M a r k e t N e w s

China expands investment in Tanzania

Posted on : Friday, 2nd January 2015

  The Tanzanian government has begun the compensation process for about 1,000 local residents who will need to be relocated, and construction will begin soon, Abdallah Kigoda, the Tanzanian minister for industry and trade, said at a news conference in Dar es Salaam last month, according to Xinhua, the Chinese state news agency.

Mr Kigoda said that the Chinese side would provide $412.5 million for the project, located in the Kurasini area of Dar es Salaam, whose port is one of two key maritime hubs in East Africa. The project was first discussed in 2009.
Lack of infrastructure and landlocked markets are “two of the most significant obstacles” to sustained economic growth across Africa, so the construction of the hub is “welcome news,” J. Peter Pham, director of the Africa Centre of the Atlantic Council, a research institute, said in an email.
According to a study by the centre, he said, transport costs are 63 per cent higher in Africa than in other developing regions. China trails Britain as the largest source of investment to Tanzania, but has become the East African country’s leading trade partner, with around $3.7 billion in business last year.
During a visit by President Xi Jinping of China in March 2013, the two countries signed trade deals worth millions of dollars, in what has become a standard feature of Chinese diplomatic trips.
But the Chinese leader also sought to offset concerns that China was only interested in Africa’s natural resources and that the import of inexpensive Chinese manufactured goods could damage the long-term growth prospects of African economies.
Nevertheless, Mr Pham warned, plans for the logistics hub appear to favour China’s interests. According to the Yiwu-Africa International Investment Corporation, the Chinese partner in the project with the Tanzanian Export Processing Zones Authority, the new hub will have five zones: a commodity exhibition area, a warehouse, a technical training centre, a support services area and an import-export processing zone.
The Tanzanian authorities have said that the distribution facilities for Chinese imports will be built first, and facilities for the export of Tanzanian goods will be constructed later.
The question, Mr Pham said, is “How much later?” “It seems that in this ‘winwin’ deal, one side potentially wins first and the other will have to wait in hopes that it will get as much in terms of attention and resources,” he said. But China, as the financial backer, has the upper hand and so can dictate the schedule, Mr Pham added.
“It’s the ‘golden rule’ of ‘He who has the gold makes the rules.’ ” The current trade balance is vastly skewed toward China, but Tanzania hopes that more exports to China in coming years can help balance this.
The Tanzanian ambassador to China, Abdulrahman Shimbo, told The ‘Daily News’, a Tanzanian newspaper, in the past week that China would increase its imports from Tanzania — “especially minerals, gas and agricultural products” — to help shift the trade balance more in Tanzania’s favour. Chinese investment in his country is growing “faster than anticipated,” Mr Shimbo said.
He also told the newspaper that he believed that China would overtake Britain as the country’s top investor in the next two years.
The Yiwu-Africa International Investment Corporation, the Chinese partner in the project, is a conglomerate of four major Chinese logistics and services companies including the Zhejiang China Commodity City Group, which operates a huge wholesale market in Yiwu, in the eastern Chinese province of Zhejiang, where aisles are filled with every imaginable plastic trinket, toy and decoration.
In recent years, many of these goods have found their way to Africa, where China replaced the United States as the continent’s leading trading partner in 2009.
“Given the huge volume of Chinese exports to Africa, it makes economic sense to strengthen the trade infrastructure,” Deborah Brautigam, director of the China Africa Research Initiative at Johns Hopkins University, said in an email.
Tanzania most likely was chosen because of its relative stability and its position as an entry point for landlocked nations in Central Africa, Ms Brautigam said. The logistics hub will serve as an entry point for Chinese goods unloaded at the port of Dar es Salaam, which competes with the port of Mombasa, Kenya, as the main maritime hub in East Africa.
“Right now a lot of African traders are buying Chinese goods at the Dragon Mart in Dubai — the largest Chinese trading hub outside of China,” she added. The facility is set to nearly double in size to 83 acres, the website of The National, a newspaper in Abu Dhabi, United Arab Emirates, reported in February.
Although Tanzania’s infrastructure is better than many of its neighbours’, its roads, railroads and ports have vast room for improvement.
PricewaterhouseCoopers estimates that Tanzania has around $19 billion in transport and utilities infrastructure projects currently in the works, with China playing a role in financing major projects such as the Mtwara-Dar es Salaam natural gas pipeline and Kinyerezi Power Station.
Such projects will help Tanzania “become the driving force in the East African region,” the Chinese ambassador to Tanzania, Lu Youqing, said during a Chinese New Year event in February

Source : in2eastafrica.net
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