Risk and reward for Chinese firms in Africa

PUBLISHED : Wednesday, 01 February, 2012, 12:00am
UPDATED : Wednesday, 01 February, 2012, 12:00am


Chinese state-owned dam builders Gezhouba and Sinohydro have highlighted the enormous risks and huge opportunities facing mainland firms in Africa just days after the end of a African Union Summit in which China featured prominently.

As a sign of China's rising profile on the continent, the summit - in the Ethiopian capital, Addis Ababa - was attended by senior Chinese officials including Jia Qinglin, chairman of the National Committee of the Chinese People's Political Consultative Conference.

Yesterday, Gezhouba announced it had signed a US$1.4 billion contract with the South Sudan government on January 20 to build a dam in the African state, which seceded from Sudan last year.

The dam will be financed by loans from an unspecified Chinese bank arranged by the Chinese government, said Gezhouba.

The dam, which will include electric power generation facilities, will be built over 80 months. Gezhouba will book 12.15 per cent of the US$1.4 billion contract this year, 17.95 per cent next year and the rest in the following five years.

'Over the next few years, this contract will have a significant impact on the company's gross assets, net assets and net profit,' Gezhouba said.

Also yesterday, Sinohydro, China's biggest dam builder, announced it has assembled emergency teams to deal with the kidnapping of its 29 workers by Sudanese rebel forces. The workers were employed on Sinohydro's US$63.2 million highway project in Sudan financed by China's Export-Import Bank. As of January 29, the workers kidnapped were safe, Sinohydro said.

The rebels belong to the anti-Khartoum Sudan People's Liberation Movement-North (SPLM-N), which South Sudan denies it supports. Sudan and South Sudan are in dispute over issues including oil revenue.

China National Petroleum Corporation (CNPC) has substantial oil production facilities in South Sudan. On January 28, Sudan's President Omer Hassan al-Bashir met Jia and told him there were risks in Chinese oil investments in South Sudan due to the South Sudanese government's policies. He also called on China to exert pressure on South Sudan to reach an oil deal with Sudan.