|China and UK business networks have agreed to build a strategic partnership for the 21st century to promote commercial collaboration and knowledge-sharing, with the objective of building high-quality, sustainable infrastructure, including projects on the African continent. The initiative has the support of both UK and Chinese Governments, each of which have substantial and growing ties to Africa. Last month, the UK Government hosted a UK-Africa Investment Summit in London which supported over ZAR120bn (£6.5bn) in commercial deals.
In line with this, in October 2019, a Memorandum of Understanding was signed by the British Chamber of Business in Southern Africa and the South Africa China Economic and Trade Association, thereby strengthening their cooperation on projects that support high quality, sustainable infrastructure that meets Southern Africa’s priorities and supports the region’s growth.
On the back of this MOU, Turner & Townsend and CRI Eagle – who are acting as lead firms on each side within the Alliance – are supporting UK and Chinese businesses in developing competitive project solutions into the Southern African Development Community.
These two companies recently brought industry partners together to discuss the infrastructure needs in the SADC region, how the UK-China Infrastructure Alliance can support companies in becoming involved in financing and delivering infrastructure projects, and also the fact that Private Public Partnerships are well worth considering for many of the infrastructure projects in the pipeline. A panel discussion was held which included knowledge sharing from Allen & Overy; Pinsent Masons; Standard Chartered Bank; Mott MacDonald; Sinosure and Gautrain Management Agency.
As Leon Ayo, President of the British Chamber of Business says: “The UK-China Infrastructure Alliance in Southern Africa is a valuable and tangible way of achieving our objectives as stated in the MOU – via industry to industry co-operation.
“We are delighted to strengthen co-operation between our Chamber and Chinese industry as this will enable us to achieve sustainable and inclusive outcomes in Southern Africa. This includes PPPs that encourage cooperative matchmaking for UK and Chinese businesses while upholding good, sustainable project finance standards.”
Adds Wang Wenan, President of the South Africa China Economic and Trade Association: “We see the UK-China Infrastructure Alliance in Southern Africa as a creative platform which benefits the industries of both countries and eventually, the local Southern African market. China has many world-class infrastructure companies operating in this region and offering turnkey solutions to public and private clients, whereas the UK has a long history and excellent track record in providing service in finance, consulting and project management. Together we can achieve win-win-win outcomes in local markets.”
With a young and growing population, studies show that by 2075 the African continent will have some of the largest mega cities in the world, for example Lagos will comprise 88 million, Kinshasa – 8.3 million and Dar Es Salaam – 70 million.
Yet Sub-Saharan African countries lag their peers in the developing world, particularly in regard to paved roads, water distribution and storage, sanitation, telephone main lines and power generation – which remains one of the biggest challenges.
The need for infrastructure in Africa is clear, and industry will need to take an active role. In the past five years, the value engineering, procurement and construction contracts signed with Chinese organisations for projects in Africa dropped by 30%, with only 20% of those contracts implemented, according to Fred Wen, Director and Deputy General Manager of CRI Eagle. “Not only is suitable infrastructure limiting growth, there is also a significant backlog in infrastructure maintenance and spending on maintenance. Positively however, in order to remain competitive on the continent, Chinese construction companies are increasingly partnering with public sector clients.”
Says Annamari Uys, Director and Head of the Private Public Partnership business unit of Turner & Townsend: “This presents an ideal opportunity for PPPs to accelerate infrastructure delivery. They play a key role because they look at funding maintenance over the life of the project. PPPs have been implemented in countries such as South Africa, Nigeria, Kenya and Uganda, among others, with recent projects focusing on renewable energy, transport and water and sanitation.
“They also allow governments to partner with the private sector to leverage private party capital/finance and expertise, providing an incentive for on-time, on-budget infrastructure delivery, and transfer risk to those mandated to manage it. It is also a meaningful way to incentivise the private sector to invest in delivering quality projects with stringent maintenance requirements – something that is receiving increasing attention as governments seek to manage public services for public good. A good litmus test for a worthwhile PPP whether it offers affordability, value for money, and appropriate risk transfer.”