On July 28, the Senate Foreign Relations Committee held a hearing on "U.S. Trade and Investment in Africa." Several of the remarks and questions focused on China's role in African trade and investment, and how the United States should respond. Witnesses at the hearing called for more U.S. engagement with the region, especially in infrastructure.
In his opening remarks, Senator Bill Hagerty (R-TN) contrasted the market-oriented approach the United States would take in regard to African trade and investment with the "neocolonial approach" and "predatory economic projects" pursued by China there.
During the Q & A with witnesses, Hagerty asked Florizelle Liser of the Corporate Council on Africa about a China-led "quad" arrangement in Africa. Liser responded that China thinks that "if they can link arms with others who are considered probably a bit more legitimate in terms of the kinds of things that they do and the ways that the Africans view them, … that's something that will benefit them. … the key for the US, though, is to not be reactive, [but rather] think proactively and creatively about what we can do."
Hagerty later asked Landry Signé of Brookings about African infrastructure and whether U.S. firms could compete with their subsidized Chinese counterparts. Signé responded that "there's an appetite in Africa for American investors," and said that "for the US to be more competitive than some of the Chinese corporations, … it is important to engage with African organizations" such as the African Union.
Senator Todd Young (R-IN) then stated that "China sometimes acts like a loan shark rather than a true partner of various countries" in Africa, and asked the witnesses for an assessment of "how unbalanced the effect of Chinese official lending in the region is," whether it actually "promot[es] development and sustainable infrastructure," and "how countries are responding." Aubrey Hruby of the Atlantic Council responded that U.S. companies were missing from many areas of African infrastructure investment, and noted that Chinese "roads and transport infrastructure has a positive impact." The question, she said, is whether the debt is worth it. Overall, in her view, "the Chinese footprint in African markets when it comes to infrastructure is a mixed bag, but it has gotten better over time."
A partial transcript of the China-related discussion at the hearing is below.
We all know that a strong economic foundation underpins broader political and social stability. Increased US-African cooperation also serves the strategic interest of the United States. It's not a coincidence that there's increasing demand from Africa for greater economic cooperation with our great nation. Leaders in government and business understand the need for robust, market based economic growth, a model that the United States continues to espouse in developing countries.
In contrast, the Chinese Communist Party continues to aggressively pursue predatory economic projects in Africa. According to a recent report, China is now the single largest financier of infrastructure in Africa, funding one in five projects and constructing every third.
Make no mistake, China will leverage their economic advantage to press their geopolitical ambitions. This neocolonial approach to trade breeds corruption and dependency.
China has no interest in hiring local people. China has no interest in training the local people. China has no interest in leading them. Indeed, China's self serving approach will not establish the foundation for long term economic success in Africa.
The onus is on the United States, working with our allies and partners, as well as various multinational institutions to show and demonstrate that there is another path to prosperity.
The United States stands for local jobs, honest business practices, high quality projects, environmental responsibility and mutual prosperity.
Q & A:
Ms. Liser, I'd like to turn to you next, and talk about recent press reports that China has proposed an alternative quad framework. I was surprised to see their outreach to Germany and France to propose a quad framework with the African nations, and they propose to cooperate on development projects here in Africa. It's not clear whether or not this proposed China-led quad will actually materialize or go anywhere, but if it were to proceed, it might pose significant challenges to the United States, and I would like to get your perspective and your opinion on how this might evolve, what would it mean for our US interests in Africa.
Yes, this kind of approach, where the Chinese are trying to basically become a part of sort of the usual processes, become linked to others that may have more of the reputation that, you know, African countries and others like, I think, is a part of their strategy. They know they've been in Africa, they surpass us in trade with Africa, years ago. They're providing favorable financing for their companies to build roads and airports, etc in Africa, and build out the infrastructure which the Africans, you know, very much need. And so, when the Chinese come to them, they offer that. Now I think that if they can link arms with others who are considered probably a bit more legitimate in terms of the kinds of things that they do and the ways that the Africans view them, then I think that that's something that will benefit them.
I think the key for the US, though, is to not be reactive. I think we'd have to think proactively and creatively about what we can do because I have not been to any country, and I've been to many on the continent, where they are not saying … where are the US companies, how can we get more US investment, you know, what do we have to do, you know, to get your companies to come. And they like our products. They like the fact that US companies will transfer technology, will transfer skills, and train. So they want to work more with us and I think that what we have to do is to look at the tools that we have now. DFC, as has been said here already. Look at the PROSPER Africa, where they're bringing together all of the 17 US government agencies and try to be on one page and leverage what the others are doing. I think that we have to look at what it is that the US can do, both the government, Congress, and the executive branch, and what US companies can do in Africa that is desirable, perhaps more than anything, then, those others in this new G4 approach can offer. And I think it will be welcomed, sir. So that's where I think we have to sit down and map out what we can do, and the tools that we can use more effectively.
