Hai, H., Versi, A. How Africa can succeed Asia, according to Helen Hai. GREAT Insights Magazine, Volume 4, Issue 5. August/September 2015. (This article was first published in African Business, June 2015).
Africa can replace Asia as the world’s factory floor. Having established one of Africa’s biggest shoe factories, businesswoman Helen Hai knows how.
I first met Helen Hai earlier this year during a conference in Accra organised by the African Centre for Economic Transformation (ACET) and Ghana’s National Development Planning Commission. Ghana had just launched its own Economic Transformation Agenda, and ACET had invited four other African countries to share their experiences, as well as Hai, to discuss the prospects of accelerating Africa’s industrialisation. In some circles, Hai is talked about with a sense of awe. In Ethiopia, she set up one of the biggest shoe manufacturing plants in sub Saharan Africa before helping establish a garment export factory in Rwanda all in record time. In Accra, when the youthful, petite and bubbly woman was introduced to me as Helen Hai, I was a little taken aback. Given her achievements, I had expected someone more formidable looking who would be able to immediately win the respect of all those around them. But I needn’t have worried. Hai shook hands vigorously, found something amusing to say to everybody and, like an excited schoolgirl on her first visit to a foreign country, asked countless questions about everything; in no time at all, she had won over everyone an essential quality in any business leader.
Manufacturing for export is the basis on which Asia’s economic transformation has been built. But the question for African countries is whether, coming so late to the field, they can hold their own in this same cutthroat environment. Helen Hai certainly thinks they can. In fact, she believes that Africa can become the next “factory floor” of the world and has shown how it can be done. “I came to Ethiopia in October 2011 as vice president and general manager of the Huajian shoe factory,” she says. “Three months after first putting my feet on Ethiopian soil, we were ready to export to the demanding and high income market in the US. Six months later, I had doubled Ethiopia’s export revenue in the shoes sector. By month 12, I had hired 2,000 local workers; by month 24, I had hired 3,500 local workers.” The unlikely experiment turned out well. So well, in fact, that Huajian is planning an additional investment of $2bn. This will take the workforce to over 30,000, turning the enterprise into one of the single biggest manufacturing outfits in the Global South. Success breeds success. Following Huajian’s debut, Ethiopia’s export processing zones (EPZs), which had been languishing and largely ignored by international investors for years, sprang to life. All 22 units of the Bole Lamin EPZ, built by the government in 2013, were snapped up by manufacturers from, among other places, India, Bangladesh, Turkey, Korea and China, In just a few short years, Ethiopia’s basic manufacturing sector was starting to transform into a serious global player. It may still be in the minor leagues when compared to the mega volumes being churned out by the Asian Tigers, but it is on the up. Furthermore, as Hai points out, many Asian countries were much smaller in production terms at a comparative stage to Ethiopia two or three decades ago. And she believes that what is happening in Ethiopia can be replicated in many other African countries. To prove her point, she persuaded a young Chinese textiles manufacturer. Candy Ma, who had already invested in Kenya, to set up shop in landlocked Rwanda. C&H Garments (Candy & Helen) is in a new government buiIt factory and is training some 200 workers. Ma expects to export around 30,000 Tshirts a month. “Her plan is to expand 10 times, to 2,000 workers in one year,” says Helen. “And she will do it” Hai has also been in talks with the governments of Senegal and Ghana on setting up similar export based light manufacturing outfits. For African governments, faced with a steadily rising population of unemployed young people, such labour intensive industries could be the answer to their prayers. The added advantage is that they provide the much needed causeways to the industrial future that Africa’s rapid urbanisation demands. They introduce new skills and technologies, managerial talents, open up new markets and bring in foreign exchange. These factories, as they have done for the Asian Tigers, could well be the wellsprings for substantial wealth generation as well as poverty alleviation.
More and more countries are waking up to these possibilities, though the pace of change is still slow and few countries seem to want to take the initiative like Ethiopia did. “People ask me why you chose Ethiopia,” says Hai. “I say, we did not choose Ethiopia, Ethiopia chose us.” She recounts that when the late Prime Minister of Ethiopia, Meles Zenawi, called on Justin Lin, former chief economist at the World Bank, to ask his advice on how to rapidly create more jobs and raise income levels, Lin advised him to invite a Chinese manufacturer to set up in Ethiopia. “He took the advice,” says Hai, “and that is why we came. What is more, he and his ministers were always ready, day or night, to fix problems and smooth out the way. Doing business in Africa is always difficult, but when you get the kind of support we did from the very top, everything is possible.” Senegal’s Prime Minister, Mahammed Dionne and Rwanda’s President Paul Kagame followed suit and, like Zenawi, invited industrialists to start operations in their countries and took personal responsibility to make sure that obstacles were removed. “Without this kind of visionary and dedicated leadership, you cannot move an inch,” says Hai. “With it, the world is yours.” She says that the reason Africa could well succeed Asia as the next global manufacturing centre is because it has a large pool of young, underemployed, low cost labour, is closer to the main high income markets, and enjoys duty free access to most of those markets. Labour costs, which tend to constitute around 25% of the overall costs of items like shoes and textiles, have been rising in Asia and, in particular, China. Hai says that despite serious shortcomings in Africa efficiency levels are relatively low, infrastructure is in bad shape, logistics are some of the most expensive in the world, and bureaucracy can be stifling the figures still add up. Manufacturers can make better margins in Africa than anywhere else. For the continent then, the window of opportunity to make the great leap forward into an industrial future is now open. But Hai warns, “it won’t remain open forever.”
About Helen Hai
Helen Hai is the CEO of the Made in Africa Initiative and is an adviser to the governments of Ethiopia, Rwanda and Senegal for investment promotion and industrialisation. She is a senior advisor on South-South cooperation for the International Finance Corporation (IFC) and works closely with the UK’s Department for International Development (DfID), World Bank, Gates Foundation, Tony Blair Africa Governance Initiative and other multilateral players. She has a BA in actuarial science and MSc in actuarial managment from City University in London and EMBA from INSEAD and Tsinghua University. She is also a UN Industrial Development Organization (UNIDO) Goodwill Ambassador. She was elected as one of the Young Global Leaders (YGL) 2015 by WEF this year.
This interview was conducted by Anver Versi, former Editor, African Business and first published in African Business, June 2015 Special Report WEF Africa.
Photo: Huajian shoe factory in the Eastern Industrial Zone in Ethiopia. Credits: Unido.
This article was published in GREAT Insights Volume 4, Issue 5 (August/September 2015).