Originally published on January 16th, 2015
It is very rare in Kenya to see on TV or in newspapers the CEO of a Chinese-owned company discussing their interests in the country. Quite often, across the continent, China-Africa relations are debated by Africans and the west. Every now and then government officials highlight the attractive opportunities in Africa during official trips or signing of contracts, but rarely do Chinese business executives take part in the debate.
So what do Chinese companies really think about doing business in this part of the world? What obstacles do they face?
A new report by the Sino Africa Centre of Excellence Foundation (SACEF) now provides insight into the challenges and perceptions of Chinese companies operating in Kenya. SACEF will this year conduct similar surveys in Angola, Ghana, Nigeria, South Africa and Tanzania.
The Kenya 2014 Business Perception Index survey covered 75 Chinese establishments in Kenya, both in the manufacturing and services sectors, and identified obstacles faced by Chinese companies. Notably, most challenges mentioned are not unique to Chinese companies.
‘Corruption, safety, work permits’
Corruption, safety and obtaining work permits were cited as the three biggest impediments that Chinese companies have to deal with.
More than half identified corruption as “a very significant obstacle”. Out of 53% companies inspected by tax officials in 2013, no fewer than 60% say they were asked for a bribe during the meeting or inspection.
Traffic police, the Nairobi City Council, and the Kenya Revenue Authority are perceived as the most-corrupt government institutions. The companies reported being asked for “gifts or informal payment” from officials of the three organisations. The court system is also deemed to be “unfair, partial or corrupt,” according to 70% of those surveyed.
Some 63% of Chinese companies regard crime, theft, disorder and personal safety, as “significant” or “very significant” problems. Although more than two thirds of the companies pay for security services, nearly 60% of them reported losses related to theft, robbery, vandalism or arson. Individual staffers also expressed concern for their personal safety.
Other challenges cited include lack of efficiency and transparency in customs clearance, difficulty obtaining work permits for Chinese citizens, managing the local labour force and inadequate power and water supply.
Pointers for improvement
“The report shows us what Chinese companies need, so policy makers can then improve in areas of weaknesses and be able to attract more Chinese investments,” says Jinghao Lu, business development manager at SACEF. “For the Chinese companies it gives an indication of areas they can try to improve, in order to mitigate the risks of doing business here.”
“If you know the tax office is going to ask for ‘gifts’ you [should] probably hire an African tax expert to help you.”
SACEF founder and chairman Isaac Kwaku Fokuo says the report will help African companies get a better understanding of their Chinese counterparts and be able to exploit business opportunities such as those identified in human resources management.
“Africans talk about China a lot, but we don’t really know what the Chinese think. Our objective was to get them to talk about how they perceive us,” says Fokuo.