TRADE & INVESTMENT:

Chinese offensive in Africa causes dilopmatic distress

open | 15 November, 2006

JOHANNESBURG. China’s expansion in Africa causes continued and growing distress for foreign governments and businesses alike.

On the ground Nordic and Western competitors with far less resources and backing from their own governments – often by choice - are facing fierce competition from the Chinese, e.g. Statoil and Hydro in Angola and Nigeria, ABB in Angola and Mozambique and Lundin in Kenya.

There is also an increasing strategic battle taking place where the Chinese influence in countries like Sudan and Zimbabwe have the potential to cause diplomatic havoc – to the extent that some are talking about “a new cold war” in the making.

The Chinese said that it would write off all its non-interest bearing loans to less developed countries in Africa during the massive and impressive Sino-African summit in November. Analysts expect that this most likely also include Zimbabwe – which will strengthen the Chinese influence in Harare even further.

The Chinese unveiled huge investment- and aid packages during the summit, including US € 1.9 billion in investments in telecom, infrastructure mineral resources, insurance and technology to a dozen countries: South Africa, Zambia, Lesotho, Cape Verde, Ghana, Nigeria, Kenya, Uganda, Ethiopia, Egypt and the Seychelles.

To speed up trade China will offer US $ 3 billion in preferential loans and US£ 2 billion in preferential buyers credits.

A small investment fund to assist Chinese companies to invest in Africa was also unveiled.

Africascan Comment

China has the ability to go straight to a government and do the kind of deals that companies from democratic, free-market economies cannot.

It is very appealing to do deals as there are few or no political questions asked. The strings that are attached have a more materialistic nature e.g. China enters an oil contract and soon after the Chinese are offered concessions.