JOHANNESBURG: On the outskirts of South Africa’s economic hub, Johannesburg, a new city is being built. The project, owned by Hong Kong-listed Shanghai Zendai, is among the largest real estate deals by a Chinese firm in South Africa.
Chinese companies have been building roads and infrastructure across sub-Saharan Africa for years. But a new project in South Africa is being built on a scale never before seen on the tip of the continent.
Chinese investor Shanghai Zendai heads the 1,600-hectare development called the Modderfontein New City project. It is set to cost as much as US$7 billion and, when completed, will become a mini city with more than 100,000 residents. According to the developer's founder, the aim is to turn the mini metropolis into the “New York of Africa”.
There are already similar, albeit smaller, developments in Johannesburg. Not far from Modderfontein is the thriving suburb of Sandton - situated in an area referred to as the “richest square mile” in Africa.
Investors hope such projects will become the new hub for Chinese firms looking to invest in the continent's south. “The Modderfontein project is located slightly outside of Johannesburg,” said Romain Dittgen, Senior Researcher, South African Institute of International Affairs. “They are planning to connect it to the Gautrain, so there is a direct connection between the airport and Sandton City. The idea is to create a city within or slightly outside of the city.”
China has been South Africa’s largest trading partner since 2009. But according to British law firm Linklaters, Japan has actually invested more in Africa in the past year. In 2014 alone, Japanese investors quietly ploughed in US$3.5 billion to finance infrastructure projects - almost three times what China committed.
The difference being Japan is focussed mainly on Nigeria, while China is betting big on South Africa. “South Africa is always the economic powerhouse of Africa,” said Ernie Lai King, Head of Tax and Asia Practice Group, Hogan Lovells. “Nigeria is slowly but surely taking over that label, but I think South Africa because of its infrastructure, its good legal and banking system, and its large economic base is seen as the attractive place to leap from into Africa.”
The hope for projects such as Modderfontein New City is that it will one day serve as a gateway to more trade and investment between China and South Africa.