Midnight Train to Addis Ababa

On September 21, 2015, the world watched the inaugural trip of sub-Saharan Africa’s first urban light rail system — and if they didn’t, they should have. The Ethiopian government partnered with two Chinese companies to bring a much-needed mass transit system to Addis Ababa, the rapidly growing capital city of Ethiopia. The spirit of the project sought to improve the quality of life for a population eager for economic development. Getachew Betru, the CEO of the Ethiopian Railway Corporation, stated that the goal was not to turn a profit, but rather to invest in social infrastructure and maximize growth. Ethiopia’s Minister of Transport Workneh Gebeyehu lauded the rail line as a step forward in empowering low-income workers. While these sentiments all ring true, the nature of Chinese investment may fog up the picture of development. The price tag of sustainable development is certainly hefty, and Chinese companies’ policy of picking up the tab may be the first stop on a journey to a brighter future. However, without careful planning, it could also take the African continent back to its colonial past.

The story of many countries in sub-Saharan Africa begins with a long history of colonialism, followed by the reality that many countries still have yet to overcome the aftershocks of imperialism in order to truly secure their independence. Ethiopia has never been colonized and, as the first free state in sub-Saharan Africa, has had a sizable head start in development. This history of relative freedom has allowed the country to establish a stable government, albeit a not fully democratic one, before many of its neighbors. Despite the country’s unrest and upheaval in the 1970s, resulting in a civil war and an overthrown monarchy, the Ethiopian government has generally equilibrated over the years. The political stabilization and economic growth, in combination with a growing labor force, have created both the need for transportation infrastructure and an attractive market for foreign investment. A World Bank survey reported that Chinese companies chose to establish themselves in sub-Saharan Africa’s so-called sweet spot due to Ethiopia’s lack of government regulation, low tax rates, and lack of foreign investment competition.

The introduction of a Light Rail Transit (LRT) system is at the intersection of development and profit for China and Ethiopia and represents an impressive international collaboration between the two nations. A Chinese loan funded 85 percent of the project, Chinese expertise designed and built the project, Chinese firms will run the project for five years through the Chinese Shenzhen Metro Group and China Railway Engineering Corporation, and Ethiopians will obtain invaluable transportation infrastructure. These efforts will ultimately provide a service that will enhance urban life within Ethiopia and fulfill the needs of residents. Already, a recent United Nations Development Programme (UNDP) report has ranked Ethiopia eleventh on an international scale for countries with rapidly increasing quality of life, the highest ranking in sub-Saharan Africa.

Thus, the LRT takes a step in the right direction toward development within the country, especially considering the immense benefits citizens will reap from the initiative. Currently, Addis Ababa is the capital of one of the fastest growing economies in Africa. Ethiopia has sustained GDP growth rates generally exceeding 10 percent for over a decade, and the country’s urban population is expected to double by 2040. Yet, before the introduction of the 2015 light rail transit project, the city of around 3.4 million residents suffered from a chronic lack of transportation infrastructure; transit was limited to a system of minibuses that would circuit different routes throughout the city. By filling this gap, the new 11-mile tram system is estimated to carry over 100,000 passengers every day for a fare of only 6 birr ($0.27 USD) per ride. Using it, commuters can travel faster than their peers in other major African cities such as Nairobi, Kenya or Lagos, Nigeria.

Already, the increase in cars on the roads of Addis Ababa serves as a visible indication of the growing middle class. A distorted housing and land market furthers the problem by making automobiles the most accessible household investment for newly middle class families. Yet, as one resident notes, “There aren’t enough roads for the cars coming into the country, particularly to Addis Ababa.” Introducing a light rail transit system to Addis Ababa reduces transportation congestion and increases efficiency within the transportation network.

The LRT’s benefits aren’t just limited to transportation: The initiative has further supported the creation of another key element for developmental infrastructure. A major hurdle at the beginning of construction was to ensure constant energy in a region where power outages are a normal part of city life. To address this, an electric grid was built to fuel the entire light rail system, ensuring both renewable and reliable energy. The LRT power grid, like 95 percent of those in Ethiopia, is powered by water. With the approval of Ethiopia’s government-operated Ethiopian Electric Power, the China Electric Power Equipment and Technology Company built and maintained the grid and the Gas Insulated Substation, which monitors the sustained flow of electricity.

