One way of gauging the international competitiveness of the Chinese construction Industry is to look at the performance of Chinese firms under open tenders. Multilateral Agencies, such as the World Bank and it affiliated African Development Bank (ADB), require unrestricted International Competitive Bidding (ICB) to take place on all significant contracts that they finance. The procurement data from these agencies is publicly available and can be used to calculate the share of contract value going to Chinese firms bidding for projects in different segments of the market. This in turn provides an objective indication of the competitiveness of Chinese construction firms.
In the case of the World Bank, it was possible to establish that since 1999 Chinese Contractors’ have been winning a significant share (10-20 percent) of African infrastructure contracts awarded by the International Development Association (IDA). The accumulated contract value won by Chinese contractors was US$738 million over the period 2001–06. While substantial, this figure is much lower than the value of Chinese commitments to infrastructure finance over the same period, which are estimated at more than US$12 billion.
Looking at more recent data from both the World Bank and the ADB, it is evident that the success of Chinese firms has been largely confined to the area of civil works. The presence of Chinese firms is almost non-existent in the area of consulting services, and minimal in the area of equipment supply where they capture a mere 3 percent of the market. However, in the area of civil works Chinese firms accounted for 31 percent of total contract value over the period of 2004-2006.
With the exception of France, which has been winning around 12 percent of the World Bank’s civil works contracts, no other country has won more than a 5 percent share. These figures illustrate the competitiveness of Chinese contractors in this market. The World Bank procurement data also provides (partial) information on the nationality of the second most highly ranked bidder for each contract. This shows that in as many as 20 percent of the total number of contracts won by Chinese firms, the second most highly ranked bidder is also a Chinese firm.
Chinese firms have also tended to capture the larger civil works contracts. The average size of a civil works contract awarded to a Chinese contractor was US$6 million in the case of the African Development Fund (an ADB affiliated structure) and US$11 million in the case of the International Development Association arm of the World Bank, compared to more typical contract values of US$3 to 4 million.
Overall, about 70 percent of the value of contracts won by Chinese firms under multilateral projects was accounted for by just four countries: Ethiopia, Mozambique, Tanzania, and the DRC. Once again, this is quite different from the geographical spread under Chinese funded projects, where more than 55 percent of the contract value is accounted for by Angola, Sudan, and Nigeria. This indicates that Chinese contractors have significant presence and experience in a number of countries that have not yet featured prominently in Chinese financing deals.
Looking sectorally at China’s footprint in Africa’s infrastructure development path, the following picture emerges:
Dams
Most dam projects undertaken by Chinese companies have a hydro-power dimension to them (see under “Power” section). In October 2008, SinoHydro concluded a loan agreement with the Ghanaian government for US$562 million. The loan is earmarked for the construction of the Bui Dam in Ghana’s Brong Ahafo region. The dam is expected to improve water storage and irrigation along the Black Volta River. The project is expected to be completed in five years.
Power
The sector attracting the largest amount of Chinese financing has been the power sector with more than US$5.3 billion in cumulative commitments at present. Much of this effort has been concentrated in hydroelectric schemes. As of the end of 2007, the Chinese were involved in financing 10 major dams in 9 different African countries. The total cost of these projects is estimated to be more than US$5 billion, of which the Chinese were financing over US$3,3 billion. The combined generating capacity of these plants amounts to more than 6 000 MW of electricity, a significant fraction of the 17 000 MW of hydropower generating capacity that exists today in Africa. Indeed, four of these projects will more than double the total electricity generating capacity within the host countries where they are located.
Some of these projects include the following:
- The largest hydropower project on this list is the 2 600 MW Mambilla scheme in Nigeria, implementation of which is now uncertain.
- The largest power project completed to date is the massive 1 250 MW Merowe dam in Sudan, which was opened earlier this year.
- November 2008 - China’s Shenzen Energy Group announced that it was planning to go into partnership with the First National Bank of Nigeria PLC, to build a 3 000 MW power plant in Nigeria. The estimated cost of the project is US$2,5 billion, with a commencement date for early in 2009. Nigeria’s total installed capacity is 3 500 MW but frequent power disruptions sees power generating capacity collapse to just 1 000 MW on occasions due to poor maintenance its aged power stations, corruption and mismanagement.
