Brics Financial Media

CHINAFRICA
Pockets of Prosperity
Industrial parks can play a pivotal role in promoting industrialisation on the African continent
By Wang Jinjie

A man works on a TV set production line at Hisense South Africa Industrial Park in Cape Town, South Africa, on 1 June 2022 (XINHUA)

7 February 2024

As African countries look to enhance their manufacturing industries and speed up industrialisation, they are learning valuable insights from the development experience of industrial parks worldwide, particularly from China.

Since the launch of the Belt and Road Initiative (BRI) in 2013, China has substantially increased its investment in infrastructure development in Africa, undertaking the construction of a large number of projects including roads, railways, hydropower plants, airports, ports, and industrial parks. Specifically, industrial parks have emerged as key engines driving Africa’s industrialisation, in that they play a pivotal role in attracting investments from overseas.

Due to a variety of factors, African countries in the past were not able to make much headway in terms of industrialisation. Since the beginning of the 21st century, the region has embarked on the exploration of new models of economic development. In general, Africa has adopted an export-oriented strategy, and is trying to attract foreign investment through industrial parks.

A total of 237 industrial parks have been built by African countries independently or in cooperation with other countries as of 2021. Among these, 60 are planned, constructed, and being operated with the participation of Chinese companies, making industrial parks a notable highlight of China-Africa cooperation.

Residents walk past the Hawassa Industrial Park in Hawassa, Ethiopia, on 3 July 2016 (XINHUA)

 

Chinese investment

During the Beijing Summit of the Forum on China-Africa Cooperation (FOCAC) in 2006, China proposed the establishment of the China-Africa Development Fund and the construction of economic and trade cooperation zones, aiming to encourage Chinese companies to invest in Africa.

The BRI has opened up a new chapter for China-Africa cooperation, and allowed industrial parks to play a major role. Many outstanding projects such as the China-Egypt TEDA Suez Economic and Trade Cooperation Zone, Nigeria’s Lekki Free Trade Zone, the Zambia-China Economic and Trade Cooperation Zone, Ethiopia’s Hawassa Industrial Park and Dire Dawa Industrial Park, and the Djibouti International Free Trade Zone have been launched or completed under the BRI.

Ethiopia stands out as one of the first countries to recognise the significance of industrial parks in driving industrialisation, and make breakthroughs in establishing industrial parks. In the past decade or so, numerous senior Ethiopian officials have visited China and other Asian countries for study. Chinese companies have also been actively engaged in a number of Ethiopian cooperation projects. In 2015, China Civil Engineering Construction Corp. (CCECC) secured the bid for the Hawassa Industrial Park project, the first modern industrial park invested by the Ethiopian government. Subsequently, Chinese companies signed contracts for constructing 10 other industrial park projects, including those in Kombolcha, Adama, and Dire Dawa. Chinese companies have emerged as major investors in Ethiopia’s industrial parks.

Additionally, the development model of “transportation infrastructure + industrial park” has achieved initial results in Ethiopia. The Addis Ababa-Djibouti Railway built by a Chinese company reduced the travel time from Addis Ababa, the capital of Ethiopia, to Djibouti City, the capital of Djibouti, from seven days to just over 10 hours. This made it possible to build industrial parks along the railway. It boosted economic development along the railway line, and then helped to form an economic corridor.

This model was later recognised as Addis Ababa-Djibouti Model. With a rather weak industrial and agricultural foundation, Djibouti used to rely on imports for more than 95 percent of its agricultural and industrial products. Leveraging its port and railway infrastructure, Djibouti is now pursuing development through the “transportation infrastructure + industrial park” model.

Another noteworthy case is the Lekki Free Trade Zone in Nigeria, a pioneering project of the “public-private partnership” model between a Chinese company and Nigerian government in the field of industrial park construction. Identified as a significant outcome of the FOCAC Beijing Summit in 2006, it was built and is being operated by CCECC. As of August 2022, the park hosted a total of 54 operational companies.

Fuelled by the BRI, the number of enterprises operating in the park has seen rapid growth in recent years, and the Lekki Free Trade Zone has entered a phase of fast development. Located on the Gold Coast of the Gulf of Guinea, with the Atlantic Ocean to its south and just 3 km from the Lekki New Port, the zone enjoys an obvious locational advantage of proximity to both a port and a city.

Local women work in the China-built Eastern Industrial Zone near Addis Ababa, capital of Ethiopia (XINHUA)

 

Human resources development

Africa is widely recognised as the “youngest continent.” With its significant advantage of a demographic dividend, coupled with low prices of land and raw materials, the continent has huge potential for industrial development. However, to fully realise this potential, multiple challenges need to be overcome.

A study of 15 industrial parks in seven African countries - Egypt, Djibouti, Ethiopia, Kenya, Tanzania, Nigeria and Zambia - revealed that lack of suitable labour skills is the primary challenge facing enterprises in African industrial parks. While more than 80 percent of the workers have completed at least junior middle school education, they generally lack the knowhow and skills needed for industrialisation.

Chinese companies play a central role in employment, skills training and technology transfer in Africa. According to a survey by McKinsey & Co., Chinese companies have hired millions of local employees in Africa, with nearly two-thirds of these companies providing training to their local employees. Nonetheless, development of a fully skilled workforce will also require efforts from African governments and universities.

There are also other challenges that must not be overlooked. Firstly, industrial parks are long-term projects that span decades, requiring long-term and stable policy support and assistance from the host country. However, frequent political and leadership changes in some African countries create uncertainties regarding the long-term effectiveness of relevant policies.

Secondly, most African countries are still in the early stages of industrialisation where the industrial activity is often labour-intensive. Due to a lack of differentiated development paths, many industrial parks face challenges in attracting investments caused by homogeneous competition.

Thirdly, some industrial parks have limited channels to make profit, insufficient liquidity, and lack of financial support.

The future development of China-Africa cooperation on industrial parks requires the establishment of an international multilateral cooperation framework, along with a clear division of labour for African countries within the BRI cooperation.

The author is director of Research Office of the Institute of South-South Cooperation and Development, and deputy secretary general of Centre for African Studies, Peking University


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