As China and Japan scramble for Africa, Africa's challenge is to maximise investment

Launching Africa into the normal world of commerce requires the continent to create the conditions to maximise this investment.

There are two shoe factories in Addis Ababa which carry a disproportionate weight of the burden for maintaining the credibility of China and Japan’s rival efforts to help Africa industrialise by adding value to its natural products. That is a key ambition of both Focac – the Forum for China-Africa Cooperation – and Ticad – the Tokyo International Conference for Africa’s Development. It is at the core of their efforts to graduate the continent from its historical dependence on aid and launch it into the normal world of commerce.

Huajian is China’s showcase shoe factory in Gelan, 30kms outside the capital. It produces about 60% of Ethiopia’s leather exports, supplying high quality shoes to top brands in Europe, the US and the East and employing about 3 500 Ethiopians.

Zemedeneh Negatu of Ernst and Young, Ethiopia has explained that if you take Ethiopia’s vast livestock resources and its abundant cheap labour and add Huajian’s global supply chain, its expertise and its capital, you have an industry which ought to thrive. Which it seems to be doing.

Perhaps it’s because Huajian has become China’s African posterboy shoe factory that Japanese Prime Minister Shinzo Abe felt he had to present one of his own when he opened the sixth Ticad summit in Nairobi last Saturday.

He said Japan would continue to help increase the productivity of factories across Africa by 30% through application of its home-grown business philosophy of ‘kaizen’. Already, he said, the Peacock Shoe factory in Ethiopia had increased its daily production from 500 pairs of shoes to 800 using kaizen.

The Huajian-Peacock comparison is telling, though. As Deborah Bräutigam, Director of the China Africa Research Initiative at the Johns Hopkins School of Advanced International Studies in Washington, points out: “Peacock has been successful as a producer of local shoes in Ethiopia but has not been very successful at breaking into the global export market … They have received a lot of foreign aid-funded help, [but] I don’t think they have more than 500 employees in their shoe factory.”

That rather epitomises the difference between China and Japan more generally. Japan led the world in formalising its engagement with Africa by launching Ticad in 1993. China (and the European Union, incidentally) only climbed on the bandwagon in 2000 when Focac was born in Beijing. Several other countries or regions, like India, Turkey, South Korea and South America have followed suit.

China has taken the lead
Yet, despite its head start, Japan has fallen behind China in the new scramble for Africa. As Elizabeth Sidiropoulos and Neuma Grobbelaar of the SA Institute of International Affairs pointed out in an article last week, Japan from the start had a similar approach as China had, focusing on infrastructure development and putting little, if any, emphasis on political conditionality – the Western preoccupation which alienated many African recipients of its aid.

“Yet, [Japan] has not benefited among African countries from this fact at the political level. It has been seen as part of the West, and China’s strong diplomatic outreach to Africa with its emphasis on South-South has made a greater impact since 2000,” write Sidiropoulos and Grobbelaar.

So recently, Japan has been playing catch-up, moving its Ticad summits from a five-yearly to a three-yearly cycle, the same as China, and, in Nairobi, holding its first conference on African soil to emphasise the equality of the partnership. This also matched China, which alternates Focac between China and Africa.

The changes meant that Ticad 6 took place just a few months after Focac 6, in Sandton last December, enabling a comparison which was probably not flattering to Japan. Although the impact of such aid packages are very difficult to decode, the headlines favoured China. President Xi Jinping announced US$60-billion of goodies in Sandton; Abe promised just half that amount in Nairobi.

Nonetheless, Japan has found its niche in the aid industry, by concentrating its assistance on human resources and capacity building.

In any case, in recent years both China and Japan have shifted their emphasis increasingly away from conventional aid and towards trying to establish more normal commercial relations with Africa.

Abe brought about 75 business leaders with him to Nairobi where he said ‘the partnership connecting Japan and Africa has entered, really, a mutually beneficial stage.’ He launched the Japan-Africa Public and Private Economic Forum as a permanent forum in which Japanese and Chinese business leaders would also meet every three years to advance commercial ties.

South Africa has tried harder than most other African countries to normalise those ties with China. It has used Focac to pressure Beijing to invest more in Africa, particularly in projects to add value to African raw materials, to balance the heavily skewed (some say “neo-colonial”) relationship, in which China imports almost exclusively raw materials and exports almost entirely manufactured goods, creating huge trade surpluses with most African countries.

That flood of Chinese manufactured goods, noticeably vehicles, has largely dislodged Japan from what was until not so long ago its top spot in most African markets.

South Africa’s lobbying has registered some success, with some Chinese investments in beneficiating minerals. And just this week Chinese vehicle maker BAIC and South Africa’s Industrial Development Corporation announced a R11-billion joint in the Coega Industrial Development Zone near Port Elizabeth, to make 100 000 vehicles a year, using 60% local content and creating more than 2 500 jobs during the construction phase.

Maximising Chinese and Japanese investment
Elsewhere in Africa though, such value-adding industrial investments have been scarce – which is why so much attention has been given to those Ethiopian shoe factories, which exemplify that cherished model of development. Brautigam explains this by saying: “Ethiopia and Rwanda continue to be the only countries with a leadership that is fairly united in being focused on economic development and structural transformation that takes advantage of their low wage advantage.”

Apart from the economics, China and Japan’s political rivalry could be read between the lines in Nairobi.

Sidiropoulos and Neuma see Ticad 6 as evidence of Abe’s more assertive foreign policy generally, in part as a response to Xi flexing his muscles by demanding exclusive rights to several islands and sea lanes, also claimed by Japan and several other countries, in the South and East China Seas.

Abe did make an oblique pitch for Africa’s support in this dispute when he said that Japan wanted to work with Africa to ensure the sea lanes connecting them were kept free, open and peaceful, and governed by the rule of law. This seemed to be a reference to China’s rejection of international arbitration of these disputes.

Beijing has scoffed at Ticad 6, suggesting Abe’s sole aim was to win African support for Japan’s bid for a permanent seat on the United Nations Security Council – which China vehemently opposes.

Abe did indeed refer to that in his speech in Nairobi, saying that “Reform of the United Nations Security Council is truly a goal that Japan and Africa hold in common” and calling on all African states to work with Japan to achieve it by 2023. He explicitly endorsed Africa’s ambition for a permanent presence on the UN Security Council, unlike China, it must be said, which remains at best ambivalent. It is striking though, that that ambivalence does not seem to have dimmed Africa’s support for China.

But whichever Asian nation is winning or losing the battle for African influence need not matter for Africa if it remains aloof from the fray. In fact, it is an advantage. As Sidiropoulos and Grobbelaar quote Kenyan foreign affairs and international trade Cabinet Secretary Amina Mohamed as saying: “Everybody is competing in the same space. And if there is no competition, there is a problem. It simply allows us to choose the best.”

The real challenge for Africa is not to maximise the flow of aid, but to create the conditions to maximise both Chinese and Japanese investment.

Peter Fabricius, ISS consultant

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