Ethiopia Shoe Factory Widens Footprint of China in Africa

African Update – 02/06/12

A steady drone of machines hum as workers assemble shoes in a Chinese-built industrial park outside Addis Ababa, the first in Ethiopia by the Asian giant deepening its presence in Africa.

A handful of Chinese supervisors at the Huajian factory watch hundreds of Ethiopian workers trim leather, glue soles and lace up boots in the Eastern Industry Zone in Dukem, 30 kilometers (20 miles) south of the Ethiopian capital.

It marks a shift in China’s traditional investments in Africa, which mainly involve heavy infrastructure development and oil production, while for Ethiopia it offers an alternative to export of unprocessed raw materials.

“The two sides have a commitment, they say ‘you should have something, I should get something,’” said Qian Guoqing, the deputy director of the Eastern Industry Zone.

Huajian, one of China’s biggest shoe manufacturers, plans to invest up to US$2 billion (1.5 billion euros) in Ethiopia to make shoes for export to Europe and North America.

Construction of the industrial park started in 2009, and rows of three-storey green and yellow buildings now stand on a patch of the expansive land. The government says it plans to build five more industrial zones throughout the country to attract further foreign investment.

When completed in 2014, the US$250 million project will host over 80 factories and create 20,000 local jobs. Currently six Chinese-run factories operate in the zone, including a car assembly plant and a plastics factory.

However, analysts say large-scale investment in Ethiopia has risks and its financial benefits are still uncertain.

“It’s not a risk-free strategy and it’s not necessarily clear that it will work,” said Stefan Dercon, development economist at Oxford University.

“The Chinese … take the opportunities now in Ethiopia where they make the trade-off between very high rewards. That’s pretty risky in the first few years of doing this, and we’ll have to wait and see.”

To minimize risks and attract investors, the Ethiopian government is offering four-year tax breaks, cheap land and free electricity to investors in the industrial zone.

But challenges abound: foreigners complain of poor telecommunications, overbearing bureaucracy and the absence of a port in the landlocked Horn of Africa country.

Cultural differences, the language barrier and work ethic among the locals also pose hurdles, said Paul Lu, Huajian’s human resource manager, but noted that the availability of labour and raw materials were key attractions.

“We came to make shoes and we had to consider the resources — Ethiopia is very rich in leather,” said Paul at the factory’s entrance, where about two-dozen people were waiting for job interviews.

source: www.africanglobe.net

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