Chinese Entrepreneur Tries to Bring Shenzhen Miracle to Africa
(Bloomberg) -- The Ethiopian officials visiting Shenzhen saw how it was transformed from a tiny, southern fishing village into a manufacturing powerhouse within 35 years, spawning China’s economic miracle. The message was clear: Ethiopia can do this, too.
Yet one minister on the 2013 trip didn’t believe that was enough and sought out his host, Helen Hai, telling her he had plenty of nice reports from American and European advisers showing him a vision of the future. He wanted specifics.
“What I need is somebody to show me how to take the first step,” Hai recalled him saying.
Hai, who at the time ran a pioneering shoe factory in Ethiopia, considered that a seminal conversation for her. Within months, she began setting up the Made in Africa Initiative. Backed by the United Nations Development Programme and with a who’s who list of African leaders as advisers, its mission was to help the continent create manufacturing hubs.
Five years later, her quest has expanded significantly. Hai, 40, co-founded factories making children’s clothes in Rwanda, Senegal and Ethiopia, and she became the UN Industrial Development Organization’s goodwill ambassador in Africa. In July, she began exploring how blockchain technology might help create jobs for the nations there and now heads the $100 million Binance Blockchain Charity Foundation.
“There’s a golden opportunity for Africa,” Hai said. “What it needs now is success stories. They have a snowballing effect.”
Hai is an unlikely champion for Africa’s development. She grew up in Changchun in Jilin province in northeast China. She says she was a typical child of the 1970s and 1980s, with her family pushing her to get a good education and then find a job in a blue-chip company.
She earned degrees in actuarial science at the Cass Business School in London and then became the youngest female partner at U.K. insurance broker Jardine Lloyd Thompson. In 2007, she returned to China as chief actuary for Zurich Financial Services.
In 2011, Hai made a big move, leaving Zurich Financial with a plan to establish her own brand of shoes. That led to a meeting with Zhang Huarong, the chairman of Dongguan-based Huajian Shoes Industry Co., who asked her to help him set up a shoe factory near Ethiopia’s capital, Addis Ababa.
Hai was intrigued by the idea of building a factory in a developing nation, she said. Within three months, Huajian was exporting shoes to the U.S., and within two years it had about 4,000 employees, Hai said. The factory has supplied such brands as Nine West, Guess? and Marc Fisher.
In 2013, former Ethiopia Prime Minister Hailemariam Desalegn invited Hai to accompany him on his first official visit to China. Sitting together on a flight, Hailemariam thanked her for making Huajian successful and then asked her to expand to hundreds, even thousands of factories, Hai said.
So Hai left Huajian to become the first Chinese adviser to the Ethiopian government while pressing forward with her Made in Africa Initiative. Her work in Africa predates China’s ongoing “Belt and Road” foreign investment plan.
Hundreds of Chinese companies have flocked to Ethiopia, helping it become Africa’s fastest-growing economy for most of the past decade. Ethiopia absorbed almost half of the $7.6 billion in foreign investment in East Africa last year, according to the UN Conference on Trade and Development’s World Investment Report.
Companies that set up factories last year included PVH Corp. from the U.S. (a supplier to Calvin Klein Inc. and Tommy Hilfiger Corp.), Dubai’s Velocity Apparelz (Levi Strauss & Co., Zara and Under Armour), and China’s Jiangsu Sunshine Group (Giorgio Armani and Hugo Boss), the report said.
As wages and other costs rise in China and the nation shifts to more sophisticated technology industries, 85 million light-manufacturing jobs must be relocated overseas, Hai said. Ethiopia’s role in Africa is similar to one Japan played in Asia in the 1960s, showing how business-friendly policies and successful factories can trigger industrial progress.
The Made in Africa Initiative now has 15 staff members in nine African nations, Beijing and Hong Kong.
The challenge is huge. Beyond Ethiopia’s borders, attracting investment is proving tough. When advising Rwanda on how to rev up its manufacturing industry in 2013, Hai couldn’t attract a single foreign investor to set up a factory for export from the landlocked nation.
So, with fellow Chinese investor Candy Ma, she co-founded C&H Garments there to serve as a demonstration model. It makes uniforms and children’s outfits and now employs 2,000 people, Hai said. About 80 percent of its production is for exports, mostly to the U.S. and Europe.
In May 2015, C&H had the capacity to produce 15,000 branded Polo shirts a month, said Rwandan Trade Minister Vincent Munyeshyaka. By June 2018, this capacity had increased to 70,000 pieces, including some for the nation’s military.
“This is a huge impact,” he said.
In 2014, Hai advised Senegal’s government on setting up its first industrial park, and C&H Garments subsequently set up a factory there and also in Ethiopia. The initiatives helped manufacturing industry investments in Africa increase almost 9 percent last year to $21 billion. In the textiles, clothes and leather segments, investment surged almost fourfold to about $4 billion, according to the UN.
“Helen understands that a success story is the best way to convert people,” said Justin Lin, former chief economist at the World Bank and an adviser to the Made in Africa Initiative. “If Rwanda can be a manufacturing floor for the global market, every country in African can be, as well.”
There have been some troubles along the way for Hai. In 2013, about 200 workers went on strike at Huajian, demanding a share of profits after a surge in orders.
Hai’s initial successes in Africa come as pressure on the continent to seize development opportunities intensifies amid advancements in automation. Growth models that worked elsewhere could become difficult to emulate, partly because of the rapid adoption of robots in manufacturing, the International Monetary Fund said in an April report. For example, a Sewbot made by Atlanta-based Softwear Automation Inc. can produce T-shirts and jeans.
Still, Hai estimated there’s a five- to 10-year window for Africa to capitalize. So she’s forging ahead with plans to expand C&H, committing $10 million over five years to create 30,000 jobs in Rwanda. The goal is to catalyze $1 billion in investment, Hai said.
In Ethiopia, C&H now has 1,500 workers. In Senegal, where operations just started, there are 300 workers with plans for 2,000 by the end of next year, she said.
“She foresaw that the garment-and-footwear industry can -- and will -- move to Africa, eventually,” said Henok Assefa, founder and managing partner at Precise Consult International in Addis Ababa. “Given her exposure to the demands of Western markets and her Chinese background, she brought an interesting perspective to support African policy makers.”
©2018 Bloomberg L.P.