A new report from McKinsey Africa, conducted across eight countries that together make up about two-thirds of Sub-Saharan Africa’s GDP, suggests that there are already 10 000 Chinese firms operating in Africa, four times the previous estimate.
Around 90% of these are private firms, operating in diverse sectors, with about a third in manufacturing. They are bringing capital investment, management know-how and entrepreneurial energy to the continent, and in so doing, are helping to accelerate the progress of Africa’s economies.
Across trade, investment, infrastructure, financing and aid, China is a top five partner to Africa, with no other country matching this level of engagement. The China-Africa relationship has increased over the past decade, with trade growing at around 20% per annum. FDI has grown even faster, with an annual growth rate of 40%. China is also a large source of aid, and the largest source of infrastructure financing, supporting many of Africa’s most ambitious infrastructure developments in recent years.
In addition to manufacturing, a fifth of Chinese involvement is in trade, construction and real-estate. Chinese firms also dominate nearly 50% market share of Africa’s international engineering, procurement and construction (EPC) market. They are primarily focused of serving the needs of Africa’s fast-growing markets, rather than on exports, and have made investments that represent a long-term commitment to Africa.
Kartik Jayaram, a senior partner and co-author of the report said, “Chinese engagement with Africa is set to accelerate—by 2025 Chinese firms could be earning revenues worth $440 billion, from $180 billion today. Additional industries could be in play for Chinese investment, including technology, housing, agriculture, financial services and transport and logistics.
“However, to unlock the full potential of the China-Africa partnership, we have identified 10 recommendations for Chinese and African governments as well as the private sector. To highlight two key ones—African goverments should have a China strategy and the Chinese government should open financing and provide guidance to Chinese firms.”
