The Zimbabwean government under President Emmerson Mnangagwa has awarded new television licenses that would end decades of monopoly by the only State-controlled broadcaster ZTV (ZBC TV). But experts fear it is merely a ploy for Mnangagwa to tighten his grip on power
Manufacturing: Make it African
The decision bySwedish clothing retailer H&M to import clothes from Ethiopia in 2012, alongside United Kingdom-based Tesco and Irelnd-based Primark, has been followed by the next logical step – setting up plants in Ethiopia itself.
In August, H&M announced it will expend its network of supplier to the East African country.
There is a very strong relationship between technology, skills, education and economic performance
Manufacturing in Africa is at a tipping point, and this is partly because of global factors. Salary increases are comfortably outstripping inflation in Asia. The Federation of Indian Chambers of Commerce and Industry reported that wages rose 15% in 2012.
The International Labour Organisation calculated that Asian wages doubled between 2000 and 2011 – and in China they tripled over the same period.
But it is also being pulled along by domestic demand and new infrastructure in Africa.
And as manufacturers start to set up shop, they are creating a snowball effect. The expansion of large agribusinesses like East African Breweries, which opened a depot in South Sudan in September and plans to open a plant in Juba this year, creates local demand for a whole range of allied goods.
For example the use of plastic packaging in Africa has grown 150% over the past six years, according to John Thompson of Exhibition Management Services, who organizes African business conferences.
“Plastics imports to Africa have grown by up to 40%. The use of plastics in East Africa alone will treble in the next five years,” he predicts.
This demand has spurred local companies to consolidate and seize opportunities. “Our corrugated packaging business is a good example. We were the largest in Uganda. Now we are East Africa’s largest, having merged with Kenya’s largest,” says Ashish Thakkar, managing director of Mara Group, a diversified East African conglomerate.
Agribusiness clusters are emerging that integrate the packaging and production processes.
Mozambique’s ProSavana project – a trilateral arrangement between Japanese development finance institutions, Brazilian agribusinesses and the Mozambican government that non-governmental organisations have criticised for disadvantaging small-scale producers – contains a grain cluster in Niassa that will include special economic zones where processing of maize, sunflower and soybean will take place.
Morocco’s Agadir Haliopôle – an integrated complex – has filled a hole in the value chain in the fish export sector, which previously had ad hoc clusters of canning factories.
Now a 150ha site on the outskirts of Agadir will house processing, packaging, logistics and research and development companies. The government’s goal is for the site to process 500,000tn of seafood a year.
For large car manufacturers, such as Renault in Morocco’s Tangier auto production hub, the presence of a dense web of suppliers is often a requirement for the initial investment in a plant.
Indeed, the presence of parts manufacturing on or near the site of a primary manufacturer is not just a handy bonus. Tajeddine Bennis, who runs the SNOP parts factory in the Tangier Free Zone, which supplies Renault, says this clustering can generate further demand.
“As a group of first-order parts suppliers we tallied together our needs and found that our collective demand for special foil packaging is enough to support an on-site manufacturer. So we contacted a Turkish company with the figures, and they are building a plant.”
There is a similar race in Ethiopia’s nascent garment and footwear sector to create the cluster of button, thread, sole and laces producers, as well as the service providers like those who repair and maintain industrial sewing machines, without which costs can mushroom.
Some governments appear able to drag manufacturers up the value chain.
The government in Mauritius, for example, was able to provide a set of incentives to help to set up spinning mills and dyeing companies, while encouraging the big conglomerates that run the sector to start investing heavily in technology.
The result is that Mauritius managed to avoid the worst of the storm that hit African textile manufacturers in 2005 with the end of the Multi Fibre Agreement, which had previously prevented Asian textile exporters like China and Pakistan from flooding world markets.
But to do this kind of technological upgrading, a country has to invest in skills and local research and development.
Much as the United States government has funded basic research that companies successfully spun off into commercial applications, China and India have had great success in attaching business incubators to universities in the fields of agriculture and pharmacology.
Africa is a long way behind, apart from some worthy exceptions in Morocco and South Africa.
Ethiopia has also started to focus on developing institutions that can help companies in their quest to adopt best practices and improve technology.
“There is a very strong relationship between technology, skills, education and economic performance,” says Elias Masilela, the chief executive of South Africa’s Public Investment Corporation.
“Australia, for instance, imports 95-98% of its technology but because of the intellectual capacity they have, they’re able to adapt that technology into their environment and make it perform better than it was before it reached their shores.” ●