China looks to Africa for more than natural resources
The Belt and Road Initiative aims to boost trade and investment across Africa, Asia, the Middle East and Europe
The Belt and Road Initiative (BRI) is a China-led strategy aiming to boost trade and investment growth across Africa, Asia, extending to the Middle East and Europe. The BRI, with related investments totalling as much as $8-trillion by 2020, is projected to boost global trade by 12%, affecting more than 65 countries and nearly two-thirds of the world’s population.
The benefits of and investment opportunities from the BRI (the “Silk Road” for the modern age) will boost trade and investment opportunities between China and various African countries.
However, looking past natural resources and infrastructure, China continues to look for opportunities to diversify into other important and fast-growing industries on the continent.
Speaking at the bank’s Belt and Road Initiative Conference, Sarah Baynton-Glen, Africa economist at Standard Chartered Bank, said improving trade relations with China and Africa had supported growth in Africa. The bank expects growth on the continent to recover further in 2019 following years of slow growth on the back of low commodity prices.
“The investment by China in Africa, together with the BRI, has acted as a catalyst for growth in Africa,” said Baynton-Glen.
“If you look at economies that have seen a lot of Chinese investment – particularly along the Belt and Road, for example Kenya, Ethiopia and Djibouti – you see a big pick-up in trade between China and Africa and with those specific economies. Clearly there is an appetite for Chinese investment in the region.”
She said SA’s growth was important for the rest of the continent and, although lagging, the economy is expected to improve under the leadership of President Cyril Ramaphosa.
The expectation for 2019 is, however, “still weak” at 1.6% but ahead of consensus forecasts, driven by more consumer spending and investment spending after the elections – although there are downside risks, particularly Eskom and the risk of load-shedding.
“We should see slightly stronger growth over the next few years, as much as 2% growth in 2020.”
Baynton-Glen forecasts the local economy to grow at a rate of 2.5% by 2021. “But that is still well below the potential you could see from an economy like SA.
“I think the issue in terms of SA’s growth outlook is that it is so important to other economies in the region. Namibia as an example is extremely dependent on SA as a trading partner. You’ve seen 11 quarters of contraction in the Namibian economy, and a lot of that is driven by weakness in SA,” said Baynton-Glen.
Eight staff athletes from Standard Chartered are turning one of the oldest trade routes into their running track.
According to Kweku Bedu-Addo, chief executive at Standard Chartered Bank South Africa, the BRI is the most ambitious and far-reaching project of its kind in the world today.
“The initiative will benefit all countries along the routes, contributing to global economic and social development,” said Bedu-Addo.
“The BRI is core to our strategy and we are present in two-thirds of Belt and Road markets, and our rich heritage, deep local knowledge and unparalleled connectivity mean that we’re ideally placed to help our partners, clients and communities make the most out of the initiative.”
In 2017, the bank globally committed additional financing for Belt and Road projects of at least $20bn by 2020, and was involved in more than 50 Belt and Road deals worth more than $10bn across a range of products and services, said Bedu-Addo.
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This article was paid for by Standard Chartered.