The Economist - UK (2022-02-19)

46 Middle East & Africa TheEconomistFebruary19th 2022

routinely impose unusually tough condi tions to ensure they are repaid. Western firms also complain that their own governments offer fewer sweeteners. Last year China said it would stump up its own cash to build smart new foreign min istries in Congo and Kenya. It has also picked up the tab for numerous other offi cial buildings, from parliament complexes in Sierra Leone and Zimbabwe to presiden tial palaces in Burundi, GuineaBissau and Togo. Given such generosity, it is hardly surprising that some African governments are predisposed to favour Chinese firms. Western governments, by contrast, often spend aid on unglamorous and sometimes unpopular things like educating girls. Most significantly, perhaps, Chinese firms have a reputation for building swift ly. Finance from Chinese development banks is quickly forthcoming, and some projects in Africa seem to be replicas of ones built in China, which presumably saves time on drawing up plans. (Stations along the new Chinesebuilt railway be tween Ethiopia and Djibouti, for example, look as if they were plucked from the Asian plain). Some of this speed may also come from cutting corners on things like envi ronmentalimpact assessments. As a result, Chinese firms can usually deliver a big project within a single elec tion cycle, thereby handing incumbent leaders a ribboncutting photo opportuni ty shortly before their people vote. Western firms are rarely as nimble. “It is hard for us to get up to the starting line,” says an exec utive at a European engineering firm. Chinese firms often win contracts for the simple reason that they are more com petitive, according to a study by Brookings, an American thinktank, of international projects financed by the World Bank. West ern firms grouse that some of the Chinese projects are shoddily built, and stories abound of roads that crumble after a few years. But another study of infrastructure projects funded by the World Bank, this time by the ChinaAfrica Research Initia tive at Johns Hopkins University, found no difference in the quality of work done by Chinese contractors and Western ones. The World Bank is, however, a stickler for clean bidding and high construction stan dards, so firms bidding on projects it funds may be on their best behaviour. And in many cases Chinese firms are scooping up work because they have no competition—many Western firms stay away because they think Africa is too risky. It can, indeed, be hazardous. Property rights are frequently threadbare; fraud abounds. One Western manager describes trying to buy land only to discover, belat edly, that the people his consortium were negotiating with did not actually own it. Such difficulties help explain why ma ny infrastructure projects flop before the

firstbrickislaid.McKinsey,anothercon sultancy,calculatesthat80%ofinfrastruc tureprojectsinAfricanevermakeitbe yondtheplanningstagesandonlyonein tenachievesfinancialclosure. Anotherhugedeterrentiscorruption. In thepastWesternfirms oftengreased palms to winwork inAfrica—and else where.Asurveyofmorethan4,000firms in 19992000 found that construction firmsspent12%ofrevenueonbribes,ac cordingtoa WorldBankpaperbyCharles Kenny. He alsonotedthatin 2005 fully 40%ofinternationalconstructionfirms saidtheyhadlosta contractintheprevious yearbecausea competitorhadpaida bribe. Nowadays anticorruption laws in AmericaandBritainaretougher,andare appliedregardlessofwherethebriberyoc curs.Westernfirmsarethereforemorere luctant topay bribes, thoughsomestill landinhotwater.Forexample,Hallibur ton,anAmericanfirm,wasfinedin 2017 for violations in Angola andthe World Bankhasimposedsanctionsona subsid iary ofBouygues, aFrenchconstruction firm,overirregularitiesoncontracts. Yet,grumblesa Westernprojectmanag er,someofficialsinAfricaareunmovedby theseanticorruptionlaws andstillask: “Butwherearethebrownenvelopesforthe ministers?Wherearethebrownenvelopes forthepermanentsecretaries?”Thehead ofa Westernminingcompany complains thathishandsaretiedincomparisonwith Chinesefirms,whichareabletooperate withoutlicences oreven,inrebelinfested placessuchastheCentralAfricanRepub lic,thepermissionofthegovernment,if theyhavepaidofflocalwarlordsinstead. SomeWesternfirmsstilltrytocompete forbusiness.Notallhavehappyexperi ences.In 2017 Bechtel,a bigAmericancon

structionfirm,wona$2.7bncontractto buildwhatwouldhavebeenKenya’sbig gesteverroad project. Havingagreed to payupfrontfortheroad,theKenyangov ernmentchangeditsmindandaskedfora loaninstead.WhentheAmericangovern mentdeclined,Kenyacooledontheidea. A Britishcompany,gbmEngineering, securedbydefaulta $2bncontracttobuild Kenya’slargestdamafterfiveChineseri vals,apparentlyunfamiliarwiththeideaof a competitivetender,failedtosubmittheir bidsontime.Sixmonthslatergbm’scon tract was cancelled amid allegations of Chinese pressure on the government boardthatawardedthetender.gbmwon fiveappeals.Allwereblithelyignored.The case continues to meander throughthe courtsandthedam,likeBechtel’shighway, remainsunbuilt. NoteveryWesternexecutiveiscrying intoa coldbeeratthelocalSheraton,how ever. An increasing number of French firmsarecollaboratingwithChineseenti ties,notesThierryPairaultoftheSchoolfor AdvancedStudiesintheSocialSciences,in Paris.Atfirstrelationshipswereinformal, withFrenchandChinesefirmsworking separatelyonthesameproject,oftenwith theformerdoingthemorecomplexparts. MorerecentlyFrancoChinesecooper ationhasbecomemoreformal.cmacgm, a Frenchlogisticsgiant,hasgoneintopart nershipswithfirmssuchastheChinaHar bourEngineeringCompany.Insomecases Frenchfirmswant Chinesepartnersbe causetheycanbringstatebackedfinance thatisnotonofferinParis.Butinother casesa formalcollaborationemergesafter yearsofworkingtogetherinformally.De loittefoundthatin 2020 nolessthan15% ofallbiginfrastructureprojectswerebeing builtbyconsortia,includingthosecom posedofWesternandChinesefirms. China’sinvolvementinAfricaninfra structurehasnotbeenanunalloyedgood. Insomecasesithasleftcountriesdrown ingindebt,fuelleddomesticcorruptionor producedinfrastructurethat,likeKenya’s railway,willneverturna profit.Butlong afterthescandalshavefaded—anddebts have been defaulted on—China’s legacy willbetheroadsandportsthatAfricaso badlyneedsforeconomicgrowth. PerhapsasimportantisthatChinais unwittinglycrowdinginWesternmoney by stoking the geopolitical anxieties of Westernleaders.Britain’sgovernmentre centlysaiditsdevelopmentarmwouldin vest$1bninKenyaninfrastructureandthat a Britishfirmwouldbuilda newrailhubin centralNairobi.Theg7 groupofcountries lastyearlaunched theBuildBackBetter Worldinitiative,a shamelesscopyofChi na’sbri. Allthisshouldmeanmoreoppor tunitiesforconstructionfirmsofallna tionalities,whetherWestern,Chineseor, witha bitofluck,African,too.n

Streets ahead Finance for sub-Saharan African infrastructure from bilateral development finance institutions Cumulative, 2007-20, $bn

Source:CentreforGlobalDevelopment

0 5 10 15 20

Proparco(France)

DEG(Germany)

JapanInternational Co-operation Agency

Development Bank of Southern Africa

FMO(Netherlands)

Kf W(Germany)

JapanBank for International Co-operation

Overseas Private Investment Corporation (US)

China Development Bank

China Exim Bank

The Economist - UK (2022-02-19)

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