CAMAL makes an entry into Namibian Market

CAMAL Visits Granite mines in Namibia- photo courtesy of CAMAL

CAMAL has continued to make strides in the international markets by connecting various suppliers to their markets. More firms across the continents continue to trust CAMAL for market sourcing and potential client identity. In the recent past, CAMAL has been moving across the continent trying to identify the resources in Africa and how countries can improve mineral trade in the international platforms.

Even with offices in China, Nairobi and Lusaka, CAMAL has seen the need of expanding its roots so as to meet the client’s needs in procurement, commodity trading and investment advisory. Mining industry has been receiving support from the central Governments in Africa because it is a sector which if exploited well, will contribute to the well-being of the country. A good example is South Africa whose economy largely depends on the resources in terms of minerals e.g Gold.

Namibian Granite Mines -photo courtesy of CAMAL

CAMAL made its first entry in Namibian Mineral market in September 2018. The bonds CAMAL has established in China over a period of time, made it easier for CAMAL to locate and find white Granite market in china for Namibian miners. Granite exists in different colors. There is White, Black, Green, Red, Blue, Brown and Pink Granite.Granite is used in buildings, bridges, paving, monuments, and many other exterior projects. Indoors, polished granite slabs and tiles are used in counter-tops, tile floors, stair treads and many other design elements.

Granite Mine – photo courtesy of CAMAL

CAMAL organized a successful trip from china to Namibia where white Granite is in huge deposits. The client needed a supplier who CAMAL identified and helped the client to inspect and do the negotiation on their behalf. There is a Chinese proverb which says that, ”A closed mind is like a closed book; just a block of wood” this proverb means that there is need to explore new opportunities and knowledge in a business. This is the reason why CAMAL has continued to build relationship with mining firms across Africa

CAMAL will continue to bring suppliers and market together for a better trading grounds. Central Governments should ensure that mining sectors are developed and implement technology advancement as far as mining is concerned. With improvement in technology, Africa will steadily increase the export of finial products made from granite which will positively impact the economy. CAMAL continues to help and share advice on what needs to be implemented for minerals to be of greater benefit to the African Continent. For all your procurement needs, CAMAL is the best there is in trade. We will help you to cut cost and increase profitability in the long run. 

 

 

CAMAL attended F0CAC2018 in Beijing.

 

Forum on China-Africa Cooperation 2018 was held in Beijing where various Heads of State from Africa represented their countries in this forum. Chinese President Xi Jingping opened the forum on 3rd of September 2018. Most Africans were eager to know how their countries would benefit from these relations.  CAMAL attended the opening ceremony where Xi Jingping delivered a keynote speech at the opening ceremony of the 2018 Beijing Summit of the Forum on China-Africa Cooperation.

Africa Heads of states during FOCAC2018 in Beijing China

Chinese President Xi Jinping pledged $60 billion in financing for projects in Africa in the form of assistance, investment and loans, as China furthers efforts to link the continent’s economic prospects to its own. Some of what $60 billion will do can be broken down to:-

  • Xi said the figure includes $15 billion in grants, interest-free loans and concessional loans, $20 billion in credit lines, $10 billion for “development financing” and $5 billion to buy imports from Africa.
  • He added that he will encourage companies to invest at least $10 billion in Africa over the next three years.
  • Xi said China was planning initiatives in eight areas, including providing $147 million in emergency food aid, sending 500 agricultural experts to Africa, and providing scholarships, vocational training and trade promotion opportunities.
  • President Xi Jingping promoted Beijing’s initiative to build ports and other infrastructure as a tool for “common prosperity” in a world facing challenges from trade protectionism.
  • China will implement 50 agricultural assistance programmes, provide 1 billion of emergency humanitarian food assistance to African countries affected by natural disasters, send 500 senior agriculture experts to Africa, and train entrepreneurs in Agri-business.
  • China pledged it will implement 50 trade facilitation programmes for Africa, as well as undertake 50 projects for green development and ecological and environmental protection.
  • Tailor-made programmes to train 1,000 high-calibre Africans will also be put in place. 50,000 government scholarships and 50,000 training opportunities for seminars and workshops will be offered.
  • On the other hand, 50 medical and health aid programmes for Africa will be upgraded.
  • Xi said that we should build a China-Africa community with a shared future that promotes harmony between man and nature. The Earth is the only place which we mankind call home. China will work with Africa to pursue green, low-carbon, circular and sustainable development and protect our lush mountains and lucid waters and all living beings on our planet.

