Thursday, December 9, 2010

Outsourcing to Africa: Part Two

From the 13 December 2010 Greater Niagara Newspapers


By Bob Confer

Over the next two decades it will be increasingly difficult to keep the store shelves stocked at price levels frugal shoppers appreciate. As mentioned in last week’s column, the cost of doing business is quickly rising in China and India and by 2030 they won’t be as attractive for outsourcing as they have been since the push for offshore manufacturing really hit its stride in the late-1970s.

That doesn’t mean the jobs are coming back. The reality of today’s world is that, globalization is and will be the way to do business. As much as Americans savor the thought of goods being produced on US soil, the chances of that happening in appreciable volume again are slim to none. Many consumers demand cheaply-priced (if not cheaply-made) goods and corporations are more than happy to oblige. Companies truly committed to domestic manufacturing (like Confer Plastics) are now rarities when once they were a dime a dozen.

Most of the world, from agricultural South America to the industrial Far East, has already been pressured by traders from the richest nations to meet their demands and in many cases the well is dry from a potential price savings standpoint. The African continent, on the other hand, has remained relatively unmolested by Westerners since the days of the slave trade. But now, Africans are primed to join the ranks of the modern slave, the “sweatshop” laborer, so common in the Far East, who earns a few dollars a day (or week).

As bad as that sounds, it’s better than what they have now. Africans are still enslaved, but by Mother Nature, despotic political regimes, and even Western charity. The continent’s population recently topped 1 billion, but a quarter of them are undernourished. 250 million people are basically starving. To put that number into perspective, the entire US population is 307 million. In the short-term (the next 3 decades), globalization will help Africa rise from a poverty that, truthfully, makes America’s impoverished look like kings. Following the quality of life trends that we saw in industrial Europe, US, and Japan, the long-term future (by 2100) is economically bright and socially responsible for Africans.

Naysayers might comment on the lack of political morality and infrastructure on the continent that would prevent development. That was the case for China. Look what’s become.

Americans are more than happy to either overlook or work in conjunction with one of the most horrid communist systems in the world, one that still - even 21 years after Tiananmen Square massacre - squashes freedom and criticism. Many African leaders are just as oppressive. But whereas China’s political system is old and deeply entrenched, most African nations have fragile systems, so newly employed Africans who will have something that only the few possess now (money) will ultimately become a financially and politically empowered people who can turn away decades of evil rule.

China was a backwards nation until only recently (by historical standards) in regard to infrastructure. Now they have quality roads galore, impressive electrical generation and vast cities that seem to pop up overnight. Whereas that’s been a public-private venture to bring them into the 21st century, Africa’s nations are lacking in wealth so it will be an entirely private investment led by Western firms. But, as capitalism goes, if the need (and reward) is there for electricity, water, ports, and roads, the necessary investments will be made. 1 billion potential workers is a very attractive number for capitalists, especially for as cheaply as they can be had at this time.

Even Sir Richard Branson, one of the richest and brightest men on the planet, acknowledges that Africa will see significant gains in the coming years. In a recent appearance on CNN he addressed America’s need to embrace the global economy as a way to overcome our recent woes. Listing some of our largest trade partners and those we should do business with, he slyly slipped in the comment, “Africa is about to boom”.

I promise you, they are. By 2025 many of the “Made in China” labels you see on items now will be replaced by “Made in” labels from far-flung locales like Kenya, Tanzania, and Mali.

It’s a wild, ever-changing – and ever-shrinking - world we live in.

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