Friday, October 18, 2019

Africa: Outsourcing’s final frontier

Under the current model of outsourcing to China and other Asian nations, it will be, over the next two decades, increasingly difficult to keep store shelves stocked in America and other Western societies at price levels frugal shoppers appreciate.

As China has grown to a $13.4 trillion economy and their public policies have focused on enlarging their middle class, in turn making their economy more of a participant than a provider, the cost of doing business is quickly rising in China and 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 here.

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. Philosophy and personal finance are two entirely different things.

The reality of today’s world is that globalization is and will be the way to do business. Most consumers, and the purchasing and sales managers who fill up the warehouses and stores for them, demand cheaply-priced if not cheaply-made goods and many corporations are more than happy to oblige. American companies (and buyers) fully committed to domestic manufacturing are now rarities when once they were a dime a dozen.

Most of the world, from agricultural South America to the industrialized 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 as the cost of labor is rising dramatically as it has in China.

The African continent’s people, on the other hand, have remained relatively unmolested by Westerners since the days of the slave trade. Other nations have focused more on taking Africa’s natural resources rather than using their human resources. Consider the pitifully-low gross domestic product among some of the countries: Chad ($2,420), Rwanda ($2,225), Sierra Leone ($1,608), Burundi ($731). The US’s GDP per capita, by comparison, is $62,152.

The continent’s population is in excess of 1.2 billion, but nearly one-in-five are undernourished. 227 million people are starving on that continent. To put that number into perspective, the entire US population is 327 million.  

In the short-term (the next 3 decades), outsourcing and globalization will help Africa rise from a poverty that, truthfully, makes America’s impoverished citizens look like kings. Given implementation of Western economic practices, 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.

Some might discount the lack of political morality on the continent that would prevent development. That was – and still is -- the case for China. But, 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 30 years after Tiananmen Square massacre - squashes freedom and criticism (for all their focus on improving economics, Chinese officials don’t see personal liberty in the same light).   

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 now possess (money) will ultimately become a financially and politically empowered people who can turn away decades of evil rule.

Is Africa’s infrastructure ready for all this?

Not now.

But, by historical standards, China was a backwards nation until only recently in regard to infrastructure.

Now they have quality roads, 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 a mostly private investment led by Western firms.

But, as capitalism goes, if the need and reward are there for electricity, water, ports, and roads, the necessary investments will be made. Nearly a billion potential workers is a very attractive number for capitalists focusing on thrifty consumers in America and elsewhere, especially for as cheaply as those workers can be had at this time.

Africa is ready to boom. It will take some time, but I guarantee that by 2040 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 an ever-changing – and ever-shrinking - world we live in.

From the 14 October 2019 Greater Niagara Newspapers and Batavia Daily News

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