Is Global Business (Manufacturing) Moving To Africa?
In the recent history of the global economy, and in various forums, China and other Asian Tigers have always been labeled the workshop of the world. They have been the major origin of manufactured goods with most manufactured products being able to be traced at least to a Chinese company or such products have connections with a Chinese business or other of the Asian Tigers. The growth that has been witnessed in the east means that more workers have been able to earn decent wages as their countries’ economies blossom. This has translated to higher wages as also the skill levels and expertise of the workers rise. Add this to the pressure of currencies that are appreciating, some of these former manufacturing haven has become expensive destinations for once profitable manufacturing. This paper will look at how the changing landscape of the African economies is shifting and if this has swung the manufacturing from China and other Asian Tigers towards Africa.
Shift in strategy
The resurgence of the African continent in the global arena and not just because of wars, coups, famine and the negative exploitation of resources but for economic purposes has made it possible for manufacturing to happen on the continent. The economic situation on the African continent has not been well but this has changed for the better in recent years.
Manufacturing in Africa
The biggest challenge to African economies has been a mixture of misguided policy and other fiscal interventions from donors and lenders and other multi-lateral institutions. This has been the bane of what has ailed their economies in general and their ability to have strong manufacturing sectors in their economies. Though this was recognized and African governments, as a result of an African Union Commission adoption, “industrialization” became the thematic focus of its January 2008 Head of States and Governments Summit which called for acceleration of Africa’s industrial development for both resource-poor and resource rich countries to promote broad-based and sustainable growth (Elhiraika et al 2).
As known in the economic community, economic performance of African countries has been low with most of them falling under the tag of least developing countries (LDCs) or developing countries. This has been the case as a result of most businesses having been multinationals that have always been engaged in extractive practices and doing little to develop local economies in terms of capacity and skill level for any form of manufacturing. The growth of local economies therefore has been left to local enterprises and businesses that struggle against a myriad of problems. Previously, most of the companies and businesses that created value addition in the value chain were owned with indigenous populations (natives), though the few that are minority owned (non-natives) controlled the vast majority of value added in most countries of Africa (Aryeetey 316). Such new businesses that are minority owned and which are enjoying growth in Africa are run by the Chinese themselves, who are among the new investors in Africa. Chinese entrepreneurs are setting up manufacturing in Africa buoyed by their government’s keen interest in seeing lower-level manufacturing facilities moved into Africa (Men and Benjamin 73).
One of the biggest hurdles that have been keeping African economies not to be involved in manufacturing is two faced. Initially, they have over relied on agriculture and natural resource based sectors that see raw materials being exploited and exported unprocessed. The second and most fundamental reason that perpetuates the situation is the lack of capacity and infrastructure that would by any mean have supported some heavy manufacturing. But all these has seen tremendous changes as the performance of Africa’s economies has improved recently (Aryeetey 312) although there is still a lot to be achieved in terms of long term growth, structural change and industrial development. The situation has in recent times seen an improvement as a result of renewed interest in Africa and its vast potential.
The potential that is in Africa has been touted as the next big frontier in business. This has not escaped the attention of investors and entities that would want to see the current situation on the ground change. Recently, representatives of more than 45 African states, together with 237 CEOs heading African and U.S. companies, joined the American president in Washington, D.C., in August of this year (2014) to have a U.S.-Africa Leaders Summit that was happening for the first time (Trustfull 92). Prior to these, General Electric had made announcements that it would invest $2 billion in facility development, skills training, and sustainability initiatives across Africa by 2018 (GE). This has not been the only interest. Americans are the latest to join the fray of those who are seeking to benefit from the opportunities that is Africa. China and most Asian developed economies like those of Singapore, Japan, and South Korea among others have already set shop, with their multinationals and state corporations doing multi-billion dollar deals. All these efforts can be said to be geared towards one end, improving capacity and supporting infrastructure that can support manufacturing.
Also, Africa’s population is made up of young person’s most of who are well educated. This can be transformed into a ready workforce that can join the industrial age by becoming the backbone upon which the manufacturing can be set upon. For this young population that is more involved in the global economy, becoming part of the success of the world has made African governments to become more sensitive to their economic plight. Evidence can be attributed to manufacturing as a tool that countries are seeking to grow their GDP since growth of manufacturing is associated with growth in output and a positive effect of export diversification through manufacturing on per capita income growth and poverty reduction (Elhiraika et al 4). This has made it possible for the proponents of manufacturing give a strong case for industrial strategies that have been well received and adopted. This was also echoed in the US-Africa business summit that had its theme as “Investing in the Next Generation”, which dwelt on empowering African leadership, growing their global business opportunities, and building a more prosperous, more secure future for the people of both continents ((Trustfull 92).
Is it therefore possible to claim that the global business and manufacturing by extension that has been predominantly associated with the East to have moved to Africa? All indications can be said to point towards one direction that change is sweeping across the African continent in business and in manufacturing. The change is being witnessed on the economic front and it is pegged on improving manufacturing prospects of African economies. Although African economies have witnessed a mismanagement of their manufacturing sectors that was characterized with low investments, poor infrastructure and virtually dilapidated economic policies, the tide is changing. There has been a resurgence of the continent mainly pegged on the rising of a generation that is demanding more of the global economic growth. The young have been touted to form the base that African economies will achieve unprecedented growth as they seek to tap their potential and turn it into opportunities.
African governments, multi-lateral institutions and investors have realized that there is something unique that can be achieved on the African continent and are therefore interested to see it become a reality. The numerous investor conferences and summits that have targeted Africa as the next frontier in business seek to exploit these opportunities. At the base of this is ensuring that African economies are allowed to develop their manufacturing industries. It is known that industries are associated with more value addition that allows for better products that fetch higher prices. It is with this revenues that the African economies can grow and thus further business opportunities that can add to the global growth of business that will be beneficial to all.
It is therefore evident and can be
concluded from the discussion in the foregoing chapters that Africa has seen a
growth in its share of the global economic productivity. Although manufacturing
is growing in Africa and business too is booming, without a doubt there are
still structural, institutional and capacity constraints that have to be
overcome before the global business (manufacturing) can truly be said to have
moved to Africa. The seed for growth has been planted, that is for sure.
Aryeetey, Ernest, et al., eds. The Oxford companion to the economics of Africa. Oxford University Press, 2012.
Elhiraika, Adam B., Ousman Aboubakar, and Kamaludeen Muhammad. “Promoting Manufacturing To Accelerate Economic Growth And Reduce Growth Volatility In Africa.” Journal Of Developing Areas 48.2 (2014): 1-20. Print
GE. “GE to Invest $2 Billion in Africa by 2018.” Business Wire (English) Apr. 0008: Regional Business News. Web.
Men, Jing, and Benjamin Barton. China and the European Union in Africa: Partners or Competitors? Farnham, England: Ashgate Pub. Co, 2011. Internet resource.
Trustfull, Paul. “The Emergence of Africa: Recapping the Successful U.S.-Africa Leaders Summit.” Forbes 194.4 (2014): 92-118. Web.