“China has invested $75bn dollars in Africa since 2005 – $25bn in mining, $25bn in energy, and $6bn in financial services, with much of that occurring here in South Africa when ICBC (Industrial and Commercial Bank of China) bought 20% of Standard Bank in South Africa four years ago,” said Hale.
He added that China has 38 mining bureaus throughout the world, with 21 of them being in Africa. This is compared to only six mining bureaus in Latin America and eight in Asia.
“And the fact that they have got all these mining bureaus here tells you that they are very, very much focused on Africa,” Hale continued. “And they are not just financing mining, with the help of the Chinese Development Bank and the Export-Import Bank, they are also financing a huge amount of infrastructure development.”
Other Asian countries are also investing in Africa. For example, Hale said Malaysia has invested $19bn in Africa over the last decade and India $14bn.
South Africa has also become a major investor in other countries in Africa. “South African companies now have invested $18bn elsewhere on the continent, but not just in mining, they are also a major player in retailing, telecom and financial services,” continued Hale.
“Africa’s problem although is, despite this FDI from Asia, its overall rate of capita spend as a share of GDP is only 22%. That’s a very modest number. It compares to 48% in China, 36% in India and around 30% in many other Asian countries.”
Democracy and privatisation fuel investment
Alongside the grab for Africa’s resources there has also been a movement towards democracy over the last decade.
“We now classify 16 countries as being effectively democratic and about nine more as trying, but not yet being fully there… Back 25 years ago we classified only three Africa countries as democratic… So on the political front Africa is making progress.”
Hale added that African governments are also starting to realise that the real solution to many of Africa’s problems will come from private investment, not government investment. For example, Africa’s inadequate power shortages remain a significant concern across the continent. Hale highlighted that the entire sub-Saharan region produces less power than Spain, a country that has only 40m people, compared to the 900m people in sub-Saharan Africa.
“Nigeria announced last year a very radical report; they privatised their electricity system. This has been a chronic problem for many years. They have very severe power shortages; all businesses must operate with diesel generators. Now that they have privatised it, there will be a massive investment boom,” explained Hale.
“And I think they will probably increase power output threefold over three years, and tenfold over 10 years. And this could boost Nigeria’s growth rate of the recent trend of 6%-7% to possibly as high as 10%. So by the year 2020, the GDP of Nigeria will be 50% larger than South Africa.”
He added that the next step in Africa’s growth story would be to ensure that African governments put into effect adequate mining governance structures, and encourage investment through clear policies on ownership and reduced mining taxes.