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Chinese firms build goodwill in Africa

Updated: 2014-06-27 09:15
By Joseph Catanzaro and Li Fangchao ( China Daily Africa)

Companies seek 'reasonable profit' even as they go about making friends

Xu Fei's four-wheel drive splutters in low gear, straining to make headway on what passes for a road in Lusaka, Zambia.

Rickety homes made of scrap wood, plastic and corrugated iron line the narrow street, part of the sprawling, metropolis-sized shantytown that has swallowed the country's capital.

Children and chickens run about in the dirt. Women with buckets gather around water pumps. Men haul goods in wheelbarrows or lounge outside makeshift shops and bars. Most people have a smile and a wave ready for the Chinese, but some faces remain hard and closed.

"This is a bad area, but not that bad," Xu says as he kills the engine.

His chief engineer, Wang Zhiming, is laughing and joking around with a curious bunch of youngsters.

"Muli bwanji?" (How are you?) the 49-year-old from South China's Fujian province yells in the local dialect. "Bwioni," (Fine) they yell back.

Xu and Wang work for AVIC International, a Chinese state-owned company that has been contracted by the Zambian government to turn this and 479 other rough urban streets into 408 km of blacktop road.

"It's not an easy job," Xu says. "It is not easy money."

An elderly Zambian slips through the crowd and approaches Wang. He wants to know if AVIC is hiring, because his brother and son are looking for work.

"We have been waiting for you for a long time," the old man says. "Work hard and we will work hard."

Wang, who speaks only halting English, cannot understand the old man.

"My name is Zhiming," he says. "Call me William."

It is clear the elderly local does not understand Wang, either.

They stand facing each other, but they may as well be shouting from opposite sides of the crowded, chaotic street. Their messages cannot vault the barriers of language and culture.

The exchange is a moment turned metaphor, Xu concedes, which sums up China's biggest challenge in Zambia and in the rest of the continent. It is a problem that at its worst has given rise to what Xu and others say is a falsehood, the bugbear of Chinese neocolonialism.

"I think it's a communication problem," he says. "A lot of Chinese people do not speak good English. The African continent is emerging. There are still a lot of resources. They think we have come here for resources. But our company is only doing investment and construction. A lot of companies are the same."

Xu, the vice-president of AVIC's Zambia operations, is part of a wave of Chinese business people in Africa who are working toward breaking down stereotypes born of language and cultural differences. Their plan to make this happen can be summed up as actions speaking louder than words.

In an industrial area in the west of Lusaka, Wang and Xu pull up to inspect progress on a 760 meter stretch of new road.

A Chinese worker drives a big roller. A bunch of Zambians shovel smoking-hot asphalt in its path.

Xu says the contract for the urban roads project, worth $350 million, was secured with 85 percent financing by a Chinese commercial bank loan.

"Because of strong Chinese government support, we do have an advantage (in Africa)," he says. "We can offer financial solutions."

Half a dozen Chinese businesses occupy the dusty lots where the road is going in, and there is a smattering of compounds belonging to other foreign enterprises.

The real beneficiary though, Xu maintains, will be Zambia.

"It's hard to estimate precisely the amount of economic benefit it (the roads project) will bring. But good roads and good infrastructure are very good for attracting and securing investment."

AVIC has about 70 Chinese engineers in Zambia and employs about 350 locals. Xu says it is looking to hire and train up to 500.

Last year, total Chinese investment in Zambia reached $2.6 billion, that is estimated to have created about 50,000 jobs.

That is a significant figure, given that the World Bank classifies only 17 percent of the population as "wage and salaried workers".

The jobs market is an area in which Xu says China is making a huge impact.

Alex Malaya knows this better than most. The 38-year-old has worked for AVIC for about a year, after laboring on a traditional farm west of Lusaka.

"I got this job because there was no money in farming," Malaya says. "Here I get 32 kwacha ($5.25) a day. As a farmer I would get maybe a third of that."

