Low commodity prices a wake-up call for Africa to boost manufacturing
Thoughts on Africa’s manufacturing sector from a panel discussion at last week’s World Economic Forum on Africa, held in Kigali, Rwanda.
The slowdown of China’s economy and its declining demand for commodities is a “good wake-up call” for African economies, according to Geoffrey Qhena, CEO of South Africa’s Industrial Development Corporation (IDC).
Speaking at the recent World Economic Forum on Africa, Qhena said this situation presents an opportunity for the continent to figure out how to grow in the face of lower commodity prices.
Despite having vast resources, most African economies rely on imports for everything from food to clothing to electronics due to an under-developed manufacturing industry that faces many hurdles.
Johan Aurik, managing partner and chairman of consulting firm A.T. Kearney, said local manufacturing is an enormous “missed opportunity”. Aurik observed Africa’s shortcoming in manufacturing has to do with inefficiencies across the value chain, such as the sourcing of raw materials, distribution and innovation.
“When people think about production or about manufacturing they see a factory… and that’s the wrong image because it is often the least important part of what [we] are talking about.”
“If one part of the chain does not work well or is not optimal then the final product… often doesn’t even reach the final customer. These are very complex systems and that is why it is so hard to do. In Europe and in North America they had 200 years – or even longer – to grow the systems over time slowly. Africa needs to move faster,” noted Aurik.
Supply chain gaps one key hurdle
Namibian entrepreneur Ally Angula said she faces several hurdles operating manufacturing businesses. She is co-founder and managing director of Leap Namibia, a diversified group of companies involved in the agro-processing and fashion industries.
One of Leap’s divisions manufactures garments that are retailed through its network of My Republik branded outlets. She cited gaps in the supply chain and labour market as key hurdles. For instance, her company imports print labels for clothing from South Africa because they are not available locally.
“There are a lot of links within the supply chain [that] as a manufacturer you have to either fill those links yourself – or you pay double the price to fill those links,” Angula said.
“In some of our manufacturing industries that we are going into it is industries that we are creating from scratch.”
She explained how her company set up a manufacturing plant in a village in Namibia that employed locals. But when the rainy season started, the village did not have power for three weeks. While this was a fate the locals were used to, it was distressing for her business.
“Unfortunately for a manufacturing entity you can’t be without power for three weeks.”
Technology vs employment
Technology could help address some of the challenges in Africa’s manufacturing sector, however, the panelists argued there should be a multifaceted approach that involves both new technologies and employment. Innovation that excludes human labour, the IDC’s Qhena warned, would leave behind millions who desperately need jobs.
“The important [thing] is to create real jobs, sustainable work. Yes, it is true that technology if it is introduced too quickly often has a negative effect on unemployment. You see that in many places around the world – for instance, online retail is replacing many retail jobs. But over the long run they tend to be replaced with other types of work.”
Need to highlight manufacturing success stories
Although it involves various elements – from product design to production to retail – manufacturing is not as hard as people make it seem, said Angula. Once the process is broken into digestible parts, people become more inspired to go into industry.
“What we have experienced is exposure plays such a big role. We have had many people come through to our company to see what it is that we are doing. Once you have had the conversation the person will say to you: ‘But I didn’t know it was so easy to make clothes’ or ‘I didn’t know it was so easy to dehydrate an onion product and get that on the shelves’.”
“We need to be showcasing a lot more in terms of the success stories on the continent when it comes to manufacturing… That will motivate people to get into the different industries,” she added.