Pro-Poor Urban Development: China and Africa Workshop Session on China’s Involvement In African Urban Development, 07/30/2012

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Published on February 5, 2014

Author: AfricaChinaUrbanInitiative

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Pro-Poor Urban Development: China and Africa Workshop Session on China’s Involvement In African Urban Development, 07/30/2012.

Dr. Tang Xiaoyang, Tsinghua University, International Studies, Beijing: The impact of Chinese enterprises on Africa's urban employment.
Data on the impacts of Chinese trade and investment in Africa were presented and critically analyzed, responding to the challenge of how to establish an effective measurement system. In fact official statistics on employment levels are not always reliable, while the effects of local employment creation in Africa may be only temporary, as for example in construction where low or no skills are required, while the main basis of trade is minerals and oil. Such a trade is imbalanced and not sustainable, and a different path based on local manufacturing would have better outcomes for Africa. At present African manufacturing is negatively impacted by Chinese imports, as in the textile industry and local shoe production in Addis Ababa. Chinese telecom and auto industries in Africa affect only a small part of the value chain and are not relevant to the urban poor. China can export manufacturing industries to Africa where labor is ten times cheaper, but African SMEs cannot cope with such competition. On the other hand, despite low labor costs and tariffs allowing export to EU and USA, Africa’s weak infrastructure and logistical capacity mean productivity is lower than in Asian countries. To sum up, a transfer to manufacturing from construction is a challenge that must be orchestrated to benefit the urban poor.

The Impact of Chinese Enterprises on Urban Employment in Africa TANG, Xiaoyang International Food Policy Research Institute Sister Cities International Tsinghua University

Quantitative Measurement  Rapid growth of Chinese economic activities in Africa 12000 140000 120000 10000 100000 8000 80000 6000 60000 FDI stocks Trade In $ million 4000 40000 2000 20000 0 0 2003 2004 2005 2006 2007 2008 2009 2010 Source: MOFCOM of

Quantitative Measurement  Examples of Official Statistics and Research Surveys 2007 in Angola: 85 Chinese companies hired 3353 Chinese and 5482 Angolans 2011-12 in Ethiopia: 24 medium and large Chinese enterprises hired 2650 Chinese and 10470 Ethiopians Source: Angola MOF, author’s survey  Caution on reliability and preciseness of the data

Qualitative Analysis   Examine various sectors Focus on development dynamism and long-term sustainability

Qualitative Analysis  Construction sector: -Large number -Temporary workers more than permanent jobs -Low skill requirement, most are laborers -Depending on projects and funding, sustainability not self-evident

Qualitative Analysis  Trade and Service -numerous enterprises, but small in size -low or no skill requirement -imbalanced trade relations, questionable sustainability

Qualitative Analysis  Trade and Service

Qualitative Analysis  Manufacturing - telecom installation & training (Huawei, ZTE) - automobile assembly (Angola, Ethiopia, South Africa) - target at limited local market - a small part of the whole value chain - well-educated trainees, less relevant to urban poor

Qualitative Analysis  Manufacturing -labor intensive branches: footwear & textile -negative impact of the made-in-China influx Over 2000 small and micro shoe-makers in Addis. In a survey 2007, under the pressure of Chinese imports, 32.4% of the producers downsized activities, 27.8% producers went bankrupt, 11.1% closed the company temporarily Tegegne Gebre-Egziabher, Impact of Chinese imports and coping strategies of local producers, JMAS, 2007, p 663.

Qualitative Analysis  Manufacturing - loss of export market Export of textile and garment from Sub-Sahara Africa to USA and EU 2000-2010

Qualitative Analysis  Manufacturing - Mitigation Measures Ethiopian government imposed higher tariff on the imported shoes and provided financial assistance to save the local shoe industry for the time being USA and EU re-introduced quota system during three-year transition period after the Multi-Fiber Agreement expired

Qualitative Analysis  Manufacturing - Mitigation Measures

Qualitative Analysis  Manufacturing - Investment and Relocation Industrial upgrading in China Footwear & textile production moving overseas Investment in Ethiopia, Egypt and Nigeria.

Qualitative Analysis  Manufacturing - Investment and Relocation Huajian Group in Ethiopia, plan to invest 2 bn usd during the next five years has employed 900 local workers, sent 86 to China for two-month training, plan to send another 300 trainees to China hire 25000 workers in China 2000-3000 RMB (300-500 usd) vs. 600 Birr (35 usd)

Qualitative Analysis

Qualitative Analysis

Qualitative Analysis  Manufacturing - Strength: low labor cost, abundant raw materials, and tariff exemption - Weakness: backward infrastructure, weak industrial bases, inconvenient logistic supply, insufficient government capacity - Opportunities: rising labor costs, industrial relocation - Threat: overall productivity, alternative destination

Conclusion     Overall impact huge and extensive Construction and trade are current job creators, but how to evolve? Manufacturing jobs are threatened by made-in-China products, protective measures are required. Labor-intensive production being relocated to Africa, orchestrating efforts are critical.

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