Accra, 14 March 2017 - The African continent has experienced immense growth in recent years which has brought wealth to many countries. Most, however, have economies that are dependent on natural resources and less so on diversified industries. It is time that Africa industrializes and begins to trade among its constituent States in order to boost economies further.
There are a number of issues that are preventing the rapid industrialization of the continent which need to be alleviated with the support of both the private and public sector.
Policies and Regulations
Regional Economic Integration
A major impediment to the manufacturing industries in Africa is the lack of basic infrastructure. Although there is inexpensive labor and raw materials to feed the manufacturing sector, the logistics involved diminish returns. The industry requires large amounts of power, water, and transportation infrastructure, each of which can contribute a significant amount to the Capital Expenditures. This can be alleviated with increased investment positioned strategically.
2. Policies and Regulations
Due to political instability in certain African countries, policies and regulations tend to be in flux and this introduces increased risk that causes investors to hold off on investment. On a more fundamental level, the policies and regulations themselves need to be altered to encourage the growth of the manufacturing sector. For example, tariffs and other taxes should be favorable for companies in the industry in order to encourage growth and increase jobs.
3. Intellectual Capital
New technologies have been introduced globally which require a skilled workforce to maximize its utility. Though Africa has a large pool of inexpensive labor, training is required to operate new technologies and methods which can introduce an increased factor of time and cost. This can be alleviated over time with training and execution.
4. Regional Economic Integration
Movement between African countries is not so conducive to the growth of the manufacturing industry due to visa requirements and tariffs between countries. Many goods which are imported from outside of Africa can be imported from within Africa and thus promoting intra-African trade. The upcoming signing of the Africa Continental Free Trade Agreement is expected to solve these issues.
The potential is vast on the continent and there is an increased inflow of investment into the continent to alleviate some of the issues addressed above. In the coming decades, trade in Africa will rise as a key driver in the global economy.
KDHI is a leading Agribusiness development firm that trains farmers, merges foreign and local capital, and secures off-take agreements to drive agriculture production in Sub-Saharan Africa and exponentially increase yields through data-driven processes. We work with our investors and strategic partners to bring world-renowned expertise to the countries in which we operate in order to catalyze greater food security for families, better health and nutrition, increased income, greater access to basic social services and increased productivity, as well as generating taxes of all kinds beneficial to the state (export revenue, agricultural equipment, etc.).