News You Really Need To See: “Turning Ethiopia Into China’s China”

“Turning Ethiopia Into China’s China”

Bloomberg Businessweek, July 24, 2014

Zhang’s [Huajian Shoes] factory is part of the next wave of China’s investment in Africa. It started with infrastructure, especially the kind that helped the Chinese extract African oil, copper, and other raw materials to fuel China’s industrial complex.  Now China is getting too expensive to do the low-tech work it’s known for.  African nations such as Ethiopia, Kenya, Lesotho, Rwanda, Senegal, and Tanzania want their share of the 80 million manufacturing jobs that China is expected to export, according to Justin Lin Yifu, a former World Bank chief economist who teaches economics at Peking University. Weaker consumer spending in the U.S. and Europe has prompted global retailers to speed up their search for lower-cost producers.  … [Huajian’s] wages of about $40 a month are less than 10 percent of what comparable Chinese workers may make.  Just as companies discovered with China when they began manufacturing there in the 1980s, Ethiopia’s workforce is untrained, its power supply is intermittent, and its roads are so bad that trips can take six times as long as they should.  ‘Ethiopia is exactly like China 30 years ago,’ says Zhang, 55, who quit [China’s People’s Liberation Army] in 1982 to make shoes from his home in Jiangxi province with three sewing machines.  He now supplies such well-known brands as Nine West and Guess … In [Ethiopia] a country where 80 percent of the labor force is in agriculture, manufacturers don’t have to worry about finding new workers.  The population of about 96 million is Africa’s second-largest after Nigeria’s. … Foreign direct investment in Ethiopia jumped 3.4 times to $953 million last year from the year before, according to estimates by the United Nations Conference on Trade and Development.”

Quickie Analysis:  Manufacturers’ quest for cheap labor is finally bringing them to Africa, for better and for worse.  

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