Africa: imports vs domestic production?

By Erukilede Julius - 22 December 2015 at 2:13 pm
Africa: imports vs domestic production?

For a continent far behind its peers in all strata of economic and social development but with one of the biggest natural and agricultural resources, economy diversification remains a vital step towards a manufacturing continent.

But the socio-economic woes, dilapidated infrastructure and epileptic power supply facing the continent have largely robbed-off its potential, especially the manufacturing capacity, limiting its transition towards a diversified economy.

In the last few years, African countries have taken some remarkable steps towards achieving an industrialised continent. According to the Africa Economic Outlook report, African manufactured output roughly doubled between 2001 and 2011. More African manufactured goods find their way into the emerging economies. And the report suggests that the new millennium has witnessed a leap in Africa’s manufacturing capacity.

However, the 2012 WTO report shows a contrary view. Though the developing economies’ share of export in the global trade is increasing, Africa’s involvement even in trade amongst developing countries is relatively small. For instance, while 35 per cent of the developing countries exports were exported to developing Asia; 6 per cent to South and Central America and the Caribbean, and 6 per cent to the Middle East, only 4 per cent of the exports took place in Africa.

Save Morocco and Tunisia who exported manufactured goods like insulated wires and clothes to the EU in 2011, most of Africa states primarily exported agricultural products and natural resources. The situation with the United States is not substantially different. According to the 2014 US trade reports, the US imports agricultural products from Africa exchanging it for manufactured products such as machinery and aircraft. Unfortunately, the disaster that befell Africa goes beyond this, while USA’s total exports to sub-Saharan Africa increased by 6 per cent reaching $25.4 billion, its exports decreased within the same period.

In 2015, the problem remains the same – the 2015 third quarter reports of the United Nations Industrial development Organization (UNIDO) international industrial statistical database on world manufacturing output shows that even though the world’s manufacturing capacity grew by 2.7 per cent, but Africa’s manufacturing capacity only grew by 0.1 per cent. Africa’s manufacturing sector continues to lag behind the rest of the world.

Rather than manufacturing locally; cheap, needless and sub-standard products from China continue its penetration into the Africa’s economy leading to collapse of local manufacturing firms. It is shameful that in 2014 alone, the tiny Benin Republic spent $411 million importing wigs and false beards into its market. And the Africa’s biggest economy, Nigeria imported approximately 160 million toothbrushes from China almost equalling one toothbrush per person.

However, most of the needless expenditures are strains on the balance of payment and foreign reserves of most African states. This enthrones a culture of waste and perpetual affection for foreign products. The continent is now an import driven continent to the extent of importing toothpicks and matches– a situation that needs urgent attention.


Time to Act

Until recently, trade barriers played a major role in stifling free trade, but today, globalisation has broken many chains. Therefore, African countries must react to the present realities. As Africa integrates into the world economy and positions itself in global value chains, painful adjustments in the way it manages its affairs are inevitable.

It is high time African countries stopped the importation of unnecessary goods and take proactive policy and financial steps towards protecting the local industries. The continent is endowed with resources that can fast-track the consolidation and establishment of local manufacturing industries to meet the increasing local demands.

For example, given that Africa’s cultivable farmland of 1.73 billion acres, compared with 408 million acres of existing farmland in the US, the continue importation of wheat from the US is therefore wasteful and unnecessary.

If there was any period to act, there was no better time to rethink its developmental path than now when the world is facing a meltdown. Both commodities and natural resources prices have dwindled in the international market causing serious cash crunch in virtually all the 54 African countries economy. At this point, various governments are prioritising their needs and identifying their comparative advantages in the global value chain.


Will it be an easy decision?

Most times, good things come with a lot of sacrifice. Nevertheless, it is vital for Africans to recognise that its quest for competitiveness is still encumbered by real challenges which cannot be swept under the rug. However, most of the challenges are surmountable.

Only a few decades ago, China took bold steps to become what it is today. While it may not be expedient for Africa to follow the same path China took on its way to the top, one lesson African countries must take from the Chinese is to look inwards and develop its indigenous knowledge and capacity. Africa must play to its strength.

Due to lack of strategic planning and the inability to utilise Africa’s comparative advantage in the agricultural sector, many products which could be produced locally, are imported. It is an irony to see Africa spent huge amount on food importation every year. Africa imports $35 billion worth of food products annually, according to Akinwunmi Adesina, the President of Africa Development Bank.

If African countries could invest annually for the next five years half of what it spent on importing frivolities on developing its manufacturing capacity, Africa story will definitely change. But an outright cooperation between the private sector and the public sector is a vital step towards any attempt to develop its manufacturing SMEs sector. SMEs manufacturing should be central to Africa’s strategy.

Inaddition, government must adequately support SME manufacturing beyond the rhetoric that the continent has endured over the years. Without this, the advocacy efforts of the government will yield little or no fruit. Government support for the manufacturing SME sector in standardising the products is essential towards a manufacturing revival the continent craves. Most of Africa manufacturing products that found their way into foreign markets in the past few years have lost their market share because of failure in adopting proper standards.

African governments should also take adequate look at policies that encourage a procurement policy targeting the millions of youths and women in the continent. Part of Africa strategy to greatness is its untapped youthful generation and productive women. They will play a vital role in adding value to the continent’s comparative advantage—agriculture. But this will only be a dream except steps are taking towards training and retraining these strategic groups in the society.

African countries must invest in education and technology exposure for the youths beyond what is currently obtainable in several states. A review of its education system to include practical means of achieving the goals that are vital to Africa’s development is a vital step towards a manufacturing Africa.

Above all, inadequate access to finance and modern technologies must be addressed for Africa to stand a chance of reversing the dumping status it has attained in recent decades. Africans in the diaspora are an important source of technology transfer – with their knowledge of technology and native pathways, their contributions to building a prosperous continent capable of maximising its potential is a necessity. Efforts should also be geared towards making diasporas’ remittance to Africa beyond its present state. It is time for the diasporas to change the narrative and invest in the African economy rather than their “food and medicine” remittances. South-based manufacturing enhances the welfare of African consumers via prices and functionality. This is exactly what Africa needs now!

Erukilede Julius

Erukilede Julius

Erukilede Julius is a legal practitioner, entrepreneur and energy professional.

He has over 6 years work experience in law practice, oil and gas industry and environment both in Nigeria and France. Julius is also a consultant on Africa’s economy with special bias for sustainable business models and frugal innovation.

Twitter: @juliusdudu

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