Chinese manufacturers look to Rwanda as wages rise at home

Rwanda may be landlocked in central Africa and saddled with prohibitive energy costs, but it has become the latest beneficiary of a quest by Chinese manufacturers to find competitive margins as wages rise at home.

Candy Ma, a 40-year-old Chinese industrialist, has just hired 200 trainee workers at her new government-built factory in the heart of the east African country, and this month, she invited buyers from Walmart, H&M and Tesco to inspect the facility. She plans to export 30,000 T-shirts a month - enough for an initial $10m in first-year sales - and expects to expand tenfold to 2,000 workers next year.

Her investment underscores a gathering trend. The Chinese, often blamed for destroying African industry by flooding the continent with cheap goods that undercut local markets, are now at the forefront of foreign manufacturers expanding their footprint across the continent.

Chinese factory owners, driven by a strengthening renminbi and rising salaries at home, are relocating to secure more competitive margins.

The World Bank says China is set to lose 85m manufacturing jobs in the next decade. While most Chinese companies are looking at opportunities close to home in Southeast Asia, more far-flung countries are also beginning to benefit. One of the main attractions of African countries is their preferential trade agreements with the US and Europe, which mean that finished products, such as textiles, avoid import duties of up to 30 per cent.

Chinese manufacturers such as Candy Ma have also been impressed by the example of Huajian Shoes, the first Chinese factory to relocate large-scale to Ethiopia in 2012 and which plans to expand its workforce to 30,000 as part of a $2bn investment.

"Every country has its own comparative advantage; you just need to find it," says Helen Hai, the former factory executive who pioneered Huajian's move to Ethiopia and has since become a champion for industry in Africa as well as a friend to Ms Ma.

Ms Ma met Ms Hai on a research trip to Addis Ababa and last year visited Rwanda at her suggestion. Ms Ma even named her company C&H Garments after the two of them - Candy and Helen.

Ms Ma believes the advantages of Rwanda's business-savvy government, the country's cheap, disciplined labour force and ready made factory space outweigh transport and other logistical challenges.

"I feel this country is special . . . and I like a challenging job," says Ms Ma who speaks English with difficulty and who visited Rwanda for the first time last year.

Although Rwandan labour costs are about 10 per cent higher than in Ethiopia, they are still roughly half those of Kenya - where Ms Ma also has a textiles factory for higher-end products - and, crucially, she says it offers disciplined workers who are quick to learn.

"In two days these people [in Rwanda] are already understanding how to use the [sewing] machines . . . next week my standard can come to exporters' standard," she says, handling a freshly made khaki children's polo shirt, a result of training sessions of the 80 latest recruits.

Rwanda, which earns only $600m a year from exports and runs a 17.2 per cent trade deficit, offers hefty tax concessions and other support in an effort to boost foreign currency earnings.

"I have to say Rwanda has amazing leadership, otherwise I wouldn't take [Ms Ma] to Rwanda and also she would not make the decision," says Ms Hai, of the country's austere leader, Paul Kagame, who has also faced criticism for his human rights record.

Ms Ma's light and airy factory is in Kigali's new government-backed Special Economic Zone, which offers investors reliable supplies of power and water, good road links and land. These can be tough to access elsewhere in the country. So far only three exporters, including Ms Ma, have located to phase one of the zone, which houses 61 businesses. Hers may be the first in the country to manufacture garments for export but Ms Ma says she does not expect to be alone for long: "More will come," she says.

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