Africa’s Trade in Manufactured Goods: Learning from our Manufacturing History & Developing the Future
Factory and manufacturing activity accounted for 10% of Africa’s GDP over the past decade. The manufacturing sector is widely considered to be the ideal industry to drive Africa’s development due to the labour-intensive, export-focused nature of the business.
Indeed, as pointed out by The Economist during 2014, few countries have been able to escape poverty without employing a significant amount of their people in manufacturing activity. The Africa Progress Panel also sees some degree of manufacturing development as a prerequisite for sustained high economic growth on the continent. According to World Bank Economist Hinh Dinh: “It is the responsibility of African governments to bring foreign direct investment (FDI) to manufacturing to create jobs. The history of economic development is such that any country would need to start producing basic household goods. Over time they moved to higher value goods. No country in the world has developed without producing light manufacturing. And no country can skip it.” From a different perspective, alleviating poverty on the continent is directly linked to improved nutritional levels, as healthier workers are more productive. Increased agro-processing in the continent would reduce food insecurity and demand for imported foodstuffs. For this reason, stimulating manufacturing production via industrial policies is an important political variable.
Already, in many African countries, investment flows from politically friendly states in Asia come with conditions requiring politicians to make room for manufacturing in their policy decisions. Admittedly, Africa offers a unique combination of factors that make it difficult to operate in the secondary sector. These issues include, on a country-by-country basis, challenges to reliable power supply, a shortage of domestic suppliers, high costs of importing and exporting goods, and deficient physical infrastructure, amongst others. To gain more insight into which countries offer an accommodating environment for manufacturing activity, the accompanied graph illustrates a Manufacturing Environment Index (MEI) constructed using data from the World Economic Forum’s (WEF) Global Competitiveness Index (GCI) 2014-15.
Only three African states (Mauritius, Morocco and Kenya) are above the global average, and the sub-Saharan Africa (SSA) average is significantly lower compared to Latin America, the Caribbean, and Emerging Developing Asia. Similarly, a WEF measurement for the competitiveness of countries’ products on the international market does not rate African states well. Only four countries (Seychelles, Ghana, Zambia and Kenya) are scored above the global average, with the SSA mean again lagging most other regions. While the accompanied graphs might not appear flattering to Africa as a whole, they do underscore the fact that Africa has dozens of different countries with diverse business environments. The illustrations show that some countries offer manufacturing enterprises a business climate that is on par with the global mean and better than some traditionally factory-oriented regions.
For full details and more information on the African manufacturing sector, please feel free to download our latest sector report on Manufacturing in Africa.
About David Okwara
Africa brief, Africa challenges, Africa opportunities, African countries, agriculture, Angola, challenges, China, development, East Africa, economy, Foreign Direct Investment, infrastructure, KPMG Africa, KPMG’s 2014 Global Manufacturing Outlook, manufacturing, Mining, Nigeria, Oil and gas, South Africa, sub-Saharan Africa, Zimbabwe