AFRICA is one of the most exciting and potentially dynamic markets in the world, increasingly capturing the attention of the world’s largest businesses, writes Craig Arnold*.
Strong economic growth, increasing regional economic integration and diversification, untapped natural resources, high access to mobile technology and a young, entrepreneurial demographic – these drivers have the potential to ensure that many markets in Africa will be capable of not just taking advantage of the Fourth Industrial Revolution but leapfrogging it.
Good governance, investment protection laws, ease of doing business, regulatory systems: these factors and others, if guaranteed, should provide a strong foundation for continued growth and investment from which mega-trends can be translated to real opportunities and employment.
Cash is a coward during times of uncertainty, so countries need to ensure that they create a conducive and sustainable environment for investments that span multiple decades. When there is uncertainty about political leadership, economic agendas or market development, companies will elect to move investment decisions and critical resources where there is more certainty. This is not unique to sub-Saharan Africa, but also for more advanced economies. What is important is that Africa is not being defaulted to ‘a farm’, ‘quarry’ or ‘a beach’.
The case for a balanced economy—and manufacturing
On my numerous travels across Africa, I have had the privilege of engaging with governments, the private sector, and business and trade organisations on Africa’s prospects in manufacturing. Indeed, most agree that Africa is ripe for industrial growth. But how does Africa become coordinated on manufacturing? As the data makes clear, all sectors are not created equal. No sector creates jobs, value and growth on the scale manufacturing does. Depending on the type, manufacturing jobs create anywhere between eight to 20 jobs around them; that is a job multiple that cannot be overlooked. It is a remarkable multiplier effect.
So African nations seeking robust economies cannot stand aside and let this sector die. Growth requires action; it takes thoughtful public policy. Other countries, particularly our Asian neighbours, understand this. The trend lines are clear. More and more, we see successful countries acting like successful companies: maximising their competitive advantages… and creating a climate that attracts and rewards investment. African countries ought to be doing more of this. The countries that succeed at this are the ones that develop a national strategy, and execute against it relentlessly.
A new model of manufacturing
We need to transform Africa’s manufacturing into a truly high-tech sector. Africa has been too heavily focused on ‘sub-optimal scale manufacturing’ – the kind that can only exist behind a high tariff wall, and which can only really serve a domestic market. Instead, we need ‘advanced manufacturing’, which takes raw inputs, combines them with intellectual capability, and adds value to create a functionality the world needs. Advanced manufacturing is the work of next-generation industries, where there is enormous demand and enormous profit to be made.
South Africa, Nigeria, Kenya, Ethiopia and other African countries could and should build these industries, particularly those with competitive advantages such as advanced mining technology, energy, agro- and health sciences, and water management technology. That is how we turn our centres of innovation into hubs of commerce. That is how we attract manufacturers who can commercialize cutting-edge products. That is how we create a virtuous cycle of economic activity. But this will not happen by default.
Priority areas for creating an enabling environment for advanced manufacturing include:
Energy: Manufacturing requires access to reliable, efficient and cost-effective energy supplies. Many African countries have significantly expanded their energy generation, transmission and distribution infrastructure with a focus on renewable energy sources like geothermal and wind. Continued capacity improvements, enabled by a more aggressive and prioritized infrastructure development strategy, will be critical in meeting the energy needs of an expanded economy.
Trade: manufacturing relies on global markets, and so access to those markets is key. Trade facilitation is also key; this will involve– working with companies to leverage new technology solutions to meet policy goals, anti-corruption efforts and efficient customs processing while promoting access to input materials for further manufacturing, job creation and product development in Africa for Africa. Enabling market access by reducing tariff and non-tariff barriers enables countries to benefit from both innovative new products, such as environmental technologies, that can solve local challenges, as well as access to key inputs that can grow necessary markets (for example, chemical products that contribute to more energy-efficient building materials).
Enhance education and skills development. Advanced manufacturing jobs are high-skilled jobs. Global businesses go where the talent is, and we need to make sure that place is Africa. That is going to require enhanced curricula built around STEM (science, technology, engineering and mathematics) subjects, new recruits to the ranks of qualified educators, and new teaching techniques and innovations in the classroom, especially in science. In addition to fast-tracking local talent, we also have to reconsider our student visa and immigration policies in order to bring in the world’s smartest students and encourage them to stay. This is only possible if education institutions are competitive and world-class.
Public-private partnerships (PPPs): Improving the business environment requires us to build genuine partnerships between the public sector and the private. This idea of public-private partnerships is critical to every other priority mentioned. We should be working with, not against, each other to create a strong, sustainable framework for growth. This is a common thread running through countries that are succeeding in the global economy.
Inclusion and diversity: Diversity is being asked to the party, inclusion is being asked to dance! Whether economic, societal, cultural or gender, inclusion and diversity is an area where clear-sighted policies can lead to sustainable economic growth, helping Africa to deliver a balanced and sustainable development. This can also be a source of innovation.
Sustainability: The world needs solutions for big challenges like energy, climate change, water, food, nature and social issues. Africa’s population is projected to hit 2.4 billion by 2050, putting pressure on resources. Circular business models will ensure optimal utilisation of available resources and enhanced productivity across the value chain.
The advanced manufacturing plan described here is ambitious. But we have advantages that will help us succeed in this effort – advantages many other nations do not have, and never will. The continent is sitting on more than $82 trillion in discovered natural resources, with the potential to contribute $30bn a year to government revenues over the next 20 years. Africa also possesses other natural resources – such as minerals, rivers, forests and fisheries – in vast quantities.
Most regions do not possess our wealth of natural resources. Most do not possess our intellectual resources, a community of thought-leaders and a truly open exchange of ideas. And no other continent possesses the resilience and the willingness to do the hard job.
Africa can do it!
*Craig Arnold is President, sub-Saharan Africa, at the Dow Chemical Company