China plans multimillion Ethiopia investment

Huajian, one of the largest shoe exporters in China, is planning a multimillion-dollar factory expansion in Ethiopia in a sign that Chinese manufacturers are starting to move to Africa to benefit from preferential trade tariffs and lower labour costs. The company, which makes ladies shoes for Tommy Hilfiger, Guess, Naturalizer, Clarkes and other western brands, and which employs 25,000 workers in mainland China, opened its first factory at a purpose-built industrial zone on the outskirts of Addis Ababa a year ago. Helen Hai, a 36-year-old British-trained actuary who runs the factory and is group vice-president in charge of overseas investment, is sufficiently impressed with the outcome that she is starting a new line of injection-moulded shoes. This will add several hundred more workers to the 1,750 Huajian already employs in Ethiopia, where the economy is among the fastest growing on the continent, the leather industry is well established, but unemployment is rife. Huajian has also signed an agreement with the China Africa Development Fund, a private equity fund owned by China Development Bank, to invest jointly $2bn over 10 years in developing manufacturing clusters focused on shoemaking in Ethiopia, Ms Hai told the Financial Times. This has potential, she said, to create 100,000 jobs. “We want to use this as a platform to attract other players in the shoe industry to come here. Because, to be honest, if in five years’ time there’s only one shoe company, I think actually Huajian should leave Ethiopia,” she said, emphasizing that to keep costs low in the long term the country needed to encourage subsidiary industries by building economies of scale. Huajian’s ambitions in Ethiopia are striking for their uninhibited confidence in the country’s long-term manufacturing prospects and for going against the grain of what African officials have come to see as China’s primary purpose on the continent: to extract raw materials and source new markets for its own manufactured exports. Writing in the FT earlier this year, Lamido Sanusi, the Nigerian Central Bank Governor, warned that China is now a competitor as much as a partner, and capable of the same exploitative practises colonial powers once employed. That makes Ms Hai, who was educated on a Beijing scholarship in the UK and worked for Zurich the insurers before seizing the opportunity to manage the Huajian group’s first venture overseas, something of a pioneer. Huajian was initially drawn to Ethiopia in 2011 when the late prime minister Meles Zenawi was in search of a company. Ms Hai said the business case was obvious, and comparable to that which drove shoe manufacturers first from Europe to Japan and Taiwan and then, when labor costs there rose, to China. She said while management and logistics costs were initially high, because she had to bring in some Chinese expertise and also components, this was countered by lower labor costs and preferential tariffs for African exports to the US and EU. Source: The Financial Times