Made in Africa: Is manufacturing taking off on the continent? By Alexis Akwagyiram

BBC Africa Published duration 29 May 2014

image copyright Jenny Vaughan/AFP/Getty image caption The low cost of manufacturing in African countries is attracting companies from around the world

Several African countries have enjoyed economic growth in recent years - but there are fears that a failure to develop manufacturing could prove to be costly.

"Made in China" is a stamp that is ubiquitous and can be found on a wide range of objects - anything from T-shirts and shoes, to watches and televisions - worldwide.

The same is true of labels showing that an object originated in Taiwan or Vietnam.

But it is rare to find an object which has a mark that points to origins in African country - "Made in Nigeria" or "Made in Chad", for example.

Despite experiencing regional economic growth in recent years, Africa commands a meagre 1.5% share of the world's total manufacturing output, according to the United Nations Industrial Development Organisation.

That compares with a 21.7% share for the Asia Pacific region, 17.2% for East Asia and North America's 22.4% share.

"Economies that have sustained high growth over the long term have typically gone through a process of economic diversification, the spread of new technologies, rising productivity in agriculture, the expansion of the manufacturing sector, and the development of a skilled workforce," write the authors of a recently published Africa Progress Panel report.

"These have not been characteristics of growth in Africa, even in sectors that are attracting foreign investment. Put differently, there has been a lot of growth but little structural transformation," they conclude.

World manufacturing output

Europe: 24.7%

North America: 22.4%

Asia & Pacific: 21.7%

East Asia: 17.2%

Others: 6.7%

Latin America: 5.8%

Africa: 1.5%

Source: Unido

A small wood factory in a town around 20km (12 miles) outside Mozambique's capital, Maputo, is just one of the many manufacturing sites across the continent trying to buck that trend.

The company - Sociedade Comercial Colosso - employs 26 people and processes timber from 25 different species of Mozambican trees to make various wooden objects, such as furniture, flooring, beams and stairs.

Two of the employees - Bartomoeu Zandamela and Angela Macobela - say the jobs have improved their lives.

"The work helps me put food on the table at home. I'm the bread winner of eight children," says Mr Zandamela , who works on the maintenance of timber-processing machines.

Ms Macobela, who is learning to make floorings and ceilings, says: "I'm a single mother. But the money I get helps me bring up my two children.

"My dream is to progress in my professional career."

image copyright AFP image caption Mozambique has a thriving economy but the country has an unemployment rate of 20%

Despite having one of the fastest-growing economies in the world, more than 20% of Mozambique's population remains unemployed.

That dichotomy, which can be found in other African countries, has led some economists to question whether the growth seen across the continent will ever be translated into more jobs and a greater distribution of wealth.

Asian economies have seen their economies grow in recent decades by becoming manufacturing hubs for the world. In countries like Taiwan, Bangladesh and China, factories have produced everyday goods - from clothing to furniture - on a large scale.

The benefit is that the, largely unskilled, work creates jobs - helping to spread wealth and bolstering the country's economy.

Mozambique's government says it is in the process of implementing policies of this variety.

"We introduced an initiative of bringing cement factories into the country. With this, we managed to stabilise the price levels of cement in Mozambique," says Armando Inroga, the country's trade and industry minister.

"We intend to have market competitive prices in the coming two years so that Mozambicans can have adequate low-cost housing using high-quality material produced in Mozambique.

"We also need to have a highly Mozambican food-processing industry which results from national produce."

Traditionally, foreign investment has poured into Asia thanks to this model. But production costs in Asia are rising, as are salaries, encouraging firms to look elsewhere.

Some experts say the current dearth of vibrant manufacturing sectors in Africa is among the biggest factors preventing countries on the continent from cutting unemployment and spreading wealth.

The recent Africa Progress Panel report states that fewer than one in 10 African workers find jobs in manufacturing.

Analysis: Hinh Dinh, World Bank economist

Light manufacturing represents a reliable way to create productive jobs in Africa. This is the right time - there is an opportunity due to the rising wages and labour costs in China and other Asian countries. Wages are still relatively low in African countries.

Job creation is very important for young people coming in to the labour force. Natural resources don't generate jobs - that's the dilemma facing a number of countries. There was always a tendency for foreign direct investment to follow natural resources because that is where you get the fastest results.

It is the responsibility of African governments to bring foreign direct investment to manufacturing to create jobs. The history of economic development is such that any country would need to start producing basic household goods. Over time they moved to higher value goods.

