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    US, Chinese Tech Giants Poised to Compete for Growing African Market

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    Amazon recently acquired Souq.com, a major retailer in North Africa. In addition, the company is expanding its presence in Cape Town and Johannesburg. China’s Alibaba, in turn, is also expanding to Africa and is ready to invest in the development of e-commerce and mobile payments.

    Hardly anyone in Europe or the US has heard about Tecno smartphones. In China, they are also rarely found in stores, but in African countries this Chinese brand accounts for almost 40 percent of the market. More than 200 million Tecno smartphones have been sold on the African continent. Africans love them.

    A student from Kenya told Sputnik that Tecno phones take excellent photos – that's apparently what explains the dedication of Africans to the Chinese brand.

    This brand was created specifically for Africa. The camera on the Tecno phone was originally set up to photograph people with dark skin; therefore, they turn out better in images. Moreover, because there are electricity shortages from time to time on the African continent, Tecno is equipped with a good battery that can last for several days. It does not matter that these advantages are reached by slowing productivity (slower processing), increasing the weight and size of the device and by the lack of some functions that are usual for Europeans. For Africans, Tecno products have optimal consumer properties.

    That's why experts believe that China is much more likely to conquer African markets. Yes, indeed, Western tech giants such as IBM and Microsoft have invested millions of dollars into the development of Africa's digital infrastructure for more than two decades; but in recent years, China’s Huawei and ZTE have gradually gained market share by adapting their products to the requirements of African markets. The same situation is in the e-commerce market.

    Amazon is trying to introduce in Africa the same business model that has been successful in the US and Europe, but in Africa, the market is completely different and is much more understandable to Chinese companies. That's what Chen Fengying, who's the director of the Institute of World Economic Studies at the China Institutes of Contemporary International Relations, told Sputnik.

    “Studies have shown that the African market is more like the Chinese, so the Chinese model is better suited for this region. China and Africa traditionally have deep relations, despite whatever's said. No matter how relations with other countries change, Chinese-African relations have never been interrupted, they have been developing for a long time. I think that the Chinese and African markets complement each other. China and Africa are emerging markets, therefore, there's common ground.”

    China is indeed becoming the most important country for Africa. According to a study by Boston University, nearly one-third, or $6.8 billion, of all Chinese foreign investment in energy projects last year went to Africa. This is even ahead of South Asia where China has invested less – $5.84 billion. Lately, Chinese capital has been injected into high-tech industries.

    Ant Financial, a fintech affiliate of Alibaba, is going to invest $14 billion on international expansion with a special focus on African countries, and here the company has great prospects, Chen Fengying notes.

    “E-commerce is best developed in backward regions. Most backward regions respond best to new things. This explains, for example, the success of Ant Financial in India. These regions generally accept e-commerce and mobile payments straight away because, unlike the US, there was no era of credit cards, only a few have these products. In the US, there's a more reliable and developed credit market, therefore, in a sense, they are more developed than we are, but this does not mean that our mobile payments are less reliable, they are simply more flexible.”

    According to EY, in 2017, 69 percent of Chinese people using the internet used some type of fintech service. For comparison, in the US this indicator is much lower – only 33 percent. China can be considered the birthplace of mobile payments. By the end of 2017, mobile payments in China totalled 294.97 trillion yuan ($44 trillion), an increase of 41 percent compared to 2016. And by 2021, according to Business Insider forecasts, the volume of payments will increase threefold.

    The reason for such rapid development of fintech in China is that the traditional banking system in the country was undeveloped. Credit cards were available to no more than 20 percent of the country's population; at the same time, demand for banking products was great. Companies such as Alibaba saw the potential of the market and used it.

    In Africa, the situation is similar. The banking sector barely interacts with the vast majority of the population. Undeveloped markets and unsatisfied demand are areas Chinese tech companies have experience in.

    READ MORE: UK Has Tremendous Advantage in Africa's Anglo-Formed Countries

    It will be easier for them to adapt to the African market than for European and American companies that do not always understand that the consumer preferences in developed and developing countries can sometimes differ significantly.

    Views and opinions expressed in this article are those of the speakers and do not necessarily reflect those of Sputnik

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