by Ray Tsuchiyama [leader in Strategic Sales, Channels Management, and Business Operations].
When I was with a U.S. semiconductor firm I once visited the French subsidiary's Paris office. An ethnically Chinese sales manager, who spoke English with a distinct French accent, greeted me. During our conversation the manager explained he was born and raised on the large island of Madagascar (where French, English and Malagasy languages are spoken), off the southeastern coast of Africa, and later attended a Paris university before joining the U.S. chip firm.
His parents had traveled from Guangdong Province in southern China and settled in the capital city Antananarivo (and eventually owned several restaurants). The Chinese population in Madagascar is larger than 50,000; the Mauritius islands have a similar population. South Africa now has the largest Chinese community in Africa with approximately 300,000, with newly-developed Chinatowns in the eastern Johannesburg suburbs.
That country, which boasts the strongest economy in Africa, had a surge of Chinese immigration after apartheid’s end in the early 1990s. There are three South African Parliament members of Chinese descent, including two with the African National Congress (identified with former President Nelson Mandela, an isiXhosa-speaker) and one with the Nathan Freedom Party. It is not uncommon that South Africans with Chinese ancestry speak English, isiZulu, isiXhosa or Afrikaans with neighbors and friends, plus possibly Cantonese/Mandarin. (See my note on language in South Africa at the bottom of this post.)
Africa and China--seemingly entirely different worlds--are not easily linked. True, July 11 is celebrated as a holiday in the People’s Republic of China, in honor of the first voyage of Admiral Zhen. He, an extraordinary 15th-century Imperial fleet commander who completed seven long ocean voyages, including beyond the Indian subcontinent, reached the Horn of Africa and what is now Tanzania and Kenya. His expeditions returned with giraffes and other exotic creatures to the astonishment of the Imperial Court. (The Ming Dynasty was rather an open society; high-ranking Admiral He was both a Muslim and a eunuch.)
Even now Chinese porcelain pieces are uncovered during excavations in ancient trading cities like Zanzibar and Mombasa. However, after these fantastic voyages, Chinese interest in “blue ocean” exploration waned and it was not until the early 1990s that Chinese re-engagement with Africa began anew and continues unabated today in many ways.
Now Africa is hot--in a political-economic sense. Africa used to be known for civil strife and famine; unfortunately, both continue in parts of the continent. Other regions are experiencing intense competition in trade and natural resources, including oil and minerals, by firms from Europe, U.S., Japan, Korea and China. Also, the World Cup in South Africa this month loudly heralds the arrival of Africa onto the world sports stage.
Many citizens in the U.S., Europe and Japan are unaware of the great emphasis China is placing on the African continent and its undeveloped market of 900 million people. Over the past two decades thousands of Chinese government and state enterprise officials have fanned out throughout Africa for diplomatic recognition, educational and arts programs, FDI and business loans, giant construction projects, and business and trade deals.
By 2007, according to the New York Times, 750,000 mainland Chinese nationals were estimated to be living and working throughout Africa. Chinese financial assistance and engineering prowess completed the Lagos-Kano railway in Nigeria (a $8 billion project), the Beguile railway line in Angola with access from the Lobito seaport to interior copper mines, a freeway in Algeria and oil pipelines in Sudan.
A 2008 U.S. Council on Foreign Relations paper entitled “China, Africa, and Oil” by Stephanie Hansen paper pointed out that “Africa registered 5.8% economic growth in 2007, its highest level ever, in part because of Chinese investment. Experts say the roads, bridges, and dams built by Chinese firms are low cost, good quality and completed in a fraction of the time such projects usually take in Africa.”
From the African perspective, it is hard to build anything--bridges, roads, schools and hospitals--without money. To do business, to sell palm oil or flowers or coffee, African small firms need money to buy seeds, fertilizer, tractors and trucks. To an African government official trying to complete a paved road to an airport or a struggling farmer in need for a loan to expand his overseas coffee sales, Chinese assistance is probably a godsend.
At the highest government level, the official multi-lateral organization between African states and the People’s Republic of China is the Forum on China–Africa Cooperation (FOCAC). Over the past decade there have been four meetings. In 2006 in Beijing, Chinese President Hu Jintao convened with top representatives from 35 African countries. Acting more like a developed, mature economic power, he signed $5 billion worth of low-cost loans to African countries.
Three years later, at the 2009 meeting at the resort town of Sharm el-Sheikh, Egypt, the number of African states’ attendees increased to over 50. The list included 35 African heads of state, 6 heads of government, 1 vice president, 6 senior officials and the African Union Chairman. It was a rare instance because so many top Chinese leaders were out of China at the same time; Premier Wen Jiabao, Foreign Minister Yang Jiechi and Commerce Minister Chen Deming all attended.
