Comment on “Changing China, Changing Africa: Future Contours of an Emerging Relationship”

Abstract

Davies et al. (2014) describe China's engagement in Africa and indicate its intention to shift some parts of manufacturing from China to Africa. The possibility of a transfer of production capacity, especially of low-ended and labor-intensive manufacturing sector, from enriched China to Sub-Saharan Africa has been seemingly envisaged and incubated jointly by China and the World Bank. Many watchers of “China in Africa” share the common observation that China's policy toward Africa has many similarities to Japan's “economic cooperation policy” in the 1960s and 1970s toward Southeast Asia. In Japan's case, the final consequence of its policy was, maybe unintentionally, to allocate production capacities from Japan to other Asian countries. Especially after the Plaza Agreement in 1985 that resulted in a large appreciation of the Japanese yen, Japanese manufacturers were deprived of competitiveness and emigrated in search of cheaper production inputs. That movement initiated the formation of the Asian regional economy with integrated value chains. This history indicates that it is not startling for China to put its policy goal as a production shift from China to Africa. However, in my observation, China now faces difficulty in attaining that purpose in spite of the limited success of some special economic zones. It is widely said, and also Chinese people may think, that the economic circumstances in Africa are not suitable for manufacturing in various aspects, namely, power supply shortages, insufficient infrastructure, and others. Above all, high production costs including labor should be the most crucial aspect. According to surveys done by the United Nations Industrial Development Organization, the average wages of the manufacturing sector in Sub-Saharan African countries have been historically higher than in their Asian counterparts. For example, the average wage in Kenya's manufacturing sector was $3322 (2010) higher than Thailand's $2233 (2006), whereas the per capita gross domestic product (GDP) of Kenya is $792 much lower than Thailand's $3116. The huge divergence between high wages and low per capita GDP is found generally in Sub-Saharan Africa. For Japanese manufacturers, therefore, the destination of any production shift is inevitably directed to Asian countries, currently Vietnam and Myanmar, for example. In the case of Hong Kong companies responding to the US policy of African Growth Opportunity Act, they put almost double the capital equipment per worker in Kenya than in their home economy to maintain competitiveness. Africa's manufacturing sectors are more capital intensive than developing Asia's. Japan's “economic cooperation” was able to find its landing ground in Asia, but China's “South–South cooperation” has a few exit in current Africa. Why are wages in Africa higher than in Asia that has a larger GDP per head? It is because the levels of consumer prices are higher in Africa. According to surveys undertaken by the International Labor Organization, cereal prices and meat prices are higher in general in Sub-Saharan African countries than in Asian developing countries. The analysis of global data shows that a high living cost brings about a high wage level. This leads to the next question: why are food prices so high in Africa? The high prices of foodstuffs are supposed to be brought about by underdeveloped agriculture in Africa. The very low level of material and technical inputs has locked cereal production of Africa into such low productivity as in the premodern era. Roughly speaking, cereal production volume per hectare in Sub-Saharan Africa stays at less than one third of the global average and one sixth of the countries that have advanced agriculture. Many Asian countries have been benefited through the “Green Revolution” started in 1960s, but modern technologies never came to Africa. Only highly productive producers can provide cheap and abundant products; therefore, foodstuffs are expensive and insufficient in Africa. Accordingly, Sub-Saharan Africa is one of the biggest cereal-importing regions despite the fact that almost 60% of its workforce is still engaged in the agricultural sector. Sustainable development of manufacturing will be realized based on agricultural development, which has been lacking in Sub-Saharan Africa. It means that development assistance for food production should be a requisite for cooperation packages if China wants to shift parts of its manufacturing to Africa. East Asia and Africa are now the largest cereal-importing regions in the world, and the volume of cereal imports by Sub-Saharan Africa is steadily increasing along with its population increase and urbanization. The most serious threat to the global cereal market is definitely the explosive growth of Africa's imports. Agricultural development is not only a topic for Africa's development but also a regional topic for East Asia's food security. The situation of agricultural development in Africa should be carefully watched to see the future contours of “China in Africa.”