At below 18 per cent, intra-African trade is low, while the share of Africa in global trade is at a mere four per cent. To change the narrative, stakeholders are calling for transformation and expansion across every sector, particularly manufacturing. Assistant Editor CHIKODI OKEREOCHA reports.
It’s not for nothing that robust manufacturing and increased intra-African trade are considered pivotal for the effective implementation of the African Continental Free Trade Area (AfCFTA) and achievement of the objectives of Africa Agenda 2063, also known as ‘The Africa We Want.’
For instance, manufacturing accounts for about 70 per cent of global trade, with about 30-55 per cent of service jobs related to the manufacturing sector. Also, enhancing Africa’s competitiveness in the context of AfCFTA and Agenda 2063 is anchored on increased intra-African trade.
The AfCFTA commits the 54 African countries, Nigeria inclusive, to remove tariffs on 90 per cent of goods, progressively liberalise trade in services, and address a host of other non-tariff barriers.
The landmark trade agreement, which was signed in March 2018, came into effect on January 1, 2021, and has opened up a plethora of opportunities for intra-African trade and economic collaboration. And if successfully implemented, the AfCFTA will create a single African market of over a billion consumers with a total Gross Domestic Product (GDP) of over $3 trillion.
The trade liberalisation deal, which will make Africa the largest free trade area in the world, is situated within the context of Africa Agenda 2063, also known as ‘The Africa We Want.’ The Africa Agenda 2063 is a strategic framework developed by the African Union (AU) to guide the continent’s development over the next five decades, from 2013 to 2063.
The Agenda is the blueprint to achieve inclusive and sustainable socio-economic development and a master plan for transforming the continent into the global powerhouse of the future.
However, in achievement this Agenda, manufacturing, which is globally acknowledged as a key driver of economic transformation and industrialisation, capable of generating employment, fostering intra-African trade, technological advancement and the reduction of poverty, must, according to industry operators and experts, play a central role.
“In the modern global economy, manufacturing accounts for around 70 per cent of global trade and more than 30 per cent of service jobs,” the Interim President of Pan-African Manufacturers Association (PAMA), Mansur Ahmed, said, for instance.
Ahmed, who spoke during the Second Executive Committee meeting and re-launch of PAMA on the sidelines of the Intra-African Trade Fair held in Egypt, recently, emphasised that to achieve the goals of Agenda 2063, African manufacturing must undergo a transformation and expansion.
This, according to him, is not a stroll in the part and cannot be left to chance. “Both the public and private sectors must make sustained efforts to successfully implement AfCFTA and attain Agenda 2063’s objectives,” he stated.
But as it is, both the successfully implementation of AfCFTA and the attainment of Agenda 2063’s objectives are hanging in the balance. Ahmed, who was immediate past President of Manufacturers Association of Nigeria (MAN), lamented, for instance, that many African economies are struggling with underdevelopment, low productivity, and minimal value addition, leaving a large portion of their population in poverty.
Indeed, the manufacturing sector in Nigeria and in many African countries has been hit by low productivity and reduced competitiveness caused by a combination of externally-induced crises and several unresolved familiar operating environment challenges.
For instance, many of them are yet to fully recover from the supply chain disruption that came in the wake of the COVID-19 pandemic and now, the ongoing Russia-Ukraine war.
Domestically, African manufacturers, especially those in Nigeria, are also battling with issues around high operating cost forced largely by inadequate electricity supply, which, according MAN Director-General Segun Ajayi-Kadir, accounts for over 40 per cent of production cost for manufacturers in Nigeria, for instance.
Other familiar challenges include excessive regulation and taxation, and inadequate supply of Foreign Exchange (forex) for importation of raw materials, spare parts and machinery that are not locally available.
The thing is that the leadership in most African economies has not been able to demonstrate the political will to implement policy reforms that will support and sustain macro-economic stability, including prioritising infrastructure, security and other pro-manufacturing policies that will encourage scale and lower unit cost of production. The result is the continent’s industrial sector’s lackluster performance.
The other issue undermining the attainment of Agenda 2063, which is also pain in the neck of Ahmed and other manufacturers and stakeholders, is the relatively low level of intra- African trade and the insignificant share of Africa in global trade.
“With intra-African trade still below 18 per cent, and Africa’s global trade contribution at a mere four per cent, the road to ‘The Africa We Want’ remains lengthy and arduous,” the PAMA boss lamented.
Former Minister of Industry, Trade and Investment, Olusegun Aganga, however, put the volume of intra-Africa trade at around 20 per cent.
“This compares with about 50 per cent for intra-Asia trade and over 70 per cent for intra-European trade,” Aganga said, at the third Adeola Odutola Lecture/Presidential Luncheon organised by MAN, in Lagos, recently, where he was guest speaker.
At the lecture, which was themed “Setting the Agenda for Competitive Manufacturing under the African Continental Free Trade Agreement (AfCFTA): What Nigeria Needs to do,” Aganga emphasised that AfCFTA alone cannot improve intra-regional trade hence African countries need to do more.
He, however, traced the disparity in intra-regional trade between Africa and other continents to a combination of historical, geographical, economic, and infrastructural factors.
He said, for instance, that European colonialism established strong trade routes and economic ties within Europe and between Europe and its colonies. Also, in Asia, ancient trade networks and historical connections played a role in facilitating intra-Asian trade. “The message here is that connectivity within Africa is critical for AfCFTA to succeed,” Aganga said.
