China’s Investment in the Hi-Tech Development of Africa

10/05/2019

China’s BRI ambition to link emerging markets with hi-tech telecommunications hardware infrastructure has turned Africa into a technological battleground and thanks to Chinese investments, African digital development is now finally booming

 

The People’s Republic and Africa are closer than ever. China is Africa’s first commercial partner and here, the Dragon plays the role of the main investor allocating funds in many development areas.

As the Africa Ayactiveness Program report released in 2017 revealed, since 2005, China has invested in 293 foreign direct investment projects in Africa, for a total of $66.4 billion, actively creating over 130,000 jobs.

 

In 2017, African imports in China reached $170 billion, much more than the $10 billion reached in 2000 and almost five times the figure for the United States, according to data from the Chinese Ministry of Commerce.

 

In January, Chinese Foreign Minister Wang Yi visited the headquarters of the African Union in Ethiopia, Burkina Faso, Gambia, and Senegal during his first diplomatic trip in 2019. As a 29-year-old diplomatic tradition, the Chinese Foreign Minister visited Africa as his first trip each year, a display of friendship that does not serve only to keep the relationship between the two parts strong but it is also necessary to sustain the economic development of the African continent.

Indeed, the Middle Kingdom has been crucial for the recent rapid development of Africa. Today, the Dark Continent is no longer on its knees in front of the United States thanks to its nations’ economic and political alignment with the world’s fastest emerging superpower, China.

 

China investment in Africa - globe - cifnews

© Unsplash. China is exporting e-commerce culture to Africa and African e-commerce market is thus booming.

 

Since the beginning of the last century, here, various Chinese companies have built stadiums, highways, airports, schools, hospitals and, in Angola, an entire city. In the last ten years, Beijing has allocated billions of dollars in the continent, becoming the largest trading partner of Africa as a whole.

“China promises to interact with Africa on the basis of a principle of sincerity and concrete results, ” said Chinese President Xi Jinping at the closing of the summit of the China-Africa Forum for Cooperation (FOCAC) held in Beijing in 2018. He then added to share with Africa a common future to pursue through a “joint march” and announced to have allocated further $60 billion funds for African development as part of a set of new measures to strengthen ties between the two regions.

Until today, China has helped Africa build over 10,000 kilometers of highways, over 6,000 kilometers of railways and hundreds of airports, ports and power plants, with the construction of numerous hospitals and schools across the continent. The PRC has also helped train hundreds of thousands of professionals for various sectors through human resource development projects.

 

Actually, Beijing sees in Africa a friend among developing countries. Since the constitution of the People’s Republic, Africa always played a key role in the Chinese plan to strengthen ties among developing countries.

 

In 2000, the building of FOCAC started a period of defining common political objectives and of mutual development goals. Moreover, the construction of an even stronger union between China and Africa through the China-Africa Cooperation Forum action plan is considered to accelerate the African integration into the Belt and Road Initiative (BRI).

Actually, the BRI in Africa is integrated with the very ambitious “Agenda 2063” issued by the African Union. A project that aims to build a high-speed continental rail network, a single African airline, and a virtual African University. The final goal is to link the 54 countries in an area of free trade and free movement of goods and people together with a shared peace on the entire continent.

However, in order to pursue the realization of its massive initiative of a renewed digital Silk Road, African technological development represents a significant part of the plan. Investing in the continent, Beijing is, therefore, not only exporting the e-commerce culture but it is actually making it boom.

 

China is investing in Africa - kenya - cifnews

© Unsplash. Amboseli National Park, Kenya. Since 2006, the PRC has trained more than 57,000 agricultural officials, technicians and vocational education students for African countries.

 

China’s BRI ambition to link emerging markets with hi-tech telecommunications hardware infrastructure has thus turned Africa into a technological battleground, especially for what concerns Sino-US tensions.

Indeed, long before the Belt and Road project, the PRC played a crucial role in developing Africa’s tech infrastructure. For more than two decades, American companies such as IBM and Microsoft made multimillion-dollar investments in Africa’s digital infrastructure. However, although Huawei and ZTE entered the game later, these Chinese companies effectively helped to develop the continent’s mobile network helping drive growth of mobile phone and internet penetration. These early investments contributed to the explosion in mobile telephony and to the birth of e-commerce in African countries.

Thanks to Chinese intervention, together with increasing urbanization, today, internet penetration in Africa is growing year after year, especially in more advanced markets such as Nigeria and South Africa, where internet penetration reached over 44%.

Nevertheless, the technological war in the African battleground is particularly intense between the world’s leading e-commerce groups, Amazon and Alibaba. Therefore, last August, Alibaba’s founder launched a $10 million annual prize scheme for budding African business people, called the Netrepreneur Prize, which Ma hopes will foster hundreds of future tech leaders over the next decade.

According to Jack Ma, this prize demonstrates the company’s “support to the next generation of young entrepreneurs across Africa that is paving the way for a better future and impart positive change in their communities.”

 

Today, China represents Africa’s main commercial partner and over the last ten years, the Dragon invested in the region a total of about $125 billion. A contribution that not only inspires international partners to pay more attention to this continent but that also places the African nation literally within the Belt and Road project.

 

So while Alibaba is rapidly investing in local activities, Amazon strategy moves slower. American expansion strategy, in fact, often relies on replicating key aspects of its model, which is in contrast to Alibaba, which invests in local players.

Today, China’s largest tech giants are establishing a basis in Africa’s still immature e-commerce market while the country’s hi-tech companies such as Tencent, Oppo, and Xiaomi are leading the local digitalization. In addition, last year, in Chengdu, ambassadors and counselors from 19 African nations met with the leaders of China’s technology sector for the first China-Africa E-commerce Industrial Development Forum, showing the continent’s effort to keep up with Beijing’s projects in Africa.

According to the research site Statista, the digital industry was worth $16.5 billion in 2017 and it is expected to hit $29 billion by 2022 while necessary infrastructure, such as mobile phone ownership, and household incomes continue to rise. By 2025, when half of Africans will have internet access, this figure could be over $75 billion, according to McKinsey estimates.

Chinese tech companies’ investments in the Dark Continent are already paying off though. Jack Ma’s group, with 4.2 million customers on the continent, saw the value of transactions through its AliExpress portal almost quadruple in 2017, driven by hungry consumers in key markets such as South Africa, Nigeria, and Kenya. But China is doing more than that, it is exporting an e-commerce culture followed by its idea of a cashless society, and consumers seem to appreciate this change.

 

China investment in Africa - Belt and Road forum - cifnews

© Xinhua. 5 Africa’s heads of State attended the last Belt and Road Forum in Beijing, which is a significant improvement compared to the 2017 event when just 2 African leaders attended the forum.

 

Nevertheless, Chinese investors have an advantage over other foreign venture capital investors. Sharing a similar history of digital development, they can use their experience in China to help African companies gain market share.

The African market is remarkably similar to China’s one before its explosive economic boom. Indeed, China and Sub-Saharan Africa have large populations exceeding 1 billion people, rapid urbanization rates and a tendency to leapfrog technologies. As Africa has leapfrogged the landline to the mobile phone, China went from cash to digital payments, bypassing cards altogether.

Therefore, given the size of China’s market and the need to connect urban regions, Chinese companies have developed business models that can easily be replicated in Africa.

In the meantime, African tech ecosystem is growing, reflecting a rising middle class, increased internet connectivity, and increasing local investment. Therefore, while China has a wide room to operate in Africa’s growing digital economy, the continent has the potential to emulate the Dragon’s hi-tech success.

With the help of the Middle Kingdom, is Africa going to sit at the table of the world’s leading tech powers soon?

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