Africa May be the Next Factory to World

Africa May be the Next Factory to World
Some foreign manufacturers have already started moving their operations to African countries

AFRICANGLOBE – At the three-day African Economic Conference which recently took place in Johannesburg, South Africa, heads of state, business leaders and development experts discussed how regional integration can boost economic growth.

African countries have seen high levels of economic growth over the past decade. That’s despite the global economic crisis that struck in 2008 and 2009. But conference organizers say growth could have been even better had countries made it easier to do business with each other. They say that’s where regional integration plays a major role.

It means investing in infrastructure, education, labor and technology – ensuring good management of shared natural resources – and having uniform rules, standards and regulations so goods and services don’t get delayed or blocked at the border.

Professor Mthuli Ncube, African Development Bank Vice President and Chief Economist, said, “Regional integration basically is about really facilitating movement in a region, in a zone, in a country, within a country. It’s about moving people. It’s about moving goods. It’s about connecting people through infrastructure. It’s about movement of talent. It’s about making sure that our seaports function well so as to service the countries where they are located, but as well as the hinterland. So it’s about movement of investment within Africa and capital as well. There are many facets to facilitating movement all with the view to developing business and growing the economies.”

Despite regional integration having been a goal for sometime, he said much improvement is needed.

“If you look at the trade in goods and services, that is still low. Intra-Africa trade is still of the order of 15 percent compared to other regions where it is much higher, many times higher. Much of it has to do with weak manufacturing bases that you find in most African countries. So the countries don’t have much to trade with each other. A lot of them will still produce natural resources, which are merely exported without much beneficiation [processing to add value]. That’s part of the reason. But there are other areas where Africa has made a lot of progress, such as in intra-Africa investment.”

This includes banks and mobile telephone companies.

Ncube said that greater regional integration can act as a buffer for possible future economic crises.
“Our research shows that those regions where the quality of integration is of higher quality, those regions were better at absorbing the shocks of the global economic crisis. And this is particularly the case with [the] East Africa region – around Kenya, Tanzania, Uganda and so forth. That region absorbed the crisis better that other regions and we think integration – at least our research shows – was critical in that,” he said.

He added that greater regional integration will prepare the continent to be – what he calls – the next factory to the world. That can happen he says, when wages start rising in countries, such as China and Vietnam.

The African Development Bank Chief Economist said countries are working toward easing restrictive trade regulations. But he warns it’s an on-going process and nations could revert to more self-protective measures. He says for Africa, it can no longer be business as usual.

“Africa is showing that it can resist successfully and absorb the global shocks. Africa needs to see itself also as part of the global growth poll. Africa needs to see itself as part of the global solution to coming out of the crisis in the first place. It’s not business as usual.”

The African Development Bank said the continent must be aware of “mega-trade partnership agreements that wealthy nations are negotiating among themselves.”

In his speech at the opening of the African Economic Conference, bank president Donald Kaberuka said while economic growth has been high, it needs to be higher. He said the continent needs a minimum economic growth of seven percent for many years to keep pace with its rapidly rising population.


By: Joe DeCapua