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)
