Chinese companies seeking to do business in Africa received a
master-class in Shanghai in what to expect and what steps to take
ahead of making such a move. Lu Bo, deputy director of the Ministry
of Commerce's World Economy and Trade Study Center, addressed on
Monday a forum named Experiences of Chinese Enterprises in
Exploring African Market. He recommended that appropriate project
feasibility studies be carried out by all enterprises mulling
business in Africa. He further asked that companies ensure their
techniques fit in with local habits, that importance be attached to
improving local public welfare and that the enterprises bear in
mind the importance of establishing strong labor relations and a
positive image.
The latest Ministry of Commerce figures put at over 800 the
number of Chinese enterprises currently doing business in Africa
principally in the areas of economic assistance, contractual
engineering, trade in goods and investment.
Most Chinese business ventures in Africa fall in three
categories: implementing donated projects, selling wares and
purchasing energy and raw materials.
The most varied sector may be the first in which companies began
investing in Africa after becoming familiar with local market
environments. As a result, their businesses may be reflected by
their versatility with private investment geared towards trading
and restaurant services. However, the flipside of their long
involvement in Africa is that they have the least capital on the
ground.
On the other hand, manufacturers are building up processing
factories to increase sales. In the 1990s, over 200 Chinese trading
companies or distribution centers had a presence in Africa with
over 100 processing centers set up since 2000. The lion's share of
investment has been garnered by the equipment and machinery sectors
which have cornered 70 percent of the market. Notable cases are the
Haier Group which opened factories in Tunisia, Shinco in Nigeria
and Hisense in South Africa. Normal methodology sees a thorough
exploration of the local market and neighboring countries before
the companies skillfully shift the origin of their products to
circumvent EU and US trade barriers to Chinese goods. This type of
investment has enjoyed the fastest growth among the three
kinds.
The final kind encompasses companies which have invested in oil
and other raw materials which are in hot demand for China. The
largest of the three investment branches, this type of entry into
the African market has caused the creation of industrial parks
allowing investors to pool resources and seek mutually-beneficial
business opportunities.
With the rapid growth of Chinese investment in the African
market, the trials and tribulations undergone from pioneers in the
field will prove invaluable to those following in their footsteps.
Many successful Chinese enterprises attribute their success in no
small parts to effective feasibility studies which have so far
mapped out political, economic, social and cultural variations
across 53 African countries.
Secondly, Africa is a vibrant continent with its own customs,
habits and values. To understand these as well as local practices
will help avoid a lot of trouble later on for the cautious company.
Thirdly, careful investment into local public welfare projects will
prove beneficial to both the company and the community into which
they invest. For example, China National Petroleum Corporation's
training of local workers and contribution to local public welfare
projects allowed it to extend its business outwards from Sudan to
encompass over 20 projects across eight African nations. On a
related angle, the preservation of labor relations is vital. Most
African nations have labor laws that are far more stringent than
China's, this having caused several strikes or labor disputes for
Chinese companies there. Finally, building a resolute and reliable
image is of primordial importance after complaints were filed by
local governments of Chinese companies failing to provide legal
working permits, despite promising to do so.
Lu had further words of wisdom. He reminded Chinese enterprises
that enter the African market that several challenges may be met
when going up against local competitors. Inefficiency, a poor sense
of service and cumbersome approval procedures are all elements that
must be kept in mind by the savvy businessman seeking to tap the
rich African market.
In closing, Lu commented that the Chinese and African economies
were highly complementary. Elements such as China's active
peacekeeping role in Darfur have harbored an environment favorable
to Chinese enterprises.
(China.org.cn by staff reporter Li Shen, May 15, 2007)
