Strength to meet growth chal­lenges

Elec­tri­cal cable maker reaps sus­tained gains from over­seas ex­pan­sion

China Daily (Canada) - - BUSINESS - By CHEN YINGQUN and XIE CHUANJIAO

To many Chi­nese busi­nesses, Africa is like a train­ing ground to get them ready to func­tion in Western mar­kets. But some find that does not work. Qing­dao Hanhe Cable Co Ltd is one of them.

As a sup­plier and part­ner of many big multi­na­tion­als, in­clud­ing Ger­many’s Siemens en­gi­neer­ing, UK-Aus­tralian min­ing firm Rio Tinto Group and en­ergy gi­ant Royal Dutch Shell, Hanhe Cable has worked smoothly with com­pa­nies from de­vel­oped coun­tries.

“Some com­pa­nies see ex­pe­ri­ence in Africa as help­ful for them to en­ter the more reg­u­lated Western mar­kets, but for us, Africa is not just a train­ing ground,” says Zhang Huakai, chair­man of Hanhe Cable.

The company has found that Africa is ac­tu­ally more com­pli­cated and chal­leng­ing, Zhang says.

“Ev­ery re­gion has its own char­ac­ter­is­tics. We have worked well with many Western com­pa­nies, but Africa is still un­fa­mil­iar and un­known to us. Do­ing well in de­vel­oped coun­tries does not mean we will def­i­nitely do well in Africa.”

Hanhe Cable, based in Qing­dao, Shan­dong prov­ince, is en­gaged in re­search and de­vel­op­ment, pro­duc­tion and op­er­a­tion of ca­bles, wires and re­lated equip­ment. It makes hightech ca­bles for op­ti­cal, telecom­mu­ni­ca­tions, nu­clear power and other uses.

Zhang says China’s power in­dus­try and busi­nesses that make equip­ment for it have made great strides dur­ing the coun­try’s rapid eco­nomic de­vel­op­ment in the past three decades.

Hanhe Cable was es­tab­lished in 1982 in Qing­dao’s Laoshan dis­trict, for­merly an iso­lated area that is now a de­vel­oped part of the city. Hanhe Cable rose from a small company with only a few peo­ple to what is now a big, listed company. It had sales last year of about 6 bil­lion yuan ($979 mil­lion), and it has more than 3,000 em­ploy­ees. It also has eight sub­sidiaries in China.

“We can make 500 kW high-volt­age cable, 320 kW di­rect cur­rent ca­bles, and also marine ca­bles, all world-lead­ing tech­nolo­gies, so we are very ca­pa­ble of go­ing over­seas in terms of tech­nol­ogy,” he says.

Zhang says that since China is re­struc­tur­ing its econ­omy, fu­ture do­mes­tic de­mand will be smaller and growth slower, so com­pa­nies need to de­velop new mar­kets and sales out­lets. Over­seas mar­kets, es­pe­cially Africa, will be an im­por­tant part of the company’s fu­ture growth.

“Africa is the world’s hotspot now, and its in­fra­struc­ture deficit ur­gently needs to be turned around. Since con­struc­tion re­quires lots of elec­tric­ity, ca­bles would also be in great de­mand,” he says.

“Our prod­ucts are suit­able for coun­tries where large-scale in­fra­struc­ture cre­ation and im­prove­ment is needed, so we see great po­ten­tial in this mar­ket.”

In the past few years, Zhang says, Hanhe Cable has done mar­ket re­search in many African coun­tries and has gained many African clients. Its prod­ucts are sold in many African coun­tries, such as Nige­ria, Ghana, South Africa, Botswana, Tan­za­nia and An­gola.

The company ex­ports prod­ucts worth 300 mil­lion to 400 mil­lion yuan di­rectly to African coun­tries, while oth­ers are ex­ported through Chi­nese builders, Zhang says.

The company has also set up of­fices in Ghana, Nige­ria and Tan­za­nia and works with lo­cal part­ners. It sends peo­ple to its of­fices three or four times a year, where they stay for one or two months. But that is still not enough for the company to run the business with­out some help.

