Africa to become world's manufacturing hub through industrial cooperation with China: AfDB chief

The chief of the African Development Bank (AfDB) Donald Kaberuka says time has come for Africa to become the world's manufacturing hub and this can be done through industrial cooperation with China as the Asian giant phrases out labor-intensive industries.

"The global manufacturing cycle started from Europe then to America, before moving to South East Asia and China. It is now coming to Africa," Kaberuka told Xinhua Monday on the sidelines of the African Union (AU) summit held in Johannesburg, South Africa.

Kaberuka, who is to retire from the helm of the AfDB this August after serving two consecutive five-year terms, quoted a Chinese metaphor "building the nest to attract birds" to urge the African countries to put in place proper infrastructure and enabling policies to facilitate the transfer of manufacturing industries from China.

"This is the time for Africa to build the nest, the birds are waiting to come and breed," he said.

He said low labor costs and an integrated, larger market through the creation of the Tripartite Free Trade Area (TFTA) would help Africa attract foreign investment to the manufacturing sector.

However, the regional bank chief stressed the need for the continent to put in place an enabling environment for investors to come in, such as adequate power and transport infrastructure.

He said Africa needed to address factors undermining its foreign investment attraction capacity such as the high cost of doing business mainly due to insufficient energy supplies and a weak regulatory environment.

The continent also needed to address the capacity of its maritime ports to ensure fast clearance of goods, he said.

"Sometimes boats bringing materials have to wait for a week or two weeks before discharging cargo. So old infrastructure is a limiting factor but of these, energy is the biggest limiting factor," he said.

China built up its export-oriented economy based on proliferation of low-cost, labor-intensive factories over the past three decades. But this edge of low-cost is being eroded by the gradual rise of workers' income and benefits as the economy continues to develop. Over-capacity at home in sectors like steel, cement, textile, and solar panel manufacture pushed Chinese companies to seek better business opportunities abroad.

The government has also identified industrial cooperation as the top priority for its engagement with Africa this year. Chinese investment to the continent reached 21.2 billion U.S. dollars in 2012, a figure aimed to be raised to 100 billion U.S. dollars by 2020.

Turning to the recently launched TFTA by Africa's three regional economic blocs, Kaberuka said the TFTA was a "major turning point" in Africa's quest to boost intra-Africa trade.

"This region coming together has already made huge progress on the issue of tariff reduction and tariff harmonization," he said.

The TFTA encompassing 26 countries of the Common Market for East and Southern Africa (COMESA), East African Community (EAC) and the Southern African Development Community (SADC) was launched on June 10 with the aim of boosting intra-Africa trade.

The 26 countries, with a combined population of 625 million people, and Gross Domestic Product of 1.3 trillion U.S. dollars, present close to 60 percent of the AU' s GDP and population.

Kaberuka said while intra-Africa trade was generally put at 12 percent and true for the whole of Africa, the actual levels of intra-trade within the TFTA was about 20 percent.

But for the TFTA to become successful, Kaberuka said all non- tariff barriers must be removed while free movement of business people and bona fide travellers must be ensured.

"So for the free trade zone to become free, tariff agreement is important," he said.

The AfDB president said the TFTA presented an immense investment opportunity for China to boost industrial cooperation with Africa.

"For Chinese companies coming to this region, they have access to a whole bigger market from Cape Town to Alexander and that's a huge advantage it offers to Chinese manufactures," he said.

Kaberuka also hailed cooperation in the financial sector where he noted that the AfDB and the Chinese were cooperating in co- financing of infrastructure development projects on the continent.

One such project that had been co-financed by the 2 billion U.S. dollars Africa Growing Together Chinese Fund being managed by AfDB was the Sharm-el-Sheik International Airport in Egypt, he said.