How Can Africa Compete With China?
Tag: Africa Compete, Africa Compete With China
Summary: It is accepted wisdom among economists that no country can out-compete China -- it will always be cheaper, faster and tougher than any other. No matter how technologically sophisticated a country's …
It is accepted wisdom among economists that no country can out-compete China -- it will always be cheaper, faster and tougher than any other. No matter how technologically sophisticated a country's industries are, when their Chinese peers enter the market, they can out-price, out-speed and out-live anyone.
If that's the case, Africa has a big problem. Its hope of selling something aside from oil, gas and minerals -- something that creates enough jobs -- lies in the type of low-skilled manufacturing where China rules. Game over? Not quite.
Africans have lots of opportunities to trade that they have not yet exploited -- opportunities that are outside of China's reach. The first of this "low-hanging fruits" is food. The continent has not yet commercialized its agriculture -- it has not linked its small, subsistence farmers with the kind of corporations that can bring equipment, technology and infrastructure.
When that happens, China would likely be a buyer of African food, not a competitor. Sadly, today those farmers find it difficult to sell their produce even across borders within Africa, mostly because of excessive bureaucracy and corruption. The grand pan-African market is so fragmented that, in practice, it barely exists.
Second, even at their low-income levels, African consumers are very specific in their preferences. Take clothing, for instance. Yes, mass-produced, Chinese-made T-shirts and blue-jeans are unbeatably cheap. But how do you explain that, in West Africa, the market for wax-print fabrics -- those beautiful, shiny colors worn by African women and men on special occasions -- is still led by a company (UNIWAX) operating out of Cote d'Ivoire, and not by mass-producing counterfeiters in East Asia?
Answer: African designers are quicker to capture the constantly-changing local fashion. That sort of commercial niche, built on a combination of knowledge and speed, is still in its infancy but it will grow apace, as more Africans join the middle-class.
Third, international trade need not be only about goods -- it's also about services. Of course, Africa's natural beauty makes it a unique tourist destination, one that remains grossly under-developed. But so is the often-overlooked trade in professional services.
African accountants, doctors, nurses, teachers and others are locked within their countries' own borders -- their degrees and certifications are rarely recognized elsewhere in the region. These same kinds of restrictions apply to banking, trucking and logistics. This is a self-inflicted wound -- you can't blame China for it.
Fourth, simply put, only Africans can convincingly produce African art. This is not about touristy souvenirs -- many of those are actually Chinese-made. This is about Africa's fast-growing multi-media. Who had heard of "Nollywood" -- Nigeria's burgeoning film industry -- 20 years ago?
Today, it is said to employ 200,000 people, turn out 20 films a week, and be the third largest movie industry in the world. This success is not necessarily due to cinematographic quality; rather, it comes from the unique African-ness of the product. Something similar is happening in music.
And the continent is only now connecting to the internet and its possibilities -- at viral speed, mind you. All this exportable art is yet to be supported by serious enforcement of intellectual property rights. But it is a sign of the times that a new African business-line is the potential victim, not the perpetrator, of intellectual property violations.
Finally, and perhaps most important, wages and land prices in Africa are still very low, while in China they are rising by the day.. Yes, the productivity of African workers is an issue -- they lack training and equipment. And, yes, land in Africa is not backed by good infrastructure, especially roads.
But a new study shows that, with better policies, more investment, and a bit of luck, many African economies could soon be globally competitive in "light manufacturing," things like footwear, furniture and low-skill metalwork. The claim sounds credible. After all, most of African products can enter the U.S. and Europe duty-free and quota-free -- China's can't. And it would really be a pity if Africa did not seize its wage and land advantage to enter the market for light manufacturing, not least because China is about to exit it -- by some estimates, the Asian giant will eliminate 85 million jobs in that sector over the coming decade.
So, in the fierce competition of international trade, a competition that China has learned to master, does Africa stand a chance? Yes, it does.
Not that it will be easy or quick. Some countries will do what it takes to compete, while others may remain stuck in exporting only natural resources. The good news is that the opportunities are there for the taking.