In late 2022, over a year after the African Continental Free Trade Area (AfCFTA) began operations, Ghana announced its first export under new free trade rules to Cameroon. Many assumed KEDA Ceramics, the exporting company, was Ghanaian-owned.
In fact, KEDA is a Chinese company, yet met all requirements by sourcing materials locally and trading with other African countries. This qualified KEDA under AfCFTA’s rules of origin, making it not only the first Chinese company to benefit from AfCFTA but also the first ever company to do so on the continent. Despite being just the fifth largest source of foreign direct investment in Africa, KEDA’s story demonstrates just how China and its firms can benefit from the continent’s increasing integration.Â
But how did KEDA get here?
KEDA Industrial Group, founded in 1992, is a Chinese company principally engaged in the manufacture and sale of building material machinery. KEDA’s journey in Africa started with Sunda International, KEDA’s joint venture, exporting ceramic tiles and eventually establishing local manufacturing plants in Kenya, Ghana, Côte d’Ivoire, Tanzania, Senegal, Zambia, and Cameroon.
KEDA’s strategic investments in Africa – and its qualification for AfCFTA rules – underscore the benefits of local production. Starting with its first ceramic tile manufacturing plant in Kajiado, Kenya, in 2016, KEDA started to source local raw materials as its inputs. This success spurred further investments, including a new factory in Kisumu and a sanitaryware factory, employing over 3,000 people, 95 percent of whom are Kenyan. These ventures have bolstered local economies by creating jobs and providing technological training to employees, ensuring the widespread and sustained benefits of industrialization.
KEDA’s approach offers valuable lessons for other Chinese and multinational companies looking to succeed in Africa. First, understanding and integrating into local markets is crucial. KEDA’s decision to source raw materials locally and adjust production processes to local conditions exemplifies the importance of adaptability. Second, investing in local capacity building through training and employment ensures sustainable growth and goodwill within the community. Third, leveraging regional trade agreements like AfCFTA can significantly enhance market access, reduce costs, and even improve operational efficiency. By aligning business strategies with the objectives of AfCFTA and leveraging its frameworks, companies can contribute to Africa’s industrialization while achieving substantial business growth.
So how could FOCAC, as the primary cooperation coordination mechanism between China and Africa, be used as a platform to further align broader Chinese foreign direct investment in Africa with the objectives of AfCFTA?
The fact is, AfCFTA, in principle, provides a stronger business case for Chinese investment in manufactured products in particular by making it easier to send products made in one country to another, as KEDA’s case demonstrates.
But, as KEDA also found, there remain significant barriers to initially investing and exporting across the continent, which Chinese stakeholders can work with African governments to overcome.
Two barriers stand out in particular.
First, although KEDA did successfully export goods to Cameroon from Ghana under AfCFTA, the challenges of regional connectivity and infrastructure development in Africa significantly hinder intra-African trade. All one hundred percent of the $170 billion of loans African governments have borrowed from China over the past 23 years have been for infrastructure projects, most of which have been incredibly productive and contributed to cutting the costs of transport within countries in particular; however, regional connectivity is still an issue.
For instance, across different African zones and unions, there are often no direct flights between countries, with internal air transport accounting for only 2–4 percent of the global air services market. For example, Mali and Burkina Faso share a long border, yet there are no direct flights from Bamako to Ouagadougou. This lack of connectivity, combined with poor infrastructure, results in transportation costs within Africa being up to 100 percent higher than in other regions.
If this gap were filled partially with Chinese lending, it would go a long way toward making a path for KEDA and other Chinese firms looking to serve multiple markets with manufactured products easier and faster. China’s Belt and Road Initiative (BRI) already aligns with many of the goals of AfCFTA, but more can be done.
Second, KEDA didn’t benefit from incentives to invest in Africa or trade finance, but such funds do exist. There are barriers to investment in Africa – many firms don’t know much about Africa and AfCFTA opportunities. For instance, in August 2023, the China Development Bank and the African Export-Import Bank signed a $400 million loan facility to support African SMEs engaged in intra-African trade and productive sectors. Expanding finance and instruments like these and enabling African firms and banks to benefit will increase the number of Chinese and African firms using AfCFTA.
The story of KEDA Ceramics illustrates that with strategic investments, a commitment to local development, and leveraging regional trade frameworks like AfCFTA, Chinese investors and firms can play a pivotal role in advancing Africa’s economic integration. Using FOCAC to take more supportive steps — enabling regional infrastructure and enabling more diversified investment — will ensure that African industries can compete globally and allow Chinese companies like KEDA Ceramics to benefit from the economic potential of AfCFTA.
By Sena Voncujovi and Huiyi Chen
Update: This article has been revised to clarify a reference to the upcoming Forum on China–Africa Cooperation (FOCAC) summit.
