Africa’s Golden Opportunity in Tech-Intensive Manufacturing
The United Nations Conference on Trade and Development (UNCTAD) recently launched its Economic Development in Africa Report 2023 in Nairobi, Kenya. The report illustrates how Africa, with its vast resources and expanding consumer market, is poised to become a significant link in global supply chains, especially in the realm of technology-intensive industries.
This is Africa’s moment to bolster its position in global supply chains as diversification efforts continue. It’s also an opportunity for the continent to strengthen its emerging industries, foster economic growth, and create jobs for millions of its peoplestated UNCTAD Secretary-General Rebeca Grynspan
This potential arises from Africa’s abundant reserves of critical minerals and metals essential for high-tech industries. With the current global landscape marked by trade disruptions and economic uncertainties, manufacturers are increasingly scouting diverse production locations. Africa offers these manufacturers not only rich resources like aluminium, cobalt, copper, lithium, and manganese but also a young, tech-savvy workforce, and a rapidly growing middle class with a thirst for advanced goods and services. Countries like Kenya, renowned for their digital innovation, further strengthen the continent’s position in the global economy.
Moreover, Paul Akiwumi, UNCTAD’s Director for Africa and special programs, pointed out the presence of over 600 incubators throughout the continent. These incubators play a vital role in nurturing and supporting innovative businesses.
Strengthening Supply Chains: A Catalyst for Regional Growth
One of the compelling arguments made in the report is that establishing an environment favorable to tech-heavy industries can lead to a significant increase in African wages, currently averaging $220 per month. This stands in stark contrast to the $668 average in the Americas. The report emphasizes that a deeper global supply chain integration can enhance the resilience of African economies against future adversities.
Furthermore, Africa holds a tremendous renewable energy potential, especially in solar power, which can be a linchpin in enhancing global energy supply chains. This not only presents a chance to reduce production costs but also to shift away from fossil fuels. Yet, despite this potential, a mere 2% of global renewable investments reach Africa. Addressing this gap is essential, and the upcoming Africa Climate Change Summit in Kenya could be the platform for such dialogues.
On the industrial front, countries like the Democratic Republic of the Congo, which produced 1.8 million metric tons of copper in 2022, can extend their role beyond extraction to refining metals, especially for industries like electric vehicles.
Navigating Challenges: The Road Ahead
To fully realize Africa’s potential as a key supply chain destination, investments in infrastructure, technology, and financing are imperative. Several countries, including Angola, Botswana, Ghana, and South Africa, have already initiated local content regulations to spur local supply chain growth and add internal value. The report also highlights the importance of securing favorable mining contracts and amplifying digital technology adoption, with Kenya being a trailblazer in the latter.
However, financial challenges loom large. As the UNCTAD Secretary-General mentioned, the cost of borrowing for African countries is exorbitantly higher compared to the West. Misrepresentation by international rating agencies further exacerbates the continent’s financing challenges.
The report suggests overcoming these financial hurdles by streamlining supply chain finance processes, mitigating high-risk perceptions, and addressing insufficient credit information gaps. The African supply chain finance market has already shown promise, with its value surging by 40% from 2021 to 2022, hitting $41 billion. Yet, as UNCTAD rightly points out, there’s more work to be done.
In conclusion, while challenges persist, Africa’s promising future in the global supply chain cannot be overlooked. With the right investments, strategic collaborations, and policy frameworks, the continent is poised to usher in an era of unprecedented growth and development.
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