No country in the world has developed without producing light manufacturing. And no country can skip it.

It quotes Nkosazana Dlamini Zuma, chairwoman of the African Union Commission, as saying: "We believe we cannot achieve development unless we industrialise. We are looking at agriculture as one of the important drivers for industrialisation.

"We have the land, the people and the products. But we need to process more of our products in order to create jobs for the young people."

Nigeria is a case in point.

Despite having Africa's biggest economy, a large proportion of the country's population is unemployed.

The problem of joblessness came to the fore earlier this year when a stampede among job-seekers taking a recruitment test in the national stadium in the capital, Abuja, left several people dead and injured.

High numbers of young, unemployed people means a cheap labour force is readily available in many African countries - not just Nigeria.

Middle income goal

But a large part of the problem is the fact that African countries lack the industrial infrastructure that their Asian counterparts have refined in recent decades.

Despite this shortcoming, many experts argue that Africa has the potential to become the world's low-cost manufacturing hub.

They say a cheap workforce, allied with an abundance of raw materials and low-cost agricultural products, means many African countries are well placed to replace south-east Asia as the most attractive, and cost-effective, region in which to create goods.

Analysts argue that foreign investment is likely to continue to rise and will be used to build factories.

World Bank economist Hinh Dinh - co-author of the organisation's report Light Manufacturing in Africa - says East African countries, such as Tanzania and Uganda, are leading the way where manufacturing on the continent is concerned.

He singles Ethiopia out for particular praise.

The government has set a goal of reaching middle-income status by 2025. This goal would be unattainable through traditional farming alone.

The government hopes to meet its targets by investing in its manufacturing sector and higher education to help rural communities diversify their livelihoods.

Ethiopian Industry Minister Tadesse Haile says the government wants manufacturing to have a "dominant role" in the economy over the next decade.

image copyright AFP image caption Is the factory-based line production model of manufacturing outdated?

image copyright Georges Gobet/AFP/Getty image caption Natural resources attract foreign investment, but firms increasingly see benefits in processing raw materials

And it is having an effect, with the country gaining a strong reputation for efficient textile manufacturing, particularly where leather is concerned.

Huajian, a Chinese shoemaker has built an export factory just outside the capital, Addis Ababa.

Tesco, one of the world's largest retailers, has announced plans to source more clothes from Ethiopia in the coming years.

And fashion retailer H&M has said it sees opportunities to produce clothing in the country, along with other sub-Saharan African countries.

Silicon saviour?

But is the factory-based line production model of manufacturing outdated? Could technological advances bring new approaches?

Kenya's technology industry has been praised as one of the fastest growing on the economy.

Innovations such as M-Pesa, a hugely successful mobile phone banking platform, has given the technology industry to ability to change everyday lives.

Last year a $14.5bn (£9.1bn) project was unveiled in Kenya to build an IT business hub, known as Konza Technology City, about 60km from the capital, Nairobi.

The site, dubbed "Africa's Silicon Savannah", is expected to take 20 years to build.

So could IT provide a new manufacturing model? And, if so, when is that likely to happen?

"Young Kenyans have already proven themselves quite adept at innovation," says John Ngumi, who chairs the Konza project.

"We, in Konza, estimate about 20,000 to 30,000 jobs in the first phase that ends in 2018. But we are looking at generating 200,000 jobs in total.

image copyright AFP image caption Kenyan entrepreneurs have used mobile phone technology as the basis of businesses

"More than that we are looking at having a strong multiplier effect that Konza becomes the forerunner of a generation of far more jobs."

But not everyone is convinced.

Alex Mukaru, an aspiring entrepreneur, typifies the kind of young person needed to set up fledgling businesses that could provide jobs in years to come. And he believes much of the hype surrounding Nairobi's technology scene is unlikely to make it capable of creating jobs on a large scale.

He argues that getting a technology company started is a struggle.

"Getting everything you need to help you compose your project into a working unit is a challenge. You find that you lack the money or resources to move to the next level," he says.

It may take decades to answer the question of whether computing can become a mass employer in Africa.

Meanwhile, Mr Dinh urges African nations to move quickly. Otherwise, major companies may find opportunities in other parts of the world.

"This is the right time," says the World Bank economist.

"If African countries miss this opportunity, it will take decades to catch up with the rest of the world."