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Africa’s post-manufacturing future

By Nicholas Norbrook
Posted on Monday, 19 March 2018 12:44, updated on Monday, 12 October 2020 11:57

With the support of government policy, South Africa's auto industry has grown over the recent years. Shutterstock

Robots and artificial intelligence are upending traditional pathways to industrialisation and threatening the jobs that go with it. The Africa Report scours the continent for the best strategies for survival and evolution

Toulouse, south-west France: a worker on a high-tech assembly line sports what appears to be deeply unfashionable eyewear. The Airbus employee is actually wearing augmented reality glasses, into which are beamed the specifications of the rivet job he is doing: which head the pneumatic gun requires and the torque level of the gun.

Meanwhile, in Ansbach, southern Germany, three orange-limbed robots dance over a pair of uber-customised trainers. Shoe manufacturer Adidas is set to open another robot-powered ‘Speedfactory’ in Atlanta in the US. Neither will produce more than 500,000 trainers per year, small beer in Adidas’s total annual delivery of 300m trainers. But you can see the direction of travel for the manufacturing sector.

In Little Rock, Arkansas, home state of one William Clinton, a new automated factory is being built. “From fabric cutting and sewing to finished product, it takes roughly four minutes,” Tang Xinhong, chairman of Tianyuan Garments, told reporters in August 2017. “We will install 21 production lines. When fully operational, the system will make one T-shirt every 22 seconds. We will produce 800,000 T-shirts a day for Adidas.”

For more than a century, development followed a pattern. First consolidate your politics into a functional state. Fix your farms, use the surplus to get into light manufacturing and push into heavy industry to employ your masses. It made South Korea, Japan and China rich yesterday, and the United States, France and Britain before that.

But what if tomorrow does not look like today?

China, desperate not to lose its hold on the role of workbench of the world, is investing heavily in industrial robots, part of a government initiative known as ‘Made in China 2025’. The country is already the largest purchaser of robots for industry, a $30bn market.

And it’s not just robots driving this industrial change.

Artificial intelligence is set to alter demand for manufactured goods radically. New logistics platforms like ride-sharing apps are even more threatening, according to Yasser Mufti, a senior Saudi Aramco executive. The consultants at AlixPartners predict that 32 car sales could potentially be lost for every car signed up into car-­sharing services. In the US, the number of ‘zero car’ families has been going up since 2004 and is now around 10% of the population.

So those countries banking on using manufacturing to absorb a large proportion of their unskilled labour are the ones that are the most in danger, says economist Dani Rodrik of Harvard University. Given the demographics of the continent, there is cause for alarm.

Too early and too late

Researchers at the United Nations Conference for Trade and Development (UNCTAD) have been watching this phenomenon play out for decades: since the 1980s, countries appear to be creating fewer and fewer manufacturing jobs despite growth in the rest of the economy. “It’s premature de-industrialisation,” says Richard Kozul-Wright, director of globalisation at UNCTAD. How can African countries navigate this tough new world? Can Africa’s economies be opportunistic and flexible?

Much has been made of the possibilities of copying the export-­driven explosion of prosperity seen in East Asian countries like Japan, China and South Korea, often using special economic zones that have less red tape and better access to ports and power. With the current changes in the production landscape, was it a mistake, for example, for the Moroccan government to have spent €1bn ($1.2bn) on luring the French carmaker Renault to its Tangier-Med ­export processing zone?

Perhaps President Paul Kagame of Rwanda is correct to say that Africa has missed its ‘Asia moment’ because “we waited too long to act”. An alarmist report by Citibank in 2016 suggested that 85% of jobs in Ethiopia were at risk from automation.

Helen Hai, the former chief executive of Huajian, a Chinese shoemaker, insists: “There is still a window [of opportunity].” Hai oversaw the construction of one of the first factories in a new flurry of textile and shoes plants in Ethiopia back in 2012. “Maybe it is just [for] a few decades, but there is a window,” she argues.

To seize that opportunity will require action, not laissez-faire, suggests Kozul-Wright. He also cites Ethiopia as an example of a country keeping up the pace of reform and improvement. Its latest additions are a new freight connection to Djibouti and colossal hydropower plants to keep energy prices low.

Cluster effect

To attract manufacturing activity today, bringing down costs is an obvious first step. For example, cargo takes two to three weeks to be processed at the main port in Nigeria, compared to four days in Kenya and one in Singapore.

Beyond logistics, power is the other critical roadblock to industrial progress. Standard Bank’s head of oil and gas for Southern Africa, Paul Eardley-Taylor, points to new growth opportunities. He says a change in China’s energy policy, where two provinces have been forced to use gas rather than coal for power, will create greater demand globally. If this filters through to Africa’s gas projects, it should increase domestic gas supplies across many African markets, then broadening access and lowering prices.