- October 2008 - Kenya awarded a US$65 million contract to Sinohydro Corporation to build a new 20MW hydroelectric power plant (HEP) in Western Kenya. The new HEP, Sangoro plant, will be located 5km downstream from Sondu Miriu HEP. The project is expected to be completed within three years.
- October 2008 - China’s International Cooperation Group (CHIC O) has been awarded a US$45 million contract by Mozambique to construct a supply system in the central province of Manica. The project will include the construction of a new water treatment station at Chicamba Dam and six water storage tanks.
- March 2009 - it was announced that China’s Sinohydro Corporation will undertake construction of a US$400 million power plant on the Kariba North Bank in Zambia. China’s Export and Import Bank is providing 85 percent of the funding, while the Development Bank of South Africa (DBSA) is providing the remaining 15 percent. Zambia intends to develop a number of power projects in alignment with its vision for the 2030 development plan.
- Finally, the Poubara hydropower dam in Gabon is to be built by Sinohydro as part of the US$ 3 billion Belinga Iron Ore project; however, the amount of Chinese financing committed into the project is not known.
Natural resources are being used to secure some of the financing. The Congo River Dam in the Republic of Congo and Bui Dam in Ghana, which are currently under construction, are being financed by the China Ex-Im Bank loans backed by guarantees of crude oil in case of the Congo River Dam, and cocoa, in case of Bui Dam. The loan for the Souapiti Dam in Guinea will be linked to mining (Bauxite) revenues.
Outside of hydropower, China has also been active in building thermal power stations, the most significant of which have been in Sudan and Nigeria. In 2005, the Shandong Electric Power Construction Corp. agreed to build three separate thermal power stations in Sudan: a 500 MW coal fired power plant in Port Sudan, a 300 MW gas fired power plant in Al- Fūlah and a 320 MW gas fired power plant in Rabak. Earlier, the Harbin Power Equipment Company had agreed to build the E1-Gaili Combined Cycle Power Plant.
In Nigeria, the federal government is constructing, with the help of credit line from China Ex-Im Bank, three gas-fired power stations: Papalanto (335 MW) in Ogun state developed by Chinese group Sepco, Omotosho (335 MW) in Ondo, developed by China National Machinery & Equipment Import & Export Corp. (CMEC), and Geregu (138 MW) in Kogi state developed by Siemens. Other than electricity generation, Chinese companies CMEC and China Machine- Building International Corporation (CMIC) have occasionally got involved in electricity transmission through major projects in Tanzania and Luanda (Angola), respectively. Thus, at present, China’s central focus is on the construction of large hydropower projects. Given the current power supply crisis in Africa, and the fact that the region has barely developed 5 percent of its identified hydro potential, these schemes are critical for Africa’s economic development. In that sense, the emergence of China as a major financier of hydro schemes is a trend of great strategic importance for the African power sector.
Reports emerged earlier this year that Shenzhen Energy Investment Co., partly owned by Huaneng Power International Inc., and the fund may build a 1,03 billion-yuan ($151 million) gas-fired plant in Ghana.
Standard Bank and the Industrial and Commercial Bank of China (ICBC) is to finance the expansion of a coal power station in Botswana for over US$800 million. An amount of US$140 million, as bridging finance, will be provided for Morupule B Power Station in eastern Botswana. The deal is backed by financial guarantees from Botswana’s ministry of finance.
Ports
On 13 January 2009, China agreed to begin a US$280 million expansion contract to extend the port at Nouakchott, by more than 900 meters, adding significantly to the port’s current capacity of 500 000 tons of cargo per annum.
Rail
China’s foray into Africa really began in large part due to the construction of the Tanzania- Zambia railway in the 1970s, which became to symbolize China’s contribution to African economic development.