China has continued to push for cooperation with Africa to help the African states achieve economic independence in the long-run.This initiative has been achieved by financing projects in Africa. A good example is the infrastructure development where china has continued to bring modern technology in this sector. The presidents in attendance were positive that Africa was taking off towards a better future of economic growth.

CAMAL Group has been doing business in China for more than 8 years and has seen China’s economy grow overtime. FOCAC2018 has opened many opportunities where people from Africa will be  allowed to do business in China. CAMAL has helped some of it’s clients  get foreign investment from china hence creating a positive economic impact.

CAMAL will continue to bring serious investors to Africa and also help the African produce get market overseas. As Xi jingping finished his speech he  insisted by saying that there is need for China and Africa to work together in order to conserve the environment, CAMAL continues to push for environmental hygiene by organising trips where African countries can come to China and benchmark on environmental conservation and how china manufactures the waste treatment plants. With the growing African population, there is need to take care of the environment at all costs.

As the bond between China and Africa becomes stronger, there is need to evaluate  the economy and check the available opportunities in the market because Africa has untapped potential. There are many benefits which can be reaped by business firms, investors and organisations that are in their take-off stage matching towards economic independence. This phase will spearhead development in countries which will channel the loans for development purposes. We just hope that the loans will bring productivity because it is a debt which will be paid later even though president Xi Jingping said that China will write-off some loans for some countries depending on how the economy is doing.

 

CAMAL makes its entry into Ethiopian market

 

CAMAL’s MD, Walter Ruigu interviewed by Ethiopian Broadcasting Corporation on opportunities for Ethiopian companies in/with China

 

CAMAL saw a lot of opportunity in Ethiopia especially from the industrialisation drive from government.

China Trade Week Vice President Sean Xiao and CAMAL MD and Sales Manager at CAMAL’s booth. CAMAL sees Ethiopia as a key regional market

CAMAL looks forward to working in Ethiopia.

For any inquiries, please email: info@camaltd.com

CAMAL participated in China Trade Week Kenya

The CAMAL team participated in the annual China Trade Week Kenya 2017.

CAMAL Booth

There was a large interest by Kenyan firms in finding Chinese partners and China procurement.

CAMAL’s MD, Walter Ruigu gave a presentation on China’s macroeconomy and changing procurement trends especially their impact on African countries

CAMAL acquired new procurement and advisory clients at the event and we plan to participate every year.

For any inquiries, please email: info@camaltd.com

Made in China: Still a Complex Scenario

I have just finished reading an article in a local paper that said “Made in China” no longer means what it did in the past, that is, cheap, low-quality products. The article argued that as China’s middle class has expanded and wages have risen, cheap products – in terms of costs and quality – are becoming scarce. Whereas the article is correct in that the quality of products from China has continually improved, the issue of “Made in China” is an intricate and complicated picture. There is a Chinese saying, yi fen qian, yi fen huo, i.e., the more you pay, the better quality you will get. This month, we outline a few procurement issues to be aware of.

Complexity in the categories of items to be procured:  Although China is known as the “factory of the world,” not every factory/company can produce an unlimited set of products. This means if one is purchasing a gamut of products or product series, one may have to deal with multiple manufacturers. Depending on the type of item to be procured, the manufacturers may vary in size, capacity, geographic location, level of internationalization etc., which adds to the complexity of procurement.

CAMAL recently worked on a project to procure different types of steel casings. The client’s requirements were so diverse that it was practically impossible to find one manufacturing plant that produced all items. The result was that we chose to work with the largest plant, which in turn subcontracted other parts to other plants. We negotiated for a contract where all the quality assurance work was to be done at the large plant (along with an international third-party testing agency) with the final responsibility for quality issues being the main supplier’s.

