China has the biggest market share of project contracting business in Africa, but it is time to change the approach from "running fast to take the lead" to "being down to earth."

Cooperation in project contracting business will benefit everyone if Chinese companies join hands with other Chinese enterprises, or with European and American companies or with African companies, as it will help Chinese companies to avoid or share risks. For Chinese companies, it is necessary to enhance the performance of employees and risk analysis of the companies and to promote the localization of employees and management. This will help drive the Chinese force in African project contracting from a big player to a top player.

Since China laid out the strategy of "going-out" in 1997, Africa has become the continent where China has seen its economic influence grow fastest than in any other area. Thousands of Chinese enterprises have used the opportunity and reaped success in various business fields even as the project contracting business in Africa stood out in the new stage of opening up for its attraction of the largest number of Chinese enterprises, labor and construction materials.

Among the 225 largest international contractors, the business volume of Chinese enterprises doubled from 2006 to 2008 and reached $20.8 billion in 2009, ranking the top in the worldwide list.

A few reasons have contributed to China's success in African project contracting business. On the one hand, most Africa countries have stepped into a "peaceful development time" in the last decade after years of conflicts and turbulence, and the demand of reconstructing nations has become urgent. In addition, the African economy has kept a remarkable pace of growth in recent years, and enabled local governments to seek participation from other countries. On the other hand, Chinese construction enterprises have been able to outpace their Western counterparts with incomparable superiority in price, labor costs, expertise and efficiency and are well known for their low price and short project duration.

However, since Africa has lagged behind in development for a long time, the continent is the most complicated area in politics, market environment and natural conditions. And it is necessary for Chinese contractors to start with condition research and risk evaluation before any business strategy is performed.

First, from the political perspective, though most Africa countries have got rid of conflicts and turbulence, changes in democratic leadership and reshuffle of ministry heads could all have a direct impact on the construction projects. Policies in these countries are less continuous than those in developed countries.

For instance, in Nigeria, a federal nation, the national government, state government and local government are all entitled to the approval and management of construction projects. And in some areas, no project will be carried out before their permission.

Another reason is corruption and low efficiency in customs. Tax agencies, industry and commerce administration and police departments have hindered many Chinese constructors' operation and retarded the process of business approval and entry of construction materials.

The third reason is that the labor unions and various NGO are too aggressive, especially during employment and wage disputes. With little acknowledge of local culture and customs, Chinese contracting enterprises usually do not localize their operations and often fall short in solving the disputes.

Meanwhile, Chinese enterprises cannot escape from blame for their own problems. Most Chinese enterprises in Africa have no collaboration spirit and even lost their advantages in the hostile internal competition through lower and lower bids, which led to lower profits. Prices were cut further, the enterprises were broken up and only jerry-built projects remained eventually.

Moreover, insufficient understanding of local laws and regulations led many Chinese enterprises to "contract pitfalls" followed by a large amount of compensation or reworking.

Compared with American and European companies which fully entered the Africa market with the adoption of the "Build-Operate-Transfer" pattern, most Chinese enterprises are still left in the downstream of the industrial chains - using EPC (Engineer-Procure-Construct) model, a one-shot and low-profit contraction pattern.

The author is a researcher at the Institute of West Asia and Africa Studies under the China Institutes of Contemporary International Relations. The opinions do not necessarily reflect those of China Daily.