Sustainability of Chinese Railway Projects in Africa:

A Study in Progress

Dr. Ulf Henning Richter, Nottingham University Business School China Ms. Yan Wang, Nottingham University Business School China Dr. Ogechi Adeola, Lagos Business School, Pan-Atlantic University, Nigeria

This paper will examine the sustainability of Chinese railway projects in Africa with

particular emphasis on the social and environmental impact of these projects. The authors will

identify sectoral issues and challenges in project implementation particularly associated with

civil dialogue and community engagements. Specific sustainability issues will include

stakeholder engagement, human rights, health and safety, supply chain, innovation, and the

environment. The findings of this study will enable an analysis of areas of improvement through

eco-innovation, knowledge transfer, and capacity development. The results will be utilized to

ascertain the social and environmental impact of Chinese railway projects in Africa and their

potential for knowledge transfer and capacity development. Based on their findings, the authors

will describe the benefits of implementing sustainability measures and elaborate on the

implications for competitiveness of Chinese firms in the African railway sector.

This study will utilize both quantitative and qualitative research methods. Questionnaires

and interviews will be used to collect data from Chinese companies and stakeholders operating

in the African railway sector. This data will identify sustainability issues and potential for

improvement of Chinese railway projects and how they contribute to or inhibit competitiveness

in the African railway market. Additional data will be obtained from annual reports of companies,

archival data, and national development plans.

It is expected that the findings will serve as a model for railway companies and other

businesses on how to meaningfully engage with society to resolve identified, and perhaps

controversial, sustainability issues.

INTRODUCTION

Transport is a vital sector in the African economy, playing a crucial role in the pursuit of

poverty eradication and sustainable development as it increases the access of businesses and

consumers to goods and services and provides the means for emerging markets to integrate

into the global economy.

Amba and Danladi (2013) highlighted in their research that transport is one of the indices

used in assessing the economic development of a country. Also, Salim (2003) and Lingaitiene

(2006) noted that the advancement of any country depends on the development of its transport

system. The rail transport contributes to the socio-economic development of Africa continents

as it facilitates access to markets, jobs, health care, education and leisure activities. Olievschi

(2013) reported that rail transportation has played a crucial role in economic development as it

supports low cost movement of freight and passengers and contributes to the growth of mining

and agriculture.

Railway sustainability is understood to mean the development of a railway system that

caters to the travel needs of society without putting their quality of life in jeopardy in the

immediate or distant future. Sustainable transport systems align economic growth with social

and environmental priorities as it provides the physical networks and services upon which a

nation depends.

The development of sustainable rail transport which actually meets the mobility and

access desires of African people and businesses and at the same times reduces or eradicates

greenhouse-gas emissions is the goal of every African head of government. Ongoing

improvement of railway systems in Africa will facilitate the transportation of goods and raw

materials, boost tourism, enhance trade and generally improve standard of living of the

populace.

Inefficient and inadequate railroad transport contributes to the high cost of doing

business and stifles sustainable development in the African continent. There are many reasons

for the failure of the African rail system to measure up to that of developed countries: The

government has given high priority to road transportation, limited financial resources have

blocked funding of railway projects, good railway expertise is in short supply, and political

conflicts and natural disasters have created barriers.

Reports delivered at the 2014 Africa Sustainable Transport Forum (2014) held, in

Nairobi, Kenya, concluded that the African continent faces numerous challenges when it comes

to sustainable transport. Despite the goals of sustainable and inclusive transport systems in

developing countries, the lack of a strong political and economic infrastructure and affordable

services have been major obstacles to the development of the Africa continent. The challenge

for African government is to create a sustainable rail system that will serve the transportation

needs of individual firms and society that at the same time protects the quality of life for future

generations.

According to the African Development Bank, the majority of Africa’s railways are in a bad

state and need investments in the billions of dollars to maintain rail tracks and signaling

systems, most of which were constructed during colonial years to connect mines and other

natural resources to seaports.

Deutsche Bank estimates that about US$50 billion investment is required in Africa to

construct 4,000km of Greenfield railway lines to fully exploit its iron reserves (Africa

Development Report, 2014). As African governments and their development partners seek to

secure safe, adequate, and affordable railway systems, they are still faced with major

challenges (as noted in the Africa Review Report on Transport, 2009): unsuitable national

policies; limited implementation of national, sub-regional, and regional agreements; poorly built

and maintained railway networks; inadequate human and institutional capacity; negative effects

on the natural environment; poor railway safety and security; poorly developed railway

information systems; and limited financial resources.

Chintu and Williamson (2013) included environmental and labor concerns as one of the

major problems confronting State-Owned Enterprise (SOE) in Africa, a choice based on

observations of the lax nature of enforcement of environmental standards, concerns about weak

environmental standards, and poor labour relations in China. This focus of our research,

therefore, is to examine the sustainability of Chinese railway projects in Africa with particular

emphasis on the social and environmental impact of these projects.

