Chinese Contractors in Africa: Insights from a Survey

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Chinese Contractors in Africa Insights from a
Survey

• Ray Levitt
• Director, CRGP

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Cooperative Framework
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Works vs. Organizations
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Growth of Trade and FDI Volumes between China
and Africa
Trade Flow
Foreign Direct Investment
425 bn
35 bn
2001
2005
2001
2005
Source IMF Direction of Trade Statistics, 2006
Ministry of Commerce, 2006.
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Method

• Constructed a database of all Chinese financed
  projects in Africa based on press reports with
  verification from Chinese government/corporate
  sources
• Interviewed representatives from the top
  contractors and financial institutions in China
  involved in Africa
• Surveyed 32 Chinese contractors in Africa (Ray)
• Compared China Ex-Im Banks financing model to
  that of French, Japanese and US bilateral lenders
  (Henry)
• Completed a case study of a Chinese project in
  Ethiopia
• Connected with Peter Bosshard who is completing a
  case study of the Merowe Dam project in Sudan
• Analyzed implications of the China in Africa
  phenomenon (Vishnu)

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Part I

• DATABASE OF ALL
• CHINESE FINANCED PROJECTS
• IN AFRICA (OMITTED)

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Part II

• SURVEY OF 32
• CHINESE CONTRACTORS
• IN AFRICA

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Topic on the Survey

• Number of Projects
• Markets/Countries where the contractor has
  presence
• Total Revenue in Africa
• Labor Source
• Management Source
• Procurement Methods
• Financialfinancial term financial support
• The most potential market segments
• Environmental and Social Safeguards for the
  Contracts
• Opportunities vs. Threats
• Successful Markets and Entry Modes

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Sample

• 32 contractors

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13
10B
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7B
7C
7D
7A
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10A
9
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Procurement Methods
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Financial Term
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Entry Modes
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Financial SupportLoans, Guarantees and Bonds
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Financial SupportDebt
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Financial SupportInsurance
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Labor Source
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Management Source
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Labor Source
Data Source Peng Mo, ADDIS ABABA RING ROAD
PROJECT A Case Study of a Chinese Construction
Project in Ethiopia
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Comparing the Cost of Managerial Staff

• Chinese managers in China - 200 to 400 per
  month
• Chinese managers in Ethiopia - 700 per month
• US managers in Africa - 10,000 per month

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Logic of Selecting EquipmentCheap, Disposable,
Accelerated Depreciation
For a 3-year project, we can import a foreign
bulldozer, for US300,000, to work for 10 yrs.
If we do not win the next project, this
bulldozer remains idle with high residual value.
In contrast, although a Chinese bulldozer can
only work 3 years, it is very cheap US100,000
and completely depreciated by the end of the
project. --A
Respondent at CIWEC
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Opportunity
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Threats
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SWOT Analysis
Source Peng Mo, ADDIS ABABA RING ROAD PROJECT A
Case Study of a Chinese Construction Project in
Ethiopia