In recent years, China has made a major comeback in the African rail sector, with financing commitments on the order of US$4 billion for this sector. They include rehabilitation of more than 1 350 kilometers of existing railway lines and the construction of more than 1 600 kilometers of new railroad. To put this in perspective, the entire African railroad network amounts to around 50 000 kilometers.
The largest deals have been in Nigeria, Gabon, and Mauritania.In Nigeria, the Chinese have committed to financing a construction of the Abuja Rail Mass Transit System; and to the rehabilitation of 1 315 kilometers of the Lagos-Kano line under the first phase of Nigeria’s railway modernization programme. The total cost of the Lagos-Kano rail project is estimated to be US$8,3 billion, of which the Chinese were to cover US$2,5 billion through a line of credit part of which would be also be allocated for supporting power projects.
However, In October 2008, the Chinese rail projects were put on hold pending a review of the agreements after a period of tensions linked to allegations by Nigeria that China was not delivering on its investment promises. [Note: Nigeria suspended the rail contract with the China Civil Engineering Compan y (CCECC) last year, saying the cost was inflated and the government did not have enough funds to modernise the country’s century-old rail system. Former Nigerian President Olusegun Obasanjo awarded the contract to the Chinese company in 2006 and promised the firm an oil block in return as an incentive. China facilitated the deal wit h an initial offer of a US$2 billion loan.]
In 2007, work started on the rehabilitation of the 1302 km Benguela Railway line in Central Angola at a cost of US$300 million, However, in February 2008 rehabilitation work was suspended owing to delayed disbursem*nts from the credit line of the Hong Kong-based China International Fund (CIF). Over 1000 route-km of the Benguela need rebuilding. Besides apparent funding problems, the process was being hampered by the presence of land mines and the need to reconstruct 50 bridges. The completion of restoration of the railway to the border with the DRC is not expected to be completed before 2012 China Ex-Im Bank is preparing to finance the 560-km Belinga-Santa Clara railway in Gabon, which, together with Poubara hydropower dam, and deepwater port at Santa Clara, is part of the already mentioned Belinga Iron Ore project. The China Ex-Im Bank’s loan for the project is to be repaid via sales of iron ore to China.
In January 2009, the China Civil Engineering Corporation signed a US$805 million contract with the Libyan government to build to build 172 kilometres of railway lines in the North African country.
The most recent railways project was the commitment to finance a 430-km railroad linking Nouakchott to phosphate-rich Bofal in Mauritania, which was agreed upon in 2007. The project is financed by a US$ 620 million China Ex-Im Bank loan and will be implemented by Chinese Transtech Engineering Corporation.
Roads
The Chinese have been active in building roads across Africa. World Bank data recorded more than 18 projects involving Chinese commitments for construction and rehabilitation of more than 1 400 kilometers of road. However, the aggregate value of finance for confirmed projects at around US$550 million is substantially below that reported for the other sectors.
The road projects that Chinese firms have undertaken have been relatively small compared to average project sizes in other sectors, and many of them are financed by grants from the Ministry of Commerce. Indeed, the database recorded only two road projects financed by Chinese sources were larger than US$100 million in size, both of which were in Angola and part of the Ex-Im Bank line of credit provided in 2004. Road building has been an especially important activity in Angola, Botswana and Ethiopia. By far the most active Chinese road construction firm was the China Road and Bridge Corporation (CRBC).
Sudan has granted China’s Sinohydro corporation a US$300 million contract to construct 486 kilometres of roads in the country. The construction is expected to make a significant contribution to improving Sudan’s road transport network in the northern and central parts of the country.
Water and sanitation
Water and sanitation account for a relatively small share of China’s total financial commitments to African infrastructure development. Participation in confirmed projects was about US$120 million, and another estimated US$200 million went into Angola’s water sector as part of the China Ex-Im Bank credit line of 2004. In 2005 a series of water projects for Nigeria was announced.
Most of these projects were smaller scale in nature and more focused on meeting immediate social needs. China’s water supply projects include a number of smaller dams that are not related to hydropower but directly to water supply, in Cape Verde and Mozambique.
