resource revenues become available sometime in the distant future – a bleak scenario, or (b) borrow money now to build the infrastructure in the short term with the loans being repaid from and secured by future resource revenues, which is called resource-financed infrastructure. That requires great care to check that projected future revenues are reasonably forecast and that multilateral or western donors do not overly weigh on terms and conditions.

This is where the Chinese authorities stepped in around 2013 with the mammoth Belt and Road Initiative (BRI), a signature policy of President Xi, proposing a planetary link of resource highways connecting resource-rich poor countries with markets, the whole to be financed through the clout of multi-trillion dollars accumulated in China through trade and manufacturing. Their forecasts were dizzyingly dazzling and soon their more flexible approaches made them indisputable development and investment partners in sub-saharan Africa.

In 2017, the BRI was written into the constitution of the Chinese Communist Party, and 138 countries and 30 international organizations have agreed to participate, with announced investments to link Asia, Africa and Europe reaching some $8 trillion. As opposed to the West’s willingness to impose their terms (transparency, democratic functioning, painful structural adjustments) China’s commitment to “non-interference” in the domestic affairs of other countries was a boon to African leadership. The result is also BRI projects that are “riddled with graft, influence peddling, and embezzlement. The unstated purpose of noninterference is to provide cover for such practices” charged one anti-corruption US agency.

But could the African (or cash-strapped Asian) leaders be blamed for taking onboard the massive investments that, for instance, would see huge investments in Djibouti connected by new rail and road to the Ethiopian hinterland? Or the massive rail connection between a redeveloped Mombasa and the interiors of Nairobi, Uganda, Sudan and Rwanda, or the large dam and power generation plants in Western Africa, or the deep port investments around Walvis Bay in Angola? In 2018 the World Bank reckoned that Chinese lending portfolio accounted for 21% of public and public guaranteed debt in 38 African countries.

A potential debt trap

There were dire warnings issued in some circles of a potential debt trap should countries embarking on Chinese fabulous but unrealistic forecasts of future revenues, fail or lag behind in their investment and interest reimbursements. A particular twist to the resource-financed infrastructure was the increasing frequency of straight resources-for-infrastructure (R4I) deals in which a Chinese conglomerate builds the infrastructure now in exchange for natural resources concessions, resource and mining rights, or the actual commodities into the future.

Could China then use BRI funds to overwhelm recipient nations, drown them in debt “generosity” and then seize those collateral, often strategic assets, such as mineral resources or even a port or airport? The question moved from speculative rhetoric to cold real-politics when Hamambota, the Sri Lankan port, had to be handed over to Chinese investors when a leonine investment contract with a 99-year lease collateral defaulted. This has fuelled a wave of disquiet. Closer to us the mammoth Standard Gauge Railway project linking Mombasa to East African interiors has been halted with the fate of Mombasa under siege. The port’s assets were collateral, and observers say they are not protected by Kenya’s sovereign immunity due to a waiver in the contract.

Stung by the increasing criticisms of its financing terms and a damaging reputation as an African raw material and commodity seeker, or a port-hungry predator for vulnerable island states (for instance, Sri Lanka and Maldives), engaging these states into leonine resource-financed infrastructure and R4I contracts, China Inc may be drawing the lessons and amend its ways. The Covid-19 pandemic, which no one needs reminding finds its origins inside Wuhan, China, has contributed to irreparably damaged economies, development and trade prospects around the globe and may have something to do with this belated “prise de conscience”. In China’s own interests, these apparently generous contracts should be renegotiated with a combination of write-offs, bail-outs and re-engineered loans without exorbitant collaterals.

It is worth recalling here that a similar mammoth port development project straddling the Port-Louis area from Baie du Tombeau to Pointe aux Sables, was ushered by the former minister of Finance, Vishnu Lutchmeenaraidoo, sometime in June 2015 when the new government presented its first budget. It was certainly bold and innovative and could indeed be marketed as launching the birth of a maritime and fishing pillar, setting out fresh perspectives for growth of the economy.

He duly travelled to Malysia and Dubai but his efforts only met with success, it seems, after meeting a Chinese delegation locally. On 25 august 2015, he announced an agreement between China and Mauritius towards the creation of this “fishing port” to be undertaken by LHF Marine Development Ltd, headquartered in China, and to be financed by the China Development Bank.

Unfortunately, as with many such State projects in recent years, there was minimal supporting evidence that revenue projections were not glowingly rosy and collateral would not be imposed by the Chinese firm in cases of repayment difficulties. According to l’express, works had started but stalled by march 2016, when the ministerial reshuffle led to the replacement of Minister Lutchmeenaraidoo by Pravind Jugnauth. From the vague information gleaned by the journal, project costs had already soared from a few billion Rs to 7 billion and 10 billion. Were projections fanciful, this might have been a noose around our neck right under our port’s nose.

Neither was it clear who would actually manage this Chinese port infrastructure or grant fishing, berthing and fuelling rights. Still less was it clear whether this would have been a dual civil-naval port facility only ostensibly for fishing operations but whose primary purpose might have been elsewhere, in line with Chinese naval requirements in the south Indian Ocean. Mauritius would have certainly constituted an interesting port of call for Chinese fleet, naval and commercial, plying to and from say Namibia or round the Cape. Even more so if the facility was entirely operated and managed by a Chinese conglomerate, often a proxy for the Chinese state.

geo-strategic interest

The proposed port then certainly held a geo-strategic interest for China, but the concern of a hidden agenda may have dawned on Mauritian authorities, who decided to let the ship flounder on the sands of Bain des Dames. Although it does not mean Mauritius should give up its ambitions to develop its maritime pillar and exert what control it can over its economic zone, lack of transparency around real intents and geo-political naïveté were not salubrious then. They are not now either in our dealings with the Indian government over the facilities being built in Agalega.

India is the largest development cooperation partner of Mauritius with a focus on our people-centered development: the cybercity, science and culture or the public health infrastructure are but a few examples. External Affairs Minister late Smt Sushma Swaraj visited Mauritius from 1-3 November 2014, to attend, as Chief Guest, the national level celebrations commemorating the 180th anniversary of the arrival of Indian indentured labourers. During her visit she made clear that India had no qualms about making our joint accords public and a strategic partnership was mooted and developed during successive visits since 2015.

The contours of that partnership include developing Agalega infrastructure for joint use by both Mauritius and certainly India, which is funding the overall development, and Mauritius which will oversee and manage both the port and airport at Agalega. Beyond defense and joint national security issues or clauses, the terms of our accords should be made public.

* Published in print edition on 1 June 2021