Tianjin, China
At a business event held in Sandton, South Africa, on July 26, 2010, Tianjin, one of China’s key municipalities under the Central Government, showcased its huge infrastructure investments over the past few years, positioning the area to be a leading economic hub. They were seeking African investors into its economy, as well as opportunities for business people from the Tianjin to invest in Africa.
As China continues the roll out of its aggressive strategy towards building economic relationships with Africa, the question continues to be how much Africa stands to gain from the developing relationship?
Some people fear that the Chinese expansion into Africa is a new form of colonialism, but others disagree. They see China as offering business opportunities with the potential of being beneficial to both sides.
Chinese- African trade has grown from less than US$ 10 billion in 1999 to over US$ 107 billion in 2009. An analysis of trade between China and South Africa, for example, shows that China mostly imports commodities, such as iron ore, gold, copper, etc. from South Africa, while exporting value-added items, such as toys, clothing, and electronic appliances to South Africa. In 2008, South Africa recorded a surplus in trade with China for the first time.
This is typically the scenario in China’s trade with African nations. While the current trade profile offers short-term benefits for Africans, the long-term question remains what opportunities are there for Africans beyond exporting commodities?
Much is usually said about Chinese entry into the African market, and there is a lot of debate about the cost/benefits to Africa. However, many people overlook the vast market China presents. With a population topping 1.7 billion people, a middle class that is larger than the total population of almost any other nation in the world, and a strategy to bring its almost 400 million poor into the middle class, China offers vast opportunity for investors.
The key question is what can Africa sell to China? Countries like South Africa offer export opportunities in the areas of healthcare, foods, jewelry, agricultural products, textiles, metallic products, technology, entertainment, etc.
Tourism also offers a key area of investment. In 2009, over 40,000 Chinese tourists visited South Africa; this resulted in an estimated spend of US$ 150 million. There is a burgeoning Chinese middle class, which wants to and can afford to travel and discover the world. African investors should be better positioned to reach and benefit from this market.
The services sector is another opportunity to consider. An example is Naspers, a South African media company, which expanded into China some years ago. Today, its newspaper is one of the most widely read in Shanghai, one of China’s largest cities.
As highlighted at the Tianjin showcase, regions in China are planning to spend an additional US$200 billion to develop various infrastructure, such as ports facilities, trade zones, eco-cities, as well as improve on existing infrastructure. This kind of investment offers opportunities for African based construction companies.
In sports infrastructure and large event management, African-based firms should be able to garner access to the Chinese market. Africa has hosted three FIFA soccer events; the under 16 World Cup in Nigeria, the Under 20 World Cup in Egypt, and recently the FIFA Soccer World Cup in South Africa.
There is also a vast deposit of skill and know-how in large scale construction and engineering within South Africa. For example, Sasol, the South African energy company and a leader in gas to fuel technology, is currently building refineries in China.
The Tianjin delegation stressed that a hundred percent foreign ownership of businesses is allowed and that laws are in place to allow foreign investors easy remittance of profits. Also, they pointed out that foreign investors should not view them as “communist” because Chinga is constantly making efforts to open up its economy. It is getting increasingly easier to do business in China.
There are also opportunities in Africa for Chinese and African firms working together. For example, jointly-owned trade and industrial zones like the Sino-Egyptian Suez Economic and Trade Cooperation Zone. Chinese investors include the Tianjin TEDA Investment Holding Company and the China- Africa Development Fund.
In fact, trade and industrial zone development is a growing business opportunity fueled by Chinese financing institutions trying to leverage on the success of the Chinese trade/industrial zone model. The idea is to manufacture most consumer items locally, and nearer to the market, thus cutting the need for heavy dependence on foreign imports.
This type of Chinese-African engagement, if done right, will fuel local economies in Africa and create opportunities for technology transfer, job creation, and skills development.
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Opportunities for African Firms in China originally appeared on Afribiz.net on July 29, 2010.
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