On geographical proximity, he said both Europe and Asia have countries in close geographical proximity, making transportation of goods easier and more cost-effective. But in contrast, Africa’s vast size and geographical barriers can complicate transportation and trade.
Aganga also said Europe and Asia have more developed economies with diverse industries, which leads to higher trade volumes. “Many African countries face economic challenges, including limited industrialisation and reliance on commodity exports. We expect this to change if Nigeria and other African countries focus on industrialisation,” he said.
Infrastructure, according to him, is another issue. He said, for instance, that Europe and Asia have well-established transportation and communication networks that facilitate trade, pointing out that in contrast, inadequate infrastructure in many African regions can hinder efficient trade flows.
“Again, Africa must focus on trade-related infrastructure and connectivity.” And as he added, “Intra-African trade can be affected by political instability, trade barriers, and inconsistent regulations among African nations,” the former Minister recommended.
Aganga, while also noting that Europe and Asia have enjoyed more stable political environments, said: “This means that addressing historical, economic, infrastructural, and political challenges will be crucial for increasing intra-African trade to levels comparable to intra-Asia and intra-European trade.”
The consensus of industry experts and operators is that when African countries trade with themselves, they exchange more manufactured and processed goods, have more knowledge transfer, and create more value.
But apart from the issues identified by Aganga, other specific issues around inconsistent visa policies, Africa’s lack of right regulatory framework and political will to halt the multiplicity of national borders that have continued to pose barriers to trade, as well as African economies’ dependence on narrow range of primary products, among others remain stumbling blocks.
For instance, Nigeria’s foremost industrialist and Africa’s richest man Alhaji Aliko Dangote, sometime ago, echoed the frustrations of African businessmen and manufacturers with regards to issuance of visa by most African countries.
According to Dangote, only 14 out of the 54 African countries offer visa-free, or visa-on-arrival to citizens of African countries, a situation he said constitutes serious barrier to intra-African trade.
Changing the narrative
Depressing as Africa’s low manufacturing base and her countries’ inability to trade with themselves is, including her poor showing in global trade, the Pan-African Manufacturers Association (PAMA) appears to have a hang on how to reverse the situation and achieve the objectives of Agenda 2063.
At the re-launch of PAMA, for instance, Ahmed insisted that transformation was required across every sector, with manufacturing as one sector that stands out as critical for economic growth.
He harped on the need for collaboration with development partners, noting that to accelerate the industrialisation of manufacturing in Africa, PAMA will actively seek collaboration with development partners.
His words: “Partnerships with African and international development organisations will contribute to initiatives aimed at enhancing and accelerating the growth of the manufacturing sector.This collaboration can unlock resources, knowledge, and technical assistance to address specific sector challenges
‘To achieve the goals of Agenda 2063, African manufacturing must undergo a transformation and expansion, which is no easy feat and cannot be left to chance. Both the public and private sectors must make sustained efforts to successfully implement AFCFTA and attain Agenda 2063’s objectives.’’
Ahmed admitted that institutions like Afreximbank, African Development Bank (AfDB), African Finance Corporation (AFC), and others are already playing crucial roles in this effort.
He, however, said it was essential for the private sector, particularly African manufacturers, to engage actively in fostering the necessary collaborations and partnerships for sector integration, expansion, and diversification.
Engr. Ahmed stated that creating an environment that fosters innovation, investment, and the growth of the manufacturing industry has never been this compelling. He said considering the weak manufacturing base of most African economies, effective policy advocacy has become an essential tool to ensure the growth of the African manufacturing sector.
He said PAMA will lead the advocacy efforts at both regional and continental levels to secure improved policies and regulatory environments across the African continent. “By working with policymakers and stakeholders, PAMA aims to create an environment that fosters innovation, investment, and the growth of the manufacturing industry,” Ahmed said.
The Association also sees the promotion of investment as key to changing the dynamics. As Ahmed said, “A thriving manufacturing sector requires continuous investment. PAMA’s goal is to serve as a one-stop shop for investors interested in the African manufacturing sector. By facilitating new investments and partnerships, PAMA aims to attract the capital necessary for the sector’s expansion, modernization, and increased competitiveness.”
Ahmed further said PAMA understands the value of knowledge exchange and industry networking and to this end, the Association will organise and facilitate regional seminars, conferences, and other events that promote the growth and development of the African manufacturing sector.
“These events will provide a platform for stakeholders to connect, share insights, and explore opportunities for collaboration, all contributing to the sector’s expansion,” he stated, adding that the establishment of technology transfer and innovation hubs across the African continent will also be given priority.
“These hubs can serve as centers for research and development, promoting the adoption of advanced manufacturing technologies. By creating such hubs, PAMA can facilitate knowledge transfer, support local innovation, and encourage technology adoption, further strengthening the competitiveness of African manufacturers,” Ahmed said.
The idea of PAMA was conceived in 2018. According to Ahmed, the Association owes its formation to the unwavering support and foresight of the Commissioner for Trade and Industry of the African Union Commission (AUC), Albert Muchanga, a Zambian national, who promoted PAMA and superintended the establishment of an interim committee to bring it to fruition.
Unfortunately, the COVID-19 pandemic and its aftermath hindered the effectiveness of the interim team’s efforts, and the lack of institutional platforms in most African countries posed challenges.
However, efforts are currently ongoing to engage as many manufacturers associations, manufacturing industries and other major companies as possible to leverage PAMA as a vital platform for accelerating the development of African manufacturing, effectively implementing AFCFTA, and achieving the objectives of Agenda 2063.
