Closing Africa's Infrastructure Gap

China plays an important role in not only providing funding for infrastructure projects in Africa, but its companies are also taking the lead in constructing the infrastructure so crucial to Africa's development. 

Infrastructure – or the lack of it – is a crucial impediment to Africa's economic development. In an estimate by the African Development Bank, the shortfall in funding for African infrastructure projects in 2011 will be around $45 billion, which will cost the continent around 3 percent in GDP growth. The problem was compounded in the 1990s when both African and donor investment in infrastructure was scaled back relative to other priorities, such as child immunization and education, partly due to the mistaken belief that private investors would step up to fill the gap. As a result, as Africa's construction sector deteriorated, poor road, rail and harbor infrastructure is adding 30-40 percent to the costs of goods traded among African countries.

It was only in the course of the 2000s that support for African infrastructure began to increase significantly, a process in which China played an important role. According to the Infrastructure Consortium for Africa (ICA), a body (whose members include G8 countries and multilateral institutions such as the World Bank Group) launched at the Glen Eagles G8 summit in 2005, total external financial support for African infrastructure reached $37.3 billion in 2007 and $38.4 billion in 2009. Over these three years, contributions by ICA members collectively increased from $12.4 billion to $19.5 billion, while China's contribution increased from $4.6 billion to $5 billion. While other donors have underfinanced infrastructure in Africa, China has devoted around 80 percent of its concessional financing in Africa to this sector.

China is also taking the lead in actually building the infrastructure in Africa. According to the Engineering News Report (ENR), in 2001, China's share of contract revenue in Africa was a mere 7.4 percent, yet by 2009 China's share had climbed to 36.6 percent, making it the dominant player, far ahead of Italy with 15 percent in second place. Indeed, Africa is now China's largest market in terms of contract revenue with 41.1 percent, even larger than Asia with 36 percent.

➲ GHANA_August: China Development Bank agreed to lend Ghana – Africa's newest oil producer – $800 million to build natural gas infrastructure.

➲ ZAMBIA_August: On the 8th of August, Lusaka General Hospital, which was built with the assistance of the Chinese Government, was officially handed over to Zambia. The hospital is equipped with CT, X-ray, four surgery rooms and 159 beds.

➲ SOUTH AFRICA_July: Canadian rare earths miner Great Western Minerals announced in July that it had signed an agreement with Ganzhou Qiandong Rare Earth Group (GQD) to build a rare earths separation plant in South Africa, to be followed later by the building of a mine.

➲ ETHIOPIA_July: Ethiopia's Ministry of Mines announced that it had awarded the Caleb and Hilala natural gas fields and eight exploration blocks in the Ogaden basin to a Chinese oil and gas company, Petrotrans Company. Petrotrans stated that it planned to build oil and gas pipelines from the Ogaden basin to the Somaliland port of Berbera.

➲ Mozambique_August: On a state visit to China, Mozambican President Armando Guebuza signed 10 cooperation agreements with Chinese President Hu Jintao. Included among these was an agreement for Chinese firm China Kingho to finance the construction of a new railway line linking the town of Maotize in western Mozambique to the port of Beira.

➲ SOUTH AFRICA_August: China African Precious Metals Ltd., affiliated with Hong Kong's SSC Mandarin Holdings Ltd., announced that it will buy Pamodzi Gold Orkney Ltd. in South Africa for $22 million. It is expected that the new owners will spend around $73 million on mine development and on erecting a new gold plant at the mine.

The ChinAfrica Econometer is produced by The Beijing Axis, a cross-border business bridge to/from China in four principal areas: Commodities, Capital, Procurement, & Strategy.

For more information, please contact: Barry van Wyk, barryvanwyk@thebeijingaxis.com

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