Building a platform for growth

Service sector in Africa offers bright investment prospects for Chinese companies, says CABC chief

Chinese companies must clearly understand the African business environment before setting up factories or an industrial chain on the continent, says Zheng Yuewen, chairman of the China-Africa Business Council.

Zheng, who represents the interests of more than 550 Chinese companies in Africa, says that by teaming up with China, Africa can speed up its pace of industrialization, especially in industries like concrete manufacturing.

Set up in 2006, CABC is a nongovernmental organization jointly established by the United Nations Development Programme and the China International Center for Economic and Technical Exchanges. Its role is to guide and serve Chinese enterprises to invest and develop in Africa.

By establishing close relationships with domestic and African partners, the council is also responsible for creating favorable trade conditions and investment environment for China-Africa economic and technical cooperation.

With the world undergoing tremendous changes and China-Africa relations experiencing new developments, China has been helping Africa to boost its economy. The nation is not only providing aid and free infrastructure construction projects to its African counterparts, but also using Africa as a new investment destination.

Zheng says not only is Africa rich in natural resources, but its weak industrial base offers immense opportunities for manufacturing investment. The real challenge, however, is to reduce Africa's excessive dependence on international aid and instead use its natural resources to establish a solid industrial foundation.

"A growing number of Chinese companies are now keen to expand beyond resources in Africa. CABC has been seeing renewed interest from Chinese companies to invest in sectors like steel, cement, electronics products, garments, shoe-making and automobile assembly lines," Zheng says.

"The advantage of investing in these manufacturing sectors is that it effectively lowers the risk caused by unpredictable political and social situations such as government changes, military coups and social turbulence in certain African countries.

"A majority of the African governments are keen to raise the proportion of manufacturing in their economic development as they feel it would provide a stable source of tax revenue and reduce their dependence on exports," Zheng says. "Thus, no matter which African leaders are in power or what kind of political direction they follow, Chinese investment in manufacturing sectors remains more or less insulated."

Zheng feels that Chinese companies should spend more time to decide what kind of industrial sectors African governments need, or which industries to treat as a priority, as it would make the investment procedures in Africa much easier.