China investment in africa (1)

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Conference on Entrepreneurship in Africa (UK 2011): China Investment in Africa , William So

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China investment in africa (1)

  1. 1. Chinese Investment in Africa: Opportunities and Challenges William So July, 2011 [email_address]
  2. 2. Why Invest in Africa <ul><li>One of the few unsaturated markets </li></ul><ul><li>Sustainable economic growth </li></ul><ul><li>Large population/market size </li></ul><ul><li>Less strong competition </li></ul><ul><li>Generally ‘China friendly’ </li></ul><ul><li>Politically important </li></ul><ul><li>Rich in untapped natural resources </li></ul>
  3. 3. Chinese Companies in Africa <ul><li>State-Owned Enterprises (SOE) </li></ul><ul><li>Non State-Owned Corporations </li></ul><ul><li>Private Businesses </li></ul>
  4. 4. SOE <ul><li>Typically large operations </li></ul><ul><li>Projects funded by Chinese government, usually through G to G loan (well funded) </li></ul><ul><li>Infrastructure, resources </li></ul><ul><li>Skilled labour, low percentage of local labour </li></ul><ul><li>Priorities </li></ul><ul><ul><li>China’s interests </li></ul></ul><ul><ul><li>Company’s Interests </li></ul></ul><ul><ul><li>Profit </li></ul></ul>
  5. 5. Non State Owned Corporations <ul><li>Typically medium size </li></ul><ul><li>Projects funded by Chinese investors (sufficiently funded) </li></ul><ul><li>Manufacturing, technology </li></ul><ul><li>Skilled labour at senior level, higher percentage of local labour </li></ul><ul><li>Priorities </li></ul><ul><ul><li>Profit </li></ul></ul><ul><ul><li>Company’s Interests </li></ul></ul><ul><ul><li>China’s Interests </li></ul></ul>
  6. 6. Private Businesses <ul><li>Typically small size, mostly individually owned </li></ul><ul><li>Projects funded by individuals (poorly funded) </li></ul><ul><li>Trading, shops and restaurants </li></ul><ul><li>Low skill labour, small labour force </li></ul><ul><li>Priorities </li></ul><ul><ul><li>Profit </li></ul></ul><ul><ul><li>Profit </li></ul></ul><ul><ul><li>Profit </li></ul></ul>
  7. 7. Challenges <ul><li>POLITICAL </li></ul><ul><ul><li>Unstable governments </li></ul></ul><ul><ul><li>Civil Wars </li></ul></ul><ul><ul><li>Growing anti-Chinese sentiment </li></ul></ul><ul><ul><li>Political issues with non-African countries </li></ul></ul>
  8. 8. Challenges <ul><li>SAFETY AND SECURITY </li></ul><ul><ul><li>Frequent kidnapping of foreign workers </li></ul></ul><ul><ul><li>High crime rate in many cities </li></ul></ul><ul><ul><ul><li>Difficult to attract employees to take African assignments </li></ul></ul></ul><ul><ul><ul><li>Usually employees have to be confined to a secured compound with limited outside contacts </li></ul></ul></ul>
  9. 9. Challenges <ul><li>CULTURAL ISSUES </li></ul><ul><ul><li>Language barrier </li></ul></ul><ul><ul><li>Way of doing business </li></ul></ul><ul><ul><li>Food </li></ul></ul><ul><ul><li>Religion </li></ul></ul><ul><ul><ul><li>Most Chinese employees are there for a short period of time, so they have no intention to ‘mix’ with locals, therefore locals don’t see them as ‘friends’. </li></ul></ul></ul>
  10. 10. Challenges <ul><li>FINANCIAL RISKS </li></ul><ul><ul><li>Debts </li></ul></ul><ul><ul><li>Fraud </li></ul></ul><ul><ul><li>Change of government </li></ul></ul><ul><ul><ul><li>SOEs and large corporates are protected by government loans and funds </li></ul></ul></ul><ul><ul><ul><li>Barter deals are common </li></ul></ul></ul>
  11. 11. The Future <ul><li>The growth of Chinese investment in Africa will increase </li></ul><ul><li>More local presence from Chinese non state-owned corporations and private businesses </li></ul><ul><li>More African presence in China </li></ul>

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