Thursday, 09 May 2013 11:47

Newsletter 31

In this newsletter:

  • Ethiopia Aiming to Become Shoemaker to the World - a Chinese Shoemaker
  • China plays huge role in promoting Africa's industrialization: diplomat
  • South Sudan: China Approves Major Loans for South Sudan to Improve Infrastructure
  • Botswana to host intl China-Africa health cooperation meet

 Ethiopia Aiming to Become Shoemaker to the World: a Chinese Shoemaker

Helen Hai, general manager for overseas investment at Huajina Group, a leading Chinese footwear manufacturer, has a bold vision: in 10 years, she wants Ethiopia to be a global hub for the shoe industry, supplying the African, European and American markets and providing jobs for more than 100,000 Ethiopians.

“We are not coming all the way here just to reduce by 10pc-20pc our costs.” Hai explains. “Our aim here is to have a new cluster of shoes making. Definitely we want to build a whole supply chain. I want everything to be produced here.”

Last January, Huajian signed a memorandum of understanding with China-Africa Development Fund, a private equity fund that facilitates Chinese investment on the continent, to jointly invest two billion dollars over a decade in creating a light manufacturing special economic zone in Ethiopia.

The company has already leased 300hct of land in Lebu, on the outskirts of the Ethiopian capital, where it plans to build a shoe city, with accommodation for 200,000 people and factory space for other manufacturers of footwear, handbags, accessories and components.

Hai expects construction to begin later this year.

Huajian has a modest outfit in Dukem, about 40Kms south of Addis Ababa. It employs 1,600 Ethiopians, all high school graduates or above, and ships more than one million dollars worth of shoes each month to the US and the UK for Guess, Naturaliser, and Clarkes.

Hai has just rented the neighboring compound and expects to start production there in May. Her aim is to double exports by the end of this year and quadruple them next year. That is impressive for a business that only started trading in January last year but a very far cry from the mega-factory Huajian envisions.

However, the company is not averse to a challenge.

The Dukem factory became operational just three months after a meeting in September 2011 with the late Ethiopian Prime Minister Meles Zenawi, at which he told Huajian of his personal wish to have a functioning Chinese factory in Addis Ababa by the time the new Chinese-built and financed conference center was inaugurated as African Union headquarters last January.

At that private meeting, Meles outlined Ethiopia’s growth and transformation plan, a strategic framework for economic development covering the period 2010 to 2015, and explained that he wanted companies like Huajian to establish a base in Ethiopia to create jobs and increase exports.

”The moment after our meeting with the late Prime Minister, we made a decision to make our investment,” said Hai.

So why did Huajian move so quickly? There are several factors, Hai explains. “China is moving up the industrial ladder,” she said. “For these labor-intensive industries, we were thinking about what to do next. To start to go abroad, finding new territories outside China, is part of our strategy.”

Hai also saw similarities between the Chinese and Ethiopian governments that she believes resulted in China’s impressive growth – good policies and a strong administration that could actually implement those policies.

“Meles gave us good confidence,” Hai recalled. “Number one, during our visit to Ethiopia, we realized this country has a lot of supply of leather and that labor costs are very competitive. At the same time, the electricity cost is also competitive. ”

Hai admits the company had not considered the challenges it would face in Ethiopia. She puts this down to the differences in approach between Chinese and European entrepreneurs.

“At the moment we made the decision, frankly; we were not aware of all the difficulties,” He said. “A lot of European entrepreneurs, if they see a tiger, they will study the tiger very well, thinking about how to conquer it. The Chinese entrepreneur, we jump on top of the tiger and then we figure out what the solutions are. It is a very different mentality.”

However, Huajian has faced considerable obstacles over the past 15 months. The cost of transportation to and from landlocked Ethiopia is just one of the problems. For every 12 containers shipped, eight containers are imported at a cost of 8,000 dollars each, which adds an additional six percent to freight expenditure compared to Huajian’s Chinese operations. Of this, 4,000 dollars goes on transport from China to the port of Djibouti; the rest is swallowed up on the 700Km journey to Addis Ababa.

The efficiency of the local labor force has also proved problematic.

“We’re not producing for the African market,” says Hai. “We are producing for the international market. If this country wants to grow their exports, the shoes they make have to be perfect in order to meet the international competition.”

To do this takes discipline – “semi-military” discipline – and the imposition of “the industrial mindset”.

China sacrificed a generation of workers during the industrialization process – they left their homes and families in rural areas to come to work in towns and cities like Dongguan, where Huajian’s factories are based. She believes Ethiopia will have to do the same if ti wants rapid economic growth.

Hai does not want to be running the Addis factory in eight years’ time; she wants to hand over to an Ethiopian executive. Huajian has selected 130 university graduates from southern Ethiopia to spend a year in China at the company’s training facility in Dongguan – 270 more will be recruited from the country’s other regions.

“They are going to be the future managers,” says Hai. “After one year’s training, they will understand how to become a manager and they are going to be a new force.”

A brave new industrialized future awaits those who are prepared to submit to mass production, Huajian style.


