China’s Rising Influence in the Horn of Africa: A Brief Case Study
In May 2019, Eritrean and Chinese Foreign Ministers met in Beijing to commend what Eritrean officials lauded as “a healthy and strong partnership for the benefit of their two peoples.” Months later, the Chinese Ambassador to Eritrea affirmed that China’s multi-formed assistance had bolstered “Eritrea’s nation-building endeavours”. This relationship is symbolic of China’s considerable interests in the Horn of Africa, which it pursues by often recurring to debt-trap policy. This approach can result in China being handed over assets at favourable conditions.
In 2001, China joined the WTO and started building its involvement in Africa, attracted by abundant natural resources and an untapped economic potential. Beijing increased its engagement in 2013, when the Chinese President Xi Jinping, formally announced the Belt and Road Initiative (BRI), pouring resources into this massive project to create infrastructure and transportation linking this area of Africa and China. In 2019 Morgan Stanley projected China’s overall expenses over the life of the BRI to be between $1.2 and $1.3 trillion by 2027.
The Horn of Africa comprises Ethiopia, Somalia, Eritrea, Sudan and Djibouti and its geographical placement on the Red Sea plays a huge role in China’s interests. Somalia guards access to the Bab el Mandeb Strait, a junction of crucial commercial interest through which 12 percent of world trade volume passes. More than 4.8 million barrels of crude oil and refined petroleum products flow through it each day , alongside many other vital supplies.
Despite its stratetegic significance, the region faces many problems. Famine has lacerated the region for decades: the Food and Agricultural Organisation (FAO) estimates that almost 40 per cent of the population is chronically undernourished. Conflict has also marred The Horn: a civil war erupted in 1961 in Ethiopia, as the Eritrean ethnic group sought independence. Both sides tried to overpower each other, involving extremist groups from Somalia. The decades-long conflict worsened hunger and created 2.7 million refugees. Today, after two decades of “no war, no peace” between Eritrea and Ethiopia, both countries are deepening their diplomatic relations, also by including Somalia in a comprehensive Joint Agreement meant to promote economic and political ties, ideally cultivating a measure of regional stability.
The economic relevance of the Horn of Africa
Chinese involvement has contributed to recent economic growth of Ethiopia and Djibouti, without translating into substantial improvements in human development measures. Though in 2018, Real GDP in the two countries increased by 6.8 and 6.7 percent respectively according to the World Bank, due to the widespread use of barter and inefficient tax systems Governments are often unable to fully benefit from higher tax revenues since the government is unable to collect them, meaning public investment may suffer. Ultimately, this means that economic growth has not translated in full-scale economic development.
Some critics hold that China is operating as a rival to the World Bank and the International Monetary Fund (IMF), lending funds to developing countries with far less financial scrutiny than supranational organisations would require. China also offers large-scale technical training and assistance with fewer bureaucratic barriers for investment.
The importance of technical assistance cannot be overlooked as a building block in the region’s development ladder, creating qualified workers and a long-term increase of the skills of the workforce, potentially improving the Horn’s human capital for the next stage of economic development. That said, various forms of assistance have left recipients indebted to Beijing. Some of them have had difficulty servicing their debts.
It is irrefutable that China is becoming a main player in the region. McKinsey estimates that China will become the largest source of Foreign Direct Investment (FDI) in Africa within this decade. These projections do not take into account Contracted Overseas Projects (COPs), such as the building of a port or a railway system, which are even larger than FDI. COPs can be considered a form of barter because often they are repaid with natural resources.
The Horn abounds in precious resources and useful minerals such as deposits of Tantalum and other types of rare earths necessary to produce vehicles, phones and wind-turbines. Between July 2019–2020,, 80% of the region’s Tantalum was exported to China. This is one of countless examples of China’s huge bargaining power.
Sri Lanka could offer a cautionary tale for Africa. Its second largest port, funded by The Export–Import Bank of China, was finalised in 2011 and by 2015 the Sri-Lankan government struggled to make loan repayments. Sri Lanka was consequently forced to cede ownership and the port’s revenues to the Chinese Government under a 99-year concession. Countries in the Horn should study this case to understand the possible implications of accepting potentially excessive assistance from China.
Geo-Strategic Concerns
Since the Horn of Africa is attracting renewed interest and rivalry for its resources and market potential, the region could potentially choose to act as the Non-Aligned Movement (NAM) countries during the Cold War, when countries such as Pakistan and Egypt stimulated competitive bidding by several American and Soviet administrations as both superpowers sought to maintain their influence. If hostilities manifested in the US-China Trade War were to become amplified, the Horn’s countries could use this — as NAM countries previously did — to increase their leverage.
China is gaining a role as the pre-eminent superpower in the area. The Communist Party endeavours to show African countries that their infrastructural projects and technical assistance represent “Win-Win” propositions, where trade flourishes within positive and sustainable relationships among the countries.
The strategic placement of Djibouti
The entire area has strategic value. Djibouti is a particularly important Geo-Politcal component of this region and China understands its strategic interest in maintaining a solid foothold there. Though it’s the third smallest country in Africa, Djibouti hosts military outposts for USA, Italy, France, Japan. Since 2017 China as well, with Saudi Arabia and Turkey, rendering Djibouti’s economy heavily dependent on military-related income. It has become crowded terrain with potential to become a conflict point in a scramble for pre-eminence in Africa.
Chinese firms have built the Djibouti International Free Trade Zone (DIFTZ), the largest free trade zone in Africa. Djibouti owes the majority of its public debt to China, giving China a particularly large vested interest there.
What China gains from investing in Africa
Another area of Beijing’s influence is winning over African citizens with technological advances. An example of gaining soft power is Tecno, a mobile phone maker, now one of the most popular phone brands in Ethiopia thanks to their special software. It’s designed to capture darker skin tones for selfies, plus being the first major phone brand to introduce a keyboard in Ethiopia’s official language, Amharic. This example illustrates how Chinese companies gain market share by responding to specific needs. According to McKinsey, Chinese Retail Industry in Africa has grown at an average pace of 20 per cent in the past 5 years.
Beyond providing innovative consumer products, the Chinese model includes building infrastructure, thus providing jobs for Chinese construction firms in the process, with the aim of enabling cheaper transportation costs and increased supplier reliability, plus working to ensure regional stability.
Some Western foreign policy experts worry that China’s increased soft power will allow it to operate as other foreign powers have in the past, in a modified form of “Economic Imperialism,” generating wealth by capitalising on the resources of underdeveloped countries through economic and political dominance.
Western society does not seem to be registering China’s meteoric rise of influence in the Horn of Africa, where it has already established itself as the principal foreign power. It is likely that the CCP will use its massive leverage as a creditor and as a main trading partner to its own benefit, as the Sri Lankan example illustrated. It is in the Horn’s interest to weigh these wider considerations while accepting assistance from and partnering on China. The playing field might not be as levelled as they would wish.
