Chinese investments boosting SADCs Industry By Brian Mudumi Introduction. China is expanding its investments in southern Africa at a time when the Southern African Development Community regional organization is seriously considering Industrialization as one of its main priorities. Industrialization can be best defined as the period of social and economic change that transforms a human group from an agrarian society into an Industrial one. China has become a prime partner on the SADC regional industrialization focus through a number of public and private partnership deals. According to the report by SADC Today, Southern Africa continues to strengthen its profile as an investment destination, attracting major inflows from China in the mining, agriculture, telecommunications and manufacturing sectors. Background of SADC Industrialization Focus SADC recently held its 34th heads of State Summit in Victoria Falls and directed that industrialization should take a center stage in the SADC regional transformation agenda so as to significantly improve the lives of people in SADC 15 member states and a ministerial committee was mandated to develop a strategy and a road map for industrialization of the region. Regional leaders have expressed high hopes of regional transformation about the new focus on industrialization for regional integration. The current SADC chairperson, President Mugabe also encouraged SADC countries to be redirected by the reviewed Regional Indicative Strategic Development Programme Plan – a comprehensive development and implementation framework developed to guide the Regional Integration agenda of the SADC over a period of fifteen years (2005-2020).The ministerial taskforce is also supposed to review the regional Indicative Strategic Development Plan (RISDP2015-2020) which is a five year plan to be implemented by SADC community and its member states. Executive Secretary for SADC, Dr Stergomena Lawrence Tax also, assures that the region is giving attention to a number of infrastructure projects, adding that “the region cannot have trade in isolation without having infrastructure which can facilitate trade and economic development as a whole.” Without strong industries to create jobs and add value to raw materials, countries within and across the Southern African Development Community risk remaining chained up in joblessness and poverty, therefore this industrialization focus has been regarded as a noble timely focus that will transform the region to become a competitor on the International markets The state of industry in southern Africa The current state of industry in southern Africa is characterized by low intra-SADC trade volumes which are being blamed on the slow pace of industrialization in most of the member states, said NCCI President Martha Namundjebo-Tilahun at the opening of the first business forum between Namibia and Zimbabwe held in Walvis Bay. She further highlighted that, current trade volumes in SADC are less than 10% of total foreign trade by the region despite government efforts to enhance regional economic integration and increase trade between member states, she said. According to Ms. Namundjebo-Tilahun, most of the trade within SADC is dependent on exports and imports of food and manufactured products. We must concentrate our efforts on building industries which can improve our industrial capacity within our countries and enable us to diversify our domestic economic activities and our exports,” she said. SARDC economist Munetsi Mudakufamba also pointed out that industrialization should be considered as a necessity for SADC transformation as it is a pre-condition for the region to achieve inclusive developments. Chinese Contribution China is expanding its investments into southern Africa at a time when the regional organization is seriously considering industrialization as its main priority. Chinas relationship with SADC countries demonstrates a new dimension of cooperation in enhancing regional integration as its investment in the SADC region amounted to about 9.4 billion. According to UNICTAD report 2014, the Southern African region doubled its FDI inflows to $13 billion, as compared to other regions which witnessed a decline. The main FDI attraction in the SADC region was on Infrastructure. As compared to other regions which witnessed FDI decline such as North Africa decreased by 7 per cent to $15 billion. Central and West Africa saw inflows decline to $8 billion and $14 billion, respectively, in part due to political and security uncertainties. The current trends highlights that, China is becoming a major partner on Investments on industrialization related projects in the region through public and private joint venture partnerships with local firms. The trend is noticeable in industry related sectors like, Energy, infrastructure, Mining, Agriculture and also notable breaking of new grounds Industrial development in Southern African Region. Across the region, Chinas engagement towards industry is diverse, in some countries like DRC, Angola and Mozambique, China is engaged in extractive Industries and construction of infrastructure projects. This support to African industry is part of the win-win policy