China has heavily invested in Africa in recent years. As the largest trade partner of sub-Saharan Africa, its investment stock has reached nearly 25 billion USD. These investments, particularly concentrated in the mining and oil sectors, are notably visible in East Africa. However, China’s African strategy seems to be shifting, with a significant reduction in sovereign loans.
China’s role as an investor in Africa
Chinese investments in Africa significantly impact the continent’s development. As the world’s second-largest economy, China uses its resources to fund various infrastructure projects, including railways, roads, and power plants.
These projects create jobs and promote the transfer of technology and expertise. For instance, the construction of the Mombasa-Nairobi railway in Kenya has not only improved transportation links but also trained many local engineers.
Additionally, the special economic zones established by China attract both local and international businesses, boosting trade and industrialization. These zones also help integrate African economies into global trade.
Chinese investments aren’t limited to infrastructure. They extend to sectors like energy, agriculture, and services, thus helping to diversify African economies.
Geographical presence of Chinese investments
Investments in Southern Africa
In Southern Africa, Chinese investments span various sectors. In South Africa, for example, Chinese companies invest in infrastructure as well as real estate and information technology.
Infrastructure projects, however, remain dominant. Road construction, railways, and power plants have a significant impact on the local economy.
Chinese firms also diversify into manufacturing and agriculture, creating jobs and transferring technological and managerial skills to local populations.
Mining is another crucial sector. China focuses on strategic mineral resources needed for its domestic industries. These investments help diversify local economies and reduce dependency on a single economic sector.
Presence in West Africa
China has significantly increased its investments in West Africa, targeting various sectors to maximize its economic influence. Senegal, Benin, and Côte d’Ivoire are among the main recipients of these loans.
Funded projects include major infrastructure such as highways and railways, strengthening regional connections. Chinese presence is also felt in energy and agriculture, contributing to economic diversification in these countries.
The establishment of special economic zones attracts both local and international businesses, stimulating trade and industrialization. A key example is the construction of a data center in Senegal, the largest in West Africa, highlighting the strategic importance of these investments. By diversifying sectors, China strengthens its economic ties with the region while meeting its own needs for raw materials and new markets.
Impact in North Africa
Chinese investments in North Africa focus on infrastructure and energy projects. Egypt, for example, benefits from numerous projects, including the construction of the new administrative capital near Cairo. This massive project, financed by Chinese companies, includes skyscrapers, residential complexes, and a modern railway network.
In Morocco, China funded the construction of a wind turbine blade factory in the Nador region, reflecting its interest in renewable energy. Telecommunications and logistics sectors are also growing, with investments in data centers and ports.
These projects not only create local jobs but also enhance the technological capacities of the countries involved. Chinese companies, in collaboration with local partners, help transfer skills and knowledge.
Key sectors targeted by China
Agriculture as an investment domain
Chinese agricultural investments in Africa are diverse. Notably, dozens of agricultural technology demonstration centers have been set up across the continent. These centers play a crucial role in training local farmers in modern techniques and introducing innovations suited to local conditions.
Additionally, China finances agro-industrial projects focused on food crops, livestock, and aquaculture. These investments aim to improve agricultural productivity and strengthen food security in partner countries.
Some concrete examples include:
- Cassava Industrialization in Nigeria
- Modernization of agricultural infrastructure in Mozambique
- Creation of model farms in Cameroon
These projects not only boost local agricultural production but also create jobs and transfer technological skills to local populations.
Mining and oil, the focus of Chinese investors
Chinese companies primarily target resource-rich countries like the Democratic Republic of the Congo (DRC) and Angola. For instance, in the DRC, companies like China Molybdenum Co. (CMOC) have heavily invested in copper and cobalt mining.
These metals are essential for green technologies, particularly for electric vehicle batteries. In Gabon, China has initiated manganese projects, another strategic metal crucial for the industry.
Chinese investments extend beyond extraction to include the development of related infrastructure, such as roads and railways, to facilitate resource transportation. This integrated approach maximizes exploitation efficiency while ensuring a steady supply for Chinese industries.
