Matthieu David-Experton, CEO and founder, Daxue Research
In random order:
Kinshasa
Addis Ababa
Lusaka
Abuja
Nairobi
While the majority of China's investments in the past have been in natural resources, there has been a significant shift since 2010 toward new and diversified sectors. Specifically, China's investors are looking at building Africa's infrastructure, leveraging its growing workforce and fostering a growing middle class, which could be the target for Chinese-manufactured goods.
Three main factors make Kinshasa very appealing:
* It is experiencing a significant growth in GDP;
* There is a considerable Chinese presence already;
* It sorely lacks infrastructure projects.
A significant portion of the infrastructure projects is in areas leading to forested regions, where China hopes to take advantage of potential agricultural development. However, developments in the surrounding regions are still funneled through the economic hub of the city, where there is a real need for even basic infrastructure. Despite concerns about how instability could endanger Chinese migrants, the possibilities for developing infrastructure, especially in transport and extraction, appear to be balancing out those fears.
Add is Ababa's major draw is the enormous cheap labor force, favorable export tariffs to the EU and U.S. markets, and significant government investment in its industrial zones. Ethiopia is, like China, offering very cheap, low-skill manufacturing. The China-Africa Development Fund and China's Huajian Group are investing $2 billion into a shoe manufacturing site in the Bole Lemi Industrial Zone. Since Ethiopia has one of the fastest growing economies on the continent, Chinese manufacturers will increasingly look to invest in Addis Ababa as China's labor costs rise.
There are worries that the rapid growth is unsustainable without addressing the basic humanitarian failings. Nonetheless, China's growing need for cheaper manufacturing seems to mesh perfectly with Addis Ababa's efforts to shape itself into a manufacturing powerhouse.
Lusaka's main attraction is the established Chinese presence, the potential for huge infrastructure, particularly in telecommunications, and the potential for growth in the agricultural sector. Recent state visits resulted in nearly $800 million in investments from Chinese companies, and China intends to raise investment over $3 billion. Lusaka's crippling lack of transport infrastructure and telecommunications presents the same opportunities as most other major cities in Africa, but with less foreign competition.
An additional attraction is that the significant number of Chinese workers in Lusaka has created a growing sector for small shops trading in conveniences, appliances, clothing, etc. Instabilities and stories of violence against migrants do raise concerns, however.
The following two cities are more stable and have enough infrastructure to allow the companies to enter with relatively little hassle. However, foreign competition remains a larger problem.
Abuja's huge infrastructure projects are a draw.The $12-billion Abuja-Kaduna line built by China Civil Engineering Construction could just be the start, along with the Lagos-Abuja high-speed lines. There's also the potential of being the first into a market set to take off in other sectors like manufacturing, or tapping a growing consumer base. Nigeria is relatively stable and therefore less of a risk. However, Abuja is the focus of a lot of foreign investment, so while the opportunities are significant, investors will face much more competition.
Nairobi has much to offer. Its growing consumer market would welcome cheaper Chinese goods. Government investment plans for a Chinese "brand city" could enable smaller Chinese investors (lacking resources to take advantage of Africa's infrastructure boom) to make their presence felt in Kenya. Nairobi's growing population of bilingual Chinese nationals would make it easier for such companies to become more integrated. The country is stable enough for more of the commercially oriented retail and tech companies China is nurturing.
The absence of cities like Cairo, Johannesburg or Tunis on this list should not imply they don't interest Chinese investors. But these cities have relatively developed infrastructures and foreign competitors have a large and historical presence.
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