On the road in Addis Ababa

Efficiency and price competitiveness are key to success of Chinese enterprises, says project manager

Zhou Yongsheng has probably done more than anyone to tackle the bustling city of Addis Ababa's traffic problems.

The 41-year-old is general manager of the highways subsidiary of one of China's largest state-owned enterprises, China Communications Construction Company, and has built many of the Ethiopian capital's major highways.

"You know, in Addis (Ababa), around 60 percent of the new roads have been built by me," he says with a hint of pride.

Zhou was taking time out on a Friday afternoon in his sparse office in the Bole sub-city area of the capital but there will be no weekend respite.

Road building in Addis Ababa is now a 24-7 operation, a marked contrast from when he first came to the city in 1998.

"Then no one worked on a Saturday or Sunday and there was no one working at night, except at a nightclub," he laughs.

Zhou, who heads both the Ethiopian and Tanzanian offices of the CCCC subsidiary First Highway Engineering Co, believes African workers still have not fully adopted the Chinese work ethic. His company employs up to 8,000 local workers, compared with 400 Chinese, a ratio of around 20 to 1.

"The Chinese people work very hard. Locals want incentives. People normally work 8 hours but if we want them to work an extra 2 hours we have to pay them 1.25 times. Another two hours on top of that and it is 1.5 times. This is also required by Ethiopian law," he says.

Zhou, who is from Baicheng in Jilin province in China and comes from a business background rather than that of an engineer, worked on the $100 million Addis Ababa ring road project when he first arrived in Ethiopia.

It was the first international contract of its type at the time in Ethiopia and both stages were completed in 2004 after six years.

The company is currently building a $612 million 80-kilometer road linking the capital with the city of Adama. It was supposed to take four years but is due now to be completed a year ahead of schedule this year.

Another major project is the $60 million 4-km road linking Meskel Square in the city with Addis Ababa's Bole International Airport. It is also due to be completed this year before celebrations begin in the city to mark the 50th anniversary of the African Union, whose new gleaming Chinese-built headquarters now dominates the Ethiopian capital.

Zhou says one of the reasons why Chinese infrastructure companies now have such a strong position in Africa is because of their efficiency and price competitiveness.

"You know in Ethiopia it is the company which provides the lowest price that gets the tender. Western companies haven't in the past been able to offer the lowest price," he says.

He says he is seeing evidence for the first time of Western companies, bereft of contracts at home because of the economic crisis, now trying to muscle in.

"Until last year we only had one or two European companies but their prices were generally high. Now because of the economic crisis, a number of European companies have come here," he says.

Zhou is concerned that with a 30 percent increase in the value of the Chinese yuan against the dollar over the past five years, Chinese contractors can no longer rely on their price advantage.

"When we buy machines and materials we always use RMB (Chinese yuan) and we also pay our staff in our domestic currency so it hits us hard. It really is becoming a big challenge for us," he says

"It is not just competition from Europe, there are companies from the Middle East such as from Yemen, Saudi Arabia, Kuwait and Egypt and also South Africa that are entering the market. If the Chinese currency goes up further it is going to put us in a very difficult position."

CCCC with a turnover of 500 billion yuan and more than 200,000 workers is one of China's top four construction companies and the largest player in overseas markets.

The company, which is listed in Hong Kong, first worked in Africa in 1963 when it was part of China's communications ministry, doing projects in what is now the Democratic Republic of the Congo and Burundi among other countries.

"Our company has been here for a long time and we have a very good reputation," he says.

Despite new competition, the Chinese still retain major advantages when it comes to building infrastructure projects.

Not only do they do construction work speedily and cost effectively, but they also provide African governments with access to finance through institutions such as the Export-Import Bank of China and China Development Bank.

"This is one of the reasons why we have a very good performance in this country. We can discuss a particular project with the Ethiopian government and they show us why it is important. We can then have our own discussions with a Chinese bank and if they say OK, we can continue," he says.

"People should not think that all projects can be financed like this. To get funding, a project needs to demonstrate it can produce a return. That is why the Addis-Adama road was attractive for funding because it was the country's first toll road and so the China Export Import Bank can be confident of getting its money back."

Zhou says the funding model is not always as straightforward as people assume and is not a case of the Chinese government throwing money around.

"Sometimes it can take one year or even two to complete all the procedures. If a project has no potential for money return, it may mean the Chinese government has to provide some form of guarantee," he says.

Zhou, who majored in enterprise management at Beijing Wuzi Universty and has an MBA from Peking University, says it can be tough living and working in Africa, a long way from his family.

His wife lives in the Wudaokou area of Beijing, where his son goes to primary school.

"I get back every six months or so because I have to report to head office and attend meetings. When I first came here, you only got leave every two years," he says.

"Of course I want to go home to China at some point. Home is best. These days, however, I am so busy that even if I have a chance to go back to China, I can't. Basically it is case of no projects, no food," he jokes.

Zhou says dealing with African bureaucracy can make working on projects more difficult than in China.

"In China things happen very quickly. Here there are a lot of procedures to go through. The Ethiopian or Addis Ababa authorities normally delegate power to local engineers and then everything depends on the experience of those engineers. If the engineer knows nothing about the project it can be very difficult to teach them," he says.

Working in Africa is becoming increasingly important for companies like CCCC because they can no longer rely on a booming infrastructure sector back in China.

"The construction market has recently been very poor and there have been only a few projects. The downturn began in 2011 and as a result there have been a lot more Chinese companies coming to Africa," he says.

Zhou says the presence of Chinese on the streets of Addis Ababa is now there for all to see.

"When I first came here, there must have been just 200 Chinese people and now there must be at least 10,000. There is actually a friendly relationship between our two nations. It is always important to recognize that this is their home and not ours," he says.

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

(China Daily 01/11/2013 page6)