The Silk Road Economic Belt and the 21st-century Maritime Silk Road Initiative (BRI) was first raised by Xi Jinping, President of the People’s Republic of China, in September 2013. The BRI is inspired by the ancient Silk Road, which is the world’s oldest and longest trade route from Asia to Europe, stretching some 4350 miles. Aside from the primary purpose of trade and commerce, it also has immense historical significance as an important facilitator of the exchange of ideas, culture and religion.
The modern-day BRI comprises an overland belt and a maritime road, with a specific focus on infrastructure. Furthermore, unlike the ancient Silk Road, the BRI involves countries and geographical regions far beyond the route from Asia to Europe, some as far away as Peru in South America and Papua New Guinea in the Pacific islands.
African states have in general been fairly receptive of the BRI; in 2018, 53 African states, and the chairperson of the African Union Commission, adopted the Beijing Declaration – toward an even stronger China-Africa Community with a shared future with China. As recently as January this year, China signed a memorandum of understanding for BRI cooperation with Botswana to help strengthen Botswana’s infrastructure construction and national modernisation process. This blog post examines some of the BRI projects which have made headlines in Nigeria and Kenya.
BRI Projects in Nigeria
Nigeria, Africa’s largest economy and the most populous nation in Africa, officially entered into the BRI through a memorandum of understanding (MoU) signed in September 2018.
So far, Nigeria appears to be a top investment destination for BRI projects in Africa. Completed and ongoing BRI projects in Nigeria include the popular Abuja–Kaduna Standard Gauge Railway (SGR), Phase II of the Abuja Rail Mass Transit, a new terminal at the Nnamdi Azikiwe International Airport, the Lagos–Ibadan SGR and the Port Harcourt International Airport.
The Nigerian BRI projects are financed in various ways, often with China being a lender in one form or another. This has, over time, generated serious concerns about Nigeria’s debt risks as against China. As of 31 March 2020, the Nigeria Debt Management Office dashboard shows a total China debt profile of USD 3.121 billion (₦1,126.68 billion at USD/N361) or 11.2% of Nigeria’s external debt.
In July 2020, the Nigerian House of Representatives raised the alarm over a clause in the commercial loan agreement signed between the Nigerian Federal Ministry of Finance (Borrower) and China’s Export-Import Bank (China’s EXIM Bank) (as Lender), which purportedly concedes Nigerian sovereignty to China in the $400 million loan for the Nigeria National Information and Communication Technology (ICT) Infrastructure Backbone Phase II Project, signed in 2018.
The clause in question provides that:
“The Borrower hereby irrevocably waives any immunity on the grounds of sovereign or otherwise for itself or its property in connection with any arbitration proceeding pursuant to article 8(5), thereof with the enforcement of any arbitral award pursuant thereto, except for the military assets and diplomatic assets”.
Although waivers like this are not uncommon and are in fact the position taken by many jurisdictions as regards the subject of state immunity, the public backlash to the arrangement demonstrates the level of apprehension which Chinese financing of infrastructural projects face in Nigeria. This sentiment can similarly be observed in an increase in local protests against Chinese projects.
At the same time, it is important to also note the significant positive effects of China’s BRI projects in Nigeria. By way of example, the construction of the Abuja Rail Mass Transit Project (Phase 1) resulted in an estimated employment of 20,000 local staff. Since commencement of operations, this project has directly provided about 1,000 jobs. During construction and operation, the project indirectly established an estimated 200,000 jobs mostly in areas of material production, subcontracting works, equipment manufacturing and related services.
Thus, the Chinese financing of the BRI projects presents challenges with respect to Nigeria’s debt obligations, from which other African countries participating in BRI projects may well take note in order to better manage the financial risks of excessively ambitious infrastructure goals. However, the collaboration between the two countries equally represent a great step for infrastructural developments in Nigeria, which is likely to create spill-over positive benefits to other industries in time.
The Kenya Railroad and Asia’s Entry to the African Continent
Kenya, a country with longstanding diplomatic ties with China, is another African state in which prominent BRI projects have commenced. There was a particular focus on Kenya as a point of entry for the maritime silk road into Africa from Asia, and one of the flagship projects is the Mombasa-Nairobi Standard Gauge Railway, which is the country’s biggest infrastructure investment since its independence in 1963. The project, which is meant to link the port city of Mombasa to the capital Nairobi and onward to other land-locked neighbouring countries, is largely financed by China’s EXIM Bank.
Widely touted as a showcase BRI project, the project subsequently become the subject of public criticism for both the colossal debt it created for Kenya to China and the choice of CIETAC, a Chinese institution, as the designated arbitral institution in the dispute resolution clause of the contract.
It further led to a high-profile litigation in the Kenyan Courts brought by activists and the Law Society of Kenya on the grounds that, among other things, the China Road and Bridge Corporation had won the public project without going through a public competition in breach of procurement procedure. The Kenyan appellate court held in June 2020 that the procurement of the construction of the project was not exempt from the provisions of the 2005 Public Procurement and Disposal Act and that, consequently, the Kenya Railways Corporation as procuring entity was in breach of the aforementioned Act as well as article 227(1) of the Kenyan Constitution.
The Future of BRI Projects in Africa
As the BRI projects progress in various corners of the world, so do the ensuing disputes and stakeholders have already begun to react to these developments. For example, China has designated new international commercial courts in Shenzhen and Xi’an for dealing with maritime road and overland belt disputes respectively (CICC). Arbitration is, similarly, envisaged by both the Chinese government and participating stakeholders.
Arbitral institutions have also focussed their efforts on enhancing their capabilities in managing BRI disputes. The ICC, for example, has created a Belt and Road Commission comprising an international panel of specialists to drive the development of its existing procedures and infrastructure to support BRI disputes. The Hong Kong International Arbitration Centre has similarly set up its own BRI Advisory Committee.
The COVID-19 pandemic has undoubtedly impacted the BRI and its projects across the globe. Nevertheless, China continues to innovate with respect to development of its ambitious initiative, with a renewed focus on the “Health Silk Road”, “Green Silk Road” and a “Digital Silk Road”. The first of the three is particularly relevant for African states today as regards the distribution of COVID-19 vaccinations. It remains to be seen what degree of success these endeavours will see, and the inevitable cross-border disputes that may arise from these efforts.