China’s private companies come into play in Sino-African economic cooperation
King Deer Group, a private Chinese company specializing in cashmere manufacturing, has been doing business in Africa for the past 24 years. Its Madagascar factory remained unaffected by the COVID-19 pandemic and continued to support people’s livelihood during this challenging period. “Thanks to maritime transport, the supply of spun yarn exported from China has not been interrupted. Our products are still being exported to Europe and North America”, said Zheng Haosheng, the group’s president.
King Deer is one of the many Chinese private companies investing in Africa. According to statistics from the Chinese Ministry of Commerce (MOFCOM), private companies now account for more than 70 percent of all Chinese companies investing on the continent. The Belt and Road Initiative, launched in 2013, has clearly reinforced this trend.
“The scope of cooperation is constantly expanding from contract work to emerging sectors such as e-commerce, finance, and industrial parks. Industrial chains are gradually emerging in African countries, where Chinese private enterprises are achieving sustainable growth while supporting regional economic development,” He Song, Deputy Director General of MOFCOM’s Department of West Asian and African Affairs, said at the 2020 China-Africa Private Sector Cooperation Forum held on December 11, 2020, in
Beijing. As a sub-forum of Forum on China-Africa Cooperation (FOCAC), it has become an important platform and flagship event for strengthening exchange and broadening cooperation between Chinese and African private enterprises.
COMPREHENSIVE INDUSTRIAL CHAINS
Xu Lejiang, Executive Vice Chairman of the AllChina Federation of Industry and Commerce, disclosed at the forum that the number of Chinese private companies investing in Africa has now exceeded 9,000, with a total
investment of more than $20 billion. One third of them are manufacturing companies, which have played an instrumental role in boosting economic development, creating job opportunities and improving living standards in Africa.
Since 2014, Sunda Group, a Chinese trading company, has invested in eight production lines in Ghana for the manufacturing of baby nappies, with a combined annual production of around 1.5 billion pieces. In the meantime, the company has noted a strong demand for industrialization and consumer goods in African countries. Therefore, Sunda set up a business partnership with Keda Machinery, a Chinese ceramic manufacturer, to explore further investment opportunities. The two partners have completed the construction of four ceramic factories in Ghana, Senegal, Kenya, and Tanzania,
employing around 1,000 African workers in each plant.
Economic and commercial cooperation parks are an essential vehicle for the industrialization of African countries, helping to facilitate the development of comprehensive industrial chains, generate employment for Africans and raise tax revenues for the countries concerned, said Wang Licheng, Chairman of the China-Africa Business Council.
Huajian Group, a women’s footwear giant based in Dongguan, Guangdong Province in south China, financed the first industrial park in Ethiopia in 2012. The park has stimulated coordinated development of Ethiopian footwear industrial chains, both upstream and downstream, creating an industrial cluster in the country. Annual exports of women’s shoes now amount to more than 2 million pairs, generating significant foreign exchange earnings for Ethiopia and creating several thousand local jobs.
“Industrial parks provide the incentives for business investment that meets individual African countries’ development needs and growth strategies. It allows them to control costs and increase productivity,” said Hany Besada, senior researcher and Program Advisor at the UN Office for South-South Cooperation (UNOSSC).
Besada said a company’s willingness to localize is a crucial determinant of whether it has a long-term strategy in the region in which it invests. According to a UNOSSC survey, an increasingnumberofChinese companies are no longer only pursuing short-term projects, but also adopting localization strategies such as partnership building, long-term planning, and the promotion of mutual economic and social benefits.
These developments are particularly beneficial to the host countries.
NEW OPPORTUNITIES
Despite the huge impact of the pandemic, SinoAfrican trade shrank by just under 20 percent between January and October 2020, while China’s direct investment in Africa during this period remained largely the same as in 2019, with a slight decline of 0.7 percent. “This is closely linked to the contribution of Sino-African private sector cooperation,” said Wu Peng, DirectorGeneral of the Department of African Affairs of the Chinese Ministry of Foreign Affairs.
According to the United Nations Economic Commission for Africa, the impact of the measures taken by African countries to contain the pandemic could cost the continent 2.5 percent of its GDP per month, amounting to $65.7 billion. Hence the pandemic has made African governments more aware of the importance and urgency of economic diversification. They have implemented supportive measures to help their manufacturing and other industries to overcome the crisis, thus creating new opportunities for development. At the same time, the digital economy is growing rapidly in Africa, with a large number of companies burgeoning in the fields of e-commerce, mobile payment, financial technologies, e-education, transport, and logistics.
“We need to pay special attention to the health and pharmaceutical sectors, as they could be the engines of economic recovery,” said Amadou Hott, Senegalese Minister of Economy, Planning, and Cooperation.