Open for business

Private Chinese companies increasingly see Africa as an opportunity to be tapped - and Africans see benefits for themselves

China's leviathan state-owned enterprises in Africa building roads, bridges and major infrastructure get all the focus - but it is estimated there are some 20,000 Chinese private businesses now operating across the continent. These range from small concerns making shoes and textiles to some of China's corporate stars such as telecommunications giant Huawei and computer manufacturer Lenovo.

Many entrepreneurs have been lured to Africa because they see it as a virgin market where major profits can be made. That they face less competition than in Western markets is also a draw.

While comparisons with the Gold Rush in the United States in the mid-19th century may seem extreme, within the newly emerging Chinatowns in some African cities, there is a definite buzz about the commercial opportunities that abound.

A number of Chinese companies, particularly the larger ones, also see Africa more as a strategic platform on which to build a global strategy.

Whatever their purpose, Chinese companies are not only providing goods and services to Africans but also much-needed jobs.

Tu Yong, deputy managing director of Huawei Technologies in Ghana, represents one major Chinese company on the continent.

Away from the sweltering heat of Accra in the sixth-floor meeting room of the company's base in Cantonment Road in the Osu district, Tu says there is no doubting the opportunity in Africa.

"The commercial potential of the cell phone is highly attractive to all our competitors, including Nokia, Samsung and (Taiwan smartphone maker) HTC," he says.

"The market here is different to the West in that it is all about voice rather than data, and making affordable cell phones is key to developing the market here. Another opportunity for us is 4G, and the Ghanaian government has already invited all the major operators here to develop service for this."

The company achieved $1.5 billion of sales in 2011 in West Africa and has about 890 employees, of whom 80 percent are local.

He says in addition to having paid $9 million in taxes to local government in 2011 and purchasing $45.4 million of goods and services locally, it will be also putting money back into the community by building its own local supply and distribution network.

"Localization is one of our key strategies to develop our market here and that means putting in a lot of effort with local retailers and distributors who have a better knowledge and understanding of our business."

Harry Verhoeven, convenor of the Oxford University China-Africa Network, says many Chinese businesses going to Africa are just experimenting with whether they can develop their business in an overseas setting.

"It is not just about making a profit or increasing turnover but also learning about competing in a foreign market and building a supply chain," he says.

"Many of them are not always familiar with local legislation or the often difficult cultural side of doing business in Africa such as the informal demands placed upon them such as bribes and patronage.

"This is not about giving some official $200 but often about employing a certain type of people or using a particular supplier. It is a market in which you need quite a lot of savoir faire."

Not far from the Akosombo Dam, one of Ghana's main sources of electricity, the biggest local employer is a Chinese company.

Akosombo Textiles, part of the Hong Kong-based CHA Group, has been based in the area since 1967, and so is more established than many other Chinese entrants.