CHINA’S role in Africa has undergone a significant transformation in recent years. For decades, Beijing was known for flooding the African continent with loans and grants, funding extensive infrastructure projects, such as Kenyan trains, Juba’s airport, and the Zimbabwean parliament. This largesse defined China’s influence in Africa, often referred to as the ‘new scramble for Africa.’
However, as China grapples with a domestic economic slowdown caused by mounting debt and the impact of the Covid-19 pandemic, its approach to Africa is shifting. Data from S&P Global Commodity Insights highlights this transition, revealing a move from loans to energy investments. In particular, the three major Chinese energy players, CNPC, CNOOC, and Sinopec, have collectively become the fourth-largest energy investor on the African continent, following BP, Shell, and Italy’s Eni.
This transformation is a historical reversal, according to Harry Verhoeven, a senior research scholar at Columbia University’s Centre on Global Energy Policy. Historically, China provided extensive credit to African nations and engaged in substantial trade but showed reluctance to make direct ownership investments. However, this has changed due to China’s evolving economic landscape and the need for capital.
China’s economic shift and the diminishing generosity
China’s economic landscape has seen a substantial shift in recent years. According to data from the World Bank, China’s annual GDP growth has steadily declined, from a high of 14.2 percent in 2007 to a more modest 3 in 2022. This decline, combined with rising debt and the pandemic’s economic impact, has resulted in a change of strategy.
S&P Global data illustrates the rapid increase in Chinese energy investments in Africa, which have surged twenty-fold since the 1980s. Conversely, loans to the continent have dwindled since 2016, as revealed by research from the Boston University Global Development Policy Center.
Chinese energy investments in Africa
Chinese energy investments in Africa have seen remarkable growth, contributing to an increase in the total gas reserves of Chinese projects on the continent, which expanded from 3.44 Tcf in 2003 to 22.52 Tcf as of October 12. These investments encompass various significant projects, including Mozambique’s Coral Sul LNG project, the East African Crude Oil Pipeline (EACOP), and Niger’s Agadem oil project and pipeline. Chinese energy companies often hold stakes alongside international oil firms in these endeavours.
These investments extend beyond economically stable regions, with Chinese companies operating in more challenging areas, such as coup-hit Niger and terror-plagued Mozambique. Such ventures highlight China’s commitment to securing valuable energy resources for its growing domestic demand.
China’s investments in Africa extend to renewable energy and critical minerals
China’s interest in Africa extends to renewable energy projects and critical minerals, including cobalt and lithium. These minerals are essential for the global energy transition, demonstrating China’s comprehensive approach to securing energy resources and supporting sustainability.
A battle for influence in Africa
Africa’s economic and population growth projections, along with its increasing diplomatic clout, have sparked a battle for influence on the continent. Multiple global players, including China, Russia, the United States, the United Kingdom, France, Turkey, and Gulf states, are vying for a prominent role in Africa. China, in particular, has employed various strategies, including trade, grants, loans, and investments.
China’s Belt and Road Initiative (BRI) is a significant component of its strategy. By enhancing policy coordination, infrastructure connectivity, trade, financial integration, and people-to-people connectivity, China aims to amplify its influence in Africa and secure the support of the “global south.”
Controversies surrounding Chinese investment
China’s largesse in Africa has often led to accusations of debt trap diplomacy and vote buying. Researchers note that key energy investment recipients have consistently sided with China at the United Nations, reinforcing China’s influence. Beyond diplomacy, Chinese oil and gas investments are also about securing future energy supplies.
China’s impact on African oil production
African producers have faced challenges in boosting oil production to meet the rising demand from China, partly due to underinvestment and technical issues at aging fields. China, a significant importer of crude oil, has turned to alternative sources, including Russian oil, causing concern among African petrostates.
The changing landscape for African producers
The growing Chinese investments in Africa have the potential to alter the outlook for African producers. Seeking investment opportunities, African producers have grappled with divestments by international oil companies from mature basins in favour of emerging markets. New drilling is essential to maintain current production levels in Africa, as indicated by data from S&P Global.
Chinese lenders filling the void
As Western energy companies and banks become more reluctant to fund African fossil fuel projects, Chinese lenders are increasingly filling the void. Beijing seems less concerned about human rights abuses and poor governance in emerging African producers, which remains a deterrent for many Western oil CEOs.
A signal of consistency
China’s involvement in Africa has demonstrated a consistent approach, even in the face of international sanctions and PR challenges. Notably, China’s first major energy project in Africa took place in Sudan in the 1990s, amid a bitter civil war and Western sanctions on the East African country. This investment signalled China’s steadfast commitment to its partners.
The future of China’s engagement in Africa
China’s evolving strategy in Africa reflects its broader global ambitions and the changing economic landscape. As China increasingly invests in African energy projects, its role in the continent’s development takes on new dimensions. The battle for influence in Africa continues, and China’s approach will play a crucial role in shaping the continent’s future.
(with Platts)