Author: Center for Chinese Studies.

The People’s Republic of China (PRC) has become an important and influential player in Africa and is increasingly a source of political and financial su pport for many African governments, particularly in countries with economies that are resource-endowed. A number of incentives drive China’s commercial engagement with Africa. Principal among these is Ch ina’s increasing need for energy sources and raw materials to fuel its rapidly growing economy. Another motivation has been the need to develop new markets for Chinese goods. Except for the relativ ely small number of resource-rich countries such as Ang ola and Zambia, the majority of African economies have mounting trade deficits with China. The Chine se have sought to offset these deficits with more favourable terms of trade for African products and the provision of aid in the form of infrastructure development. China’s involvement in Africa’s construction and in frastructure sectors has proved most effective in b uilding relations with African governments - increasing inf luence and expanding access to natural resources on the continent. Chinese state-owned and private compani es are making strategic inroads into the constructi on and infrastructure sectors in many African economie s at the expense of European and South African companies. Naturally, the traditional actors are a larmed by this phenomenon with concerns that China’ s politically determined business models do little to build local capacity. The Centre for Chinese Studies conducted a four-cou ntry research study that evaluated the market entry models of Chinese construction firms in Angola, Sie rra Leone, Tanzania and Zambia. Particular attentio n was paid to their methods of engagement and impact on the local construction industries. Chinese acti vity in the four case studies was examined and compared across five areas: 1) tendering, 2) access to capit al, 3) labour, 4) procurement, and 5) quality of workma nship. The business environment, in terms of governmental bilateral relations, aid, trade and in vestment profiles between China and the countries concerned were also taken into consideration. The success of China’s companies, particularly stat e-owned enterprises (SOEs), can be attributed to several factors: cost competitiveness in overall bi dding price; access to cheap capital through Chines e state-owned banks; access to skilled low cost labou r; access to cheap building materials through suppl y chains from China; and political support from the C hinese government channelled through Chinese embassies and Economic and Commercial Counsels in t he respective African countries. Chinese companies were found to rarely compete with indigenous construction companies, which usually lack the capacity for large scale construction proj ects, in the initial stage of their engagement in a n African country. They were also usually found to employ la rge numbers of local labour. Despite the potential benefits in terms of skill and technology transfer, the Chinese have shown only limited interest in collaborative ventures with local construction comp anies due to their low levels of human capital, technological proficiency and problems with the fin ance and management. Instead, foreign firms were found to be the preferred partners for joint-ventur es and are also attractive candidates for sub-contr acts on contracts won by Chinese companies. While political support from the Chinese government has undoubtedly played a critical role in facilita ting the entry of Chinese companies, it was found that they faced the same challenges as other construction players: corruption, lack of infrastructure, poor q uality of local labour, communication and political instability. Despite widespread perceptions that their quality o f work is inferior, the study showed that when buil ding codes and regulations are in place and effectively enforced, the standard of work done by the Chinese was reported by the majority of stakeholders to be very high. However, where quality controls are not pro perly enforced, especially in less developed markets such as Sierra Leone, standards are often low. The contribution of Chinese companies to the develo pment and rebuilding of infrastructure in Africa is considerable; however, to maximize these benefits i mproved monitoring and evaluation mechanisms are required. As China increases its profile in Africa , further dialogue on these issues involving all st akeholders is crucial.