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25% Chinese Companies in Africa Make Their Initial Investment Within A Year

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A new report has shown that China is Africa’s largest economic partner, with 10,000 of Chinese firms operating in Africa – four times the previous estimate.

The new report by McKinsey Africa finds that its involvement is bigger and more multifaceted than previous studies suggest.

Through a study conducted across eight countries that together make up about two thirds of sub-Saharan Africa’s GDP, the report finds that about 90% of these are private firms, of all sizes and operating in diverse sectors, with about a third in manufacturing.

These firms are bringing capital investment, management know-how and entrepreneurial energy to the continent, and in so doing, are helping to accelerate the progress of Africa’s economies.

Across trade, investment, infrastructure, financing and aid, China is a top-five partner to Africa – no other country matches this level of engagement. The China-Africa relationship has ramped up over the past decade with trade growing at around 20% per annum.

FDI has grown even faster – at an annual growth rate of 40%. China’s financial flows to Africa are 15% larger than official figures suggest when nontraditional flows are included. China is also a large and fast-growing source of aid and the largest source of infrastructure financing, supporting many of Africa’s most ambitious infrastructure developments in recent years.

Chinese Firms Are Market-Driven and Investing For The Long-Term
Operating across many sectors of the African economy, in addition to manufacturing, a quarter is in services and a fifth in trade and in construction and real estate.

Chinese firms already handle 12% of Africa’s industrial production – valued at US$500bn a year in total.

In infrastructure, Chinese firms’ dominance is even more pronounced, having cornered nearly 50% market share of Africa’s international engineering, procurement and construction (EPC) market.

Chinese firms are making healthy profits. Nearly a quarter of the 1,000 firms surveyed said they covered their initial investment within a year or less. A third recorded profit margins of over 20%.

These firms are agile and quick to respond to new opportunities. They are primarily focused on serving the needs of Africa’s fast-growing markets rather than on exports. Chinese firms have made investments that represent a long-term commitment to Africa. Of the Chinese firms surveyed, 74% said that they are optimistic about their future in Africa.

Clear Benefits, But Challenges Must Be Addressed
The report points to three main economic benefits to Africa from Chinese investment and business activity:

Job Creation and Skills Development:
Of the 1,000 firms surveyed, 89% of the employees are local. The research suggests that Chinese firms employ several million Africans. Nearly two thirds of Chinese firms provide skills training to their workers.

Transfer of Knowledge and New Technology:
Chinese firms are modernising African markets by introducing new products and technologies. Some 48% introduced a new product or service and 36% have introduced a new technology in the last three years.

Financing and Development of Infrastructure:
When asked what they value most from their Chinese partners, for some 50 African public-sector leaders, low-cost financing and improved infrastructure topped the list. They cited Chinese firms’ efficient cost-structures and speedy delivery as major value-adds.

While on balance, China’s burgeoning partnership with Africa is a positive for Africa’s economies, governments and workers, there are areas that need significant improvement:

Local Sourcing:
By value, only 47% of Chinese firms’ sourcing was from local African firms, which is lost opportunity for these firms to benefit from Chinese investment.

Local Managers:
Too few locals are in managerial positions – only 44% today.

Pain Points for Both Sides:

Chinese firms cite personal safety and corruption in some countries as their top concerns. For African leaders, language and cultural barriers are pain points. There have been instances of labour and environmental violations by Chinese firms.

Maximising the impact of the partnership
Kartik Jayaram, a senior partner and co-author of the report said, “Chinese engagement with Africa is set to accelerate – by 2025 Chinese firms could be earning revenues worth $440bn, from $180bn today.

Additional industries could be in play for Chinese investment, including technology, housing, agriculture, financial services and transport and logistics. However, to unlock the full potential of the China-Africa partnership, we have identified 10 recommendations for Chinese and African governments as well as the private sector. To highlight two key ones – African governments should have a China strategy and the Chinese government should open financing and provide guidance to Chinese firms.”

Few African countries have a clear strategy and engagement plan for China. Governments should develop such strategies, linked to national plans and priorities. They should also cultivate capabilities in their bureaucracies to support these strategies.

