China's influence in Africa has grown rapidly over the last decade. Although China’s economy is not growing as fast as it did in recent years, the Asian superpower remains quite visible in many parts of the continent and even more so in South Africa.
Traditionally, China-South Africa economic activities have focused on government-to-government relations. But engagement between private sector entities is picking up, says Jinghao Lu, project director at the Sino Africa Centre of Excellence (SACE) Foundation, an organisation that seeks to improve China-Africa relations. SACE Foundation has been conducting surveys on Chinese companies operating in South Africa. It has also been working with local SMEs that want to sell to Chinese companies operating in the country..
Lu says Chinese companies particularly need legal, tax, human resources, marketing, communications and public relations services from local organisations that have a better understanding of regulations and cultural issues. “Lately Chinese companies in South Africa are looking to become more market oriented – they are no longer just looking at government deals. They are tweaking their products to be relevant to local demands and they care what the market thinks. One just needs to look at Chinese phone makers Meizu, Hisense, Oppo, Tecno and Huawei, which are doing local marketing. They work with local service providers and hire local staff. It is a truly promising trend. Previously one would see Chinese companies import products that don’t bear a brand, and they didn’t care about having high brand value. But today they understand that here is a sound middle class and a young consumer group that will pay for brand value. So these companies are now sourcing services from local providers in marketing, branding and communications, for instance,” Lu adds. According to him, the foundation has received several enquiries from South African companies who want to pitch and sell to Chinese companies.
There are also more South African-owned trading companies importing goods from China – from electronics to home furnishing materials etc. The biggest challenges for African enterprises doing business with China, particularly those engaged in import and export, include financial constraints, language barriers and lack of trust. “Local businesses that import goods from China struggle with these things. Chinese companies usually say, ‘put all the money upfront and I will send your goods afterwards’. And if they are buying from you they will demand you ship the goods first and when it arrives at a Chinese port then they will pay you. They are worried about fraud,” states Lu. “What many local enterprises are not aware of is that in South Africa, for instance, there are at least 500 Chinese trading companies that sell a variety of goods from ceramics to household goods to CCTV cameras to electronics. If a local company doesn’t have the capacity to source directly from China, they could actually work with a Chinese trader company based here.” There are also opportunities to sell to Chinese consumers in China using e-commerce platforms such as Alibaba.com and JD.com that have a huge following in China.
“At the moment African countries, including South Africa, provide most value to the Chinese market in terms of agricultural produce. China is becoming an upper-middle income country and people are not concerned about spending thousands upon thousands of dollars on health and wellness. Thus, there is opportunity in things organic, natural and healthy for South African entities in China,” says Lu. He points out that wealthy consumers are more than willing to pay premium for products perceived to be superior, unique and exclusive. “For example, right now Starbucks is a big player in China, but we are increasingly seeing people looking for really good single-origin coffee so now there is a new trend of boutique coffee houses. There are also a lot of classes about how to appreciate coffee and tea, and that is an opportunity for South Africa. You can actually sell premium if you differentiate your coffee, tea, moringa seeds, or anything that has health benefits,” Lu explains.
To a typical Chinese consumer, Lu expounds, Africa represents things that are ‘wild, natural and culturally exotic’. “African products that position themselves in these lines will appeal to consumers. For example, you can talk about the history of rooibos tea, why it is different from that in other markets, and also reinforce the fact that even consumers in Western markets like it. In fact, mentioning the Western association is important because young people in China appreciate Western culture and will resonate with products Western markets are consuming,” concludes Lu.
