African leaders prefer China’s hard cash to US overtures

Written by Toh Han Shih and Adrian Wan

The continent’s nations appear more enamoured by the mainland’s willingness to deal in hard currency than Barack Obama’s pledges

US President Barack Obama may be trying to woo Africa but the continent’s leaders seem more attracted by China’s cold, hard cash. With Obama’s African tour barely over at least three African leaders have rushed to China to sign deals worth billions of US dollars.

Obama visited Africa from late June to July 2, pledging US$7 billion to upgrade electricity infrastructure. But China’s growing financial might appears to be holding sway over US influence.

During Nigerian President Goodluck Jonathan’s visit to Beijing last week, US$1.1 billion of loan deals were signed, including a US$500 million Chinese loan for the construction of four new international airports in Abuja, Lagos, Harcourt and Kano.

China’s investment in Africa has increased 30-fold since 2005, with 2,000 Chinese firms now present in 50 African countries.

Over the past 10 years, Britain has invested the most in Africa, with 437 deals totalling US$30.5 billion, law firm Freshfields Bruckhaud Deringer said in a report this month. France came in second with 141 deals totalling US$30.5 billion. China was the third-largest investor with 49 deals worth US$20.8 billion.

“The various MOUs (memorandums of understanding) signed between Chinese and Nigerian companies will lead to stronger economic ties between the two countries,” said Jonathan in Beijing last week.

In recognition of the strategic trade link between China and Nigeria, the Central Bank of Nigeria recently converted part of Nigeria’s foreign reserves from US dollars to yuan, Jonathan announced last week. During Jonathan’s visit, Beijing agreed to expand tenfold its demand for Nigerian oil from the current 20,000 barrels per day to 200,000 barrels per day by 2015.

Chinese companies are already building roads across Nigeria in contracts valued at US$1.7 billion. On July 11, state-owned China Machinery Engineering Corp (CMEC) signed a US$201 million agreement to build a 120-megawatt power station, oil storage tanks and other infrastructure in the Nigerian city of Bauchi in 33 months, the Hong Kong-listed firm announced.

On the same day, CMEC signed a US$420 million contract to build a 500MW power station within 31 months in Benin City, Nigeria.

Nigeria is not the only African nation lining up for mainland funding. During a trip to China this month, Ugandan Prime Minister Amama Mbabazi visited CMEC’s headquarters in Beijing, where he said: “Our government is concentrating on a few priorities due to insufficient funding and China is to fund a number of these.”

Uganda would offer most of its infrastructure projects to Chinese companies, because they could be repaid from Uganda’s future oil revenue, unlike Western businesses that expected advance payment, Bloomberg quoted the office of the Ugandan prime minister as saying.

On July 8, China Harbour Engineering, a subsidiary of China Communications Construction, signed a US$700 million contract to build a new airport in Khartoum, the capital of Sudan, in 40 months. The project will be financed by a loan from the Export-Import Bank of China.

Sierra Leone President Ernest Koromo last month said he signed US$8 billion of infrastructure deals on his visit to China.

This includes a US$1.7 billion contract with China Kingho Energy Group for the construction of a port, mine, power facilities and a 250-kilometre railway; and a US$300 million contract with China Railway International for a new international airport 60km from Freetown, the capital of Sierra Leone.

Dam builder Sinohydro on July 2 signed 13 contracts to build 3,482 flats in Algeria, said Sinohydro’s website.

This article appeared in the South China Morning Post print edition.