This type of procurement where one supplier plays the lead role can reduce complexity and costs/time in due diligence work and consolidate risk and responsibility. The downside is that the final invoice price may be higher than the individual suppliers’, but this may be outweighed by reduction of transaction costs.

Specialization of suppliers:  Specialization in China attains levels that would make Adam Smith, the Scottish economist who regarded increasing division of labor as the key to prosperity and proud. There are factories, companies and even towns dedicated to producing a single component that may end up being used in only one product in one industry in one sub-sector. This is a double-edged sword for procurement. If one is to procure the single component, identifying the right partner may ensure unlimited access to the component and ensure attractive cost savings. On the other hand, it also increases the complexity, particularly if one is not present in China and not an expert in the local industry, as finding the right factory requires a lot of research and ground work.

Number of suppliers:  Given the massive size of the “world’s factory,” suppliers of a given product are in the range of hundreds to thousands, which increases the complexity of narrowing down a legitimate and reputable supplier.

A client recently wanted to procure a crushing machine for mineral processing. Our initial research indicated there were over 2,500 companies that could produce the product and these were spread over at least six key manufacturing bases. Also, the 2,500 included traders, manufacturers, assemblers and briefcase companies. With the aid of desk research, supplier visits and primary research by industry experts, we were able to narrow down the key companies to about 10. It is still a very high figure, once again underscoring China’s specialization in manufacturing

Finally, one key issue to consider when procuring from China is whether or not to use trading companies. Traders are essentially a black box linking the manufacturer and the buyer, and at times, there could be multiple parties in between a transaction. Once again, the appropriateness will depend on the type of procurement required, time constraints and budget allocations. A trader can be an effective solution in reducing the complexity, especially in dealing with all the sub-contractors. However, traders’ markups can be extremely high; and even then, some traders may be unwilling to carry the manufacturing risk on their books. So in China, finding the right trader may entail some research. But they can be a beneficial partner down the line.

This article originally appeared in the Chinafrica Magazine, Made in China: Still a Complex Scenario

Meet Kenyan entrepreneur at the forefront of China-Africa relations

When Kenyan entrepreneur Walter Ruigu embarked on his journey to China in 2009, he had no clue this would be the place he’d spot so many business opportunities for a budding African entrepreneur.

Today CAMAL prides itself in successfully assisting companies to leverage China as a source of supplies, capital & technical expertise.

This week he speaks with Nillah Nyakoa about what it takes to find success in China and above all the good business lessons he has grasped over time, working with clients from both China and Africa, and how those lessons have helped steer his company in the right direction.

Listen to the rest on China Radio International Website:

 

China’s Environmental Regulations are Crippling its Steel Sector and Severely Wounding Manufacturing

I have just returned from a sourcing trip in Tangshan and I was marked by the blue sky and white clouds. In all my years in China, I have never seen Tangshan like this, let alone during winter. I have witnessed the same scene in the last week in Dingzhou, Anping, Shijiazhuang and other steel producing cities of China.

Downtown Tangshan (One of the key steel producing cities of China) – Nov 22, 2017

Clean Air at a Cost

New regulations in China have mandated anti-pollution measures / equipment / quotas / shutdowns etc. which have all led to increased costs amongst restricted supply. In Tangshan for instance, coal power is no longer permitted as a source of power for producing steel. The alternative, natural gas, is a cleaner energy source, but one that has lead to an increase of USD 10-15 per ton of steel.

With coal no longer a permissible source of (cheap) power, most coal processing machines lay ideal in most steel mills

Although most people appreciate the breathable air, there are hundreds of mills and processing plants that have been shutdown leading to lost income, unemployment and rising prices. Where shutdowns have not been mandated, increased costs have rendered many firms noncompetitive (locally and internationally) leading to bankruptcies and closures.

With the new regulations, electric furnaces have been targeted due to their typically high pollution and often smaller size in comparison to blast furnaces. The result has been extremely tight supply of steel especially billets that are necessary for downstream production, and which once constituted a major portion of China’s steel exports.

Not everyone is Upset with New Regulations

The biggest beneficiaries of the strict regulations have been blast furnace suppliers of steel billets. They have seen profits sour with figures of over USD 150 per ton. With some factories producing thousands of tons per week, business has been booming as artificially high profit margins continue.

