Africa's Heavy Industries Get Competition

Chinese contractors are dominating the African market, and Chinese manufacturers of heavy industry are well on their way, to compete with the leading brands in the continent.

In the last decade, Chinese construction and engineering companies have been actively building bridges, roads and railways all over the continent, due in large part to the fact that the bids they put in for these projects are the most competitive. The numbers speak for themselves: in 2001, China's share of African contract revenue was a mere 7.4 percent. Yet by 2009, this figure had climbed to 36.6 percent, making it by far the leading player. In fact, Africa is now even China's largest market in terms of contract revenue with 41.1 percent, surpassing Asia's share of 36 percent.

The ability of Chinese contractors to compete effectively in Africa can be seen as a natural perpetuation of the prowess that these contractors have built up in the previous decades of rapid infrastructural growth in China. Chinese contractors are showing their ability to apply this competitive advantage in an African landscape desperate for infrastructural renewal.

Africa is now also becoming the battleground for a whole new level of Chinese competitiveness in heavy industry. In the last decade, Chinese companies have made remarkable progress: on a recent listing of the top 50 global construction manufacturers (using total sales revenue in 2010 as a metric), there were three Chinese companies in the top 10; six years ago, the highest ranking Chinese company was 33rd overall.   

As China's leading construction manufacturers rose in the ranks in the last decade, they have started to compete with entrenched Western players for market share in developing markets. The efforts of China's construction and transport machinery have become conspicuous in South Africa, where the market is still largely dominated by Western brands such as Caterpillar and Komatsu.

Sany and Shantui have now been operating in a number of African locations for a number of years, and in November 2011, Shantui opened a large new parts and services facility in Johannesburg, signaling their intent to compete with the leading global brands. FAW, a Chinese truck maker, is enjoying great success in South Africa, with its trucks proving to be very popular among farmers, who consider it both cheap and of highly reliable.

Africa is now the most prominent scene of Chinese contractors, and although it will still require some time in order for this to reach its full fruition, competitive Chinese heavy machinery is also gradually gaining traction on the continent.

The ChinAfrica Econometer is produced by The Beijing Axis, a cross-border business bridge to/from China in four principal areas: Commodities, Capital, Procurement, & Strategy.

For more information, please contact: Barry van Wyk, barryvanwyk@thebeijingaxis.com

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