Can China’s economic zones change Africa?

By Mark Kapchanga Source:Global Times Published: 2016-5-5 23:08:02

Illustration: Liu Rui/GT



Critics believe the relationship between China and Africa is skewed with China drawing much of the benefits from the cooperation.

This journey to make the engagement balanced started in earnest with the appreciation of Africa's poor state of industrialization. Today, the average share of Africa's manufacturing value added in GDP is just about 12 percent, the second lowest in the world. Moreover, the manufacturing share of total exports is still at a paltry 25 percent.

With this in mind, China is directing a fair portion of its foreign direct investments toward industrializing Africa. For instance, last year, Chinese Foreign Minister Wang Yi pledged to catalyze industrialization in the continent and the shifting of a fragment of China's industrial base to Africa. Along similar lines, China showed its commitment to industrializing Africa in 2015 during the Forum on China-Africa Cooperation (FOCAC) event in South Africa when it promised a $10-billion "China-Africa Production Capacity Cooperation Fund."

Chinese President Xi Jinping said in his opening speech in Johannesburg that China will support the education of 200,000 African specialists through setting up professional schools in Africa and training 40,000 Africans in China.

Industrializing Africa is an arduous undertaking. The continent faces many challenges such as poor infrastructure, the bureaucracy that is deeply embedded in the public sector, corruption, and labor disputes, among others. Despite these hiccups, China is setting up special economic zones in Ethiopia, Zambia, Malawi, Mauritius, Nigeria, Egypt and Algeria. Drawing experience from projects set up in China in the 1980s, the special economic zones are designed to attract more Chinese investments which are supported by the state to areas with friendly business environments.

The zones propose investment in a wider range of sectors, ranging from agro-industry, manufacturing and services. These are essential industrial landscapes especially for Nigeria, Zambia and Ethiopia where the levels of industrialization are still low. Currently, the Huajian Shoe Factory in Ethiopia employs 3,000 local workers, and making millions for the country in terms of foreign exchange, thanks to the industrial revolution led by the Chinese in the country.

But it is imperative to appreciate the fact that these zones on their own cannot turn around Africa's underlying fortunes. For the zones to have the desired long-term impact on the development of African countries, they must address the important issues that have arisen in each country at the early stages of development. Most of these relate to financing gaps and to policy incompatibility. For example, in a number of cases, construction works on zones in some African countries end up stalling or collapsing owing to delays in the disbursement of funds. As was the case in Ethiopia, a host country may also face difficulty in financing off-site works such as the modernization of feeder infrastructure.

Importantly, there must be political goodwill and a logical incentive structure in the host country to support the establishment and development of zones. This ultimately ensures that they are integrated into the national development strategy so as to achieve preferred outcomes. For example, Kenya has done this by recognizing special economic zones as engines of industrialization in its development blueprint Vision 2030.

As China seeks to industrialize Africa, host nations need to address the problems of stifling bureaucracy, poor communication and local infrastructure, inadequate market linkages and a lack of commitment on the part of governments. In South Africa, for instance, strong labor laws, the high cost of labor and the difficulty of dismissing workers have put off potential Chinese investors in the manufacturing sector. Crucially, for the zones to succeed as a test case of industrialization, it is imperative that the African governments take full ownership of the zones and strongly trust in their economic potential.

The ownership can be fostered by the host-country government having a stake in the zones. The Nigerian government has successfully negotiated a share of the two zones in the country. But caution must be exercised in the local shareholding of the special economic zones. Disproportionate involvement of host government should be avoided as it may run down the operations of zones.

In Egypt's Suez Zone, for example, excessive government involvement has led to interference and inefficiencies in the management of economic zones. For a balance to be created, therefore, special economic zones should be negotiated between the host country government and the Chinese stakeholders.

The author is a journalist on African issues based in Nairobi, Kenya. mkapchanga@gmail.com Follow us on Twitter @GTopinion



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