Will Turkey steal competitive advantage from China in Africa

On Aug. 14, Turkish President Recep Tayyip Erdogan hosted Guinean President Alpha Conde at the hilltop Vahdettin Mansion in Istanbul. One of the former residences of the last Ottoman sultan is currently used as Erdogan's main office for the Asia side of Turkey's largest city. Overlooking the blue waters of the Bosphorus Strait that divides the Asian and European continents, the two leaders talked of the possibilities that await the two countries. Twenty-two days after the meeting, Conde was arrested in a military coup, Nikkei Asia writes.

Speaking on Sept. 7, two days after the takeover, Turkish Foreign Minister Mevlut Cavusoglu condemned the coup and indirectly accused former colonial powers for being behind the event. "In the past, the old colonial view had been to exploit African countries. Now they resort to different ways to bring governments they like to power, or to change governments they do not want." "Get your hands off Africa," Cavusoglu said, before calling on the people of Guinea: "Know the ones who try to support you are those who want to use you."

It was symbolic of Turkey's inroads into Africa -- an effort that has seen the country expand the number of embassies in Africa to 43 from just 12 in 2002. During his time in power since 2003 -- both as prime minister and president -- Erdogan has visited 28 different African countries for a total of 38 times, making him the most frequent-visiting global leader to the continent.

Calling Turkey "an Afro-Eurasia state," Erdogan has used every tool in his kit to engage with African states. In Muslim African countries, Turkey has built mosques. In Northern Africa, Erdogan has used the Ottoman card, talking about the historic ties. In countries unhappy with old colonial powers exploiting oil and minerals, Erdogan uses his favorite move: serving as the "voice of the oppressed people."

Turkey's web of relations are not well understood in the West. Richard Outzen, a geopolitical consultant and former member of the U.S. State Department's Policy Planning Staff, says that of all the misconceptions in Washington about Turkey, the notion that Ankara is diplomatically isolated is "perhaps the most distorted of all the lenses." "Turkey actually has a very sophisticated diplomatic approach, and they've worked well in Africa, they've worked well in Asia, they have balanced relations with many countries throughout Central Asia and East Asia. Turkish-Japanese relations are pretty good. They also have a very strong historical relationship with South Korea," he said.

A relatively untapped frontier, Africa provides new markets for Turkish exporters with less rivalry. The same goes for Turkey's construction businesses, as Western companies often stay away due to business risks. Erdogan has spearheaded a coordinated strategy of opening embassies, connecting direct flights and deploying commercial counselors so that businesspeople can make a smooth entry into the new market.

But when it comes to the scale and span of projects in Africa, Turkey is no match for China. According to Engineering News Record's Top 250 international contractors ranking, based on revenues generated overseas, Turkish contractors ranked third with 40 companies in 2020, after the 41 contractors from the U.S. The top, by far, is China with 78 companies.

As of June, Turkish contractors have undertaken 1,666 projects in 43 African countries worth $76 billion since 1972, according to the Ministry of Trade. Sub-Saharan Africa constitutes only 305 projects worth $18.3 billion, with the rest being in North Africa, where Turkey has traditionally had strong ties. But while sub-Saharan Africa offers potential for Turkey to expand, it is where China has an even greater advantage.

"In sub-Sahara, most countries do not have the oil or gas wealth like North African states and they are short of financial power," Eren said. "In that region, we try to push Turkish Eximbank resources but we hit the Great Wall of China."

Turk Eximbank is Turkey's official export credit agency, which helps facilitate trade credit, guarantee and insurance programs. However, it is dwarfed by the massive financial capabilities of the Chinese state, which provides support to African countries to build infrastructure without seeking any collaboration from any third country.

But Turkey sees some avenues it can explore to gain ground on Beijing. In July, some 250 Turkish and Angolan businesspeople met for a forum in the Turkish capital of Ankara. On the sidelines, participants from both countries sounded optimistic. "Now that direct flights have started, together with skyrocketing shipping costs from China, we have a chance to compete with Beijing, due to our proximity to Angola," said Abdullah Anil Altunkaya, manager of Turkish machinery producer Samsun Makina.

Meanwhile, a representative of an Angolan law firm that advises foreign investors, said: "Chinese footprint is everywhere in Angola but a lot of the infrastructure that they built, like roads, quickly wore out. Turkish companies with higher quality have a business chance." A major obstacle for Turkey's ambitious drive is its dwindling financial muscle, which has been hit by a meltdown in local currency lira as well as the pandemic.

Turkey's answer to China may be to team up with partners. "Where we competed and won projects against China, such as in Rwanda, Tanzania and Senegal, Turkish contractors managed to utilize funds from international institutions like the World Bank and the African Investment Bank," Eren said.

Selim Bora, chairman of Turkish construction company Summa, which has completed 20 major projects in Africa ranging from airports to sports centers, noted that Chinese companies recently are showing less appetite for build-operate-transfer (BOT) and public-private-partnership model projects. African companies prefer these schemes more than state-guaranteed borrowing models, "which brings an advantage for Turkish companies in competition with the Chinese," he said. Bora said Summa will soon start construction for a new international airport in Khartoum, Sudan, which will be built under a BOT model.

Japan is watching Turkey's advance into Africa closely, hoping to find ways for the two countries to combine their strengths and gain leverage. Japan Bank for International Cooperation (JBIC) opened a regional office in Istanbul last year, with a not-so discreet mandate to seek Turkish cooperation in Africa, countering Chinese influence. "We will show more effort to further develop cooperation between Turkish and Japanese companies in Africa where Turkish companies already have a strong presence," said Suzuki Ryuta, the bank's Istanbul chief representative.

Steelmaker Tosyali Holding, which has a $650 million joint venture with Japanese steel giant Toyo Kohan in Turkey, is the largest Turkish investor in Africa. In Angola, Tosyali signed an agreement with the government to redevelop the Cassinga mine in the country's south. Iron ore extracted from Cassinga will be exported via a terminal being developed by Toyota Tsusho and financed by JBIC and Nippon Export and Investment Insurance. Turkey's Calik Energy, in which Japanese trading house Mitsubishi Corporation has a stake, has recently completed expanding a small hydropower plant in Malawi with financing from Japan International Cooperation Agency.

Speaking exclusively to Nikkei Asia, Turkey's Foreign Minister Mevlut Cavusoglu last month said, "Africa has the youngest population, the most rapid urbanization rate and the most dynamic economies in the world. The continent has big challenges but also great opportunities." "We are not competing with anybody. We can work with any country, including China." Cavusgolu told Nikkei.