Chinese Investment in African Infrastructure

Chinese economic presence in Africa has long been increasing due to the significant investments made by the Chinese government [source]. The same cannot be said for Western firms. In fact, their presence in the African infrastructure market has decreased from 85% in 1990 to 12% in 2020.

Key Judgement 1: Over the next 12 months, it is highly likely that European and American firms will decrease their presence in Africa.

  • In 1990, European and American firms funded more than 85% of all construction contracts in the African continent. However, Western firms are now struggling to win any of the infrastructure projects in Africa. This is largely due to Chinese firms’ domination of the market [source].

  • In 2020, Chinese firms were responsible for 31% of all infrastructure projects in Africa, a marked increase from 12% in 2013. Western firms have shown the opposite trend. European and American economic presence in Africa decreased from 37% in 2013 to 12% in 2020 [source].

  • The Infrastructure Consortium for Africa has estimated that in 2018 China contributed US$25.7 billion of the overall US$100.8 billion committed towards African infrastructure development projects. This funding is part of the Belt and Road Initiative (BRI) which finances ports, roads and other infrastructure on the continent [source].

  • Chinese firms often win contracts simply due to a lack of viable competition. African infrastructure projects offer significant risks to investors such as ambiguous property rights legislation and difficulty with negating fraud [source].

  • Corruption is rife in contract procurement in Africa. According to the World Bank, in 2005, 40% of international construction firms reported losing contracts because a competitor had paid a bribe. However, anti-corruption laws in both the US and EU are far more stringent and apply in all jurisdictions, meaning that these firms are beholden to these AML and anti-corruption laws [source].
(Img; The New Silk Road as part of the Belt and Road Initiative; via Grey Dynamics)

Key Judgement 2: Over the next 12 months, it is highly likely that Chinese firms will continue to grow their market share in Africa.

  • Between 2007 and 2020, China’s development banks invested $23 billion in infrastructure projects on the continent. Therefore, Chinese economic presence in Africa has grown exponentially [source].

  • Chinese firms often bring in domestic Chinese workers and offer little training and skills for African employees, as well as raw materials from China. In the majority of cases, local companies are not hired for the construction of infrastructure. Therefore, China-funded projects generate significant capital back into the Chinese economy through the use of Chinese-owned firms throughout the entire supply and construction chain [source].

  • In addition, Chinese firms are more competitive than European firms in terms of price, whilst maintaining the same level of quality as their Western counterparts. Chinese-owned companies consistently win construction contracts over Western and African firms due to their competitive advantages and it is highly likely that their market share will increase.

Intelligence Cut-Off Date: 20th of June 2022

Table of Contents

Related Content

Secret

Anas Khattab: New Syrian Intel Chief Has Terrorist Ties

TYPE:_ Article
Location:_ MENA

NORAD: North American Aerospace Defense Command

TYPE:_ Article

Khost: An Al-Qaeda victory against the CIA?

TYPE:_ Article
Location:_ Eurasia

Iranian Intelligence Community: An Overview

TYPE:_ Article
Location:_ MENA

Chinese Special Forces: Dragons of the East

TYPE:_ Article

A Comprehensive Overview of Israeli Arms Exports to Azerbaijan

TYPE:_ Article
Location:_ Eurasia

Stay in the loop

Get a free weekly email that makes reading intel articles and reports actually enjoyable.

Log in

Stay in the loop

Get a free weekly email that makes reading Intelligence Reports and Articles actually enjoyable.

Table of Contents

Contact

Contact

"*" indicates required fields

This field is for validation purposes and should be left unchanged.