AfCFTA: Creating Globally Competitive African Manufacturing Sector

The marking of the 50th Anniversary of the Manufacturers association of Nigeria (MAN) provided the opportunity to bring together the movers and shakers of African economy, which included policy makers, industrialists, academicians, regulators and bankers to discuss the challenges and prospects of making African manufacturing a globally competitive industry, writes Dike Onwuamaeze

The President of the Manufacturers Association of Nigeria (MAN), Mr. Mansur Ahmed, set the tone of discussion at the “High-Level Roundtable on Industrialisation in Africa,” that marked the commemoration of the 50th anniversary of MAN, with a brief remark.

Ahmed said: “It is our firm belief that our conversations at this event will help chart the course for sustainable Africa’s industrialisation and economic transformation.”

With this brief remark, Ahmed cleared the ground for the erudite Economist and Senior Lecturer, Lagos Business School, Dr. Doyin Salami, who moderated the panel discussion during the round table to sketch out the conversation by stating that the African Continental Free Trade Area (AfCFTA) holds a lot of potentials as well as quite a number of obstacles that must be resolved before the potentials it portends could be realised.

Salami noted that it would be important while emphasising the size of the market offered by the free trade area to take into cognizance issues around the payment system, the movement of people, the impact on SMEs, intellectual property and regional value chain.

He pointed out two dimensions that manufacturers and other stakeholders should bear in mind revolved critically around Africa building a globally competitive manufacturing capacity and how it would set the boundaries between collaboration and corporation, bearing in mind the already existing custom unions across Africa that have failed to succeed.

“One characteristic of them is that for the most part they have not succeeded. It is going to be important to understand why they have not succeeded.

“Also, the issue of funding industrialisation on the continent across the different countries is going to be very important.

There are also issues around security and the question is what will the development around Afghanistan portends for Africa? These are issues in my view that policy makers, legislatures and operators are going to collaborate on since the challenge will be how well are we going to implement the AfCFTA?”

Having sketched out the conversation, Salami brought in the Africa’s Foremost Entrepreneur and President of the Dangote Group, Mr. Aliko Dangote, with a direct and punchy question on what he thought about Africa developing a globally competitive manufacturing sector.

Dangote answered by stating that “to be really globally competitive we must produce very high quality products and we have to produce it at the cheapest cost possible because others have been there before us.”

He pointed out that African manufacturing should first of all focus on meeting the continent’s domestic need for manufactured goods and then begin to export to other continents of the world.

But this could not happen without governments in the continent supporting manufacturers with stable policy environment and mustering the political will to remove certain encumbrances to effective industrialisation of the continent.

These include poor infrastructure, poor supply of electricity, high port charges and difficulties encountered in the movement of people, products and services across national boundaries that Africa is littered with.

Dangote said: “I think government must have to remove most of the hurdles in terms of poor infrastructure and unfriendly regulations and improve our power and ports environment.

“Our gas prices here is almost double than other normal areas. So, how come be competitive? Today, if I want to go through the ports the government will charge me $10 dollars per tonne even though I am exporting a very cheap product to the next country. So, I think that there are quite a lot of areas we have to look at to make this thing competitive. The border crossing is the most important one for us. We must make sure that crossing our borders do not take time. Government has to do quite a lot in terms of having the political will to remove all these bottle necks at the border.”

In his contribution to the conversation, the Vice President, Professor Yemi Osinbajo (SAN), stated that inasmuch as the AfCFTA offered limitless opportunities for Africa’s industrialisation, governments across the continent must take the right policy stance to actualise them.

Osinbajo said: “We must take policy actions to create an environment in which businesses can thrive. To start with, we must adopt the right type of macroeconomic and industrial policies.

“It is important for African governments to provide a stable macroeconomic environment which avoids and smoothens out volatility in prices, sharp deteriorations in the current account and budget deficits and of course, rapid accumulation in debt burdens.”

He added that, “well negotiated rules of origin are important in the context of the free trade agreements as they are key to preventing trans-shipment and the deflection of trade. Without them, firms from non-state parties could set up simple labelling operations in one member state with a view to shipping already finished products to another member state without really adding any value.”

Osinbajo observed that it is important for MAN to involve itself in an advisory capacity to government negotiators “as we go further into the rules of origin negotiations (these rules negotiations have, of course, started), but I think as we go on, we should get more contributions and advise from MAN.

“Our manufacturers must also strive to become competitive after clearly specified time periods so that they can withstand the ever present danger of stiff competition from imports. In other words, while our manufacturing industries must be nurtured and supported, they cannot remain infants forever, ”he added.

