Belt and Road facilitating entry of Chinese products in Africa
Guest contribution by Wadeisor Rukato, graduate of Yenching Academy of Peking University researching relationship between African States and China
The Belt and Road Initiative, proposed in 2013 by Chinese President Xi Jinping, has become largely synonymous with China's growing role in facilitating globalisation and cooperation in the international community. The Initiative is comprised of two main components, the Silk Road Economic Belt and the 21st Century Maritime Silk Road, with over 60 countries from Asia, Europe, Africa and the Middle East taking part in the initiative. Ethiopia, Egypt, Kenya and South Africa are the African countries that will play a key role in the direct role out of the Initiative on the continent.
Kenya is particularly important for connecting countries like Uganda, Burundi and Rwanda to the Initiative through a $4 billion Chinese-built railway. The Nairobi-Mombasa Railway, which was completed in 2017, forms the first leg of a railway line that will eventually extend into Rwanda. A central aspect of the Belt and Road Initiative, therefore, is the ability of the roads, railways, transport networks and other projects included in the Initiative, to promote trade and the opening up of global markets for goods and services.
With Africa currently serving as an export market for Chinese goods and labour, the flow of Chinese goods into African markets is no new phenomenon. In the context of constantly deepening relations between China and African countries, the introduction of the Belt and Road Initiative is sure to further facilitate access to African markets for a diverse range of top Chinese brands and businesses that are looking to Africa for business opportunities. Demonstrating this in the banking and financial services sector is UnionPay International. UnionPay International, a subsidiary of China UnionPay that focuses on international business, has grown its presence across the region since 2007. Particularly in the last two years, UnionPay's transaction value in the African region has grown significantly, primarily aided by the expansion and deepening of China's business and trade relations with African countries.
In 2016 UnionPay International signed a Memorandum of Understanding (MoU) with Barclays Africa which made provisions for the issue of 5 billion cards to take effect across 10 African English speaking countries including Ghana, Mauritius and Botswana. The agreement also enables the use of UnionPay cards at any Barclays ATMs or points of sale. More recently, on August 4, 2017, the Kenya Commercial Bank (KCB) partnered with UnionPay International to roll out a new near field communication (NFC) debit card that will be made available first in Kenya, and later in other East African countries. Given East Africa’s importance as a focal-point for the Belt and Road Initiative in Africa UnionPay's expansion into Kenya, and indeed East Africa at large, has been facilitated by the implementation of the Belt and Road Initiative and the subsequent development of the Africa-China economic corridor.
This time starting in Southern Africa, China's national liquor Kweichow Moutai recently began targeted marketing and distribution on the African continent. At a launch event held in Cape Town at the end of November 2017 and attended by business officials and diplomats from both South Africa and China, the liquor brand was officially launched in South Africa. Produced by Kweichow Maotai Co., Ltd.- a partial state-owned enterprise in China- Kweichow Moutai is generally considered the best brand of baijiu (a traditional distilled spirit) in China. Currently China's top liquor brand, Maotai's sales have risen in recent years partly due to a boom in the market for luxury goods in the country. The Cape Town launch event for Kweichow Maotai took place under the theme "Meeting in Africa through the Unique Aroma- China Kweichow Moutai, the Belt and Road Branding Initiatives in South Africa."
According to Moutai Group General Manager Li Baofang, Cape Town was chosen "as the gateway for Moutai to enter the African continent, as the city in South Africa holds a strategic position among countries involved in the Belt and Road Initiative". Here we see how the Belt and Road Initiative has been important both for guiding the Maotai Group's entry strategy into the African continent and for branding this entry. A statement by Kang Yong, consul-general of the Chinese consulate in Cape Town, "the Moutai company is so smart that now [it wants] to use the fast track of the Belt and Road by coming to Cape Town". Subsequent to the Cape Town launch, a Maotai delegation also visited Namibia for a fact-finding mission, which is in line with the Maotai Group's intentions to seek out opportunities across the SADC region. The trip to Nambia was followed-up with a similar visit to Mozambique.
At the Cape Town launch event, Zhao Shuyue, a board member of the Moutai Group also announced what has been titled the Proposal for Africa-China Enterprises Belt and Road Common Development Alliance. Maotai along with 12 Chinese companies with operations across Africa including Huawei and Sinosteel signed the proposal on the day.
Huawei, which is no newcomer in the African region, has had a presence in Africa since as early as 1998. Huawei currently has operations in at least 40 African countries and is among the top three telecommunications companies in the region. Chinese companies that are exploring entry into the African region, and indeed companies such as UnionPay International and the Maotai Kweichow Group, can certainly learn a lot from Huawei's success in the region which is largely underpinned by the company’s strategic pricing and its ability to tailor its products to the local environment in different African countries. Although it is unclear what the contents of the Proposal for Africa-China Enterprises Belt and Road Common Development Alliance are, what is quite clear is that the Belt and Road Initiative is playing an important facilitatory role in allowing for new (and existing) Chinese companies in the region to position their products in African countries. Additionally, companies that choose to do so can benefit from the already existing traction that has been garnered by the Belt and Road Initiative in Africa by strategically aligning their branding and marketing with the Initiative.