The South African-based academic talks about green-tech opportunities along the Belt and Road countries
Dr Steven Kuo is a Sino-Africanist who lives in Johannesburg, South Africa, and regularly travels to Mainland China. He is Research Fellow within the School of International Relations and Public Affairs at Shanghai International Studies University (SISU). He previously taught African politics and International Security Studies at SISU and was a full-time Consultant for Chinese clients in Africa for a British risk management consultancy. Dr Kuo has a PhD from the University of St Andrews, where he focused on the study of Chinese participation in United Nations peace operations in Africa. He talks to Vikki Richardson about African reactions to the Belt and Road initiative.
There has been much publicity surrounding the Belt and Road initiative (BRI). What are your thoughts on the significance of this project and its short, medium and long-term impact on African countries?
From an African perspective, the BRI will be a game changer and have significant impact on Africa’s substantial infrastructure deficit. With BRI’s focus on infrastructure, there can be substantial benefits for African countries’ overall economic growth in the medium and long-term, as power, roads and telecommunications receive much-needed investment.
As Chinese firms localise, they have begun to use British consultancies in areas such as risk management and public relations in order to manage local risks.
What have reactions within Africa been towards the BRI?
The reactions are mixed. Ethiopia and Kenya have led the way and have been outstanding in creating a political, economic and regulatory environment conducive to inbound Chinese investment. While South Africa remains the country that receives the most Chinese Foreign Direct Investment (FDI), the current political stalemate within the ruling ANC Party, as well as sustained distrust towards Chinese intentions from mid-level politicians, means that South Africa has not rolled out the welcome mat as wholeheartedly as it should have done to welcome Chinese inbound investments.
What are the key opportunities available to British companies within Africa, as part of cooperation alongside Chinese organisations in the BRI?
In terms of basic infrastructure, British companies can provide expertise in the areas of project finance, engineering consultancy, and environmental impact assessment as a part of identifying what is feasible.
Large Chinese construction companies are beginning to invest in African infrastructure in increasingly sophisticated ways, they are moving away from only acting as the project contractor, as the profit margins become ever tighter, and are becoming equity investors and taking part in PPP (Public Private Partnership) and other models of investment. In these endeavours, British advisors are able to lean on the UK’s reputation and expertise, and provide consultancy services to Chinese firms in Africa.
How can British companies and organisations (for example in the areas of security, insurance, logistics, and legal services) provide support to Chinese companies and organisations operating in Africa as part of the BRI?
Around five years ago, British government agencies and NGOs in Africa moved away from criticism of the Chinese model of operating in Africa (in the areas of aid, as well as investment), and have been advocating three-way cooperation with limited success. On the other hand, British companies in areas such as engineering consultancy, risk management (including security), project finance, as well as legal services, have always been ready to assist their Chinese clients in Africa. As in any market, those companies that put their clients’ interests first and offer the best solutions are doing very well.
There is a great deal of experience that Chinese companies can gain from working with British firms across the world as Chinese companies venture outside of their borders.
In addition, how can UK companies and organisations support African countries with their business dealings with China?
Many UK companies have decades of experience operating in either Hong Kong or Mainland China. UK companies in Africa can draw upon their Chinese experience and provide this to their African clients.
What are some of the main challenges and risks facing British companies who are working in cooperation with Chinese organisations under the BRI, within Africa? How can these be overcome?
British consultancies have evolved to service Western companies. As your readers are aware, there are still substantial cultural gaps between Chinese and Western ways of doing business, and a great number of British firms continue to mainly service Western clients in China. While many British firms have decades of experience in China, as well as in Africa, my experience is that the Chinese ‘old hands’ (and the local Chinese hires) do not know very much about Africa and vice-versa. Overcoming internal bureaucratic boundaries to coordinate a firm’s knowledge of Chinese clients’ needs with its African expertise can often be tricky. That the Chinese client will almost certainly have a HQ in Beijing or Shenzhen, as well as an African country office, adds to the problem of communicating and managing client expectations.
I would think that many people are stuck between Chinese clients’ expectations and British rules and regulations. I regret to confirm that there is no easy way of overcoming the cultural and bureaucratic constraints between British companies and Chinese state-owned enterprises that are spearheading the BRI in Africa. Those British companies that have won and maintained Chinese clients have done so by fully supporting their Chinese senior managers and partners.
As part of the BRI, China has provided funding for a number of ‘green tech’ projects in Africa and other countries. What do you believe to be the driving force behind China’s investment in green technology in these countries?
I think Adam Smith’s Invisible Hand is driving green investments in Africa. Electricity transmission lines are expensive and it can be difficult to coordinate different political entities. In this context, a solar or wind farm close to the energy user is the suitable solution. While BRI policy will push Chinese state-owned infrastructure companies to invest in a ‘political project’ (to satisfy Beijing’s demand to ‘Go Out’) these patently unprofitable projects remain in the minority. Chinese infrastructure and equipment supplier companies are primarily looking at return on investments when they assess bankable feasibility studies of green technology projects.
What do you believe the impact of BRI green technology projects will have on African countries involved?
I think it will differ from country to country, project to project. Those countries that are better managed, with more stable political structures and thus a brighter long-term outlook will likely do better. In those countries where governance is weak, BRI investment will become another project for corrupt politicians to take advantage of.
What are the challenges of China setting up green technology projects in Africa under the BRI?
The larger Chinese state-owned infrastructure companies have had about a decade to find their footing and learn lessons in Africa. Similarly, African governments have also learnt to better manage Chinese projects, such as demanding skills transfer and employment of local workers. The biggest challenge is political will. The introduction of new green technology to Africa means loss of business to existing, state-owned electricity utilities. It requires political will to pacify resistance from existing suppliers and putting the necessary legislative framework in place, so that Power Purchase Agreements and supply in to the existing grid can be put in place.
How have, or how can, British companies contribute to overcoming these challenges?
British companies usually have better on the ground intelligence, and have longer experience operating in country. Chinese firms have learnt that their Chinese state-owned status and direct line to the Chinese embassy does not always offer them immunity from political risks. As Chinese firms localise, they have begun to use British consultancies in areas such as risk management and public relations in order to manage local uncertainties.
What effect do you believe UK-China cooperation and partnerships developed alongside the BRI will ultimately have on UK-China relations?
I think that the partnership and initiative from the UK in terms of working with the Chinese around the world is commendable. There is a great deal of experience that Chinese companies can gain from working with British firms across the globe as Chinese companies venture outside their borders.