Small can be beautiful for investors in Africa

By Hou Liqiang (China Daily) Updated: 2015-09-21 10:06

"As their credit is downgraded, they will find it more and more difficult to obtain financing. This makes it a must for African governments to seek a balance between infrastructure construction and economic diversification," he added. "I found in my talks with some African officials that the countries, at least in their top policymaking, show a strong desire for China to participate more in their industrialization."

But their stage of industrialization is not at the same level as China's, which is now upgrading. Neither is it the same as the restructuring that is going on in major developed countries.

"Many African countries are now at entry-level industrialization, similar to the agricultural sector," Li said. "Chinese SMEs that have come up in the past several decades are the most experienced in dealing with such a stage.

"Though they have surpassed that level after several decades' development, these Chinese entrepreneurs have firsthand, personal experience in doing that.

"For many developed countries, however, it's the entrepreneurs of the previous generation or even earlier who have development experience in the stage African countries are in," Li added.

Investment at this early stage of industrialization may be too small for big Chinese State-owned companies. But SMEs are well suited for this kind of challenge, Li said. Projects in which the big, State-owned companies are involved in usually come at a later stage in industrialization.

While Chinese SMEs have potential advantages in African countries, Li said they still face hurdles in turning this potential into reality.

"Currently, many enterprises hold that the investment environment in Africa isn't comparable with that of China," he said. "The problems include the low efficiency of governments, bureaucracy or failures to perform. This is quite widespread in Africa."

"For many SMEs, it's not easy to achieve success in Africa, even though there are opportunities and preferential policies there," Li added.

Naturally, it will take time and patience for Chinese SMEs to reap the rewards of their hard work in African countries.

"Knowledge in a specific area alone is not enough to work well overseas. This integration can't be accomplished through a single action, but it can get better and better," he added.