Chinese firms’ direct investment in Africa rises despite Covid-19

31-Aug-2021 Intellasia | South China Morning Post | 5:02 AM Print This Post

China’s foreign direct investment in Africa grew in 2020 year-on-year despite the coronavirus, the latest figures show.

The Beijing-based China-Africa Business Council (CABC), which promotes trade and investment, has released a report detailing how much Chinese companies have invested, and where.

The cumulative total of $47.4 billion invested by the end of 2020 included $2.96 billion last year, according to Chinese commerce ministry data up from 2019′s $2.7 billion. A United Nations

report showed that global foreign investment in Africa fell 16 per cent in 2020.

The CABC found that 12 countries accounted for two-thirds of the total since Chinese companies began investing in the continent. They included middle-income countries South Africa and Egypt and resource-rich nations, in Nigeria, Angola, the Republic of Congo, Zambia, Ghana, Algeria and the Democratic Republic of Congo (DRC).

There was also substantial investment in Ethiopia, Kenya and Tanzania, which lie along a route for the Belt and Road Initiative, China’s transcontinental infrastructure and investment strategy.

At the end of 2020, Chinese enterprises’ total investment in those 12 countries was $32.4 billion, accounting for 68 per cent of China’s direct investment in Africa.

Cumulatively, South Africa had received the most (US$6.5 billion), accounting for 14 per cent, followed by DRC (US$5.8 billion) and Zambia (US$3.4 billion), the CABC found.

Most of the investment in South Africa had gone into capital-intensive, technology and service industries, the report said. For example, Beijing Automotive Group invested $800 million to build a car manufacturing plant and Hisense invested $30 million to build a home appliance industrial estate. Both firms are state-owned.

CABC chair Wang Licheng said total Chinese direct investment in Africa probably surpassed $56 billion by the end of 2020, because some firms did not register their investment with the ministry, and reinvestment was not included. His organisation’s survey on reinvestment by nearly 100 private enterprises from June to July found that in Africa nearly 30 per cent on average was reinvested.

“Facing the threat of the Covid-19 pandemic, economic slowdown and border protectionism, and African debt issues, Chinese companies still maintained a willingness to invest in Africa,” he said.

Several Chinese companies were building infrastructure mega-projects such as ports, motorways, power dams and airports, mostly under the belt and road banner.

At the turn of the century, the Chinese government encouraged companies to go abroad through the “going out” strategy, and more than 10,000 Chinese enterprises have since moved into Africa, according to McKinsey. A third were in manufacturing, and most were small and medium enterprises, it said.

Many private enterprises have invested in a large number of African projects, the CABC found, citing Huawei, Holley, Jiangsu Yongyuan, King Deer, China-Africa Cotton, Huajian, Transsion Holdings, Sunda International and StarTimes.

This boosted China-Africa trade, which in 2019 exceeded $200 billion 20 times more than in 2000 before falling to close to $180 billion last year following the pandemic. China has been Africa’s largest trading partner for 11 years since overtaking the US in 2009.

Dr Vera Songwe, executive secretary of the UN Economic Commission for Africa, said Chinese investment remained an important part of Africa’s growth prospects, but “we have to ensure that investments’ rate of return is higher than the cost of investment”.

“We should worry about debt sustainability,” she said.

Several African countries, including Ethiopia, Zambia and the Republic of Congo, are in debt distress and have sought debt relief from China and the Paris Club group of creditor nations.


Category: China

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