Making Africa their base

He Liehui is a private business owner who has set up an African base to export goods to Europe and the United States.

The 37-year-old, chairman of Shanghai-based Touchroad International Holdings Group, is able to bypass strict controls on Chinese imports by having a textile factory in Botswana.

"Many companies set up factories in Africa and then export their products to Europe and the US," he says.

"To do this you must have a certain percentage of your workers who are African and obtain some raw materials from Africa. It varies from country to country."

But He, who has written a book on trading with Africa, China's Africa Strategy, which is to be translated into English, says it would not make sense for a Chinese company to set up in Africa just for that reason.

"The export market is very seasonal. During the high season you could export 80 percent for your products that way but the rest of the time you need to also sell to the local market, just to maintain your workforce," he says.

Lu Weiguang, president of A & W Woods based in Shanghai, has made overseas investments in Brazil, the US and, more lately, Africa.

The company makes hardwood flooring for commercial clients such as retailers Haagen-Dazs and Coach but retail is its main market.

The company first started exporting to the US in 2006, where it has since acquired a sales business, but also now has factories in Brazil and Africa, where it now has major plans to expand.

"I want to transfer a lot of our activities to Africa, where the costs are low and we now have good channels. We have the only wood factory in Togo at present and we want to expand to surrounding countries such as Nigeria, Benin and Cote d'Ivoire."

Lu says he has sold one of the company's two Brazilian factories at a loss since the rising value of the Brazilian real has made it difficult to export semi-finished products back to China but the upcoming World Cup and Olympics make Brazil a buoyant market. The company is planning to host a match featuring China national team players at its remaining factory, which has an adjacent pitch, later in the year.

"In some ways Brazil is a better place to do business than China. It has a big population and domestic consumer market. The legal environment is also better," he says.

Zhou Fumin is another private company boss who is set to make a major outbound investment in Africa in October.

The 49-year-old general manager of Suzhou Orient Investment, based in Wujiang, a district of Suzhou, is investing $10 million (7.5 million euros) in a factory on the Eastern Industrial Zone in Addis Ababa, making headdresses for both Muslim men and women.

The company is taking advantage of a seven-year duty free period and will eventually employ 200 people on site. The investment came as a result of meeting Africa officials at a China-Africa forum in Suzhou last year.

"We will be closer to our key markets in the Middle East such as Dubai, Qatar, Yemen, Egypt, Iraq, Iran and Sudan," he says.

Some 70 percent of Muslim headwear globally is now made in Wujiang, near where a number of chemical substances required in their manufacture are located. The company intends to use its new Addis Ababa base as springboard to operate in 20 other African countries over the coming few years.

"We were the first to introduce headdress making techniques here and the district has since become a major global production center for them," he says.

He at Touchroad International Holdings started his first business in Africa in 2000 and now has interests in diamond mining and tourism and is in the process of setting up a small private airline for Chinese executives to travel around the continent.

"I still think Chinese companies have still got a long way to go in building overseas operations," he says.

"If we had to grade ourselves on scale of primary school, middle school and college, I would say we are still at junior middle school."

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

(China Daily Africa Weekly 08/30/2013 page7)