Many African economies’ current reliance on raw commodity exports for growth makes Africa susceptible to global price movement; however, growing the manufacturing sectors on the continent has the potential to promote economic and inclusive growth in African countries.
“In most cases, the general population does not directly benefit from the country’s natural resources. “However, producing goods to supply the domestic market has a positive impact on the structure of the trade balance, and manufactured exports have a much wider scope and more stable demand than commodities exports – making the manufacturing sector ideal for sustainable growth,” says global network of professional services firm KPMG industrial manufacturing global chair Jeff Dobbs.
KPMG’s Manufacturing in Africa 2013 sector report indicated that the World Bank’s Perfor-mance of Manufacturing Firms in Africa 2012 report states that manufacturing accounts for only 13% of the growth domestic product in sub- Saharan Africa.
He adds that very few countries can accumulate wealth without investing in their manufacturing sectors, and a strong and thriving manufacturing sector usually precipitates industrialisation.
Dobbs further mentions that there is a direct correlation between export levels and the economic success of a country, where domestic manufacturing improves external accounts by decreasing imports and diversifying exports.
“As a result, a strong manufacturing sector contributes to the development of the private sector, where this not only increases the eco-nomy’s resilience to external economical situa-tions but also creates opportunities to grow other service industries in and around the manu-facturing sector and, in so doing, create more jobs,” Dobbs mentions.
However, African manufacturing is still in its infancy and is curtailed by several structural shortcomings, including a lack of quality transport infrastructure and electricity supply, low levels of productivity, a shortage of skilled labour and innovative entrepreneurs, and insufficient savings that are needed to make large capital investments necessary for the establishment of manufacturing enterprises, he highlights.
“Despite these shortcomings, manufacturing sectors on the continent are showing signs of expanding – driven by strong growth demand – while improving infrastructure and increased openness to foreign investment,” says KPMG Africa COO Anthony Thunstrom.
However, he points out that for manufacturing sectors to flourish on the continent, Africa needs to establish frameworks that will promote world-class productivity, shared innovation and transparent and collaborative supply chains.
“Growing the manufacturing sectors on the continent has a huge potential role to play in promoting economic and inclusive growth in African economies, owing to its labour-intensive and export-focused nature. “However, for Africa’s industrialisation poten-tial to come to fruition, it will depend chiefly on affordable and accessible energy, improved infrastructure and growing skills capabilities,” states Dobbs
With this in mind, Thunstrom says mining and extractive activities in Africa will continue to attract large sums of investment, noting that there are signs of investor reorientation towards the burgeoning African consumer market, as some of the most attractive sectors during the last decade have been consumer-related manufacturing industries.