By Franklin Alli
AFRICA is not a strong player in the global manufacturing space given its paltry production output and value of exports of manufactured products to countries outside the continent, year on year.
A recent World Bank data showed that the continent’s contribution to world manufacturing output stands at 2.0% compared to China’s 28.7%, and America’s 16.8%. Also, the total value of its exports of manufactured products was 26% compared to South Asia’s 71%, America’s 60%, and EU’s 79%. This is even as the continent’s intra- trade figure peaks between 15%-18% for decades.
To change this narrative, the Manufacturers Association of Nigeria (MAN) brought Thought Leaders in the government and private sector together from across the continent to look at the problems, the prospects, and advice on how to transform the manufacturing sector to become globally competitive.
Dr. Doyin Salami, Economist and Senior Lecturer, Lagos Business School (Moderator); Africa’s Foremost Entrepreneur and President of the Dangote Group, Mr. Aliko Dangote; Vice President, Professor Yemi Osinbajo; and the President of the African Export and Import Bank (Afreximbank), Professor Benedict Okey Oramah (rep by the Executive Vice President of Afreximbank, Mr. Amr Kame). Others were the Secretary-General of the AfCFTA Secretariat, Mr. Wamkele Mene; Nigeria’s Minister of Industry, Trade and Investments, Mr. Niyi Adebayo; the Commissioner of Trade and Industry of the African Union Commission, Mr. Albert Muchanga, among other stakeholders.
Eng. Mansur Ahmed, the President of the Manufacturers Association of Nigeria (MAN) set the tone for the “High-Level Roundtable on Industrialization in Africa, with the theme: ‘Positioning African Industries for Economic Transformation and Continental Free Trade.’
He said: “It is our firm belief that our conversations at this event will help chart the course for sustainable Africa’s industrialization and economic transformation.”
Obstacles to industrializing Africa
The thought leaders identified the following problems confronting African manufacturers to include:
- Issues around the payment system, the movement of people, the impact on SMEs, intellectual property, and regional value chain.
- Existing custom unions across Africa have failed to succeed.
- Unstable policy environment and the lack of political will by African Heads of States to remove certain encumbrances to effective industrialization of the continent.
- Poor infrastructure, poor supply of electricity, high port charges, and difficulties encountered in the movement of people, products, and services across national boundaries that Africa is littered with.
- High energy costs and port charges
- The dearth of bankable projects rather than insufficient finance has been the major problem of industrialization in the continent.
- High tariffs constrain discourage investments in manufacturing as well as non-tariff barriers like burdensome custom procedures and regulations that do not facilitate trade.
- The processing of raw materials on the continent is very little, and this has caused the continent to lose out on job opportunities, a large volume of export trade, and increased foreign exchange earnings.
- There are challenges of interconnectivity, transit of goods across borders, and high cost of connectivity.
- The dearth of investment in education, research, and development to bolster Africa’s manufacturing capacity and transit from being a consumer of technology to a provider of technology.
- There is also an issue around security and the question is what will the development around Afghanistan portends for Africa?
Having pinpointed the drawbacks to making Africa a globally competitive manufacturing place, the panelists went further to proffer solutions to achieve the desired results.
Here is what they said:
Aliko Dangote: “To be globally competitive we must produce very high-quality products and we have to produce it at the cheapest cost possible because others have been there before us – the Asian Tigers. They concentrated on their domestic markets. They kept on improving on the quality of their products and also the cost of whatever they were producing.
He pointed out that African manufactures should first of all focus on meeting the continent’s domestic need for manufactured goods and then begin to export to other continents of the world.
Also, the governments need to focus on removing all these barriers so that we can have a very good flow of business. If we don’t do that, we will never be competitive.”
Vice President, Professor Yemi Osinbajo: “We must take policy actions to create an environment in which businesses can thrive. To start with, we must adopt the right type of macroeconomic and industrial policies.
“We must build a network of roads, bridges, and rail that will facilitate the movement of goods and people just as we build the electricity plants to power our factories and the broadband networks that lubricate modern business. It would also be essential in the interim to develop sites with dedicated infrastructural and regulatory structures like Special Economic Zones and Shared Facilities for small businesses.
∠ If we do not invest in research and development our manufacturing will be based on imitations. And if we don’t, we shall perennially remain at the bottom of the global value chain
“Well negotiated rules of origin are important in the context of the free trade agreement as they are key to preventing trans-shipment and the deflection of trade. Without them, firms from non-state parties could set up simple labeling operations in one member state to ship already finished products to another member state without really adding any value.”
Vice President of Afreximbank, Mr. Amr Kame: “Africa could get around the challenge of poor infrastructure by developing industrial parks where it would be much easier to provide quality infrastructures in a smaller geographical area than spreading them across the whole country.
“That is where Afreximbank has been very strong in supporting industrialization. We are working with Nigeria’s ministry of industry on advisory bases on how to role these industrial pacts and we also financing our projects here in Nigeria,”
Similarly, the Secretary-General of the AfCFTA Secretariat, Mr. Wamkele Mene, pointed out “AfCFTA was part of the tools to aid industrialization. The best figure we have on intra-African trade is 18 percent, which is more on primary commodities. Our immediate task is to make sure that we establish the correct policy environment for manufacturing to thrive, for productive sector investment to happen in pharmaceuticals, automobile sector, agro-processing and others that will have a positive impact on manufacturing.”
The Commissioner of Trade and Industry of the African Union Commission, Mr. Albert M. Muchanga, posited that for Africa to gain the capacity to manufacture, we have to invest in research and development.
“There is no way out. If we do not invest in research and development our manufacturing will be based on imitations. And if we don’t, we shall perennially remain at the bottom of the global value chain. Moreover, our universities should be remodeled into research universities that can produce skills for the fourth industrial revolution.”
Doyin Salami, the moderator of the conversations, urged the stakeholders – Africa heads of governments, policymakers, legislatures, and operators to work together in removing these barriers through cooperation and collaboration ahead of the competition so that there will be smooth flow of business now that the African Continental Free Trade Area (AfCFTA) regime is in force. He believes that this would have ripple effects on unleashing Africa’s full industrial potential.
Δ Cover image: Across section of the stakeholders during the event; making a point is Ali Madugu, National Vice President of MAN, North West Zone.