A UK-China relationship in the heart of Africa?

Nelson Ogunshakin

There is a growing realisation between political and corporate leaders that a mutually beneficial strategic relationship between the UK, China and Africa could be the solution to developing much needed infrastructure investment in Africa.

Not much happens these days in Africa without the involvement of China in some way. The over-arching approach adopted by Chinese companies is to finance and construct infrastructure projects in a strategic pursuit of natural resources acquisition.

However, the recent clamour by Chinese corporate leaders for better transparency, re-balancing of their investment portfolio, and the need to raise investment capital from the international market has resulted in more flow of Chinese investment into the UK, through share ownership of UK companies, and major infrastructure projects. This is evidenced by recent share ownership in UK registered Regulatory Assets owners, and investment commitment in SPVs created to deliver projects listed in the UK National Infrastructure Plans (NIP).

"To overcome the challenges associated with regulatory and compliance process in the UK, one can easily predict the next step for Chinese investors will be direct acquision of UK supply chain businesses."

It is highly plausible to assume this growing Chinese interest in UK has resulted from the renewal of cordial relationship between British and Chinese Governments, which has translated into growing Memoranda of Understanding (MoUs) signed at Government, corporate and institutional levels.

Evidence also suggests growing numbers of African countries leaders are becoming increasingly concerned about the long-term sustainability of their Chinese relationship. As a result, most African countries are keen to welcome the return of British companies to Africa, for the obvious reasons; shared English language, legal system, ethical practice, robust standards, etc. Similarly, the Chinese are also becoming aware that their current level of funding cannot be sustained and western finance will be needed to support their expansion in Africa.

While the flow of Chinese investment funds to the UK is good for business, the real challenge remains as to what is the best dual entry strategy to secure successful position in the UK and also maintain position in Africa?

This emerging realisation is leading to calls for strategic partnerships between Chinese contractors and British professional consultants and contractors to provide the bankable project development expertise for PFI; the feasibility studies, robust design standards, construction and contract management necessary to meet international project finance institutions lending requirements.

To overcome the challenges associated with regulatory and compliance process in the UK, one can easily predict the next step for Chinese investors will be direct acquision of UK supply chain businesses – professional consultancy and engineering firms and major contracting organisations – in order to extract revenue across the UK value chain.

Therefore, UK infrastructure industry should be under no illusion that the story is ‘the Chinese are coming.’ The reality is that they are already here. This is not the time to stand by and observe – it is time to bite the bullet and be proactive.

There is ample scope for a joint UK, Africa and Chinese relationship to release equity investment in major infrastructure projects and help address some of the World Bank Millennium Development Goals for Africa. The ACE, Department for International Development (DIFD), Institution of Civil Engineers (ICE), UKTI, BSi and major Investment Institutions are keen to promote this burgeoning UK, African and Chinese, tripartite arrangement. As we have successfully engaged the UK Treasury and Infrastructure UK (IUK) under the umbrella of NIPSEF, ACE will be prepared to play a strategic key role in delivering this next particular objective for UK Plc.

We must not let the opportunity to pass us by!