At the overflowing 2009 FOCAC session China committed to $10 billion in low-cost loans, plus an additional $1 billion in loans for African SME firms. The total loan figure was not all: Wen, a geologist by training, also committed funding for 30 hospitals and 30 malaria centers, training for 3,000 doctors and nurses and 1,500 teachers, 50 China–Africa friendship schools (including Confucius Institutes in 16 African countries--since Confucian teachings revere elders for wisdom, there is synergy with traditional African culture), 20,000 health and technical professionals--and, startlingly, increased the number of Chinese government scholarships for African students to 5,500 by 2012 and a new plan to bring 100 African post-doctoral fellows to do research in China.
These latter African student figures are of high significance, since the programs would dramatically increase the number of Mandarin-speaking Africans. It is challenging to find other well-funded, multi-sector African assistance programs undertaken by other developed countries, like, say, Japan, the world’s second-ranked economy, where fewer African students study at Japanese universities even though it too is a superpower. In other words, in poker terms, China was all in for future China-Africa relations.
According to the “China, Africa, and Oil” report, from 2002 to 2003, trade between China and Africa doubled to $18.5 billion; by 2007, it had reached $73 billion. Furthermore, the paper continues: “Much of the growth was due to increased Chinese imports of oil from Sudan and other African nations, but Chinese firms also import a significant amount of non-oil commodities such as timber, copper, and diamonds. China recently began to import some African-manufactured value-added goods, such as processed foods and household consumer goods. Eighty-five percent of Africa's exports to China come from five oil-rich countries (Angola, Equatorial Guinea, Nigeria, the Republic of Congo, and Sudan), according to the World Bank...But Chinese interest in Africa extends beyond oil. China now ranks as the continent's second-highest trading partner, behind the United States, and ahead of France and Britain.”
If China-Africa engagement continues into the future in such an explosive fashion, there will be large communities of newly arrived Chinese traders, engineers and manufacturing professionals from Cairo to Addis Ababa, from Lagos to Luanda, from Harare to Maputo to Capetown.
New Chinese enterprises will launch plants for “local products,” including clothes, pots and pans, plastic buckets, watches, shoes, soft drinks, packaged convenience foods, soap and cosmetics and low-end mobile phones. They could also make and sell consumer electronics, like localized versions of MIT Media Lab OLPC laptops and PCs, and white goods, like televisions, air-conditioners, fans, rice cookers and refrigerators. There will be factories for cement and steel beams for new apartment and office buildings, for furniture and solar power panels. Employing thousands of new plant workers, a line of Tata’s Nano-like inexpensive car and utility truck/SUVs could be produced in South Africa for export throughout the continent.
Simultaneously, these new Chinese-funded projects would require IT support, specialized oil drilling expertise, design services, project management skills and factory floor manufacturing equipment--in short, a new Chinese-led African business and technological eco-system with an appetite for a wide range of products and services.
What should be the future strategy for multinational firms trying to take in this Chinese wave of raw materials imports and low-cost manufacturing and sourcing in Africa?
The answer lies in the thousands of African students arriving at mainland China technical schools and universities via the aforementioned multi-year FOCAC China-Africa assistance programs. Foreign firms should establish long-term interaction with leading Chinese faculty at Chinese universities, from top-rated Beijing University to Tsinghua to Fudan (in Shanghai) to other colleges in Tianjin, Dalian, Nanjing, Wuhan, Xiamen and Guangdong.
Employing first Chinese graduates of these colleges as liaison staff (and later Mandarin-speaking African college graduates), multinationals should sponsor Chinese faculty research in key areas like petroleum engineering, manufacturing operations and international commerce, and seek out talented students from Angola, Zambia, Congo and Sudan.
Multinational firms can train these recruits, and pay for their visits home to establish contact with their communities for further tapping of local talent. Then these employees representing--say, Microsoft, Procter & Gamble, Bechtel or Ford--can visit Chinese-run offices in Brazzaville and converse in Mandarin about a RFQ. It's a scene that should become as familiar as a Chinese speaking Swahili or Yoruba or Malagasy-accented French, like the semiconductor sales manager I met in Paris years ago.
A complex China-Africa emerging-markets strategy of geography, products and commerce is not easy for a firm headquartered in Chicago to grasp all the pieces of the puzzle, but the first step is to identify the right talented staff who have in-depth knowledge about the two seemingly disparate worlds of Africa and China--peoples, cultures, languages and markets.
(Note: When I was working in Johannesburg, South Africa I was surprised by the ease the hotel reception staff pronounced my last name. Usually it is mangled by Americans and Europeans, as the opening “tsu” sound does not exist in Indo-European languages. The South Africans explained that the “tsu” sound, plus other syllables in my name, is used among Bantu family language [isiXhosa or isiZulu] speakers. I felt quite at home.)