South Africa

Details

  • Industry: Business Desk, China
  • Type: Business and industry issue
  • Date: 2010/09/13

The KPMG Global China Practice Network

KPMG's China Desk was established to assist clients from South Africa with establishing business relationships in China and vice-versa.

The China and Africa dynamic: Looking to the future 

Professor Deborah Brautigam, author of The Dragon’s Gift, was recently interviewed by Glenn Ho, about China-Africa investment and trade.

Based on your research, what is the basis of China’s involvement in Africa? Is it primarily in pursuit of energy and natural resources?

 

China’s engagement is based on business. In Africa, energy and natural resources are the most attractive investment and import opportunities. But Africa is also a $50 billion annual market for exports from China and Chinese companies are doing upwards of $20 billion per year in construction contracts.

 

How does China’s model of engagement differ from traditional western donors?

 

Aid is a small part of China’s engagement. For the West, it’s a much larger part.

 

Would Africa be able to emulate and follow China’s economic growth model?

 

I don’t think so. African countries can learn specific things from China, especially how it has been strategic about economic growth. China’s presence is giving African countries policy space to experiment with their own development models rather than those imposed on them from above.

 

Can Africa benefit from its engagement with China or is it a one-sided relationship? Are there any success stories?

 

Yes, Africa can benefit (and many countries already are benefiting). South Africa, for example, where a Chinese bank has made what I think is the largest single Foreign Direct Investment in the country: 20% of Standard Bank. Chinese demand for commodities has given many countries a new lease on life with higher commodity prices.

 

How do you see China-Africa engagement over the next five to 10 years? That is, do you think it will increase or have we reached the peak?

 

It’s going to continue to increase.

 

Which industries do you think will be areas of greatest interaction between Africa and China?

 

For Chinese investment in Africa, building material industries are of growing importance now (cement, glass, steel, etc). Commodity processing (minerals, oil refining, agricultural goods like cotton in Malawi and sugar refining) is also growing, along with leather tanning and shoe-making.

 

We are seeing more interest in vehicle assembly, although not much parts manufacturing yet. These are all typical ‘first stage’ industries that are still lacking in many African countries.

 

Which African countries are most likely to interact and engage with China?

 

China is very active right across the continent, from resource-rich to resource-poor countries. All countries provide opportunities for construction contracts and trade in consumer goods, which are by far the largest (by number of firms) areas of interest. The largest value areas are the big resource investments and, particularly in South Africa, banking. South Africa has historically been the country with the largest trade and investment from Chinese companies. They are also quite active in Nigeria, across many sectors.

 

What advice would you give to African companies wanting to engage with China?

 

Hire people who know China and can speak Chinese. Spend time learning how things work in China. Think about what you can offer that is not available elsewhere: what is your comparative advantage? Learn from other African companies with experience working in China. Investigate opportunities for joint ventures with Chinese firms, which could get equity participation from the $5 billion China-Africa Development Fund. Small and medium-sized firms should enquire about the new $1 billion fund for African SMEs, which was announced last November in Egypt.