The Reputational Risk of Chinese Firms in Africa

In Africa, the investment opportunity for Chinese firms has arrived.

On 4th August, Les Échos published an article titled "China leading the race for investment in Africa", claiming that China's first-mover advantage in investing in Africa stretches from Morocco's Tangier to South Africa's Cape Town. This, according to the article, resulted in a record $57 billion of foreign direct investment in Africa for the year 2013 alone.

在非洲，中国企业的投资机会来了。

法国《回声报》网站8月4日以《中国在对非投资中领跑》为题报道称：2013年，非洲所吸纳的外国直接投资总额达570亿美元，创下历史新高。从摩洛哥的丹吉尔到南非的开普敦，非洲大陆正成为新的投资天堂，而中国在其中占尽了先机。

This article is originally translated from Mandarin, click here to read the original from Sino Trade and Finance .

In 2013, Sino-African trade totaled US$200 billion, a twenty-fold increase from 13 years ago. That amount is also twice the value of US-African trade. South Africa, Kenya and Nigeria represent China's most important trade and investment partner countries in Africa.

Les Échos also reported that Chinese firms are eager participants in many large-scale infrastructural projects in Africa — including a damming project in Ethiopia, oil transportation projects in Sudan and Chad, port building in Kenya, and a US$4 billion railroad project in East Africa.

Despite the rapid growth of Chinese investment in Africa, one should not forget one major problem that Chinese firms currently face in Africa — the lack of corporate social responsibility adversely affects how the African market views Chinese firms investing there.

A 2014 survey conducted by EthicsSA in 15 sub-Saharan countries investigated the reputation of Chinese firms in Africa. According to the results of this survey, 43.3% of the 1,056 respondents considered the reputation of Chinese firms in Africa to be negative, while only 35.4% regarded it positive. 55.9% of those surveyed had a negative opinion on Chinese products and services, and 53.9% of all respondents felt Chinese firms in Africa are not sufficiently responsible towards the environment.

In the three African states mentioned above,  with which China has close partnerships, 56% of Kenyan respondents are sanguine about the reputation of Chinese firms in Africa, while the relevant percentages for Nigeria and South Africa are only 33.1% and 22.4% respectively. Kenyan respondents in general are also more positive about the economic and corporate social responsibilities of Chinese firms than their Nigerian and South African counterparts.

However, on the subject of corporate social responsibility, only 23% of Kenyans, 6% of South Africans and 7% of Nigerians felt that Chinese firms were making business decisions that sufficiently considered societal and community interests in their respective countries. This alarming statistic indicates that Chinese firms are not properly localized in Africa, as they have merely focused their energies on interacting with government officials and the upper class of the African countries they are investing in.

Corporate social responsibility should not be neglected if Chinese firms desire to achieve sustainable market expansion in Africa. This informative survey by EthicsSA effectively fills the void on the issue of African attitudes on Chinese firms in Africa. Chinese firms have much to learn from the results of this survey, including paying more attention to local cultures, increasing the level of interaction with local communities, increasing the quality of Chinese products and services, as well as ensuring that the interests of local African employees are met. By making more meticulous and local-oriented trade and investment decisions, Chinese firms may then obtain more popular support at the local level in Africa.

This article was translated by Guan Hui Lee, Staff Intern with the Asia Program at the Wilson Center. 

Photo courtesy of Vin Crosbie via Flickr Commons