Hai, the former Huajian executive, compares the economic zones provided for her firm five years ago to the ones that the Ethiopian government is building today. The new Hawassa zone in southern Ethiopia solves some of the problems she found the first time around, but more importantly, it is trying to deliver a cluster effect.

“For real industrialisation, you need hundreds or thousands of companies doing exactly the same thing. And then the whole supply chain will come, the packaging companies, [etc.] and then everybody grows together,” says Hai. The fact that the Hawassa zone has attracted big players such as PVH, which own big brands like Tommy Hilfiger and Calvin Klein, will help the cluster to pick up speed.

Next, the private sector, boosted by infrastructure and a supportive industrial ecosystem, will need to punch its way into the disaggregated global supply chains that characterise modern manufacturing. Complex products like planes and cars are created by assembling parts built across several locations, with multinationals holding the top rungs of the ladder.

Some Moroccan companies are finally making big moves thanks to the strong foundation created by the government’s decade-long push to support the car sector. Induver, a Moroccan company, is partnering with global glass giant AGC Group of Japan and together they are building a new factory in Kenitra. It should produce more than a million windshields per year from 2019. Hakim Abdelmoumen, Induver’s chief executive, points to the benefits that come with being embedded into the higher echelons of global manufacturing: “We have been able to place our employees in factories in Japan and across Europe to gain skills.”

Morocco’s trade and industry minister, Moulay Hafid Elalamy, regularly talks about his desire to drive local content in the car sector. He told reporters: “What is important to understand is that once the carmakers came to Morocco, the parts-suppliers followed and we are now seeing the third phase, which is the integration of Moroccan capital.”

In Nigeria, a local content development act dealing with the Nigerian oil sector (see page 58) was one of the few clear success stories of former president Goodluck Jonathan’s legislative programme. By legally requiring that Nigerian companies take up a certain percentage of international oil contracts, Nigeria now has dozens of small engineering and oil services companies working in the sector, as well as large companies such as Lagos Deep Offshore Logistics Base (Ladol).

Going global

And Ladol, too, is now part of the international web of contracts that make up the global energy sector. French oil giant Total ordered a new offshore production rig from South Korean giant Samsung Heavy Industries, whose local technical partner is Ladol. On 24 January, to much fanfare, the hull of the $3.8bn Egina production unit, one of the largest in the world, finally arrived at Ladol’s deepwater docks, where the whole project is being put together. “We, as a Nigerian company, are carrying out services that previously you would have had to fly in people from abroad,” says Ladol chief executive Amy Jadesimi.

But to prepare properly for a post-manufacturing future, Africa will need to find jobs in other domains. Agriculture is one obvious area where Africa has a comparative advantage, with abundant sunlight, water and labour. What many countries lack, however, is coordination – because that requires a strong civil service.

Rwanda’s administration has attempted to repair the deep cracks left in the civil service by decades of colonialisation and the 1994 genocide by introducing a contract system, known as Imihigo, signed between high-level civil servants and the government. Food and Agriculture Organisation resident representative Attaher Maiga, in his exit interview on 22 January, was the latest person to heap praise on the government’s impact in boosting the agricultural sector.

Another well-managed body of civil servants, Ethiopia’s Agricultural Transformation Agency (ATA), has been critical in helping Heineken expand its operations in the country. The ATA enabled the Dutch brewing multi­national to rapidly increase seed stock of the right kind of barley; it used the army of state agricultural extension workers to assist in aggregating farmer produce via intermediaries into easily managed units; it facilitated import procedures; and it trained farmers in response to Heineken’s crop requirements. “The ATA helped us navigate all that,” says Heineken’s director of local sourcing, Paul Stanger. These are the ‘soft skills’ needed to improve the business climate.

Emerging sectors

In contrast, despite a deep-rooted change in Nigeria’s agricultural production, with rice production rising to 15m tonnes last year, there is still a great deal that could be done. There is the potential to ­double or triple sorghum yields, but it needs a “coordinated effort from private sector businesses such as Nigerian Breweries, government and the seed companies,” says Stanger. “I don’t think that one group can do it on their own.”

Beyond agriculture and manufacturing, there are of course a multitude of other fruitful areas where African companies and countries will spread their wings and create employment. Tourism requires its own blast of industrial policy to help bring in the next wave of Asian strivers and ageing Europeans. Casablanca, for example, has built a special berth for cruise ships, to tap into the baby-boomer market on the other side of the Mediterranean.

But perhaps the best way to survive the post-manufacturing future will be to play the technology game itself. Although not everyone will become an information systems whizkid, Seni Sulyman of Nigerian start-up Andela says there is a huge mismatch in global demand and supply for coding talent. “The world needs coders,” says Sulyman. And programming-­focused Andela, which took $24m in investment from Facebook founder Mark Zuckerberg’s foundation in 2017, thinks that Africa will provide them.

This article first appeared in the March 2018 print edition of The Africa Report magazine

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