Risky business: instability and lack of local knowledge hold back Chinese firms in Africa, report says

Chinese investors in Africa have suffered huge losses due to instability on the continent and the failure of some mainland companies to fully grasp local conditions, a major think tank has warned.

China has greatly expanded its infrastructure, energy, mining and manufacturing businesses in Africa in recent years, but the investment environment there has many risks and many companies’ operations are flawed, according to the annual report on development in Africa by the Beijing-based Chinese Academy of Social Sciences.

Official statistics showed China’s direct investment in Africa reached US$32.35 billion in 2014, with more than 3,000 companies operating in 52 countries across the continent.

But the projects faced security risks, the report said. Regional wars and conflicts have cost Chinese enterprises massively in countries such as Libya, Ivory Coast and South Sudan, while investment in the oil industry is going to areas where extremist groups like Boko Haram are ­expanding.

China National Petroleum Corp took a financial hit as unrest flared near its two most important oil fields in South Sudan after the country declared independence in 2011.

Continued violence severed links between the fields and refineries run by CNPC and Sinopec.