The Lobito Corridor project in Africa is a significant infrastructure initiative aimed at creating a vital trade route. It seeks to connect the mineral-rich Democratic Republic of the Congo ("DRC") and Zambia to Angola's Atlantic coast port city of Lobito. This project holds particular interest for some Western nations, potentially serving as a counterpoint to China's expansive Belt and Road Initiative ("BRI").
China remains a dominant economic force in Africa, having invested $1.8 billion in the first half of 2023 alone, marking a year-on-year increase of 4.4 percent. Chinese investments significantly contribute to infrastructure advancement in Africa, with China-funded and -led projects valued at over $400 billion having been concluded. China's bilateral trade with Africa reached $282 billion in 2022, solidifying its role as Africa's largest trade partner for the fourteenth consecutive year.
According to the author of this article recently published by CEPA's Bandwidth, some African nations are reevaluating their contracts with Chinese firms due to concerns over project quality and transparency. The Lobito Corridor offers an alternative and represents the first major US-backed initiative to counter China's BRI and its first significant investment in African rail development in recent years.
Source: CEPA's Bandwidth
Author: Eduardo Castellet Nogués
The US and EU are building a rail line connecting critical minerals in Zambia, the DRC to the sea of Angola. Will transatlantic cooperation fend off China’s Belt and Road?
The Lobito Corridor runs from Zambia, the Democratic Republic of the Congo, to the Angolese port of Lobito. It’s a gigantic undertaking to counter China. Some 800 kilometers of a new track must be built in Africa. An initial $1.6 billion will fund 1,500 wagons, 35 locomotives, and the upgrading of existing rail lines and port terminals. The US has already committed an additional $2.3 billion for the railroad and accompanying mining and refinery projects, most in loans from the Development Finance Corporation and the Export-Import Bank.
The potential prize is enormous: the Congo and Zambia are the top African producers of copper, accounting in 2022 for 2.3 million and 797,000 tons respectively. Copper is crucial to building electric batteries, wind turbines, and electric car charging ports. Angola is also resource-rich, possessing reserves in 32 of the 51 minerals vital to green technology.
The Lobito project is shaping up as a giant test of Western will to counter China. In order to succeed, the West now must mobilize the private sector and resist its own protectionist urges. But Lobito comes at a propitious time. China’s African investments are falling, and both the US and EU are pledging financial support for the project.
Over the past decades, Beijing has built roads, ports, and other infrastructure throughout Africa, gaining a stranglehold on the continent’s rich mineral resources. Chinese loans often contain punitive terms and entail risks of a debt trap. Sri Lanka defaulted on its loans taken out for China to build the Hambantota Port. More than half of China’s $1.1 trillion of loans to low and middle-income countries have entered their principal repayment periods, prompting Beijing to reduce exposure to distressed debt. China’s foreign direct investment in Sub-Saharan Africa fell by 55% in 2022 from 2021.
Governments in Angola, Zambia, and the Congo have taken note and begun courting the West. When President Joe Biden hosted Angolan President João Manuel Gonçalves Lourenço in the Oval Office last November, Lourenço praised Biden’s approach to the continent and said his country is looking to develop increased economic and security ties with the US.
The Lobito Corridor project is already taking shape. European companies Trafigura, Mota-Engil, and Vecturis have won a 30-year concession from the three African national governments. They have begun upgrading 500 kilometers of existing tracks and making improvements at Lobito’s port.
Progress has been made on funding. The African Development Bank and Africa Finance Corporation are providing money and project management organization. At a forum for investors in February, Canadian, Japanese, Dutch, and Congolese companies, including some state-owned companies, announced their participation.
But obstacles remain. Zambia’s unsustainable national debt has led to missed payments and debt restructuring. Civil War in the eastern Congo threatens to interrupt the construction of the railway’s Congolese section.
The lack of a transatlantic agreement on critical minerals represents another hurdle. Without common US and EU standards on minerals, imports could be subject to tariffs and delays. So far, the allies have not offered African minerals free market entry. A potential solution would be to declare the Lobito Corridor and Port a Special Economic Zone that would allow suppliers full access to the EU and US markets.
EU and US officials hope to tackle at least some of these challenges by creating local, good-paying jobs. The EU is giving grants, and the US issuing concessionary loans totaling more than $1.6 billion so far to finance the Lobito railway and the adjacent industries and critical minerals supply chain. These will also finance the construction of 5G towers and solar panels, and investments in cold-storage shipping, which will help local agriculture exports. The plan also includes building refineries along the rail line and near the Lobito port, a response to China’s domination of the world’s refining capacity.
If successful, the Lobito project could signal a turning point in countering China’s Belt and Road. Failure would mean allowing China to strengthen its grip on Africa — and on the continent’s critical minerals.
Eduardo Castellet Nogués is a Program Assistant for CEPA’s Digital Innovation Initiative.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.