Like many of the local employees who spoke to China Daily, Malaya says working with the Chinese has changed his perception of who they are and what they are doing in Zambia.

"I have Chinese friends now. We eat together, we joke together. Working for a Chinese company is pretty good. I've learned a lot."

Xu says Zambians commonly believe that Chinese companies dominate mining, but this is false, he says.

He acknowledges that infrastructure development, which many argue will launch Zambia and other African economies to new heights, is dominated by the Chinese.

"About 80 percent of infrastructure projects here in Zambia are Chinese. It's very difficult and it's hard and there's some profit but also high risk. Many of the projects are financed by construction loans, and the money comes from the Chinese government. Western companies come to Zambia if there's a very good profit. We are looking for reasonable profit."

The figures tell a similar story, says professor Barry Sautman and Yan Hairong at the Hong Kong University of Science and Technology.

"According to the Zambia Development Agency, in 2012, China's share of the stock of all foreign direct investment in Zambia was 9 percent, with China far behind Canada, Australia and the UK as the fourth-largest investor," Sautman says. "Mining constituted 72 percent of all foreign direct investment in Zambia. China's share of production of copper, which overwhelmingly constitutes the mining sector in Zambia, was about 8 percent in 2012."

So why do the negative stereotypes about Chinese investment in Zambia linger?

Xu says it may be partly China's fault.

"In Chinese culture, we are taught to be very polite. We do not speak very loudly if we do something good. Perhaps we are not giving a very clear picture of what we are doing here."

Sautman agrees, but thinks there is more to it. In particular, he thinks the idea of "Chinese neocolonialism" is an "ideological construct" that serves rival political and economic agendas.

"The neocolonialism tag is placed on China to de-legitimize Chinese investment and trade, while legitimizing comparable Western investment and trade. For those in the West who conceive of a strategic competition with China or who want to avoid attribution of Africa's problems to systemic causes, the neocolonialism tag is a useful narrative."

Anhui Foreign Economic Construction is one of the Chinese corporations that has recently entered Zambia's resources sector. The company is building infrastructure for an emerald mine 700 km outside Lusaka and is considering a joint venture with a local partner when the mine enters its operational phase.

All told, Anhui FEC's past and present developments in Zambia are worth more than $100 million, among them a recently opened five-star hotel called the Golden Peacock.

Not far from the center of town, the company's acting general manager in Zambia, Chen Qing, inspects work on dormitories for a team of Chinese doctors and nurses.

"We employ about 300 Chinese staff, and more than 1,000 locals during peak times (in Zambia)," Chen says.

The Chinese government put up the cash for both the apartments and the nearby Mwanawasa hospital where the medical team works.

These types of goodwill gestures-cum-diplomacy are nothing new.

In the 1970s, when China itself was still struggling to develop, it famously financed and constructed a vital trade lifeline, the 1,860 km Tazara railway that linked the town of Kapri Mposhi in Zambia with the port of Dar es Salaam in Tanzania. The $500 million in finance needed for the project was given as an interest-free, 30-year loan. Much of that debt has since been written off.

"There were 50,000 Chinese workers here in Zambia working on it when China didn't even have proper railways," Chen says. "About 60 Chinese workers died."

Chinese Vice-President Li Yuanchao has just completed a four-day visit to Lusaka during which he held talks with his Zambian counterpart, Guy Scott. Eight agreements on Chinese grants and loans were signed.

Sautman says the Chinese government is interested in Africa's industrialization. Both the outcome and the process of building infrastructure to make it happen are mutually beneficial.

"The process is valuable to Chinese companies, most of which are SOEs," he says. "Long-term, low-interest loans are a spur to the process, and in some cases they are securitized with resources."

China needs new markets. Zambia, with the help of foreign investment, has enjoyed GDP growth of between 6 and 7 percent in each of the past five years.

Li Dongwei, representative for the China-Africa Development Fund in Zambia, says FDI has been the country's main source of growth, but domestic demand is also fast becoming a driver.