On the other hand, downstream industries have been forced to buy raw materials at these elevated prices and ultimately the costs are being passed on to consumers. With fewer producers, elimination of the (Cheaper) electric furnace producers and new quotas, billet manufacturers have ripped immense profits during this period.

End of Cheap China?

Those who have paid close attention to the steel industry can only reminisce when steel prices were sub USD 150 compared to USD 600 per ton today. It is highly unlikely that the price will ever return to these figures.

Excessive steel billet (such as above) prices have caused a knock-on effect on downstream industries and manufacturing

Given that profits of the billets are abnormally high, it is possible that new regulations targeting certain enterprises will tame these margins therefore resulting in knock on effect for downstream industries, but its clear China has turned a chapter of cheap steel at all costs.

‘New Normal’ and the Changing China Opportunity

So what does all this mean for international firms looking to China for procurement or investment? Next week, I shall examine implications of this new normal.

 (Walter Ruigu is managing director of CAMAL Group, a trade and investment advisory firm based in Beijing, Nairobi and Lusaka and can be reached at wruigu@camaltd.com)

Why China Remains a Major Sourcing Destination

There have been countless articles and books about China’s reign as the factory of the world coming to an end. While it is true that wage increases are making some of China’s lower-end industries, such as textiles, less competitive vis-à-vis other low-cost countries such as Viet Nam, Cambodia and Bangladesh, China remains one of the top procurement sources for mid- to high-tier products. For instance, heavy equipment exports from China experienced a growth rate of about 30 percent in the last decade alone. Even as some of the lower-end industries move out, there is more to a country’s competitive supply chain than labor costs. China maintains a set of key factors that will continue to make it a competitive exporter even as the economic landscape shifts. These include:

  • High-quality infrastructure (especially export-related infrastructure): China’s rail and road infrastructure, particularly along the coastal cities, are among the most developed globally. With a history of double-digit investment in infrastructure, China’s ports complement the rail/road infrastructure. Shanghai long surpassed Singapore as the world’s busiest port and it will be a while before key competing countries can match China’s current (and continuously developing) infrastructure.
  • Increasing qualified labor force: China produces hundreds of thousands of graduate engineers and scientists each year to be absorbed into the local industries. Moreover, China now has the world’s largest student population studying overseas with a sizeable number returning upon completion of their studies. Although there has been renewed attention to quality rather than quantity in the number of graduates, the increasing education level will boost China’s competitiveness vis-à-vis some of the other low-cost sourcing destinations.
  • Growing research and development expenditure leading to higher innovation capacity: Despite the reputation for copying, China’s innovation has continued to pick up pace. A report by McKinsey & Company (Greater China) highlights innovation in areas such as renewable energy, consumer electronics, instant messaging and mobile technology. As internal and external competition increases, China is also focusing on price reduction, adaptation of business models and supply chain development. This will lead to the elimination of less efficient firms, both domestically and those focused on the export market.
  • Lower costs relative to industrialized countries: Despite double-digit growth in both wages and currency appreciation during the past decade, China’s minimum wage still stands far below that of industrialized countries. Rising wages are correlated with increasing productivity. Therefore countries competing with China for lower costs will have to also compete with increased productivity and vice versa.
  • Specialization, not only at sector level, but also at product level: China’s specialization in various products remains unparalleled globally. There are entire towns dedicated to producing a single product. For instance, Shenyang, a city in northeast Liaoning Province, has developed a reputation for its heavy industry, particularly in the manufacture of automobile and light machinery. The Pearl River Delta is known for textiles/electronics industries, whereas Shenzhen has become the IT hub of China. Moreover, the product range available in these agglomerations is diverse, catering for low- to high-end products, resulting in differentiation as a key competitive factor.
  • Pro-export policies: It is true that the Chinese authorities have decided to alter the export-led growth model to one focused on domestic consumption. However, the country’s “going out” policy combined with an increasing saturated domestic market, especially in sectors related to fixed assets investment such as steel, cement and heavy equipment, continues to have explicit support (via export rebates or subsidies) or tacit support (high barriers to entry, licensing requirements), especially at local level. This support will continue to boost Chinese exports’ competitiveness – at least in the short term.

