What is the progress on China-Africa Cooperation?

There is great need to monitor the progress of China-Africa cooperation. In the recent past, people across Africa have been having different opinions concerning the benefit, losses and worries of China investing in Africa. CAMAL being on the forefront of procurement from China and investment advisory, the firm has been analyzing these relations closely since they started. The success of these relations will be realized by making Africa better in terms of development.

CAMAL’s Managing Director Mr. Walter Ruigu has a deeper understanding of China economy.  Being a first class procurement firm, CAMAL believes that  from a macroeconomic perspective , China-Africa trade relations continue to boom in both directions. The future of the trade looks positive because the two parties are complimenting each other.

  • It is true to say that the RMB depreciation against the USD has affected business in one way or the other . China has benefited because the exporters are working with RMB but they are being paid by USD which higher.
  • China market being one of the largest consumer of the soybeans from USA, has been suffering because of the high tariffs that USA has imposed on the produce. China is now looking for other sources where they can be getting the soybeans as an alternative to the existing problem. Africa however has not yet tapped the full potential of these supplies as the areas which produce this commodity is under the terrorists Boko Haram in Nigeria.
  • Russia is giving land to Chinese for them to be able to cultivate and export more to china. The existing trade war is changing the global supply chain.
  • Africa should work on quality and standard products if the exports from the continent will be  accepted in the Chinese market.
  • There are strict laws in China concerning what they are importing. Actually, if china gets faulty products, they can end the supplies  from that country because of a single firm which has not meet the standards. China has had these restrictions to protect the local industries. The restrictions do not necessarily affect Africa, the restrictions cut across the globe.
  • China just like any other country has companies that are producing with an aim of making profit.In China, there has been a mindset of targeting high volumes and low profits. There is also large fragmentation of Chinese private owned companies wanting to do business with Africa. Most firms are looking for specific projects and business opportunities.
  • There is a lot of competition from other countries i.e. Turkey, India and Russia especially for the industrial Chemicals; the depreciation of the RMB has made the prices competitive.
  • The reason why the numbers have gone down in from the macro perspective is China’s economy has shifted from one that was focused on fixed asset investment to one that is now focused on domestic consumption. Long before this happened, the commodities were moving from Africa to China to feed the economy. A good example is Angola which used to export petroleum to China but this has decreased but this situation does not mean the relations are worsening, this is only getting better.

You can listen to the whole interview and get more insight about the matter. Courtesy of Eric Olander for Africa-China reporting Project interview and Managing director

What will China gain from the growing cooperation with Africa?

The discussions in the recent past have been inclined on how Africa is set to fall in the “debt trap” which many people think is what China wants. Well this is not the case because it’s not 100% about Africa gaining from China. It goes without saying that, when two parties enter into an agreement of any sort, and then there are mutual benefits in that agreement. This happens to be exactly the same thing happening in the China-Africa cooperation. CAMAL has been attending the forums which are aimed at bringing a better continent with the Asian country.

Many people have continued to see the impact China is having in Africa in terms of development and poverty alleviation in Africa. Africa has been able to influence policy formulation in China thanks to the relations. If you want to fight any negative idea in a country you have to deal with the source of that problem first.  A good example of this is the when Africa became united and said it’s illegal to do ivory trading, China adhered to that and being one of the biggest market of ivory from Africa, then the elephants and rhinos are now safer than before.

China has been speculated to be colonizing Africa slowly by coming up with attractive monetary deals which will entice African leaders to allow China to invest in their countries. Mainly, China is pushing for the cooperation with Africa, for the following reasons,

  • Political connection with Africa. China knows that Africa represents over 50 votes in the United Nations and other international organizations.
  • China’s quest for new Markets. As the domestic market become saturated while more and more Chinese are going global, Africa represents a new market for the products produced.
  • As the Chinese economy continues to grow, there are certain products that Africa can provide depending on the demand from China. A good example is the Minerals from Africa. More Chinese are coming to buy Manganese and Marble from Africa and CAMAL has continued to connect the suppliers in Africa to the buyers in China. More and more suppliers are now trusting CAMAL to do the negotiations with china and bringing them buyers from China.

For those who are for the idea that China is out to colonize Africa, there is need to understand that the companies in China operate like any other Company in the world. The end product should bring profit to the company. This is the reasons why, companies in China are working closely with CAMAL to help them cut on cost by getting their raw material from Africa in order to ensure that the locals in Africa where the minerals are being mined benefit in one way or the other. If these relations were not for a good reason, then the number of countries in FOCAC would be less. From the previous engagements, only one country is not in the China-Africa cooperation.

China is set to adopt innovative technology which comes from Africa. A good example is the M-PESA innovation from Kenya. This technology has continued to wow other countries across the world, china being one of them. To support more of these innovations, China has established innovation centers in different parts of Africa where Chinese are offering different projects to the locals to see to it that they embrace the available technology from China.  This has mainly been happening in the Agricultural sector.

China has also benefited from Africa in terms of techniques of environment conservation. Due to industrialization in China, there has been an increase in the pollution levels making the cities in China a health threat. However china has visited some of the African countries such as South Africa which is one of the most industrialized countries in the continent and learns how they manage pollution in the country.

