The World’s Next Great Manufacturing Center

In a low-slung office building at his giant ceramics factory in southwestern Nigeria, Sun Jian insisted that we have tea. He had just returned from a trip to China, and he had a batch of top-quality tea he wanted to share with visitors, in an age-old gesture of Chinese hospitality.

Sun is from Wenzhou, a midsize city in southeastern China. Nearly 4,000 years ago the lustrous, pale green glaze called celadon was invented in Wenzhou, which became the birthplace of Chinese ceramics. In the 1970s, however, times there were tough. After elementary school, Sun dropped out and started working. In 1978, two years after Mao Zedong’s death, Wenzhou was the first city in China to establish private enterprises. Sun worked his way up through several leather-processing factories and eventually saved enough to start his own leather manufacturing business. But by the late 2000s costs were climbing at an alarming pace, and he knew he needed to move out of China. A friend suggested he think about Nigeria.

He went for a five-day visit. “Immediately all these poor people were asking for money,” he told me. “But then I realized there are a lot of rich people, too, and although it’s hard to make it in this market, it’s just as hard for everyone else as it is for me.” Back in China he called an acquaintance at the customs authority and asked him what was the heaviest, most expensive to ship product being exported in large quantities to Nigeria. The answer? Ceramics.

After that single visit, Sun devoted about $40 million to building a ceramic tile factory in Nigeria. It runs around the clock and employs nearly 1,100 workers, a thousand of them locals. Electricity is unreliable and costly, but business is good. Nigeria, with its relative lack of competition and booming demand, allows Sun to earn a 7% profit margin, compared with the 5% he earned in China. In manufacturing, margins are often razor-thin, and a 2% bump is substantial.

Sun’s story is not unusual. According to data from the Chinese Ministry of Commerce, privately owned Chinese companies are making more than 150 investments a year in the manufacturing sector in Africa, up from only two in 2000. The real figure is probably two or three times as large: Scholars doing fieldwork on the topic routinely encounter Chinese companies that have not been captured by government data.

These companies are already having a major impact. In Nigeria, Chinese businesses smelt steel to fuel the construction boom in Africa’s largest economy. In tiny Lesotho, Chinese and Taiwanese companies churn out Kohl’s yoga pants, Levi’s jeans, and Reebok athletic wear destined for U.S. shopping malls. They’ve made the clothing industry the largest economic sector in the country. In Ethiopia, just as the British pharma giant GSK was scrapping its plans to build a drug production plant, Humanwell, a Chinese pharmaceutical company, broke ground on a $20 million production site outside Addis Ababa; its board approved an eventual investment of $100 million in Ethiopia’s pharmaceutical sector.

Over the past few years, I’ve talked to nearly 50 Chinese manufacturing entrepreneurs across half a dozen African countries. In the following pages I describe how their investments are transforming Africa’s economy and society by providing millions of Africans with formal employment for the first time, fostering a generation of African entrepreneurs, and inspiring African institutions to support vibrant manufacturing clusters. These entrepreneurs are not saints, of course. Bribery, poor working conditions, and problematic environmental practices are pervasive. But Chinese manufacturers are arriving in larger and larger numbers in Africa, and manufacturing—unlike natural resources or services—leads to the possibility of industrialization. An industrial revolution in Africa: This is no longer a far-fetched notion.

 

The Largest Pool of Labor in the World

Chinese entrepreneurs are being both pushed and pulled into Africa. On the push side, China’s ascendancy in global manufacturing is now coming under structural pressure. A generation under the one-child policy has shrunk the country’s labor pool, causing shortages in its coastal manufacturing hubs. And labor costs have risen sharply in recent years: Hourly manufacturing wages have increased by 12% annually since 2001, and productivity-adjusted manufacturing wages nearly tripled from 2004 to 2014.

According to Justin Yifu Lin, a former chief economist at the World Bank, “China is on the verge of graduating from low-skilled manufacturing jobs….That will free up nearly 100 million labor-intensive manufacturing jobs, enough to more than quadruple manufacturing employment in low-income countries.” To put that into perspective, when manufacturing employment reached its peak in the United States, in 1978, only 20 million people had jobs in American factories. Now five times that number of jobs are about to migrate out of a single country: China.

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