Weaving a profit from plastic

Bag maker from northeast China plans to continue investing in its growing Ethiopian operation

Standing proudly outside his new factory being built about 37 kilometers from the Ethiopian capital, Addis Ababa, Gao Wei has a wide smile on his face.

The Chinese general manager of Ethiopia Great Wall Packing PLC, which produces woven plastic bags made with polypropylene or polyethylene, is excited about moving into the impressive 8,000 sq m facility.

Until now he has been sharing space with another company in the Eastern Industry Zone, an area in which Chinese-owned businesses like his are clustered.

But Gao says the expansion is only the start of what he hopes for the business, as he has bought 26,500 sq m of space in total on the site.

He describes the new building as "small-scale" compared to the rest of his plans. Great Wall produces about 40,000 to 50,000 woven bags a day, mainly destined for industrial use.

Since production started in June 2011, a number of major Chinese companies operating from the same industrial zone, including Zhongshun Cement and Dongfang Spinning Printing and Dyeing, have become customers.

"We are ready to expand production and introduce more advanced new equipment," Gao says.

He and his Chinese colleagues live in dormitories at the side of the existing factory, and the new site will also allow them to enjoy better living accommodation, and their own offices.

The 38-year-old has been in the plastic bags industry for 17 years, entering straight after serving four years in the army.

He now owns 45 percent of the Ethiopian business, with Yuanhao Trading Co Ltd, which is based in Zhangjiagang, a county-level city in eastern China's Jiangsu province, holding the rest.

Gao's sister and younger brother also own and run their family's plastics factory in Haicheng, a county-level city in Northeast China's Liaoning province, while his brother-in-law has invested in a similar factory in Cambodia.

He admits the idea of coming to Ethiopia was "totally accidental", sparked during dinner - after several drinks - with some business associates back home.

"After a year then discussing the project, a decision was made to invest overseas for the first time," Gao says.

His family's factory in Haicheng previously exported products only to Guinea and some other West African nations.

"My original plan was to invest in Southeast Asia, like my brother-in-law," he says, after competition in China had become too tough.

The company has been operating in Ethiopia for eight and a half years, and its initial 8.5 million yuan ($1.47 million) investment has been recovered.

Last year it made a 17 million birr ($847,000) profit, which was reinvested back into the business, Gao says, and a further $2.42 million is now being spent on new equipment in the new factory.

The company has 160 staff, mainly locals who live nearby, with just 10 staff from China.

Like many investors in the mainly farming region around the capital, the specific automated equipment skills Gao needs for his factory are thin on the ground, but after investing heavily in training he is gradually building a strong team of Ethiopian team leaders.

"Our labor relations will be better when the locals are managing the locals," he says.

But the training took longer than he might have hoped, he says.

"In the first year, it seemed that every day someone was getting hurt," he remembers.

Gao himself came to live in Ethiopia fulltime nearly three years ago and now feels more comfortable, although communication can still be a problem at times.

"After a while, our workers started to understand the Chinese we repeated to them every day.

"We are also learning basic Amharic (the official language in Ethiopia), so along with some body language we all get along pretty well, even without an interpreter," Gao says.

The Eastern Industry Zone is the first in Ethiopia to house just Chinese companies.

But it sometimes suffers as many as 10 power cuts a day, although the situation has improved recently with a major upgrade in its electricity substation.

Gao's business has also been faced with slow customs clearance procedures, especially during the typhoon season when equipment and raw materials sent from China can take four or five months to arrive.

It is a situation highlighted in a World Bank report two years ago, which suggested that without improvement Ethiopian investment by Chinese companies could suffer.

"It's killed me at times," Gao says.

Polypropylene and polyethylene resins imported to Ethiopia from other countries are a lot more expensive than those shipped directly from China.

But even with this advantage, the country's domestic woven plastic bag industry has become highly competitive, saturated even, as more investors pour into the sector to cash in on Ethiopia's rapid economic growth, he says.

But still the competition is nothing like that in China, he says, and the Ethiopian government has now halted approving any new projects in the field.

Gao says Great Wall has also started recycling plastic waste from the local market to use as raw material.

"It will be great if all the raw materials could be produced and sourced from here," he says.

chenweihua@chinadaily.com.cn

(China Daily Africa Weekly 09/26/2014 page19)