5 - Manufacturing

Summary

Chinese investments in Africa’s manufacturing sector are a relatively new phenomenon apart from a few old aid projects. Since 2010, the number of Chinese factories in Africa have grown rapidly for several reasons. Some were attracted by the opportunities in Africa’s market, which has less competition than other regions. Others process the raw materials in Africa to export. Rising labor costs in China also force manufacturers to relocate their production bases to African countries. A major challenge facing the manufacturers in Africa is the limited supply chain. Unable to find upstream and downstream support locally, producers have to look for input and output in foreign countries. The accompanying logistics burden, delay, and financial risks seriously affect factory operations. Stagnating manufacturing sector in turn discourages the investments in upstream and downstream industries, causing a vicious circle. Field research reveals that clustering of numerous small and medium-sized Chinese investors, particularly those targeting at Africa’s local market, fosters linkage between Chinese projects and local economy, facilitating synergetic growth along the value chain. The coevolution of market and production can more effectively contribute to broad sustainable growth of the manufacturing sector in Africa.