Africa the next China – Is it an overstatement?

What is China to you?

It really depends on what you define China today as, to have a basis of comparison for the future Africa you envision. Are you talking about Africa becoming a geopolitical superpower, a manufacturing hub or a mighty economic force?

Africa’s potential to become the next China

Prior to the big spurt of growth, China was actually quite similar. With a large portion of the population living in poverty, uneducated, but young and fit for manufacturing work. This makes Africa an ideal candidate as the next manufacturing hub of the world. Africa’s growing population and declining infant mortality rate will result in them having the world’s largest working population at some point in time.

As costs rise in China, manufacturers have started migrating some of the cheaper lost cost goods production to Africa. The cost and population advantage Africa have will fuel this growth. The construction boom in Africa has also led to a growth in domestic manufacturing to serve the demand of the local market.

In addition to Chinese investment in the manufacturing space, the Chinese urbanisation plans have been deployed in African cities. Railways, offices and housing estates have been built by the Chinese, to the Chinese specifications. This urbanisation will support manufacturing and create jobs in the short term; Economic growth in the long term.

The theoretical results of manufacturing and urbanisation

There are tons of literature covering the benefits of industrialisation, so I will not go into detail. But in general, industrialisation has allowed large number of people, who were previously subsistence farmers to participate in the global economy. This will lead to urbanisation and growth, as we have seen from the industrial revolution in the past. The transfer of knowledge and skills will at some point in time allow Africans to start their own industries. An ecosystem of supporting services will spring up to meet the needs, further contributing to their growth.

Like many emerging countries, where governance is weak, and corruption is widespread, Africa will experience income disparity and environmental degradation in similar proportions. Whether they will manage to move up the value chain like how China has or be able to sustain growth by focusing on local consumer demands is something that is too far down the road to tell.

Continent vs Country

Up until this point, it does seem quite likely that Africa will be the next China, at least when it comes to manufacturing and using industrialisation to lift themselves out of poverty. However, many seem to overlook the fact that Africa is a 54-country big continent, whereas China is a single country. This means that China got a head start, with common language culture and a single government. Africa also face other unique challenges of widespread diseases.

While there are plans to unify Africa, it will be an immensely difficult task to pull off. The level of development among African nations vary greatly, making integration difficult to negotiate. Unlike China where the majority of the growth is concentrated along the coastal area, the developed cities are far apart in Africa, presenting geographical challenges.

 What could change the outcome?

China went through the growth phase in the 20^th century. Africa will be going through theirs in the 21^st century. Affordable mobile computing is available, and internet access is widespread.

The connectivity will accelerate the flow of information. Opportunities and successful business models will make inroads to Africa faster than before. This will be Africa’s chance to not just play catch up, but to leap frog China’s traditional road to success.

China’s heavy involvement in transferring technology and funding the urbanisation African cities will give the African a chance at accelerating their growth faster than China managed previously.

What does Africa’s future look like?

The African industrialisation and urbanisation will happen and offer growth. It is likely to become a manufacturing hub due to pull factors like cheap labour, and push factors like high costs from existing hubs.

The infrastructure projects in Africa, while a good start, are nowhere near the scale of China’s. It is unclear if Africa will be able to band together and dare to take the risk to fund mega projects like China’s high speed rail for their next phase of growth. After all, even India did not manage something similar.

China and Africa are different in almost every aspect. Society, culture, economy and language. It is unclear if industrialisation and the replication of Chinese urbanisation plans will reap the same results. There are too many variable factors here and hence beyond acknowledging that they will become a manufacturing hub, the rest remains to be seen. What do you think? African Lion; The new Asian Tiger perhaps?

Thanks for reading The Low Down, insight and inside knowledge from the team at Momentum Works. If you’d like to get in touch with us about any issues discussed in our blog, please drop us an email at [email protected] and let us know how we can help.