Still, such improvements have not reached rural areas. While 98 percent of households in Addis Ababa are connected to the electric grid, peer households outside of the city have significantly lower connection rates. However, the suite of infrastructure and transportation projects indicates a movement toward modern investments across the country. The nation’s sustained GDP growth rate suggests, on at least a fundamental level, there is an increasing amount of money available to do just that.

The introduction of a Light Rail Transit (LRT) system is at the intersection of development and profit for China and Ethiopia and represents an impressive international collaboration between the two nations.

Developing transportation infrastructure in a city like Addis Ababa has a direct impact on the welfare of its residents: Physical mobility translates to socioeconomic mobility. Accessible transportation can act as a catalyst for social development and is one of the strongest indicators of potential economic growth. According to a World Bank report on the concept of Resilient Cities, one of the objectives for Addis Ababa’s coming stage of development should be to build a frequently available, widespread, and cost-effective mass public transportation sector. The report defines the Resilient City as an urban environment that can adapt to changing conditions and withstand unforeseen shocks while still sufficiently providing for its residents. Effective mass transportation leads to a population with dependable access to medical care, job opportunities, education, and cultural and recreational activities. The returns on investment for these transportation projects are even more tangible in cities that have never had such ease of access before, such as Addis Ababa.

Ethiopia can expect the positive impacts of its new LRT system to spread, as it plans to expand mass transit to include long-distance train lines connecting the capital to the rest of the country and its neighboring nation, Djibouti. Connecting urban areas to rural ones will begin to address the crippling disparities in population health and wealth in Ethiopia, primarily by making social services more accessible to rural populations. Urban Ethiopians are ready to say goodbye to bumpy, six-hour-long private car trips to villages, and to embrace modern, rapid-transit trains for long distance trips. Conveniently, alleviating congestion on the roads would allow more room for comprehensive motorway maintenance work. According to one urban professional from Addis Ababa, “[Now] if you earn your living doing business, moving here and there, owning a car is a must.” The LRT system presents an opportunity for this new norm to be overturned, as public transportation increases mobility for all, not just those who can afford a car.

Ethiopia isn’t alone in making significant improvements to quality of life and infrastructure. According to the UNDP, the populations and economies of the global south are anticipated to outpace the global north by the middle of the century. Botswana, Benin, and Burkina Faso run parallel with Ethiopia on the list of countries experiencing the fastest increases in their Human Development Index (HDI) and GDP rankings since 1970. Mali’s HDI value has more than doubled over that period, translating to a visible increase in development necessities like health care, sanitation, and education. Over the last decade, Ethiopia alone has increased road coverage by over 45,000 miles, mobile phone subscribers to 23.67 million, and Internet subscribers to over 4.43 million. More Africans will be digitally connected than ever, and they are expecting infrastructure and technology’s continued growth to bolster their new, higher quality of life.
Accompanying the growth of African industry is China’s burgeoning interest in the continent. “We have turned east where the sun rises, and given our backs to the west, where the sun sets,” the Zimbabwean President Robert Mugabe stated during the 25th anniversary of his country’s independence, pointing out Africa’s growing relationship with China. And Addis Ababa’s new light rail is one data point in a larger trend of Chinese-funded development infrastructure in Africa. The system was built through a loan from the Export-Import Bank of China that financed its $475 million construction. In many ways, these loans have proven more accessible, effective, and desirable for African governments like Ethiopia than global aid resources.
China’s presence in Ethiopia is not new, but it has grown stronger with time. In a study on the emergent nature of China and Ethiopia’s bilateral trade agreements, Gedion Gamora identified several factors that illuminate the relationship between the countries. Aside from monetary assistance, the study identified a certain camaraderie between the two countries in their shared history as low-income countries stricken with poverty and exploited by the West. Along with that shared national history, countries like Ethiopia view Chinese investment and aid as a legitimate alternative to the strings-attached aid that is seen as characteristic of the West.

