An interesting article from the Asia Times online, republished on Dust in My Eyes‘ blog.

Africa Frenzy Feeds China Stock Bubble
Asia Times Online: China Business News
China’s stock bubble can be traced to Angola

Mar 27, 2007

By Zhou Jiangong

SHANGHAI - In recent years, many Chinese enterprises, including listed companies, have flocked to Africa in the hope of “digging up gold” in this “uncultivated continent”. However, some of the huge investment projects may be too good to be true.

Hangxiao Steel Structure, a Shanghai-listed construction company based in Zhejiang province, is being scrutinized by investors and regulatory authorities because of its huge 34.4 billion yuan (US$4.4 billion) contract with the China International Fund (CIF), a Hong Kong company, for a housing-development project called Residents’ Heaven in the southwest African nation of Angola.

Emerging from the shadow of the “Black Tuesday” slump on February 27, China’s stock market is well back on track. Hangxiao Steel, with its African investment project, has poured a little fuel on the flaming market. It says the contract for providing steel construction products and services to Angola for the public-housing project is worth 34.4 billion yuan.

However, before the company made a public announcement on March 13 of the share-price-sensitive information, its shares soared past the 10% ceiling for six days (Chinese law restricts the price of a share from going up or down by more than 10% in a trading day). The stock remained buoyant for another four days before it was suspended from trading on March 16. A couple of big money players bought millions of shares.

Analysts, investors and, eventually, the government watchdog began to doubt the authenticity of Hangxiao Steel’s Angola contract. Indeed, to a small firm like Hangxiao Steel with annual revenue of 3 billion yuan, it sounds too good to be true: according to the contract, the sale of steel construction products is worth 24.8 billion yuan ($3.2 billion) and the company will be paid another 9.6 billion yuan for its construction services in 12 cities in the African country.

Hangxiao Steel, a construction company specializing in steel structures for shopping malls, stadiums, theaters and museums, does not seem to be capable of taking on such a huge project within two years.

The amount of Hangxiao Steel’s contract, 34.4 billion yuan, is equivalent to 4.1% of the gross domestic product of Angola for 2005. But the Chinese Embassy in Angola said it had no knowledge of the Hangxiao deal.

The China Securities Regulatory Commission (CSRC) has ordered the Shanghai Stock Exchange and Zhejiang provincial securities regulatory authority to investigate suspected stock-price manipulation and insider trading. So far the company has denied that its senior executives have bought or sold its stocks.

Rumors are flying about company restructuring, mergers and acquisitions. Even loss-making companies are said to become vehicles to accommodate new assets. Such talk can trigger wild jumps in value. Some market analysts even deliberately spread false information to project rosy profit pictures for those companies whose share prices are dominated by big market players.

Read the full article here.

These are the articles, posts and news-items that have caught my eye in relation to Africa over the last month. My main sources are Africa Unchained, Sociolingo, BlogAfrica, My Heart’s in Accra and Timbuktu Chronicles, amongst others…

African Update paints a portrait of the Mugame regime, backed by video evidence, before predicting its demise, while Stephen Chan gives a good analysis of the current situation in Zimbabwe on Open Democracy. A good, informed read, like most of Stephen’s stuff.

Issa G. Shivji, Professor of Law at the University of Dar es Salaam, discusses on Pambazuka News the changing nature of the development discourse in Africa over the last few decades.

Afrol News writes a really interesting article on Ethiopia’s continuing economic boom, which - unlike that of other African economic miracles like Angola or Botswana - is not attributable to oil or natural resources, but to ‘hard work, economic reform and investments in its people and infrastructure’. While IMF officials were quick to state that this ‘mainly comes as a result of implementing economic policies prescribed by the Fund’, the article rightly points out that it’s down to Ethiopia’s willingness to ‘invest in key sectors that empower the poor masses, mainly in education, infrastructure and agriculture’. A good example of this comes via Sociolingo: in the outskirts of Addis, Azmeraw Zeleke is turning burnt-out shells into cylinders used in coffee machines!

Again afrol News discusses the heavy price air-borne African exports are beginning to pay because of Europe’s increasingly populist green policies. Also at stake is the increasingly important tourist industry, at a time when more and more African countries are relying on tourism to earn much needed foreign reserves.

Henry Ekwuruke from TakingITGlobal argues on his blog that ‘funding is not a necessity for invention’. In fact, he says, ‘the need to adequately fund research without unfairly compromising invention and innovation, this is why money is such a complicated component of any scientific and technological development’.

Ethan Zuckerman writes on My Heart’s in Accra about the awe-inspiring talk given at the TED conference by former Nigerian finance minister Dr Ngozi Okonjo-Iweala: Africa, she says, has its fair share of problems, but it’s Open For Business, and the signs of an African Renaissance are beginning to be visible.

Akwe Amosu on Foreign Policy in Focus gives a good and in-depth overview of the China-in-Africa issue, and of the governance issue that lies at its heart.

Sociolingo writes about the 50th anniversary of Ghana’s independence, and reviews the comments and articles that have been generated across the web.

Timbuktu Chronicles reports on the imminent advent of solar-powered cellphones, which promise 20-25 minutes of talk time for a 40 minute charge in the sunshine. This phone could revolutionize the way Africans communicate and do business in an environment with unreliable electricity supplies.

The UNDP published (back in February, in fact) a highly critical policy brief on the impact on the MDGs of privitizing basic utilities in Sub-Saharan Africa (PDF): Privatisation has failed on several counts. Contrary to expectations, private investors have shied away from investing in such utilities in the region. So it has been costly for governments to motivate them to invest. Moreover, the focus of investors on cost recovery has not promoted social objectives, such as reducing poverty and promoting equity. Thus, current realities dictate refocusing on building up the capacity of the public sector. It continues to dominate the provision of water and electricity, and will do so for the foreseeable future. But a dramatic scaling up of both external and domestic resources will be needed to finance more extensive public investment in these sectors.

And finally, Kathleen starts getting excited about the PICTURE Africa project, which aims to learn how ICTs are affecting poverty in East Africa. Nice!