Foreign Media: China Invests $10 Billion in South Africa to Build the Next Tech Hub in Africa

¬ China has pledged to invest $1 billion in South Africa, betting that Pretoria can compete with Nairobi and Kigali to become the next tech hub in Africa.

¬ This investment is equivalent to South Africa's annual inflow of foreign direct investment, but power shortages and governance issues may hinder the completion of the projects.

¬ As Beijing deepens its $5.5 billion trade relationship within the BRICS framework, President Ramaphosa praised the commitment to employment.

China has committed to investing $1 billion over the next five years in South Africa for the construction of ports, railways, and a flagship technology park, which is hailed as Africa's largest "Silicon Valley." This agreement was announced at the China-South Africa bilateral committee meeting held in Pretoria, highlighting Beijing's efforts to consolidate its influence in South Africa, the most industrialized economy on the continent, while also providing Pretoria an opportunity to compete with the emerging innovation centers in East Africa.

South African President Cyril Ramaphosa views this investment as a lever for industrial modernization and youth employment. "This partnership will create opportunities for our youth in future industries," he stated while co-hosting the meeting with Chinese leaders. For China, this agreement further expands their already dominant trade relationship, with projected bilateral trade exceeding $5.5 billion by 2024.

South Africa's GDP last year was approximately $419 billion, with the region's deepest financial markets and largest university network. However, in terms of tech startup vitality, South Africa lags behind Kenya and Rwanda. Nairobi's "Silicon Savannah" has attracted venture capital through breakthrough technologies like M-Pesa, while Kigali's Innovation City has drawn numerous multinational corporations. Beijing's bet tests whether state-led capital combined with South Africa's scale can turn the tide.

The $1 billion commitment far exceeds previous levels of foreign investment inflows. According to UNCTAD data, South Africa attracted about $9 billion in foreign direct investment in 2023, meaning if China's commitment is fulfilled, its annual investment could double. However, execution risks are imminent: long-term power shortages, regulatory bottlenecks, and governance concerns have long hindered investment prospects in Pretoria.

Infrastructure is a direct attraction. South Africa already has the largest cluster of data centers and broadband projects in the region, with support from the World Bank and the International Finance Corporation for additional capacity. Reliable power and fast connectivity remain critical for the success of large tech companies. China's financing strength may help fill the gap – but only if grid reforms keep pace.

Labor issues are equally crucial. South Africa has more engineering and information and communication technology graduates than other developed countries, but its youth unemployment rate is as high as 46%. A well-functioning tech center could absorb some of the excess labor force. In contrast, Rwanda and Kenya have used education-industry partnerships to align skills with new innovation parks, a model that Pretoria has yet to replicate.

For Ramaphosa, the goal is to reposition South Africa from an industrial power to a digital leader. For Beijing, the goal is to embed influence in Africa's innovative economy within the BRICS framework. Whether this "African Silicon Valley" will rise in Pretoria or whether Nairobi and Kigali will maintain their lead hinges not on the amount of money, but on how quickly the funds are disbursed.

Source: ecofinagency

Original: www.toutiao.com/article/1844017614086282/

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