Africa has largely failed to emulate this success as it has lacked the necessary policy environment. Deficient infrastructure on the continent has also led to higher production and transaction costs. Poor leadership, governance, weak institutions and rent-seeking activities have also detracted from opportunities to build the continent's value-added sector. Despite significant tariff preferences into the United States, under the African Growth and Opportunity Act (AGOA), Africa's manufactures are not competitive.

In contrast, China has quickly become the global price setter for manufactured exports. This has affected African manufactures' market shares in domestic and export markets – particularly in the clothing and textiles sector, as this is the sector that has substantial manufactured export capacity in Africa (relative to other manufacturing sub-sectors).

To put this into context, U.S. imports of apparel and clothing totaled $79 billion in 2008. Through improvements in its global competitiveness, China expanded its contribution to U.S. clothing imports from 11.4 percent in 1990 to 14.6 percent in 2000 and 34.5 percent in 2008. Africa reduced its stake in the American market from 11.9 percent in 1990 to 6.6 percent in 2000 and only 2.5 percent in 2008. Although African economies were growing rapidly during this period and enjoyed tariff preferences, they were unable to expand or even maintain their market share in the United States.

Competition

China is a notable competitor for Africa's clothing and textiles sector – a key job-creating sector and established springboard for diversification. Such competition, coupled with greater Chinese resources demand, has arguably steered some African economies toward greater specialization in natural resources production. Yet, it is Beijing that has expressed goodwill and taken action to address imbalances in some African countries' trade and productive engagements with China.

China's shifting production structure and move up the manufacturing value chain, coupled with Beijing's pursuit of a more sustainable growth path, is resulting in reforms of the nation's industrial capacity, and ultimately a shift from "Made in China" to "Created in China." The World Bank estimates that more than 80 million Chinese lower-end manufacturing jobs will be moved offshore over the medium term due to rising labor and input costs. As mature, labor-intensive industries look to move to relatively lower-cost regions, competitive and forward-looking African economies should use opportunities in these industries to position themselves to attract investment.

Chinese-funded and constructed special economic zones (SEZs) in nations such as Ethiopia, Mauritius, Nigeria and Zambia, are already supporting this trend. These zones could be key contributors to unlocking Africa's diversification potential and value-addition based industries. These dedicated geographic areas are attracting production industries. Supported by transport, power and other business infrastructure improvements, as well as preferential tariff structures, these zones, if managed effectively, could be catalysts in Africa's move toward diversification. The SEZs are positioned to attract FDI through various fiscal and other incentives, and to generate foreign reserves from value-added exports. Ultimately though, they look to create opportunities for local employment, skills and technology transfer, as well as the potential for backward linkages in host countries to pursue greater diversification of exports and domestic economic activities.

With China already acting as a major contributor to the advancement of Africa's infrastructure, and a key financier of the continent's development, African policymakers should be actively looking to attract Chinese production in industry, assembly and agro-processing sectors by drawing on Chinese capital, skills and technology, either through joint ventures or partnerships. China has already given financial support to such ventures. And as domestic structural changes in China accelerate – with China moving away from being a leading exporter economy to becoming a consumer and investor-focused country – industrialization prospects could improve for countries that recognize this opportunity and position themselves accordingly.

(Hannah Edinger is Head of Research & Strategy at Frontier Advisory. Ron Sandrey is an Associate at the Trade Law Center of Southern Africa).