http://www.bloomberg.com/news/2014-07-22/ethiopia-becomes-china-s-china-in-search-for-cheap-labor.html
Ethiopian employees work inside the Huajian Shoes' factory outside Addis Ababa.
Ethiopian workers strolling through the parking lot of Huajian Shoes’ factory outside Addis Ababa last month chose the wrong day to leave their shirts untucked.
Company President Zhang Huarong, just arrived on a visit from China, spotted them through the window, sprang up and ran outside. The former People’s Liberation Army soldier harangued them loudly in Chinese, tugging at one man’s aqua polo shirt and forcing another’s shirt into his pants. Nonplussed, the workers stood silently until the eruption subsided.
Shaping up a handful of employees is one small part of Zhang’s quest to profit from Huajian’s factory wages of about $40 a month -– less than 10 percent the level in China.
“Ethiopia is exactly like China 30 years ago,” said Zhang, 55, who quit the military in 1982 to make shoes from his home in Jiangxi province with three sewing machines and now supplies such brands as Nine West and Guess?. “The poor transportation infrastructure, lots of jobless people.”
Almost three years after Zhang began his Ethiopian adventure at the invitation of the late Prime Minister Meles Zenawi, he says he’s unhappy with profits at the Dongguan Huajian Shoes Industry Co. unit, frustrated by “widespread inefficiency” in the local bureaucracy and struggling to raise factory productivity from a level he says is about a third of China’s.
It takes two hours to drive 30 kilometers (18 miles) to the Huajian factory from the capital along the country’s main artery, illustrating the challenges. Oil tankers and trucks scream along the bumpy, potholed and, at times, unpaved road. Goats, donkeys and cows wander along the roadside and occasionally into bumper-to-bumper traffic. Minibuses and dented taxis, mostly blue Ladas from the country’s past as a Soviet ally, weave through oncoming traffic coughing a smoggy exhaust.
Huajian is nonetheless becoming a case study of Ethiopia’s emerging potential as a production center for labor-intensive products from shoes to T-shirts to handbags. In a country where 80 percent of the labor force is in agriculture, manufacturers don’t have to worry about finding new workers. Its population of about 96 million is Africa’s second-largest after Nigeria’s.
Huajian’s 3,500 workers in Ethiopia produced 2 million pairs of shoes last year. Located in one of the country’s first government-supported industrial zones, the factory began operating in January 2012, only three months after Zhang decided to invest. It became profitable in its first year and now earns $100,000 to $200,000 a month, he said, calling it an insufficient return that will rise as workers become better trained.
African nations have a compelling opportunity to seize a share of the about 80 million jobs that China will export as its manufacturers lose competitiveness, according toJustin Lin, a former World Bank chief economist who now is a professor of economics at Peking University.
‘Great Potential’
Cost inflation in countries including China has prompted Hennes & Mauritz AB, Europe’s second-biggest clothing retailer, to work with three suppliers in Ethiopia. The nation has “great potential” for production, H&M head of sustainability Helma Helmersson said in an April interview.
China’s average manufacturing wage is 3,469 yuan ($560) per month. Pay at the Huajian factory ranges from the basic after-tax minimum of $30 a month to about twice that for supervisors. By contrast, average manufacturing wages in South Africa, Africa’s biggest manufacturer, are about $1,200.
The duty-free and quota-free access that Sub-Saharan Africa enjoys for the U.S. and EU markets gives additional savings thanks to the African Growth and Opportunity Act for the U.S. and the EU’sEverything But Arms accord for the poorest countries. Import tariffs on shoes made in China range from 6 percent to as much as 36 percent, Zhang said.
Chinese and Ethiopian work supervisors stand for inspection by their President Zhang Huarong outside a shoe factory operated by Huajian Group outside Addis Ababa.
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