According to the latest Economist Intelligence Unit report into Chinese investment in Africa, there’s been a distinct shift in emphasis.
It says while Beijing’s investment in Africa’s resource sector is significant - its not a game-changer and the mainland is now going after the consumer more aggressively.
"Chinese investment in Africa is becoming increasingly diversified as Chinese businesses seek investment opportunities in large new markets," the report says.
It cites a number of examples including telecoms, where Beijing firms have broken the monopoly of Western telecom firms in Africa through competitive prices, better ‘on the ground’ services and advanced technologies.
But its led to unusual challenges for the Chinese, such as homeland companies now vying for clients.
"Huawei and ZTE are competing with each other in Africa. Consequently, Huawei has positioned itself as a low-cost yet high-quality telecom company. Huawei’s pricing strategy is to price itself not more than 15% lower than major international competitors to avoid to be seen as another low-cost Chinese provider," says the report.
"ZTE, on the other hand, prices up to 40% below international competitors and its products are therefore perceived as being of inferior quality."
It says ZTE may have made a mistake, with Africans searching for quality as well as good prices.
"Huawei’s strategy has so far been the most successful. Despite increased competition from Indian and Brazilian telecom firms, Chinese enterprises are set to continue expanding their telecom businesses across the continent."
Speaking to BDFM Online, Economist Intelligence Unit Director in Hong Kong, Ross O’Brien, said the interesting development has been in Special Economic Zones, or SEZ’s.
"The story of Chinese investment in Africa has been one of, perhaps, scary, rapacious driving desire to exit with gold and oil and minerals .. but China needs Africa as an aspiring market for consumer products," he said.
Official Chinese estimates suggest that there are about 2000 Chinese companies in Africa.
But that’s thought to be underestimated with the vast majority of mainland firms on this continent registered as privately owned, and SME’s that are sometimes not registered at all.
The report has found that Chinese businesses are escaping fierce competition at home by seeking new commercial
opportunities in Africa.
"China doesn’t need to just take from Africa," says O’Brien.
"The SEZs are also intended to function as centres for Chinese economic activity in Africa, and Chinese enterprises are being given various incentives to invest in the zones."
lathamd@bdfm.co.za