Martin Davies, a renowned expert on Africa-China relations, warned investors in Botswana to prepare Chinese sovereign wealth funds (SWF) which are chasing some investment opportunities across the African continent.
Speaking at a Stanbic Bank breakfast last week, Davies said China is using its sovereign wealth funds to assert its strategic interests.
“The Chinese see the current system as unfair and they are cutting the expensive middle man and are coming straight into Africa. In the next 15 to 20 years, we are going to see commodity market as we know it disrupted,” he said, referring to the commodities market which is set in European cities and United States of America.
In the recent past, China has poured money in a number of investment opportunities in Africa, including mining and banking sectors, in a bid to strategically position itself within the African continent.
It has also used its sovereign wealth funds to penetrate countries in Latin America – much to the dislike of the European Union and the United States of America. At the last World Economic Forum held in Davos, Swizerland, there were bitter exchanges between the USA and Europe on one hand and China, Russia and Saudi Arabia on the other. Europe and USA wanted the sovereign wealth funds to sign up to a code of conduct which was bitterly rejected by emerging economies.
China has built a mountain of foreign reserve to the tune of US $ 1.5 trillion which it uses to shop around the world.
Recently it took a huge stake in Standard Bank ÔÇô parent company of Stanbic Bank of Botswana ÔÇô to the tune of US $ 5.5 billion.
“There are 800 Chinese companies operating across 53 countries in Africa. Trade between Africa and China is becoming marketised rather than politicized such as the Stanbic deal,” he said.
“China is sitting on a lot of money and it is using that money to buy assets,” he said adding that “it will create parallel markets that will lead to disruption of the commodities markets in the developed countries. That is why there are some geo strategic concerns about China’s interest in Africa from the west.”
Recently, China said it intended to invest up to US $ 12 billion in the DRC and a further US $ 6 billion in Malawi. Further, China is also pursuing free trade agreements with a number of African countries, Latin America, Australia, New Zealand and other Asian countries as it prepares to be the biggest economy in the world. It also got energy concessions with other African countries including Angola and Nigeria.
“Angola is becoming the fastest growing economy primarily because of China,” he said, adding that “business in Botswana should also position itself for this new development.”
China and Botswana trade doubled between 2006/7 to US $ 144 million indicating that the two countries are now doing much business together.