Made In Africa: Is Manufacturing Taking Off On The Continent?

Made In Africa: Is Manufacturing Taking Off On The Continent?
Natural resources attract foreign investment, but firms increasingly see benefits in processing raw materials

Despite having Africa’s biggest economy, a large proportion of the country’s population is unemployed.

The problem of joblessness came to the fore earlier this year when a stampede among job-seekers taking a recruitment test in the national stadium in the capital, Abuja, left several people dead and injured.

High numbers of young, unemployed people means a cheap labour force is readily available in many African countries – not just Nigeria.

Middle Income Goal

But a large part of the problem is the fact that African countries lack the industrial infrastructure that their Asian counterparts have refined in recent decades.

Despite this shortcoming, many experts argue that Africa has the potential to become the world’s low-cost manufacturing hub.

They say a cheap workforce, allied with an abundance of raw materials and low-cost agricultural products, means many African countries are well placed to replace south-east Asia as the most attractive, and cost-effective, region in which to create goods.

Analysts argue that foreign investment is likely to continue to rise and will be used to build factories.

World Bank economist Hinh Dinh – co-author of the organisation’s report Light Manufacturing in Africa – says East African countries, such as Tanzania and Uganda, are leading the way where manufacturing on the continent is concerned.

He singles Ethiopia out for particular praise.

The government has set a goal of reaching middle-income status by 2025. This goal would be unattainable through traditional farming alone.

The government hopes to meet its targets by investing in its manufacturing sector and higher education to help rural communities diversify their livelihoods.

Ethiopian Industry Minister Tadesse Haile says the government wants manufacturing to have a “dominant role” in the economy over the next decade.

And it is having an effect, with the country gaining a strong reputation for efficient textile manufacturing, particularly where leather is concerned.

Huajian, a Chinese shoemaker has built an export factory just outside the capital, Addis Ababa.

Tesco, one of the world’s largest retailers, has announced plans to source more clothes from Ethiopia in the coming years.

And fashion retailer H&M has said it sees opportunities to produce clothing in the country, along with other African countries.

Silicon Saviour?

But is the factory-based line production model of manufacturing outdated? Could technological advances bring new approaches?

Kenya’s technology industry has been praised as one of the fastest growing on the economy.

Innovations such as M-Pesa, a hugely successful mobile phone banking platform, has given the technology industry to ability to change everyday lives.

Last year a $14.5bn project was unveiled in Kenya to build an IT business hub, known as Konza Technology City, about 60km from the capital, Nairobi.

The site, dubbed “Africa’s Silicon Savannah”, is expected to take 20 years to build.

Similarly, Rwanda is investing heavily in digital technology in the hope that this will speed up its transition from an agriculture-based economy to a services-oriented one.

So could IT provide a new manufacturing model? And, if so, when is that likely to happen?

“Young Kenyans have already proven themselves quite adept at innovation,” says John Ngumi, who chairs the Konza project.

“We, in Konza, estimate about 20,000 to 30,000 jobs in the first phase that ends in 2018. But we are looking at generating 200,000 jobs in total.

“More than that we are looking at having a strong multiplier effect that Konza becomes the forerunner of a generation of far more jobs.”

But not everyone is convinced.

Alex Mukaru, an aspiring entrepreneur, typifies the kind of young person needed to set up fledgling businesses that could provide jobs in years to come. And he believes much of the hype surrounding Nairobi’s technology scene is unlikely to make it capable of creating jobs on a large scale.

He argues that getting a technology company started is a struggle.

“Getting everything you need to help you compose your project into a working unit is a challenge. You find that you lack the money or resources to move to the next level,” he says.

It may take decades to answer the question of whether computing can become a mass employer in Africa.

Meanwhile, Mr Dinh urges African nations to move quickly. Otherwise, major companies may find opportunities in other parts of the world.

“This is the right time,” says the World Bank economist.

“If African countries miss this opportunity, it will take decades to catch up with the rest of the world.”

 

By: Alexis Akwagyiram