Interactive: The AfDB and the rise of China

These days, the involvement and investment of Asian countries in Africa’s development is widely acknowledged. It has become a hotly debated topic, with many questioning whether all Asian aid and investment in Africa is benefitting the continent in a sustainable manner. But while there is a general consensus that the role of Asian organizations in driving Africa's development is growing, there is little publicly available data to understand this growth. Opacity of aid and investment flows, especially from the heavyweight Chinese economy, makes it difficult to analyze the phenomenon. Many organizations are working to plug this data gap: McKinsey’s recently released report on Chinese-African economic ties draws on hundreds of boots-on-the-ground observations and interviews with business leaders; and AidData’s carefully crafted methodology for tracking aid flows from less transparent donors has allowed it to produce a large dataset on Chinese development financing flows. As part of our AfDB Contractor Insights series, Devex can shine light on one aspect of this phenomenon: the growing success of Asian firms in winning African Development Bank contract awards. While AfDB projects constitute only a portion of development activity in Africa, the market for AfDB contracts might serve as microcosm of African development, through which we can observe Asia’s growing presence on the continent. With 16 years’ worth of AfDB contract awards data, we explore how Asian firms — and Chinese firms, in particular — are making their presence felt in their work with the bank. A bigger piece of a bigger pie From 2000 to 2006, contractors from countries including China, India, Japan, Indonesia, the Philippines, Singapore, South Korea, Sri Lanka, and Pakistan won an average 13.8 percent of annual AfDB funding — varying from $34 million to $155 million dollars. However, from 2006 to 2008, total annual AfDB awards overall shot up from $800 million to $2.1 billion, and the share awarded to Asian firms went from $100 million (12.5 percent) to $1.1 billion (50 percent), increasing more than tenfold in two years. After 2008, Asian contractors continued to win higher amounts and higher percentages of annual AfDB awards, averaging 34.8 percent of annual awards through 2016. The increase in awards to Asian contractors is also reflected in the greater share of annual awards they won each year from 2008 onward. Asian contractors were able to capture a larger share of the AfDB awards market at a time when that market was ballooning in size. This is because the sectors receiving most of this sudden surge in AfDB awards were works-heavy infrastructure sectors, an area in which many Asian firms have extensive experience. The dragon in the room When journalists, development practitioners, and analysts talk about “Asia in Africa,” they are most frequently talking about China’s activity in Africa — and with good reason, according to AfDB’s contract awards data. Most of the credit for the explosive growth in AfDB awards to Asian firms goes to Chinese firms. From 2000 through 2016, Chinese contractors won approximately $6.2 billion dollars in AfDB funding — more than firms of any other single, national origin. French firms came in second place with $2.2 billion dollars. But the sum of all European firms’ awards is only slightly higher than China’s total. This is even more impressive when you consider that China’s $6.2 billion came from a total of 550 contracts, whereas Europe’s $6.3 billion came from 3,407 contracts. Even more impressively, Chinese firms won almost all of those awards — 91.5 percent of them — in the past 10 years. All of this points to the fact that, after 2006, Chinese contractors began winning many of the highest value AfDB opportunities available, and very quickly. These high-value opportunities largely came from transportation infrastructure projects awarded to large, state-owned engineering firms. This included an award for $263 million dollars to China Harbour Engineering for the design and construction of the Walvis Bay port container terminal in Namibia, as well as one for $171 million dollars to Jiangxi Zhongmei Engineering to upgrade the road between Marsabit and Turbi in northern Kenya. The most successful Chinese awardees, such as Sinohydro Corporation, China Geo-Engineering Corporation, and China Henan International Cooperation Group (CHICO), won contracts in other sectors — especially water and agriculture — in addition to many lucrative transportation sector contracts. While Chinese firms were active implementers of AfDB projects in nearly every country in Africa, their success with AfDB may be partially explained by an overlap in geographical priorities. Chinese firms won the most contracts in East African countries — particularly in Tanzania ($668 million), Kenya ($601 million), Uganda ($341 million), and Ethiopia ($301 million). These are countries whose projects were generally among the most funded by AfDB awards between 2000 and 2016. This may indicate that Chinese firms were simply “following the money” to countries receiving more funding — but this argument is contradicted by Chinese firms’ lack of awards in the two biggest destinations of AfDB funds in the data. Morocco and Tunisia received $3 billion and $2.1 billion, respectively, in funding for local projects, but only $11 million and $1 million was won by Chinese firms, respectively. It would appear that Chinese firms have a competitive advantage in East Africa that they lack in North Africa — although this has not stopped them from being enormously successful contractors to the AfDB. But it’s not only China Although Chinese firms are dominant among AfDB contractors, it is not the only Asian country that sees opportunity in Africa. In the next part of our AfDB Contractor Insights series, we take a look at the role of Japan, India, and South Korea — all of which are increasingly pivoting toward Africa for opportunities, both through the AfDB and through other means. Interested in learning more about Asian contractors to the AfDB? Visit our analysis and interactive visualization of AfDB contract awards data to learn more and perform your own analysis, or read our article on China’s role in African infrastructure development. 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