The last golden land? : Chinese private companies go to Africa

Abstract

A new dynamic presence is spreading rapidly and widely across Africa: that of Chinese private enterprises. For these firms, Africa is ‘the last golden land’ of economic opportunity. Based on the most extensive survey to date of Chinese private firms, business associations and government officials across China and sub-Saharan Africa, this paper explores the critical questions of why these enterprises are investing in Africa? What are their perspectives on Africa’s investment climate? The study shows a growing number of firms that contradict the stereotype of Chinese firms in Africa. Pushed by intense competition within China’s domestic marketplace and pulled by the glint of new opportunities, many small, private manufacturing firms are heading to Africa quite independently of the Chinese government. They grasp this opportunity in a ‘three jump’ pattern. The first of these ‘three jumps’ are better known, from doing business within China to exporting to Africa; and then from exporting to Africa to investing in production in Africa. The third jump is less familiar: to investing in industry parks in Africa. Chinese firms cluster in new business parks, collaborating in coordinated production. Yet simultaneously, and contrary to popular perceptions, they are most concerned about the competition they face from other Chinese firms and not by competition from African or other expatriate firms in Africa. The Chinese business sector in Africa thus has growing ‘enclave’ characteristics: enterprises are located together in business parks, and simultaneously both competing with one another and cooperating and largely doing business with one another in the supply chain. They are relatively optimistic about the investment climate in Africa, especially those obstacles created by governments and public policy. However, Africa’s prospects for successfully harnessing the Chinese private firms to its development goals lies in the way each is adapting to their growing understanding of each other. Keywords: Chinese Private Enterprises; internationalisation; ‘Three Jump’ Pattern; enclave characteristics; Africa investment climate; development implication.