China’s goods burden Africa’s producers


Chinese President Hu Jintao, center, walks past delegates as he prepares to deliver an opening speech for the 5th Ministerial Conference of the Forum on China-Africa Cooperation in Beijing, China on July 19, 2012. (Andy Wong/AP)
July 20, 2012

From the edge of Lagos Island, you have a clear view of the giant cargo ships coming in to dock. Walk a few blocks away from the water to Balogun market, and you’ll see where some containers’ contents end up.

In small, packed stalls spilling onto the streets of Nigeria’s commercial capital hang suits, fire extinguishers, shoes, radios, padlocks, shirts, clocks, generators and countless other items. The common link for many of the goods is their origin.

“All from China,” said Mustafa Adekule, 29, who sells suitcases and belts. “The quality is better than before, and the prices are low. China is helping us by making these products we can afford.”

His customers may be content, but some manufacturers and politicians on the continent are not. As South African President Jacob Zuma pointed out at the China-Africa Forum in Beijing, the current bilateral trade pattern — in which mainly raw materials flow out from Africa and finished goods come back — is not sustainable.

“Their business has been aggressive in Africa, in natural resources, in uranium, in oil,” Mahamadou Issoufou, president of Niger, said in an interview in London last month. “We are an open country — open to investors from anywhere. But we want ‘win-win’ partnerships, and that is our relationship with China. We will defend our interests and they will defend theirs.”

Chinese exports to Africa jumped 22 percent last year to hit $73 billion, more than double the gross domestic product of Kenya or Ethiopia. Chinese officials pledged to do more to encourage exports of African goods, including expanding the range of products that qualify for zero tariffs. “We should work harder to . . . improve the trade mix and upgrade trade,” Chinese President Hu Jintao said Thursday at the forum.

However, African manufacturers insist not enough is being done.

In some countries, notably South Africa and Kenya, cheap Chinese wares have forced local factories to close and acted as a disincentive to local production.

“You can’t compete with China. It’s impossible, as it’s not a level playing field,” said Stewart Jennings, chief executive of PG Group, a South African glass manufacturer, and chair of the Manufacturers Circle, an industry lobby group that counts BMW and SABMiller among its members.

A Chinese currency he believes to be 40 percent undervalued and the favorable financing and other incentives Chinese companies receive to go overseas mean South African businesses feel the competition acutely.

“If we had to compete with China, we would have to drop our wage rates by between 50 percent and 80 percent, and it can’t be done,” Jennings said. “And it’s causing significant job losses in Africa. To me, China is exporting unemployment.”

But the picture is complex, and varies from country to country. In Nigeria, Africa’s most populous nation, imports from China did affect local industries, especially textiles. But that was some years ago, and it could be argued that the country’s poor infrastructure and governance were as much to blame for the lack of competitiveness.

What’s more, the easy money from oil, which accounts for more than 80 percent of national revenue, meant that other sectors, from manufacturing to agriculture, were neglected. Though the government is trying to remedy this, most finished goods must still be imported, from rice, a staple dish, to T-shirts. And it is not simply a case of Chinese businessmen sending their goods to Lagos; it’s people like Nicholas Obi, a 26-year-old entrepreneur, traveling to Guangzhou three or four times a year to buy thousands of pairs of trousers for his Balogun market stall.

“If I had to go to Italy, the clothes would be too expensive,” Obi said. “So I go to China to get what people here demand.”

Asked what products he might be able to take from Nigeria to sell in China to help redress the trade imbalance, he replied: “Food for the other Nigerians there?”

On a visit to a trade fair in China, Kenyan textile manufacturer Sati Bedi was horrified to come face to face with counterfeit fabric emblazoned with his own company’s logo.

“We were kind of chuffed somebody’s taken the initiative to copy our fabric — it means we’re doing something right,” he says.

But Bedi has since lost the contract for police uniforms in Kenya to a Chinese company, and says his business survives thanks only to punitive tariff barriers that make it hard for China to compete, along with rising wages.

“We don’t have economies of scale. Infrastructure and logistics is a nightmare for us. The only thing we have is cheaper labor,” he said. “Their fabric is also always going to be substandard.” Chinese counterfeits in everything from batteries to mobile telephones are so derided throughout Nairobi’s markets that shoppers even refer to fake brands as “China phones.”

Leading Kenyan industrialist Chris Kirubi, whose Haco Tiger Brands company manufactures everything from face cream to pens and household bleach, blames government policy for the complications he faces in competing.

“I cannot blame the Chinese — our own government policies must be strong on counterfeits and come up with minimum standards for imports, so that we guide and protect the manufacturing industry in Africa in order to add value to our own raw materials,” he said.

Chinese loans and road construction have helped bring down transportation costs, Kirubi said, but he added that Kenya’s infrastructure still needs work to address problems such as the high cost of electricity.

“Without that development, we will never compete,” he said.

— Financial Times

Katrina Manson in Nairobi, Andrew England in Johannesburg, Tom Burgis in London and Leslie Hook in Beijing contributed to this report.

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