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Chinese Investment: Propeller for African Development
2017/10/16

The 3rd African Investment Forum was held in the Senegalese capital of Dakar. Over 400 government officials, entrepreneurs, representatives of financial institutions, experts and scholars from China and Africa discussed around a range of topics including, inter alia, energy, agriculture and agriculture technology, information technology, education, finance, governance, and sustainable development. During the Forum, the two sides signed several MoUs on energy, agriculture, and education, etc.

In recent years, China-Africa economic and trade cooperation has become ever closer. It was the belief of many participants that Chinese investment in Africa have provided Africa, “the continent of hope”, with much-needed capital, technology, and job opportunities, which constitutes a propeller for the take-off of the African economy.

Innovation Bringing Opportunities

The first two sessions of the African Investment Forum were held in Addis Ababa, Ethiopia, and Guangzhou, China, respectively. This year’s session came to Dakar, pearl on the western coast of the African continent. The Forum was jointly organized by the Senegalese government, China’s Ministry of Finance, China Development Bank, and the World Bank, with the aim of sharing the development experience of China and accelerating investment to Africa.

"Africa’s era is now”, said President Sall of Senegal. He pointed out that on the road of economic take-off and revival, African countries should think out of the box and change some ideas and practices in public policy. He called on Africa to invest in infrastructure and security, create an investment-friendly private sector, protect investment security and profit from investment, and attract more investors.

Vice-President Duncan of Cote d’ Ivoire said that Africa boasts rich resources and 60% of uncultivated land in the world. 40% of the population in Africa is under the age of 15, who, if educated properly, will turn into valuable assets.

Local analysts believe that the return on investment in Africa is very high, making the continent the most attractive for investors. According to Financial Times, the UK newspaper, total investment in Africa in 2016 increased by 40%. Investment interests by foreign investors have become more diversified, with the aim of grasping opportunities in the fast process of urbanization in Africa.

“Innovation” is the keyword of this year’s Forum. The Forum focused on the new wave of opportunities driven by innovation, an important factor for releasing development potential of Africa and accelerating inclusive growth. A report from World Bank points out that with increasing uncertainties facing the world economy, and given that economic growth is increasingly driven by innovation, China and Africa need to enhance relations, promote innovation, and help Africa realize leap-forward development. To this end, World Bank and China Development Bank have released the report Leap-Forward Development Driven by Innovation, which discussed opportunities for various sectors of the African economy to expand innovation.

According to Mr. Yang Shaolin, executive vice-governor and CFO of the World Bank Group, African leaders have realized the power of embracing new and subversive technologies. The Forum is an important multilateral platform to enhance cooperation and ignite the fire of innovation on the African continent.

Investment Becoming Diversified

”Belt and Road” Initiative was one of the focuses of the Forum. Many participants believe that the Initiative represents development opportunities for Africa. The operation of the Addis Ababa-Djibouti railway and Mombasa-Nairobi railway have made Chinese railway a bright name card in Africa, and filled Africa with hope for China-Africa railway cooperation.

“The real development of Africa needs railways,” said President Sall, whose words were met with resounding applause from the participants. The President said that African states need the network of railways to realize connectivity, otherwise, intra-Africa trade cannot be carried out smoothly. “We need to build African railways. Africa needs infrastructure such as telecommunications, bridges, ports, airports, and power plants.”

Africa is yearning for more investment to add new driving force into the accelerating trains of economic growth. In the past decade, Africa has enjoyed fast economic growth, which had a lot to do with increasing Chinese investment. According to a recent report by Financial Times, China has become the biggest source of FDI for Africa.

Mr. Wang Yongsheng, vice-president of China Development Bank, said at the Forum that by the end of June this year, CDB had provided 43 African states with over US$50 billion, with US$36.8 billion of loan balance, which mainly supported areas like agriculture, manufacturing, infrastructure, and social welfare.

In Bamako, capital of Mali, there is a modern pharmaceuticals company with Chinese funding. According to Mr. Li Wensheng, general manager of the company, with an investment of US$35 million, his company has the highest standards of technology in West Africa, which produces basic pharmaceuticals locally. The company has not only ended the history that Mali had no capabilities of pharmaceuticals production, but also created over 200 jobs for the local people. At the same time, the company has also brought with it modern management ideas and training system. “Local employees take pride in working in the Chinese company. Local government officials often ask whether more Chinese pharmaceuticals companies can make home in Mali”, said Mr. Li. In the future, the company plans to develop an industrial chain based on raw materials of the local area, which, he hopes, will lead to wider industrial development in the area.

According to Mr. Li, African countries know that their development cannot be realized without investment and they welcome Chinese investment with open arms. African countries hope to have more investment not only in manufacturing, which can lead to higher employment and technological levels, but also look forward to more investment in education, finance, and health. Chinese investment in Africa is becoming more diversified. Companies participating in the Forum come from a wide range of sectors including infrastructure, manufacturing, finance, telecommunications, pharmaceuticals, etc. In addition to traditional sectors, Chinese companies have also entered the E-commerce market of Africa. Chinese mobile phone companies have also tailor-made mobile phones for African consumers, with highlighted features of beauty cameras and music apps, which prove to be very popular.

Increasing Dividends

According to statistics of the Chinese Ministry of Commerce, in 2016, non-financial direct investment from China to Africa reached US$3.3 billion, an increase of 14% yoy, covering construction, leasing, commercial services, mining, manufacturing, wholesale, and retail sectors, etc.

At the end of this year, work will start on the Ethiopia-Hunan (China) Industrial Park in Adama, the second largest city in Ethiopia. According to staff of the park, by now, 16 Chinese companies have planned to enter the park, including Sany Heavy Industry Co. and Foton, which cover a wide range of areas including equipment manufacturing, furniture, construction materials, textiles, etc. This is just an epitome of industrial capacity cooperation between the two countries. The Oriental Industrial Park, built in 2007, has attracted over 70 companies, most of which are Chinese companies. Huajian Shoe Company employs over 5000 local staff, becoming one of the biggest job-provider and revenue-creator in the country.

Chinese investment in Africa has caught wide attention. In its report Africa’s Investment Attractiveness by Accounting Firm Ernest&Young in the first half of this year, since 2005, China has invested in 293 projects in Africa, with total investment of over US$66.4 billion and the creation of 130,000 jobs. Last year, China set a new record in the creation of jobs in Africa, doubling that of 2015 and 3 times that created by the United States.

A report by McKinsey believe that the width and depth of the involvement of Chinese companies in African economy has beat previous studies. The report revealed that there are over 10,000 Chinese companies investing in Africa, around 90% of which are private companies, and a third of the private companies are in the manufacturing sector. These companies brought to Africa much-needed capital, management experiences, and job opportunities. Many Chinese investment in Africa is long-term and 74% of Chinese companies interviewed say they are optimistic about the future.

The report says that Chinese investment in Africa has brought Africa three economic dividends. First, creating employbility and cultivating skills. Most of the employees of Chinese companies are local. Second, transfer of knowledge and new technologies. Through the introduction of new products and technology, Chinese companies have facilitated the modernization of African markets. Third, financing and infrastructure development. The 50 African officials interviewed believe that the major advantages of Chinese companies are efficient cost structure and fast delivery of projects.

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