TCA Apr 2014

Regional Focus: CHINA-AFRICA

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Even with a cooling of the Chinese economy, the total value of China-Africa trade in 2013 reached USD 210.2 bn, an increase of 6.2% y-o-y – demonstrating the expanding relationship between the two regions. In this edition, we report the latest China-Africa trade data, review major China-Africa trade and investment deals and spotlight China’s relationship with the South African Development Community (SADC).


China-Africa Briefing

➢ In January 2014, Ethiopian President, Mulatu Teshome, stated that Chinese investment is transforming the African continent. Analysts suggest that Africa has the opportunity to capture a large proportion of the manufacturing jobs China is expected to outsource as domestic production costs continue to rise
➢ In December 2013, African Development Bank compliance and safety experts developed social and environmental guidelines for investment projects with Chinese policymakers. Together, these partners proposed developing institutions to facilitate regular meetings and coordinate a reporting platform to demonstrate the value of socially responsible business practices and avoid adverse impacts of economic development
➢ The 2013 Africa-China Commodities, Technology and Services Exposition took place in December in Addis Ababa, Ethiopia. This expo marked the first time a China-Africa trade expo was held in Africa, which demonstrates growing demand for Chinese business in Africa. More than 150 companies from across China participated in the event, including major Chinese firms such as Huawei, Sinosteel Corp and Chery Heavy Industry
➢ At the 2013 African Investment Summit that took place in Hong Kong in November, China Exim Bank committed to investing USD 1 tn over the next 12 years in a series of transnational transportation projects including highways and airports in Angola, Mozambique and other countries on the African continent
➢ In late November 2013, Chinese Vice Premier Liu Yandong led a three-day high-level Chinese delegation to Addis Ababa, Ethiopia, to discuss health, education and technology with the Ethiopian President, Prime Minister and Deputy Prime Minister


China-Africa Trade

Total Trade
➢ Total value of trade between China and Africa reached USD 210.2 bn in 2013, an increase of 6.2% y-o-y
➢ African exports to China continued to grow faster than imports from China; China’s trade deficit reached USD 24.6 bn in 2013 

China Imports from Africa
➢ Imports to China from Africa totaled USD 117.4 bn in 2013, a 3.7% increase y-o-y
➢ Trade data for the first three quarters of 2013 reveals that the five leading African exporters to China were South Africa, Angola, Nigeria, Egypt and Algeria
➢ Leading commodities China imported from Africa in 2013 were oil, platinum, copper and other minerals

China Exports to Africa
➢ China’s exports to Africa totaled USD 92.8 bn in 2013, an 8.8% increase y-o-y 
➢ Trade data for 2013 reveals that the five leading destinations for China’s exports to Africa were Ethiopia, South Africa, Angola, Nigeria and Tanzania 
➢ Leading commodities China exported to Africa in 2014 include clothing, toys, construction equipment and military equipment


China-Africa Investment

➢ The cumulative stock of Chinese investment in Africa has grown rapidly from less than USD 9.3 bn in 2009 to USD 21.2 bn in 2012. At the same time, the number of Chinese companies investing in Africa exceeds 2,000, mainly targeting the finance, mining and manufacturing industries

