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.

 

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

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