Lucrative government contracts are drying up, but companies are adapting to stay in business

Chinese firms in Zambia have become resilient in the face of mounting competition, a global economic slowdown and weak commodity prices, which are weighing down growth in the country, insiders say.

Critical sectors such as construction and infrastructure are feeling the crunch, but companies are digging in to stay ahead of the curve.

For starters, employees like Chen Pu, a 28-year-old civil engineer with China Overseas Engineering Group Co Ltd, are learning the local language, Nyanja.

"Muli bwanji is hello, and zikomo means thank you and is commonly used to end a conversation. Chonde is please," says Chen, a graduate of Beijing Jiaotong University.

Nelson Mandela, one of Africa's biggest statesmen, is quoted as having said: "If you talk to a man in a language he understands, that goes to his head. If you talk to him in his own language, that goes to his heart."

Chen liberally uses the few words he knows to break the ice when he interacts with Zambians. He calls it the site language, as he hears it on the constructions sites.

Overseas Engineering Group is one of the oldest Chinese companies operating in this central African nation, having entered in 1992. Recently, it secured major contracts from the nation's Health Ministry worth a combined $3.5 million: One to expand a district hospital with an administration block and X-ray unit and complete external renovations; and another to build a hospital in Mwinilunga with the capacity for 200 beds.

Working for the Education Ministry, the company also erected a student dormitory at Paul Mushindo University in Lubwa.

An estimated 500 Chinese companies operate in Zambia today, but keeping ahead of their European and South African competitors is no easy feat.

Their strengths lie in the business relationships they have developed, their competitive prices, their access to cheap building materials through Chinese supply chains, and their affordable financial and political support they receive from back home.

Unfortunately, government projects have begun dry up as tumbling copper prices start to bite. According to the World Bank, Zambia's economy grew just 3 percent last year, far short of the 7 percent in 2010, after a six-year low in copper prices, power outages and poor harvests.

"Ten years ago, these (government) projects were many. But now we're not sure where the next one will come from," Pu says.

Despite Zambia's dwindling fortunes, however, China's support continues. "China is an all-weather friend," says Pu, adding that he is optimistic of good times ahead.

Last year, the Export-Import Bank of China released $108 million of the $360 million it has promised for the expansion of Kenneth Kaunda International Airport. The development, which is being carried out by China Jiangxi Corp for International Economic and Technical Cooperation and is scheduled for completion by 2020, will allow the airport to handle 4 million passengers a year, roughly double the current number.

In November, Sinohydro Corp Ltd was awarded a $2 billion contract to develop the 750-megawatt Kafue Gorge Lower Hydropower Project in the south. The Zambian government is required to raise 15 percent, while the rest will come from China Exim Bank and Industrial and Commercial Bank of China.

The dam is one of the biggest infrastructure investments in the past 40 years and is expected to create 5,000 jobs. The country's unemployment rate stands at 13 percent.

The International Monetary Fund has also agreed to loan the country about $1 billion after the general election in August.

Political stability, along with China's growing presence, makes Zambia an attractive investment destination these days. Yet foreign enterprises may have to be innovate to stay competitive.

First, they will need to move away from contracts covering engineering, procurement and construction, which are always government funded, and instead explore models in which they build, operate or transfer projects, and promote public-private partnerships.

Moreover, companies will need to cultivate stronger links with tertiary colleges to shore up the local talent pool.

Chinese companies have for a long time grappled with serious skill shortages in Africa. Although the literacy rate in Zambia is at about 70 percent, just over 60 percent of the population has qualifications that make them employable in skilled jobs.

"Previously, Chinese firms would source (employees) from home, but this has become costly. Chinese require high wages, work permits, vacation time and accommodation," Pu says. "We're considering shopping for top talent at universities such as the Copper Belt University by liaising with lecturers there."

lucymorangi@chinadaily.com.cn

(China Daily Africa Weekly 07/08/2016 page28)