Chinese firms take to Africa like bushfire

Background: One in every five people is a Chinese

• China is currently the world’s third largest market in terms of nominal gross domestic product (what the country produces at exchange rate terms), after the US and Japan, but has the potential to overtake these two markets in the coming years.
• It is home to the largest population on the world —1.3 billion people or about one fifth of the global population, the largest labour force, and thus the largest potential for future consumption as a market.
• Income per capita (per person), however, is still relatively small compared to industrialised economies, and thus China still ranks as a developing market.
• Wealth creation especially in the eastern and more developed parts of the country are evident, with more than 450,000 millionaires (US$) at the end of December 2009, and more than 60 billionaires.
• It is the largest importer of a number of raw materials and by end of 2009 overtook Germany as the largest exporter. It has become the manufacturing powerhouse of the world, and based on its export-driven growth policies over the past three decades, has averaged economic growth rates of between 9 per cent and 10 per cent for the past 30 years.

The Chinese influence, in the form of its people, investment and business, is sweeping across the African continent like a wild fire.

Be it financing and executing massive infrastructure projects — roads, power plants and mineral extraction, or small time commercial ventures such as textile, electronic and other household goods, the Chinese are literally driving the African economies.

It is a phenomenon that has triggered a strong wave of reaction from the various African countries, including Kenyans, ranging from open-arm welcome to indifference, to even hostility bordering on Sino-phobia.

An expert in Sino-Africa relations, Dr Martyn Davies, warns that while China is a significant investor in Southeast Asia, one can hardly hear any criticism against the Chinese from that region.

“It (criticism) is coming from Africa, partly due to the vested western political interests in this (Africa) region,” Dr Davies, the chief executive officer of Frontier Advisory (Pty) Ltd, a research and strategy consultancy firm on emerging market economies, said of the People’s Republic of China, which established diplomatic relations with Kenya on December 14, 1963.

Fuelling interest

While this is subject to serious debate, the biggest question is; what is fuelling China’s sudden interest in Africa, Kenya included? “When we changed our foreign policy from the West and looked East, we opened our doors to the Chinese and welcomed them with our arms open,” said Dr Tabitha Kiriti-Nganga, a senior lecturer, School of Economics, University of Nairobi.

Immediately the Narc government came to power following the 2002 General election, the new regime started courting the Chinese by, among others, senior government officials including President Kibaki visiting Beijing while senior Chinese officials came calling in Nairobi such as Vice Premier Zeng Peiyan in February 2005.

Significantly, President Kibaki was among the African heads of state and government who flew into Beijing in 2006 at the invitation of the Chinese government for a trade conference. He returned with Sh6 billion worth of financial aid.

It is a diplomatic and economic relationship that has continued to blossom in his second term as seen by the Head of State’s visit as well as other members of his government such as Prime Minister Raila Odinga and Vice President Kalonzo Musyoka, with the latter visiting Beijing as late as last week.

While the ensuing bilateral agreements have resulted with total bilateral assistance of Sh42 billion, including the Sh1.2 billion grant announced during Kibaki’s latest trip — the third in five years — to China in May this year, they have also seen Chinese firms snapping up lucrative infrastructure projects.

For instance, among others, China Road and Bridge Corporation (CRBC) upgraded the over 470 km highway between Mombasa and Nairobi. Shengli Engineering won the Sh1 billion tender to refurbish the Moi International Sports Centre, Kasarani, which was built by the Chinese government for the All Africa Games in 1987 while the China National Offshore Oil Corporation (CNOOC) is involved in the exploration for oil in northern Kenya.

China Wu Yi Company, Synohydro Corporation Ltd and Shengli Engineering Construction are building Thika Road, which is scheduled for completion in 2011 at a cost of Sh26 billion. Other projects that have gone to Chinese firms include the Kisumu Airport, Nairobi’s southern and eastern bypasses, Jomo Kenyatta International Airport extensions, Kenyatta University library and the Sondu Miriu hydro project.

Although the same applies to many other African countries, including Zimbabwe where President Mugabe’s frosty relationship with Western governments has sent him into the bosom of the Chinese, however, the biggest driver of the Chinese into Africa is not “African.”

With a growing population, increasing unemployment, a vibrant manufacturing sector and fast improving life-styles, China’s demand for natural resources, markets for its products and job opportunities is growing at astronomical rates. This has made it seek new sources of resources, markets and employment for its people and Africa fits the bill.