China and the World

Fancy footwork in Africa

A Chinese entrepreneur spends billions on an Ethiopian shoe factory

You may not be smiling after you hear his speech: Hu with Zuma

When Chinese admiral Zheng He’s fleet of ships arrived at the east coast of Africa in the early 15th century, he presented gifts of gold, silver, porcelain and silk.

There were more gifts on offer last week as Africa’s leaders journeyed to Beijing for the China-Africa Forum.

Specifically, President Hu Jintao offered the continent a credit line of $20 billion over the next three years to fund development.

Not everyone was grateful, mind you. South Africa’s leader Jacob Zuma – an erstwhile cheerleader for China – sounded a more critical tone, warning of the unbalanced nature of Africa’s trade with China.

“Africa’s commitment to China’s development has been demonstrated by the supply of raw materials, other products and technology,” said Zuma. “This trade pattern is unsustainable in the long term. Africa’s past economic experience with Europe dictates a need to be cautious when entering into partnerships with other economies.”

Evidently Zuma fears a relationship in which Africa sells its resources and buys China’s manufactures – thus missing out on the benefits of wider industrialisation. Latin American policymakers have voiced concerns about something similar and there is some truth to Zuma’s argument.

But it is not the whole story. For instance, one of his counterparts Ethiopia’s President Girma Wolde-Giorgis, likely feels a bit more positive about China. That’s thanks to the Huajian Group, based in Dongguan. This year it opened a huge factory in Ethiopia to make shoes, with sales targeting the European market. According to the Guangzhou Daily, Huajian already employs 800 workers on two productions lines and it will invest $2 billion to expand the factory on a Chinese-funded industrial estate outside Addis Ababa.

The light industrial park is co-funded by the China-Africa Development Fund, which signed a 10-year contract with the Ethiopian government in January. The plan is to create 100,000 manufacturing jobs.

Huajian is a big part of that goal. Founded in 1992 as a cobblers workshop in Guangdong province, entrepreneur Zhang Huarong grew his initial staff of 80 into a shoemaking giant employing 20,000.

In that time Zhang’s company has made over 1,000 different types of shoes, doing so for prominent brands such as America’s Nine West. According to Global Entrepreneur magazine Huajian is China’s largest exporter of middle-to-high end women’s shoes, with an annual output of 15 million pairs.

Now Zhang’s planning to become Ethiopia’s largest shoe manufacturer. It’s not as odd as it initially sounds. The China Footwear Industry Association estimates that China accounts for 65% of the world’s shoe production, making an incredible 13 billion pairs last year. Of these around 10 billion were exported. But as the China Daily points out, many of these shoemakers are now searching for “survival strategies” due to rising costs and declining orders.

Zhang first sought to lower his costs by moving some of his production inland within China to places like Henan. He also looked at moving his factories to neighbouring Cambodia, but found labour costs were also rising quickly.

So when he went to the World Footwear Development Forum last year he was interested to meet Ethiopia’s industry minister. The politician told him that Ethiopia had rich sources of high quality, cheap leather (with the second largest cattle population in Africa) as well as a low minimum wage. According to Guangzhou Daily, Zhang reckoned he could hire 10 Ethiopian workers for the price of one Dongguan employee.

Ethiopian-made goods also enjoy preferential access to European and US markets (in accordance with the Cotonou Agreement and the African Growth and Opportunity Act). Then there is an increasingly buoyant local market: Africa’s GDP has grown by an average of about 5.2% annually over the past decade.

Of course, some think Zhang is making a risky bet. The Economist points out that sceptics think “shoddy infrastructure” could prove a serious drawback. But the magazine adds: “If Huajian succeeds, other shoemakers may follow. Wages will be lower than in China and Ethiopians have a tradition of handicraft.”

So if Ethiopia does become a shoemaking hub, Chinese investment can take some of the credit.

Presumably, Jacob Zuma would approve too.


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