China Pledges US$40 Billion In Multiple Infrastructure Projects For Africa
Wide ranging nine-point development plans showcase significant trade opportunities
The 2021 Forum on China-Africa Cooperation (FOCAC) has concluded, with China continuing its commit to the African continent in both trade and the potential for additional infrastructure loans. With Chinese President Xi Jinping appearing by video, his speech to the forum included a number of new commitments, including increase of Chinese imports of African products, Chinese participation in African poverty reduction programmes, a green development programme, a capacity building programme and a digital innovation programme.
The increased trade aspect will come as a direct result of the African Continental Free Trade Agreement (AfCFTA) which came into effect on January 1st this year and has eliminated tariffs on 95% of all intra-African traded goods. That makes it far easier for sourcing companies to operate pan-African supply chains and to then consolidate those into one specific area such as an African Special Economic Zone to be worked on, with duty free imported (Chinese) products to produce a finished item that can then be reexported back to China, the upcoming RCEP bloc, or resold back onto the African market. This is a major reason why China-African trade has already jumped 38% this year. It will be an on-going trend for the coming years and supply chains penetrate deeper into Africa and infrastructure improves access.
There have been (mainly Western) criticisms of China loading up certain African countries with debt, an issue addressed at the conference by Hannah Ryder, previously with the UNDP and Government Economist, now CEO of Development Reimagined who stated that “It is wrong to interpret any change through a lens of Africa is in debt distress. That simply isn’t supported by data.”
The proposed infrastructure spend is a continuation of China’s on-going Belt and Road Initiative and will be spread across specific, targeted initiatives as part of the China-Africa Cooperation Vision 2035. President Xi introduced this in his speech, identifying nine specific programmes:
Medical and Health
To help Africa reach its target of vaccinating 60% of the African population by 2022, China will deliver a further 1 billion doses of Covid-19 vaccine to Africa. This will come in the form of 600 million doses as donation and 400 million doses to be provided through joint production by Chinese companies and African countries. In addition, China will undertake 10 medical and health projects for African countries and send 1,500 medical personnel and public health experts to Africa.
Poverty Reduction and Agricultural Development
Measures include China undertaking 10 poverty reduction and agricultural projects for Africa and sending 500 agricultural experts to the continent.
China will aim to reach US$300 billion in total imports from Africa over the next three years. Measures will include opening customs “green lanes” for African agricultural exports to China and increasing the scope of products enjoying zero-tariff treatment for the least developed countries that have diplomatic relations with China (all African countries except for Eswatini). China will provide US$10 billion of trade financing to support African exports, and will undertake ten trade connectivity projects for Africa, form an expert group on economic cooperation with the secretariat of AfCFTA, and give continued support to the development of the AfCFTA.
China will encourage its domestic companies to invest at least US$10 billion in Africa over the coming three years and will establish a platform for China-Africa private sector investment promotion.
China will undertake 10 digital economy projects for Africa, establish centres for China-Africa cooperation on satellite remote-sensing, (assisting with product origin verification) support the development of joint laboratories, partner institutes, and scientific and technological innovation cooperation bases. Online shopping festivals promoting African products and a campaign to market 100 African stores and 1,000 African products on e-commerce platforms will be established.
China will undertake 10 green development, environmental protection and climate action projects for Africa, support the development of the “Great Green Wall”, and build centres of excellence on low-carbon development and climate change adaptation in Africa.
Projects will include the building or upgrading of 10 schools in Africa, while inviting 10,000 high-level Africans for training programmes and to promote vocational training and skills for African labour.
Cultural and People-to-people Exchanges
Chinese tourism in African countries will be promoted and facilitated.
Peace and Security
President Xi said that China will undertake 10 peace and security projects for Africa. It will continue to deliver military assistance to the African Union and support African countries’ efforts to independently maintain regional security and fight terrorism, and conduct joint peace-keeping exercises.
The President of the African Union Congress, Cyril Ramapahosa, stated that “Since its inception, FOCAC has been an engine for progress, a valuable platform for dialogue, and for amplifying Africa’s voice on the world stage.” He also drew attention to the gains it had brought Africa in terms of trade and investment and the cooperation it had fostered in fields from higher education to medical care and transportation. “Over the next three years we will be implementing the Dakar Action Plan,” he said. “This will require that we recalibrate the Sino-Africa relationship with a greater emphasis on promoting sustainable development for the benefit of all. He also called on China “to increase infrastructure investment in Africa, especially in key sectors such as port, rail, energy and water, and to continue to support human capital development and technology transfer.”
The commitment to Africa makes sense in many ways – as China itself heads up the added value chain and becomes more expensive as a manufacturer, part of that process, in conjunction with increased sourcing and a development of African labour skills will help China feed its markets. It is also a strong indicator of the detail and cooperation that has gone into China’s African policy – a notable omission from the European Union’s announcement of a US$300 billion ‘Global Gateway’ infrastructure development plan that contained only rhetoric from Brussels, with no input from any of the proposed regions it intends to finance. There is a profound difference in the ability to produce in these two different stances.
Africa will also gain with China’s admission into the RCEP free trade bloc, which commences in less than four weeks’ time, on January 1st, 2022. RCEP includes China as well as all ten ASEAN nations, Japan, South Korea, Australia, and New Zealand. African and Asian lawyers, import-export agents and trading companies should be looking at the RCEP rules of origin agreements in detail to examine what African components can be sourced and resold onto the RCEP markets. For assistance, please contact our firm.
Chris Devonshire-Ellis is the Chairman of Dezan Shira & Associates. The firm assists British and Foreign Investment into Asia and has 28 offices throughout China, India, the ASEAN nations and Russia. For strategic and business intelligence concerning China’s Belt & Road Initiative please email firstname.lastname@example.org or visit us at www.dezshira.com