China and Africa partner for sustainable investment and growth

• China looks for sustainable business prospects in Africa
• ICT infrastructure can pave the way for digital leap
• Long-term potential as investment destination

Chinese banks now make up about one-fifth of all lending to Africa. China’s continued investment in Africa is evident through its bilateral trade, that reached a historical high of $282 billion in 2022.

Despite challenges such as trade deficits, inflation, and sovereign debt borrowing constraints, Africa’s burgeoning population and urbanisation, its commitment to environmental social governance, and the need to localise and regionalise supply chains have placed the continent in good stead for the next phase of investment-driven and sustainable growth, not just with China but also the rest of the world.

China looks for sustainable business prospects in Africa

China is looking to Africa as a major investment destination predicated on various opportunities in terms of raw materials, sustainability, and a growing and educated population.

Investment prospects in sustainable industries make Africa appealing to Chinese investors in the electric vehicle (EV) industry and related mineral mining. China has a constantly-growing EV market, with consumers purchasing 439,000 new energy vehicles in February 2023 alone.

Africa is rich in the materials required for this industry, including cobalt, nickel, lithium and copper. Investing in Africa’s mineral resources with mining and smelting in Africa for the global EV market can create a win-win situation, benefiting both China and Africa, while promoting sustainable transportation and reducing carbon emissions.

In addition, the global initiatives and commitments around carbon peak and carbon neutrality open another door for Chinese investors looking to invest in Africa. The continent is actively pursuing an energy transition from fossil fuels to renewable sources, and China leads the world in total installed capacity for solar photovoltaic (PV) and wind power projects.

China also has leading manufacturers and engineering, procurement, and construction contractors for solar PV and wind power projects, which can deliver turnkey projects at competitive costs and timelines. Investing in renewable energy in Africa can contribute towards mitigating climate change, promoting sustainable development, and fostering technology transfer and knowledge-sharing between China and Africa.

The investment potential of cement production may not grab the headlines, but it must not be overlooked. Driven by industrialisation and urbanisation, Africa’s cement industry is booming, with additional capacity needed to meet the demand. Although cement production has been perceived as a pollutant in the past, new strategies and technologies are being deployed to decrease greenhouse gas emissions and upgrade cement manufacturing capacity more sustainably. China’s expertise in cement production and sustainable practices can contribute to Africa’s infrastructure development while promoting environmental sustainability.

ICT infrastructure can pave the way for digital leap

Information and communication technology (ICT) infrastructure is another area of investment opportunity for China in Africa. With over 456 million unique mobile subscribers in Sub-Saharan Africa alone by the end of 2018, there is a growing demand for broadband connectivity. However, fewer than a third of Africans have access to broadband, presenting a significant opportunity for investment in ICT infrastructure.

Improved access to ICT can foster economic growth, enhance efficiency and transparency, and promote digitalisation and innovation in Africa. The development around data privacy and cross-border data transfer will also likely attract more investment for local and regional data centres in Africa for African individuals and corporate clients.

Long-term potential as investment destination

Africa’s long-term investment potential is underscored by its rising consumer market, abundant resources, infrastructure development, urbanisation and technological advancements. By recognising and tapping into these factors and others such as regional integration and agricultural opportunities, its entrepreneurial spirit, political stability, and policy reforms, investors can unlock significant opportunities.

China has long recognised the investment potential of Africa and has been a crucial partner to the continent in various sectors, including infrastructure, ICT and agriculture, among others. The partnership between China and Africa presents a promising opportunity for sustainable investment and growth for both parties, while also opening doors to global investors.

Kai Zhu is the head of China Corridor at Absa Corporate and Investment Bank, serving global and Africa-based multinationals, public sector and institutional clients.