A shift inland: As the coastal areas become expensive, investment in areas such as Chengdu and Chongqing, which are a distance from the coast, continues to see increasing direct investment from both local and foreign firms. This is not to say that the inland does not pose its own problems, but over time it may prove easier to shift inland than abroad.

This article originally appeared in the Chinafrica Magazine, Why China Remains a Major Sourcing Destination

What the Sino-Africa investor and trader can look forward to in the year of the sheep

In the Chinese zodiac calendar, 2015 is the Year of the Sheep. Some say it is the zodiac sign shrouded in bad luck, not only for personal issues such as marriage and childbirth but also for business. So what can the Sino-African trader and investor look forward to?

1.An economy continuing to moderate – With China having sustained double-digit growth for almost three decades, the government policy now is to aim for “moderated” growth of 7.5 percent and adjust the economic structure with greater emphasis on domestic consumption. The 2015 outlook will see the growth rate continue to decline as less investment goes into fixed assets and government spending comes under more scrutiny.

2.Increasing prominence of the China (Shanghai) Pilot Free Trade Zone (the Shanghai FTZ) – The Shanghai FTZ represents one of China’s most ambitious economic reform policies. It goes beyond its predecessors, the special economic zones, with more liberal policies and regulations, and more sectors hitherto closed to foreign investors opened up. Foreign trade in the Shanghai FTZ exceeded $120 billion in its first year of operation. Pledges have been made to replicate the Shanghai FTZ policies in other areas.

3.Continued crackdown on corruption  – More actions against “flies” (low-ranking officials) and “tigers” (high-ranking officials) are expected as the government continues its fight against what it views as the biggest threat to the stability of the Party and society – corruption. Foreign and local businesses must be aware that China’s business environment is evolving. What was the acceptable modus operandi in the past may no longer prevail.

4.Continued focus on Africa – 2015 will witness the Sixth Ministerial Conference of the Forum on China-Africa Cooperation (FOCAC) in South Africa. The conference will review the political, economic and social commitments made during the 2012 FOCAC in Beijing. China has always exceeded previous commitments in past forums; in 2012, Beijing announced a $20-billion credit line to Africa. China to surpass this commitment can be expected once again.

5.Rule of Law – One of the key outcomes of the Fourth Plenary Session of the 18th Central Committee of the Communist Party of China, was a greater emphasis on law. 2015 will see the implementation of commitments from the plenary session. Combined with the anti-corruption drive, a greater emphasis on the law will change the way business is done in China and alter the overall social landscape.

6.Increasing consolidation of Chinese firms, especially in mining -As China continues to pursue economic reforms and develop into a world economic power, the government has laid down clear policies to consolidate fragmented sectors that result in inefficiencies in the economy and exacerbate environmental issues. Tens of thousands of coal companies will be consolidated into more than 20 large enterprises. 2015 will see smaller enterprises going out of business or being acquired by their larger counterparts. Foreign companies should take the initiative to engage with the smaller companies in overseas projects.

7.Rise of private banking – China’s banking sector has long been dominated by state-owned banks led by the “Big Four.” However, with the continued opening up of the financial sector, companies such as Tencent have begun offering services hitherto closed to even domestic firms. As the government continues to rein in the infamous shadow banking, private actors including peer-to-peer lending schemes will increasingly find their niches. But the state-owned enterprises won’t accept this new competition without a fight.

8.China’s increasing role as an international economic catalyst – China is already the world’s largest economy on a purchasing power parity basis and will rightly claim that position in nominal terms in due course. Along with the construction of a New Silk Road, plans for a railway linking Beijing to Europe, and launching of the Asian Infrastructure Bank, China will continue to assert its place in the global economic landscape.

9.Increasing energy cooperation between China and the United States in Africa  – There is an African proverb: when two elephants fight, it is the grass that suffers. However, the two giants, the United States and China, seem increasingly likely to cooperate in Africa – at least on renewable energy. A key discussion at the recent Asia-Pacific Economic Cooperation summit in Beijing was on the U.S. proposal to partner with China on improving electricity capacity in Africa. While China will continue to undertake a majority of project contracting, particularly in the energy sector, more collaboration is expected on renewable energy projects in Africa.

