Partnership good way to build infrastructure

Western and Chinese firms working together can profitably help Africa meet development goals

Traditionally, the competition for resources and contracts in sub-Saharan Africa between China and the West has been interpreted as a new version of the "Great Game", with governments giving sometimes opaque and unfair support to their companies to gain advantage over a historical rival.

But conflict need not be the defining feature of projects that make money while achieving important development gains.

Indeed, an increasing number of companies and international financial institutions have come to a realization that governments seem to be edging toward: that cooperation is not only possible but also desirable for all involved.

In the run-up to President Barack Obama's arrival in Beijing, there were reports that China and the United States were considering being partners in projects and the financing of electricity generation and transmission schemes in several African countries. Reuters said moves by the US to collaborate with China in power projects in Africa "would mark a significant shift in diplomacy between Washington and Beijing after long-running disputes over foreign policy, security, espionage and alleged human rights abuses".

Through the Power Africa initiative announced in mid-2013, Obama has sought to tackle sub-Saharan Africa's extremely low levels of access to electricity. Helping to overcome the continent's gaping energy deficits would add a virtuous luster to the embattled president's legacy; Obama has mobilized corporate America behind Power Africa, led by General Electric, which is promising huge investments.

There has been speculation that the US and China could come together with international financial institutions - led by the African Development Bank and World Bank - to develop Africa's largest planned infrastructure project, the estimated 44 gigawatt Grand Inga dam in the Democratic Republic of Congo. But more likely, official Chinese and US support will come together for smaller projects.

In many respects, business and international financial institutions are moving faster than governments. Chinese enterprises made a spectacular return to African business in the past decade or so, when bilateral trade rose from $10 billion in 2000 to $210 billion in 2013, an increase many times greater than even optimists had planned. There is room for similar levels of growth in the next decade which will have to be driven by the private sector, adding new layers of commercial sophistication to Chinese businesses' presence in Africa.

A growing number of multinationals are using their Chinese manufacturing plants and workforces to compete in Africa. Headquartered in Paris, engineering firm Schneider Electric has several manufacturing plants and some 30,000 staff members in China; Schneider Electric (China) Company Ltd can access export credit from the Export-Import Bank of China. Schneider recently won a major contract to install a solar photovoltaic generation plant in Algeria, in partnership with Sinohydro Corporation. In Morocco, Schneider China is involved in bids for the Safi thermal power plant and port (with China Harbour Engineering Company).

Many of the Chinese businesses that attended the Africa Infrastructure and Power Forum conference, organized by UK-based EnergyNet in Beijing on Sept 25-26, appreciated that their growth in Africa would often be best leveraged by working with partners. Amyn Musa of Nairobi-based law firm Anjarwalla & Khanna said: "The Chinese have moved out of government-to-government deals". Indeed, the China-Africa Development Fund and other Chinese investors were looking "aggressively" to take equity stakes in investment projects, he observed.

Many international participants, ranging from the Africa Development Bank, which has a new $2 billion African investment fund with China, to power equipment suppliers, are looking to leverage China's huge financial balances to develop infrastructure. Western firms have already been active in efforts to invest in, and form partnerships with, Chinese players in growth industries such as solar power, where well-known names such as Jinko Solar, Yingli Green Energy and ReneSolar have been looking beyond traditional markets to build their order books.

The benefits of partnership in African deals with Chinese firms were highlighted by Louis van Pletsen, a founding partner at UK-based developer Quantum Power, who observed that "the Chinese came in when others didn't winning construction contracts with government as counter party (Now, Chinese business is) increasingly shifting toward a private sector-led, competitive process, and Chinese suppliers are 40 percent cheaper". Businesspeople like Pletsen are working to build their networks of Chinese suppliers and financiers to help develop their own businesses across sub-Saharan Africa.

Such trends are likely to see Chinese investors and suppliers working more closely with Western companies, including US corporations, who are being inspired by Power Africa and other developments to take a new look at Africa, as it struggles to overcome its crippling lack of electricity and other basic services. Western and Chinese companies working together can cut costs, raise financing and profitably help Africa meet cherished development goals. And that is even without considering any diplomatic advantages working together might produce.

The author is chairman of Cross-border Information Ltd, a British consultancy focused on Africa and the Middle East, which also publishes African Energy.

(China Daily Africa Weekly 11/14/2014 page9)