Major Recent Deals and Developments 
➢ In March 2014, China Development Bank signed MoUs with Societe Generale and Barclays to cooperate in corporate finance, retail banking, capital markets and structured finance in the African continent 
➢ In February 2014, China Africa Cotton finalised plans to build a cotton factory in Mozambique. The USD 3 mn factory will process 30,000 tons of seed cotton per year and will also have the capacity to produce 3,000 litres of cooking oil per year 
➢ In January 2014, China Powerway Renewable Energy, through its regional subsidiary Powerway South Africa, revealed plans to invest about USD 160 mn in the construction of a 100MW solar plant in Zimbabwe. Powerway, a solar farm engineering and construction company, will partner with Mobility Holdings, a local company that specialises in renewable energy projects 
➢ In January 2014, China Development Bank provided Wesizwe Platinum, a Johannesburg-listed mining company in South Africa, USD 650 mn to support the development of the Bakubung platinum mine, which is expected to reach full production capacity by 2021 
➢ In January 2014, the China National Nuclear Corp (CNNC) purchased a 25% share in the Langer Heinrich uranium mine in Namibia from Paladin Energy, an Australian uranium producer, for USD 190 mn
➢ In January 2014, the Reserve Bank of Zimbabwe announced its plans to add the Chinese yuan to its list of official currencies following its challenges with inflation. In the same month, the Nigerian central bank announced that it would increase its holdings of Chinese yuan from 2% to 7% by selling roughly USD 2.2 bn of US dollars and replacing them with Chinese yuan
➢ In January 2014, Chinese construction firm Huasheng Jiangquan Group committed to invest over USD 2 bn for the construction of an industrial park in Western Ghana. This project is expected to create 5,000 jobs and open the region to future economic growth
➢ In December 2013, Chinese engineering firm Sinoma International Engineering, a subsidiary of China National Materials, signed a USD 536 mn contract with Nigeria’s Dangote Cement. The firms will be building two clinker cement production lines in Nigeria, each with a daily capacity of 6,000 tonnes
➢ In December 2013, China UnionPay signed a deal with Tanzania’s B-PESA to allow the Tanzanian pre-paid bank loop card to expand their operating territory beyond Tanzania to cover 1.6 mn ATMs and over 12 mn merchants in 142 countries. Observers view the deal as an attempt to facilitate China-Tanzania business projects and tourism
➢ In November 2013, the China-Africa Development Fund (CAD Fund) and Shandong-based Shankou Steel Pipe group signed a cooperation agreement in order to capture
more opportunities in West African energy, logistics and infrastructure markets. The two firms will build a welded pipe-processing plant in Ghana. With an annual capacity of 250,000 metric tonnes, the pipe plant will supply a growing number of oil and gas projects in Africa with rebar, wire rod and welded pipe
➢ In November 2013, the Ethiopian Railways Corp. purchased thirty railway coaches from China’s CNR Corp. to be used on the Addis Ababa-Djibouti railway, which is expected to increase regional development by providing modern transportation links between the Ethiopian capital and its main shipping port in Djibouti. The rest of the trains will be used on the Ethiopian railway network, which will travel 2,600 kilometres across the country once construction is completed in 2015
➢ In October 2013, the China Machinery Engineering Corporation began a three-year overhaul of a water treatment facility in Harare, Zimbabwe following a 2008 cholera epidemic. The project was financed by a USD 144 mn loan from China Exim Bank
➢ In October 2013, CAD Fund disclosed that it has invested USD 880 mn in the first phase of an affordable housing project, which includes a hospital, school and shopping centre, in Mozambique. Much of the firm’s USD 200 bn of investments in Africa are targeting the African housing industry
➢ In September 2013, Chinese mineral and resources company, Tewoo, agreed to purchase a 16.5% stake in the Tonkolili project, an iron-ore mine in Sierra Leone, for USD 990 mn from African Minerals. Observers suggest that the deal has guaranteed China’s supply of iron ore for the next 20 years
➢ In September 2013, CNOOC won a USD 2 bn deal to develop the Kingfisher oil field in Uganda. An estimated 195 mn barrels of oil are recoverable from the oilfield. CNOOC will develop the Kingfisher field over the next four years


Africa Regional Focus:
China and the South African Development Community (SADC)

Brief Regional Profile
➢ Headquartered in Gaborone, Botswana, SADC consists of 15 African countries: Angola, Botswana, Democratic Republic of the Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe
➢ In 2012, SADC countries had a combined GDP of USD 651 bn and an average real GDP growth rate of 5.1%. SADC is the largest African regional bloc in terms of GDP and GDP per capita
➢ SADC nation states make up a population of roughly 277 mn people and cover nearly one-third of the African continent
➢ SADC was formed in 1992 to promote economic development, security and poverty alleviation, and to support disadvantaged groups through greater regional integration. It is one of the largest intergovernmental organizations in Africa
➢ In 2000, SADC instituted a free trade agreement, which covers all SADC member states except Angola, the DRC, Congo and Seychelles
➢ By the end of 2012, Chinese investment in SADC amounted to USD 9.4 bn



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