10.Increasing mergers and acquisitions (M&A) – Chinese firms, primarily private equity and listed firms, saw an increase in overseas M&As in 2014, a trend expected to continue well into 2015. The key focus of M&As remains the natural resources China needs to continue fueling its economy as well as the high-end technology Chinese firms are looking to access.

As we head into the Year of the Sheep, African companies looking to do business in or with China should be cognizant of the changes taking place and adjust their China strategy accordingly to stay ahead of the pack.

This article originally appeared in the Chinafrica Magazine, What Lies Ahead

Selecting a Chinese Construction Partner

Chinese construction firms, typically referred to by the construction model of engineering, procurement, construction (EPC), have gained a reputation for carrying out some of the largest construction projects both domestically and overseas. In fact, China now claims more than half of the top 10 tallest buildings in the world and according to the weekly magazine Engineering News Record, more than 60 percent of major contracting projects in Africa are now being carried out by Chinese firms. A quick look at China’s Ministry of Commerce (MOFCOM) information shows that there are over 3,000 firms permitted to carry out international project contracting. So how does one identify a suitable EPC partner?

1. Can the EPC carry out overseas projects? Not every Chinese construction firm is permitted to undertake overseas projects and the MOFCOM maintains a list of permitted firms. Moreover, given the large domestic market, some firms may have no interest in venturing overseas.

2. What is the source of financing for the overseas project? If one were to pick a decisive factor in deciding if a Chinese EPC company is a suitable partner, the African partner must be clear on the source/type of financing for the proposed project. This is also directly linked to the type of business cooperation model, such as a turnkey EPC project, Build-Operate-Transfer (BOT), Public Private Partnership (PPP) etc. • If a project has financing, then a large majority of firms would be able to carry out the project. However, if one requires financing, then one must address a new set of questions on how the EPC will recoup its financing:

(1) Does the project have sovereign guarantee?

(2) Can an international financial institution guarantee the project?

(3) Can a local financial institution guarantee the project?

• If the above is possible, then the pool of cooperation partners remains significantly large, but will reduce for each question answered “no.”

• If the project cannot offer any of the above guarantees, then a business case for the project must exist:

(1) Does the project have a feasibility study from a reputable institution?

EPCs will more readily consider projects that do not entirely depend on the market, such as power projects that can be backed by a power purchasing agreement.

(2) Does the project require the EPC to carry out the study? This will significantly reduce the type of interested EPC companies in the project.

3. What is the structure of the EPC? There are projects that are more favorable to state-owned companies as opposed to private companies. Moreover, even within state-owned companies, some projects are more suited to central government firms, i.e. those based on government-togovernment agreements or those that require financing from Chinese state-owned policy banks, such as the Export-Import Bank of China or China Development Bank.

4. What are the technical requirements of the project? For most projects, Chinese EPC firms are able to be the main project contractor while subcontracting specific sections. However, only select firms are allowed to carry out projects that require very specific expertise, such as construction of an airport runway or nuclear facilities, especially if they are state-owned, as there are specific licensing requirements.

5. Where is the project? There are EPC firms that are not allowed to venture into certain geographic regions due to Chinese government regulations, internal policies within the firm that restrict intra-group competition, or simply because the EPC has no interest in venturing into a given area. For large EPC companies, such as China Communications Construction, Sinohydro or China Railway Construction, policies to reduce intra-group competition are particularly relevant.

6. To bid or not to bid? For certain projects there must be international bidding and some EPCs are simply not willing to bid. Reasons may be diverse, such as lower profits due to increased competition, a low chance of acquiring the project, the large investment that may be required to carry out the bidding process with an uncertain outcome, etc.

As Chinese EPC firms continue to expand their reach within the continent, it is crucial that their African partners remain cognizant of how these firms are operating on the continent in order to identify and select suitable partners.

This article originally appeared in the Chinafrica Magazine, Selecting a Chinese Construction Partner