China’s Huajian To Invest $2billion In Ethiopia, Export Shoes To Europe And North America

VENTURES AFRICA- China has continued to establish itself in the shoe making industry of Ethiopia. At the Eastern Industry Zone in Dukem, 30 kilometers (20 miles) south of the Ethiopian capital, Addis Ababa, it is typical to see several Ethiopians gluing soles and lace up boots in Chinese shoe factories.

The presence of Chinese shoe companies marks a distinct diversification from the traditional investment of China in infrastructural development and oil sector in African countries.

One of the major investor in the shoe business in Ethiopia is the Huajian shoe factory.

Huajian is one of China’s biggest shoe manufacturers. It plans to invest up to US$2 billion (1.5 billion euros) in Ethiopia to make shoes for export to Europe and North America. Ethiopian government plans to expand the industrial sector by building five more industrial zones throughout the country to attract further foreign investment. When completed in 2014, the US$250 million project will host over 80 factories and create 20,000 local jobs. Currently six Chinese-run factories operate in the zone, including a car assembly plant and a plastics factory.

However, China’s investment in the Ethiopia shoe business is not a one-side affair as Ethiopia also benefits from this bargain by exporting unprocessed raw materials like leather to far away China. Deputy Director of the Eastern Industry Zone, Qian Guoqing, said “The two sides have a commitment; they say ‘you should have something, I should get something.”

Meanwhile, some analysts stated that having a large scale investment in Ethiopia has its risks as its financial benefits are uncertain.

Stephan Dercon, a development economist at Oxford University said, “It’s not a risk-free strategy and it’s not necessarily clear that it will work.”

“The Chinese … take the opportunities now in Ethiopia where they make the trade-off between very high rewards. That’s pretty risky in the first few years of doing this, and we’ll have to wait and see.”

However, to minimise risks and attract investors, the Ethiopian government is offering four-year tax breaks, cheap land and free electricity to investors in the industrial zone.

But there may be trouble in paradise as foreigners complain of poor telecommunications, overbearing bureaucracy as well as the absence of a port in the landlocked Horn of Africa country.

Huajian’s human resource manager, Paul Lu, also cites cultural differences, language barrier and poor work ethic among the locals as a problem. Yet he said the availability of labour and raw materials were key attractions.

“We came to make shoes and we had to consider the resources — Ethiopia is very rich in leather,” said Paul.