China Is Taking The African Continent By Storm In Investments, And Why The West Should Follow Suit
By Okechukwu Okugo
Iron, copper, tin, brass, silver, bauxite, gold, diamonds, salt, cobalt, uranium etc., are abundant in many parts of Africa. Woods, fresh tropical fruits and inexhaustible arable land that supports all kinds of crop and animal production are also abundant in almost all parts of Africa. As many resources are facing depletion in other continents, those in Africa are abundant with the prospects of many other undiscovered minerals available, in different parts of Africa.
Truly Africa is a continent that modern investors should not exclude from their investment horizon. And China is already taking advantage of that opportunity, as well.
China now has more than one million immigrants in Africa, with the largest population of the people in South Africa, which has a new Chinatown that is bustling and bubbling, according to www.quora.com. The Chinese residents in this town are estimated to be between 200,000 and 350,000. But the population is not the attraction, rather, the businesses they are bringing in.
According to Council on Foreign Relations, cfr.org, “China surpassed the United States as Africa’s largest trade partner in 2009.” Citing estimates from Thomson Reuters and the World Bank, the source continued to reiterate that China continues to be “a destination for 15 to 16 percent of Sub-Saharan Africa’s exports and the source of 14 to 21 percent of the region’s imports.”
From Liberia, Angola, South Sudan, Ghana, Nigeria, Ethiopia, Kenya, Angola, to Democratic Republic of Congo (DRC), etc., China’s presence in different aspects of their economy is strongly being felt in a positive way.
Business Insider opines that “China has become by far Africa’s biggest trading partner, exchanging about $160 billion worth of goods a year; more than one million Chinese, most of them laborers and traders, have moved to the continent in the past decade,” to buttress the point.
Seyllou—AFP/Getty Images
Senegal’s Culture Minister Abdou Azize Mbay, center left, and Wang Yi, China’s Foreign Minister, center right, visit the construction site of Senegal’s Chinese-funded Museum of Civilizations Noires on January 11, 2014 in Dakar. Wang was on a two-day trip to Senegal, as part of an Africa tour. Photo credit: http://www.chinafile.com
Railway lines, roads, mines etc., are constructed by Chinese firms; and the Chinese government has financed the construction of roads, ports, airports, hospitals, schools, stadiums etc.
But why is China all around the world, especially in Africa, investing? For every good investor, there should always be a quest to break into new and fertile markets. There is the need for diversification. Moreover, barging into new fields, where one will likely be well equipped to be the best will grant an upper hand and may likely eliminate or reduce competitors. And this will certainly guarantee profitability.
Foreign investors who have come prepared, have an edge doing business in Africa. There are many virgin fields that have never been explored before in Africa. And there are many other fields which have been underutilized or being tapped far below the actual potential. These underutilized opportunities provide avenues of creating many profitable ventures. Unlike many western markets that have been stretched, used to the full, or saturated, it will be long before the so many markets or frontiers that exist in Africa would ever begin to show signs of saturation. This provides a very good playing ground and broader opportunities for profitable experimentations.
For example, in Africa, financial technology is underutilized and is now growing at such an enormous pace. And that has been the case with so many other aspects of technology. Bringing in technology that is non-existent or at most undeveloped, and applying it to a broader field would open the door to tap from a larger pool of consumers. For example, KGK Group, a foreign firm, has gone to Botswana, to tap from the abundance of diamonds, and the mining activities going on there, and opening a diamond cutting and polishing factory that uses the latest diamond cutting technologies, with well mapped out “plans to cut and polish diamonds worth an average of $1.5 million every year,” according to www.jewellerynewsasia.com. These kinds of investment opportunities are everywhere, all over Africa.
There are so many untapped or undeveloped markets and fields calling for individuals and firms to tap into. All that is needed to do after knowing the area one would like to invest in, is to look up for a specific African country with a track record of stability in government and a peaceful atmosphere where the opportunity or market exists, go right down there to see how other similar businesses run, do the feasibility study, contact the right government channel and then set up a legitimate business. There are laws that regulate and protect foreign investments. A lot of Chinese business men, women and firms have become integrated into the various sectors of the economy and the African markets.
The University of Pretoria Youth Choir in fine voice at the Year of China in South Africa launch
Competition, prices, and technology which are at its peak have saturated most of the western markets, whereas in Africa, the summit of technological advancement has not been reached leaving the room for more opportunities, where prices are good, and competition are less, with a corresponding consumer purchasing power that is tripling. Investing in Africa will remove certain fluctuations and other market uncertainties that are afflicting most European and western markets today.
