What is needed for Chinese companies to take the leap and invest in African countries? That was that the main topic at a symposium arranged by the International Trade Centre (ITC) in partnership with the Investment Promotion Agency (CIPA) of the Ministry of Commerce of the People's Republic of China (MofCom), on the sidelines of the China International Import Expo (CIIE).
Organized for the first time, more than 2,800 enterprises from over 130 countries and 150,000 professional buyers are present at CIIE, including many Chinese companies looking at investing in African countries.
The symposium, entitled Investing in Africa: Financing and Risk Control, attracted 120 participants, especially Chinese small and medium enterprises (SMEs) interested in investing in Ethiopia, Kenya, Mozambique and Zambia. Speakers explored how to promote investment in the agro-processing and light manufacturing sectors in the four countries, and presented statistics and analysis on the investment climates of each country.
Central to discussions was the sharing of best practices on financing and risk control to facilitate sustainable Chinese investment in Africa. This included key elements of the a new ITC publication launched during CIIE - 'Guide to Chinese private investment in Africa: Insights from SME competitiveness surveys'- which contains competitiveness data for African firms in the Gambia, Ghana, Kenya, Morocco and Zambia that can guide Chinese private investors.
Mr. Liu Dianxun, director-general of the Investment Promotion Agency of MofCom said: 'We will conscientiously implement the outcome of the Beijing Summit of the 2018 Forum on China-Africa Cooperation, and closely align the Belt and Road strategy to the African Union Agenda 2063, the United Nations 2030 Sustainable Development Goals, as well as the national development strategies of different countries in Africa.'
In addition to this push from China for investing in Africa, there is a strong 'pull factor'. Production and manufacturing costs are rising at home and are pushing many Chinese manufacturers to develop production facilities abroad where labour is more abundant and hence labour costs are low. While market returns in Africa are high, investing in Africa entails a certain amount of risk as is the case with investing in any other developing country. Chinese SMEs face challenges in accessing financing, preventing and controlling investment-related risks. Investments by Chinese private firms are mostly self-financed through retained earnings and savings, or funded through personal loans. In fact, MofCom estimates that 65% of Chinese foreign direct investments make a loss. This compares with a 50% international average. Against this background, the PIGA symposium held three panel discussions, in which experts from China, the UK and African representatives addressed these issues and highlighted investment opportunities.
'As Chinese investments are characterized by confidence and long-term commitment, more financing possibilities and measures to de-risk investments could go a long way in increasing their investments in Africa and generating sustainable positive impact. These long-term investment partnerships can greatly benefit Africa, including through transfer of skills, technology and job creation,' said Mr. Ashish Shah, Director for Country Programmes at ITC.
The China-Africa Development Fund (CADFund), the Investment Promotion Center of the China Council for the Promotion of International Trade (CCPIT), the China-Africa Business Council (CABC), the China Chamber of Commerce for Import and Export of Textile and Apparel (CCCT), the China Chamber of Commerce for Import and Export of Light Industrial Products and Arts-Crafts (CCCLA), the China Chamber of Commerce of Foodstuffs and Native Produce (CCCFNA), also contributed to and participated in the event.
The symposium was organized under the auspices of the Partnership and Investment for Growth in Africa (PIGA) project, funded by the United Kingdom's Department for International Development (DFID).
Under the PIGA project, DFID, CCPIT, CADFund and ITC work together to increase investments in manufacturing and agro-processing sectors to maximize local development beneﬁts and job creation in Ethiopia, Kenya, Mozambique and Zambia.