Chinese investment in Africa increasingly carried out by private companies and focused on local production

3 March 2014

The new wave of Chinese investment in Africa is increasingly carried out by private companies rather than state companies as was the case initially and, as well as the mining and oil industries focuses on local production, according to a study from Stellenbosch University.

In a study published in the annual report of the Centre for Chinese studies of the South African university, researchers Daouda Cissé and Yejoo Kim said that China’s need for raw materials will continue to make Africa, #of significant importance on the Chinese agenda for foreign investment,” with a growing role by private players.

“Demand for foreign business opportunities, in relation to growth markets and testing the companies’ skills to operate in a foreign environment leads Chinese companies to operate in Africa,” they said.

They also noted that these companies had less access to finance compared to state companies or large multinationals, and are faced with growing labour and production costs.

Relocating production “offers the industrial sector opportunities in Africa,” the authors said citing the examples of Ethiopia and South Africa, a trend that could allow these countries to “diversify their exports, which are still strongly based on raw materials.”

Mozambique is soon expected to become a car manufacturing and exporting country this year following an investment by China Tong Jian Investment, which is also attracting other companies in the sector to Mozambique.

Construction of the facility, costing an estimated US$200 million, should produce around 10,000 vehicles per year, 30 percent of which for the Mozambican market and the remainder for export.

The factory, which is located in the Machava area of Matola, in the former workshops of Mozambican state port and rail manager Portos e Caminhos de Ferro de Moçambique, will produce buses and light passenger vehicles of the Matchedje brand, according to the Mozambican press.

In the report by Stellenbosch University the two researchers noted the growing number of private, small and medium-sized groups and companies from China working in Africa.

This is the case with Cabo Verde (Cape Verde), where the government recently said that there was Chinese interest in the privatisation of airline Transportes Aéreos de Cabo Verde (TACV).

The China Road & Bridge Corporation (CRBC) will build a deep water port, a cruise ship terminal and repair the Cabnave shipyard on the Cape Verdean island of São Vicente, the Cargo News website reported in January.

In the last few weeks, the Cabo Verde government lent its “unquestioning” support to the tourism investment project by a Macau businessman on the islet of Santa Maria, off the coast of the city of Praia.

Wherever investment comes from, the two researchers said, only if it is “well managed, with appropriate regulation and execution in African countries, can it ensure job creation and technology and knowledge transfer.” (macauhub)