China-Africa Economic Bulletin, 2024 Edition

African countries have and are shaping development goals in alignment with the United Nations 2030 Sustainable Development Goals (SDGs) and the African Union Agenda 2063.

Potential sources of financing for energy and transition materials have become increasingly important for devising strategies that will allow Africa to achieve these goals.

Over the past three decades, China-Africa economic engagement has deepened across trade, development finance and foreign direct investment (FDI), contributing to African countries’ development and bringing about economic benefits and environmental risks.

China’s historic economic relationship with Africa positions it to contribute financial resources, as one of many partners to African countries.

A new report published by the Boston University Global Development Policy Center and the African Economic Research Consortium analyzes China-Africa trade, finance and FDI from 2000-2022 to evaluate trends, reveal gaps and identify pathways for China to support Africa’s energy access and transition amidst economic challenges and energy opportunities.

The authors find that Chinese financiers, investors, companies and trade facilitators have engaged in two tracks of economic engagement for energy and transition materials:

• An electrification track, comprising general support for electrification infrastructure (power plants and transmission and distribution lines);
• An extraction track, comprising a pipeline of the exploration, extraction and export of primary energy commodities and transition materials to China.

Main findings – Trade:

• Africa-China trade (imports and exports of goods) has grown significantly from $11.67 billion in 2000 to a peak of $257.67 billion in total trade in 2022, as China has become many African countries’ lead trading partner, surpassing the United Kingdom and the United States.

Figure 3: Change in Africa’s Lead Trading Partners from 2002-2022

• Africa-China trade is largely an exchange of primary commodities for finished goods. From 2000-2022, 89 percent of Africa’s exports to China were in the extractives sector and were mostly oil, copper, iron ore and alumina commodities. Imports on the other hand, were dominated by manufactured goods, such as telecommunications equipment and fabrics, which represent 94 percent of all imports from China during the same period.

Figure 5: Africa Exports and Imports to China by Sector, 2000-2022

• Between 2021-2022, African exports to China increased by 19 percent. China’s exports to Africa grew by 11 percent over the same period, but since China’s export value to Africa remained higher than Africa’s exports to China, a trade deficit of 2.6 percent of GDP persisted by the end of 2022.

Figure 4: Africa-China Trade Balance, 2000-2022

• In terms of exporting to China by country from 2000-2022, Angola leads through supply of crude oil primarily, followed by South Africa mostly by way of iron ore exports. The next three highest exporters, Sudan, Democratic Republic of Congo and Congo have mainly exported crude oil, copper and crude oil, respectively. Together, exports from these countries alone amounted to about 2 percent of Africa’s GDP in 2022 and 69 percent of total export value from 2000-2022.

Figure 6: Africa Exports to China by Country, 2000-2022

Main findings – Development finance:

• Between 2000-2022, Chinese lenders supplied an estimated $170.08 billion in loans to sovereign borrowers in Africa, $134.01 of which was provided by China’s two primary development finance institutions (DFIs), the Export-Import Bank of China (CHEXIM) and the China Development Bank (CDB).

Figure 7b: Chinese Loans to Africa, 2000-2022

• Though the amount of loan financing channeled to African sovereigns has transformed China into Africa’s largest bilateral creditor, Chinese lenders’ provision of loans has declined steadily since its peak in 2016. Existing debt burdens and the increased cost of borrowing leave little room to take on additional debt.
• Chinese DFIs supplied one-third of their loans to the energy (34 percent) sector. The DFIs’ energy lending amounted to $52.38 billion, of which 51 percent was for fossil fuels projects with oil, gas/liquified natural gas (LNG) and coal energy sources. Lending for renewables constituted a mere 2 percent, despite Africa’s considerable untapped potential, especially in solar. These energy loans have targeted both electrification and extraction track projects.

Figure 8: Chinese Loans to Africa: Energy Lending and Total Lending, 2000-2022

• In 2022, Africa’s debt to China was 13 percent of Africa’s external debt, which was roughly the same as debt owed to the World Bank and under the 28 percent owed to bondholders. China’s largest debtors in Africa were Angola ($20.98 billion), Ethiopia ($6.82 billion), Kenya ($6.69 billion), Zambia ($5.73 billion) and Egypt ($5.21 billion). Though Angola and Kenya narrowly avoided default recently and look well poised to refinance existing debt, the three African countries that defaulted in the last three years, Zambia, Ghana and Ethiopia, were all among China’s top 10 borrowers in Africa.

Figure 10: Top 10 African Countries Debt Stock to China in 2022

Main findings – FDI:

• From 2000-2022, Chinese companies announced $112.34 billion in greenfield FDI and completed $24.60 billion in mergers and acquisitions (M&A) FDI deals for projects and ventures across Africa. Greenfield FDI was directed mainly toward industry and trade/services, energy and non-energy mining and processing sectors. M&A FDI was mainly distributed across non-energy mining and processing and energy sectors.

Figure 11: Trend in China’s Greenfield and M&A FDI to Africa, 2000-2022

• The majority of both greenfield and M&A FDI for energy ventures supported fossil fuel projects (oil and gas/LNG), while greenfield FDI supported renewable energy at a higher percentage (8 percent) than DFI loans. FDI to copper, alumina and iron ore largely dominated, showing the involvement of Chinese companies in all stages of the metals and minerals supply chain in Africa. Chinese FDI primarily targets the exploration and extraction of these energy sources and transition materials.

Figure 15: Chinese FDI for Non-energy Mining and Processing in Africa by Metal or Mineral in Billions USD, 2000-2022

In short, the authors argue that past economic engagement has entailed both financial support for electrification that increases energy access and the exploration and extraction of commodities for the purpose of exports back to China. These tracks helped African countries overcome infrastructure bottlenecks, yet they also replicated trade patterns where Africa exchanged its primary resources for finished goods. If China and African countries intend to tackle current development objectives like energy access and transition, then concessional loans, equity finance and trade aimed at renewables and value-added green industries are promising targets for future cooperation.