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LIGHT MANUFACTURING IN AFRICA
the comparisons are for labor productivity, similar dispersions are evident for total factor productivity. Large variations in productivity within narrowly defined industries arise from multiple factors: limited dispersion of entrepreneurial and technical skills, market segmentation arising from policy interventions (for example, tariffs or entry restrictions) or geography (for example, poor roads), and limited competitive pressure. The consequences are visible in the gap between the free-onboard (f.o.b.) prices for comparable products earned by Ethiopian and Chinese exporters. The f.o.b. price of Chinese-made polo shirts is approximately US$5.38–US$5.80, substantially higher than the f.o.b. price of Ethiopian-made polo shirts, which fetch no more than US$2.95–US$3.41, with the difference reflecting both the physical quality and finish of the product and the capability of the producing firm to provide other characteristics (delivery time, reliability) valued by the buyers. Against 5 percent production waste in best-practice firms in China, best-practice firms in Ethiopia have 10 percent waste. For wooden chair production in Zambia, production waste in converting lumber into a chair is 15–30 percent, compared with 10 percent for Chinese firms. These differences in the production process (not related to costs, inputs, or output markets) can be attributed to weak entrepreneurial management and technical skills.
Low Level of Education Our survey of small firms found big cross-country differences in the education of firm owners (figure 6.1). In Tanzania, 70 percent of the owners have at most six years of education—that is, they have completed primary school or less. But in Vietnam fewer than 5 percent of owners have only a primary education. In China and Vietnam, nearly 90 percent of owners have more than some secondary education, but in Tanzania, only 20 percent.
Possible Solutions from Asia These variations reflect national differences in access to education. In China, for example, the expansion of education meant that by around 1990 nearly all school-age children completed primary school; by 2000, nearly all young Chinese completed junior high school. Recent years have brought rapid expansion in the proportion of youths attending high school. While the educational qualifications of African workers will not match China’s achievements for some decades, productivity in light manufacturing can be raised in the short term by increasing the skills of entrepreneurs (through managerial training and technical assistance) and facilitating the positive spillovers of establishing a competitive manufacturing sector (through support to first movers and foreign direct investment). In the two Asian countries, most respondents list family members and relatives as contributors of ideas, technical expertise, and financing. The proportions are much smaller in Africa, especially for technical expertise and financing.