Opening Chinese government financing and providing guidance on responsible business practices to Chinese private sector firms in Africa would accelerate sustainable investment.


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AXA Mansard Empowers Female SMEs with Financial, Digital Skills

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AXA Mansard, a member of AXA has empowered 200 female Small and Medium Enterprises with financial literacy and digital business skills.

In collaboration with SME 100 Africa, the two-day training, which was held in Lagos, is part of AXA’s lined-up programmes to commemorate this year’s International Women’s Day.

Speaking, Olusesan Ogunyooye, Head of Marketing AXA Mansard, said the training was aimed to empower female SME owners with skills to improve business output and position them for the increasing economic opportunities available in an increasingly digital marketplace.

Ogunyooye noted that the move was in line with AXA Mansard’s sustainability agenda, explaining that the company was convinced that support for women through its inclusive protection programmes was pivotal to its purpose of acting for human progress by protecting what matters and its mission of moving from being a payer to a partner.

He further said that focusing on digital skills was important because the company realised the importance of digital skills to the growth of the SME sector in Nigeria and wants to ensure that women were empowered enough to be a consequential part of that growth.

“It’s almost trite to say that SMEs are the engine for economic growth, especially in developing countries like Nigeria, where over 45 million adults are business owners. What needs to be continually discussed is how Nigeria is going to unlock that potential for economic development and how much of that potential will be unlocked by women and for women.”

“For us at AXA Mansard, we are aware that digital will play a major role in unlocking these current opportunities and Nigeria’s economic future. So, to ensure that women are equally represented in unlocking these future potentials, that’s why we have collaborated with SME 100 Africa to support them in developing the required skills”.

“Our choice of digital and financial literacy skills is deliberate. We understand the power of the duo. We understand that helping these SMEs with the skills to attract more customers will be a faster means to empower them.

“We see that they have amazing products and services, but they need to understand how to attract value for themselves by attracting the right customers, and you will agree with me that virtually all customer segments are online in one way or another today.

“So, if we can empower them with digital business skills, we would have helped them with the heavy lifting of trying to find and attract customers”. Ogunyooye explained.

According to him, AXA Mansard believes that for the world to experience progress truly, there must be an equitable distribution of creation and access to opportunities for men and women. This quest for balance informed the SHE for Shield initiative, a women-centred inclusive protection programme of AXA Mansard.

SHE for Shield is a group of initiatives designed for the Nigerian woman. The goal is to see them grow, add value, and help them mitigate risks at every step.

According to the company, research has found that access to health care is one of the most important things to Nigerian women, regardless of their economic segment. They desire to be financially independent, secure, and respected in the community.

 


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IFC Invests in New 4DX Ventures Fund to Support Tech Startups in Africa

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IFC is investing $10.5 million in a new fund by 4DX Ventures, a New York-based venture capital firm focused on supporting early-stage African technology companies across a broad set of sectors, including fintech, e-commerce, edtech, climate tech, and health tech.

IFC’s investment in 4DX Ventures Fund III will come from IFC’s $225 million venture capital platform, which was launched last year to strengthen emerging VC ecosystems and invest in early-stage companies in Africa, the Middle East, Central Asia, and Pakistan.

Africa is among the regions least served by venture capital, receiving just 2% of global venture deal volume in the third quarter of 2023. Access to capital on the continent has been further exacerbated by a slowdown in global venture capital investment.

Tech ecosystems are nascent, or even nonexistent, outside of more established markets such as Egypt, Kenya, Nigeria, Senegal, and South Africa.

“IFC and 4DX Ventures share the commitment to supporting tech entrepreneurs with innovations that will help Africa leapfrog in critical areas such as climate, health care, fintech, e-commerce, and education,” said Walter Baddoo, Co-Founder and General Partner of 4DX Ventures.

“We look forward to partnering with IFC to help promising tech startups build transformative businesses and realize sustainable development impact on the continent.”

4DX’s new fund will invest in companies with tech solutions that can improve productivity, efficiency and competitiveness across Africa. The firm’s first two funds invested in companies such as Egypt-based e-commerce platform MaxAB, an IFC portfolio company; Ghana-based health tech firm mPharma; and Kenya-based B2B e-commerce platform Wasoko, formerly known as Sokowatch.

