Move over – China is blowing through. The Asian country has been touting its ventures into the Africa contintent, and has now trumped the West by becoming South Africa’s largest trading partner, according to South Africa’s Department of Trade and Industry (DTI).
China has beat out other top traders including the US, Germany, the UK, and fellow Asian country Japan, by increasing South Africa-China trade to 11.95% from 8.45% in the same period last year. Trade volumes with China between January and July have reached R32.4 billion, followed by the US with R21.7 billion, Germany’s R17.5 billion, the UK’s R15.2 billion, and Japan’s R19.7 billion,.
With the China-Africa Development Fund (CADF), Chinese enterprises were encouraged to invest in the continent with an initial investment of $1 billion to establish three to five trade and economic cooperation zones. In March, China and South Africa signed a framework agreement in which the South African branch of CADF is providing assessment for Chinese companies looking to finance power and alternative energy-related projects (China-Africa Development Fund to the Rescue).
However, South Africa isn’t the only African country to have a greater trade relationship with China – Angola accounts for 24% of China-Africa trade, South Africa follows with 17%, Sudan 8%, Nigeria 7%, and Egypt 6%, these five countries alone receive a combined 62% of China’s overall trade with Africa.
The next five years could see a substantial growth in Asian investment for the Sub-Saharan energy market, according to an analysis released by Frost & Sullivan. The consultancy estimates that the total value of Asian commitments in the sub-Saharan African electricity sector was $4.44 billion as of 2008. Frost & Sullivan also projects that Asian companies could be involved in additional projects worth over $2 billion by 2014. The following regions are covered in this research: East Africa, West Africa, Southern Africa, and Central Africa.
"Asian countries, notably China and Japan, are interested in several power projects across the African continent," says Frost & Sullivan energy industry analyst Jeannot Boussougouth. "The majority of these power projects are hydro-based because of China’s vast experience in the construction of hydro-power projects."
However, there could be obstacles that would limit the number of energy projects. For instance, China has complicated contract terms.The Asian country receives harsh criticism by many because of its insistence on importing Chinese laborers and its resettlement procedures.
"Although China’s funding is made available to willing sub-Saharan African public utilities, there are growing concerns on the contract terms," Boussougouth stated. "The challenge for sub-Saharan African governments is to obtain better terms during the contractor procurement process, while ensuring China’s eagerness to continue providing these funds."