China’s Role in African Infrastructure

LAGOS (Capital Markets in Africa) Chinese companies are unlikely to be challenged in the near term as they dominate Africa’s construction market with a 62% market share, even as the pandemic slows activity. The continent’s infrastructure growth potential could eventually attract European funds, we believe, as new common strategies are developed to provide partial funding and execute civil engineering projects. 

China’s Belt and Road Initiatives in Africa to Remain in Play
Despite shifting financial resources to deal with the pandemic’s fallout and calls to forgive debt in Africa, China is likely to remain an essential player in Africa’s growth through its Belt and Road Initiative, we believe. With $143 billion committed to African infrastructure projects (2000-17), and 17% of governments’ external interest payments going to China in 2018, according to the African Finance Corp., Chinese funding is here to stay. It’s dominated by the Export-Import Bank of China, which accounts for 67% of the credit, and China Development Bank, 13%.

On the execution front, over 50% of projects are accounted for by Chinese engineering, procurement, and construction contractors, covering about 30,000 kilometers of highways, 2,000 km of railways, and more than 30,000 km of transmission grids. (09/14/20)

China Construction Companies Dominance Unchallenged in Africa
Chinese construction companies’ dominance over European rivals in Africa is likely to persist, even as Covid-19 worsens China’s economic slump, we believe. With a 62% of the share of Africa’s infrastructure market in 2018,  government-subsidized Chinese companies have a competitive advantage that will be hard for European competitors to surmount. China Communications Construction secured a road- and bridge-building contract in Ethiopia, financed by China Export-Import Bank, which is also partially funding the $2 billion Sudan-Chad railway line project.

While the pandemic is driving speculation that globalization will decelerate or even reverse, we don’t think this applies to the long-term partnership between China and Africa, which has some of the world’s biggest infrastructure deficiencies and growth potential.

Source: Bloomberg Business News

 

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