CHINA’S ENGAGEMENT WITH AFRICA IN THE RAILWAY SECTOR

China’s investment in Africa has a long history. Mohan and Power (2008), however,

noted that the China–Africa relationship was born out of demand and supply considerations, not

political and economic affinities. The Chinese quest for African resources and markets was

reciprocated by the African quest for Chinese products and markets (Zeleza, 2014). Chinese

hunger for resources provided the motivation for investment in Africa (Bohlund, & Orlik, 2015).

The construction industry, a backbone of the Chinese economy, has historically been

largely state-owned. However, the increased privatization of some state-owned enterprises and

the recent surge of private firms has diversified the market (Center for Chinese Studies, 2006).

According to the report of Centre for Chinese Studies, Chinese firms have become an important

player in the construction sector in Africa.

China’s entrance into the African market began with the construction of Tanzania-

Zambia railway in the 1970s, and this symbolized China’s contribution to Africa economic

development (Corkin, Burke, & Davies, 2008). It was estimated that by the end of 2006, 800

Chinese firms were active on the African continent, engaging in various sectors, mostly

construction and infrastructure (Corkin et al.).

According to the German newspaper Der Spiegel, some 2,000 Chinese firms are in

Africa, with the majority involved in roads and rail construction. In the Democratic Republic of

Congo (DRC), two Chinese construction firms and a copper mining firm, all state-owned, signed

a US$9 billion contract for the construction of rail and road networks (Nirit, 2014).

China’s investments in Africa fall into four economic categories: Large Private Enterprise

with close ties to government; State Owned Enterprise (SOEs); Small and Medium Enterprises

(SMEs); and Independent Chinese Entrepreneurs (Zeleza, 2014). According to China’s Import

Bank, about 800 Chinese firms were in Africa as of 2006, of which approximately 85% were

privately owned. In 2009, that number grew to 2000 and by 2011 there were about 4,600

Chinese firms in Africa (Shinn & Eisenman, 2012).

By 2004, Chinese investments in Africa were present in finance (20%); construction

(16%); manufacturing (15%); business and lending services (5%), and other sectors 13%

(Zeleza, 2014). By 2007, the value of construction contracts won by Chinese firms in Africa

amounted to US$30 billion (Dent, 2011).

In 2007, in a bid to promote investment in Africa, the Chinese government created the

China-Africa Development Fund (CADF), and created banks which included China

Development Bank, China Export Import Bank, and China Agricultural Bank.

Although there have been several projects embarked upon by Chinese SOEs in their

relations with Africa, our focus in this literature review will be the sustainability of the Chinese

railway project. In recent years China has contributed significantly to Africa’s economic growth

both in terms of trade and large scale infrastructure projects (e.g., the rehabilitation of the 840

mile Benguela railway line connecting Angola’s Atlantic Coast to the Democratic Republic of

Congo and Zambia [Eigen, 2012] and the expansion of the East Africa railway which to

connects Kenya, Ugandan, Rwanda and South Sudan).

In Libya, the China Railway Construction Corporation (CRCC) won two contracts in 2008

with a combined value of US$2.6 billion to build the rail connection from the east to the west of

the country. In January 2009, the China Civil Engineering Corporation signed a US$805 million

contract with the Libyan government to build 172km of railway lines in the North Africa country.

In September 2012, the China Railway Construction Corp. (CRC) signed a US$1.5 billion

contract for the rehabilitation of a railway system in Nigeria (Cottie, 2014).

The majority of the rail systems in Africa have their root in the early 20th century during

which the European colonial power built railways to aid military movement and the

transportation of goods produced in the mining and farming operations (Africa Development

Bank, 2015). After the attainment of independence, the railway networks were broken up.

The Africa Development Bank (2015) report highlighted major drivers of railway

development in Africa:

• The need for better and more integrated logistics

• Increased demand in transportation due to the growth of Africa economies

• The need to provide new urban mass transport

• The need to build high capacity infrastructure capable of handling mining in bulk

volumes.

• The need to provide access to the sea with capacity and reliability.

Strengths contributing to railway development in Africa (Africa Development Bank, 2015)

• Increase in the African integrated trade

• Increased environmental and social sensibility

• Direct and indirect creation of jobs

• Better control of urbanization

• Becoming more attractive for freight transportation.

Other benefits of using railway include reduction of road casualties and related costs, far

less air pollution than other modes, and less noise pollution than road modes.

Chintu and Williamson (2013) pointed out that there have been concerns about the

operation of Chinese firms in Africa in terms of environmental and labour issues. The leniency in

environmental laws in China and lack of adequate labour laws in hosting countries were said to

be responsible for these problems. In some instances, Chinese firms are known to employ more

of their own citizens than the citizens of their host countries.

However, the much-welcomed development was offered by Schneidman (2014, n.p.)

