Why African companies should view China as a market, not as competition

China is often viewed as a threat to Africa’s manufacturers due to its cheap exports. But Jas Bedi, the Kenya-based chairman of the African Cotton & Textile Industries Federation (ACTIF), sees the Asian giant as a market for Africa’s textiles and apparel. He cites demand from China’s growing middle class increasingly spending on everything from cars to fine wines.

Additionally, China’s strength as the world’s manufacturing hub is now threatened by rising production costs and an ageing workforce.

“Chinese consumption is going up. China is no longer the factory of the world. China is becoming the market of the world. Last year China bought the largest amounts of Mercedes Benz cars, whiskey, wines … we have to think differently. China is not competition anymore, if anything it is a market. So how do we service that market?”

Little faith in ‘Made in Africa’

Bedi co-founded ACTIF in the mid 2000s to lobby for the extension of the African Growth and Opportunity Act (AGOA) after its first expiry. The Act offers manufacturers in Africa duty-free access to the US market. Since its inception, ACTIF has focused on expanding market access and trade opportunities for African cotton, textiles and apparel manufacturers. Africa’s garment industry is one of the big beneficiaries of the programme.

However, when AGOA came into effect in 2000 Bedi recalls there was little faith in ‘Made in Africa’.

“Initially we found it difficult to penetrate the market. They looked at Kenya and all they saw was a great country for a wild life safari. But they wondered whether we could really make garments. So we had to deal with our image, and after a while buyer perceptions towards Africa changed.”

But in 2005 export restrictions on Asia were lifted allowing countries such as China to do as much export volumes as it could. Bedi says many Africa-based manufacturers suffered as foreign investment relocated back to Sri Lanka, China, India and Bangladesh.

‘The sexiest bride in town’

The Kenyan industrialist notes the tide has been changing with costs rising in China. Health and safety concerns have also affected buyer perceptions towards countries such as Bangladesh where 117 people died in a textile factory fire last year.

“We see a renewed interest in Africa,” says Bedi, adding there are several factors that work in favour of the continent’s textile industry. For one, it has significant production of cotton, although currently a vast majority is exported in raw form. Hence there is room for value addition. Africa also has a big and expanding young population.

“That tells you we are going to have a big labour force in Africa,” he says. “In the 1900s everything was made in England. Later trade moved to Hong Kong, Korea, China, Vietnam, Bangladesh and Cambodia. Where will it go next?

“I say Africa. I call Africa the sexiest bride in town. Everybody wants a slice of her.”

He notes investment into Africa’s textiles industry is also increasing. In the last few months new investments have been made in Uganda while foreign investors have made commitments to pump hundreds of millions of dollars into Ethiopia and Kenya’s industries.

“Industrialisation all over the world started with basic industries like textiles and apparel. It is an industry that employs a lot of people. From here we can continue with the industrial revolution and move into other industries like electronics. That is how we will move up the ladder and become wealth creators,” he predicts.

It’s not all doom and gloom

Whilst poor infrastructure and the high cost of electricity is a key challenge for manufacturers in Africa, Bedi believes “not everything is gloom and doom here”. With AGOA in place, textile and apparel manufacturers in Africa have access to a multi-billion dollar market in the US alone.

“We have an opportunity to grow our business 100-fold because we are allowed to export to the US duty free, while Asia is not. To me, that is massive opportunity waiting in front of us.”

He adds that African countries like Uganda which is a significant cotton producer, and Nigeria with a large population and big “national dress”, hold immense potential.

“You and I wear three metres of fabric each, but in Nigeria the national dress is made of seven metres of fabric. That is double per capital consumption… it is like India. The Indian sari is seven metres long; no wonder the textile industry is flourishing there.”

Bedi says the picture is even more promising globally citing industry statistics which show as at 2012 the textile and apparel industry was valued at $1.7tr.