I certainly agree with the substance of your statement. In terms of not being reactive, that was precisely my reaction to what China announced in terms of an Africa oriented quad, because we've been so successful with our quad approach, between ourselves, Japan, India and Australia, the Indo Pacific. In many ways, I think this is yet more propaganda coming from China. I like your choice of words, legitimate, because the United States does provide a legitimate framework. And I agree with you if we can bring our 17 agencies together under the PROSPER Africa Initiative, and really develop and drive, the full force and power of the American position, I think we can make great strides.
Mr Signé, may I turn to you quickly. Africa's infrastructure needs are massive, as we've discussed. Recent estimates by the African Development Bank put the continent's minimum infrastructure needs at $130 to $170 billion. And for over two decades, China has actively poured money into infrastructure projects in Africa, and it's unclear whether their motives are market based or whether they're strategic. As a lifelong businessman, I understand it's very difficult to do business with a competitor that plays by a different set of rules and has the balance sheet of China behind it. Dr. Signé, are US firm showing interest in building infrastructure, and can they do so in an effective way, given the difference in the competitive posture versus China?
Thank you very much for the questions. So, one point I want to highlight is that African citizens, per Afro barometer surveys, prefer the American model of development, compared to the Chinese one. For example, in one of the recent studies, 32% over the Chinese 23%, and the other countries lagging substantially. So definitely there's an appetite in Africa for American investors and I think both Madam Liser and Mrs. Aubrey have identified, or so that appetite, as illustrated, so that is one point.
So the second point is that I think the US should be strategic in terms of engagement, in terms of infrastructure. A sectoral perspective, and as mentioned in my written testimony, in the context especially to bridge the gap in terms of digital technology, digital infrastructure gap, extremely important, but it is still possible for the US to be more competitive than some of the Chinese corporations. I think for this to happen, it is important to engage with African organizations, whether the African Union, we have the program for infrastructure development in Africa for example which is a plan, aiming at bridging the infrastructure gap in Africa by 2014. …
We've seen how Chinese aid, investment and trade in the region have grown in the past decade. But these large numbers often over inflate the value of China's engagement and mask the true costs that various countries face. A recent report by AID Data shows that African countries that borrow from the PRC have had to sign confidentiality clauses, set up offshore revenue accounts, and agree to many burdensome conditions. To put it indelicately, you might say China sometimes acts like a loan shark rather than a true partner of various countries. This is all the more apparent now as countries struggle to recover from the COVID-19 pandemic and Communist China continues to balk at participating fully in debt relief measures. Now with that said, I don't doubt that PRC resources can do some good, and are doing some good in the region. So I would just like to hear from our witnesses, what your assessment is of how unbalanced the effect of Chinese official lending in the region is impacting the region, actually promoting development and sustainable infrastructure. And if you could touch on how countries are responding to Chinese assistance now that some of the true costs of these arrangements are coming to light.
So I would think this speaks to another question we had earlier about infrastructure and the need that is dire on the continent to fill an infrastructure financing gap. Many African countries are looking at financing solutions from China because they have not many other options that make sense in a political timeline that you all understand and we understand here in Washington. You get elected, you need to bring power and roads and rail to the people, and you don't have time to wait eight years for long term processes by multinational institutions. So China brings a fast solution to that.
But African partners are not naive in that process. They understand that there are trade offs to be made and often they come to that because there are not many alternatives. You had asked earlier, Senator, where were American companies on infrastructure and I think outside of the digital space, most of them are missing. They're not there. If you look at the largest EPC (engineering, procurement and construction) companies in the world, the top 10, of the top 10 seven are Chinese.
There are the Bechtels every once in a while, there are a few, but we're not rapidly looking for these type of opportunities to build transport infrastructure on the continent. And so I think we have to look at areas where we are. Look at what Google and Facebook are building when it comes to undersea broadband cables. Look at the potential, the transformative potential, of SpaceX's Starlink, which could do last mile internet at a way that completely leaps over the Huawei and ZTE-built 2G, 3G infrastructure. It's going to be direct from satellite. So I think we have to look at those opportunities. And I think, to the Senator's question about the assessment, an honest assessment. Listen, those roads that are built by Chinese companies, sometimes they carry Coca Cola, and sometimes they carry P&G products, and they allow people to get to clinics faster, and they allow people to go to school. So those roads and transport infrastructure has a positive impact. The question is, is the debt worth it? Is the debt worth it at the terms that it's being given? And is it being used to actually be efficient in terms of generating growth? So debt is not a problem in and of itself. Bad debt is taken on when you can't afford it and when it's used for the wrong ways.
So I think we have to break down the issue of indebtedness and African markets. And look, many many African countries are not even at their limits in terms of the GDP debt ratio. So, we're talking about specific countries, Zambia is obviously one where indebtedness is an issue, but not all African countries are in that boat. And I think we always have to be aware of averages, right, the average African country is the size of Montana. But talking about it that way doesn't make sense when you have a Nigeria that's 200 million person versus a Namibia which is 2 million, right. Averages are a challenge and regional kind of generalizations can be a challenge as well.
So I think the Chinese footprint in African markets when it comes to infrastructure is a mixed bag, but it has gotten better over time. You do not see the crazy projects that you saw of the kind of white elephant in the stadiums that we saw 10-15 years ago. It's made a march towards the market.