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Release peace: the magazine

Release peace: the magazine

Analysis & Background Stories on International Affairs

An Interesting Case Study of Chinese Overseas Investment

Written by: Sebastian Isakovic

Photo credit: ZSM

Ninety Metres into the Sky

On the banks of Ghana’s Black Volta River, a 90-metre dam emerged in record time between 2009 and 2013. It became known as the Bui Dam and it is fuelled not just by the thrust of the water running through it, but by geopolitical decisions made 11,600 km away: in Beijing. Just as in other parts of the world, the People’s Republic of China (PRC) has been investing in major infrastructure projects in West Africa. The Bui Dam was to become one of its biggest endeavours on the African continent, but reported about very little in the rest of the world.

The Second Dam in the Nation

Right after the damn began operating on 3 May 2013 it hit its power generation capacity of 400MW, and a cost of approximately $621 million. This dam is the second largest in Ghana, only topped by the Akosombo Dam which was constructed right after Ghana’s independence and continues to be the country’s biggest source of electricity. The Bui Dam development was jointly funded by China’s Export-Import (ExIm) Bank and the Government of Ghana. While the project provides benefits to China as well as the West African nation, a plethora of issues was quickly uncovered, including detrimental impacts on the local population that the dam was meant to serve. This article will look closer at these often-overlooked local stakeholders and at the Chinese concept of Guanxi, which appears to be inextricably linked to the Belt and Road Initiative and China’s conduct overseas more generally.

Impact on Locals

From the start, the dam provided an enormous increase in the level of power generation security in Ghana. However, as with most large dam constructions, whether financed by China or others, there have been a series of negative effects on the local community and the environment. The most disruptive of these impacts was the inundation of 6 villages, resulting in the need for relocation of 1,216 people to new settlements. Moreover, 7,500 people lost access to their farmland and forests which they used as their main sources of income. Even though the Ghanaian government endeavoured to provide replacement homes and farmland for those affected households and communities, they have reported a loss in yields due to poorer fertility of the replacement land they were provided with. Furthermore, although communities have been provided with access to the reservoir for fishing, they do not have the required tools or skills to take advantage of this new resource. Previous fishing was done on rivers, and thus the fishermen were ill-equipped for having to deal with the strong winds and waves that occur on the open reservoir. This phenomenon is not only due to the reservoir itself having a greater surface area, and therefore greater exposure to the elements, than the river had, but also results from large parts of the surrounding forests having been cleared for the dam’s construction.

Benefits Outweighed by Costs?

It is in part due to these factors that some researchers have concluded that for the resettled communities of the area, the Bui Dam project has been “more costly than beneficial”. Promised benefits, such as an irrigation project, are yet to materialise, with the irrigation project only being in the initial stages of planning. What must be noted, however, is that due to the Chinese financiers and dam builders signing a turnkey contract with the Ghanaian government, the Chinese dam builders do not make any decisions concerning the dam’s management. They therefore cannot be attributed the blame for the ongoing negative effects on the local residents, as this is not within their remit.

The Perspective From Beijing

Aside from the power generation itself, the benefits to Ghana are actually quite numerous. One very visible example was that the workforce for the construction of the dam was made up of over 90% Ghanaians. Furthermore, following a loss of farmland and an increase in fishing opportunities, the average wage of local residents experienced an increase of 18% in the village of Lucene and 30% in Agbegikuro. It should however be noted, that various studies which have conducted interviews with residents in the area of the Bui Dam reported that, in the more immediate aftermath of the dam’s construction, fishing yields were lower than before, with one article arguing that this is due to the lack of necessary skills required for fishing on the reservoir. From the Chinese perspective, the benefits for China include the improvement of economic relationships with this West African nation, which may help in the enabling of trade links between, resulting in better access to export destinations for Chinese companies, future opportunities for Chinese construction firms with other Ghanaian infrastructure projects, and loyalties in the realm of diplomacy and international affairs.


Chinese investment in developing countries often takes a form which benefits the economies of both the PRC and the economy where the investment is made. This serves to build China’s influence economic and political clout, in some cases extending to the wider region of the investment destination. This soft power follows a central tenet of Chinese culture, known as Guanxi, which refers to systems of personal networks and relationships which in turn can lead to successful negotiations and deals outside of formal (trade and diplomatic) institutions. This soft power is developed through the investment and aid packages that are provided to the destination countries of China’s investments, with the PRC subsequently using this influence to manifest diplomatic support, voting alignments in international forums like the UN General Assembly or UN Security Council, and the dissemination of its values.

Gains or Losses?

From one perspective, the case of the Bui Dam in Ghana has caused the displacement of local communities and the loss of farmland. On the other hand, it has brought energy security for households and businesses to the tune of 400MW annually. It must be noted that the responsibility for managing such and other projects rests with the government of the country under whose jurisdiction the investment falls. The nature of Chinese investment involves economic gains for the recipient country, employment opportunities for the local workforce, and improved infrastructure, while simultaneously supporting China’s quest for greater access to international markets and expanding its geopolitical influence. This approach to investments and geopolitics aligns with the Chinese culture’s emphasis on guanxi, building networks for future negotiations and spreading Chinese values. As with any other project, its success will be determined by the lens through which it is viewed.

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