One country and one region that are each home to more than a billion people – China and Africa – are fundamental to international efforts to combat climate change. Since China is a leading investor in Africa’s infrastructure as part of its Belt and Road Initiative, it is timely to identify lessons – good and bad – from China’s own development experience for African policy makers and interested investors. This can support African countries to adopt a more sustainable industrial path than did China over the last forty years.
This month the world’s environmental scientists, decision-makers and activists gathered in Poland for the 24th session of the Conference of the Parties (COP24) to the UN Convention on Climate Change (UNFCCC). They defined three target outcomes: raising climate change-related ambition; transformative action in the real economy; and unprecedented citizen and youth mobilization.
No country’s decisions matter more to those aspirations than China’s. China is the world’s largest carbon emitter. In coming decades, the nation is also forcastet to become the world’s largest economy. It will remain the world’s largest population for some decades forth. What China does at home – and abroad – matters, as well as how. China is a leading global investor in greenfield energy and infrastructure systems across the developing world. It is the lead investor in these fields Africa – a trend that may intensify under its Belt and Road Initiative. This makes it timely to explore lessons from China’s own infrastructure experience.
The African continent meantime is rich in renewables-related resources and home to some of the world’s fastest growing economies. At the same time, a majority of African economies lag in development and are in need of sustainable economic transformation. Sub-Saharan Africa specifically is home to the world’s fastest-growing populations. This is moreover the only region in the world where the median population age remains below 20 years. Directly and indirectly, a sustainable development partnership between China and Africa, thus, is imperative to prospects for achieving COP24’s goals.
Africa is a logical target for Chinese investment
Slowing growth and structural change at home and in China’s traditional export markets has been an important driver of Xi Jinping’s flagship Belt and Road Initiative, launched in 2013.
Alongside China’s more proximate Central and South East Asian neighbors, Africa is a logical target of China’s new outbound investment agenda. Not only is the region home to resources that are important to new growth sectors in China, such as renewable energy industries, it is also home to a large pool of youthful lower-wage labor. As labor costs in China rise, the terms of trade are shifting in favor of labor markets in African economies. This is especially true for African economies sitting in the pre- or emerging phase of demographic transition, the transition from high fertility and mortality to low fertility and mortality. The latter infers that those countries, with appropriate policies in place, are poised to enjoy a period of low-wage demographic dividend development – as China did over recent decades. China, now at the tail end of that growth model, is eager to become a stakeholder in the industrialization of those lesser-developed countries.
China is especially interested to invest in infrastructure – a sector in which it is very competitive and which serves to unlock the growth of other sectors. A recent World Bank estimate suggests that the infrastructure gap presently slows Africa’s growth by some 1.2 percent annually, and that improving the quality of existing infrastructure alone would add 0.5 percent to growth. This complementarity between Chinese supply and African demand means that China is now Africa’s greatest foreign investor in the infrastructure sector. This suggests it is timely to extract lessons from China’s own experience of infrastructure development for decision-makers in Africa.
China’s domestic infrastructure investments underpinned the transformation of its place in the global economy, but the approach was not perfect. It left lasting burdens for the country’s economy and environment also. At a time of accelerating technological progress and heightened preference for environmental protection, it is timely to review what China did, including, and perhaps especially, what China did less well, in its infrastructure development. This might enable later developers, including in African countries, to benefit from cost- and environmentally-friendly gains to their own infrastructure development program.
Infrastructure could be more sustainable from the get-go
China got a lot of things right when it comes to building public transit systems. It illustrated the potential of metro rail as the primary means of transportation for millions of urbanizing residents. A share of its rail projects drove up debt without later offering revenue streams to cover operational costs, let alone related debts. African countries must dexterously balance the need to foster growth and employment via infrastructure investment with debt sustainability. That is especially true for African countries that are low in population density, since this would imply a prospective lower per-capita usage of transportation.
China gave weight to the environment relatively late in its development. The “Airpocalypse” of 2012, however, in which smog rose to record levels in major Chinese cities, reflected a turning point. It led to the September 2013 State Council issue of a Pollution Action Plan. This year, the Ministry of Ecology and Environment, covering water, oceans, soil, air and climate, was instigated (as an upgrade).
As part of that process, China is presently re-visiting the energy efficiency of its infrastructure stock. Shanghai Port for example, is taking steps to become more energy-efficient. For example, it has established a domestic emissions control area around the broader Yangtze River delta port region, to limit the pollutant transfer to coastal residents. Vessels entering the area must meet strict environmental criteria, or otherwise offload their cargo. Port authorities make land-based energy sources (that are more efficient than on-board sources) available to vessels while in port.
Efficiency gains like these could be implemented in the first instance in the case of port and other infrastructural developments in African countries. Domestically, China’s Ministry of Transportation works with an approach described as “Avoid-Shift-Improve,” which is something akin to a “Reduce-Reuse-Recycle” mantra. The approach may be usefully adopted, where possible, to China’s outbound infrastructure investment program – and African recipients of Chinese investment should push for this.
In sum, China offers many timely examples of the importance of public infrastructure during the process of economic development. The solutions China now uses to make its domestic infrastructure more environmentally sustainable might also be affordably implemented in BRI-related investments in the first instance. Many African countries, like China before them, now face that narrow window of demographic circumstances that are favorable to development. As partners, both sides have an important opportunity to forge a greener development model at an earlier stage in African development than was the case for China.
This blogpost is based on Occasional Paper 292 of the South African Institute for International Affairs (SAIIA) published on December 13 and authored by Lauren A. Johnston and Robert Early.