China’s funding of infrastructures in Africa is vital for stimulating economic growth – World Bank

14 July 2008

Washington, USA, 14 July – Since 2006 China has provided nearly US$11.5 billion in financing of communication lines and hydro-electric power stations in sub-Saharan Africa, which have driven the economic growth of countries in the region, said the World Bank.

According to the study, “Making the bridge: The growing role of China as investor in infrastructures in Sub-Saharan Africa,” presented at the end of last week in Washington, the Asian giant is currently financing the reconstruction of 1,350 km of rail lines and the construction of over 1,600 km of new railways, “an important contribution to the 50,000 km of existing rail network on the continent.”

Angola, Nigeria, Ethiopia and Sudan – countries rich in natural resources – receive around 70 percent of Chinese investment in Sub-Saharan Africa, but the number of countries covered already totals 35.

“The success story of China in reducing poverty through rapid and sustained economic growth is remarkable. And the enormous investment in infrastructures was a key factor,” said vice president of the World Bank for Africa, Katryn Ezekwesili Obiageli at the presentation.

Today, she added, “the growing involvement of China in Africa is helping to deal with the significant lack of infrastructures on the continent. Obviously there are challenges which will have to be met by African countries and by China, together with the support of their development partners. However, by working together, we can create winning partnerships for both sides.”

The lack of infrastructures in the region costs the countries there the equivalent of one percentage point in GDP growth “per capita”.

According to the World Bank, before 2004, Chinese investment in the region was less than US$1 billion per year, but since then it has taken off.

Last year, it reached US$4.5 billion, after having reached a historic maximum of US$7 billion in 2006.

Of the roughly US$16 billion of Chinese investment, 10 percent concerns projects that have already been finished, 25 percent are currently underway and 65 percent are at the contract stage.

“The growing South-South cooperation is being driven by the strong complementary characteristics of China and Africa. China’s search for natural resources finds a parallel in Africa’s considerable and often unexplored petroleum and mineral reserves. The urgent need for infrastructures in Africa finds its parallel in the Chinese construction industry, which is competitive on a worldwide scale,” said World Bank economist, Vivien Foster, co-author of the report.

The study highlights that 10 of the projects supported by China to the tune of US$3.3 billion could increase the continent’s capacity for production of hydro-electricity by 6,000 megawatts, or 30 percent.

It also points out that usually funding contracts include a concession of 33 percent, close to the world standard, even though the terms of contracts with African countries vary greatly depending on the projects.

According to Chuan Chen, co-author and former lecturer in civil engineering at China’s Tsinghua University, “the key challenge is to maintain the rhythm so that the results are long-lasting in terms of development.”

Currently, only one in four Africans have access to electricity and travel on the main roads used for export take two or three times longer than in Asia.

This greater involvement is having consequences in bilateral trade and Angola is currently by far China’s biggest trade partner on the continent, followed by the Republic of Congo, Equatorial Guinea, South Africa and Sudan.

The greater involvement of China in infrastructures came about at a time when western donors were concentrating on social support, namely the fight against AIDS or malaria.

The World Bank’s report underlines the role, though on a smaller scale, of other “new” investors such as India and Arab development funds. (macauhub)