Learning African culture key to successful firms 

Over the past decade, outflow of Chinese companies and investments have spread across the world. As the ties between China and African countries became increasingly closer during this period, Chinese investments achieved remarkable progress in the continent.

During the decade, China has gradually emerged as one of the major sources of investments for African countries, and Africa has become an important investment destination for China.

China's investments have invigorated economies in African countries. During the past decade, more than 100 Chinese companies have invested in Ethiopia, one of the African countries that is defined as "the least developed" by the United Nations. They have invested in numerous sectors in the African country, such as project contracts, light industry, textile, steel, cement, automobile assembly, telecom and real estate.

In Ethiopia, Chinese companies have accomplished numerous "firsts" for the African country: the first expressway around the city and the first large-scaled overpass, the first production factory for iodine salt, the first specialized mobile phone factory, and many others.

Thanks to the Chinese companies, Ethiopia's economy has undergone fast development. Some products, which were only imported, are now produced in the domestic market. Moreover, some "made-in-Ethiopia" products are even exported, starting to generate profits in the country's trade with other countries.

Many other African countries share Ethiopia's problems: their weak industry sector needs development and their economic structure needs to be further diversified. Chinese companies are important in this respect.

In the meantime, as Chinese companies entered the African market, concerns and problems in their daily business operation and management also surfaced. They fall under the following three categories:

First, operating in African countries, Chinese companies have concerns about security for their employees and assets. During the recent years, violent incidents, such as robberies targeting Chinese companies in African countries, have been widely reported by media worldwide. In June 2009, a group of armed bandits robbed a Chinese construction company at its hydropower plant construction site. Seven Chinese employees were injured, and all cash and some assets of the company were taken away. As a result, the project was halted.

Second, some Chinese companies may get involved in disputes with local community. A number of Chinese companies have projects in remote areas and it is difficult for them to seek immediate help from the local government.

In 2008, a crowd of local people gathered at a construction site of a Chinese railway construction company, asking for work opportunities. Pressured by the situation, the company hired them. But after the company fired some of those who were slack in their work, they began making trouble at the construction site. The company eventually had to seek government protection.

Finally, some companies have complaints about governments of African countries. In Ethiopia, some Chinese companies complained that the administration of customs was inefficient. Some companies accused customs officials of corruption.

Numerous Chinese companies in different African countries share these three kinds of problems. But to some extent, these problems were caused by the fact that many Chinese companies do not quite understand local culture or customs, particularly the legal system. In fact, most of the African countries have a comprehensive and sophisticated legal system. And African people are also very keen on defending their own rights within the legal framework.

In addition, Chinese companies should also pay more attention to issues such as environment protection and social responsibility, when they intended to invest in the local market. Some companies prefer working with high-ranking government officials and refuse to understand the local community. This kind of practice is quite dangerous, particularly in the African continent where the political situation is comparatively unstable.

We should remember that no company can achieve overseas development without support from local people. And one of the most effective approaches is to participate in the local community and perform your share of social responsibility.

The author is a researcher at the Institute of West Asian and African Studies under the Chinese Academy of Social Sciences.