China’s Role as a Catalyst for African Industry
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China’s Role as a Catalyst for African Industry
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By Isaac Kwaku Fokuo, Founder and Principal, Botho Emerging Markets Group
July 18, 2017
As China continues to flex its muscles globally, its relationship with African states remains a point of fascination in the international arena.
The speculation around Sino-Africa relations oscillates between two extremes: is China a new imperial power, or a partner with which African countries can advance their developmental ambitions to mutual benefit?
The dominant narrative remains that China’s interest in Africa is confined to natural resources. While there is some merit to this viewpoint, African governments need to respond with actionable policies that leverage on economic development. In other words, can China serve as a catalytic force in a nation’s industrialisation journey?
The impact of isolated successes could be turned into a multiplier effect if African nations were to follow the Ethiopian example. With the change in its economic policies in 2008, allowing more Chinese investment into the manufacturing sector, its capacity has expanded, allowing the country’s unemployment rates to decrease significantly, and it has become one of the fastest growing economies in the Horn of Africa.
For example, Ethiopia is home to the region’s largest cattle population and it has used this as an opportunity to process leather products, attracting Chinese investment firms to make it a fully fledged industry, exporting the finished products to countries all over the world. The PHISS Company of China, an international leather trading and production giant, invested US$8.3m in 2015 in Ethiopia in its Friendship Tannery 83km from Addis Ababa.
Tecno, a Chinese mobile manufacturing company focused on Africa, sold 20m smartphones and 60 million feature phones in Africa in 2016. Tecno established a handset production plant in Ethiopia in 2013, employing local Ethiopians, thus decreasing the number of unemployed.
The Chinese have built most of the roads in Ethiopia, including the Addis Ababa–Djibouti railway project, telecommunications infrastructure, and the light rail system in Addis Ababa, all of which allow a landlocked Ethiopia to export its products to the rest of the world. African nations may consider adopting a model within their own macroeconomic strategic frameworks to initiate a chain reaction that could create millions of productive jobs. Ethiopia, like most African countries, had a relatively small or negligible manufacturing sector before engaging with China.
Industrialisation and securing investment for sectors that boost economic growth for African nations will not be a straightforward process. However, the potential of market entrants to serve as catalysts for the growth of new, competitive industries is undeniable, as demonstrated by China’s relationship with Ethiopia. The Ethiopian model can serve as a lesson for countries that are willing to take the risk of opening their markets to Chinese investment.