Africa is a 'big, big opportunity'

Lenovo is one of few major Chinese private enterprises to build presence in Africa

Jack Lee says Africa could make or break China computer giant Lenovo's global strategy.

The company corporate vice-president says the continent is no longer the distant outpost it was once regarded.

"We see Africa as a big, big opportunity. We see it as a must-have and not a nice-to-have," he says.

The 44-year-old was speaking after an overnight flight from Dubai, Lenovo's Middle East and African headquarters, at the luxury boutique Tribe Hotel in Nairobi's diplomatic district.

Lenovo, again second to Hewlett-Packard in global PC sales after overtaking it briefly last year, has 160 offices worldwide and first established a base in Africa in Johnanesburg in 2009.

It now has key operations across the continent, including ones in Nairobi, Lagos and Cairo.

"Lenovo won't be successful if it can't conquer Africa. There is so much going on in terms of education, infrastructure and sectors such as financial services, oil and gas. Everyone wants and needs a computer," he says.

The computer giant already has a 10 percent share of the southern Africa market, 15 percent in Egypt and between 12 and 15 percent in Morocco, although its position in Kenya and Nigeria is weaker at less than 5 percent since it is relatively new to these markets. Its global market share is around 14 percent.

Lee, a charismatic figure who is as comfortable talking about the films he watched on his flight as the details of his business strategy, was speaking just before handing over the reins as head of Lenovo's Middle East and Africa operations to Oliver Ebel.

The senior executive, who has moved to head up the company's businesses in Hong Kong, Taiwan and South Korea, says Lenovo is one of the few major Chinese private sector companies to have built a presence in Africa.

"If you look at the big names like (consumer electrical goods maker) Haier and Tsingdao beer, they haven't expanded in Africa yet. The ones that have a big presence here tend to be state-owned enterprises. That is why I am very proud of what we are doing here," he says.

Lee, who was born in Singapore but whose parents are from China, was chief operating officer for Lenovo's Emerging Markets Group in Beijing, before his successful two-year spell as Middle East and Africa chief.

He was educated in Canada, studying for a bachelor's degree in Asian studies and Chinese language at the University of British Columbia.

Before joining Lenovo in 2009, he was vice-president of the OEM business for Microsoft in Greater China. He has also held senior roles with software solutions company Ariba in Greater China and worked extensively throughout the Asia-Pacific region.

Lee says that it is not always easy to establish a Chinese brand in a market such as Africa, where consumers do not always feel confident about China-made products.

"The Sino-African relationship is a big connection. I would say it is almost like a love-hate relationship. A lot of people view Chinese brands as cheap products in Africa," he says.

"From my global experience I can say it is harder to sell the Chinese brands in other markets, too. Once people get to know a Chinese brand and get to understand the product, they usually find them very acceptable."

The total PC market size in Africa is 4.7 million unit sales a year, compared to 70 million in China, now the world's largest market, after narrowly overtaking the United States last year.

Lee says he wants to increase his company's sales in Africa by 10 percent a year.

"We would like to be No 3 in the whole of Africa in 12 to 18 months. Currently, we are No 5 in Africa and No 2 in the world," he says.

"I think Africa will be a very key market for Lenovo in five years' time. We would like to expand from just selling PCs to setting up major distribution centers and assembling as well."

Lee says it may be possible to eventually manufacture in Africa. Currently, Lenovo makes computers in India, Mexico, Hungary and Japan as well as at four centers in China.

"We may also look at, hopefully, manufacturing products and creating some jobs," he says.

He says Lenovo encounters the same competition in Africa as in other parts of the world such as Dell and Hewlett-Packard, although in Nigeria it has competition from a Chinese company Zinox, which has come up with a brand specifically for the African market.

"All the major brands are coming here. What you need to succeed is good partners, sexy products and to also ensure you have good service behind the products. Of course, pricing is key, like in any other region," he says.

Lee says Africa is very different from mature Western markets, where consumers are often looking for a second computer. "Here people are looking for the first desktop at school and that is why the potential here is so huge."

"Because there is a preference for desktops does not mean you can bring any old 5-year-old machine to the market. They have to have a sexy color, too, and be nice-looking."

He adds that behaviors in the market are not dissimilar to those in the lower-tier, more remote cities in China.

"If you look at the tier-5 cities in China, the workers or farmers would want the best computer they could afford for their children. Years ago they might have given them a bicycle. In China you find people buying wedding couples PCs, smartphones or flat screen TVs. That is also the trend here."

Lenovo, which was founded in 1984 and began as an import distributor before manufacturing its own computers, now has $21 billion sales worldwide and, like other Chinese companies, struggled initially to internationalize its business.

Its 2005 purchase of IBM's PC division - from which it acquired the ThinkPad brand - faced a backlash from the US Congress worried about Chinese companies taking over key US commercial assets.

Now, however, unlike many Chinese companies, five of the 10 people on the company's executive board are foreigners, which Lee believes gives the company certain advantages when taking on markets like Africa.

"Out of the 200 people working in the Middle East and Africa, I would say there are only 12 who are Chinese," he says.

"We are a multinational company that only has its roots in China. Even our executive council has its meeting every month in a different regional market. Our employees are from so many different African countries here, they are familiar with almost everything in Africa."

Although Lenovo is a consumer brand, a key element of its businesses is its base of corporate customers, which always require special care and attention.

Lee says the biggest challenge to serving corporate customers in Africa is poor logistics, which means setting up distribution hubs around the continent has to be a priority.

"Even Kenya which is considered a well-developed country on the continent, provides us with a lot of logistical challenges. The port of Mombasa has limited capacity since it is not only a port for Kenya but also neighboring countries. In many cases we take the decision to fly products to our customers even though it is shockingly expensive," he says.

"We have big customers here like HSBC Ghana and Huawei and we have to provide them with the best service, even though we might lose money on it."

Lee believes Chinese companies like Lenovo now benefits from the increasingly favorable impression many Africans now have of the Chinese.

"If you ask a Kenyan, regardless of how old they are, they will tell you that the Chinese are building roads and other infrastructure and transforming the continent," he says.

"I think Africans are beginning to have the same positive view of major Chinese private companies like ourselves and ZTE and Huawei. They can see for themselves the change in China and what China can offer them."

Contact the writers at andrewmoody@chinadaily.com.cn and zhongnan@chinadaily.com.cn

(China Daily 01/18/2013 page6)