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Why Chinese investment is a key stimulus for Africa

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Ethiopia is in negotiations with Beijing over the start of fruit exports.

Ethiopia is aiming to export fruits including bananas, avocados and mangoes as well as meat products to China, according to Ethiopia’s ambassador to China, Teshome Toga.

He said Ethiopia had benefited from Chinese investment as a result of being part of the country’s Belt and Road Initiative.

This, in turn, had caused the creation of the Ethio-Djibouti railway and several industrial parks, he added.

The Ethio-Djibouti railway was finished in 2018 and now forms the backbone of the country’s rail network.

Ethio-Djibouti Railway (EDR) Share Company CEO, Abdi Zenebe, told state news agency ENA its cargo transport service had enabled Ethiopia to save ETB 2.4bn ($45m) in logistics costs over the past year.

Zenebe said the company had transported over 1.7m tonnes of import-export cargo in 71,000 containers.

The line transported 98% of Ethiopia’s sought-after coffee to the international market through the line.

Ethiopia’s negotiations to export food to China are part of prime minister Abiy Ahmed’s wider plans to dramatically increase food exports.

Recently, China has been strengthening ties with several African countries. For instance, this week China announced it was lifting restrictions on wool from South Africa, which had been in place following an outbreak of foot and mouth disease.

Between 70%-80% of South Africa’s wool is exported to China. The country’s wool industry estimates the ban has cost it ZAR 734m ($43m) in exports to China. Thoko Didiza, agriculture, land reform and rural development minister, and trade, industry and competition minister Ebrahim Patel have welcomed the decision.

Meanwhile, South African-based mining company Kumba Iron Ore has said it hopes China’s infrastructure spending would increase demand for iron ore after lockdowns and a fall in property prices hit imports.

Beijing is planning to increase infrastructure spending to stimulate China’s economy following its zero-tolerance Covid-19 lockdowns.

Timo Smit, Kumba’s executive head of marketing, said in a results call: “There’s a significant stimulus that’s being provided by the Chinese authorities.

“We expect that to have an effect on iron ore demand. It is all about China in the iron ore market, so you would expect some support to come on that Chinese stimulus.”

 

Source: Andrew Allen | Cips.org

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