African Business 2021

OVERVIEW
Manufacturing
A focus on manufacturing exports can add value.
SECTOR INSIGHT
Distell is expanding its
African footprint.
Credit: Ethiopian Investment Commission
Manufacturing makes up about 40% of intra-African
trade but only 19% of exports. The Brookings
Institution estimates that business-to-business
spending in manufacturing in Africa could be
$666.3-billion by 2030. This figure represents a $201.2-billion
increase over the amount for 2015.
To get even greater value for their manufactured goods, Africans
must export more. The African Growth and Opportunity Act (AGOA),
which gives duty-free access to the US for about 6 500 products from
39 Sub-Saharan countries, will be in place for another five years and
there is a chance to ramp up production of goods of higher value to
take advantage of the agreement, which has not been exploited to
the extent that it might have been.
Exactly how to move Africa’s economy away from agriculture into
productive manufacturing is a subject of some debate. The “Vietnam
Model” is based on growing the sector by offering manufacturing
companies a low-wage environment as wages in China rise. Other
countries to take this route include Sri Lanka and Bangladesh.
Ethiopia is following this trend. A Bangladeshi garment
manufacturer has set up a factory in Ethiopia which supplies
H&M and a Sri Lankan company, Hela Clothing (pictured), has
produced and shipped its one-millionth garment from its factory
in Ethiopia. TAL Apparel, a
company with Hong Kong
roots, had 27 000 employees in
the same town in which Hela
is operating, Hawassa, until
Covid-19 struck. This is part of
a drive by Ethiopia to increase
its annual export earnings in
clothing from $145-million to
$30-billion (CNN).
Lesotho and Mauritius
are other countries exporting
textiles, although the island
nation chose to focus on the
high-end market and has
developed the skills and qualitycontrol
protocols needed to
supply that niche. As a colony
Mauritius was a sugar-based
monoculture. Today sugar cane
is still in the export basket but
there are also textiles, clothing,
processed fish and cut flowers.
Services exports such as
financial services and tourism
are rising, and medical tourism
and higher education are seen
as a high-value sectors worth
investing in.
Dr Yuwa Hong and Dr
Martyn Davies have argued
that wage rates are just one
of the “pull” factors that attract
manufacturers (Sunday Times,
26 January 2020). Of the six
countries referenced in their
article, Rwanda, Ethiopia,
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