Chinese private enterprises pioneer in Africa (2)

Still a lot of room for investment

Currently, investments made by Chinese private enterprises in Africa are still at a tentative stage. "Many private enterprises that have invested in Africa are in a transition period." Ge said. In general, private enterprises are primarily engaged in trade and begin to invest in industries there after gradually understanding the development potential of the local market. During the transition period, enterprises also have an opportunity to expand and become stronger.

The development of the Wenzhou Hazan Shoes Company in Nigeria is an example of a successful transformation. In 2004, Hazan started building factories and assembling products in Nigeria that were exported half-finished from China. By 2007, Hazan had invested a total of over 13 million USD in Nigeria, and had become the largest shoe manufacturer in Africa, with factory buildings covering an area of 40,000 square meters and an annual production of six million pairs of leather shoes.

There are a series of problems facing Chinese private enterprises investing in Africa. First of all, they lack talent in understanding international practices and local languages. Ge explained that enterprises investing in Africa have basically achieved localization of employees, so that only a small number of senior management is Chinese. However, communication between the two sides relies on translators. At the same time, Chinese companies are not familiar with the local culture, laws and regulations, something which has often led to labor disputes.

These private enterprises lack communication channels and credit with domestic financial institutions in China, so they find it difficult to obtain financial support when they want to further expand their businesses. “The development of Chinese private enterprises in Africa still needs domestic support,” Ge said. So, establishing institutions that provide credit guarantee services between the enterprises and banks has become a top priority.

Financial crisis breeds new opportunities

Affected by the financial crisis, sales of silk made in Nanchong, Sichuan Province dropped sharply in the markets of Europe and North America. However, exports to Africa were barely affected, and the African market is still strong. “China-Africa economic and trade relations still maintain a momentum of all-round rapid expansion.” Huo Wei, an official from the Department of Western Asian and African Affairs for China’s Ministry of Commerce, said that it will take a while for the impact of the financial crisis on China-Africa economic and trade cooperation to appear. This will cause certain difficulties for both sides, yet the basis for cooperation remains unchanged.

Liu Hongwu, executive director of the Institute of African Studies of Zhejiang Normal University, believes that the financial crisis is a significant opportunity for the two sides to expand trade relations.

First, China-Africa economic and trade relations are currently focused on areas of people’s lives which do not involve high-end products such as high-tech products or financial services. Because of this, there is still broad development potential.

Second, the economic development model and experience that China has gained in poverty reduction over the past 30 years has exerted a huge influence on Africa.

Since the financial crisis, the development model of developed countries in the West has been widely questioned, so the attraction of Africa to China’s experience has been further strengthened. This also provides a rarely-seen opportunity for the development of China-Africa relations.

At present, private enterprises should broaden their thinking and carve out new investment areas when investing in Africa. Liu points out that aside from investing in energy resources and mining in Africa, private enterprises can also make efforts in fields such as culture, art, folk handicraft and lifestyle.

This will develop new African cultural industries so as to boost both local employment and the exports of basic commodities and labor services. By doing this, the development model of the enterprises can then be transformed from being energy resource-oriented to a multi-development model that involves aspects such as culture and the environment.

By People's Daily Online