Through significant investment in a continent known for political and security risks, China has been able to beat odds in setting up a strong base in Africa.
Despite facing continued criticism from Western and African civil society over its controversial business practices and poor advocacy in promoting human rights, China’s activity in Africa has rapidly increased in the recent past.
A new report by McKinsey Africa shows that China now has over 10,000firms across Sub-Saharan Africa. Of these, 90 percent are said to be private.
A third of the Chinese firms in Africa are operating in the manufacturing sector, a quarter in the service sector and a fifth is in the trade, construction and real estate according to the report.
“These firms are bringing capital investment, management know-how and entrepreneurial energy to the continent, and doing so, are helping to accelerate the progress of Africa’s economies,” the study reads in part.
The study surveyed 1,000 of the firms and found out that nearly a quarter of the surveyed recovered their starting capital in 12 months or less, and a third said they recorded profit margins of over 20 percent within the same period of time.
“These firms are agile and quick to respond to new opportunities. They are primarily focused on serving the needs of Africa’s fast-growing markets rather than on exports,” reads the study.
The study reveals that these firms heavily rely on local Africans for manpower, with the 1,000 surveyed showing that 89 percent of their employees are Africans.
Despite the firms creating employment, the survey reveals that only 44 percent of managerial positions have been availed to local Africans.
The report also noted that the firms have played an active role in modernizing Africa.
“Chinese firms cite personal safety and corruption in some countries as their top concerns. For African leaders, language and cultural barriers are pain points. There have been instances of labor and environmental violations by Chinese firms,” read part of the report.
Chinese firms handle 12 percent of Africa’s industrial production valued at US$500 billion a year in total.
Their dominance can be seen in infrastructure, covering 50 per cent market share of Africa’s international engineering, procurement and construction works.