Satisfying a growing proportion of Africa’s construction equipment needs.

Satisfying a growing proportion of Africa’s construction equipment needs.

NEP7 serves a growing proportion of Africa’s construction machinery needs. As a proportion of overall African exports, this rose dramatically from 7% in 2003 to 25% in 2011. Most of this growth has been the result of increasing Chinese exports, however Korea, Brazil and Turkey have also made substantial gains in exports.

It is generally believed that NEP7’s “hungry resource” is strategically focused on obtaining entry to African resources, subjecting them to invest overwhelmingly in infrastructure related to or partly planned to promote commodity exports.

Nonetheless, while research shows that NEP’s infrastructural presence in the resource sector is partly justified by the need to obtain access to African resources, there is no proof that it is overwhelmingly directed towards the exploitation and export of these resources.

We have explored a variety of channels of NEP participation including transparent tender programs, aid, FDI and direct trade-funded initiatives. Approximately half of all infrastructure investments are aid-or loan-funded. The proportion is higher for social infrastructure and stadiums (most of which require concessional loans) and the least apparent for oil pipelines and airports.

The second-largest factor of development ventures is the open tender awarded, which accounts for about a third of the number. Open tender projects are more apparent for homes, airports and oil; pipelines, and least possible for railway systems and stadiums.

FDI surfaces as an important vector in the oil sector, and in railways. There are also some projects which involve a combination of aid and FDI, and this is most clear in the case of seaport infrastructure.

Beyond these types of aid grants, FDI and open-ended projects, there is an additional form of participation that is fairly recent in the African sense. This includes programs where the servicing of loans and payments to contractors are explicitly and directly linked to the export of commodities.

Almost 21 per cent of the 239 projects, for which knowledge exists, featured this direct correlation between infrastructure projects and commodity production.

Bringing together details on trade-related repayments and projects involving various financing mechanisms, it is important to investigate the scope and essence of the “merging” of NEP participants in the African market.

We can identify three types of bundling. 

  1. The first are cases where only a single vector of activity that is an aid, or finance, or FDI or commodity-export linked payments. 
  2. The second are cases where two of these three vectors are involved. 
  3. The third is where all three vectors are bundled.

Sources

Office of the Special Adviser on Africa (OSAA) 

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