THIS TIME FOR AFRICA!

Over the past two decades, low-cost manufacturing has transformed China, India and a group of other developing countries. Now, it’s Africa’s turn. That will sound unlikely to the many people who see Africa as synonymous with extreme poverty, conflict and instability. But anyone who understands the nuances of the vast continent knows that African countries are well placed to grab a bigger share of global manufacturing in the coming years

Kruti Bharadva

To understand Africa’s potential as a manufacturing hub, it’s important to stop seeing it as a monolith. The continent groups 54 economies and societies with variations as wide, if not wider, than those in Europe and Asia. Three of the five most fragile countries in the world are African, among the many nations there that suffer from high levels of corruption, violent conflict and low levels of education.

But then there are countries like Senegal, Rwanda, Mauritius, Cote D’Ivoire and Botswana that have a strong track record of economic growth, stability and education. Six of the 15 fastestgrowing economies in the world are in Africa and the continent has become a must-visit destination for the titans of the U.S. tech industry. African countries have talent in multiple languages and the youngest population of any continent. By 2055, the continent’s 15-24 year-olds are expected to be more than double the 2015 total of 226 million.

Investment in manufacturing in Africa has long been subdued by the region’s generally poor infrastructure and its sometimes deserved reputation for corruption and crises. Manufacturing’s share of African GDP has hovered around 10Y over the past decade. Africa as a whole only meets about half or less of its $130-170 billion annual infrastructure investment needs, according to the African Development Bank.

But there are signs of change, especially for the region’s economic stars. Between 2005 and 2014, manufacturing production in Africa more than doubled from $73 billion to $157 billion. The strongest growth has come in countries such as Uganda, Tanzania, and Zambia that have track records of prudent economic management and business-friendly reforms.

Already some countries are gaining footholds in oil refining, garments and textiles, agriculture processing, automobiles and pharmaceuticals. For instance, the Spanish drug maker Grifols announced a manufacturing plant in Morocco and Volkswagen is building assembly plants in Ghana and Nigeria and doing skills development labour force work in Ethiopia.

General Electric, which has had operations in Nigeria for four decades, plans to spend $1 billion there by 2023 to strengthen its manufacturing and product services, in particular power generation as well as oil & gas exploration and production.

But anyone who understands the nuances of the vast continent knows that African countries are well placed to grab a bigger share of global manufacturing in the coming years

Sweden’s H&M and Ireland’s Primark already source much of their garment materials from countries like Ethiopia and even luxury producers are starting to acknowledge opportunities for small-scale production in Africa, such as New York’s Beyond Good chocolatier, formerly Madecasse, which has expanded its workforce in Madagascar.

Among policymakers and scholars alike, a robust manufacturing sector is broadly understood as a fundamental path to economic growth and development. The most recent illustration is the launch of the African Continental Free Trade Area, a single market for goods and services in Africa that aims to unlock manufacturing potential and facilitate industrialisation, driving sustainable growth and jobs among other objectives. The key boon of manufacturing is that it absorbs large swaths of workers and places them into productive and decent paying jobs. Throughout history, this exact recipe has transformed the United States, United Kingdom, France, Japan, and Germany into some of the world’s wealthiest nations. Most recently, a new age of industrialisation has helped push China into one of the world’s fastest growing economies boasting the largest middle class, with other Southeast Asian countries following closely behind. These are all examples of how industrialisation can generate rapid structural change, drive development, and alleviate poverty and unemployment.

However, this narrative seems to exclude many African nations. Despite their manufacturing potential and promising trajectories, most African countries have remained relatively dearth of factories. This limited industrial development represents a missed opportunity for economic transformation and quality employment generation that alleviates poverty.