Tags: South Africa

US, China Compete for South Africa Business

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Monday, 18 Aug 2014 08:59 AM Current | Bio | Archive

President Barack Obama was described as trying to catch up with China in light of driving investment at the US-Africa summit that took place earlier this month in Washington.

The summit was to see $14 billion investment by American business into Africa covering areas of infrastructure, finance, energy, agriculture, and consumer goods.

When comparing the state of US investment in Africa against China's investment in Africa, it is important to not only focus on the dollar value of investment but the nature thereof.

China has had great success in investing where there is immediate demand.

To give an example, if an African municipality struggles to perform it is most commonly due to a lack of funds and a lack of expertise. This is where China is able to respond by offering a solution in both areas. Due to very low interest rates, China is able to make specialized loans to provide funding to operate the municipality effectively. They then bring in their own expertise to ensure that their interest will be managed correctly.

The income of the municipality is then handed over to the Chinese in return for their investment. This is not a one size fits all approach when it comes to other Chinese investments in areas such as extractive industries and construction.

The approach that president Obama has taken is of a more partnering nature.

We see a preference for working with African organizations to benefit both Americans and Africans in the long term. His focus on aid and energy has been key in creating a foundation of trust and forging lucrative partnerships for the future.

In an interview with Cape Business News, Daniel Silke, one of Africa’s top economists, noted that when Africa looks at becoming self sustaining it is going to change the structure of investment in the continent.

Chinas approach is highly attractive for African institutions, resulting in the high level of investment figures that we see today. However the nature of their investments, are more often than not, business deals that find solutions to short term problems.

Obama’s slow and steady approach may not be raking in the dollars right now however when looking at the future progression of the African economy, it is likely that partnering with America to do business will be far more attractive than outsourcing departments and industries to China.

Click here to see the interview with Daniel Silke

Matthew Klynsmith earned a business administration diploma at CTI in Cape Town, South Africa. He now works at Strategic Options as an associate partner. To read more reports from Matthew Klynsmith, Go Here Now.
 


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When comparing the state of US investment in Africa against China's investment in Africa, it is important to not only focus on the dollar value of investment but the nature thereof.
South Africa
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2014-59-18
Monday, 18 Aug 2014 08:59 AM
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