China’s Belt and Road Initiative (BRI) is stepping up a gear, with new BRI-related projects estimated to be worth US$350 billion over the next five years in the pipeline. This is according to a new report by law firm Baker McKenzie, and data analysts Silk Road Associates, on Belt & Road opportunities and risks. According to the report, various African countries along the BRI have the potential to provide major opportunities for investment. These countries particularly include Kenya, Tanzania, Ethiopia, Djibouti and Egypt. BRI – also known as One Belt One Road (OBOR) – is primarily divided between the overland ‘Belt’, the classically defined Silk Road that stretches from China to Europe, and the new maritime Silk Road. According to Baker McKenzie, the maritime road is a densely populated consumer and industrial opportunity. Like the landlocked Belt, it also connects China and Europe, but differs in that the Road passes through Southeast Asia, South Asia, the Middle East and East Africa, a region that is home to 42% of the world’s population and 25% of its GDP, excluding China. “For investors, a big attraction of the Belt and Road Initiative, for both governments and project sponsors, is that it assists the speed of project implementation. Project stakeholders advise that the whole process is a lot quicker than other options,” said Kieran Whyte, head of the energy, practice at Baker McKenzie in Johannesburg. The report outlines East Africa’s “integral role” in the BRI, owing to Djibouti’s ports, Ethiopia’s manufacturing, and the region’s existing plans to connect rail, road and energy networks. BRI infrastructure projects in East Africa include the recently opened railway in Kenya between the port city of Mombasa and the capital, Nairobi and the Karuma Hydroelectric Power Station, a 600- megawatt hydroelectric power project under construction in Uganda. Port connectivity is also expected to improve significantly in the next five years thanks to BRI. Data from the Chinese government indicates that, to date, 50 Chinese SOEs have already invested or participated in nearly 1 700 projects in Belt and Road countries since the initiative was launched three years ago. “This number is set to grow significantly in the next five years, particularly as private Chinese interests and international partners begin to invest,” said Ben Simpfendorfer, founder and CEO of Silk Road Associates. Baker McKenzie has warned however that the BRI is not without risk for those companies that are investing in and working on BRI projects. Those risks include foreign investment restrictions, antitrust regulations, tax, local employment and environmental laws, as well as political risks in some jurisdictions “It’s important to have on-the-ground legal representation to help mitigate these risks,” said Whyte.
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A big attraction of the Belt and Road Initiative, for both governments and project sponsors, is that it assists the speed of project implementation. – Kieran Whyte
