In Africa, U.S. Businesses Are Losing Out to China

Why aren't American businesses doing better in Africa?

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FE_130208_chinaafrica.jpg
**ADVANCE FOR SUNDAY, JAN. 17** This Oct. 11, 2009 photo shows Chinese workers pouring cement as they construct a housing project funded by the Algerian government and built by a state-owned Chinese firm near Algiers, Algeria. While still struggling with the aftermath of a decade-long Islamic insurgency, oil-rich yet impoverished Algeria is getting a makeover: a new airport, its first mall, its largest prison, 60,000 new homes, two luxury hotels and the longest continuous highway in Africa. The power behind this runaway building spree is China. Some 50 Chinese firms, largely state-controlled, have been awarded $20 billion in government construction contracts, or 10 percent of the massive investment plan promised by President Abdelaziz Bouteflika for a nation where jobs and housing are scarce and al-Qaeda has struck roots.

Stephen Hayes is president and CEO of the Corporate Council on 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.

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.

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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.

Some of these companies have major operations in China. They do not want to say anything that might jeopardize a larger and currently more profitable market relationship for them. These companies also are sometimes brought in as partners with Chinese companies on African projects. One major company representative with significant resource investment in Africa told me that he had no problem with the Chinese, as they were his company's largest buyer of their African operations, and, he joked, "The customer is always right." Others simply don't want to look like sore losers and remain silent.

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Nevertheless, the Chinese dominance is a growing concern in the United States. Policymakers are working to address the issue, but continue to do so with little consultation with the private sector. A key to the Chinese success is the willingness of the government to engage in partnership with a very vibrant private sector in China. It is important to note that China does finance its own government-owned companies, assets that the U.S. government system cannot match, but it has also encouraged thousands of smaller businesses, which it does not finance, to go abroad and especially to Africa to seek new business. Every Chinese Embassy in Africa is equipped to help these businesses in whatever they can, even though they do not provide finances to many of them. There are also large Chinese private companies that do not seek government help, but who do understand the importance of Africa to their future and therefore make their own investments, as many of our larger companies are doing as well.

We need far more true partnership between the public and private sector, and the public sector needs to make the adjustments necessary to support U.S. investment in Africa. We also need leadership to explain to America the importance of Africa to our own economy and political future. That case remains to be made in a positive and effective manner, and if it will not be made this will prove to be a tragedy for our future.

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