EU’s flagship Africa project under fire over ties to Chinese state-owned firms

To European Commission President Ursula von der Leyen, the ribbon of rail snaking from the Democratic Republic of the Congo and Zambia across Angola to the Atlantic port of Lobito is “more than just infrastructure”. The Lobito Corridor rail upgrade is a flagship project of the EU’s €300 billion (US$346 billion) infrastructure drive, Global Gateway, launched to great fanfare in 2021 as a rival to Beijing’s own Belt and Road Initiative. It is also pivotal to the EU’s efforts to wean itself off China’s chokehold on the global supply of critical minerals. The corridor is designed to ferry copper and cobalt – commodities crucial to making the hi-tech products powering the world’s industrial economy – from mine to port as quickly and cheaply as possible. Now, EU lawmakers are demanding to know whether the more than US$2.3 billion in European funds that von der Leyen has poured into the Lobito Corridor is being funnelled towards Chinese state-owned companies. The capital will help upgrade and expand the existing Benguela railway in Angola, extending it into the DRC and Zambia. The core infrastructure was already rebuilt largely by Chinese firms with Chinese state-backed finance after being destroyed in the Angolan civil war, while the sponsor for its expansion has deep links to Beijing. Lobito Atlantic Railway (LAR) is a joint venture between Swiss commodity trader Trafigura, Portuguese construction group Mota-Engil, and Vecturis, a private railway firm. In 2022, it was awarded the 30-year concession to operate, manage and maintain the railway. Since 2021, Mota-Engil has been 30 per cent owned by China Communications Construction (CCCC), a Chinese state-owned company, raising concerns among lawmakers that European taxpayer money will be strengthening a geopolitical rival. In February, a Trafigura press release praised the first sale of low-carbon-intensive copper anodes produced by Kamoa Copper to Aurubis Group, a German-based metals supplier. The anodes were delivered to Trafigura’s dry port facility in the DRC to be then transited by LAR to the port of Lobito to Aurubis “for use in its European refining operations”. They were produced “in the recently commissioned state-of-the-art copper smelter at the Kamoa-Kakula Copper Complex”, which is 44.45 per cent owned by Zijin Mining, according to a note on the Chinese company’s website. In 2021, when announcing the Global Gateway, von der Leyen said “it does not make sense for Europe to build a perfect road between a Chinese-owned copper mine and a Chinese-owned harbour”. In this instance, the EU seems to be replicating elements of the scenario that the German official expressly warned against. A report adopted by the European Parliament on Thursday called for “an immediate investigation into the involvement of all Chinese companies in the Global Gateway”. It said there were reports “that a number of Global Gateway projects are being implemented by Chinese companies”, which was a “direct violation of the initiative’s objective of presenting an alternative to the [Belt and Road Initiative]”. Barry Andrews, chair of the parliament’s development committee, said the tangle “underlines how we have to be careful about matching the rhetoric around Global Gateway with the complexity of global supply chains”. “Equally, this is information that we inadvertently have come across and is not readily available from the commission,” he added. “We can do better.” EU insiders said that while they preferred to avoid giving funds to Chinese companies, they could not rule out that some had helped implement some Global Gateway projects. Part of the issue is that partners in third countries have their own procurement rules and selection processes, which can lead to Chinese companies winning tenders where EU money has been pledged. In the case of LAR, however, it was publicly known since 2020 when Mota-Engil and CCCC struck their investment deal that the Chinese company was a major shareholder. The affair lays bare the challenge facing Europe: arriving to the scramble for minerals years after China and other rivals. This is also not the first time the EU has selected a part-Chinese-owned company to help with Global Gateway. In 2023, the South China Morning Post reported that one of the companies on the scheme’s advisory board was majority Chinese-owned. China Three Gorges (CTG), a state-owned enterprise, is the largest shareholder in Energias de Portugal SA (EDP), which is among those companies that advise the European Commission on “implementation of the Global Gateway strategy and scaling up of Global Gateway flagship” projects. As EDP’s biggest shareholder, CTG – controlled by the Chinese government’s State-owned Assets Supervision and Administration Commission (Sasac) – holds the largest proportion of voting rights. According to EU spokesman Guillaume Mercier, the bloc “aims for its funding to primarily benefit European and partner country companies”. “This is reflected in its procurement rules: for tenders managed directly by the EU, participation is generally restricted, meaning that companies from G20 countries outside the EU are in principle not eligible.” “However, many EU projects are implemented indirectly through partners such as the [European Investment Bank] and other development finance institutions, which apply their own procurement frameworks,” Mercier added. “While these are based on open competition, they can lead to broader participation.” In the EU’s next budget, currently being haggled over in Brussels, “the commission has proposed a more strategic and nuanced approach to procurement … including measures to strengthen the European preference”, he said. This would be in line with the commission’s Industrial Accelerator Act, a recent proposal to ensure European firms are preferred to cheaper Chinese rivals in procurement markets in key sectors within the EU.

EU’s flagship Africa project under fire over ties to Chinese state-owned firms

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Lawmakers demand to know where over US$2.3 billion in funds is going in venture meant to wean off Beijing’s critical minerals chokehold

Lawmakers demand to know where over US$2.3 billion in funds is going in venture meant to wean off Beijing’s critical minerals chokehold