African economies are among the fastest growing economies of the world, with economic indices that are showing a very vibrant future that will last a long time. A young and fast-growing population with a penchant to spend or consume are readily available.
McKinsey 7 Company’s data shows that, “…Africa’s Combined Gross Domestic Product will be $2.6 trillion by 2020,” and “Africa’s consumer spending by 128 million households with discretionary income is expected to be around $1.4 trillion.”
And this brighter prospect is reaffirmed by Africa.com report in 2015 based on the data of World Bank’s Global Economic Prospects (G.E.P), regarding sub-Saharan Africa’s economy, and rightly predicting that growth will “…pick up in the coming year to an average of 4.6 percent. An increase to 5.0 percent is expected to be witnessed in 2017. This growth increase will be fueled by domestic demand, continuing infrastructure investment and private consumption driven by lower oil prices.”
China has also sought to consolidate their investments in Africa as a form of insurance, to have a place to fall back on, with meeting up with tomorrow’s challenges. For example, China needed a backup place with a huge expanse of fertile farmland to produce agricultural products and food that will enable them to feed their teeming population. And Africa fits into the picture perfectly well. Africa has a very large arable land mass and numerous forest resources, as well. Still being an under-explored continent, Africa as a modern investment hub, can accommodate as many foreign investors as would want to tap into the investment opportunities they provide in all sectors.
Chinese people are teaming up with Africans in agriculture to produce more food on Africa’s arable land. Photo credit: China in Africa
There is a boom in today’s African modern economy, and this boom is inexhaustible because it is just beginning, and large enough to accommodate as many foreign investors as possible. Only China cannot tap the whole of it. And it is a good thing that some other countries are following suit as well. As Business Insider puts it, “The African boom, which China helped to stoke in recent years, is attracting many other investors.”
It is time for the West to join China and other countries to the full, tapping more into this new frontier, and maximizing their economic prospects.
“Brazil and Turkey are superseding many European countries,” in terms of investment in Africa. And the Business Insider source, continued to quote He Lingguo, a Chinese construction worker in Kenya, saying that the country “…is a good place for business…” Africa is truly an investment destination today.
The continent does not only expect to get, rather, they are also eager to offer what they have. China imports metals, iron-ore, mineral fuels, food, agricultural products and lubricants from Africa. And the West, as well, needs more of African products.
While labor is rising steadily in other places, such as China and many other Asian countries, where labor used to be cheap, Africa now becomes the best sources of cheap labor. Cheap labor reduces direct costs and helps maximize productivity gains. A lot of money can be saved if certain specialized production skills are transferred to the local people, the overall production cost would be cheap and gain is maximized. Africa is swarming with a more youthful population who are already gifted and skillful. And the people’s desire for a better life makes the marketing of quality products profitable there.
The essence of doing business is to maximize profits, and Africa provides a pedestal where a little input in modern investments provides a mega leap in outputs and gains.
Time is now for the west to start taking the advantage of the various opportunities in the African economy. Time is now for the west to start taking advantage of the growing market shares available in the African markets that are steadily rising to their peaks.
Extending a production or servicing arm of a firm or business to Africa is surely a profitable frontier for western investors who would not need to be competing with China because of the dynamic nature of African markets. Rather, it will help them avoid the stiff competition they face in their home countries among rival companies.
It is time to go invest in the field where one would have the leverage because of the inexhaustible market and unrivaled opportunity. There are many different frontiers calling for further explorations. It is time to go investing in Africa and tapping into a larger pool of consumers. It is time to go set up that factory in Africa and make use of their abundant cheap and skillful labor to produce cheaper goods that would be competitive in the world market.
In Africa, there is a need for development in financial technology, there is great need to transform the energy system with modern renewable energy technology; and many more aspects of technology that are still grossly undeveloped. All these opportunities provide multibillion-dollar investment prospects in Africa. Green energy companies and other technology companies can take advantage of the opportunity right there etc.
A Chinese business district in the bordertown of Oshikango, on Namibia's border with Angola. Photo credit: Kanhema Photography
Most recently, there is a slowdown in the Chinese economy; whereas African economies continued to rise and flourish, thereby aligning Africa as an unrivaled investment destination in today’s modern world. With conviction, there is nothing to fear about these stable African economies because, just as Aubrey Hruby, co-founder of the Africa Expert Network, puts it, nothing “…totally derails the African growth story.”
Opening image: Chinese President Xi Jinping and South African President Jacob Zuma visit the China-Africa equipment manufacturing industry exhibition in Johannesburg. The writer says that last week's Focac summit enhanced the mechanism of practical co-operation between China and Africa. Picture: Li Tao, Xinhua. Photo credit: IOL
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