What are the chances of China’s manufacturing industry entering Africa?
With the development opportunities provided by my country’s “One Belt, One Road” national strategy, Africa is becoming another fertile ground for manufacturing investment after Southeast Asia and South Asia.
Recently, the “China’s Investment Forum on Sustainable Development in Africa” co-sponsored by the United Nations International Trade Center, China Council for the Promotion of International Trade and China-Africa Development Fund was held in Beijing. The forum held special discussions around the two themes of “Promoting Sustainable Investment for the Purpose of African Economic Growth” and “Exploring Manufacturing and Agricultural Investment Opportunities from the Perspective of Improving African Exports.” Representatives from government agencies, trade and investment institutions, and business circles from China, the United Kingdom, and four African countries, Ethiopia, Kenya, Mozambique, and Zambia, jointly discussed opportunities to promote the sustainable development of China’s investment in Africa’s productive industries, thereby promoting “Africa Manufacturing” exports and achieving inclusive economic growth in Africa.
For the textile and garment industry, what are the specific advantages of African countries in industrial cooperation by attracting foreign investment? What issues should be considered in the process of technology and production capacity transfer in my country’s manufacturing industry? This article will provide an analysis of these issues that companies are concerned about.
Attractive export tariff concessions
At the “China Investment Forum on Sustainable Development in Africa”, Shi Jiyang, President of the China-Africa Development Fund, threw out this set of figures: Africa has 54 countries and regions, more than half of the arable land, and a population of 1.1 billion , young adults under the age of 25 account for more than half of the total population, and there are 10 million new labor force every year. Since 2000, Africa’s GDP growth has remained above 9.5% for 10 consecutive years. Africa will become the next world economic growth pole. As China’s first investment fund in Africa, since its launch in June 2007, the China-Africa Development Fund has invested in 86 projects in 36 African countries, with a total investment of more than US$3.4 billion. It has also driven more than 160 Chinese companies to invest in Africa. One hundred million U.S. dollars. Xiong Jiuling, President of the Beijing Council for the Promotion of International Trade, added: “China has been Africa’s largest trading partner for seven consecutive years. There are now more than 3,100 Chinese companies investing and operating in Africa, with an investment amount of more than 32 billion U.S. dollars, and more than 10 Ten thousand jobs.” The potential market space in African countries has triggered unprecedented investment enthusiasm from Chinese companies.
For African countries, since they enjoy preferential policies for the two major global export markets of the United States and the European Union, this advantage has become the main reason for African countries to attract foreign direct investment. Julia Spies, a market analyst at the United Nations International Trade Center, pointed out that in addition to Africa’s abundant natural resources and labor resources, all products invested and produced in Africa are less likely to involve tariffs and quota restrictions if exported to European and American countries. Under the framework of the African Growth and Opportunity Act provided by the United States to Africa, 6,400 products from 37 African countries can enjoy tariff reductions and exemptions for export to the United States. In addition, the EU has signed an Economic Partnership Agreement with African countries. According to the agreement, 80% of African products exported to the EU can enjoy zero tariffs.
Specific to the field of textile and clothing investment, Julia Spies said that agriculture and animal husbandry are the traditional advantageous industries of African countries. Textile companies investing in Africa will be able to make full use of the large amount of high-quality local raw materials such as cotton, hemp and fur. She gave an example: “Relying on the cotton industry of Ethiopia, Zambia and the sisal industry of Mozambique, we can focus on textile and clothing processing; relying on the fur industry of Kenya, we can develop the luggage and shoe manufacturing industry.”
Regarding export preferential policies, according to Zhang Huarong, chairman of Huajian Group, a Chinese company with a large investment in Ethiopia, for example: “Chinese clothing and shoe-making companies investing in Africa can enjoy treatment that is different from China’s export tariffs. For example, a shirt from African exports to Europe and the United States are subject to zero tariff, while exports from China to Europe are subject to a 12% tariff, and exports to the United States are subject to a 19% tariff.” Zhang Huarong also praised the efforts of the local government. He said: “When I first arrived in Ethiopia, it took an average of 5 months to transport containers from China to Ethiopia. Now it can arrive in one month. The transportation cost used to be 6%, but now it has dropped to 4.2%. And transporting containers from China to the capital of Asia It only takes 25 days to reach Des Ababa, and the transportation cost is only 2.1%. In order to achieve Ethiopia’s goal of becoming Africa’s manufacturing center by 2025, the local government is working hard to provide an excellent business environment for enterprises.”
The labor market is stable and abundant
For Chinese investors, what they are most concerned about when “entering Africa” generally focuses on the political environment, social security, basic facilities, quality of life, labor quality, legal compliance and other issues in African countries, as well as African countries’ efforts to protect local resources. and a series of restrictive requirements imposed by the natural environment.
