The 42nd World Economic Forum annual general meeting, which was held in Addis Ababa, Ethiopia, May 9-11, has come and gone. About 2,600 business, government and civil society leaders – including 40 heads of state or government, participated in the meeting, which took place under the theme ‘The Great Transformation: Shaping New Models.’
The conference revealed that Africa accounts for a mere 1 percent of global manufacturing and is losing ground in labour-intensive industries. The big question that needs to be addressed is: How can the continent bolster the productivity and competitiveness of its manufacturing sector?
The following dimensions were addressed:
•Strengthening business environments
•Improving the quality of labour supply
•Addressing the potential and peril of industrial policies
Key points raised:
Manufacturing growth is key to achieving sustainable development in Africa as it promotes inclusive growth, job security and balance of payment. Africa needs to address challenges in areas of infrastructure and skilled talent to spur industrial growth and position itself to attract industries.
Regional integration and removal of trade barriers between countries promote increased market access within the continent.
African nations must identify their respective comparative and competitive advantages and form strategic relationships to become leaders in specific sectors.
The panelists included Olusegun Aganga, minister of trade and investment of Nigeria; Sachen Chandaria, executive director, Orbit Chemical Industries Ltd., Kenya; Rob Davies, minister of trade and industry, South Africa; William V. Hickey, president/CEO, Sealed Air, USA; Leslie W. Maasdorp, president, Southern Africa, Bank of America Merrill Lynch, South Africa; Young Global Leader, and Global Agenda Council on Africa.
The panelists pointed out that for all the reported growth in Africa, manufacturing in the continent still lagged behind. The moderator, Vittorio Massone, managing director, sub-Saharan Africa, Bain & Company South Africa, South Africa, asked the diverse group of panelists from government, small and large industries and banking to identify what they saw as the critical factors for Africa to gain its share in manufacturing.
The panelists established that no country in the world had grown from poor to rich without having a robust manufacturing and services sector, that manufacturing helps to solve a country’s challenges in creating inclusive growth, job security and balance of payment.
Common themes emerged in what all panelists identified as significant steps for African countries to address to attract industry. Primarily, Africa must overcome its limitations in infrastructure. Currently, transportation costs to move goods within Africa by road, railway, air and sea are prohibitively high. Too often, it is faster and easier to move goods outside the continent than within. In addition, it is often difficult to find adequate and reliable power to invest in manufacturing on a large scale. African countries must continue to work with their partners and invest more to improve the continent’s infrastructure.
Nigeria, for instance, is replete with manufacturers running their generating plants. We have the likes of Notore Chemical Industries Limited, Nigerian Breweries plc, Guinness Breweries plc, Unilever plc, news paper companies and a host of others across the country.
The session noted: As the cost of labour and arbitrage rises in other developing country markets (such as Asian countries), Africa must invest in its human capital and position itself to be the next industrial hub. Specifically, Africa must invest more in education, research and technology and develop the talent of its labour pool.
It is difficult to find skilled labour in Africa, which is important to attract large-scale industry. Related to this, Africa must pay due attention to industries in clean technology and prepare to attract the next potential industrial boom.
Speakers also identified the necessity to support small and medium enterprises to grow and transform into manufacturing. This sector is the driver of most economies in Africa, especially in rural areas, and needs both policy and financing support to grow.
The session also pointed out as follows: Scale presents another challenge in Africa: it is difficult for multinationals to invest in any significant scale in any one country in Africa. Taken individually, the domestic market in African countries is simply too small for manufacturers who are interested in getting access to the continent’s nearly one billion population. Thus, integrating the regional markets and removing trade barriers between countries are key factors for manufacturing growth, as Africa must trade more within itself.
Aganga indicated that “in trading among themselves, African countries need to identify their respective comparative and competitive advantages.” For example, although South Korea is one of the world’s largest petrochemical producers, it imports gas from Qatar to drive its industries. Africa can have similar strategic advantages: one country in Africa can import resources from another country in the continent to be a leader in a given industry.
In addition, strategic relationships between states and the private sector must deepen. Experience from other countries teaches that growth in manufacturing will be faster in countries that advance attractive industrial policy.
Rob Davies indicated that, although the manufacturing voice was not as strong as the retail industry in Africa, his ministry nonetheless “engages with manufacturers regularly when developing industrial policy.”
In sum, participants stressed the need for African nations to share experiences and good practices among themselves. It is equally important to learn from other economies such as Brazil and countries in Asia that have recently transformed through manufacturing growth. Essentially, improved infrastructure, a talented labour pool, regional cooperation between countries, wider market access and a conducive regulatory environment, are all necessary to drive manufacturing growth in Africa.
Manufacturing in Nigeria
The Federal Government has said that the role of the manufacturing sector in the Vision 20:2020 agenda is targeted at promoting and stimulating socio-economic growth through industrialisation, one of the main growth drivers of any economy.
Shamsuddeen Usman, minister, National Planning Commission, at the annual general meeting of the Manufacturers Association of Nigeria (MAN) in Lagos, noted that Nigeria would need a vibrant and globally competitive manufacturing sector that contributes significantly to GDP with a manufacturing value addition of not less than 40 percent.
The minister urged operators in the real sector to partner government in its efforts to achieve the Vision 20:2020 agenda, saying “Nigeria would need focus, diligence, discipline, self correction, consistency, coordination and collaboration to ensure effective implementation of the strategic plan.”
Nigeria’s manufacturing sector currently contributes only 4 percent to GDP as compared with The Netherlands (14 percent); Poland (19 percent); Turkey (22 percent), Indonesia (28 percent). To achieve the Vision 20:2020, Nigeria needs 15 percent to 30 percent contribution from the manufacturing sector for economic growth.
Story adapted from summary written by Misikir Tilahun of World Economic Forum 2012.