established by the 5th FOCAC ministerial meeting in Beijing 2012 which both Africa and China are supposed to benefit from enlarging business opportunities. The nature of the new wave of investment into manufacturing is creating jobs and adding value to the economies of the SADC countries. More than half of China’s Southern African OFDI stock was in South Africa, Zambia, and Angola. South Africa alone received more than 20 percent of China’s OFDI in Africa ($4.8 billion) by 2012, while it only took 6.5 percent ($58.9 million) a decade ago. China’s OFDI total stock in these top three African destinations significantly increased in the past decade, from only $317.2 million in 2004 to $11.2 billion in 2012, or by 35.5 times. A range of Chinese institutions are providing financial support services specifically to promote business cooperation between Chinese companies and African entrepreneurs. China EXIM Bank have provided a funding facility for a joint venture partnership between a Zimbabwean Business firm and a Chinese Company on a project which will add 200 megawatts at Kariba. Chinese company, Xuzhou Construction Machinery Group, offered a 100 million USD credit facility to small scale miners in the country. South Africa, the largest economy in the region, has caught the attention of the Chinese investors through financial cooperation agreements worth of $2.5 US billion between the Development Bank of South Africa and the China Development Bank. According to the Financial times report, In 2009 FDI had clocked 2.3 billion from China and are spread across various sectors such as mining, financial services and infrastructure development. From 2000 to 2011, the mining sector also saw, an investment of $877 million by Chinas state-owned miner Jinchuan and China Development Bank in South Africas platinum industry, and an investment of $250 million USD by Chinas Huaqiang Holdings in a theme park in Johannesburg. Recently the China-Africa Development Fund has provided funding for a Steel Production deal. The deal, according to the Industrial Development Corporation of South African (IDC) amounted $4.5-billion and is expected to increase production to 5-million tons per year. Recently, China Africa Sunlight Energy Ltd. recently invested $2.1 billion in developing a 2,100-megawatt plant to help ease electricity shortages in Zimbabwe, which is capable of generating 1,320 megawatts. Also China Africa Sunlight Energy is looking at the possibility of pumping gas to the port city of Beira in neighboring Mozambique. This power plant is expected to produce 300 megawatts by mid-2015, and the number is looking to double by the end of the year. Therefore this illustrates that, China is reshaping Southern Africa’s economic landscape through large-scale infrastructure development that is of strategic value contributing to the regional focus on Industrial development. In Angola, China is helping the country’s reconstruction effort after the devastating civil war. One of China’s major investments in Angola is the rebuilding of the Benguela Railway, “an 840-mile transcontinental railway that links the Atlantic port of Lobito in Angola with rail networks in the Democratic Republic of Congo and Zambia. The project is expected to cost $300 million, and it will provide a much-needed cheap outlet for Congolese and Zambia copper, tin and coltan. This evidence reinforces China’s substantial investment in building Industry and infrastructure in Southern Africa. China has emerged the leader in terms of Foreign Direct Investment (FDI) into the Southern Africa Development Community (SADC). An economist in the region Richard Kamidza come to explain that the Chinese Foreign Direct Investment (FDI) and infrastructure projects in SADC were estimated at N$84 billion, including N$42 billion non-financial investments by February 2011. Thus China is regarded as the key investor in Southern Africa and strategically contributing to the regional focus . Chinese investments in SADC included some 37 million dollars injected by Jinchuan group to revive a Zambian Nickel mine which closed in 2000 due to poor international mineral prices. In Namibia, Chinese companies are operating in the mineral exploration sector, where 27 Chinese state-owned companies are currently operating in the fields of construction, mining, engineering, information and technology and financial services. In Botswana, China is cooperating in mining, construction, manufacturing and telecommunications, In Mozambique, Chinese enterprises have developed the north-south road. These infrastructure projects are helping to connect previously isolated regions and have also helped to facilitate business across southern Africa, said Kamidza. China’s trade volumes with SADC, which was estimated at N$521 billion by 2010 (accounting for 48 per cent of trade between China and Africa), is increasingly making it the largest trading partner of the southern African region. Brian Mudumi Is a Final Year student in International Studies at Midlands State University and Student Researcher at the Institute of China Africa Studies In Southern Africa at SARDC. He can be contacted at [email protected].
Posted on: Wed, 22 Oct 2014 13:02:15 +0000