Generally we can say that both parties are gaining from the relations and if this continues in the future, China and Africa should have more benefits for each other. CAMAL continues to push for more exports from Africa to China; the firm believes that china should build more capacity in Africa to facilitate the standard they require because the resources are there. The procurement by China from Africa should not necessarily revolve on raw materials but also finished products. The best thing about the cooperation China is having with Africa is that it has brought competition among the super powers.  More European countries are now investing heavily in Africa to match what China is doing and this means more development for Africa.

You can watch the interview CAMAL’s Managing Director Mr Walter Ruigu had with CGTN about this topic

 

CAMAL’s Managing Director reviews the achievements of FOCAC2015

 

China- Africa cooperation has been going on for some time now. CAMAL’s Managing Director Mr. Walter Ruigu was spent some time to review the progress of FOCAC2015 which was held in South Africa. The theme was how to facilitate the movement or transfer of the industrial knowledge from China to Africa.

  1. From the macroeconomic perspective, the conference was successful because China stepped up the pledges from $20 billion to $60 billion which will be in different forms, they will increase financial funding to develop the SMEs
  2. China will offer more training support to African Students who will learn more about technology.
  3. From a company level FOCAC2015 could have done more as the attendance was mainly done by the Government state owned companies instead of firms from Africa. Africa should have more of these forums so that we can they can be a step in the same direction with China.
  4. China’s economy has been slowing down in that China has moved from economy that was based on investment and to fixed asset to domestic consumption. This means that Africa being a large trader in Commodity trading, the continent has been suffering from the economic fluctuation of the prices of these commodities.
  5. The Chinese manufacturing sector has been operating in over capacity i.e. the steel industry; this means there is need to move some of these industries in Africa. However, there is a lot of information which would help the industries in China to move to Africa. Many small medium enterprises are closing down because they do not know how to move to Africa because they do not have the regulations of the country they would want to move to.
  6. The companies in Africa need to engage with China at a macroeconomic level for them to benefit. Once the African companies engage with the big companies in China, definitely the issues of infrastructure will be addressed. China is able to integrate many companies to come up with one common industry.
  7. The market in china cannot be gauged by looking at the population, this is because of the difference in the consumption pattern and the marketing plans. African countries have to research more on Chinese market. Africa should focus on value addition so that export can be increase to China.

Comparing this with FOCAC2018, there has been an improvement as many companies came on board and attended the forum. Unlike in 2015, more countries are sending companies in china to carryout market research, procurement purposes and to get investors. CAMAL continues to be on the forefront to see that clients from African Continent get the best from china. CAMAL also continues to link more industries from China to the African market making it easy for entrepreneurs to source from China. The theme of these forums has been to see to it that Africa has achieved economic growth through these relations in the long-run.

Attached is a file with an audio where CAMAL’s Managing Director Mr. Walter sheds more light on what Africa needs to do for a smooth cooperation with China.

 

5 THINGS TO KNOW ABOUT CHINA SOURCING

5 THINGS TO KNOW ABOUT CHINA SOURCING

In order to ensure effectiveness in the global market, most countries have begun the implementation of high global sourcing strategies. China, being the largest economy in the world is one of the major destinations for people worldwide, despite the increasing cost of manufacturing in recent years. In order to achieve a successful China market sourcing, here are some tips.

1. Quality control management: in China market, there are varieties of goods with different qualities ranging from low to very high standards. So to ensure quality products and timely delivery from China suppliers, the buyer forms his own quality control system. Also, other things that can be done to ensure quality control are:

  • Inspection of factory audit with view of how quality control is being done in the factory.
  • Checking of the factory’s licenses (especially ISO), certifications, human resources policies and their production capacities.

When buyers form their own control system, a noted risk encountered by these buyers is the increasing friendliness between the quality control personnel and the suppliers. A choice attached to this is to involve a recognized inspection company to take on one’s support in the company

2.  Product specification: the stating of exact specification of China products willing to be bought by buyers should be ensured, so that;

  • No confusion concerning price and quality between buyers and sellers would occur.
  • Discouragement of “cutting of corners” by the China suppliers due to blurry specifications in the China market would be encouraged.
  • There would be increase in the efficiency of the import process.Sign of incompetence resulting from suppliers committing to sales without thought for product specification or questions about goods should be observed by buyers.

3. Payment methods/terms: when importing China products, it is necessary to note the payment conditions in order to ensure the safety of buyer’s funds. The steps taken by buyers in processing payment includes:

  • Negotiation for payment (most important)
  • Choice for payment option

Influencing the negotiations with the China suppliers, is the value of the order which depends on the level at which the supplier operates.

  • The purchase history which creates an avenue for re-negotiation and compliance with the client, making the purchase history an important factor.
  • The competition in the company one tends to order from.

For various reasons such as defraud, logistic (bureaucratic problems in claiming funds), China sellers do not always agree with the buyers preferred payment. The payment options include;

  • International wire transfer (most accepted)
  • Letter of credit (most secured)
  • Online escrow
  • Sourcing companies or agents
  • Pay pal

4. China sourcing is not always at low cost.

There is this mentality that China products are always cheap compared to other countries product, but this might not always be the case. In China, there are many factories that constitute to low cost of labor and raw materials. Due to the location, cost of manufacturing can be high because rent is high in some location thus, increasing the cost of price of product depicting that China sourcing is not always at low cost.

5.Avoid 100% upfront

Using a good OEM agreement is a way to avoiding 100% upfront. An example of such can be delay in the delivery of goods or services, change in future prices, etc. can occur leading to total loss