Boosting Africa’s economic progress

Enhanced China cooperation and strategies on industrial parks can help continent’s development

(WU BOHAO / FOR CHINA DAILY)

Prior to their independence, African countries missed out on several global waves of industrialization and failed to establish sound and systemic economic systems. Most countries in the continent became independent after the 1960s and implemented import substitution industrialization strategies in the early stage of economic development. This resulted in industrialization being too costly and culminated in lack of growth momentum.

In the 1970s, the global oil crisis wreaked havoc on Africa’s industrialization, which had just started to show signs of growth, with many African nations slipping into debt distress. In the 1980s, many African nations started to rely heavily on external capital and indiscriminately followed Western policy prescriptions, ending up with reduced international competitiveness.

Since the turn of the 21st century, African countries have started exploring new pathways of economic development, in particular by building industrial parks to attract foreign investment and implement an export-oriented strategy. The launch of some pro-economy and pro-cooperation policies worldwide accelerated this process.

In 2000, the US Congress approved the African Growth and Opportunity Act, or AGOA, which provides eligible sub-Saharan African countries duty-free access to the US market. Some African, Caribbean and Pacific countries received full duty-free and quota-free access to the European Union for all their exports with the exception of arms and armaments, under the EU’s “Everything but Arms” arrangement in 2001.

At the 2006 Beijing Summit of the Forum on China-Africa Cooperation, the Chinese government proposed to set up the China-Africa Development Fund and economic and trade cooperation zones, and encouraged Chinese companies to invest in Africa. The African Continental Free Trade Area agreement entered into force in May 2019, giving African countries a major opportunity to boost manufacturing, promote trade, and attract investment.

The Belt and Road Initiative has opened a brand new chapter in China-Africa cooperation, with the joint construction of industrial parks taking the lead in boosting bilateral cooperation and successful cases constantly springing up. As of the end of 2021, African countries had built or co-built 237 industrial parks or zones. Nearly 60 of them were designed, constructed, or operated by Chinese companies.

Ethiopia was one of the first African nations to attach significance to using industrial parks to accelerate industrialization. In 2015, China Civil Engineering Construction Corporation won a bid to construct the Hawassa Industrial Park, the first flagship industrial park developed by the Ethiopian government.

Another remarkable example is the Lekki Free Trade Zone in Nigeria, a pioneering public-private partnership between Chinese enterprises and the Nigerian government. Despite the adverse impacts of the COVID-19 pandemic, the number of companies in the zone had risen rapidly to 54 by August this year.

According to our survey, one of the biggest challenges facing companies in the industrial parks is the lack of technical skills among the local workforce. Although over 80 percent of local workers have received junior secondary education or above, they lack the required technical skills.

Meanwhile, China-Africa cooperation in industrial parks faces other challenges. To start with, policy implementation ability and policy consistency in African countries are yet to improve. Industrial parks are long-term projects. Political upheaval and frequent personnel changes threaten the long-term effectiveness of policies associated with the development of industrial parks.

Most African countries are in the initial stage of industrialization, and are therefore positioning the industrial parks as clusters of labor-intensive industries. 

Moreover, African countries are susceptible to policy changes made by their trading partners. For instance, Washington revoked duty free access to the US for Ethiopia, Cameroon, and others, citing their noncompliance with the AGOA eligibility criteria. This has triggered the massive withdrawal of capital by companies in the industrial parks.

Given this situation, China-Africa cooperation in industrial parks should further optimize factors and resource allocation to help African countries build stronger capabilities for self-driven development. 

In the meantime, the top-level design for China-Africa industrial cooperation should be strengthened and long-term coordination mechanisms between governments should be built. 

Chinese financial institutions should accelerate their strategic layout in Africa to provide businesses with localized financial services, and strengthen the exchange rate risk-related financial service system to offer more diversified products that could help businesses hedge against risks.

On top of that, companies that have invested in the industrial parks should pay attention to combining talent cultivation with businesses and the local development, and provide technical and skills-training programs for local employees in addition to creating job opportunities. 

Also, China-Africa cooperation in industrial parks should attach great significance to coordinated development with local communities by providing services that help to boost their sustainable development capability.

The author is a research assistant professor of the National School of Development at Peking University and director of the Research Office of the Institute of South-South Cooperation and Development at Peking University. The author contributed this article to China Watch, a think tank powered by China Daily. 

The views do not necessarily reflect those of China Daily.