"The chicken that is searching for food in the rain must be very hungry" is a Nigerian proverb the Chinese hope won't become their fortune. China is not yet hungry but it is looking to get in front of the rain that is sure to come in the form of a Western rush. The Chinese footprint in Nigeria is expanding quicker than most would think or admit. While oil and other natural resources are essential to Western economies, there is more to Nigeria and the region. There are other business opportunities the West in general, except for French Alcatel's lucrative partnership with China, are missing out on.
In the 20 February 2006 Asian edition of Fortune magazine, Vivienne Walt wrote a very good piece on the China's headway in its "African safari". China is looking to hedge its supplies. Getting over a quarter of its oil from the region, compared to 15% for the US, it is making a determined and visible effort to expand all across the sub-Saharan region (more here, here, and here).
On a broiling December morning in the Niger Delta, a dozen men clamber into a boat and head up a creek through a mangrove swamp to meet the curious foreigners who have arrived at the edge of their fishing village. Over warm beers, Sokulprim Welsh, a slender, 32-year-old Kula community leader, tells the newcomers that his village wants their help in return for its hospitality. "We have no telephone," Welsh says. "We have no doctor."
Over the years Welsh has made similar appeals to other foreigners who have come digging for the priceless bounty under the delta: an estimated 34 billion barrels of crude oil.
But these foreigners are different from any he has met before. They are from China.
With its ramshackle houses perched along a crumbling wharf on Nigeria's Atlantic coast, little Kula finds itself in the midst of a global high-stakes scramble. China has come hunting for oil to fuel its rocketing economy, increasingly muscling into areas where Western competitors have long enjoyed significant clout, offering to fix railways, power grids, and refineries in order to secure contracts. In what began as an almost stealth move into Africa during the early 1990s, Chinese trade has proliferated so quickly in the past few years that in countries such as Zimbabwe and Angola it threatens to eclipse relationships that the U.S. and Europe have nurtured for decades. U.S. officials estimate that China's trade with Africa has nearly tripled since 2002 and could top $30 billion this year. That still lags behind the nearly $50 billion in trade between the U.S. and 47 sub-Saharan countries last year. But China's sprint through Africa is accelerating fast, driving up the price of minerals and the signing bonuses on new oil contracts. Chinese companies are mining copper in Zambia, diamonds in Sierra Leone, and cobalt in the Democratic Republic of Congo. They're logging timber in Mozambique, Gabon, and Equatorial Guinea. And in early January, one state-owned company--China National Offshore Oil Corp., or CNOOC--paid $2.3 billion for a stake in an oilfield in the delta, China's largest single investment in Africa to date.
The US is of course interested in human rights and other dignities, although they've been known to bend the rules. The Chinese are under no such preconditions to sealing the deal. In the Horn of Africa, they have built housing to replace civilian homes destroyed in floods to see the military become the new residents. The Chinese response? It's internal politics. In the Nigeria, they will look the other way to secure the contracts. They will also bundle, directly or indirectly, a host of other services and products with the long term in their sights.
China has also become the biggest foreign investor in Zimbabwe, where President Robert Mugabe's policies have beggared the country and left millions homeless. Zimbabwe doesn't have oil, but it is the world's second-largest exporter of platinum, a key import for China's auto industry. Chinese radio-jamming devices block Zimbabwe's dissident broadcasts, and Chinese workers built Mugabe's new $9 million home, featuring a blue-tiled roof donated by the Chinese government. While Western politicians railed against Mugabe last year for flattening entire shantytowns, China was supplying him with fighter jets and troop carriers worth about $240 million in exchange for imports of gold and tobacco. China has also agreed to sell armaments to Nigeria--$251 million worth of Chinese fighter jets financed by China's Exim Bank and satellite technology provided by defense contractor Norinco.
Just a couple of weeks before Walt's piece went to press, China's Export and Import Bank it would provide $200 million in credit to Nigeria to support construction of the country's first communications satellite project, Nigcomsat-1. This will be launched on a Chinese Chinese Long March 3B rocket in 2007 and will provide telecommunications, broadcasting and broadband services to Nigeria.
China isn't the 'perfect competitor'. They have their own problems. They are still and outsider and cannot negotiate with as much agility as Western corporations. And then there's the language barrier in a country whose official language is English and whose customs are largely influenced by their British colonial experience.
[T]hey too find it difficult to negotiate with Chinese oil companies, since each detail requires approval from government officials in Beijing. "It is very, very slow," says Tony Chukweke, head of Nigeria's Department of Petroleum Resources. "They go back and forth. And when they come back, sometimes you find it is not what you agreed to in the meeting." The language barrier is also daunting. "Sometimes you do not know if they have actually understood what you are saying," Chukweke says. At the Sinopec gas rig, operated jointly with Shell, Zhao's Dutch colleague resorts to having him write notes when he fails to understand Zhao's accent.
Walt's story (by the way, for those following from home, the Asian edition was more expansive than the US edition... the US bubble / filter of foreign news strikes again) is not the only news, of course.
Chinese cultural imperialism (or exchange, depends on where you sit) deepens with a PRC reporter in Lagos asked to conduct Chinese language courses. It is minor, but it is potentially a harbinger of the larger issue.
The United Kingdom has an opening, through a South African enterprise, but will there be a full-court follow through? The West goes in largely through corporations with little government help.
For Nu Metro's owners, diversified South African media and entertainment group Johnnic Communications (Johncom), the push into Nigeria - which includes taking a stake in local newspaper Business Day - has not been without frustration. Nigeria's ban on certain imports jeopardised the procurement of necessary shop fittings that were not available in the country, as well as merchandise stock. Delays in passing goods through the ports and customs delayed the project by months. Plus Johncom's planners had to go head to head with Nigeria's vibrant counterfeit market.
Undaunted, Johncom is now planning to open a four-cinema complex in The Palms shopping centre, a $40m, 23,600sqm retail development on the Lekki Peninsular in Lagos. The first-of-its-kind mall is being financed by local developer Tayo Amusan, private equity specialists Actis and the International Finance Corporation.
Financing discussions only began in earnest once Mr Amusan had secured buy-in from a number of experienced and internationally reputable anchor tenants. He dryly notes being laughed out of the offices of some the UK's high-street retailers: "I don't think they just dismissed the idea; I think they actually shredded the proposal." He was eventually compelled to turn to South African retailers, which are logical partners for a development on the African continent but relatively inexperienced given that their expansion northwards seldom pre-dates the 1994 end of Apartheid.
"Frustratingly, UK retailers did not realise that they already enjoyed high brand recognition with the target market for our shopping centre, Nigerians who travel abroad regularly. The South African companies are less well- known," he points out.
South African mobile provider MTN is in stiff competition with the Chinese and bad press in the Nigerian media does not portend good tidings.
To counter the Chinese, corporations need a level of assistance for the long term US interests to level the playing field. ZTE of China receives significant state funding and, as a result, the larger Chinese project benefits.
By different memoranda of understandings signed among the Federal Government and ZTE of China on one hand and the Akwa Ibom State government with China
Electronics Corporation and China Jinshilin Techno, Nigeria thus becomes one of
the first countries among others to benefit from the Emerging Market Handset
(EMH) Initiative of the GSM Association...
This initiative, according to Conway is aimed at connecting the next one billion
mobile subscribers especially in the unconnected and uncovered parts of the
world particularly Africa and the third world.
The Chinese companies will manufacture their own brands locally and sell to the
telephone starNed Nigerians.
ZTE has its plant in Abuja under a private public participation (PPP) basis.
The chicken is pecking away in anticipation of the rain to ward off impending hunger and resource competition. We must do the same.