Chinese investment

China and Ethiopia sign deals

China’s premier Li Keqiang and Ethiopia’s prime minister Hailemariam Desalegn at a treaty signing ceremony in Ethiopian capital, Addis Ababa

Chinese Premier Li Keqiang arrived in Ethiopia Sunday for the start of a four nation Africa tour (Nigeria, Angola and Kenya), his first visit to the continent since assuming his position a little over a year ago. Both nations signed 16 deals total which included legal accords covering diplomatic visa exemptions, cultural corporation and extradition, agreements on economic, trade and technical cooperation, loans and cooperation agreements for the construction of roads and industrial zones.

Chinese firms have invested heavily in Ethiopia in recent years with their worth swelling well over $1 billion in 2014, according to official figures.

Beijing is also a key partner in Ethiopia’s bid to expand infrastructure such as roads, railways and telecom services.

Huawei Technologies Co Ltd – the world’s second largest telecom equipment maker – and ZTE Corp are working to introduce a high-speed 4G broadband network in the Ethiopian capital Addis Ababa and a 3G service throughout the country.

Officials said both firms have now signed an $80 million deal to lay optical ground cables to form a nationwide network.

This is the second major high level visit to Ethiopia after last years visit by President Xi Jinping.

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China increases investment and aid to Africa

Chinese Premier Li Keqiang

In continuation of Chinese investment, engagement and cooperation in Africa, Chinese Premier Li Keqiang unveiled extra aid for Africa totaling at least $12 billion on Monday, and offered to share advance technology with the continent to help with development of high-speed rail,  boost collaboration in industry, finance, poverty reduction, ecological protection, people-to-people exchanges, and peace and security.  Speaking in Addis Ababa, Ethiopia’s capital, Mr. Li also reaffirmed Beijing’s support for Africa’s infrastructure sector: “Infrastructure is the precondition to industrial development. China will actively participate in projects such as roads, railways, telecommunications and power in Africa”.

Li said that the new $12 billion credit line would be on top of the existing $20 billion already offered when former President Xi Jinping made loans of $20 billion to African nations from 2013-2015 when he visited in March 2013.

He also said China will discuss with the African Development Bank the prospect of establishing a joint fund to support infrastructure development.

China’s direct investment in Africa reached $25 billion at the end of last year. With Africa having four of the top 10 fastest growing economies in the world, expect more investment and commitment from not just Africa, but many other nations.

 

China signs deal to invest in South Africa’s platinum industry

China has signed a deal to invest $877 million in South Africa’s platinum industry, Beijing’s second largest investment in Africa outside the energy sector.

China is set to make its second largest investment in Africa outside the energy sector by ploughing $877m into South Africa’s platinum industry.

The deal signed last week adds intensity to China’s ambitious drive to sustain its economic boom by securing Africa’s natural re-sources. For the first time, Beijing will take a direct stake in the continent’s platinum reserves, most of which are in South Africa.

Jinchuan, a Chinese state-owned mining company, is to acquire a 51 per cent stake in Wesizwe, a junior South African platinum developer, for $227m (€185m, £158m).

The China Development Bank will then raise an-other $650m to develop its flagship Frischgewaagd-Ledig platinum project. After the mine is built, Jinchuan will take all its platinum produced, according to a long-term supply deal.

“This is a very significant strategic play because it gives China its first direct access to platinum,” said Martyn Davies, chief executive of Frontier Advisory, a Johannesburg company that worked with Wesizwe.

The entry of one of China’s largest mining companies into the South African platinum industry follows that of Eurasian Natural Resources Corp, Kazakhstan’s largest miner.

ENRC agreed to buy a 12 per cent stake in Northam Platinum for R2.2bn (€230m, $280m, £190m) in April, with many industry analysts expecting ENRC to increase its stake over time.

Like Wesizwe, Northam is on the smaller end of a global platinum industry dominated by three big South African producers: Anglo Platinum, Impala Platinum and Lonmin.

In the past decade platinum has been used mostly in the automotive sector, which uses it to make autocatalysts to clean exhaust from vehicles. But last year demand for platinum jewellery surged, driven by Chinese buyers attracted to lower prices, according to a recent report by Johnson Matthey. South Africa accounts for some 80 per cent of the world’s platinum group metal production.

The deal’s structure – with a relatively small equity stake supplemented by a more significant project financing component and long-term supply agreements – is becoming a pattern among Chinese resource deals in Africa.

This year similar structures were agreed with Chinese companies to develop African Minerals’ Tonkolili iron ore deposit in Sierra Leone and Bellzone’s Kalia iron ore deposit in Guinea.

More background on Chinese investment in South Africa.

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China strengthens investments in South Africa

China increases business stake in South Africa.

China on Thursday announced its largest investment in South Africa for more than two years, entrenching its position as the resource-rich continent’s most important economic and commercial partner.

For example, FAW, a Chinese carmaker, last month announced a $100m investment in South Africa. “Chinese companies are coming to the party,” said Martyn Davies, chief executive of Frontier Advisory Services, a Johannesburg-based consultancy. “They have a high level of confidence in the continent and see South Africa as a springboard for expansion elsewhere.”

The China Africa Development Fund and Jidong Development Group will help build a new cement plant worth at least Rmb1.5bn.

The announcement lays the ground for a planned August visit to Beijing by Jacob Zuma, the South African president, who has made deepening economic and political ties with China a priority of his foreign policy.

China emerged as South Africa’s largest trading partner last year, partly due to a large rise in iron ore exports, mirroring a trend in other countries on the continent, which have been courted by Beijing for their resources and growing markets.

The latest agreement will see the two Chinese entities joining forces with Continental Cement, a local enterprise, and Women Investment Portfolio Holdings, a South African company dedicated to empowering black women. They will build the new plant in Gauteng province, outside Johannesburg.

The new plant is aimed at making up a shortfall of domestic building products, such as cement, much of its caused by the huge infrastructure programme from construction for the football World Cup.

Congested roads and railways make it relatively costly for South Africa to import cement, so investment in local production facilities is correspondingly more attractive.

Growing economic ties with China and other big emerging markets have paved the way for closer political ties, especially since Mr Zuma came to office last May. While his predecessor, Thabo Mbeki, expressed reservations about China’s role in Africa, Mr Zuma’s own enthusiasm has been greater.

A $5.5bn investment by the Industrial and Commercial Bank of China in South Africa’s Standard Bank agreed in October 2007 remains easily the largest Chinese investment in Africa to date, accounting for about a quarter of the funds that Beijing dedicated to the continent.

Much of that investment has concentrated on roads, power plants and other infrastructure but analysts say a growing number of Chinese companies are beginning to buy building and other materials locally. They are also eyeing Africa’s rapidly growing consumer markets.

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