Agriculture in Africa new hope for private firms
The African continent has become more and more attractive for Chinese private enterprises since the establishment of the free trade area of the Southern African Development Community in August 2008 and the commencement of operations by the East African Community Common Market in July 2010.
Without tariffs and trade barriers, many foreign enterprises can expect the same treatment when producing and selling goods in some African countries.
Hebei Hanhe Investment Co. is one of those groundbreaking enterprises. After two years of trial planting and experimentation, it has now begun to cultivate vegetables on a large scale, covering 2,600 mu (173 hectares) of land in Uganda, with plans of expanding to 260,000 mu (17,333 hectares) in the near future.
The work is considered a flagship project involving private Chinese enterprises engaged in the "going out" strategy. Uganda has long been a large agricultural country with low per capita income. Although the country put into practice a new Immigration Act in October of 2010 which imposes restrictions on foreigners doing short-term business there, it still offers Chinese industrialists preferential policies. For enterprises here, that means opportunity.
Opportunities in Uganda
Like most African countries, agriculture production has historically been Uganda's main industry. Agriculture accounted for 56% of the economy in 1986, with coffee as its main export. However, due to low productivity, the country has always been burdened with an acute food shortage.
Even so, soil conditions and climate are favorable for good agricultural harvests in Uganda. With annual cropping in the north, local conditions allow for continuous cultivation in the south. But by the late 1990s, statistics showed that only about one-third of the country's estimated area of arable land was under cultivation.
A few years ago, the news of arriving Chinese enterprises cheered up local government officials in Uganda. They believed Chinese industrialists could help them with the declining agriculture, especially in a time of financial crisis when global food prices began to surge.
At that time, Hebei Hanhe Investment Co. smelled opportunity and made a decisive step onto the African continent.
In December 2010, as Election Day drew near in Uganda, political candidates were busy competing with one another by all possible means. Two district chairmen near the Hanhe Farm offered to help out there and the Luweero District Government even promised to provide electricity for the farm.
Qiu Lijun, a staff member of Hanhe Farm, said he never thought the farm would become the source of a political showcase in Uganda and draw so much attention. Nevertheless, utility poles and electrical connection equipment have all since been installed at the farm.
Countries such as South Korea have also been eyeing opportunities in Africa. A South Korean company rented an office in Kampala in February 2010, and planned to invest $5 billion to purchase land in the country.
Broadening the market
Apart from the principal business of agriculture, Hanhe has launched other projects in Uganda, including a martial arts club to teach kung fu. The company has also done much to introduce Chinese traditional medicine to the country.
Qiu Lijun revealed that they have sent a team to offer traditional physical therapy in Uganda since the very beginning of their agricultural project. Whenever they arrive at a local community the team shows the residents what Chinese traditional medicine is, and not only cooperates with local hospitals and clinics, but also organizes public benefit activities.
Occasionally, the medical team offers free health check-ups and traditional medicine therapies. With time, the people of Uganda have developed a favorable impression of Chinese people, added Qiu.
The investment in such work is very low, but the use of therapies such as acupuncture and cupping cannot be ignored. It helps Chinese enterprises gradually become entrusted culturally, said Qiu, and when trust is there, doing business will be much easier.
However, Qiu said that some Chinese enterprises were damaging the Chinese image because they only regarded short-term interests as important and cared about nothing but money, having a negative effect on the investment environment.
Difficulties for private enterprises
The core business of Hanhe includes high-tech species introduction and breeding; agricultural planting, production and processing; agricultural and veterinary medicine production; and logistics and sales.
According to Qiu, there are about 2,000 Chinese enterprises doing business in Africa, and over 90% of them are private. Usually, they operate independently, without any standard oversight.
During the last China-Africa Agriculture Cooperation Forum in August 2010, many private enterprises recommended themselves to large state-owned enterprises for cooperation. Hanhe also tried to do so, because the government mainly supports state-owned enterprises.
But there are many difficulties involved. To Qiu, most state-owned enterprises share the same problem of a discontinuous aid process and usually end up with a shortage of funds. Private enterprises put economic interests as a top priority, and try to maximize the benefits they get from their projects. If the two kinds of enterprises cooperate with each other, they seldom agree on how to earn money, as state-owned enterprises are usually guided by a mission or obvious purpose, and do not put economic interests first.
Therefore, in order to "go out," private enterprises must have sufficient funds. Hanhe is lucky to be supported by the African Development Fund under the China Development Bank. But for other enterprises, the question remains unanswered.
Chen Deming, China's Minister of Commerce, mentioned in last year's annual meeting that African agriculture may be a field of opportunities for Chinese enterprises. Currently, Chinese businessmen are growing vegetables in almost all African countries.
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