Opinion
In Africa, U.S. Businesses Are Losing Out to China
By Stephen Hayes
Why aren’t American businesses doing better in Africa?
I was recently asked by a news researcher to provide names of companies who have lost bids for African business to Chinese competition. The underlying concern is, why aren’t American businesses doing better in Africa, and does the future of business in Africa, now the world’s largest untapped market, belong to the Chinese, and if so, won’t Africa necessarily gravitate politically towards a Chinese sphere of influence?
I sent a notice to more than 60 companies of my own organization that are involved in Africa and asked them if I could provide their names and contact information to the reporter if they had lost out on bids to the Chinese. There were few companies willing to come forth, but the reasons for such were not all the same.
(More: Trade between Africa and China expected to surpass $200 billion in 2012)
First, it is true that China is beginning to dominate the marketplace in Africa. There is not a country in Africa untouched by a growing Chinese commercial presence. At the government level throughout the continent, Chinese architecture is sprouting like mushrooms in a spring forest. It seems in every African capital and major city the new government buildings are constructed by the Chinese. Indeed, the spacious new African Union headquarters in Addis Ababa is a gift of the Chinese people, via the Chinese People’s Political Consultative Conference, one of the four pillar organizations of the Chinese Constitution. New roads and railroads throughout Africa are being built by the Chinese. It is hard to fault this, as infrastructure is badly needed by every African nation.
The problem is that the buildings, as well as the roads and rail systems are all part of a bidding process against which few companies outside China can easily compete. These are often part of payment for resources for African countries, resources that are necessary to fuel growth in China. We also need these resources for our own economic growth. The bids are quickly financed by the Chinese Export-Import Bank or some other Chinese financial institution, different national companies owned by the Chinese government are quickly put in place and construction moves quickly. Any U.S. company competing against this would have to find financing, put together a group of companies to do other aspects of the total package, and then try to coordinate these various entities into the African country. Even if financing were attainable, our enterprise and government system simply is not structured to compete in this manner. Given this, American companies are reluctant to compete or as they see it, waste time bidding on a contract they do not believe they can win.
However, even with this competition many companies are doing business in Africa, and many more are looking at ways to break into the African marketplace. We deal with hundreds of these companies every year. And, yes, many of these same companies have lost out in bids to Chinese competition, but they are often reluctant to speak publicly on the record.
