Africa: Next Factory of the World

I have just read a book by Irene Yuan Sun called The Next Factory of the World: How Chinese Investment is Reshaping Africa. She has studied the emergence of Chinese owned and managed factories in African countries as diverse as Lesotho, Nigeria and Kenya. Her fieldwork with McKinsey identified 1500 Chinese factories engaged in manufacturing. She identifies a large number of factories producing garments for big American labels like GAP, Levi, Old Navy and Rebook.

Irene suggests that Chinese factories in Africa:

This is the future that will create broad-based prosperity for Africans and usher in the next phase of global growth for a large swathe of the Chinese economy. This is what will make Africa rich and achieve a dramatic and lasting change in living standards.

Factories are the bridge that connects China, the current Factory of the World to Africa the next Factory of the World. Over the past fifteen years, Chinese factories have been driven out of China by rising costs, and may have landed in Africa.

The movement of factories matter, because when factories arrive en masse, prosperity soon follows. Form Great Britain at the dawn of the Industrial Revolution in the eighteenth century, to America in the nineteenth century, to Japan and Asian countries in the twentieth, factories have restructured entire economies towards a new, lasting level of wealth. That because manufacturing, unlike agriculture and services, engages mass labour in highly productive ways to participate in the global economy. It’s also because on an individual level, industrialisation allows substance farmer enmeshed in highly local systems of exchange to transform themselves into consumers and producers in the global economy. Industrialisation is how China reshaped itself from a poor, backward country into one of the largest economies in the world in less than three decades. By becoming the next Factory of the World, Africa can do the same (pp 6-8).

Irene writes about the difficulties that workers face in shifting from a rural life which is governed by the clock to working in a factory which is controlled by the clock. She explains that this was a problem in the Industrial Revolution and also in China. Workers in Africa take several years to make that transition. Those who run businesses in developing countries have to deal with this issue.

What surprised me is that many of the factories were owned and operated by Chinese entrepreneurs. I had assumed that because China is ruled by a Communist party, that most of the investment in Africa would be done by large state-owned enterprises. That might be the case for the large infrastructure projects, like roads, bridges, railways and airports, but it is not the case with manufacturing. Most the Chinese factories in Africa are owned and managed by Chinese who have factories in China (a few in Taiwan or Hong Kong). Some have sold factories their families owned in China to invest in Africa. They usually develop their businesses without government support, and often with opposition.

This raises an interesting question. Why are Chinese willing to invest in Africa when doing business there is hard she gives plenty of examples that illustrate how really hard it is). Why are they willing to love and work in such primitive conditions?

• Many of the managers and owners she interviewed had grown up in Chinese villages that were even more backward than they lifestyle they found in Africa. They had seen their home region transformed by manufacturing, so they believed the same could happen Africa.

• Having grown up in backward underdeveloped towns and villages, they are happy to live in work in tough conditions in Africa. I presume that managers from the US and Europe would not be willing to live under these conditions.

• Chinese managers and business owners are used to dealing with a fickle government and corrupt bureaucracy. They are used to a fairly unpredictable government and legal system. They assume that they can cope with the same thing Africa., whereas Americans and Europeans would be scared off.

Irene is optimistic for Africa, while not downplaying the risks and dangers. Time will tell if her optimism is justified.