Research shows that more than 10 000 Chinese businesses are successfully operating across Africa. Yours could be one of, but there are some challenges to keep in mind.
The number of Chinese companies that have started and grown on the African continent increases annually.
“Right now, there are more than 10 000 Chinese companies already operating in Africa,” says Irene Yuan Sun, author ofThe Next Factory of the World.
Africa is in the early stages of a population boom that will reach 2 billion people by 2050, creating what will become the largest pool of labour in the world. The continent is therefore seen as a natural destination for China’s manufacturing industry in particular, but other sectors can thrive too.
Sun cites as an example StarTimes, a Chinese multinational media company offering digital terrestrial television and satellite television services with a strong presence in Africa. StarTimes has surpassed DStv as the largest pay-TV business in Africa by subscriber volume. How did the company do it?
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Here are some key steps you can take to achieve similar success:
1. Seek out a local partner
The most vital consideration when setting up your business on African soil is whether you’re going to do it on your own, or join forces (and resources) with a partner. Given the new, unfamiliar business environment, acquiring a local partner – who understands the landscape and can offer advice – is the best way to lay a solid foundation for a successful business in your chosen community.
Ahmed Ibrahim manages a cardboard box factory in Nigeria for his Chinese boss, the owner of the factory, Wang Junxiong. As Sun explains, “Investors often prize local knowledge and seek out trustworthy local partners; the Chinese are no exception.”
2. Ensure your resources are sufficient
As a major multinational embarking on African expansion, consider if you have adequate resources to set up shop, especially in the early stages, when you may not have access to local assets.
“What we have found in a number of these countries is that, initially, you’ve got to use quite a lot of your own resources rather than rely on local skills,” says Jacko Maree, Deputy Chairman at Standard Bank. “Over time, of course, that changes.”
3. Adhere to local labour laws
Various laws are in place to protect workers in South Africa, says Lusanda Raphulu, Employment and Benefits Practice Partner at Bowmans. As a Chinese company looking to set up operations locally, you’ll to need to familiarise yourself with, and adhere to, these laws.
“In essence, expatriates may be brought in as necessary to provide required skills, but not to the detriment of available South African workers able to perform those roles,” says Raphulu. “Having workers in contravention of the immigration laws exposes companies to material fines or even imprisonment for its leadership.”
Jinghao Lu, project director at the Sino Africa Centre of Excellence (SACE) Foundation, uses Chinese phone makers Oppo, Tecno and Huawei’s local marketing initiatives as an example. “They work with local providers and hire local staff,” he says. “These companies are now sourcing services from local marketing, branding and communications agencies, for instance."
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4. Remain compliant with information legislation
Are you aware of South Africa’s draft data protection legislation? Compliance with this is mandatory for every Chinese company doing business in South Africa.
“It contains provisions regulating the collection and use of data – both inside South Africa and across to other jurisdictions, as well as the period for which data can be retained,” says Raphulu. “Lack of compliance exposes the company to the possibility of a hefty fine.” Such financial implications could hinder your business’s growth before you’ve even gotten it off the ground.
Depending on where in Africa you intend on putting down roots, you may encounter certain operational challenges, increasing certain setup and running costs. “If you’re happy with the size of the opportunity, we think that the potential is there,” says Jacko Maree, Deputy Chairman at Standard Bank.