How to negotiate infrastructure deals with China: four things African governments need to get right

“You don’t negotiate with China !” I was quickly told when I started interviewing African public servants about their infrastructure deals with Beijing. There is a widespread view in Africa that you accept whatever terms are offered, for fear that the money might go somewhere else instead.

China is the leading infrastructure finance provider on the continent – as demonstrated by a recent pledge of US$60 billion (£47 billion), most of which is for infrastructure projects. Big projects on the slate include hydropower plants in Angola and Guinea, an oil refinery in Nigeria, and a new city in Egypt.

Yet, when you look closely at what happens on the ground, some African countries are much better at negotiating with the Chinese than others. Railway projects in East Africa appear to be a good example. In Kenya, the Standard Gauge Railway is the largest infrastructure project since independence from Britain in 1963. China Eximbank providedmost of the finance for the first phase – 472 kilometres of track between Nairobi and Mombasa – at a cost of US$3.2 billion.

In neighbouring Ethiopia, an electric train line from Addis Ababa to Djibouti, which is also Chinese-financed, opened two years ago. The cost for this more expensive type of railway was US$3.4 billion – for 756 kilometres. Kenya claims that its railway cost more for reasons like the terrain and the need to carry higher volumes of cargo. At the same time, however, many believe other issues to have been at play – including failures around the negotiation process.

My ongoing research into China funded infrastructure projects is confirming that African governments can learn from best practice in this area. The best deals depend on the following four conditions being met.

1. Involve everyone

The process in Chinese deal-making tends to go like this: Beijing will begin by making financial pledges, often aimed at a number of countries; these are followed by meetings at state level between a Chinese delegation and the African head of state and their senior officials. Infrastructure projects under discussion have often already been passed over by Western donors.

Once a project is broadly agreed, the relevant Chinese contractors, mostly state owned enterprises, will typically contact African civil servants in the relevant branches of government to get detailed negotiations underway – with support from the Chinese trade mission and local embassy. Topics to be discussed will include costs, but also the use of materials and workers; technology transfer; and the effect of national regulations in areas like labour, construction and the environment.

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