“Chinese officials are recognizing the need to participate more actively in the African

communities in which invest. In fact, while corporate social responsibility is still a new concept

for many Chinese companies, it received attention in the 2013 report on China-Africa Trade

published by the Chinese Academy of International Trade and Economic Co-operation

(CAITECH)”

CHINA’S ENGAGEMENT WITH NIGERIA IN THE RAILWAY SECTOR

The growing trade relationship between China and Nigeria is an indication that both

countries have economic complementarities (Foster Butterfield, Chen, & Pushak, 2008;

Oyeranti, Babatunde, & Ogunkola, 2011). Nigeria is a resource-rich country with inadequate

technology or infrastructure and China is in dire needs of resources (raw materials) to assist its

industries. The implications for China–Nigeria trade relations is that primary products are moved

to China and finished products are imported to Nigeria, particularly the finished goods which

Nigeria lacks the technological know-how to produce (Akongbowa, 2008).

Zelesa (2014) perceives mixed reactions to Sino–Nigeria relations. The relationship is

seen in some quarters as new colonialism in Africa; exploitation without transparency or good

corporate citizenship (Chintu & Williamson, 2013). However, in reality, the reverse is the case

as China’s foreign policy is based on socialism that believes in equal justice for all. As claimed

by Mohan and Power (2008), China’s relationship with Africa are not based on giving political

and economic conditionalities to Africa; rather, it is based on supply and demand

considerations. In other words, China’s contractors in Africa disregard ideology but attach

importance to political risk and stability in host countries (Oyeranti et al., 2011).

In their quest for resources and their bilateral relations with African countries, China has

engaged in what is tagged “resources for infrastructure.” This implies the provision of

infrastructure such as roads, bridges, and rails in payment for resources acquired from Africa.

There have been mixed reactions to this plan. For example, in the case of Nigeria, an inquiry

into the oil block auctions in 2007 shows that the Nigerian government disapproved the oil-for-

infrastructure approach because they were aware that some of China’s State-Owned

Enterprises (SOEs) did not deliver on previously promised infrastructure projects (Egbula &

Zheng, 2011).

In the area of railway construction, the dominant company in Nigeria is the China Civil

Engineering Construction Company (CCECC), with contract awarded for the rejuvenation of the

Nigerian rail systems (Ogunkola, 2008), the modernization of the Nigerian one-track rail line to a

standard gauge rail project (Siaka, 2009), amongst others. Notably, in October 2006, the

Nigerian government signed a US$2.5 billion loan facility with China, with a substantial portion

used for the financing of the railway system refurbishment (Emeje, 2006). The first phase of the

contract included the 1,215 kilometre double track standard gauge line from Lagos (southwest)

to Kano (northwest) with a branch in Minna and Abuja (Rindap, 2015). Upon completion it is

expected that the railway modernization and expansion project will have the capacity to operate

36 trains per day from Lagos to Kano (Rindap, 2015). Therefore, it can be argued that China

has indicated a strong financial commitment to the Nigerian rail sector, especially the Lagos-

Kano rehabilitation project, the Abuja Rail Mass Transit System, amongst others (Oyeranti et al.,

2008).

RESEARCH DESIGN AND METHODOLOGY

Our approach is based on findings from a 2014 study by Network for Business

Sustainability (NBS) Canada, “A dialogue about Sustainability in Canada’s Railway Sector”

(NBS, 2014). The report identified the most relevant sustainability issues relating to the sector

as Emissions, Safety, Ecosystem and other environmental issues, Employees,

Stakeholders/Communities, Climate adaptation, Governance/ethics and Customers. Using the

eight themes, we developed questionnaires which will be administered to the following

stakeholder groups:

Community and Government

Industry Partners

Employees

Climate Change Specialists

Customers

The main objective of this work is to assess the applicability of these eight sustainability

issues to Chinese railway projects in Africa, and propose suggestions on how to improve the

social and environmental performance of the projects. The data gathered from Chinese and

African stakeholders using questionnaires and personal interviews data as well as information

obtained from annual reports of companies, archival data and national development plans will

contribute to an understanding of how such projects may advance or inhibit competitiveness in

the African railway market.

The study will focus on Chinese railway projects in Kenya (East Africa), Ghana and

Nigeria (West Africa), and South Africa.

Conclusion

Despite the negative effect of rail transport on environmental human health (such as air

and noise pollution, destruction of forests and wildlife habitat, land degradation through soil

erosion of drainage system and geological formations associated with the construction of

railways) railway still plays a vital role in the development of African economies by transporting

freight and passengers at low cost and enabling the growth of the mining and agriculture.

African nations need to develop policies that strengthen their ability to monitor and

enforce capabilities labour, safety, and environmental protections (Shinn & Eisenman, 2012) by

ensuring that Chinese firms involved in the construction of railways in Africa adopt global

standards and abide by the rules of the International Labour Organisation. The African

government should create an enabling environment that will encourage investment in the

continent. Sustainable transport development thrives best in an environment of good

governance, peace, and security.

The findings of this study will provide practitioners with assessment tools for the

evaluation of railway projects in Africa and offer effective ways for stakeholders to eradicate or

minimize the environmental impact associated with the construction and maintenance of

railways, including issues on staff welfare, community development, and stakeholder

engagement. The study will also identify social corporate responsibilities (community services)

that should be adopted to enhance relationships with host communities. It is expected that the

findings will serve as a model for railway companies and other businesses on how to

meaningfully engage with society to resolve identified, and perhaps controversial, sustainability

issues.

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