Chinese firms boost African investment

08:49, April 21, 2010      

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Africa, which boasts a large volume of natural resources and powerful consumption market, is turning into an increasingly important destination for Chinese investment.

"When it comes to which nation is the largest investor in Africa, China is undoubtedly the largest," Egyptian Minister of International Cooperation Fayza Aboulnaga told China Daily during the third Common Market for Eastern and Southern African States Investment Forum held in the island resort of Sharm El-Sheikh.

According to a report from the United Kingdom's Overseas Development Institute, foreign direct investment into Africa fell 30 percent between 2008 and 2009 as developed nations cut spending, but BRIC nations (Brazil, Russia, India and China) increased their investment in Africa over the same period.

According to Ministry of Commerce, despite the financial crisis, China's investment during the first half of 2009 in Africa's non-financial sectors - mining, manufacturing, agriculture and infrastructure - grew 78.6 percent to $875 million.

Describing the trend as "positive", Aboulnaga said: "I believe there will be a lot more (investment) in the future thanks to the already successful cases established here."

He Wenping, director of Africa Research Center under the Chinese Academy of Social Sciences, agreed. "The figure is small compared with (investment in Africa from) developed nations, but the growth is amazingly rapid," she said.

In March, China FAW Group Corporation, China's major auto manufacturer, announced a manufacturing project with an investment of $100 million in South Africa, also the largest ever in volume that Chinese investors have made in the region's auto industry.

In late March, China National Chemical Engineering Group Corporation and a local company set up Sudan's largest chemical fertilizer plant - with an annual production capacity of 360,000 tons - with an investment of $500 million.

The fertilizer factory in Sudan equipped with technologies from China will help develop the nation's agriculture sector in a cheaper way. For long, Sudan was a net importer of fertilizer, but the factory can produce fertilizer by using the nation's own natural gas.

"Growth in investment from China into Egypt has never been higher than in recent years ... and of course ... the time is absolutely right for Chinese investors," Ahmed Amin, chairman of the General Authority for the Economic Zone of Suez, told China Daily.

In Egypt, arguably the best investment destination in North Africa, Chinese enterprises are rising speedily.

According to Egyptian statistics, 1,038 Chinese companies have invested an accumulative $311 million mainly in the nation's infrastructure, services and manufacturing sectors, 90 percent of which was made in the past five years.

In the Economic Zone of Suez, an area covering 6 square kilometers especially tailored for Chinese enterprises, 23 companies have registered so far.

"A total of 200 companies with an investment of $1.5 billion are expected to locate their factories here," Amin predicted.

"There has been a push from China into Africa and that trend is very positive, China realizes it has to cultivate powerful relationship with Africa to get access to commodities and markets that Africa owns," said Martyn Davies, chief executive officer of Frontier Advisory, a research and strategy company that assists clients to enter and operate in emerging market economies. .

This investment not only favors China. For African nations, "China is very, very important" because it can "help us grow rapidly", said Aboulnaga.

China's investments also make many things more affordable for Africans. Before 2006, few Egyptians could afford BMW cars as imports were too expensive, but things have changed now.

Since Brilliance Auto, a Chinese major automaker, came to join hands with a local partner establishing a manufacturing factory in Cairo, "cars are much cheaper", said Friedrich Becker, general manager of operations of Bavarian Auto Manufacturing Co.

In 2009, 200,000 cars were sold, down from 260,000 in 2008, but "there will be big increase this year", he said.

The joint venture is Brilliance's first investment in Africa, and the company is considering "more in other nations".

"It is a success story, profitability here is better than in other locations," said Becker.

Many other Chinese companies are also happy to be in Africa.

"Operating costs could be cut by 20 to 30 percent in Egypt. Electricity is cheaper, labor costs are lower and transportation is cheaper," said Han Ruihua, deputy general manager of Egypt CTMC Nonwovens Co Ltd.

CTMC is Egypt's largest foreign-owned enterprise from China, producing nonwoven cloth for export to Europe.

For Chinese, the investment environment in Africa is improving a lot. According to Becker, in Egypt, procedures are getting simpler, and skills are improving.

Source: China Daily


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