Sunday, 01 July 2012 12:05

Newsletter 13

In this newsletter:

  • Africa learning from China’s spectacular economic growth
  • Could Africa replace China as base of world manufacturing?
  • China-Africa relation further to peak if supported by understanding of host countries’ business and culture

Africa learning from China’s spectacular economic growth

Gregory Nott‚ director at Werksmans Attorneys (one of the pioneer law firms to establish a China desk in 2000) says that South Africa is placed in the front row as an emerging world economic power. He suggests that this was made possible partly because of the extensive investment coming from Chinese government and its multinational companies.

“Because of the speed at which China’s economy grew and hit the world stage‚ people forget that it used to have a small economic base – much like Africa today‚ in fact‚” says Gregory Nott‚ “As one of three African countries attracting the most Chinese investment‚ South Africa is extremely privileged‚” he says. “Apart from the trading and investment potential of our relationship with China‚ we have the opportunity to learn first-hand from its success story.”

There are distinct parallels between Africa today and China before its rapid rise into the ranks of the world’s top two largest economies‚ Nott says.

“The similarities include large populations and widespread poverty. Africa is poor but like China‚ we have the people and resources to take ourselves out of poverty – provided we are willing to learn from the lessons China has to offer us.”

In Nott’s view‚ the three main characteristics that have fuelled China’s spectacular rise to world-power status are visionary leadership‚ disciplined economic management and radical economic transformation agenda.

Nott adds that as a foreign investor in Africa‚ China has become increasingly attuned to Africa’s needs and priorities. To date‚ China has signed bilateral investment treaties with 33 African countries and double taxation agreements with another four.

Nott suggests that South Africa and many other African countries are trying to adopt the Chinese economic policy and countries like South Africa seem to have found the way to the next economic power of the world.


Could Africa replace China as base of world manufacturing?

Back in 1990 and early 2000 many western corporate giants relocated their main manufacturing plants to Asia looking for a cheaper labor and manufacturing expense. Well that period now seems abating as the labor costs in Asia have gradually risen forcing the manuafacturers to look for a new alternative without losing their competitive advantage.

Could Africa replace Asia and/or China as the world's next manufacturing hub?

Africa has a number of manufacturing advantages that it has yet to realize. Besides low labor costs and abundant resources, these include duty-free and quota-free access to U.S. and EU markets for light manufactures under the Africa Growth and Opportunity Act (AGOA) and the Cotonou Agreement.

China dominates the global export market in light manufacturing, and its competitive edge far exceeds that of low income exporters that recently entered the global market.

But steeply rising costs of land, regulatory compliance, and especially labor in China's coastal export manufacturing centers have begun to erode the latter's cost advantage, a trend likely to accelerate in the coming years.

The ongoing redistribution of cost advantages in labor-intensive manufacturing presents an opportunity for Sub-Saharan Africa to start producing many light manufactures, enhance private investment and create millions of jobs.


China-Africa relation further to peak if supported by understanding of host countries’ business and culture

Although much has already been achieved in regards the business relationship between China and Africa, some argue that the growing potential still remains untapped. Increasing Chinese or African businesses’ understanding of a host country’s business culture, work ethics and society will lead to improved business relationships and trust between China and African countries, says market analysis firm Frontier Advisory China Africa analyst Jinghao Lu.

The undeniable success of China in sustaining unprecedented growth and development, including successful, large-scale infrastructure programs, is one of the reasons African countries can benefit from engaging with the economic giant. Cultural barriers do persist; however, there is also a significant lack of relevant research and information generated on both sides about the business culture in the context of China-Africa economic relations, Lu says.

Underlining that China has a much more homogenous society as opposed to many Africa countries, he states that very little research is done in Africa on engagement with China. Further, Chinese companies should conduct case studies of successful and failed ventures on the continent and should develop a deeper understanding of the business culture and society of the African countries they seek to enter, he advises.


Last modified on Sunday, 01 July 2012 12:09