Beating China

That Ghana was significantly richer than Thailand when it achieved independence from the British in 1957, and yet is now more than five times poorer, has been repeated so much that it has gone beyond the cliché.

Well, here’s Africa’s chance to get back into the game.

The past 20 years has seen the wholesale dismantling of Europe’s consumer-based industries, and the emergence of these sectors elsewhere in the world, primarily Asia (shoes: made in China, toys: made in China, chic fashion accessories: made in China) .

For some time, folk have also been speculating about a similar phenomenon happening in Africa – the African Lion or the African Elephant, perhaps. What appears to be happening on the continent, though, is slightly different to the Asia success story – and could explain why the 21st Century will remain Asia’s to dominate.

There have been signs of significant growth in certain sectors in Africa, agribusiness being an obvious one that I write regularly about. Here, throughout the continent, subsistence farming is developing into commercial farming at a breathtaking rate, with dramatic and largely positive results. It means, for one thing, that we’re not going to starve. At last, the idea that Africa can be the “breadbasket of the world” is coming to fruition.

At the same time, many countries are seeing a huge surge in the affluent middle class. Nigel Bannerman, an investment director at Silk Invest, an investment fund, says Nigeria, Ghana, Ethiopia, Egypt and Morocco are looking particularly strong in this respect.

This has meant that many investors can set up a manufacturing base in certain countries and sell to the local populace. Silk Invest bases its entire strategy around this philosophy.

What does not appear to be happening, however, is the establishment of a dedicated consumer industry that can export to the rest of the world, in the same way as has happened in places like China and India.

Costs in Asian factories – particularly labour costs – now appear to be rising, particularly as governments start playing around with the minimum wage.

So is the time yet ready for Africa – which has a large unemployed population, and correspondingly lower wage demands – to step into Asia’s ready?

Conversations that I have been having recently suggest that it probably isn’t, and this could become the continent’s greatest missed opportunity so far in the post-colonial world. For whilst labour costs might appear cheaper in Africa, corresponding productivity remains low, making the cost competitiveness less attractive than in Asia. The World Bank has done some research on this.

The Asian miracle has come about not just because of cheap labour costs, but because of a committed workforce, strong work ethics and efficiency. If Africa can reinvent itself in this way, it has a lot to gain, but my fear is that it won’t and this great opportunity will slide by.

Advertisements

Tags: , , , , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: