029_G17_InSight_BrandChina

Global_17

Global Insight Brand China that could almost have been bodily lifted from China, that appear designed to cater solely to Chinese customers. A more sinister aspect is that Chinese workers have been smuggling illegal ivory in small quantities back to their homeland where high demand commands exceptional profits. In early December, customs officers at London’s Heathrow Airport seized large quantities of ivory disguised as ‘curios’ and shipped through reputable courier services. They said this was just the tip of the iceberg and pointed out that some of the ivory had come from freshly slaughtered elephants. Penalties for smuggling small quantities are hardly punitive and unlikely to deter the workers from taking calculated chances. Explaining the antipathy the Chinese seem to be arousing among local communities in Africa, Huang Hongxiang, a Chinese journalist, writes that for the average Chinese worker, Africa is the last place they would willingly go to. He says that most Chinese nationals who end up in Africa are “poorly educated, mostly from a rural or third tier city background, barely speak a foreign language or understand foreign cultures. Ultimately, these individuals’ solitary focus is about making money, often to send to their families back home”. Similarly, he says, “an assignment in Africa is far from the first choice for most of the employees of Chinese state-owned enterprises operating in Africa. These companies usually fail to attract the most educated or successful college graduates”. They tend to resent being ‘stuck in Africa’ and often take their frustrations out on local employees. Attempts by Beijing to rein in the excesses of some companies have not been successful. Ian Taylor, a professor of African politics at the University of St Andrews in Scotland, says Beijing has “less and less” ability to control some of the largest Chinese companies, thus undermining the official policy of a ‘win-win’ situation for both sides. In addition, Chinese companies compete fiercely among themselves and will stop at nothing, including bribery and even threats, to win contracts. The build-quality of some of the less reputable companies can be so poor as to be positively dangerous. My friend from Botswana told me that for some contracts, “we were fleeced. The quality was so poor that we complained to the Chinese authorities. When something is too good to be true in terms of pricing, we learnt that it really is too good to be true. There is always a hidden cost”. In sharp contrast, you often meet well-educated Chinese who speak local languages, such as Kiswahili, not only fluently but without a hint of an accent. They tend to go out of their way to mix with local populations and seem quite popular. A Chinese journalist in Ethiopia who seemed very much at home told me he and the government in Beijing were embarrassed by the behaviour of some of their people but there was very little, in practical terms, that they could do. While a simmering resentment against the Chinese at the lower end of the scale has been around for the past decade, it now seems that larger African companies are also feeling the bite of Chinese competition. Mukesh Halai, a director at Parbat Siyani, one of Kenya’s top construction companies, says that “Kenyan companies are suffering hugely”, as the Chinese now dominate roads and property contracts in the government and private sectors. “Most local companies are going into middle-scale projects, because with the bigger ones the Chinese are always there,” he says. Last year alone, China Wu Yi and China Jiangxi International secured tenders for multi-billion dollar private projects including the Hazina Trade Centre, which will be the tallest building in Nairobi. Some Chinese immigrants make an effort to integrate, learning local languages In December, Kenya’s President Uhuru Kenyatta launched a new Chinese-financed railway that will link the port of Mombasa to the capital Nairobi and then on to South Sudan, the Democratic Republic of Congo and Burundi. The project, worth $5.2 billion, went to the state-owned China Road and Bridge Corporation, leading to complaints that it had not gone to tender. But the Chinese, it seems, are quick learners and are adapting rapidly to their new environment. African authorities are also learning how to channel Chinese ambitions to achieve their own goals. The Ethiopian government, for example, slapped a ‘crust tax’ of 150 per cent on semi-finished leather to curb the practice of Chinese companies exporting leather back to China for the final manufacturing process. The result was that Huajian Group, one of China’s leading shoe exporters that makes shoes for Calvin Klein Last year alone, China Wu Yi and China Jiangxi secured tenders for multi-billion dollar private projects, including the Hazina Trade Centre in Nairobi and other Western brands, chose Ethiopia to launch its first overseas operations and now employs 1,750 people at its factory outside Addis Ababa. It expects to create another 30,000 jobs by 2022. Interestingly, Pittards, a British glove-making company, which has sourced its leather from Ethiopia since the 1920s, was also forced by the tax to decide whether to pull out or reconfigure to manufacture locally. It chose the latter option and trained local staff. The gambit paid off and the company made a handsome profit last year. With labour costs in China now rising rapidly, it seems very likely that Chinese subsidiaries in Africa, such as Huajian, will outperform their parent firms in China. This could lead to a mass migration of Chinese companies to manufacture in Africa, creating the skilled jobs the continent needs. That will be a true ‘win-win’ situation for all. If China’s presence in Africa can be compared to the tide, then for Africa it will be essential, with apologies to William Shakespeare, that the tide be “taken at the flood, leading on to fortune”. global f i rst quar ter 2014 www.global -br ief ing.org l 29


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