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China’s Africa overture needs common touch

By Francois Baird

 

Francois Baird is co-chairman of Baird's CMC, an international communication management consultancy. This is an edited version of a talk last week in Frankfurt to the China Europe Business Meeting of Horasis, a global visions community.

Africa 's increasing importance to China and other countries in the developing world raises the question of whether Asia may supplant Europe, the traditional powerhouse in Africa, to become Africa 's major trading and development partner. Both China and India have a long history of involvement in Africa, but their strategy for African engagement differs. China leads the way in government-to-government action — exchanging oil, gas and mineral resources for infrastructure — and has lately been active in business-to-business investment. However, India arguably leads China in business-to-consumer action through branded consumer products. Both China and India have the additional benefit of never having been colonisers in Africa. To win in this scenario, China should actively shape Brand China, encourage Chinese companies to build brands in Africa, partner with African brands and focus on corporate social investment to reach Africans directly, not only through governments. China is supporting African growth. By the beginning of this year, China had invested more than $6,6bn in Africa, and some predictions are that Chinese-African trade might reach $100bn by 2010.

Africa is also a growing tourism destination and consumer market. With events such as the Beijing Olympics next year and the 2010 Soccer World Cup in SA, tourism between Africa and China is bound to be stimulated markedly.

Africa is increasingly also a political partner to both China and India against western hegemony. So south-south co-operation is as much a political as an economic phenomenon. Growing south-south ties do not preclude competition between China and India in Africa, however. The China strategy seems to differ markedly from the India strategy, but both are beginning to challenge Europe in Africa. The Chinese strategy in Africa presents both risks and opportunities for India and Europe in Africa, on which Africa could capitalise.

China 's policy of noninterference has both benefits and concerns for Africans. The benefit is that China is not seen as a coloniser of Africa. But China should be concerned about the effect of grassroots African reactions against Chinese businesses and products if African civil society becomes unhappy with its policy of noninterference. Examples of popular discontent with China in Zambia and elsewhere in Africa are early symptoms.

China seems now to be entering the business-to-business arena more aggressively, as illustrated by the purchase by the Industrial and Commercial Bank of China (ICBC) of a 20% shareholding in Standard Bank. This will make ICBC the biggest single foreign investor in SA. This partnership model will be very appealing to African companies. It should no longer be unthinkable that China could eventually overtake Europe in Africa.

Europe still leads in business-to-consumer relationships in Africa, because of the strength of European brands in Africa, but India is beginning to challenge its leadership in branded consumer products. Eventually India may gain popular consumer support similar to what some European companies currently enjoy. Tata and other Indian companies are assiduously investing in their own brands in Africa.

Given the importance of its Brand China versus India 's consumer brands strategy, China needs to shape its brand more actively in Africa, and develop a direct relationship with African consumers and grassroots. Given the risk for China of damaging the reputation of its consumer relationships whenever something goes wrong with Brand China, it is imperative to manage better the reputation of Brand China and Chinese consumer goods by assessing and managing reputation risks.

China should encourage Chinese companies to build reliable Chinese brands, recognised for qualities other than only price — style, innovation, novelty, uniqueness could all be developed. The more China partners with African brands in Africa (and in China ), European partners may in time even be regarded as too prescriptive and dominant, due to Europe 's colonising past.

Brand China needs to be a friend of Africans, not only of Africa. China should make corporate social investments to reach the people of Africa directly, not only indirectly through their governments. African business could also be expected to play a more active role in determining the economic role of China as business partners in Africa. China would therefore do well to heed the views of African consumers and businesses as much as those of African governments.

Eventually, the reputation of Chinese consumer brands will matter as much as that of Brand China. But in the short term, Brand China needs work to compete more effectively against Indian and European consumer brands in Africa.

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[1] See “The China trade syndrome” in the Charlemagne section of the Oct 4th issue of The Economist.

[2] See 2006 World Investment Report by the UN Conference on Trade and Development.

[3] See, for example, the speech by Premier Wen Jiabao to the Davos World Economic Forum on 7 September 2007 .

[4] See again “The China trade syndrome” in the Charlemagne section of theOct 4th issue of The Economist.

[5] EU trade data are taken from Eurostat, based on SITC product classification.

[6] See, for example, the 2006 OECD report “OECD Information Technology Outlook”.

[7] EU trade data from Eurostat based on SITC product classification.

[8] Quotation from the IMF's press release No. 07/72 “International and Monetary Financial Committee Reviews Multilateral Consultation” ( 14 April 2007 ).


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