According to the President of the African Export and Import Bank (Afreximbank), Professor Benedict Okey Oramah, who spoke on the nature of challenges African manufacturers are dealing with, said that most African countries score very low on ease of doing business, cross border trade as well as on infrastructure and logistics, adding that financing, from the bank’s perspective, is not the major hinderance to industrialisation in Africa.

Oramah, who was represented by the Executive Vice President of Afreximbank, Mr. Amr Kamel, said that dearth of bankable projects rather than insufficient finance has been the major problem of industrialisation in the continent.

He said: “There is a lot of huge amount of money that is out there especially with low interest rate environment on foreign currency. The problem really is in finding bankable projects. Getting a transaction to a stage that it is bankable is really quite challenging. That is why the Afreximbank created project facilitation unit designed primarily for helping businesses with good ideas to make them bankable.”

He added that the Africa could get around the challenge of poor infrastructure by developing industrial pacts where it would be much easier to provide quality infrastructures in a smaller geographical area than spreading them across the whole country. “That is where Afreximbank has been very strong in supporting industrialisation. We are working with the Nigeria’s ministry of industry on advisory bases on how to role this industrial pacts and we also financing our own projects here in Nigeria,” Oramah said.

Be it a paucity of bankable projects or poor infrastructure and other catalogue of militating factors, one thing that is clear is that the continent is faced with the dearth of industrial capacity. The African Development Bank (AfDB) ascribed Africa’s station at the bottom of global trade value chain to its control of less than two per cent share of global manufacturing.

Similarly, the Secretary General of the AfCFTA Secretariat, Mr. Wamkele Mene, pointed out that even though Africa has pockets of success within countries on various capacity of industrial development; the continent still lacked “the depth of manufacturing and depth of industrialisation to create jobs that will fight unemployment to push back the frontiers of poverty.”

Mene observed that the desire to ensure that the continent boosts its industrial capacity was one of the reasons that informed the establishment of the AfCFTA agreement as envisioned in the intra-African trade action plan in 2012 to address Africa’s underdevelopment from the industrial point of view.

He said: “AfCFTA was part of the tools to aid industrialisation. The best figure we have on intra-African trade is 18 per cent, which is more on primary commodities. Our immediate task is to make sure that we establish the correct policy environment for manufacturing to thrive, for productive sector investment to happen in pharmaceuticals, automobile sector, agro processing and others that will have a positive impact on manufacturing.”

Mene, however, noted that there are challenges of interconnectivity, transit of goods across borders, high cost of connectivity, and the high tariffs amongst others. “The average tariff on automobiles is about 40 per cent. We have high tariffs that constrain and discourage investments in manufacturing as well as non-tariff barriers like burdensome custom procedures and regulations that do not facilitate trade,” he said.

The Nigeria’s Minister of Industry, Trade and Investments, Mr. Niyi Adebayo, said that low state of industrial manufacturing in Africa implied that the processing of raw materials on the continent is very little.

This has caused the continent to lose out on job opportunities, large volume of export trade and increased foreign exchange earnings.

Adebayo said: “The situation is even worse in some countries that are further embattled by a combination of structural constraints and political instability, which jeopardised efforts for private sector-led economic diversification and transformation.

“Toward this end, to unleash our full industrial potential, African countries must embark on an audacious agenda, preferably driven by private sector-led investments to ensure the economic transformation of the continent especially through industrialisation.”
He said that the ministry under his watch is positioning Nigerian industries to take the leading role in the economic transformation of the country and the continent at large.
This included bringing all stakeholders to come up with specific measures and initiatives that would improve the cost competitiveness of players in the sector.

One of the ways he is improving the cost effectiveness is by “collaborating with the Ministry of the Petroleum Resources to lower the cost of gas, which is a critical to the production of energy for the sector. This is one factor that can significantly impact the competitiveness of items manufactured in Nigeria.”

According to the Commissioner of Trade and Industry of the African Union Commission, Mr. Albert M. Muchanga, Africa should invest in education, research and development in order to bolster its manufacturing capacity and transit from being a consumer of technology to a provider of technology.

He said: “For Africa to really gain the capacity to manufacture, we have to invest in research and development. There is no way out. If we do not invest in research and development our manufacturing will be based on imitations. And if we do that we shall perennially remain at the bottom of global value chain. Moreover our universities will be remodeled to become research universities that can produce skills that are oriented to the fourth industrial revolution.”

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