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.

Set up along the Chinese coastal provinces in the mid-1980s and credited for China’s developmental success, Beijing is now trying the same strategy in Africa by rolling out the economic zones in targeted African economies –Zambia, Mauritius, Egypt and Nigeria.
Others are being mooted in Angola, Ethiopia, Mozambique, Tanzania and Uganda.

The China-Africa Development Fund (CADFUND), a venture capital fund for Chinese firms to tap when investing in Africa, is spearheading the financing of Chinese companies looking to set up in these zones. “China’s “state capitalism” seeks to project power internationally through its companies that are rapidly becoming emerging multinationals,” says Dr Davis.

But the Chinese engagement with Africa is not a centrally steered process per se. While Chinese government-controlled institutions are the key players by laying the political and commercial groundwork, state-owned (local and regional) enterprises, large private companies and small-scale entrepreneurs are increasingly coming into play.

“All these do not necessarily pursue the same objectives and sometimes compete for contracts and market share,” says the Kofi Annan-chaired Africa Progress Panel. The Panel was formed as a vehicle to maintain a focus on the commitments to Africa made by the international community in the wake of the Gleneagles G8 Summit and of the Commission for Africa Report in 2007.

And there are good reasons why China is succeeding in Africa, edging out the continent’s traditional Western partners. Apart from their efficiency and speed of completing projects, its policy of not attaching any conditionality to its trade and aid to Africa has seen it literally run out of town the Westerners although this has been the source of its criticisms in the continent.

For instance, while the World Bank’s insistence on due diligence on the contractors has delayed the construction of Nairobi’s 30km Southern bypass, the city’s 85 per cent Chinese funded Northern and Eastern bypasses — a total of 70 kilometres — are almost complete, save for delays caused by Kenyans who have encroached on its path.