In a paper on conditional development aid to Africa, Rolf Hofmeier of the Institute for African Studies in Germany points to “political conditionality” as the recent trend for Western aid in the developing world, particularly on the African continent. In the past two decades, aid from countries like the United States and organizations like the World Bank and the International Monetary Fund have been increasingly contingent on meeting political and economic conditions. Countries with one-party systems are heavily pressured to adopt new governing systems as a prerequisite for aid – yet for countries with particularly tumultuous political histories – such as Uganda, Ghana, and Sudan, these forced transitions may be premature and could even aggravate existent ethnic, religious, and political rifts. For many developing countries, the stability offered by one-party systems is a means to a more democratic end, once adequate growth and development have been achieved. A shaky democracy may be more detrimental to development than a centralized, stable, but less democratic government. In the case of Ethiopia and China, using quasi-autocratic, central-governing styles allows for less focus on political differences and politicized prescriptions and more focus on the pragmatics of development.

This is not to say that Chinese investment comes without strings. One of the key issues with Chinese investment in Africa is that it brings foreign skill into the country, but often without adequate methods to transfer that expertise into domestic job markets. This gap in construction puts domestic laborers at a relative disadvantage to their foreign competitors. In Ethiopia, Chinese industries imported their management teams and consequently distorted the local job market, particularly with regards to skilled labor and middle-income positions in LRT construction and planning. Alternatively, sustained growth could be achieved both by investing in capital projects and increasing opportunities for domestic entrepreneurship and middle-class employment. When asked why Chinese state-owned and private industry leaders are drawn to construction investment in Ethiopia, they claimed to enjoy profits from “limited market capacity and market competition.” Essentially, Chinese industries have come to hold a virtual monopoly over the market for infrastructure development, manufacturing, and service sectors in Africa by out-competing most other interested foreign investors, such as those from the Middle East, South Africa, and India. This dynamic has been exacerbated by the Ethiopian government’s lack of incentives to implement measures that would break down these monopolies, even though its own workers are shouldering the cost.

In many ways this makes sense — after all, the two countries share the immediate benefits from their various partnerships. Ethiopia enjoys investment in public works and Chinese companies enjoy decreasing upfront costs to develop in Ethiopia due to the growing community of Chinese business owners and developers absorbing many of the initial investment risks. The more Chinese firms are established in Addis Ababa, the easier it is for new ones establish themselves; a softer motive for these Chinese industries is the strongly established social network of investors already present. These networks, however, are indicative of a troubling power structure. Given sub-Saharan Africa’s history of colonialism and foreign domination, the reintroduction of a foreign, elite economic benefactor may feel reminiscent — if not the beginning of a new narrative — of neocolonialism to Ethiopians. Although Ethiopia was never colonized by a Western power, the country has a history of relying on the aid of powerful foreign states — a pattern that has not yet been changed in much of the continent.

Addis Ababa’s LRT symbolizes the dichotomy between the tangible benefits and potential harms China brings to Ethiopia and sub-Saharan Africa, as well as, more broadly, the dualities of foreign-aided development. At a conference for land-locked developing countries, Minister Workneh Gebeyehu shared a national vision of becoming a middle-income country within the next 30 years. The plan is fueled by infrastructure development within all sectors on the national level to streamline trade and improve residents’ quality of life. He explained the need to shift from growing the country’s agricultural sector to focusing on sectors with more value-added benefits to scale, such as manufacturing and service sectors. Yet, Workneh is clear that his country and the others attending the conference face “serious constraints and challenges in…trade, transit and overall socioeconomic development.” This reality presents Ethiopia with a crucial trade-off between economic autonomy and the necessary infrastructural development of a growing country.

That balancing act has been influenced by other African states’ attempts at similar infrastructure projects. For instance, in Nigeria, a similar light rail backed instead by a World Bank loan and spearheaded by the Lagos Metropolitan Area Transport Authority took years to get off the ground. Slated to open in 2011, the three-year Phase I project has ended up taking an additional five years and is still unfinished, prompting allegations of misspent money. China is still highly involved in this construction project through the China Civil Engineering Construction Corporation. However, because China is simply building the light rail line, its incentives are distinct from the efficacy of project management and financial concerns for funding such a substantial infrastructure project. Adjusting for differences in size and management structure, there is truth in the critique that the Chinese companies investing in Africa have the tools and the incentive to get projects done faster and cheaper than sub-Saharan African governments and quasi-public agencies do, but only if structured correctly.

