Manufacturing in Africa
Country Focus: Ethiopia
With the global economy evolving significantly away from the third industrial revolution, there is still much optimism tied to the idea that manufacturing will play a key transformative role in developing countries in Africa today.
It is commonplace to subscribe to the notion that a well-developed manufacturing industry is sacrosanct to forward economic development. A popular example of this principle is the People’s Republic of China, which up until the 1980s was a G20 country, whose strong economy is primarily backed by its manufacturing industry.
The obvious rewards attached to a developed manufacturing sector appear lost on Africa, and its countries. Data proves that the manufacturing sub-sector in over 90% of African countries, contributes less than 20% to the countries’ GDP. Asides incomplete and inefficient policies, high labour costs, high energy costs, bad transportation and so on are some factors that continuously make the African manufacturing industry unattractive to foreign investors, thereby impeding the growth of this sector.
A deep dive into available data sheds a bit of optimism for the sector and continent. The African continent is largely a youth population, which in turn translates to a burgeoning work force, and a growing demand for labour-intensive goods and products such as telecommunication devices, footwear, and clothing. In fact, it is determined that by 2025, one-in-five young Africans will spend over 70% of their income on such items. According to experts at VIZON Research, this young and cash conscious population will serve to generate a huge and untapped market, which foreign investors are beginning to notice.
Optimistic reports show that an industrial revolution in Africa is imminent.
Not only are foreign investors beginning to see that the manufacturing sector in Africa is but a diamond in the rough, policy-makers and government bodies are enacting changes and reforms to boost the sector. Analysts at VIZON Research determined that better transport infrastructure could double Africa’s produced goods supply, and increase revenue by about $326billion per year in the consumer goods sub sector alone.
Of noteworthy mention is Ethiopia, which for over a decade has experienced rapid economic growth. A double digit GDP, 10.5%, a growing manufacturing output of about 17.9% in 2017, and over $3billion in Foreign Direct Investment, points to the fact that the country is on the right path and best positioned for huge advances in the manufacturing sector. Low wages, affordable power and stable political conditions have attracted international companies such as H&M to source from Ethiopia, with other companies such as Aldo, Calvin Klein and the likes looking for opportunities to enter the Ethiopian Market.
The importance of industrial development cannot be overemphasized, and its rewards to both the people and continent are vast, as it leads to job creation, increased productivity, which all translates to a booming economy. It is projected that African business-to-business spending in manufacturing will grow by 43.3% to reach an estimated $666.3billion by 2030.
A robust manufacturing sector additionally keys into the implementation of the Sustainable Development Goals in the continent. The conditions for growth in the African manufacturing sector are present, the onus lies on the people and government to recognize this potential, and support the industrialization which will be underway.