One concern about the increased Chinese business presence in Africa is that it is forcing opportunities away from U.S. businesses. Stephen Hayes, President and CEO of the Corporate Council on Africa, explained to The Cipher Brief that there are opportunities for both, but that U.S. businesses have a lot to learn in order to remain competitive.
The Cipher Brief: How has Chinese presence in Africa changed since you began as President of the Corporate Council on Africa?
Stephen Hayes: When we entered the new millennium, I told anyone who would listen that China was going to be a major factor in Africa sooner than expected. I was basing that on my own association with China’s emerging leadership generation, with whom I had worked in the 80s and 90s. The top people weren’t coming to the U.S. any longer. They were sending me messages from Africa. I felt a little like Cassandra, the Greek prophetess, who accurately predicted the future, but no one would listen. Given our different systems, I am not sure we would have adapted any differently if someone had listened. We were focused on the Middle East then, and Africa wasn’t a priority to us. I am not sure it is yet a priority to the U.S., or we would have closer public-private cooperation. I see signs that this is beginning to happen, but we need to move with more focus. However, to answer your question, the investment of China in Africa now, as opposed to fifteen years ago, is many times over.
TCB: Where in Africa, in terms of both economic sectors and geographical location, where do you see Chinese businesses most prevalent?
SH: China’s presence in Africa is ubiquitous. However, if I were to highlight one country where it is overwhelming, it would be Ethiopia. China’s investment in Ethiopia is enormous and is still well-received by the leadership. Sure, they would like other countries, but China is making an enormous difference for Ethiopia right now. China is looking at every country on the continent, north to south, east to west. We continue to focus on a few, particularly where the markets are large and the potential is equally so. Certainly China is engaged in the extraction industries in order to feed its own economy, but I see a far broader engagement in nearly every sector of the economy. This is especially so when you realize that Chinese settlements are being built, de facto, in nearly every African nation. They are actively engaged in small shop business, as well as in large enterprises. I don’t know that Africa has ever seen such engagement, even in its colonial past.
TCB: How have American businesses been impacted by Chinese involvement in Africa? Are American companies unable to compete with Chinese firms in Africa, or do they find the investment not worthwhile in light of the increased competition?
SH: It is difficult to say how companies have been impacted. A lot of the information is anecdotal, and companies are reluctant to talk about deals they won, let alone those they lost. However, U.S. cell phone companies lost big in Africa to China, then to the African-based cellular companies themselves. Interestingly, companies like Verizon and AT&T saw the market before it was ripe. They lost out, not because they were too late but too early. Timing is everything.
China has benefited from a coordinated and well-planned approach. Their system has an advantage in that regard. They assess national needs and then put the Chinese package together that wins out. They can deliver products and services more quickly, because they are often working in harmony with various internal interests. They can bring financing, product delivery, and work force all together in a matter of weeks and months. It takes us far longer to put a total package together that could compete with the Chinese. So if you ask if Chinese interests have impacted U.S. companies, I think the answer is “absolutely yes,” but it is difficult to quantify this.
TCB: What can American businesses do to better compete with Chinese companies? Are there also areas for cooperation?
SH: American businesses can do a lot of things better, but that can be said for almost all of us in the human species. We can always do better.
One of the things that Americans need to do better, specifically, is to understand that building relationships at the personal level is very important to success at the business level. Our business tradition has been that we try to prove the superiority or utility of the product, make the sale, and move on. It doesn’t work as well in Africa. You have to earn trust. For reasons we all know, it is often difficult for some on the continent to trust others. Relationships are important. We must also recognize that in African development now, large comprehensive projects are important. No single company can meet all the needs of a project. We need to identify other companies that can partner with us. We do that fairly well, but more and more we need to identify African companies, as African nations are demanding more local content, more local partnerships. Therefore, we ought to look much more closely at capacity building as a business opportunity, and not something to fight. This has been a weakness in the Chinese approach, but that is changing as well.
TCB: What role can the U.S. Government play in advancing Western business interests in Africa?
SH: The U.S. Government has been abysmally slow to do much for the private sector in Africa. Certainly our emissaries have seen the issue and are focusing more on economic aspects of the relationships, but it takes more than committed Ambassadors to make a difference for the private sector. The problem is more here in Washington. We lack a comprehensive financing approach, and the biggest challenge to U.S. companies doing business in Africa, at least on this side of the Atlantic, is finding financing at favorable terms. The shutdown of the Ex-Im Bank certainly hasn’t helped, but they too have had a very cautious approach to supporting companies doing business in Africa. They are far slower in their response than the Chinese Ex-Im Bank. A central economy has the advantage in this regard as well.
I am encouraged by the approach that our Secretary of Commerce has taken in forming a Doing Business in Africa task force comprised of some very good U.S. companies. Ten of the 15 members are members of the Corporate Council on Africa, and what we hear from our companies is encouraging, but the reality is that we have a long way to go if we are to become more engaged in Africa.
