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China mobile business to promote African economic industrial chain

         Date: 2012-03-30

           Tag: African economic, China mobile promote African economic

Summary: This data "confirm some of the mature economy fears" that they are losing ground to Chinese exporters in Africa, Standard Bank economists Simon Freemantle and Jeremy Stevens say.

Now, with Chinese companies moving up the value chain, that trade-off is changing. African consumers are still lapping up Chinese products, but these are more sophisticated. From smartphones to farm threshers, they are elbowing aside foreign, not local, competitors.

Chinese exporters have more than tripled their market share in Africa since 2002, supplying 16.8 per cent of the continent's total imports last year, according to a report published this month by Standard Bank. Over the past four years Chinese companies recorded their biggest gains in selling machinery, vehicles and electronics.

European and Japanese companies have been the losers. African imports from Italy, Spain, Germany, Britain and Japan were all lower last year than they were in 2008. Meanwhile, imports from China surged 38 per cent over that same period.

This data "confirm some of the mature economy fears" that they are losing ground to Chinese exporters in Africa, Standard Bank economists Simon Freemantle and Jeremy Stevens say.

The success of Chinese companies is about more than being cheap. Low prices undoubtedly help, but improvements in product quality and better co-operation between Chinese and African companies in tandem with political ties have also been crucial.

The Ideos phone from Chinese electronics group Huawei is a prime example. Already billed as the world's most affordable smartphone running Google's Android system, it is subsidised in Kenya by Safaricom, a mobile network operator, to improve internet penetration.

At 8,000 Kenyan shillings – less than $100 – it is seven times cheaper than other similar smartphones.

"The features sell the phone," says Martin Muraya, who owns a mobile phone stand in a chemist and has sold all his Ideos stock.

The Ideos was launched in 2010 and had a 45 per cent share of Kenya's smartphone market less than a year later.

Shipments of Chinese goods to Africa have followed a path ploughed by Chinese money. Chinese companies have invested about $13bn in Africa, most since 2000, according to Standard Bank.
"It complements the competitiveness of Chinese firms in Africa," the report says.

Zhenjiang Shenglong Machinery Manufacturing, a medium-sized maker of farming equipment in China's Jiangsu province, gained exposure to Africa by contributing to aid missions.

"We were doing well in the Chinese market, but we realised that our products would die out domestically eventually. We had to break into other under-developed countries," Luo Min, chairman of Zhenjiang Shenglong, says.

His company made about $3m in sales to Africa last year. For big purchases, Zhenjiang Shenglong sends trainers to teach farmers how to use and maintain the machines.

"Our competitors, some of which make better equipment, offer no training. No matter how good the machine is, without farmers knowing how to use it, it's nothing but a waste," Mr Luo says.

But even as Chinese companies fight to move up the value chain, the old guard of the country's exporters – those making cheap and often shoddy goods – still cast a long shadow.

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