Acumen that holds up half the African sky
China is working with the International Trade Centre, a 50-year-old Geneva-based organization, to build the competitiveness of smaller African businesses and link them to the global value chain.
This move, including a focus on female-owned enterprises, is lifting millions of families from poverty, as jobs are created and higher wages earned, officials said.
ITC, a joint mandate of the World Trade Organization and the United Nations, bills itself as “the only multilateral agency fully dedicated to supporting the internationalization” of small and medium-sized enterprises.
“We implement the benefits found in multilateral agreements made possible by the WTO and employ it in fighting poverty, a mandate of the UN,” said Arancha Gonzalez, executive director of the ITC.
Gonzalez, speaking on the sidelines of the 10th WTO Ministerial Meeting in Nairobi in December, said China’s support had boosted ITC’s programs in sub-Saharan Africa, where pockets of poverty remain. The agency aims to enable a million more women entrepreneurs to enter global markets by 2020.
“We believe that trade is the solution to fighting poverty, and by supporting businesses in these countries a greater impact is achieved,” said Gonzalez, who previously served as chief of staff to former WTO director-general
Arancha Gonzalez, Pascal Lamy, who served from 2005 to 2013.
In November, ITC launched a program linking Chinese businesses to Africa, and African businesses to China, with the support of the China-Africa Development Fund, a Chinese government-controlled equity fund, and the Department for International Development, the British government’s development arm. The program covers Kenya, Ethiopia, Zambia and Mozambique.
“We are trying to build value-chain growth in enterprises found along the northern corridor. Essentially at this stage we are identifying value chains before creating linkages between businesses found along the corridor,” Gonzalez said.
The corridor is a transport route that connects the port of Mombasa in Kenya to countries in the interior of East and Central Africa. These include Uganda, Rwanda, Burundi and the Democratic Republic of Congo. The route also includes Ethiopia, where efforts are being made to support the leather industry, a sector in which Chinese companies have a huge stake.
The program’s target is micro, small and medium enterprises. Gonzalez said she is encouraged by the planned relocation of some Chinese industries into the region. They offer opportunities for Africa to increase its participation in global trade, she said.
The firms are subsidiaries of Chinese parent companies that have experience engaging in existing sophisticated production processes and already have a hold in global trade chains. They are well-prepared to help Africa increase its exports of finished goods.
Although industrialization is Africa’s strongest ambition, Gonzalez said the focus should be broadened to economic transformation. That means broader and deeper participation by a variety of enterprises, and the inclusion of groups such as women and youths.
“This concept means improving the productivity of all factors of production. Improving agricultural processing, packaging, branding and marketing services, which encompasses two-thirds of some African countries’ economies, such as in Nigeria, Ghana and Kenya.”
China’s engagement with Africa has broken the yoke of aid dependency, which was neither sustainable nor practical, she said. “What we are working on at the moment, together with China, is converging development aid, the private sector and trading. This is a powerful recipe.”
ITC has been able to convince Chinese investors to invest in Africa by providing market intelligence. It is also helping African businesses navigate the Chinese market.
“We are a bridge in the knowledge gap existing between Chinese and African businesses. Businesses in Africa and Europe have known each other for centuries. But ChinaAfrica businesses are new, so it is about getting to know each other a little bit better.”
Trade is breaking down barriers between the two partners, she said, and the relocation of Chinese businesses to Africa is a strong indication of that.
“This is happening. In the long run, it buoys efforts to reduce poverty by using market mechanisms so that enterprises become sustainable and eventually makes aid redundant.”
Present programs are in honey production in Zambia, the leather industry in Ethiopia, the spices value chain in Tanzania and Zanzibar, fruit and tea processing in Kenya and cotton production in Malawi.
Gonzalez believes that a bigger market, stable political environment and attractive laws and regulations will make Africa an attractive investment destination for Chinese firms. “They also need funds to sustain them through the difficult infancy period,” she said.
Africa also needs modern infrastructure and reliable energy sources to operate seamlessly and competitively, a common challenge for African governments.
Recently, China has become more involved in narrowing the gap. Some infrastructure projects are cross-border and help fulfill Africa’s ambition to integrate, creating a bigger market of consumers.
That not only means improvements in skills and employment for the bulging, youthful populations of sub-Saharan Africa, but also a rise in foreign direct investment.
Still, Gonzalez said she thinks there should be deliberate development of policies supporting the participation of women and youths.
“It should start from socially and culturally promoting women-led entrepreneurship. Second is providing equal opportunities for women to participate in trading such as access to finance since they have no collateral.”
In 2013 President Uhuru Kenyatta of Kenya set in motion the amendment of government procurement rules to allow 30 percent of contracts to be given to youth, women and those with disability without competition from established firms.
“Annual global procurement is worth $15 trillion a year,” Gonzalez said. “Only 1 percent is serviced by women-led enterprises. We need to address this market failure, and that is why we hosted a women’s business forum here in Nairobi to highlight this issue.”
The impact of the fourth World Conference on Women, held in Beijing 20 years ago, is still being felt today, she said.
“It was about setting the agenda to highlight the glaring gender gap. Twenty years later, it is not a question of whether or not we need to tackle the gender gap, because the Beijing conference highlighted the usefulness of including women in economies, political systems, governments and businesses. The next 20 years will be about accelerating the closure of the gender gap.”
We believe that trade is the solution to fighting poverty, and by supporting businesses in these countries a greater impact is achieved.”
ITC executive director
Arancha Gonzalez, International Trade Centre executive director, said China’s support has boosted ITC’s programs in sub-Saharan Africa, where pockets of poverty remain.