New partnerships with Chinese Banks Mark Transformation in Africa’s banking industry

Sources:
Financial Times - ICBC in $5.6bn S Africa bank deal
Financial Times - China’s CDB seals Nigerian deal

The China Development Bank has entered a partnership with the United Bank for Africa, but has not bought equity in the African Bank. This partnership is significant because it will expand the China Development Bank’s ability to finance infrastructure projects in Africa. CDB owns more assets than the World Bank and Asian Development Bank combined. Therefore, the United Bank for Africa’s chief executive, Tony Elumelu, noted that this partnership was particularly important because “[i]t provides us [with] an almost infinite amount of capital to execute projects.” One of the first projects Nigeria hopes CDB will finance is a power project to help with electricity shortages.

Additionally, last week the Industrial and Commercial Bank of China announced that it will pay $5.56 billion to buy a 20% stake in South Africa’s Standard Bank. The Standard Bank chief executive views this deal as a “vote of confidence in South Africa and Africa.” Furthermore, the deal illustrates that China is seeking to deepen its ties with Africa by moving beyond the traditional cheap loans that it has made in the past.

Part of the reason Chinese Banks are interested in funding African projects comes from their desire to secure oil and minerals from Africa to fuel China’s economy. Tony Elumelu pointed out that “Africa is a huge untapped market – but it takes those who understand African markets and African risks to take advantage.”

Discussion Question:
Africa has been primarily dependent on Western companies and donors for funding. What impact, if any, will this shift in funding from Asian banks have on Africa’s economy?