Africa is currently the world’s largest untapped market. American businesses should be rapidly expanding into Africa, but they are not succeeding. Why is this?
This US News & World Report claims it is because the Chinese are beating them to the punch. China is dominating the African business market, and every country in Africa is currently affected by Chinese business in some way. For example, the new African Union Headquarters in Addis Ababa (the capital city of Ethiopia) is a gift from China via the Chinese People’s Political Consultative Conference. The Chinese are constructing new government buildings in most African capitals. But why aren’t American businesses competing with China for these and other jobs? The answer is largely because of the easy financing structure the Chinese government has put into place for nationalized construction companies to build in Africa. In America, businesses would have to privately raise money and put together a group of companies to do separate parts of the job, both of which can be lengthy processes. The Chinese have a system where the nationalized companies can go straight to the Chinese Export-Import Bank to get their bids financed and start working soon. The close connection between the public and private sector in China’s economy makes it easy for Chinese companies to get financing for jobs.
What are the implications of increased Chinese influence in Africa? It is possible that because of all of China’s help building their infrastructure, African nations will gravitate towards China’s political sphere of influence.