BIZweek n°333 12 mar 2021
BIZweek n°333 12 mar 2021
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  • Parution : n°333 de 12 mar 2021

  • Périodicité : hebdomadaire

  • Editeur : Capital Publications Ltd

  • Format : (260 x 370) mm

  • Nombre de pages : 10

  • Taille du fichier PDF : 2,7 Mo

  • Dans ce numéro : les relations entre l'Afrique et la Chine.

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VENDREDI 12 MARS 2021 BIZWEEK ÉDITION 333 LA TOUR AFRICA-CHINA RELATIONS Taming the dragon  : New frontiers of co-operation ? Relations between Africa and China have been tested by the impact of the Covid-19 pandemic that spread across the continent in 2020. Disruption to national and international travel, trade and investment caused a synchronised downturn in all but a few economies in Africa. However, the Chinese government and some Chinese companies are making shrewd moves to build goodwill in the region, protect their strategic interests and set the foundation for stronger commercial engagement in the years ahead. The Economist Intelligence Unit expects Sino-African relations to remain strong despite the hiccup of 2020 and new frontiers of co-operation will be explored. China clearly retains a strong appetite for African ventures and the question is posed  : How can African markets fully exploit and benefit from this evolving relationship ? Sino-African relations are an increasingly busy commercial two-way street and one that presents both opportunities and challenges for African states, their corporations and other foreign businesses or investors with an interest in taking their first steps or expanding their footprint in the region. China has worked hard to establish a solid footprint across Africa through years of high-level political engagement and the provision of access to much-needed project finance and expertise. Chinese companies have delivered thousands of transport, power and telecommunications projects in Africa over the past two decades. China has also supported export-oriented industrial park developments and taken a dominant position in many African markets for products such as competitively priced consumer goods, building materials, plants and machinery, and electronic equipment. The value of Chinese construction contracts in Africa has topped US$40bn every year since 2011 (surpassing US$50bn in 2014-17), and for years the number of Chinese workers in Africa has been close to 200,000 (although this slipped from a high of 264,000 at the end of 2015 to 183,000 at the end of 2019), according to the National Bureau of Statistics of China. China is the region’s single largest bilateral trader and provider of foreign capital in the formof commercial loans and FDI. Over the past two decades loans and FDI have been directed towards transport, power, extractives and telecoms projects, as have smaller but increasing amounts to manufacturing, finance, business services, and health and education. Resource-rich countries, including Angola, Algeria, Democratic Republic of Congo (DRC), Egypt, Nigeria, South Africa and Zambia, have been major beneficiaries. Countries on the eastern seaboard, including Djibouti, Ethiopia, Kenya and Tanzania, have received finance for major industrial and transport-sector projects. The financial splurge looks likely to continue, although financial forays may be more selective and even more diverse in the years ahead, given Chinese financial exposure to some parts of Africa coupled with China’s own evolving strategy and needs. An interesting feature of China’s financial engagement in Africa is the primacy of loans extended to the region over FDI flows. This could suggest that Chinese companies have tended to be more risk averse when it comes to Africa and may have attempted to minimise operational risks linked to political and regulatory issues. However, the gap appears to have narrowed in recent years, possibly suggesting that China has become more confident about a more hands-on and exposed approach to its engagement. Whether this is true—or will last, given the impact of Covid-19 on African financial stability—remains to be seen. 4 Cont’d on page 5
VENDREDI 12 MARS 2021 BIZWEEK ÉDITION 333 A new year brings new focus The pandemic year of 2020 proved a difficult time for relations between Africa and China, with Chinese trade and investment stumbling over hurdles created by virus containment measures imposed worldwide. Nevertheless, relations started 2021 on a reasonably strong footing, with China well on the road to recovery and actively seeking to protect its investments and shoreup access to African markets, production bases and raw materials. Gestures of goodwill—aligned with efforts to protect commercial interests—saw Chinese companies work closely with African counterparts (especially Ethiopia and specifically Ethiopian Airlines) to distribute personal protective equipment and medical supplies across Africa in 2020. Currently, China is offering the prospect of timely access to affordable (or free) and effective vaccines for Covid-19 to African states that find themselves on the fringes of the global scramble for inoculations. China is also providing financial respite (along with other G20 countries) to some of its African debtors that have been hard hit by the Covid-19 pandemic. In a bid to further cement Sino-African relations, the Chinese foreign minister, Wang Yi, undertook a five-country trip to Africa in January, visiting Nigeria, DRC, Botswana, Tanzania and the Seychelles. The thrust of the tour