21 Sep

Africa: Overcoming the challenges for manufacturing

During the period of relative stability since the start of this century, Africa has experienced rapid growth and has indeed outperformed global growth trends. As a result, its gross domestic product (GDP) has significantly increased and has brought wealth to many countries. However, most African countries that have enjoyed high growth recently, are mainly mono economies. Blessed with many natural resources, their economies have greatly improved, but they still remain at a subsistence level and have not moved beyond.

Despite the high growth rate, industrialisation in Africa has barely taken root. Besides South Africa, the most industrialised African country, and barely a few others, large-scale industrial manufacturing is practically nonexistent. Thus, for Africa to grow to the next level, it is critical to examine the reasons why the continent does not seem able to gather momentum for high value-added manufacturing activities.

Political stability and relevant economic strategy

The main reason cited by foreign and domestic investors for putting off or even avoiding major investments in the manufacturing sector, is the perceived lack of political stability in Africa. While the development of the capital-intensive manufacturing sector requires a long investment cycle, the political lifecycle may be very short-term. As a result, it is very difficult for the government of the day to implement a coherent long-term economic strategy with all the relevant economic frameworks and policies that will only bear fruit long after their term in office has expired.

Although Africa has great potential to develop its manufacturing sector, the political leaders need to have a clear economic vision to develop sectors in which their respective countries have sources of competitive advantage. Without a conducive environment supported by the relevant economic framework, there are no significant incentives for potential investors to commit themselves.

Most of the time, political factors trump economic factors. African political leaders conduct their own type of populism, where they need to satisfy their majority supporters to win elections and remain in power.

Read more: Overcoming the challenges for manufacturing in Africa

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