Risks and opportunities

Recognizing the important economic role that the textile and apparel sector plays on the continent, the Southern African Customs Union (SACU) and Botswana is developing an industrial development policy, attracting and encouraging foreign investment in Africa. For the industrial development policy, textile and apparel sector has been identified as one of the priority sectors by SACU member nations namely, Lesotho, Swaziland, Botswana, Namibia and South Africa.

Apart from SACU, African communities, including the Economic Community Of West African States, the Southern African Development Community, East African Community, not only enjoy collaborative business opportunities between community members, but can take advantage of the same. Exports and imports within member countries enjoy preferential tariff rates, which facilitate enterprises that develop in Africa. "As long as we enter one market [of community members], we will easily enter other markets," said Yao.

Last December, China signed an agreement with four major African cotton-producing countries - Benin, Burkina Faso, Chad and Mali, to strengthen cooperation in cotton production.

Cooperation will include technology transfer, technical assistance in researches, provision of seeds, agricultural machinery, fertilizers and pesticides, funding of training projects, as well as exchanges of experience, in order to improve understandings of Chinese textile entrepreneurs toward Africa, and further encourage Chinese textile capital to Africa.

"In the longer term, we may relocate some of the textile and apparel industry into Africa," said Chinese Commerce Minister Chen Deming at the agreement signing ceremony, noting that there are already cases of such relocations.

Such cooperation will help boost cotton production in Africa. As Jas Bedi, Chairman of Kenya Association of Manufacturers and Africa Cotton and Textile Industry Federation, put it, "Kenya looks forward to Chinese textile enterprises' investment." He believed that both sides would create a bigger market by taking advantage of China's advanced technology and African preferential policies in the clothing and textile sector.

The continent's potential is undisputed in the face of a relatively unfamiliar market environment; industrial analysts suggested that a careful analysis of local markets is a must for enterprises.

"Development of the textile industry and local needs differ among various African countries," Luo Kun, Assistant Researcher with Asia-Africa Development Research Institute of the State Council Development Research Center, told ChinAfrica, adding that the actual investment will vary depending upon local conditions peculiar to the geographic area or market. He suggested to carry out more technical cooperation between China and African countries with developed textile industries, such as Egypt and Sudan, while companies should take into consideration the higher investment cost and security issues when considering investment in some African countries with great potential in the textile industry, like Tanzania.

Luo believed that it is an inevitable trend that Chinese enterprises establish industrial parks in Africa. "Making use of the industrial parks or free trade zones [established in Africa] can avoid vicious competition and a waste of investment and resources, so as to ensure market order."

Government and industry associations should also offer guidance to help enterprises engaged in overseas investments integrate resources, avoid risk, and achieve mutual benefits and win-win situation for both sides, he added.