“By supporting the development of tech ecosystems in emerging markets, IFC’s venture capital platform aims to improve access to key services, boost business competitiveness, and promote job creation through digital transformation,” said Mohamed Gouled, Vice President of Industries at IFC.

“Our investment in venture funds such as 4DX Ventures will help African entrepreneurs access more financing and resources they need to scale tech innovations and bolster sustainable growth across the continent.

In addition to providing capital, IFC will work with 4DX Ventures to implement their environmental and social management system.


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Climate Action Africa Announces CAAF24

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Climate Action Africa (CAA) has announced the inaugural convening of the Climate Action Africa Forum (CAAF24). This international event brings together stakeholders from across the world who drive thought leadership insights on how to encourage collaboration, catalyse actionable solutions, and urge governments, businesses, and individuals to invest in climate-smart initiatives.

The climate-focused event was announced at last week’s Friday international press conference held at the prestigious Transcorp Hilton Abuja. This marks a significant milestone in Africa’s journey towards a sustainable future. A precursor to the upcoming Climate Action Africa Forum scheduled for June 17-19, 2024, at the Landmark Events Centre in Lagos, Nigeria, this press conference brought together leaders, experts, and stakeholders from across the globe. The gathering’s main goal was to discuss the urgent need for sustainable development plans and climate-smart investments in Africa.

Framed by the theme “Green Economies, Brighter Futures: Innovating and Investing in Africa’s Climate-Smart Development,” the international press conference became a vibrant platform for insightful discussions, strategic collaborations, and impactful engagements. It convened an esteemed gathering of leaders, experts, and stakeholders to explore solutions for Africa’s pressing environmental challenges.

The event kicked off with a welcome address by the Executive Director and Co-founder of Climate Action Africa, Grace Mbah, who having announced the commencement of event registration as April 2nd, 2024, made the call for tech-driven solutions and innovations in the fields of emissions reduction, transportation, agriculture, energy, circularity and building and construction to apply to participate in the deal room.

Providing insights to attendees on how innovative approaches and collaborative action is at the heart of CAAF24, she extended an opportunity to like minded organisations who would like to partner by hosting side events and finally, a call for volunteers from across the continent.

“It’s no news that the world stands at a critical juncture, where decisive action is imperative to mitigate the adverse impacts of climate change. Against this backdrop, CAAF24 serves as a pivotal platform for key stakeholders to engage in meaningful discourse, and forge collaborative pathways towards a greener, more sustainable future.

The essence of CAAF lies in its commitment to shaping a climate-resilient Africa through co-creation, innovation, and sustainable investment. Through this initiative, we aim to catalyse solutions that enhance the sustainability and prosperity of the continent’s natural resources, people, and economies,” Grace stated.

During the International Press Conference, distinguished speakers and thought leaders emphasised the urgent need for collective action in tackling Africa’s climate challenges.

They delved into critical topics like renewable energy, sustainable agriculture, biodiversity conservation, and climate finance, offering practical insights and inspiring initiatives.

Jummai Vandu, representing the National Council on Climate Change, expressed optimism about the initiative’s outcomes. “Today’s discussions,” she said, “underscore the urgency of our collective efforts to combat climate change. The National Council believes working together is key to driving meaningful action and creating a more sustainable future for Africa and beyond.”

With the International Press Conference complete, the stage is set for CAAF24. Stakeholders will converge to translate ideas into action, forge partnerships, and drive progress towards a climate-smart Africa.

Mrs. Taiwo Fashipe, Head of Media for the Presidential CNG Initiative (P-CNGi), echoed similar sentiments, stating: “The theme of this year’s Climate Action Africa Forum aligns with our goals, vision, and mission at the Presidential CNG Initiative.

“We look forward to using this platform to advance interest in and investment in greener and cleaner energy sources like CNG.”

Standing at a crucial juncture in Africa’s quest for sustainable development, CAAF24, convened by Climate Action Africa in partnership with the National Council on Climate Change, Channels Media Group, and Founder Institute, emerges as a beacon.

It brings together the private and public sectors, guiding the continent towards a future marked by resilience, prosperity, and environmental stewardship.

 


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