Business Daily (Nairobi)
Emmanuel Were
31 October 2007
A Chinese bank has struck a deal with a lender in Nigeria who will enable it finance infrastructure projects in Africa which have attracted attention over the labour practices of Chinese contractors.
Critics say the contractors are abetting the export of unskilled personnel to lay roads, bridges and manufacturing plants even as the continent is bursting to the seams with millions of unemployed youth.
The entry of China Development Bank through a partnership with United Bank of Africa, a leading financier in Nigeria, points to Chinese firms gaining virtual control of projects in Africa, from financing to construction.
The Financial Times reported yesterday that the deal was sealed last month, but is yet to be announced, expanding CDB's ability to finance utilities in Africa.
CDB is the second Chinese Bank to launch a decisive foray into Africa within a week, after another government owned bank, Industrial and Commercial Bank of China, announced it was buying a 20 per cent stake in South Africa's Standard Bank for $5.56bn.
Standard Bank is Africa's largest bank by assets and has a presence in 18 countries in Africa, including Kenya where its subsidiary - Stanbic Kenya - has acquired a 60 per cent stake in listed CFC Bank for Sh19 billion. It is the country's biggest merger.
According to the report CDB has not bought equity in UBA, which is listed on the Nigerian stock exchange.
The two deals mark the start of a transformation in Africa's banking industry, opening fresh channels for finance in a region hitherto dependent on western companies and donors.
The Financial Times said Chinese banks were seeking local operators to channel billions of dollars into African projects, in part to secure the oil and minerals needed to fuel China's fast-growing economy. Tony Elumelu, UBA's chief executive, told the Financial Times: "It provides us (with) an almost infinite amount of capital to execute projects."
He added: "They will invest in any credit that we recommend." According to an agreement seen by the London paper Chinese staff from the bank will work with their counterparts at UBA's headquarters in Lagos to fund projects in West Africa.
Mr Elumelu said he hoped by the end of March to strike an agreement with CDB to finance a power project that would help to tackle Nigeria's chronic electricity shortages.
UBA, with a balance sheet of about $8bn, hopes to expand into as many as 12 African countries next year.
"It is no longer a question of funding capability, but about our ability to identify good projects," Mr Elumelu said.
"Africa is a huge untapped market - but it takes those who understand African markets and African risks to take advantage."
CDB has more assets than the World Bank and Asian Development Bank combined, with $281bn of loans outstanding by the end of June.
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