Chinese investment in Ethiopia continues despite COVID-19

The Addis Ababa Light Rail, the first light rail system in sub-Saharan Africa, built with Chinese assistance. Wikimedia Commons.

Dr Messay M Tefera, Addis Ababa University, Ethiopia
Visiting Research Fellow, CACS  /  15 May 2020

China’s involvement in Africa has grown exponentially since the 1990s. Its investment in Africa has increased particularly sharply since the 2015 Forum on China-Africa Cooperation (FOCAC) Summit, where China announced a commitment of US$60 billion in financial support to the continent in the form of aid as well as development finance. China announced a further commitment of US$60 billion at the 2018 FOCAC summit, comprising US$20 billion for extended credit lines; US$15 billion for grants, interest-free loans and concessional loans; US$10 billion for investment financing; and $20 billion for related outlays. These sums are to be spent over the three-year period of the FOCAC Beijing Action Plan, from 2019 to 2021.

China’s engagement with African countries as well as pan-African institutions, notably the African Union (AU), has created unparalleled opportunities for people across the continent. Countries benefiting from Chinese aid and investment include Nigeria, Angola, Ethiopia, Kenya, Zambia, South Africa, South Sudan, the DRC, Congo, Cameroon, Mozambique and Uganda. In line with China’s principle of non-interference in the internal affairs of African countries, restated in the Beijing Action Plan, its assistance to African countries has not been affected by changes in forms of government or national leadership.

Focus on Ethiopia

Ethiopia has benefited hugely from Chinese engagement. Given that the AU is based in the Ethiopian capital of Addis Ababa, this developmental relationship has major implications for the whole of Africa as well.

While assistance to Ethiopia started long before, it has burgeoned since Dr Abiy Ahmed became prime minister in April 2018, following the unexpected resignation of Hailemariam Desalegn. Since then, the two countries have signed agreements for numerous megaprojects. In May 2018, according to the Ethio-China Development Co-operation Office (ECDCO), China provided Ethiopia with a $225 million loan for the Mekelle City Water Supply Development Project (MCWDP). Mekelle – the capital of the Tigray region in northern Ethiopia — is a rapidly growing and fast-paced city, and the project is aimed at providing its residents with an adequate and sustained supply of clean water.

China has cancelled a loan for financing the Kebena Square-Arat Kilo Road Project in Addis Ababa, co-financed with the Addis Ababa City Administration (AACA). It has also agreed to restructure a loan for the US$4 billion railway linking Addis Ababa with Djibouti, the US$2.5 billion Addis Ababa-Sebeta-Mieso-Dewale road project, and the US$290 million Omo No 2 & No 3 Sugar Projects. The rescheduling of the loan for the railway project alone has saved Ethiopia more than $430 million in marginal interest and the grace period obtained.

According to ECDCO, the Chinese government attaches great importance to the Beautifying Sheger Project, and has provided it with significant financial assistance. The project, an initiative of the Ethiopian premier, Dr Ahmed, involves developing green belts along the rivers running through Addis Ababa, from Entoto Hill in the north to the Akaki waste water treatment plant in the south east. The project includes residential parks, bicycle paths, walkways, recreational spaces, an artificial lake, a wedding venue, trees and urban farms. The first phase, comprising 12 kilometres of the 56-kilometre project, was launched in October 2019

China is also funding numerous other projects in Ethiopia via commercial, concessional and interest-free loans as well as grant funding. These include the Addis Ababa Electrical Service Rehabilitation Project; the $98 million Bole-Lemi and Kilinto Industry Zone power transmission project (under construction by a Chinese company TBEA Contractors); the $45 million Meles Zenawi Leadership Academy (under construction by China Wuyi), the Kaliti roundabout-Tulu Dimtu and Kaliti-Bulbula-Kilinto road projects (co-financed by the Ethiopian government and the EXIM Bank of China); the Dire Dawa-Dawale road project; several other sugar projects (Kesem, Wolqait and OmoKuraz no 5); and terminals at Bole International Airport.

Sino-Ethiopian cooperation is also playing a vital role in sustainable human resource development. At a reception held in Addis Ababa in September 2019, the Economic and Commercial Counsellor’s Office of the Chinese Embassy in Ethiopia outlined progress made with the Training Fellowship Programme under the Beijing Action Plan. More than 5 500 Ethiopians have been trained in China in the fields of engineering, education, health, governance, agriculture and manufacturing. At this event, the Counsellor’s Office announced scholarships in China for 228 Ethiopian MSc and PhD students.

Emergency food aid

China is also making a major contribution to emergency response in Africa – notably its massive aid to all African countries, via the Jack Ma and Alibaba foundations, to fight the COVID-19 pandemic. Among other things, bulk medical supplies were delivered in three rounds in March and April 2020.

In August 2019, China sent 7 987 metric tons of emergency food aid worth about $7 million to Ethiopia destined for internally displaced people (IDPs) as well as people affected by El Nino-induced drought. Humanitarian food assistance began with the onset of the weather-induced disasters in 2015 when China provided around $60 million worth food assistance to Ethiopia, both bilaterally and via the World Food Program (WFP).

Following the COVID-19 outbreak in China, many feared that Chinese investment in Ethiopia would slow down. However, these fears have proven to be unfounded. Current data from the Ethiopian Investment Commission (EIC) shows that at least 30 Chinese investment projects have been licensed in Ethiopia between 2 January 2020 and 16 April 2020, involving total registered capital of more than $2 billion. All except one are at the pre-implementation stage, and the remaining project has entered the operational stage. Eighteen are located in Addis Ababa, nine in the Oromia region, two in the Amhara Region, and one in the Tigray Region.

Chinese investment in Ethiopia has continued unabated even during the COVID-19 pandemic, thereby further dispelling the skepticism in some quarters about Chinese engagement with Africa

The newly licensed companies are active in textiles, plastics, food, compact transformers and switchgear, diapers and sanitary pads, metal, oxygen and acetylene gases, basic precious and other non-ferrous metals, medical instruments and appliances, wearing apparel (including sport wears and shoes), domestic appliances, baby food, yeast, vinegar, mayonnaise, iodized salt and similar food products, paper and wood products, starches and starch products, and chemical products (such as propellant powders, explosives, photographic films and similar products). Others are engaged in medical services, rail engineering consultancy services, real-estate development, construction engineering, and data centre services. When fully operational, these projects are expected to create about 7 600 jobs.

To conclude, Chinese investment in Ethiopia has continued unabated even during the COVID-19 pandemic, thereby further dispelling the skepticism in some quarters about Chinese engagement with Africa. Certainly, based on their first-hand experiences, the Ethiopian government and the Ethiopian people do not believe that Chinese involvement in their country constitutes a form of neo-colonialism, or that China is seeking to establish an African hegemony.

For its part, China is scrupulously upholding its commitment to support Africa’s sustainable development while allowing African countries to explore their own development paths, formulate their own development strategies, and improve their own governance, as spelled out in the FOCAC Beijing Action Plan.

On the Ethiopian side, relevant leaders and government institutions should bear in mind that getting the best out of its relationship with China and the opportunities on offer will require effective, efficient and accountable planning and governance.

The views expressed in this article are those of the author, and do not necessarily represent the views of the CACS.

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