Currently, Africa is labeled as war, disease, and hunger for various reasons. There are still more than 20 countries in Africa among the least developed countries in the world. However, there is a huge gap between the rich and the poor among African countries, and the national conditions vary greatly. Relatively speaking, Ethiopia, Kenya, Mozambique and Zambia are all relatively politically stable countries in Africa. According to the Global Happiness Index report released by the United Nations and a US university, Zambia is the happiest in Africa.Ranked first in number.
Zhang Huarong told reporters: “Textile companies investing in Africa do not have to worry about personal and property losses caused by social unrest. We have the support and protection of the powerful Chinese government. When Huajian first invested in Ethiopia, the Guangdong Provincial Government was the main promoter. In 2011, Former Ethiopian Prime Minister Meles visited Guangdong. When meeting with provincial leaders, he specifically mentioned that Ethiopia has advantages in textile and clothing raw materials and hoped that Chinese textile companies would invest in it. After receiving the notice from the provincial government as soon as possible, I rushed to Shenzhen and had the honor to meet with him. Prime Minister Meles had an in-depth conversation for more than 40 minutes and reached cooperation. In recent years, when leaders of national and provincial governments visit Ethiopia, they often visit Huajian to help enterprises solve practical problems. In cooperation, we actively work with the local government Communicate production goals and implement production projects, and take care of each other.” Tang Xiaoyang, deputy director of the Carnegie Center for Global Policy at Tsinghua University, said that strong political leadership and effective administrative systems are crucial to the sustainable development of the African economy and the full tapping of its development potential. . He specifically mentioned that the Ethiopian government has strong decision-making and execution capabilities in economic development and provides strong help to established enterprises.
In addition, according to Zhang Huarong: “The price advantage of local labor is obvious. The average monthly salary of our employees in the Jiangxi headquarters is 4,000 yuan, while hiring local employees in Ethiopia is 500 yuan. In addition, Africa has a labor force of 600 million young adults. Compared with the difficulty of recruiting workers in our country, Ethiopia can recruit a considerable number of highly educated graduates, and the demographic dividend is very attractive.” Zhang Huarong further said: “In January 2012, when Huajian landed in Ethiopia, there were only more than 500 workers, and two American mid- to high-end brand production lines. Today, this factory has grown to more than 4,000 workers. In 2015, it achieved an export target of US$18 million, and this year’s export target is expected to be US$25 million. Our practice has proven that African workers can also produce Produce high-quality, high value-added products. In April 2015, Huajian’s light industry park with a total investment of US$2 billion was officially put into operation in Ethiopia.”
Employee training is crucial
Textile and clothing belongs to the processing manufacturing industry, which emphasizes efficient productivity and requires a large number of skilled workers. The quality of the labor force is very important. Most countries in Africa have been in the primary production stage of agriculture and animal husbandry for a long time and spend a lot of money on labor training. “In the first three months after the establishment of the factory, we airlifted more than 300 local workers from Ethiopia to Ganzhou, Jiangxi Province to live and eat with the headquarters employees and learn labor skills. Although the initial investment was relatively large, we have tasted the benefits. After hard work , the productivity of African workers has increased significantly, from the initial 65% equivalent to that of Chinese skilled workers to 90%.” “To carry out industrial investment cooperation in Africa, it is better to teach them to fish than to teach them to fish.” British International David Kennedy, director of the Economic Development Bureau of the Ministry of Development, said that since the reform and opening up, China’s achievements are obvious to all. Chinese companies can use their own development experience to help African companies establish a health and safety production standard system, improve their survival skills, and improve their living conditions. In this way, the sustainable development of Chinese enterprises in Africa is no longer an empty talk.
Arancha Gonzalez, executive director of the United Nations International Trade Center, said in particular that small and medium-sized enterprises in Africa account for 95% and require a large amount of capital, technology and talent support, which has great potential for Chinese companies.
The construction of industrial parks is a convenient means for Chinese enterprises to go global and help African countries improve their industrial chains and basic supporting facilities. Although the initial investment is relatively large, this is indeed a good strategy to minimize investment risks and adapt to local resource development requirements. “Huajian Light Industrial Park is a comprehensive commercial real estate with a sound sewage treatment and energy-saving power grid system. The park’s goal is to provide employment for a population of 30,000 to 50,000 and earn US$200,000 in exports. Through the development of textile and garment manufacturing, the industrial park The high concentration of different business formats brings local economic development, and this behavior is not speculative.” Zhang Huarong told reporters.
David Kennedy said: “According to assessment, there are currently more than 30 countries in Africa that can accept international production capacity transfer. Production capacity transfer can not only help Africa get rid of low-productivity industries, but also drive it towards industrialization and commercialization. Development.” In addition, Tang Xiaoyang also pointed out to reporters: “In the past, even if infrastructure construction was carried out in Africa, there was no support from industry and commerce, such as the Tanzania-Zambia Railway. Because without logistics and transportation, there was no way to maintain it. Now through Industrial investment cooperation can strengthen its industrial supporting system.”