China plays huge role in promoting Africa's industrialization: diplomat

The Chinese government and companies are playing a critical role in promoting job creation and industrialization in African countries, a top Chinese diplomat told Xinhua on Wednesday.

Speaking on the sidelines of China-Africa Business Summit in Johannesburg, Economic and Commercial Counsellor of the Chinese Embassy in South Africa, Rong Yansong said claims that China's purchase of raw material from Africa is identical of colonization are "ridiculous."

He made the remarks in response to some criticism that China brings too much Chinese labor force and Chinese?Cmade products to Africa, saying "the truth is that both the Chinese government and companies are doing their best to promote local employment and industrialization."

Rong said local staff constitute 85 percent of total workers in Chinese companies operating in Africa, and cited the ratio between local staff and Chinese staff in Chinese companies in Zambia which stands at 13:1.

"We also find that the longer Chinese companies operate in Africa the higher percentage of local staff they have in total employment portfolio," he said.

"For instance, in 68 Chinese companies doing business in DRC (Democratic Republic of Congo), Chinese staff account for one third in their 5 years of operations, while those that operate for more than 5 years hire local staff who account for more than 80 percent," Rong said.

The diplomat said that in bilateral trade, China does not force African countries to buy or sell as the Western countries did 100 years ago. "On the contrary we always trade on the basis of equality and mutual benefits," he said.

China's products only substitute those imported to Africa from other continent rather than replacing local products, he said.

Africa countries have abundant natural resources and Africa people are eager to turn this natural advantage to development advantage, he said, adding in this regard China offers a big opportunity to Africa.

However natural resources are by no means the only focus of China in Africa, he noted. "China uses its foreign aid to build roads, railways, bridges, schools and hospitals in Africa and apparently those projects have nothing to do with the pursuit of natural resources," he said.

According to Rong, China's oil import from Africa only accounts for 17 percent of Africa's total oil export. China's investment is less than one sixteenth of the total foreign investment in Africa's oil industry, far less than Europe and America.

"China and Africa are friends and partners," he stressed. "It's beyond any doubt that as long as China and Africa can walk hand in hand, we are able to create a brighter future for all," he said.

The summit, organized by the South AfricanFrontier Advisory (FA) , is aimed at promoting China-Africa economic bilateral arrangements. It was attended by several government officials from Africa as well as representatives from Chinese and African businesses.


South Sudan: China Approves Major Loans for South Sudan to Improve Infrastructure

Juba — South Sudanese president Salva Kiir Mayardit said on Tuesday that the Chinese government has approved a major loan scheme to help his country improve infrastructure, adding that the agreement shows the level of cooperation between the two countries.

Kiir made the remarks while opening the National Legislative Assembly after return from recess during which reiterated his commitment to return the country to war at all cost.

"I am happy to say that we have continued to work to improve and build upon our relations within the international community, both bilateral and multilateral. I would like to announce that we have agreed on a major loan scheme with the People's Republic of China", Kiir said.

The loans will cover the cost of major infrastructure projects, including the completion of Juba International Airport, which remains half-built.

"Our current airport has outgrown its capacity and we need a new airport building that will accommodate the huge air traffic in and out of South Sudan", Kiir added.

He said the loans will also be used to begin the construction of key roads to connect the world's newest state to neighbouring countries, as well as improve interstate connectivity, adding that better road infrastructure would improve communications and reduce internal transportation costs, subsequently lowering the cost of goods and movement.

Other developmental projects which will be implemented through the loans include the construction of major electricity schemes which will provide rapid improvements in both the standard of living for South Sudanese people, as well as encourage industrialisation and ease the expense of doing business in South Sudan. .

"These are crucial schemes. Without such improvements in communications and power supply, we will not be able to provide the fast development which our people demand, and so richly deserve", said Kiir

He also announced the successful outcomes of the South Sudan Economic Partners Forum, hosted by the US state department between 16-17 April in Washington.

The former rebel commander turned politician said the US forum marked the start of an enhanced partnership with international actors to strengthen governance, political inclusiveness and sustainable development in South Sudan.

One of the major initiatives to come out of the forum is a private sector investment conference to be held in Juba later this year, which will be organised by South Sudan with support from international partners.

"We are in agreement that a thriving private sector is critical to job creation, improved livelihoods and economic growth," Kiir said.

"The international private sector is most welcome to come [to the conference] and share in the fruits of our rapid development, and we look forward to learning from them, through effective skills transfer to our own people", he explained to the law makers, mostly members of his ruling Sudan People's Liberation Movement (SPLM) party.


Botswana to host intl China-Africa health cooperation meet

Botswana will be hosting the 4th International Roundtable on China-Africa Health Cooperation on 7th May in the capital Gaborone.A release from Botswana’s Office of the President states that the Conference is aimed at promote greater Sino-Africa partnership.

The partnership is centred in such health related areas as Human Resource Development, HIV/AIDS, Maternal and Children Health, Combating parasitic diseases, malaria, immunisation and vaccines and health commodity provision.


Last modified on Thursday, 09 May 2013 12:50