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China's Africa revenue could reach US$440bn by 2025: Report

China's Africa revenue could reach US0bn by 2025: Report

Chinese firms in Africa could reach revenues of US$440 billion by 2025 by aggressively expanding in existing and new sectors on the continent.

This is according to McKinsey & Company's Dance of the lions and dragons: How are Africa and China engaging, and how will the partnership evolve?, which found that Chinese firms already handle 12% of Africa's industrial production, valued at $500 billion a year in total. The report found that China's involvement in African economic development is much bigger than what previous reports suggest.

The study was conducted across eight countries that together make up about two-thirds of Sub-Saharan Africa's gross domestic product. It included on-site interviews with more than 100 senior African business and government leaders, as well as the owners or managers of more than 1 000 Chinese firms and factories operating in the continent.

Kartik Jayaram, co-author of the report, says Chinese engagement with Africa is set to accelerate and by 2025 Chinese firms could be earning revenues worth US$440 billion, from US$180 billion today.

"Additional industries could be in play for Chinese investment, including technology, housing, agriculture, financial services and transport and logistics. However, to unlock the full potential of the China-Africa partnership, African governments should have a China strategy and the Chinese government should open financing and provide guidance to Chinese firms," says Kartik.

According to the report there are already over 10 000 Chinese firms operating in Africa – four times the previous estimate. Nearly a quarter of the 1 000 firms surveyed said they covered their initial investment within a year or less. A third recorded profit margins of over 20%.

The report notes that half of Chinese firms have introduced a new product or service to the local market, and one-third have introduced a new technology. In some cases, Chinese firms have lowered prices for existing products and services by as much as 40% through improved technology and efficiencies of scale.

In 2015, Chinese telecoms heavyweights Huawei Technologies and ZTE were reported to have business operations in more than 50 African countries.

Huawei's Norman Frisch, head of business development transport solutions on the roll out of the ICT company's digital railway solution (also available in Kenya) for South Africa's PRASA said; "This successful BRICS partnership resulted in the establishment of 153 new GSM-R base stations built upon the global system for mobile railway GSM-R platform and based on second generation technology."

Four years ago, PRASA and Huawei connected to develop a railway communications system that fulfils the demand for a high capacity rail service.

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