China, India launch investment spree in Africa ahead of BRICS summit
Chinese President Xi Jinping and Indian Prime Minister Narendra Modi have continued to lend in tandem to African states ahead of a major emerging markets summit for BRICS in Johannesburg, South Africa, that will take place on Wednesday.
Xi, arriving in South Africa on Tuesday, pledged $14.7 billion of investment to the country.
His South African counterpart Cyril Ramaphosa is attempting to reboot the country’s economy after years of mismanagement and stagnation under former President Jacob Zuma. Ramaphosa’s target is to raise $100 billion in foreign investment.
The South African rand rose 1 percent on the news of China’s commitment, according to Reuters.
$2.8 billion of China’s cash will be siphoned off into South Africa’s primary state utility Eskom. The struggling public firm reported a $171 million full-year loss on Monday.
Modi’s lending on behalf of India has been more modest, as the world’s fastest-growing major economy trails China’s ubiquity on the African continent.
During a flying visit to Uganda, Modi pledged $205 million to the East African country. The sum is intended to help Uganda develop its dominant agricultural sector and electricity distribution infrastructure.
‘Alternatives to the West’
Both Xi and Modi were in Rwanda earlier this week, where a total of over $300 million was announced in loans. The money will develop the tiny, landlocked East African nation’s agriculture, roads and special economic zones.
Analysts CNBC spoke to read the news as Rwandan President Paul Kagame sending a defiant message to the U.S. over trade, amid an ongoing spat over second-hand clothes.
Among African countries, “China and India are viewed as alternatives to the West,” Anna Rosenberg, research director at emerging markets advisory firm Frontier Strategy Group, told CNBC via e-mail.
“Since economic growth has accelerated and interest from other emerging markets has picked up, African governments are glad to have more choice among those that are willing to support development efforts.”
While China’s ready capital dwarfs that provided by India, the latter country can share its technological advances with Africa, Munish Gupta, vice president of the India Chamber of Commerce, told CNBC Africa. “Today, China shares very little of its technology with the rest of the world,” he said.
Rosenberg added that given China’s prominence on the African continent, countries were “now well aware of the strings attached” to business deals. Meanwhile, “Africans are well exposed to Indian work culture,” she said, given that “there are many African/Indian run distribution companies across the continent, especially in East Africa, typically run by locals of Indian descent.”
Xi and Modi are to attend a three day BRICS (Brazil, Russia, India, China and South Africa) summit, uniting the leaders of the bloc which encompasses the five emerging economies.
Brazilian President Michel Temer and Russian President Vladimir Putin will also be joining host Ramaphosa. Trade, given the current climate of U.S.-China import tariffs, is set to dominate the agenda.