“Shoe city” is how Helen Hai, CEO of Chinese export giant Huajian, describes its future.
Chinatown is how locals describe it.
Both are referring to the area outside of Addis Ababa, Ethiopia that is home to Huajian’s shoe manufacturing plant and the foundation of the company’s grands plans to develop Ethiopia as a manufacturing powerhouse for footwear.
The foundation for this billion dollar development plan began in 2011. Hai opened a factory in Dukem shortly after meeting with the late prime minister of Ethiopia, Meles Zenawi, who outlined the mutual benefits of opening a shoemaking factory.
China would get to access Ethiopia’s cheap labor, abundant supply of leather, cheap electricity costs and preferential trade tariffs.
Ethiopia would get to increase exports and benefit from job creation. By some accounts, the Huajian factory, which makes shoes for Guess, Clarkes, Naturalizer, and other western brands, employs more than 1,500 Ethiopians.
So why is a Chinese company taking such an interest, besides the obvious reasons, in Ethiopia?
China, which is still often identified on the world market as the resource for cheap manufacturing and cheap labor, is evolving as an industrial center. Hai explained to BDLive that her company is starting to think about what’s next, indicating that China’s evolution in its economic development cycle involves going abroad to capitalize on complementary opportunities.
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“Our aim here is in 10 years’ time to have a new cluster of shoes making,” Hai told BDLive. “Definitely we want to build a whole supply chain. I want everything to be produced here.”
In April, the Huajian Group announced plans to expand its existing operations and build a manufacturing zone, which Hai expects to generate $4 billion in exports over the next 10 years and employ more than 1000 local workers.
But this plan will require $2 billion in investment. It has support from agencies like the World Bank, whose chief economist Justin Yifu praised development of manufacturing in clothing, leather, metal, agriculture, and wood as a path to economic growth.
Dr. Asayehgn Desta, associate professor of finance and economics at the Dominican University of California, believes that China’s presence is inevitable. “In a globalized world, it might be very difficult to prevent competitive foreign companies from investing anywhere but what kind of investment are we talking about? Is the Huajiian company involved in a joint venture or wholly-owned investments in Africa?
China’s relationship with the continent has been much discussed in the world global debate; and in some cases has been deeply criticized for ushering a new age of colonialism. But Huajian’s specific endeavor has not drawn as much criticism as expected. Many experts support the relationship between the two countries.
“If this goes forward it will be enormously helpful to Ethiopia,” said Dr. Deborah Brautigam, a professor and director of international development at Johns Hopkins University. “There may be short term costs as local producers and those producing for export compete for the same supply of raw materials. But over the medium term that market will sort itself out, as Ethiopia has enormous herds of cattle, goats and sheep.”
Although some critics worry about the longterm undermining of local development and neo-colonization, Zemedeneh Negatu, managing partner at Ernst & Young Ethiopia, told the Guardian that he believes China’s involvement doesn’t have to be long term and that it can represent the inception to self-reliant economic progress.
“Huajian could be the anchor but all around are Ethiopian companies,” Negatu said. “It should be made clear to investors that they need to help build local capacity.”
While Hai’s company has been making international headlines for its bold foray, another local shoe entrepreneur, Bethlehem Tilahun Alemu, has been nurturing her company, soleRebels, as a model of locally-focused business development.
Employing more than 300 local workers to make shoes from old tires, soleRebels is the first Ethiopian certified fair trade footwear firm and the largest African footwear brand in the world, selling its shoes in more than 55 countries.
According to Forbes, soleRebels generates more than $1 million in revenue. While Alemu continues to rack up praise as an African-born example of entrepreneurship and self-reliance, foreign companies like Huajian are betting big that their investment will reap big rewards.