was to consolidate existing ties and build new relations to ensure that Sino-African engagement remains on a positive trajectory. During the trip, Chinese officials emphasised a seven point plan for enhancing relations in 2021 and beyond, with a fresh focus on agriculture, environmental issues, the digital economy, healthcare provision, industrial capacity, regional connectivity and free trade, and national security. During the trip, DRC and Botswana became the 45th and 46th African states to signup to China’s ambitious global infrastructure development strategy, the Belt and Road Initiative (BRI). The BRI drives international connectivity Delivering transport projects has and will remain a major point of engagement between Africa and China. All but a handful of African states have signed a memorandum of understanding to participate in the BRI, and some strategic locations will continue to see infrastructure facilitated by major developments to enhance their trade, especially those designated as access points to the continent for Chinese companies. One of China’s biggest port operators, the China Merchants Group (CMG), has investments and concessions in Djibouti, Nigeria and Togo, and plans for expansion. The Djibouti government announced in January that CMG had agreed to a US$350m investment to help convert the Port of Djibouti into an international logistics and business hub, which comes soon after US$590m of investment in the nearby Doraleh Multipurpose Port and US$3.5bn in the Djibouti International Free Trade Zone. These and other investments (including a railway to Ethiopia and a Chinese naval base) are not surprising, given Djibouti’s importance as a transshipment hub on the BRI-linked Maritime Silk Road, as wellas its potential as a commercial hub for access to other parts of Africa, and its strategic location as a security node for busy shipping lanes passing through the Gulf of Aden and the Red Sea. Other major ongoing (or recently completed) port development projects involving Chinese finance and construction linked to the BRI include major seaports at Abidjan (Côte d’Ivoire) ; Tema (Ghana) ; Lekki (Nigeria) ; Kribi (Cameroon) ; Dar es Salaam (Tanzania) ; Africanehi nese trade anal industry Moro= Cabo Verdet Maur dama..'eSerge Mali Aicha Tu',nia Ume ne «.-418 Egilit Nsgur The Gombsa Suries r * E arria Chad Ginnea- Sur Kuria F.-o Bissau GLIInerl *.'-'jelL. gr Nelil. lib f 111[91 ; 1014r Sierra Leone Centre South Liberia I Afr Kan Sutter 94 Carnetoon IlioublIc Côte d'ivoire -I tendai Ghana _I] Rwanda-Le Km Togo f GabwL Benin DRC Sào Tomé 8 Principe Equaturial Gurnea Ç 46 AFrican states have signed BRI co-operation documents * 22 Chinme-buill industrial palis or Free-trade zones B speaal econnmic zones 1 free-trade agreement with China (Ma untioS) Mombasa (Kenya) ; and Abu Qir, Alexandria and El Dekheila (Egypt). These ports, together with those in Djibouti, Durban and Lagos (Tin Can Island and Apapa) are identified as major maritime access points and commercial hubs for Africa. China is actively investing in all of them to improve port performance and enhance connecting infrastructure. Railway expansion progresses Chinese-backed major railway projects in Africa complete in recent years are the Mombasa-Nairobi Standard Gauge Railway (SGR) in Kenya (costing around US$3.2bn), the Addis Ababa-Djibouti electrified SGR (costing around US$3.4bn), the Abuja-Kaduna and Lagos-Ibadan SGRs in Nigeria (collectively costing more than US$2.5bn), and the Benguela Railway from Lobito to Luau in Angola (costing around US$1.8bn). These projects were constructed by Chinese companies and the contracts were largely paid through loans from China, and more are in the pipeline. Tanzania announced in January that two Chinese companies—the China Civil Engineering Construction Corporation and the China Railway Construction Corporation—had won the tender to construct the northern section of a planned national SGR network centred on Dar es Salaam, the commercial capital. The two companies will construct a line from Mwanza on Lake Victoria to the north central town of Isaka under a contract valued at around US$1.3bn. In addition, Chinese companies that built the recently completed SGRs in Nigeria are contracted to deliver railway projects connecting Ibadan to Abuja, Kaduna to Kano and Abuja to the port city of Warri, with the latter valued at around US$3.9bn. Free trade and industrial development A new feature of Africa’s evolving commercial relations with China could well be the emergence of more bilateral and collective free-trade deals. Mauritius became the first African state to launch a bilateral trade deal with China when a free-trade agreement (FTA) between the two countries came into effect in January, marking the first step in a potentially new direction for Sino-African relations in which Mauritius could wellact as a LA TOUR Burundi-re n'An. * Congo (Bre/elle) Fornorns Angola Namibia 4- Zambra Zimbabwe*. Botswana l elizambique South Arca -Lesotho ia Djibouti Seychelles a, tiauntiLn catalyst and template for other free-trade deals in Africa. Currently, 13 African countries (Algeria, Tunisia, Egypt, Sudan, Ethiopia, Uganda, Nigeria, Zambia, Zimbabwe, Botswana, South Africa, Seychelles and Mauritius) have bilateral investment treaties with China, which could morph into more comprehensive trade and investment agreements in the years ahead. China has also developed industrial parks and free-trade zones in a wider range of African countries, as wellas an evolving network