"The middle class is growing quickly and creating market demand," he says.

On a dust-bowl oval on the edge of Lusaka, where barefooted boys chase soccer balls in the afternoon heat, some of Anhui FEC's workers are renovating the interior of a small clubhouse.

Julia Sinkala, 29, piles on cement for a Chinese colleague, who smoothes it and slaps down a row of tiles.

"I've been working for the company for two years now," Sinkala says. "The wage is too low. I sleep out the back here (on site)." But he concedes it beats the alternative.

"Before (this job) it was bad, really hard to find a job."

His friend Francis Mwanesa, 32, chimes in. "The Chinese provide jobs, and that's what we need. That's all we need. We like the Chinese."

The renovation is a tiny project, Chen says, worth only 800,000 kwacha ($131,000). But the small-scale worksite is a window into the bigger picture of how Chen says Chinese do business in Africa.

"We're almost doing this (job) for free," he says. "Normally we only take on projects of $1 million or more. This is goodwill. Do one project, make a friend, open the market. Finish the project and let it advertise your standard. If you can, pick a difficult project first, then everyone knows what your company is capable of. It's all about reputation."

On a construction site in Lusaka, contractor Le Zan Masurik, 27, supervises a crew of local workers raising a suburb of new homes where once there was nothing but scrub and dirt.

All 500 homes taking shape at the housing development, a joint venture between Chinese company ZDA-Henan Guoji Investment and the Zambian government, have been presold to buyers from the country's fledgling middle class.

Masurik, born to a Chinese mother and Zambian father, is the energetic personification of closer ties between the two countries.

The reason that Zambians like working on Chinese projects is simple, he says.

"The pay for local workers varies depending on skill. On this site it starts at $4 a day and can be as much as $7 a day. It's better than European and American companies' pay. For a local company you would get $3 to $4. China pays the best, literally."

ZDA-Henan Guoji Investment's deputy general manager in Zambia, Richard Chavula, used to work for the Zambian government's Development Agency, where he issued investment licenses to foreign firms.

"Chinese investment is having a positive impact on the economy, on employment and the transfer of knowledge," he says.

But the 49-year-old acknowledges that not everyone is convinced.

"Most Zambians who understand investment and business, they appreciate Chinese business. Those that don't understand business think Chinese companies bring a lot of Chinese workers here, without realizing that most employees are Zambians. They think the Chinese are taking jobs, but in reality they are creating jobs."

Out in the remote reaches of Zambia, nine Chinese medical teams in specially equipped vans make circuits of the towns and villages. Over the past two years, they have performed 20,000 operations and treated about 200,000 people, or one in six Zambians.

The $60 million to finance this project was loaned to Zambia by the Chinese government at a low interest rate. The deal and sale were put together by AVIC, which covers ongoing costs.

"Some of these people, most of them, have never had medical treatment or seen a doctor before," Xu says.

In many ways, the initiative is a touchstone for the way China does business in Africa.

"The Zambian government had a problem," Xu says. "We pitched this solution and put together the package. We did make a little bit of profit; it's not a complete charity."

Back on the AVIC worksite, the roller idles and the roadwork pauses long enough for a few employees to take a quick break.

The older Chinese workers smoke cigarettes and talk about how Zambia reminds them of the China of their youth in the 1970s and early 1980s, before the country developed.

Deputy project manager Liu Xiaodong, 52, remembers seeing armies of workers build the roads in China by hand when he was a boy.

"I witnessed the development of China," he says.

The big roller lurches forward again, flattening the steaming asphalt that Zambian workers shovel into its path, turning dirt and hard work into progress. This is nation-building inch by inch.

"The Chinese have a saying," Liu says. "If you want to get rich, you must first build roads."

The amount of work still to do is daunting, but he smiles as he gets back to it.

"Maybe in my lifetime I will see Africa develop, too."

 Chinese firms build goodwill in Africa

Waitresses at the five-star Golden Peacock hotel, developed by Anhui Foreign Economic Construction.

 

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