Written by Aaron Maasho | From Reuters

As basic wages soar in China, low-end manufacturing is starting to shift to cheaper locations around the world, and frontier African nations such as Ethiopia are positioning themselves to reap the benefits.

With rock-bottom wages, cheap and stable electricity and improving transport infrastructure, the continent’s most populous nation after Nigeria is building a reputation for producing clothes, shoes and other basic goods.

The sector is still in its infancy in what was for decades a Communist-run economic backwater. Bureaucracy and poor transport links mean business costs aren’t quite as low as they might be.

But state investment in factory zones and the arrival of firms from Turkey, India, the Gulf and China suggest industrialisation is finally taking root in the east African giant, where many still rely on subsistence agriculture.

“We have to move because of manufacturing’s development in China, due to the high increase in wages and in raw materials,” said Nara Zhou, spokeswoman for Huajian, a Chinese company that makes over 300,000 pairs of boots and sandals a month for retailers such as Guess from a factory near the capital.

“Ethiopia enjoys stability, the government is eager to industrialise and there is also the low labour cost here – a tenth compared to China,” she added.

HIGH GROWTH RATES

For years, investors gave Ethiopia a wide berth, wary of the heavy role played in the economy by a government that shuns the liberalisation seen in other African nations and which has retained its monopoly on telecommunications and bar on foreigners in the financial sector.

However, in the last few years the commercial logic of factory production has started to outweigh those concerns, and the wider effects are dramatic.

The government is projecting gross domestic product (GDP) growth at 11 percent a year, and even though the International Monetary Fund is more sober its 8.5 percent forecast for this year indicates Ethiopia is one of Africa’s – and the world’s – fastest-growing economies.

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