Fitting in is the biggest challenge

Localizing solves many problems for China Railway International joint venture in South Africa, report Xing Zhigang and Li Jiabao from Johannesburg

Localization has become the strategy for Chinese project contractors as they look to expand in South Africa as a result of rising labor costs in China.

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And that is certainly the case for China Railway International-Eagle Investments (Pty) Ltd. As it bides its time waiting for opportunities in infrastructure construction in South Africa, it has dived into the property development business. In doing so it hopes not only to make money but to establish a reputation locally for its commitment to the country and its people.

"Our operation here is totally localized," said Wen Jian, its deputy general manager and director, in his office in Johannesburg.

"Apart from a few Chinese management staff, employees at all levels are 100 percent local. As a newcomer, we were unfamiliar with the market and had to rely on local professionals."

The South African government's Black Economic Empowerment program requires a certain amount of local input, Wen said.

"South Africa is not the only place that has such requirements. They present a certain investment challenge, but we have to adapt to the local market. Of course if we relied 100 percent on input, equipment and staff from China we could save a lot of money. But failing to make any social contribution, including creating jobs and buying locally, would understandably upset locals and do nothing but tarnish the image of Chinese businesses."

Li Deqiang, financial manager of CRI-Eagle, sees localization as a "very effective driver" in doing business overseas.

"Chinese companies have to rid themselves of their traditional thinking and harness the benefits of relying on local input. There is no doubt that our growth in South Africa is based on just one principle: localization. If that were not the case we would be getting nowhere."