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September 20, 2018

Factories, not cheap import, required

One of the factories in Mtito Andei../FILE
One of the factories in Mtito Andei../FILE

According to the Economist, in an article published September 15, 2016, (Industry in Africa: In or out?), rapacious governments, potholed roads, inefficient ports and insufficient power are impediments to manufacturing output and industrial growth.

The 2010 Census on Industrial Production revealed 30 per cent of manufacturing establishments reported capacity utilisation below 50 per cent. Reason? High cost of energy and raw materials.

Kenya’s 2018 Economic Survey report reveals that the contribution of manufacturing to GDP declined from 10.6 per cent to 0.4 per cent from 2013 to 2017. Only one in nine Kenyans works in manufacturing. The precipitous decline in manufacturing is a troubling structural shift. Real estate, transportation and storage, education and agriculture are the bulwark of economy.

According to the World Economic Forum, the average share of manufacturing in GDP in sub-Saharan Africa is estimated at 10 per cent — the same as in the 1970s. Moreover, Africa’s current share of global manufacturing is less than two per cent.

The investment in climate adaption reforms by the World Bank­ — construction permits, agricultural reform and debt resolution — will not bring manufacturing to Africa’s shores. Let’s get real. To catalyse industrial growth and drive manufacturing, Africa must mobilise investment in enabling infrastructure and skills. Africa must learn from East Asia’s industrial success, driven by exports, agglomeration and firm capabilities.

To enter the league table of global industrial economies, African governments must invest and promote industrial exports, enhance the capacity of domestic firms and build industrial clusters.

How can the international community help? Africa needs support to expand and strengthen regional integration. Africa needs support to formulate robust policies and institutions to create Special Economic Zones. And, more importantly, high-income countries need to increase preferential market access to Africa’s nascent non-traditional exports.

The US Trade Act and the African Growth and Opportunity Act were formulated to enhance market access to the US for sub-Saharan countries. AGOA provides duty-free benefits for exports such as apparel, agricultural products, chemicals, wines and steel.

In an effort to build its apparel industry, Rwanda raised tariffs on second-hand clothes imported from, but not manufactured in the US. The Secondary Materials and Recycled Textiles Association (SMART) petitioned the United States government for action against Rwanda, resulting in a 60-day suspension of Rwanda’s AGOA duty free privileges.

Kenya, the biggest second-hand clothing market in the EAC, buckled under pressure. So, did Tanzania. Africa is a destination for other inferior items such as second-hand cars, low-quality fuels and damaged electronic devices.

The suspension of duty-free privileges must be lifted unconditionally. Action against Rwanda amounts, shamefully, to bullying. Africa must be given an opportunity to build its manufacturing capacity and create jobs for tens of millions of unemployed youth.

Africa must do its part: provide high-quality basic education and invest in vocational and technical education to create skilled labour. Moreover, African universities must drive the research and innovation necessary to launch Africa into the fourth industrial revolution.

Alex Awiti is the director of the East Africa Institute at Aga Khan University

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