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[AUDIO] Chinese money is helping Africa to be next manufacturing powerhouse

[AUDIO] Chinese money is helping Africa to be next manufacturing powerhouse

Author Irene Yuan Sun argues in her now book that Africa is poised to become the world’s next manufacturing boosted by Chinese investment and production expertise. With costs steadily rising in the PRC, more and more companies are looking to offshore production from China to more affordable countries. Africa and its abundant population of young workers, free trade access into the US market and proximity to the European Union make it an attractive investment destination for cost conscious manufacturers.

But Africa is not alone vying for the estimated 85 million jobs that will be in play as China transitions away from manufacturing to a services/consumption-based economy. African countries will have to compete vigorously against Vietnam, India and other Asian nations to lure Chinese manufacturers.

“You have to be crazy to run a factory in Africa. It’s hard work, it’s risky, and success is far from assured. In this day and age, the only sizable mass of people crazy enough to take on the job are Chinese people, fresh from working their way up in factories in China and ready to take a gamble to make their fortune. It takes crazy people to build a factory in Africa, and that’s one of the main reasons Africa’s shot at industrialization is tied up with China.” — Irene Yuan Sun

Time is also a key factor. Major international manufacturing companies like Foxconn and Pegatron, contract manufacturers that both produce hi-tech products for Apple, HP and Dell among others, are working very hard to automate their production lines using robots powered by artificial intelligence. With more companies, including once low-tech industries like apparel and furniture assembly, moving as quickly as possible to automate their production lines, African policy-makers must no doubt be concerned that with the pace and sophistication of automation steadily increasing, might encourage Chinese manufacturers to keep their operations rolling back home, albeit with fewer workers.

Sun, for her part, argues the fear of technological dislocation is overblown. “The essential point automation alarmists miss is that technological adoption happens through millions of individual decisions by companies that are constrained by the demands of their value chain, the financing capability of their balance sheets, and their own managerial know- how. Just because they could produce something in a more automated way doesn’t mean they will,” she said. Already, Sun contends, Chinese-factories in Africa are using robotics and automation with human labor still playing an essential role throughout the production process.

Sun joins Eric & Cobus to talk about her new book, “The Next Factory of the World: How Chinese Investment is Reshaping Africa.” The book is part travelogue, part business intelligence of a fascinating trend that operates largely out of sight yet has potentially massive implications for the future direction of almost every economy in Africa.

Show Notes:

About Irene Yuan Sun:

Irene Yuan Sun is a thinker and practitioner focused on deeply understanding developing countries’ own experiences in order to remake global development. She is a leading expert on the Africa-China economic relationship. Born in China, raised in the U.S., and working in Africa, Irene brings a truly global perspective that crosses boundaries of East and West, developing and developed countries.

Irene co-leads McKinsey & Company’s research and client work on Africa-China business and economic development. She is the lead author of a major McKinsey report on this topic (www.mckinsey.com/africa-china). She is a graduate of Harvard College, Harvard Business School, and Harvard Kennedy School.

Irene’s work has been published by the Harvard Business Review, the Cornell International Law Journal, and the Johns Hopkins School for Advanced International Studies China Africa Research Initiative. Her book The Next Factory of the World was shortlisted for the Bracken Bower Prize for the best business book proposal.

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About Eric Olander

Eric Olander is the founder and Editor in Chief of The China Africa Project. Eric is a veteran international journalist with 20+ years experience throughout Greater China, Africa, the United States and Europe. Eric is currently based in Southeast Asia where he is the senior news executive with a leading 24-hour all business news cable TV network.

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