Home' Trinidad and Tobago Guardian : February 13th 2014 Contents BG26 | ECONOMIST
BUSINESS GUARDIAN www.guardian.co.tt FEBRUARY 2014 • WEEK TWO
Less than an hour s drive outside Ethiopia s capital,
Addis Ababa, a farmer walks along a narrow path
on a green valley floor after milking his cows.
Muhammad Gettu is carrying two ten-litre cans
to a local market, where he will sell them.
He will get less than half of what they would fetch at a
dairy in the city. Sadly, however, he has no transportation. A
bicycle sturdy enough to survive unpaved tracks would be
enough to double his revenues. At the moment none is easily
available -- but that may be about to change.
An affiliate of the Chicago-based SRAM, the world s sec-
ond-largest bicycle-components maker, is aiming to invest in
Ethiopia. Its Buffalo Bicycles look ungainly, but have punc-
ture-resistant tires, a heavy frame and a rear rack that can
hold 220 pounds. They are designed and assembled in Africa,
and a growing number of their components are made there
from scratch, creating more than 100 manufacturing jobs.
About 150,000 Buffalo bikes are circulating on the continent,
fighting puncture-prone competition from Asia.
FK Day, a founder of SRAM, says that he set up his first
African workshop in South Africa and is looking at Addis
Ababa and Mombasa in Kenya as possible next sites. Landlocked
Ethiopia has only partially shed its Marxist heritage, yet is
attracting industrial companies. Huajian, a Chinese shoemaker,
has built an export factory not far from Gettu s farm.
Those who cast doubt on Africa s rise often point to the
continent s lack of manufacturing. Few countries, they argue,
have escaped poverty without putting many workers through
factory gates. Rick Rowden, a skeptical development pundit,
"Apart from a few tax havens," Rowden says, "there is no
country that has attained a high standard of living on the
basis of services alone."
Already, however, a quiet boom in manufacturing in Africa
is taking place. Farming and services still are dominant, backed
by the export of commodities, but new industries are emerging
in many African countries.
Thandika Mkandawire, a Malawi-born expert, and Dani
Rodrik, a Princeton economist, argue that growth is bound
to fizzle because of a dearth of factories. They may be too
pessimistic, however. Manufacturing s share of GDP in sub-
Saharan Africa has held steady at ten per cent to 14 per cent
in recent years. Industrial output in what is now the world s
fastest-growing continent is expanding as quickly as the rest
of the economy.
The evidence, big and small, is everywhere.
H&M, a multinational Swedish retail-clothing firm, and
Primark, an Ireland-based one, source a great deal of material
from Ethiopia. General Electric is building a US$250 million
plant in Nigeria to make electrical gear. Madecasse, a New
York-based chocolatier, is looking for new hires to add to its
650 workers in Madagascar already turning raw cocoa into
expensively wrapped milky and nutty bars. Mobius Motors,
a Kenyan firm started a few years ago by Joel Jackson, a Briton,
is building a cheap, durable car for rough roads.
Domestically owned manufacturing is growing too. Seemhale
Telecoms of South Africa is planning to make cheap mobile
telephones for the African market. Angola says that it is going
to build its own arms industry, with help from Brazil. African
craftsmen are making inroads in fashion: Ali Lamu makes
handbags from recycled dhow sails on the Kenyan coast and
sells them on Western Web sites.
Many of these businesses are beneficiaries of growth outside
the manufacturing sector. The spread of big retail shops encour-
ages light industry. In Zambia a surprising number of goods
in South African-owned supermarkets are made locally, because
often it is too expensive to transport bulky stuff across bor-
A construction boom is fostering access to high-voltage
power. The spread of mobile telephony, including mobile bank-
ing, helps small suppliers struggling with overheads. IBM,
which has an eye on the African market, goes so far as to say
that "software is the manufacturing of the future." Consumers
will still want to buy hardware, but growing local demand is
creating a market for African app and software developers.
Underpinning all this is a big improvement in education.
Charles Robertson, the chief economist of Renaissance Capital,
a financial firm founded in Russia, argues that, for the first
time in its history, Africa now has the human capital to take
part in a new industrial revolution. In the 1970s Western gar-
ment-makers built factories in places such as Mexico and
Turkey, where a quarter of children went to secondary school.
Africa, then at nine per cent, has caught up.
Another spur for African manufacturing is investment by
Chinese workers who stay behind after completing their con-
tracts for work in mining and infrastructure projects. Many
thousands of them have set up workshops to fill the gaps in
local markets. The African Growth and Opportunity Act,
signed by the American Congress in 2000, also has boosted
trade in African-made goods.
The World Bank has been suggesting for several years that
Asian manufacturing jobs could migrate to Africa. Obiageli
Ezekwesili, a vice president of the bank, says that more than
80 million jobs may leave China owing to wage pressures, not
all to neighbouring countries with lower costs. If African labor
productivity continues to rise, many could go to Africa,
especially if corruption and red tape, still major scourges of
the continent, are curbed. In contrast to China, business in
parts of Africa is becoming cheaper as infrastructure improves
and trade barriers are lifted. The average cost of manufacturing
in Uganda, for instance, has been falling.
This could mark a sea change. The rise of Asian manufacturers
in the 1990s hit African firms hard, and many were wiped
out. Northern Nigeria, which once had a thriving garment
industry, was unable to compete with low-cost imports. South
Africa has similar problems: Its manufacturing failed to grow
last year despite the continental boom.
This is partly the fault of governments. Buoyed by commodity
income, they have neglected industry s needs, especially for
roads and electricity. That too may at last be changing, how-
"Africa is now in a good position to industrialise with the
right mix of ingredients," World Bank economist Wolfgang
Those ingredients include favorable demography, urbanisation,
an emerging middle class and strong services.
"For this to happen," Fengler adds, "the continent will need
to scale up its infrastructure investments and improve the
business climate, and many countries have started to tackle
these challenges in recent years."
Kenya is not about to become the next South Korea. African
countries are likely to follow a more diverse path, benefiting
from the growth of countless small and medium-sized busi-
nesses, as well as some big ones.
For the next decade or so, services still will generate more
jobs and wealth in Africa than manufacturing, which is fine.
India has boomed for more than two decades on the back of
services, while steadily building a manufacturing sector from
a low base. Do not bet against Africa doing the same.
Manufacturing in Africa:
An awakening giant
Links Archive February 12th 2014 February 14th 2014 Navigation Previous Page Next Page