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Can we not undercut labour to attract investors?


Last week was significant for the United States of America (US) and Africa.

Develop me: Tapiwa Gomo

China clothing factory
China clothing factory

In the US, they witnessed the smooth transfer of power from President Barack Obama to Donald Trump, while in Africa, Gambia was in the headlines for the wrong reasons.

The former President, Yahya Jammeh, had refused to relinquish power until he was pressured to do so by the Economic Community of West African States (Ecowas).

Those watching from Southern Africa could not help but drool with envy, as a new day beckoned on Gambia. Yes, change can still happen in some African countries and thanks to Ecowas for showing the way.

But change for the sake of change without improvement is insignificant. There are growing fears that the recent change in the US administration will usher in radical policy changes domestically and globally.

The biggest fear arises from Trump’s inauguration speech, which laid out what sounded like a nationalist, protectionist and remedial agenda.

“From this day forward, it’s going to be only America first,” he said to the applause of his supporters.

Nationalist policies have been the bane of most African economies. A country cannot serve its own interests without interacting with those who hold the economic wherewithal.

It was very clear in Trump’s speech that his intended audience are American corporations that had moved their companies following the lure of cheap labour in China, resulting in what he called the American carnage of rusted factories.

While as a politician Trump has raised more moral questions than answers, his business acumen is beyond questioning.

However, managing a business and running a country are two different games.

Perhaps what needs to be understood is how the major western companies ended up in China under the noses of shrewd and democratic politicians.

The dynamics have shifted over the decades. Business is fast shifting away from politics, the same way federal governance drifted from religion during the epoch of industrialisation.

Business now follows profit opportunities and is no longer parochial to the morals of good governance.

The inability of Zimbabwe to attract investors is not squarely because of poor governance and corruption by Zanu PF, but we just do not have much to offer to the world of investors. Investment can happen without us.

When China was known for its autocratic policies, bad human rights record and rampant corruption that was the same time when the American and European companies were closing down to relocate to China.

The reason was simple. China offered cheap labour to the business world that was facing financial recessions and seeing labour costs exponentially going up.

China was okay with an employed, but unpaid population than one that was poor and unemployed.

The business world responded by grabbing the opportunities. Profit margins increased and so did production, which together led to China’s economic boom.

Business is after opportunities that help boost profits.

Democracy or lack of it no longer influence business considerations that much, as long as the capital interests are protected.

This is the baseline from where Trump’s policies are grounded and the same basis on which Africa can draw its own lessons from.

For Trump to bring back American businesses from China will require major policy changes and concessions.

It will mean reducing the minimum wages, cutting down taxes for businesses and reducing energy costs.

Unfortunately, these cannot happen without costing him politically and attracting the ire of activists.

African countries can still attract investors by undercutting labour for those investors who wish to increase production in locations that are nearer their markets.

Rwanda is setting an example, which some African countries can follow, by attracting Chinese companies to open their production plants in Rwanda for affordable labour and its proximity to the western markets.

If China is now outsourcing labour and production, why not African countries?

Take, for instance, most of South Africa’s clothing for major chain stores is produced thousands of miles away in China.

Imagine if Zimbabwe offered to provide that service to South Africa.

We can convince South Africa that producing their clothing in Zimbabwe would cut transport costs and, therefore, make the selling prices much lower, while maintaining or increasing the profit margins.

We can also argue that it is good for business and it increases the standard of living for the workers in South Africa as they can save more on clothing.

On the other hand, it creates employment for our people in Zimbabwe, cutting down on economic migrants, boost the economy and stimulate the cotton production industry.

And because our economic imagination does not go further than politics, it is China that is renting land in Africa to produce cotton for their industry to supply clothes to Africa.

Tapiwa Gomo is a development consultant based in Pretoria, South Africa

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