Four new factory buildings rise up from fields on the outskirts of Senegal’s capital, the first phase of a government plan to woo Chinese companies shifting low-end manufacturing to Africa as wages in East Asia rise.
Senegal, a country with a tiny manufacturing base and main exports including fish and peanuts, hopes to replicate that success with a new industrial park and a deal with the Chinese businesswoman whose shoe factory kick-started Ethiopia’s nascent industrial revolution. The nation’s stable democracy and Atlantic Ocean port make it a natural candidate for export-based industry, but it ranks 147 out of 190 countries on the World Bank’s ease of doing business index due to problems with electricity access and bureaucracy.
The 85 billion CFA franc ($138.59 million) project in the town of Diamniadio is gambling on hopes it resuscitate a manufacturing sector that has languished for decades. If it works, this will be one of the first cases of Chinese industry spreading to Francophone West Africa. China has also invested in manufacturing in Ghana and Nigeria, West Africa’s top economies, but its activity in the French-speaking countries has been centred on more traditional areas like infrastructure and mining.
C&H Garments, a Chinese company plans to hire 5,000 workers at Diamniadio and export clothes to the U.S. and Europe, said co-owner Helen Hai. Hai expects the plant to open this year. Around 20 other companies from Senegal, North Africa, Europe, and Asia have applied for factory space and are awaiting selection although Senegal still needs to pass new tax laws for the special economic zone.
This was the case in Ethiopia. After Hai’s shoe company Huajian opened a plant near Addis Ababa in 2012, other firms clustered around it and foreign direct investment grew over 300 percent to reach $1.2 billion by 2014, according to a U.N. World Investment Report. Senegal has higher wages and electricity costs than Ethiopia, but its proximity to target markets in Europe and North America makes it attractive, said Hai, who is also advising the government. Nevertheless, analysts say Senegal will still need to work quickly to seize the opportunity in a brutally competitive environment.
Between five and 10 African countries are likely to see their industrial sectors take off in the next decade as production shifts from Asia, said John Page, a Brookings fellow and former chief Africa economist at the World Bank.
“It’s going to be a combination of better governance, better policies, and some good luck” that distinguishes the countries that pull ahead from those that don’t, Page said.