“Work­ing with lo­cal part­ners like this helps us bet­ter un­der­stand lo­cal cul­ture and laws, and helps us un­der­stand the mar­kets, strengthen our con­nec­tions with lo­cal cus­tomers and cre­ates a foun­da­tion for our fu­ture business. So we are also talk­ing to po­ten­tial part­ners in some other coun­tries like South Africa,” Zhang says.

But more im­por­tantly, the company plans a long-term pres­ence by set­ting up its own lo­cal com­pa­nies and fac­to­ries in some mar­kets with a large de­mand, such as Nige­ria and South Africa.

“Our business in Africa is in­creas­ing, but is not steady. So we want to invest di­rectly in the mar­ket, and hope­fully can do this with South Africa this year,” he says. “As long as sales reach a cer­tain size, we will ac­cel­er­ate build­ing fac­to­ries as soon as pos­si­ble. Business there now is scat­tered, and we want to achieve some sig­nif­i­cant size,” he says. In some years, they get big projects, in­clud­ing some worth 300 mil­lion to 400 mil­lion yuan, but in oth­ers there are few projects.

In de­vel­oped coun­tries and re­gions such as Europe, the United States and Aus­tralia, reg­u­la­tions and in­dus­try tech­nol­ogy stan­dards are clear and com­plete, and the mar­kets are more ma­ture. As long as the company makes prod­ucts fol­low­ing the com­mer­cial spec­i­fi­ca­tions of th­ese mar­kets, it is easy for them to do business there, Zhang says.

“Ev­ery African coun­try has its own reg­u­la­tions and has adopted dif­fer­ent in­dus­try stan­dards, so there are a lot of dif­fer­ent things we need to learn and to make ad­just­ments to. We un­der­stand a lot about de­vel­oped coun­tries, but Africa is more un­fa­mil­iar, in­clud­ing the business en­vi­ron­ment, reg­u­la­tions and prod­uct stan­dards.

“We need to set up a sales net­work and then set up a fac­tory to make prod­ucts that cater to the lo­cal mar­ket’s char­ac­ter­is­tics and re­quire­ments.”

More­over, the na­tional se­cu­rity and so­cial se­cu­rity of some coun­tries are also con­cerns, mak­ing the company more cau­tious about in­vest­ing in them. Some­times it is also dif­fi­cult to get the right per­son to travel to Africa, be­cause some think it is un­sta­ble and risky.

Zhang says the company is look­ing to make long-term in­vest­ment, not just sales. So while de­vel­op­ing the mar­ket, they in­tend to pro­vide more em­ploy­ment to lo­cal peo­ple.

The company has also set up a char­i­ta­ble fund of 200 mil­lion yuan, part of which will be used for lo­cal so­ci­ety as a whole, and part for em­ployee wel­fare at home.

Zhang says the company is now is search­ing for and cul­ti­vat­ing more over­seas em­ploy­ees who un­der­stand not only the company and the power in­dus­try but also Africa. Hir­ing lo­cals also saves the company money, he says.

One way is re­cruit­ing African col­lege stu­dents in Qing­dao Univer­sity and Ocean Univer­sity of China in Qing­dao to work as in­terns for the company, al­low­ing them to im­prove their un­der­stand­ing of the in­dus­try and the company, in hopes that when they grad­u­ate and go back home, they would work for the company or help it find good em­ploy­ees. They have been tak­ing on short-term in­terns for about a year, and cur­rently have three.

Pratt Brook­man, from Ghana, a stu­dent at Ocean Univer­sity of China ma­jor­ing in in­ter­na­tional business, is one of them. He has been in­volved with the company for three months.

“It will help my ca­reer. I in­tend to work for the company after I grad­u­ate,” he says. “I want to do some­thing re­lated with business. I didn't have much knowl­edge about elec­tric­ity, but I’m learn­ing more about it grad­u­ally. I think the company will help me grow.”

In Africa, the big­gest com­pe­ti­tion comes from Chi­nese com­pa­nies, which now want to go global be­cause of sur­plus pro­duc­tion in the do­mes­tic mar­ket, Zhang says. Their

prov­ince

PHO­TOS PRO­VIDED TO CHINA DAILY

Elec­tri­cal cable be­ing loaded for ship­ment at a Qing­dao Hanhe Cable Co Ltd unit in Africa

Zhang Huakai,

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