For Ethiopia, rejecting Chinese influence would not necessarily be the best path toward economic growth and development. Chinese investment has proven to be cost effective and adaptive to Ethiopian needs, and the benefits of trade and international cooperation are widely acknowledged as crucial to sustained growth, especially in developing countries. Still, this exchange is more palatable between countries in which there is a relative balance of give and take. Ethiopia’s significant trade deficit with China shows that, proportionally, Ethiopians are consuming many more Chinese goods than Chinese consumers consume goods from Ethiopia. While a trade deficit is not always a negative mark on a country’s economic health, it can reveal greater trends when evaluated in economic and social contexts. Ethiopia’s trade deficit with China is indicative of a structural economic disadvantage and further emphasizes the complex social and political dynamics of foreign investment.

It is difficult to conceive of Ethiopia ever becoming a full-fledged trade partner with China, especially if China continues to be the central benefactor of its development. However, it is possible. The key difference between China’s market-based intervention and other, past forms of colonialism in the region is that Ethiopia has chosen to engage China in this relationship and has a primarily debt-based obligation. China is not looking to annex Ethiopia, exploit resources for its sole gain, or become the moral authority in the nation, as was the case with Western colonization in the 19th and 20th Centuries.

Further, Chinese investment may be the best way for Ethiopia to develop quickly, given the pitfalls of Western aid, as similar projects funded by aid agencies seem to stall because they lack appropriate profit incentives. After all, it was those same incentives that motivated China to follow through with its monetary and administrative support in Addis Ababa. The LRT is a small project with a big payoff indicative of a larger trend in the relationship between China and Africa. Ethiopia probably will accept more aid of this type in the name of national economic growth and development, but poorly managed debt and its normative implications could prove a detriment to long-term, sustainable growth for the country. Chinese investment is not the enemy of sustainable development, but monopolistic development may come to be.

Chinese development investment should be seen as a signal for an even more diverse group of investors to approach Ethiopia, and Africa as a whole, not a deterrent for countries that can’t compete with China’s low cost and quasi-home court advantage. The introduction of a diversified investment base could even push up wage rates in the construction sector if the government begins to choose trading partners based on how they balance cost-effectiveness and the holistic social benefits of the projects. However, the Ethiopian government needs to still incentivize investors with the low-regulation and low tax rates that attracted Chinese investors to the country in the first place.

Ethiopia’s government also needs to prioritize leveraging its growing GDP to continue to invest in its own domestic factors of production. Transportation infrastructure is a crucial part of the process, but so is increasing education and mobility opportunities for its citizens. Ethiopia’s poverty rate may have fallen from 39 to 30 percent between 2004 and 2011, but economically and socially disenfranchised populations still make up a significant portion of the country’s population. The light rail symbolizes a powerful tool to develop human capital, but increased access to vocational schools and universities are a necessary supplement for these new opportunities.

For his part, Minister Gebeyehu has recognized the need for foreign investment to supplement the large portion of Ethiopian GDP that is being spent on infrastructural development. He also stressed that, going forward, other developing land-locked countries will need to band together to take ownership of their growth in response to the post-2015 Sustainable Development Goals. To do this, he calls for a particular focus in building strong relationships between recently developed countries and developing countries through trade and open communication. In addition, he identifies the importance of aligning their plans of action with a global development agenda and prioritizing internal development in order to arrive at a place of effective cooperation between landlocked, developing countries in the long run.

Solutions drawn from the Addis Ababa LRT will be invaluable tests of scalable practices to not only develop the city but the nation and the entire region of sub-Saharan Africa. For that reason, Ethiopia must prepare in the coming decades to use Chinese investment pragmatically to create further growth and opportunity, which will in turn — to borrow President Mugabe’s imagery — allow the sun of future promise to rise on their own national horizon.