Pure Business

With the exception of the Paris deep dive on July 10, China has been a curiously silent specter hanging around -- but not necessarily injecting itself into -- our global discussions on Africa’s prospects for economic development.  Frankly, the presence of large groups of Chinese businessmen at our hotels in Nairobi and Dakar has been more telling than some of the discussions to date.  But things clearly changed when we set down in Beijing on July 27 to meet with local business, government and academic leaders.

From the outset, China’s growing presence and influence in Africa has been one of the driving forces behind this GIO focus area.  Over the past five years, trade between China and Africa has quadrupled, and in 2006, it surpassed Great Britain to become Africa’s third largest trading partner, trailing only the United States and France.  More than 800 Chinese companies have established trade with Africa, resulting in more than $6.6 billion U.S. dollars of foreign direct investment (FDI) in the region by the end of 2006 – 14 times greater than at the beginning of the decade.  And building off its diplomatic relations with 48 of the 53 African nations, the Chinese government hosted the Forum on China-Africa Cooperation (F.O.C.A.C.) last November, drawing 1700 participants for what the was billed as “the largest summit China has hosted in modern history.”

Business participants in the Beijing discussions ranged from players long established in Africa, such as the China National Petroleum Corporation, the China Civil Engineering Construction Corporation and the China Development Bank, to newer entrants, such as telecommunications infrastructure giant Huawei Technologies Company and business consultancy The Beijing Axis. 

Not surprisingly, all shared bullish positions on the prospects for business in Africa, tempered with pragmatic, real-world examples of the challenges faced when entering the market.  One business leader lamented the dearth of established small and medium-sized businesses with which he could partner.  His preference would be to source locally as many jobs and contracts as possible, but few locals possess the core skills needed by his business. 

Others told tales of needing to supply massive amounts of fuel, medical supplies and food to simply establish and maintain base business operations.  Yet others observed how local tribal interests can often supersede “official” government policy, making for a complicated regulatory matrix to navigate.

But most Chinese aren’t daunted by the risks.  They acknowledged – tacitly – that they have a safety net not shared by publicly traded companies – the backing of the Chinese government.  Kobus van der Wath, the South African-born general manager of the Beijing Axis, observed: “The general perception is that when Africa does business with Chinese companies, they’re doing business with Beijing.  When American companies operate there, no one thinks they are doing business with Washington.  That’s a big difference, so it’s no wonder the U.S. and the E.U. are getting jittery.”

Ruth Solitei, the Kenyan ambassador to China, tried to assuage possible concerns from both Chinese and Western businesses: “Investors need to understand the policies we have in place.  Many African countries are members of groups that mitigate the risk and protect the investments outsiders make.”

The growing Sino-African trade relationship is also being fueled by Beijing’s economic policies.  In other words, Chinese investment generally comes with no strings attached, and that approach can prove very effective for opening new markets.  One GIO participant shared a recent conversation with Nigerian business leaders, who confided, “We want to do business with China because we can have an entirely open discussion.” 

While the Chinese express no interest in leveraging their trade position to influence local political issues, some business leaders say they are increasingly investing in corporate social responsibility programs across the continent.  A representative from a petroleum company explained:  “We open schools, bring Chinese medicine and introduce other services that don’t exist.  We invest so local people can manage some of the business.  It helps the local people but we also know it will eventually lower our operating costs (when we can source more work locally).”

Getting a full picture of the rapidly evolving Sino-African trade situation is clearly not possible with a single one-day session.  But impressions can be formed, especially when contrasted with the insights surfaced in other markets around the world.  In Beijing, perhaps more than anywhere else so far, the motives seem pure:  plain and simple, Africa means business to China, and China means business to Africa.