Lessons for Doing Business in Africa from the Chinese
By Nissi Ekpott in Johannesburg, South Africa.
The phenomenal growth of trade between China and Africa offers an opportunity to develop a new strategy to tap into Africa’s unique markets. For a continent not too long ago described as the “Dark Continent,” it’s mind boggling that its trade with China has grown over tenfold in the past ten years, topping $10000 billion. Today, China is even South Africa’s largest trading partner.
At the same time, Africa’s investment in China is also growing gradually. Up until now, the total investment of African firms in China has reached nearly $100 billion.
While there are advocates and detractors for China’s engagement in Africa, there is the fact that China has assisted African countries to complete over 900 projects, including textile factories, hydropower plants, stadiums, hospitals, and schools. Many of these directly benefit the well-being of local people.
Chinese firms pays more attention to investing in “hardware” projects, such as roads, bridges, and other infrastructure. While on the other hand, Western firms focus on capacity building and other “software” projects.
Also, China does not dictate a particular political ideology to African governments. African leaders have spoken in glowing terms of the new relationship with China, saying that Chinese offer “business.” It is left to the Africans themselves to negotiate deals that work for them.
While China’s engagement with Africa may be imperfect like so many others, there are lessons to be learned from it which investors and businesses can put to use.
Functionality versus luxury
Chinese undertakings are perceived as functional compared to Western undertakings, which are perceived to focus more on luxury. This means every dollar invested and managed by the Chinese will go much further than the average Western investment.
In Africa, the business culture is greatly influenced by the social dynamics. Networking is a strong source of business referrals and new business. This means that a typical company going into Africa may be required to refer the Africans to other businesses from an unrelated field. For the African business person, a referral is seen as a vote of confidence. The Chinese are perceived to easily fit into this type of model, seeing that they have a fairly similar business culture. Their ability to manage these kinds of issues offers them huge advantages. Africans perceive the opposite about Western companies, who are seen as niche focused and tend to separate business from social networks.
A drive through many African project sites involving Chinese nationals will see them with sleeves rolled up and directly involved in the work. They are perceived to be practical and ready to dirty their hands. This earns them more commitment from the workers. The average Western national is seen as “aloof” or far away, and this perception tends to promote lack of commitment, absenteeism, and other similar hindrances to productivity.
There have been many examples of Chinese investment groups signing multimillion- or billion-dollar deals in weeks. For the Africans, this seems to be a huge relief from Western funding organizations, who typically take five to ten years to release project funding. The level of development needed in Africa demands swiftness that may be uncommon elsewhere. The Chinese are also seen as being able to handle the weaknesses that come with lack of structure and other dynamics. They are able to make major decisions as they go along.
High appetite for risk
Africa is perceived as high risk, although in light of the global economic crisis the view of Africa is becoming more balanced. While there is still a lot of caution in the West, the Chinese are seen as risk takers, doing business even in countries that appear as high risk on risk indices. The Chinese are in places like the DRC, Sudan, and Zimbabwe.
While Chinese are assertive in business, their engagement is considered humble compared to perceptions of arrogance of Western cultures. This makes it easier for African business people to relate or feel comfortable.
No political meddling
At the recent Tianjin Investment showcase in Sandton, the conversation turned to perceptions of China’s approach to politics in Africa. The perception seems to be that China simply signs deals. They do not ask questions about the political issues. Some analysts see this as being irresponsible and promoting bad governance. Others see this model as a quick way of giving economic empowerment to African people, which means better governance in the long run. The argument is that before now, African governments listened to their funder, who were primarily foreign aid agencies. However, the influx of new funds enables locals to be empowered; this in turn makes them taxpayers, and eventually forces the government to listen to them. The Chinese model seems to lend support to this, and Africans seem to like it.
Africa presents challenges like other business environments, but it’s obvious that many, like the Chinese, have found significant success in Africa. And it’s through their success and lessons learned, others should find paths to their own success.
Nissi is an entrepreneur, business developer, and catalyst for African restoration. Nissi consults for small and big businesses in Africa, touching business and leadership development and providing services, including business tours and training programs for public and private sector officials.
Nissi coordinates BizConnect Afrika, a place businesses connect, as well as share ideas, opportunities, and resources. He also serves as a business journalist for Afribiz.net, a media brand of Conceptualee, Inc. (U.S.) and other websites and magazines in South Africa.
This article was originally posted on South Africa Business Communities