China finds manufacturing opportunities in low-wage Africa

Belt and Road Initiative leads to ready access from the continent to Europe and the United States

Industrial estates are springing up funded by Chinese investors attracted by cheap labour and an abundance of raw materials

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A Chinese-owned factory in Uganda is making face masks to plug shortages caused by the new coronavirus pandemic. Photo: Xinhua

Published: 4:05pm, 1 Jun 2020Updated: 10:46pm, 1 Jun 2020

China’s manufacturing footprint is growing across Africa, as companies set up factories to tap into the continent’s cheap labour and abundance of raw materials.

Chinese investors are funding the construction of industrial estates and free trade zones for the production of goods that otherwise would be imported from China. They include shoes, clothes, fibreglass, construction materials, electronics, steel products and foodstuffs, which also find their way from Africa into European and American shops.

Industrial estates – which have been extremely successful in mainland China – are springing up from Uganda to Ethiopia, Egypt to South Africa, Algeria to Zambia.

Charles Robertson, chief economist with Moscow-based investment bank Renaissance Capital, said the minimum wage in China was now “up to three times higher than many African countries, which is encouraging manufacturers to move to Africa”.

Across the continent, there are more than 10,000 Chinese-owned companies, with one-third involved in manufacturing, according to a 2017 McKinsey report which excluded small companies, mostly not tracked by Chinese authorities. “In manufacturing, we estimate that 12 per cent of Africa’s industrial production – valued at some US$500 billion a year in total – is already handled by Chinese firms,” the report said.

In landlocked Uganda, President Yoweri Museveni last week commissioned two production lines at Lida Packaging Products, a Chinese-owned firm making face masks and personal protective equipment, to plug shortages as the country battles to contain the spread of coronavirus.

The factory, in the central Ugandan town of Mbalala, can produce up to 560,000 masks per day and employs 315 Ugandans. It is one of several factories to have set up shop in the dozens of industrial estates that have sprung up in the country, many of them funded by Chinese investors.