TUNIS, Tunisia — Africa may be an alternative for textiles and apparel manufacturers that are paying higher labor costs in China and other newly industrialized nations, a top African banker said.
This story first appeared in the January 14, 2010 issue of WWD. Subscribe Today.
Donald Kaberuka, president of the 53-nation African Development Bank, which seeks to promote economic and social development on the continent, said at the bank’s Eminent Speakers Program here that the higher wages have already caused some Chinese industries to relocate to Southeast Asian nations such as Cambodia and Laos.
Speaking with a group of visiting foreign reporters, Kaberuka said he expects some relocations for textiles and apparel industries “could be on the African continent.” He plans to visit Beijing next month in an effort to ensure “that some of this manufacturing capacity comes to Africa.”
However, Kaberuka, a former minister of finance in Rwanda, said big outlays would be needed to improve core infrastructure such as roads, ports and public utilities.
“You can’t bring factories to a place where there is no energy or no access to the maritime ports,” he said, adding that such improvements could lower the business costs. “We hope we can lead forward,” he said.
Kaberuka, an economist trained at Glasgow University, has estimated that Africa needs about $75 billion a year over the next decade just for sub-Saharan African nations’ infrastructure. He said many African nations need to move away from their heavy dependence on the export of commodities and into more value-added manufacturing, including production of yarn, rather than simply exporting cotton.
Regarding textiles and apparel, Kaberuka said the industries on the continent need to boost supply capacity, noting that preferential trade agreements such as the U.S.’s Africa Growth & Opportunity Act are fine “but they do not increase supply capacity.”
The bank annually provides billions of dollars in project loans and grants, and private guarantees, including trade finance support. In 2010, Kaberuka predicted African economic growth could increase 6 to 6.5 percent “across the continent,” driven largely by renewed demand for commodities, particularly from China and India. But he cautioned that commodity-dependent growth “is not sustainable” and stressed the importance of promoting domestic growth and economic integration in Africa.