of special economic zones across Africa, which present the potential starting point for more in-depth trade and investment ties. In addition to this, China has expressed support for pan-African and sub-regional freetrade arrangements that seek to build larger markets and more integrated supply chains on the continent. For instance, China is supportive of the enormous African Continental Free Trade Area (AfCFTA) agreement, which began its initial implementation phase in January. China considers the AfCFTA and other smaller sub-regional agreements as « win-win » situations, at least in the short to medium term. These FTAs necessitate infrastructure development and industrial know-how (including more and better highways, railways, seaports and airport infrastructure) and industrial know-how, which are areas where China excels on the continent. However, regional FTAs could create competition for Chinese manufactured products in the longer term. A clearer picture will emerge surrounding the impact on Sino African relations of the AfCF- TA and other regional FTAs once rules of origin are better established for the provision of African goods and at what level external tariffs are set for Chinese imports. At present, China does not appear overly concerned and is more eager to exploit the opportunities that Africa’s regional FTAs look set to create. Telecoms and the Digital Silk Road China dominates the market for smartphones and feature phones (traditional-style push-button mobile phones) in Africa, and this is unlikely to change soon. Chinese companies offer affordable prices and tailored products to African markets that provide a clear competitive edge. Transsion and Huawei, together with Xiaomi, Oppo and a few other minor players, provide more than two-thirds of registered smartphones and an even larger share of feature phones in Africa. A dominant and expanding handset presence is just one part of China’s strategy for the telecoms sector in Africa, which has and will continue to drive the rapid spread of mobile data and voice services across the region. Even more crucial to China’s future engagement in the telecoms sector in Africa, and a key pillar of its broader commercial strategy, is control over existing hardware and the rollout of next generation technology. Chinese companies including Huawei, ZTE and China Telecom are major providers of backbone and last-mile technology in Africa with an eye on wider rollout of mobile and fixed line infrastructure. Huawei may have been excluded from key telecoms infrastructure contracts in North America and Europe, but the company has deep roots in Africa that provide it with a solid and seemingly irreversible foothold to pursue expansion plans in the region. Information and communications technology (ICT) services could receive a boost in 2021, as China will soon lay the final stretch of a cross-border fibre-optic cable in Pakistan that forms the backbone of its Digital Silk Road and will support China’s digital expansion across Africa. The cable will connect to the submarine PEACE cable in the Arabian Sea that links to various entry points in Africa. Bumps in the road ahead Concerns have escalated over the past twelve months regarding African debt exposure to China and the potential loss of sovereignty over strategic assets and resources following failure to make payments. However, China has proved reasonably flexible in postponing and restructuring debt repayments so far in countries such as Angola, Ethiopia, Kenya and Zambia. In the case of Kenya, in January the government secured a sixmonth debt-repayment holiday worth around US$245m, although China had taken a tough stance ; the potential for a debt for asset swap with regards to the Port of Mombasa port looked a real possibility until fairly recently. To date, China has signed debt service suspension agreements with a total of 12 African states and has provided waivers of matured interest-free loans for 15 African states under the G20 Debt Service Suspension Initiative, and more could follow. However, Africa’s current financial difficulties are not easily solved, and debt restructuring has largely kicked the problem down the line in the hope that economic conditions improve and financial strains ease. Anti-Chinese sentiment within some African populations is simmering below the surface, with citizens resentful of Chinese economic influence and the lack of higher-value job creation for locals associated with some Chinese investments. There is a perception that ruling elites in Africa are complicit in Chinese predation of national resources and the displacement of African workers and products by Chinese substitutes. Whether or not these feelings are justified, the developments of 2020 increased tensions and elicited a response from China to appease its critics. China has fought hard to secure a foothold in Africa and has nowupped its game in the competition for access to the region’s resources and markets. China’s focus on Africa has shifted to a broader set of objectives in recent years that aim to strengthen existing commercial ties and foster new ones, while sticking to the underlying principle of pursuing mutual benefit. This broad strategy is likely to provide China with a competitive edge that willattract the attention of African counterparts seeking potentially lucrative flows of trade and investment, ultimately making it difficult to dislodge. [Source  : New report by The Economist Intelligence Unit] 5

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