Manufacturing sector growth
Chinese companies play a key role in the development of Africa’s manufacturing sector. Today, more than 10,000 Chinese companies operate on the continent, about one-third of which are in manufacturing. This presence helps create local jobs and modernize industrial infrastructure.
Chinese investments often focus on special industrial zones, which offer tax incentives to attract more investors. For example, in Ethiopia, several industrial zones have been developed with Chinese funds. These zones house textile factories, electronics assembly plants, and construction material production facilities.
These initiatives not only boost the local economy but also transfer technical skills to African workers. They further integrate African countries into global value chains, increasing their competitiveness on the international stage.
Evolution of Chinese FDI in Africa
Key figures from 2018 to 2020
Between 2018 and 2020, Chinese direct investments in Africa grew significantly. In 2018, investment flows reached 5.4 billion USD, marking a 31.5 % increase from the previous year.
In 2019, the trend continued with Chinese FDI totaling around 7.1 billion USD, despite a global decline in investments.
In 2020, Chinese direct investments reached 2.96 billion USD, a 9.5 % rise compared to 2019.
The most attractive sectors for Chinese investors include infrastructure, mining, and manufacturing. Private Chinese companies account for about 70 % of these investments, diversifying funding sources and the types of projects undertaken on the continent.
Forecasts for the coming years
The coming years will be crucial for Chinese investments in Africa. Beijing recently pledged massive funding, totaling 50 billion USD over three years, to strengthen its economic ties with the continent.
These funds will be primarily allocated to strategic sectors such as infrastructure, agriculture, and energy. At the same time, China plans to create at least one million jobs in Africa, contributing to reducing unemployment and improving local skills.
Chinese companies will continue to develop economic and trade cooperation zones. These zones will host industrial and technological projects, facilitating the transfer of knowledge and skills.
However, China will need to manage its internal economic challenges, which could affect the implementation of these investments. African countries must also carefully manage their debt to avoid financial difficulties in the long term.
Economic impact on African countries
The economic impact of Chinese investments in Africa is varied. Firstly, job creation is a significant benefit. Infrastructure projects and economic cooperation zones attract African workers, reducing unemployment.
Additionally, these investments promote skill transfers. Chinese companies often train the local workforce, improving the technical and managerial skills of African workers.
However, some African countries are becoming increasingly indebted to China, which could lead to long-term financial difficulties. The International Monetary Fund has already highlighted the risk of over-indebtedness for some of these countries, making debt management critical.
Chinese investments also touch on key sectors like agriculture and energy, helping diversify African economies, andmaking them less dependent on traditional natural resources.
Why is China heavily investing in Africa ?
China invests heavily in Africa for several strategic and economic reasons. Firstly, Africa provides an abundant source of natural resources crucial for supporting China’s rapid industrialization. These resources include rare metals, oil, and minerals.
Furthermore, China’s infrastructure projects, such as roads and railways, aim to facilitate access to these resources and improve logistics for trade. China also seeks to diversify its export markets by developing new outlets for its manufactured products.
Other important motives include:
- Soft power reinforcement through cultural and educational investments
- Securing maritime routes, particularly through the Horn of Africa
- Political support in international bodies like the UN
These initiatives aim not only to secure supplies but also to strengthen China’s geopolitical influence on the continent.
Which African countries have received the most Chinese investments ?
Nigeria is one of the African countries that has received the most Chinese investments, with capital mainly directed toward energy, transportation, and real estate. In 2023, Nigeria attracted approximately 15.6 billion USD in Chinese investments, including 8.2 billion USD in the energy sector.
South Africa is also a major destination for Chinese investments. The acquisition of 20 % of Standard Bank by the Industrial and Commercial Bank of China (ICBC) is a notable example. Algeria and Ethiopia also benefit from significant investments, particularly in infrastructure and services.
Other countries like Angola and Kenya see billions of dollars injected into infrastructure projects, such as roads and ports, furthering their economic development and regional connectivity.
