• Wednesday, July 24, 2024
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BusinessDay

Nigeria’s new entrepreneurs to China’s Silicon province

Da_Steinbock

China’s southern province, Guangdong, is emerging as a globally important innovation zone. The old Guangdong attracted Nigerian traders and importers. The new Guangdong is a magnet for innovation-driven startups. It could serve the new generation of Nigerian ICT entrepreneurs.

The year 2016 marks the 45th anniversary of Nigerian-Chinese diplomatic relations. Bilateral trade between Africa’s most populous nation and the world’s second-largest economy has increased exponentially since the two countries established a strategic relationship a decade ago. In the first 10 months of 2015, Nigerian-Chinese trade amounted to $12.3 billion. Nigeria is China’s third largest trade partner in Africa.

Chinese engineering firms have built major projects that contribute to Nigeria’s infrastructure, including the Abuja Light Rail, Abuja-Kaduna railway and Lagos Rail Mass Transit System. Last year the volume of completed Chinese projects in Nigeria reached $1.6 billion. Nigeria is China’s third largest investment destination in Africa.

In the recent Forum on China-Africa Cooperation (FOCAC), President Muhammadu Buhari said that “Africa expects Chinese investment flows to the real sector of our economies to promote African enterprises.” However, there is also another way that a new generation of Nigerian corporates, SMEs and particularly ICT entrepreneurs can participate in and learn from China’s rapid economic development – in China.

Guangdong’s new experiment

Africans began moving into China after the Asian financial crisis in 1997 prompted many to abandon outposts in Thailand and Indonesia. By exporting cheap Chinese goods back home, many Nigerian traders made a handsome profit. In the process, China’s southern province Guangdong became the new Promised Land.

It was Guangdong that first pioneered Deng Xiaoping’s economic reforms and opening-up policies in the 1980s. With 107 million people, including 30 million migrants, its population is bigger than that of the Philippines. Every third is a migrant. However, there are also tens of thousands of Africans in Guangzhou’s “Little Africa”, the bustling 7km stretch from Sanyunli to Baiyun, in northern Guangzhou.

The current generation of Nigerian entrepreneurs in Guangdong represents mainly small enterprises who made their fortunes as traders and with imports. Now Guangdong has begun a new era of change. It is an era that could benefit those Nigerian companies, which seek to move higher in the value chain.

Indeed, the forces that once boosted Guangdong’s dramatic economic boom – industrialization, booming world trade, cheap labor and low-cost manufacturing – are fading. Today, Guangdong’s economy is a dual story about the demise of industrialization and the rise of the post-industrial society.

Toward cutting-edge innovation

Last November, the US-China Joint Commission on Commerce and Trade convened in Guangzhou. It reflected Guangdong’s new strategic importance in China’s innovation-driven development strategy. Since last March, the province has intensified efforts at industrial transformation, while seeking to establish several industrial belts. It benefits from the Pearl River Delta economic zone, which covers nine major cities (including Guangzhou, Shenzhen, Zhuhai and Dongguan).

Guangdong leads the way in moving up the value chain from light industry to high-end manufacturing. Ranked in terms of value added, its key industries feature information and communication technology (22%), but it is also strong in electrical machinery (9%), chemicals (5%) and automobiles (5%).

Guangdong accounts for over a quarter of China’s total utilized foreign direct investment. It is home to telecom giants Huawei and ZTE. It is where corporate titans such as Lenovo, TCL, BYD, Apple, IBM, Philips, BGI, Lucent and Olympus house their manufacturing bases, research and development, and design capabilities.

In China, innovation – as measured by R&D per GDP – has climbed to 2.1 per cent (which, despite the huge population, is higher than that of France, the UK or Australia). In Guangdong, the comparable figure is close to 2.5 per cent but in Shenzhen it is estimated to be 4 per cent – not far from the world leaders, South Korea (4.4 per cent) and Israel (4.2 per cent).

The delta’s transformation enjoys government support. Last May, Beijing launched its “Made in China 2025” policy. Similar goals are emulated by Guangdong’s “Intelligence Manufacturing Development Plan (2015-2025)”. Responding to rising labor costs, manufacturers and the provincial government are investing in robotics and automation. To reduce polarization, local leaders also seek to develop rural areas in the next five years by encouraging labor-intensive manufacturing to relocate from cities into Guangdong’s rural regions.

From Pearl River Delta to Southeast Asia

Last year, Guangdong’s annual growth was about 7.9 per cent, a percentage point higher than the national average. The growth target is now set at 7 per cent for 2016-2020, which is very ambitious in the current environment. The province hopes to become a “moderately prosperous society” by 2018 – two years ahead of the national target of 2020.

Among Chinese provinces, Guangdong has the largest economy and population. In 2014, its GDP, despite a rising US dollar, amounted to more than US$1 trillion, which puts it in the same league as Mexico and makes it larger than Indonesia.

But Guangdong is fuelled by its cities, particularly Shenzhen and Guangzhou which account for almost 60 per cent of the delta’s GDP. Shenzhen’s population has reportedly surged by 3 million, to 21 million. The city is likely to continue to attract new internet and finance companies, and corporate giants such as Tencent and Dajiang, while foreign banks and financial intermediaries have set up shop in the city’s development zone, Qianhai.

Within the province, Guangdong seeks growth, upgrading and innovation vis-à-vis the Guangdong Free Trade Zone, which covers Nansha (Guangzhou), Qianhai-Shekou (Shenzhen) and Hengqin (Zhuhai). It aspires to become a Guangdong-Hong Kong-Macau cooperation demonstration zone, a hub of the 21st-century Maritime Silk Road and a pilot zone of China’s new reform and opening up.

Concurrently, the pilot free trade zones in Guangdong and Fujian are being extended across the pan-Pearl River Delta region. The area is China’s largest regional collaboration initiative, covering 11 provinces and special administrative regions, from Guangdong and Fujian to Sichuan and Hunan.

Inter-regionally, these measures support and benefit from Beijing’s “One Belt, One Road” initiative. The grand goal is to build a new trade network connecting Hong Kong and Macau, facing Southeast Asia, and lead higher-level development in the pan-PRD region.

Dan Steinbock

 

Dr Steinbock is the founder of Difference Group and has served as research director at the India, China and America Institute (US) and visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Centre (Singapore). www.differencegroup.net