Proponents of manufacturing say the sector is a great opportunity for Africa to industrialise and provide jobs to millions of unemployed. Value-added manufacturing currently accounts for only a small proportion of GDP in most sub-Saharan African countries, where resources are often exported in raw form for further processing abroad.
Some economists argue that Africa could become the world’s next manufacturing hub as rising labour costs push producers out of Asia. However, the continent’s manufacturing sector faces a myriad of challenges that need to be addressed, ranging from inadequate infrastructure to corruption.
African industrialists such as Aliko Dangote (Nigeria) and Manu Chandaria (Kenya), who opted to stay the course despite these challenges, have built successful multi-million dollar businesses.
To discover what it takes to succeed in manufacturing, How we made it in Africa speaks to Salim Anjarwalla, managing director of Kenyan-based African Cotton Industries, a manufacturer of products such as ear buds, sanitary towels, toilet paper and cotton wool. Anjarwalla joined the family business in 1981 and has spearheaded its expansion.
Variety of skill sets required
Running a manufacturing company requires a variety of skills, including actual production, distribution, sales and marketing, and human resources management, to name a few.
Anjarwalla warns that aspiring industrialists should not start a manufacturing business just because they have one of the skill sets required to run such a company. They should do proper research and gain a thorough understanding of the business, and hire good talent.
“I find that many people don’t make enough effort in the beginning to understand the business and what it requires,” says Anjarwalla. “Most of the time entrepreneurs don’t have the knowledge in other fields [other than their own profession] and are unprepared to take care of all the other elements of running a manufacturing business. You have to study your business idea and the industry to understand what it would involve in totality.”
He adds that business people should understand what their strengths and goals are.
“You really need to be focused on what you want to achieve and how you will achieve it.”
Prepare for uncertainties
“In this part of the world you have to take into account that things can go wrong,” says Anjarwalla.
He notes that in many African countries one has to be flexible and prepared for uncertainties including sudden political instability, currency fluctuations and the introduction of prohibitive taxes and regulations.
Anjarwalla cites the case of Kenya in 2011 when the local currency went on a downward spiral to trade at Ksh. 106/US$1 from Ksh. 86/$1 in just three months, leaving many businesses exposed.
“In your business model you have to factor in the uncertainties because here the waves are [bigger],” he says. “We have seen such swings a hell of a lot in the last 50 years.”
Expect tough competition
Not only do companies face competition from other local players, they also have to fight for market share against foreign firms operating in countries where the cost of manufacturing is much lower.
“This is a very competitive environment… [and] today competition is global. We have challenges here with high costs like electricity that are much higher than in other countries such as in the Far East,” explains Anjarwalla.
He says aspiring manufacturers need to ensure they have a competitive advantage.
“Just because… you can import a cheap machine from China, does not mean you should also make toilet tissue. That is not enough because there are so many other people making toilet tissue.”
Companies should either “have a big price advantage or specialise in a niche market”.
It is all about the consumer
When a finished product finally hits the shelves it is the consumers who decide the winners and losers. Whether for quality or price, consumers will always pick what they feel best addresses their needs.
Anjarwalla therefore advises entrepreneurs to conduct thorough research, interact with consumers and be innovative to ensure that their products are up to expectations.
“You have got to be very focused on your customer. Who are you targeting?” says Anjarwalla.