NAIROBI, Kenya, Jun 28 – There are over 10,000 Chinese firms operating in Africa, according to a new report by McKinsey Africa.
Of these, 90 per cent of the firms are private, with about a third operating in the manufacturing sector.
A quarter is in the services sector while a fifth are in trade, construction and real estate.
“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.
Chinese firms also handle 12 per cent of the continent’s industrial production valued at US$500 – Sh51.7 trillion- billion a year in total.
Their dominance can be seen in infrastructure, where they cover 50 per cent market share of Africa’s international engineering, procurement and construction works.
Overall, China is also the continent’s top five partner in matters trade, investment, infrastructure, financing and aid – a feat that no other country has been able to match up to.
“The China-Africa relationship has ramped up over the past decade with trade growing at around 20 percent per annum. FDI has grown even faster, at an annual growth rate of 40 per cent.”
The firms are out to make profit too.
According to the study, nearly a quarter of the 1,000 firms surveyed said they covered their initial investment within a year or less. A third said they recorded profit margins of over 20 per cent.
So what makes them thrive as much as they do?
“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.
Unlike other firms, Chinese firms have also made investments that represent a long-term commitment to Africa. Of the Chinese firms surveyed, 74 per cent said that they are optimistic about their future in Africa.
– Job creators –
The study says Chinese firms in operation have employed several million Africans. Figuratively, of the 1,000 firms polled, 89 per cent of the employees are local, while nearly two-thirds provide skills training to their workers.
The firms were also noted to have played an active role in modernising Africa. According to the study, some 48 per cent of the firms introduced new products and technologies while 36 per cent have introduced a new technology in the last three years.
Despite the positives, the study notes that the firms offer too few locals managerial positions at only 44 per cent. The firms are also not sourcing products in the continent as they should, as only 47 per cent of the firms’ sourcing was from local African firms.
“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 labour and environmental violations by Chinese firms.”