Monday, December 31, 2018

China takes centrestage in Africa through infrastructure

Standard gauge railway at Suswa
Construction works on Phase 2A of the Kenya's standard gauge railway at Suswa. China Communications Construction Company are the contractors. PHOTO | GEORGE SAYAGIE | NMG 
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Chinese contractors have taken centrestage in the implementation of infrastructure projects in Africa, as funding by the continent’s development finance institutions shrinks.
However, investment in social sectors such as health and education remained low, according to the report Africa Construction Trends (2018) by consultancy firm Deloitte.
The report, released last week, shows that East African governments fund only 12.9 per cent of their projects in the region, with China and international financiers funding 25.9 per cent and 20.1 per cent respectively.
Number of projects
Value ($ bn)
South Africa
“The significant role played by China in advancing funding for infrastructure development in East Africa speaks to the importance of the region as a touch-point for China’s Belt and Road Initiative,” the report says.
The initiative is Beijing’s multibillion-dollar Marshall Plan that seeks to strengthen Chinese global dominance through investment in infrastructure around the world worth more than $1 trillion.
President Xi Jinping has a grand plan to connect Asia, Africa and Europe through mega projects. The initiative involves infrastructure development and investments.
From Southeast Asia to Eastern Europe and Africa, the initiative connects 71 countries that account for half the world’s population and a quarter of global GDP.
So far Chinese companies have secured more than $340 billion in construction contracts along the Belt and Road.
The initiative was launched by President Xi Jinping in September and October 2013 during visits to Kazakhstan and Indonesia.
According to the report, 33 per cent of the 482 projects tracked this year were built by Chinese companies and 24 per cent by local contractors.
However, large-scale investment in social development and education projects remained low, at 0.1 per cent each across the continent.
The majority of the infrastructure projects were in the transport sector (38.6 per cent), followed by real estate (22.8 per cent), energy and power (13.7 per cent) and shipping and ports (7.5 per cent).
According to the report, the transport sector, valued at $107 billion, represented 22.7 per cent of the continent’s total spend on large construction projects, with governments and China being the two significant funders of the sector.
The report notes that although African governments continue to fund the largest share of projects, particularly in the transport sector, the Chinese influence on the continent is increasing with 19 per cent of the projects being funded by China (close to one in every five projects) followed by international development finance institutions with (13.7 per cent), and private domestic firms with (10.6 per cent).
China is the most prolific (and single country) builder of projects, constructing 160 (33.2 per cent) projects this year, up from 85 last year.
The majority of Chinese construction also falls within the transport sector.
Other single-country builders include Italian firms, although they are some way behind with 21 projects (4.4 per cent), followed by French firms with 15 projects (3.1 per cent).
East Africa has the largest number of projects at 139 (29 per cent) and North Africa accounted for the largest share of projects in terms of value, at 31.5 per cent ($148.3 billion).
Egypt has the most projects at 46 (9.5 per cent of projects on the continent) as well as the most projects by value at $79.2billion (17 per cent of the continent’s value), more than South Africa and Nigeria.
According to the report, African governments own 364 projects (75.5 per cent), followed by private domestic firms (9.3 per cent).
Firms headquartered in China own 3.3 per cent of Africa’s infrastructure projects, followed by firms in Australia (2.5 per cent), and the Middle East (2.5 per cent).
According to the report, the total number of projects in East Africa rose by 96 per cent between 2017 and 2018, with high value projects such as Kenya’s Konza Technology Park and Tanzania’s Bagamoyo megaport boosting the region’s infrastructure agenda.
Kenya has the largest number of projects in East Africa, with 41 projects valued at $38.2 million, followed by Ethiopia with 38 projects valued at $19.1 million.
The transport sector in East Africa’s accounts for 45.3 per cent of all projects in the region and 26.6 per cent of their dollar value.
Energy and power projects account for a significantly lower share of projects, at 18 per cent in number and 21.1 per cent in value terms.
According to the report, the transport and energy sectors are critical to the EAC’s development strategy.

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